Despite enduring two of the largest asset bubbles within a decade (the tech bubble and housing bubble) we will continue to have more bubbles because of our psychology that almost always believes that rising prices for assets are a good thing (even though we know it is not true). This is because many investments have converted their returns from dividend payouts to speculative capital gains. Because investors need capital appreciation to earn any decent return, we are more likely to invest by chasing momentum which leads to inevitable booms and busts. Investing has gone away from the advice of asset accumulation to asset appreciation. Accumulation means you own more of something. Appreciation means you own something at a higher price. Those are two distinct strategies and follow two different paths of investing. When you buy an asset (stock, commodity, real estate) where the principle investment gain is through capital appreciation you must hope for ever increasing prices to receive a return on your investment (Who I will call Appreciators). This is in contrast to assets whose primary returns are derived from dividend income which can be reinvested and accumulate more shares or property (Who I will call Accumulators). Therefore, if you hold an asset that relies on capital gains you do not care if the price becomes untethered to its historic valuation, by which I mean expanding earning multiples. In fact, you want multiple expansion because when sell you achieve a richer price than if the multiple didn't grow. Unfortunately, the person who bought it from you must sell it to someone else at a higher price still. Of course, multiple expansion is the bane of income producing investments because you receive a lower dividend yield. Here, you want multiple contraction, meaning lower asset prices. The two strategies lead to two different mindsets when prices rise and fall. When prices rise 1) Appreciators chase the price increase lest they lose their opportunity to buy it at that then lower price (The "buy now or be shut out forever" phenomena); 2) Accumulators see falling yields and either cut back or decline to invest further. When prices fall 1) Appreciators see fewer people willing to buy and sell in a panic if they find themselves deeply underwater because there is no guarantee they will be able to return to breakeven; 2) Accumulators see rising yields and are willing to buy because their investments' dividend payouts can be reinvested at those higher yields. What you wind up with are one type of investors, the Appreciators, who chase momentum and panic sell, meaning buy high, sell low and another type of investors, the Accumulators, who take advantage of price fluctuations to buy low and sell high. The former foment bubbles and the latter ameliorate them. Bubbles form when multiples expand and busts follow when multiples contract. To reduce the likelihood of a boom/bust cycle investors need to rethink their love of ever increasing prices and switch to investments that rely on income to produce the bulk of their returns.