Another classic manifestation of a bubble is that small investors begin to "pile on", thinking that the bubble asset class is a "sure thing", and that they "can't lose". Data now shows that this pattern is now occurring, with small "retail investors" -- Main St, not Wall St -- shoveling money into the stock market at a record pace.
Wall St insiders know that this is the time to get OUT of the market. They use this last stage of parabolic rises to sell. They "take their money and run". They have also been doing this since this past summer.
Still another classic characteristic of a bubble is that investors are so convinced that the bubble will continue to rise in perpetuity, that they go deep into debt to put the money into the market, thinking that they can't lose. But when the trigger event occurs, they ALL lose because there is no one willing to buy in a collapsing bubble market. Who wants to try to catch a falling knife? And all those highly-leveraged investors get slaughtered as the market collapses. In the past few months, margin debt has reached all-time highs, with investors borrowing record amounts of money to go "all in". They never realize that this behavior is textbook bubble behavior. It's all psychology!
Interestingly, most small investors also have a bad habit of "holding on", even as the market falls further and further, hoping beyond hope that the market will turn around and redeem them in the end. It never does. Small investors ironically tend to sell and leave the market just about the time that the market reaches its nadir and starts going UP again!
