CNN Money’s Paul R. La Monica has written an article about where to potentially find the next bubble: Pessimism.

The article brings forth an interesting point: Just as everyone kept buying internet stocks, real estate, commodities, etc., now everyone will want to short sell stocks in general. It argues this could spark the next bubble, which will act like a bubble in reverse, since it will not drive any prices higher, but all prices lower, than equilibrium.

We at Dumbagent think he is correct, but this is not a bubble. After bubbles occur, the pendulum will swing back the other way, and it will always swing a bit too far. No one knows when exactly the bottom will be reached, so some people will keep selling and selling past that point, leaving others the opportunity to buy stocks at bargain prices once again.

This happens not only with bubbles, but arguably with every stock. If XYZ inc. makes a favorable announcement, its stock may climb too high on speculation, and once investors realize it’s too high it may then fall too low, once again on speculation. It will then tend to settle at some point in between.

Therefore it is true that stocks that were too high will probably fall too low, but this is how the market works. When stocks climbed very high, they will fall very low. You can call it panic selling, a run on the banks, too much of a correction, or just bad times. Calling it a Pessimism Bubble is just a new name for the same old thing.