| Bubbles |
| Definition: Over-valuation of an asset caused by a combination of speculation and investing, often with speculation out-weighing investing. |
| Bubbles can only grow to their limits --- then they burst regardless of what speculators hope and investors know. |
| Historic bubbles include tulip bulbs, Florida real estate in the mid-1920's, and stocks in the late 1920s. |
| Important bubbles of the future include the one that hits personal investments and/or causes the economy to turn down, unemployment up, and deflation. |
| Recovery from a burst bubble can take a (life)time. The Dow industrial average returned to its high level of 1929 in 1954 --- 25 years to recover. |
| See also: Liquidity |
| The investment axiom that is always valid: Caveat Emptor |
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