How to fix hanging popen3 in Ruby?

Question

I am getting unexpected behaviour using popen3, which I want to use to run a command like tool ala cmd < file1 > file2. The below example hangs, so that stdout done is never reached. Using other tools than cat may cause hanging, so that stdin done is never reached. I suspect, I am suffering from buffering, but how do I fix this?

#!/usr/bin/env ruby

require 'open3'

Open3.popen3("cat") do |stdin, stdout, stderr, wait_thr|
  stdin.puts "foobar"

  puts "stdin done"

  stdout.each_line { |line| puts line }

  puts "stdout done"

  puts wait_thr.value
end

puts "all done"