All bubbles share common characteristics: during the euphoric expansion, participants are richly rewarded for buying every dip and for confidently embracing the belief that this time it's different.

(Exactly how it's different changes from bubble to bubble, but the core mechanism is identical: for these entirely rational and "mathy" reasons, this time is truly different.)

The common characteristic when bubbles pop is the eventual bottom is far lower than anyone believes possible. This confidence in the bubble's permanence permeates the entire financial system and encourages a faith that buying every dip will continue to be the road to easy wealth.

When euphoric risk-on switches polarity to risk-off, buying every dip becomes the road to ruin as the eventual bottom is incomprehensibly lower than the first stairstep down.

Here's a composite of what happened during the dot-com bubble burst. An Internet company that hit $90 per share has slipped to $60, and investment banks are recommending it at $60 based on "the Internet has endless growth ahead" and the loss of a third of its valuation makes it a relative bargain. The I>buy the dip crowd has already lost money buying every stairstep down, but a 30% decline must near the bottom, right?