The investment value of a stock comes from the cash flow it generates. Speculators, in contrast, care not a whit for cash flow; they are focused instead on future stock prices. This is the “greater fool” theory: Pay a foolish price with the hope that a greater fool will pay an even more foolish price.

A bubble happens when speculators push prices foolishly higher than justified by the cash flow. The bubble pops when speculators no longer believe that prices will keep rising — because there is no reason for them to buy if prices are not rising.