This paper examines the role of rational speculators in financial markets and challenges the conventional view that they stabilize prices. It argues that when noise traders follow positive feedback strategies—buying when prices rise and selling when prices fall—rational speculators may instead destabilize prices. Rational speculators might benefit from anticipating future price movements and buying in advance of noise trader demand. If they do so, it can trigger positive feedback strategies among other investors, leading to increased volatility. The paper presents a model where rational speculators and positive feedback traders interact. In this model, rational speculators can drive prices away from fundamentals by anticipating future demand. Positive feedback traders then respond to these price increases, further pushing prices away from fundamentals. This dynamic can lead to price instability, even though rational speculators aim to profit from market movements. The paper also discusses the implications of positive feedback trading for market manipulation. It shows that in the presence of positive feedback traders, rational speculators with no information about future prices can manipulate markets by triggering large purchases. This is illustrated with historical examples, such as the "pool" in RCA stock operated by Michael Meehan. The paper concludes that the presence of positive feedback investors can lead to destabilizing rational speculation. Rational speculators may not always stabilize prices but can instead amplify price movements. This challenges the traditional view that rational speculation is always stabilizing and highlights the importance of positive feedback strategies in financial markets. The paper also notes that the observed positive correlation of returns at short horizons and negative correlation at long horizons can be explained by the interaction of rational speculation and positive feedback trading.This paper examines the role of rational speculators in financial markets and challenges the conventional view that they stabilize prices. It argues that when noise traders follow positive feedback strategies—buying when prices rise and selling when prices fall—rational speculators may instead destabilize prices. Rational speculators might benefit from anticipating future price movements and buying in advance of noise trader demand. If they do so, it can trigger positive feedback strategies among other investors, leading to increased volatility. The paper presents a model where rational speculators and positive feedback traders interact. In this model, rational speculators can drive prices away from fundamentals by anticipating future demand. Positive feedback traders then respond to these price increases, further pushing prices away from fundamentals. This dynamic can lead to price instability, even though rational speculators aim to profit from market movements. The paper also discusses the implications of positive feedback trading for market manipulation. It shows that in the presence of positive feedback traders, rational speculators with no information about future prices can manipulate markets by triggering large purchases. This is illustrated with historical examples, such as the "pool" in RCA stock operated by Michael Meehan. The paper concludes that the presence of positive feedback investors can lead to destabilizing rational speculation. Rational speculators may not always stabilize prices but can instead amplify price movements. This challenges the traditional view that rational speculation is always stabilizing and highlights the importance of positive feedback strategies in financial markets. The paper also notes that the observed positive correlation of returns at short horizons and negative correlation at long horizons can be explained by the interaction of rational speculation and positive feedback trading.