Financial Bubble

What is a financial bubble? How does it evolve? How can we protect ourselves from a bubble? I will try to answer these questions in this post, as this subject is always relevant but somewhat more relevant today when some assets are being traded near all-time high levels. A financial bubble (or economic bubble) happens when the price (e.g., market value) of an asset greatly exceeds its fundamental value, which is the value according to standard economic methods of valuation,

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Buying a house—A wise financial decision? (2)

In the previous post, I discussed whether or not buying a house today is a smart financial decision. I recommend reading it before reading this post, but if you’re a millennial who hates to read a lot, then the short answer would be no. Or probably not. Not everyone wants to buy today. Some are considering various alternatives for investment. Some do not have enough free cash flow, while others are waiting for a bubble to explode. Among millennials, some

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Buying a House—A Wise Financial Decision? (1)

Buying a house can be the most important financial decision you’ll ever make, especially if you live in coastal areas, where real estate prices tend to be higher. In a series of posts, I will consider how wise it would be from an economic perspective to buy a house today. I will not discuss psychological factors involved, for example, most people want to live under a roof of their own, or some other practical factors—you are very limited in being

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San Francisco vs. the NASDAQ

 “Real Estate Prices have gone nuts! The prices are insane!” Real estate prices are a major topic everywhere you go. Home prices have skyrocketed in recent years, becoming out of reach for most young people. The price-to-income ratio in Los Angeles and San Francisco is now approximately 10, which means that if you work ten years, earn the average salary of a person living in one of those cities, and save all of it, you would be able to buy a house at the end

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