investment vs speculation and bubbles !

We normally mistake speculation for investment most of the times. But both are distinctly different and understanding this is very important in the field of investing. Speculation is when an asset or a business is bought with the hope of selling it at a higher price in a relatively short time. Bubbles are the result of rampant speculation whether it is houses, stocks, art etc. Investment is something that is made upon a careful analysis of the business and its long term prospects, so the value of the business and its growth prospects are important attributes in calling something as investment. To a certain degree both investment and speculation will coexist in making investment decisions almost in any business activity. But, pure speculation is a very dangerous endeavor if the past bubbles are any indication. Buying something just because someone else will pay a higher price for it tomorrow is a fools game, it's basically a greater fool theory. As long as a greater fool believes in this hype and bids up the price, this speculation will go on unhindered. But as some point, the pool of fools get exhausted and the bubble will burst, the tech stock bubble of 2000 is the classic illustration of this phenomenon. There is also this popular belief that real estate is always safe, but nothing is safe when speculation reaches a peak and everybody is drinking the same kool-aid. The peer pressure during speculative bubbles is so intense that it becomes very tough to avoid it. When your stupid brother-in-law or friend is getting rich speculating in the bubble, you'll be almost seen as as social outcast if you are not doing the same thing.