Charles Kindleberger and Robert Aliber observed that 'there is nothing so disturbing to one's well-being and judgment as to see a friend get rich,' which explains the FOMO-driven psychology that drives bubbles and makes price discipline difficult.

Only about half of the nifty50 stocks (as enumerated by Wikipedia) remain in the S&P 500 today; while mergers and acquisitions account for some disappearances (not failures), missing leaders include Xerox, Kodak, Polaroid, Avon, Burrough, Digital Equipment, and Simplicity Pattern, illustrating how hard persistence is.

The risk in current markets is not just low annualized returns but the possibility of sharp multiple compression occurring over 1-2 years (like 1973-74) rather than gradually over 10 years, which would produce large capital losses despite earnings growth.

The appropriate price to pay for a company that will make $1 million next year and then shut down is slightly less than $1 million; however, stocks are priced at P/E multiples (multiples of earnings) because investors assume companies will earn profits year after year into the future, making valuation a question of discounting perpetual future earnings.

Stocks were tarred in the TMT bubble bursting and the S&P 500 declined in 2000, 2001, and 2002—the first three-year decline since 1939 during the Great Depression—causing cumulative returns of zero from mid-2000 until December 2011 (more than 11 years).

The TMT bubble burst in mid-2000, and housing bubble of mid-2000s led to subprime mortgage crisis with subsequent massive losses for investors, especially financial institutions that retained mortgage-backed securities.

The Magnificent 7 stocks (Apple, Microsoft, Alphabet/Google, Amazon, Nvidia, Meta, Tesla) have dominated the S&P 500 gains in recent years, with their combined market capitalization representing 32-33% of the index at the end of October, roughly double their share from 5 years ago.

Prior to the Magnificent 7 emergence, the highest share for top seven stocks in the last 28 years was roughly 22% in 2000 at the height of the TMT bubble, making the current 32-33% a historic extreme.

A bubble reflects not only rapid price rises but a temporary mania characterized by irrational exuberance, outright adoration of subject companies, belief they cannot miss, massive fear of missing out (FOMO), and conviction that there is no price too high to pay.

The three stages of a bull market are: first, only a few insightful people see improvement is possible after a crash; second, the economy and markets actually improve and most people accept it; third, after sustained good news and soaring earnings, everyone concludes things can only get better forever—the last stage marks bubble psychology.

Psychological extremeness marking a bubble can often be inferred from widespread participation in investment fads among non-financial types; legendary examples include JP Morgan learning of a problem when his shoeshine boy offered stock tips, and John Paulson's partner observing bubble conditions when a soccer dad bragged about tech stocks in 2000 and a Vegas cabbie discussed three condo purchases in 2006.

Bubbles are invariably associated with new developments—technological or financial—including the nifty50 stocks in the 1960s, disc drive companies in the 1980s, TMT/internet stocks in the late 1990s, subprime mortgage-backed securities in 2004-2006, and historically the 1630s Dutch tulip craze and the 1720 South Sea Bubble.

In normal circumstances, investment historians can use historical precedent to constrain excessive valuations (e.g., 'this industry has never sold above X% premium'), but when something is new with no history, there is no tether to terrafirma, allowing unbounded enthusiasm because it is owned by 'the brightest people' shown in headlines and on TV who have made fortunes.

Marks joined First National City Bank's equity research department in September 1969, where the bank invested mainly in nifty50 stocks considered so good that nothing bad could ever happen and there was no price too high—establishing his baptism under fire with a genuine bubble.

Three factors contributed to investor fascination with nifty50 stocks: first, strong post-WWII US economic growth; second, involvement in innovations like computers, drugs, and consumer products; third, the emergence of growth stocks as a new investment style that became a fad in itself.

The nifty50 were the object of the first big bubble in 40 years; since there hadn't been a bubble for so long, investors had forgotten what one looks like—causing them to lose 90% even though these were supposedly the best companies in America, with P/E ratios collapsing from 60-90x to 6-9x.

Further bad things actually did happen to several nifty50 companies in fundamental terms, beyond valuation compression—supporting the principle that bubbles based on overestimated innovation can involve real deterioration in business quality as well.

From his nifty50 experience, Marks formulated three guiding principles: (1) It's not what you buy, it's what you pay that counts—good investing is about buying things well, not buying good things; (2) There's no asset so good that it can't become overpriced and dangerous; (3) There are few assets so bad that they can't get cheap enough to be a bargain.

Technology evolution seemed gradual in Marks' early decades (computers, drugs, products improved incrementally) but in the 1990s innovation came in a 'big rush,' with e-commerce stocks going public at seemingly high prices and tripling on the first day.

There is usually a grain of truth underlying every mania and bubble—the internet absolutely did change the world and we can't imagine a world without it—but the vast majority of internet and e-commerce companies that soared in the late 1990s bubble ended up worthless.