Tag Archives: Buying at the top

How to Identify a Bubble: Wall Street Says It’s Not a Bubble, by Charles Hugh Smith

Wall Street tends to do a lot better than its clients. From Charles Hugh Smith at oftwominds.com:

The post-bubble-crash phase is already being prepared: ‘no one could have seen this coming’–except anyone who paid attention to anything other than self-interested shills.

It’s really pretty simple to identify a speculative bubble of epic proportions in stocks: if Wall Street says it’s not a bubble, it’s a bubble. As I explained in The Smart Money Has Already Sold, from the long view the entire game of “investing” (wink-wink) boils down to one dynamic:

Wall Street and the Federal Reserve inflate an unprecedented debt-funded speculative bubble and then lure retail “investors” (i.e. gamblers) in with the promise that the enormous gains are just starting, there’s so much more easy money ahead, etc. Then Wall Street distributes (sells over time so as not to alert the complacent herd of retail punters) its shares of overpriced rubbish (“investments”, heh) to bagholders, and then to everyone’s surprise (or not), the market suddenly crashes as the unsustainable bubble pops.

Wall Street has long practice in how to reassure the herd: since insiders have juiced the market higher for years at every dip (with the Fed’s free trillions offering a helping hand), the bagholders have been well-trained to buy the dip even as the wheels come off the whole “this time it’s different” scam.

Human psychology being what it is, desperate retail 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.

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