How to Identify A Bubble: Wall Street Says It’s Not A Bubble

s The comments below are an edited and abridged synopsis of an article by Charles Hugh Smith

It’s simple to identify a speculative bubble of epic proportions in stocks: If Wall Street says it’s not a bubble, it’s a bubble. It boils down to one dynamic: Wall Street and the Fed inflate a debt-funded speculative bubble and then lure retail investors in with the promise of enormous gains just ahead, there’s so much more easy money to come, etc. Wall Street distributes its shares of ‘investments’ to bagholders, and then the market suddenly crashes as the bubble pops.

How to Identify A Bubble: Wall Street Says It’s Not A Bubble | BullionBuzz | Nick's Top Six
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Wall Street has practiced how to reassure the herd: Since insiders have juiced the market higher for years at every dip (with the Fed’s QE helping out), the bagholders are trained to buy the dip even as the wheels come off the whole ‘this time it’s different’ scam.

Human psychology means that desperate bagholders cling to the delusional belief that a recovery to new highs is just around the corner because that’s what the market has done for 13 straight years.

Every decade or so, Wall Street spews the same justifications for ‘this is not a bubble’: This rally is just getting started, because corporate profits are rising and will support much higher valuations; the Fed will never let any bubble pop; and if we look at comparative charts, it seems that the S&P 500 is still undervalued.

The hardest part is waiting for the pain from the last bubble to wane enough for greed to overwhelm caution, but it’s finally showtime, and the bagholders continue buying junk that’s guaranteed to collapse in value. The post-bubble crash phase is already being prepared: No one could have seen this coming—except anyone who paid attention.

The pain will be colossal, as will the profits for Wall Street insiders. They will be hiding their glee at getting away with the same old “this isn’t a bubble” scam.

What nobody asks is, will the bagholders have anything left after this third-time’s-the-charm bubble pops? This isn’t the end for the ‘this isn’t a bubble’ scam. Without greed-fueled bagholders with cash/credit to gamble, the game is over.

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