Just Another Manic Market

Others, like former stock analyst Henry Blodget, offered anodyne rationalizations to numb painful memories of the crash: "Our exuberance helps build industries, however boneheaded it may later seem," he wrote in an op-ed in The New York Times last month.

Blodget is right that the tech industry is doing just fine. But for investors, complacent thinking about stock corrections is just as dangerous as complacency during bubbles. It's just when everyone is so certain that there can't be another bubble that it becomes possible again. And the idea that a bubble like we saw in the late '90s is a once-in-a-generation occurrence is especially misleading.

"It's true that bubbles are separated by a long period of time on average," says Stefan Nagel, a professor of finance at Stanford's Graduate School of Business. "But they're not going to be separated by the same amount of time every time. So, that's not a safe assumption."

In fact, there's reason to believe that the demand for shares is already growing faster than the supply. As housing prices stabilize, or even correct in the overheated markets like Florida and California, some of the speculative money that drove it higher will be desperate to find a place that can offer more returns. Besides the stock market, where can it go?

Some of that money may already be heading in. According to TrimTabs Investment Research, more than $2 billion has flowed into U.S. equity funds alone in each of the past two weeks -- more than double the $900 million average this year.

Nagel says there are clear signs, both quantifiable and behavioral, that mark the beginning of a return to a bubblelike mentality. One is an increase in stock volume and another is a rise in buying stock on margin. While volume on the NYSE and Nasdaq is steady and at most rising slightly, margin debt in August stood at $208 billion, even higher than it was in November 1999.