Market Dynamics & Investor Behavior - Markets are not always rational, and prices can rise far beyond intrinsic value [1] - Bubbles form due to herd behavior, where people follow the crowd [1] - Rising prices attract more buyers, creating a feedback loop that fuels further price increases [1] - Media and stories contribute to market hype and irrational exuberance [1] - Emotions, rather than logic, often drive investment decisions [1] Economic Factors & Valuation - Low interest rates can inflate bubbles in asset markets [1] - Stocks and housing are both susceptible to irrational booms [1] - Shiller's CAPE ratio serves as a warning signal when markets are overvalued [1] Risk Management - Bubbles inevitably burst, although identifying them in real-time is challenging [1]