The fire analogy, or triangle, was developed by Quin and Turner in their book Boom and Bust to describe what is necessary for a bubble and thus also identifies the conditions under which a bubble may burst. The triangle states that an asset needs Oxygen, Fuel, and Heat. Oxygen is the marketability or ease of trading. Fuel is the money and credit availability. Heat is the speculation or momentum associated with an asset.
Assets have to be easy to trade by a large set of investors. Bubbles need credit or money to borrow and leverage into larger positions. Heat is the speculation or momentum of assets, which creates a sense of FOMO and provides positive feedback on market views.
We have all three conditions in the tech AI space, and until there is a change in conditions, we will continue to see prices move higher. Rates are coming down. These assets remain marketable, and momentum remains favorable.
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