Just about every relevant source I read is now writing about bubbles.

Are we, or aren’t we, inflating bubbles? The Economist is typical:

“TALK of bubbles is in the air again. The Dow Jones Industrial Average has hit an all-time high. … Twitter has floated its shares on a flood of investor demand. Private-equity groups are buying companies using amounts of debt not seen since 2008. [Property and artworks are making new records] … Robert Shiller of Yale University, who correctly identified bubbles in tech stocks in the late 1990s and in property in the 2000s, has expressed unease about giddy American share valuations.

… The Economist’s house-price indicators suggest that property in New Zealand, Canada and Australia is substantially overvalued …

The Japanese stockmarket is up 51% so far this year …”

… on and on the examples go.

And, on and on go the rationalisations, by some, that we are not in a bubble (yet) in this or that market. Even the Reserve Bank recently used the “not yet” language regarding Sydney house prices a few weeks ago. But everyone is watchful. No-one wants to miss the top.

In this context the Wall Street stock market is key. How often have you heard the talking heads talking about the markets “taking their lead” from Wall Street. When Wall Street is bullish everyone wants in on the party. When it turns bearish, or collapses, everyone wants out. (September 2008).

Another common characteristic of many financial markets is the distinct asymmetry between the slow climb up and the steep fall down.

So let’s just look at Wall Street.

This, from Zerohedge a few days ago:

Interesting correlation, don’t you think? … and, the Zerohedge post goes on …

They say those who forget the lessons of history are doomed to repeat them.

As a student of market history, I’ve seen that maxim made true time and again. The cycle swings, fear back to greed. The overcautious become the overzealous. And at the top, the story is always the same: Too much credit, too much speculation, the suspension of disbelief, and the spread of the idea that this time is different.

And then the current Wall Street sentiment is described (pretty accurately if one is to base it on widespread writings and data I’ve seen) as follows …

… bullish sentiment at record highs, margin debt at record highs, bears capitulating left and right, and a market that is increasingly dependent on brokerage credit, Federal Reserve stimulus, and a fantasy that corporate profitability will never again come under pressure.

Eerie, isn’t it?