“A bubble is a market cycle that is characterized by the rapid escalation of market value, particularly in the price of assets.
Typically, what creates a bubble is a surge in asset prices driven by exuberant market behavior. During a bubble, assets typically trade at a price
that greatly exceeds the asset’s intrinsic value. Rather, the price does not align with the
fundamentals of the asset.“
This definition is suitable for our discussion; there are three components of a
“bubble.”
The first two, price and valuation, are readily dismissed during the inflation phase. Jeremy Grantham once produced the following chart of 40-years of price bubbles in the markets. During the inflation phase, each was readily dismissed under the guise