Speculative Bubble

Speculative Bubble

A situation in which prices for securities, especially stocks, rise far above their actual value. This trend continues until investors realize just how far prices have risen, usually, but not always, resulting in a sharp decline. Speculative bubbles usually occur when investors, for any number of reasons, believe that demand for the stocks will continue to rise or that the stocks will become profitable in a short time. Both of these scenarios result in increased prices.

A famous example of a bubble is the dot-com bubble of the 1990s. Dot-com companies were hugely popular investments at the time, with IPOs of hundreds of dollars per share, even if a company had never produced a profit and in some cases, had never earned any revenue. This came from the theory that Internet companies needed to expand their customer bases as much as possible and thus corner the largest possible market share, even if this meant massive losses. NASDAQ, on which many dot-coms traded, rose to record highs. This continued until 2000, when the bubble burst and NASDAQ quickly lost more than half of its value. Other famous examples include the tulip mania of the 1630s and the housing bubble in the early 2000s.
References in periodicals archive ?
Then over breakfast here was our Chancellor confronted live on the radio with the awful proposition that the great speculative bubble in e-shares could burst, impoverish investors who have staked their savings on it and quite possibly leave all manner of economic havoc in its wake.
Annual falls hit 1.9 per cent in March as the property market remains flooded with new residential units after a speculative bubble burst led to a $25 billion debt restructuring in a state-owned conglomerate in 2009-2010.
Speaking during the first meeting of the committee, on 4 November, Green MEP Pascal Canfin said that a new "speculative bubble" was ready to burst, and that member states would be ill-equipped to deal with the fallout because of public indebtedness.
Fiscal 1999 results for Japan's three largest securities houses are likely to include the biggest profits since fiscal 1991, when they were hit hard by the bursting of the asset-inflated speculative bubble, company officials said Thursday.
But as prices spiraled higher, finance officials realised Japan was trapped in a speculative bubble. They moved to rein it in by tightening credit.
and Dubai are the collapse of the real estate speculative bubble and, very much related, the freezing of the credit markets.
But the company has been bogged down in huge debts since the bursting of the speculative bubble. The document was prepared in January 1991 by LTCB officials who were then sent to EIE to lead the company's rehabilitation.
"This decline was fueled by security breaches and hacks, spiking fees and the popping of a highly speculative bubble."
It asked residents to say no to high prices, the displacement of the middle and lower social strata from the city's core, the ongoing elimination of public space, the criminal exclusion of residents from the decision making that affects the city, the construction of speculative bubble high-rise buildings, the impending environmental disaster and the ongoing deterioration of the city's character.
He added the present speculative bubble doesn't mean current prices for particular cryptocurrencies couldn't rise.
A quick Google search reveals descriptions of Bitcoin ranging from "scam," "speculative bubble," "investment mania," and "money laundering scheme," to "the currency of the future."