What is clearly an outrageously overvalued asset perched at nosebleed levels of central-bank fueled speculative euphoria is to the owner an asset at "fair market value."
-- that is, whatever bubblicious asset we happen to own and treasure as a source of our financial wealth could be popped, destroying not just our financial bubble but our psychological bubble of faith in permanent manias.
In the first bubble, those benefiting from the stupendous price increases are not just euphoric at the surge in unearned wealth--they believe the hype with all their hearts and minds that the bubble is not a bubble at all, it's all just "fair market value" at work.
In other words, .
All the certainties that seemed so obviously true and timeless to the believers melt into air, and their touching faith that the bubble valuations were permanent, rational and deserved dissipates in a wrenchingly painful reconciliation with reality.
The same central bankers that inflated the bubble with super-low interest rates suddenly see their much-loved (i.e. the bubble-generated psychological sense of wealth that emboldens people to borrow and spend money they shouldn't borrow and spend) imploding before their eyes.
Instead of flushing the system of bad debt and speculative leverage and allowing the market to reprice impaired assets, central bankers push the perverse incentives that inflated the bubble to new highs.
Should lowering interest rates to zero fail to reflate the bubble, central bankers then start buying assets hand over fist, creating trillions of dollars, yuan, yen and euros out of thin air to boost asset prices with direct and indirect purchases.
Rather than retrace to pre-bubble levels, valuations are caught in mid-air and pushed higher by central bank liquidity and asset purchases.
The nagging realization that all bubbles are temporary and irrational, and that bubblicious wealth is unearned and undeserved, lingers in the traumatized psyches of the former true believers.
Go pop somebody else's bubble, but please please please leave mine intact.
Once the skittish owners of a bubblicious asset sense the nail is pushing against the bubble and the inevitable popping is nigh, they sell sell sell.
Every punter who's not a sucker knows that 1) stocks are overvalued, 2) every bubble eventually pops, and 3) the survivors are those who sell at the first whiff of trouble.
and your mind attuned to the many needles and nails pressing against the thin membrane of the bubble.