Having spent 10 years studying emerging markets, I know that you have patterns repeated over and over again. A bubble is like a fire which needs oxygen to continue... when you see there is no oxygen, things change.
Sentiment: NEGATIVE
The bubble, as investing phenomenon, has been well studied ever since the 17th-century tulip bulb frenzy. Its counterpart in bear markets is not well understood.
We've suffered a 'Ponzification' of the economy in recent years, as bubbles have built up and then burst, and each time we act as though it's the first time.
Concentrating wealth in the hands of the few and deregulating financial institutions and practices lead to speculative bubbles that eventually burst - and that brings the whole country down.
We see that hyperactivity and reward areas are important when the bubble's rising. People getting caught up in it. We also see areas involving mentalizing, which means thinking about other people: Who's buying? Who's selling? Do they know something? We see emotional areas before the crash that indicate a sense of uncertainty or dread.
For us, whether the market is skewed from a bubble perspective or not really is mitigated by staying focused on what we do best.
What we need to understand is, one, that there are market failures; and two, that there are things like asset bubbles and irrational exuberance. There are periods of booms, bubbles, and manias. These things, if left to themselves, can lead to crashes, to busts, to panics.
This world's a bubble.
Indeed, bull markets are fueled by successive waves of prior skeptics finally capitulating as their fears fade. Eventually, fear turns to euphoria, and that's the stuff of bubbles.
Everyone would like the world always to be in bubble times. But that doesn't happen.
Stock market bubbles don't grow out of thin air. They have a solid basis in reality, but reality as distorted by a misconception.