Economic bubbles encompass all types of bubbles such as real-estate bubble, stock market bubble and even precious metals bubble.
There are distinct traits or symptoms of a bubble. Over-confidence, exuberance and optimism and greed are classic traits of people in times when an asset is appreciating beyond realistic rates of return. Often a bubble begins its journey on good news where the fundamentals are solid but somewhere the over-confidence creeps in along with greed to make a quick return. This is when the asset gets into bubble territory.
There have been many bubbles in the past such as the Tulip bubble, great depression and the stock market crash in 1929, the south sea company bubble and the tech stock bubble in 2000.
The main point here is to make an attempt to identify these symptoms in an asset bubble that may be forming and keep away from the greed and protect one’s capital. Bubbles will always occur on account of greed, over-optimism and over-confidence.
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