When a buyer and seller engage in a transaction, it was purchased at a price, at that time. Is that a bubble or market accepted price?

I ask anyone that says they don't believe in Bubbles to describe bitcoin 2016 to 2018 price action.

Vance C. - A willing buyer and seller of 1% of a company's stock in a single day does reflect but does not set the value of the company. If Amazon goes up or down by 10% in one day, did the value of Amazon really go up or down by 10%. Bubbles do exists based on normal willing human behavior. If your mind is open, you might want to read Soros' book The Soros Lectures: At the Central European University or watch the lectures on YouTube. You can watch or read just the sections on his economic theory. What makes the market fun is finding mispriced stocks and buying them or shorting them. Good luck. DLS

Hi David, I actually agree with you. I agree with Soros. My mind is open and that.’s why I understand the other side of the coin - people that say there are no such things as bubbles. Market value can be described in intrinsic valuation terms. Market value is equally defined by relative value, and/or as the transactional price between a willing buyer and seller, who are at fair arm’s length from each other at a certain date and time.

Here is an example of the difficulty of defining a bubble. From 10/07 thru 3/09—-almost 18 months—-the total return of the S&P was almost minus 60%. During the next 4 years 3/09-2/13 the S&P was up 135% (meaning back to even from 10/07). Was the 10/07 price a bubble? Or was the 3/09 price a “reverse bubble”? A bubble implies objective reality that can be known in advance. This is very rare. What one can do is look at prices and analyze what else has to be true to justify that price. The only time I ever observed extreme over valuation was at the peak Nasdaq market in 2000. For example, for the price of Cisco to be justified, it’s growth would have had to be so high that it implied it would equal the size of the whole economy (or that GDP growth would double or triple). That did not happen. In 2009, many investors were convinced that real estate markets were still overvalued. But for that to be true, default rates at that time would need to rise by a multiple of 5x. That did not happen—-in fact they declined from there. Like the old cliche about economists forecasting 10 out of the last 3 recessions, the same is true about bubbles.

concept of a bubble is always realized in hindsight try timing the bubble

Great discussion all, both perspectives equally weighted.

Most hedge funds don't consistently make money. But some including Renaissance Technology's Medallion, certain DE Shaw funds, and activists like Paul Singer's Elliot management have consistently posted market beating return..excerpt from New Yorker: "Singer’s ventures have been consistently successful, with average annual returns of almost fourteen per cent..."