So far, so good: These are all solid factors for appreciation. There are shortages of an asset, causing the cost of it to climb-again, classic supply-and-demand principles.New products or technologies spur demand and, whenever something's in demand, its price naturally rises (what the economists dub demand-pull inflation).Low-interest rates and other favorable conditions in a nation encourage an influx of foreign investment and purchases.Interest rates might be low, which tends to encourage borrowing for spending, expansion, and investment.Major incubators of bubbles, which often interact or occur in tandem, include: Commodity bubbles involve an increase in the price of traded commodities, "hard"-that is, tangible-materials and resources, such as gold, oil, industrial metals, or agricultural crops.Īsset bubbles can begin in any number of ways, and often for sound reasons.Specific examples of assets include corporate bonds or government bonds (like US Treasuries), student loans, or mortgages. Credit bubbles involve a sudden surge in consumer or business loans, debt instruments, and other forms of credit.Run-ups in currencies, either traditional ones like the US dollar or euro or cryptocurrencies like Bitcoin or Litecoin, could also fall into this bubble category. Asset Market bubbles involve other industries or sections of the economy, outside of the equities market.These bubbles can include the overall stock market, exchange-traded funds (ETFs), or equities in a particular field or market sector-like Internet-based businesses, which fueled the dotcom bubble of the late 1990s. Stock market bubbles involve equities-shares of stocks that rise rapidly in price, often out of proportion to their companies' fundamental value (their earnings, assets, etc.).
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