Just Another Manic Market

Among the behavioral signs, Nagel points to investors trading more for near-term gains rather than for buy-and-hold strategies -- an ethic alive and well in stocks like Baidu.

Another is a willingness among daytraders to make a living at stock trading. While that's hard to measure, Ameritrade's average daily trades did increase 29% in August from a year ago.

None of this is meant to argue that a broad-scale tech bubble is back, only that the mania mentality that precedes a bubble is stealthily returning to the market, just when few are expecting it. To have a full-fledged bubble, you need obscene valuations; and the average P/E on information technology stocks in the S&P 500 is around 20, less than half its 2000 peak.

On the other hand, that price-to-earnings ratio never dropped far below 20, while a ratio of 10 or lower is more typical of a bottoming-out figure. And that raises the possibility that the last bubble never fully deflated and that maybe we're just in the tranquil eye of a very long bear-market hurricane.

Alan Newman, who edits the bearish stock newsletter Crosscurrents, says investors feeling bullish about stocks are blind to a bear market that began in 2000 and that has another decade to unfold. "In tech stocks, valuations are anything but fair," he says. "Microsoft trades at 6.96 times sales and Intel trades at 4.06 times sales. No one in his right mind would make a private purchase of either company at their current valuations, so why would anyone buy a share in them at their current valuations?"

Whether it's a prelude to a new bubble or the second act of the old one, the persistent belief that we're safe from the mania of speculative investing -- belied by factors like surging margin debt -- can't be a good sign.

"You can't have a bubble when everyone knows there is a bubble," says Stanford's Nagel. "There has to be some people who don't believe it. It's the greater fool theory: You can speculate as long as there's a greater fool to sell to."

This could make 2005 like the sequel to a zombie movie: The Return of the Greater Fool.