[jl2718]

I think there is a heavy quantitative induction mechanism in the markets, that is, a positive feedback mechanism from index funds trying to minimize divergence, or hedge funds trying to font-run those algorithms. So it doesn’t take much to set off irrationality, and not much exists to pull it back, because income investing basically doesn’t exist, and therefore value investing has little support.

Partial side note: obviously the FOMC has a lot to do with investment flows, but I’ve found that the tax system is just as relevant or more so in market distortions, but it is poorly understood, rarely observed, and never considered for alternative possibility, like the water that our economy swims in. For instance, the combination of 401k and double taxation killed income investing. Also, capital gains tax and long-term preference deters sale in a pump, and actually works the other way to prefer short-term selling of losses, so the net effect is to add to the positive feedback. Every tax situation is a comparison of speculative gain and loss on an efficient market hypothesis prior, versus a guaranteed tax loss.