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.<p>It's obvious in hindsight, but apparently it wasn't in the present.<p>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.<p>In other words, if this bubble pops, who will loose out? Will it have catastrophic consequences for the economy at large?
Someone - a very wise, very successful someone - once provided a pretty good definition of a bubble. A bubble is when the fundamentals are right, but the timing is wrong.<p>For example, let's consider the most recent housing bubble. The housing bubble was predicated - at least in the beginning - on the fact that populations are growing, but land mass (and livable land mass, at that) remains constant. If we work under that assumption, land is at a premimum, and therefore _in the long term_, it can only go up. However, the problem is that too much happened too soon, and it created artificially high prices.<p>The tech bubble of the 90s was largely similar. It was a case where any retailer could chuck a .com at the end of their name and make millions. The fundamentals, however, were largely correct. I do almost ALL my big-ticket purchases online. Amazon's online retail presence is huge and pervasive.<p>I believe we MAY now be in an "information bubble." This isn't the .com bubble of yore. Rather it is a battle for your information. Facebook's got a nice chunk of it, as does Google. Instagram had a nice chunk of your photos. Essentially, information is at a premium right now. To what end? I suppose that remains the deciding factor on whether or not we are ACTUALLY in a bubble. If the information can be monetized then perhaps what we are seeing is simply the markets catching up to the tech trends. Eventually it will slow down - but that's entirely different from a "pop."<p>The alternative to the above is that people start to realize that the information isn't wholly reliable, and can not be converted (easily - for now) into revenue. In that case I'd expect there to be a correction at some point. But I think the fundamentals are sound. Information is the currency of the future - especially as we become more and more connected.
I hope so. Bubbles are <i>fun</i><p>Seriously. Bubbles are where you get paid outlandish sums to program computers for a living. They're where your silly web startup gets bought for $40M for no particular reason. They're where you watch your stock portfolio double in six months, then double again four months later. A Bubble is truly a great time to be alive.<p>The important point is to recognize a Bubble for what it is and don't make the mistake of thinking you're actually as rich as you seem to be. Cash out frequently into things that are actually worth money, and don't go buying that $1.6M house that you can "afford" with all this "money" rolling in.<p>It'll stop rolling in soon enough. Then most of it will roll back out. And if you stay smart you will have had an absolutely great time of it.<p>At least that was my experience in the late 90's, quadrupling the salary, being "one year from retirement", then unquadrupling the salary and having a regular amount of savings and a regular looking stock portfolio. But while it was happening, it sure was good.
Does it matter?
Markets go up and down, rise and fall.
Recently heard breast augmentation was a reliable indicator of market changes.
Ultimately you want to make the most of crazy money while following key business fundamentals... Like being a going concern by making a profit.
There is a Bubble in Bubble Predictions; Robert Shiller <a href="http://www.dailyfinance.com/2012/04/11/robert-shiller-on-the-bubble-in-bubble-predictions/" rel="nofollow">http://www.dailyfinance.com/2012/04/11/robert-shiller-on-the...</a>
A bubble occurs when people who shouldn't invest, invest and ultimately lose money.<p>Right now it's still just a bunch of rich guys investing, which won't effect the 99% when they lose money.
People have been predicting tech bubbles since this website was called Startup News. Each large large investment/valuation/acquistion is grist to the mill. Eventually they will be correct.