What is a Bubble?
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“The world keeps on changing, but there is always something, somewhere, that remains the same.” – Ruskin Bond, author
The world today looks much different than it did 20 years ago. Try explaining the concept of touch screen smart phones, Uber, Social Media, and Amazon (as we know it today) in the year 2000. The world may keep on turning and changing, but one constant can be found in the nature of markets: the law of supply & demand.
Even with advancements in technology and the ease of access to information, markets remain the same. Markets are driven by supply & demand and the beliefs and emotions of investors. While no two events are identical, investors behavior is often similar. Most of the time, investors are rational, and markets are calm. Rarely, like we saw back in March, you see a knee-jerk reaction that results in a trading anomaly- panic selling followed by panic buying. Occasionally, investors experience a euphoria that results in a market bubble.
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