“Stock market bubbles don’t grow out of thin air. They have a solid basis in reality, but reality as distorted by a misconception.” — George Soros
Here I go again, sounding like a broken record. A couple months ago, I wrote an article noting that we are likely in the final act of the biggest stock market bubble in history.
But given there is so much at stake, I feel an obligation to repeat myself. In doing so, I know I will draw the ire of many market participants. It’s a given that Chicken Littles are never very popular when everyone is having a good time.
But the fact remains that this bubble, like every bubble that preceded it, will end eventually. And when it does, a lot of investors are going to get wiped out. Sadly, the majority of those losers won’t be the “inside” crowd.
Instead, they will mostly be average, unsophisticated investors. But rather than rehash my opinions on the state of the markets, I would like to focus on the psychology of the class of investor that is the latest entrant to this 12-year-long U.S. equity bull market.