<image credit: realinvestmentadvice.com> “ An economic bubble or asset bubble (sometimes also referred to as a speculative bubble, a market bubble, a price bubble, a financial bubble, a speculative mania, or a balloon) is trade in an asset at a price or price range that strongly exceeds the asset's intrinsic value.
It could also be described as a situation in which asset prices appear to be based on implausible or inconsistent views about the future. Asset bubbles date back as far as the 1600s and are now widely regarded as a recurrent feature of modern economic history. Historically, the Dutch Golden Age's Tulipmania (in the mid-1630s) is often considered the first recorded economic bubble.” From Wikipedia.com
We may not know how the bubble form but we probably know how it ends.
A picture is worth a thousand words :
Minsky identified five stages in a typical credit cycle – displacement, boom, euphoria, profit taking and panic. Although there are various interpretations of the cycle, the general pattern of bubble...