A bubble is made from more than insane valuations - it requires a thorough delusion about the inherent value of the asset-class that's the source of the bubble. In the dotcom bubble, anyone that did anything online was considered infinite revenue potential, even if they had no revenue and no business plan. In the mortgage bubble, no-one had the fantasy to imagine the real-estate market going down on the whole. The ratings agencies' worst-case scenario was zero-growth.
It's obvious in hindsight, but apparently it wasn't in the present.
While there are isolated instances of on-the-face bizarre valuations, such as Instagram or color.com, the prevailing actors in the market are actually making money.
In other words, if this bubble pops, who will loose out? Will it have catastrophic consequences for the economy at large?
It's obvious in hindsight, but apparently it wasn't in the present.
While there are isolated instances of on-the-face bizarre valuations, such as Instagram or color.com, the prevailing actors in the market are actually making money.
In other words, if this bubble pops, who will loose out? Will it have catastrophic consequences for the economy at large?