We saw the “blowoff” top in bonds last summer (see this and this). This summer investors get to witness what the “blowoff” stage of a massive stock market bubble looks like. My friend, John Hussman, outlined the technical case earlier this week.

But in addition to technicals, fundamentals and sentiment and how they relate to each other are also key components of identifying these things. Like most bubbles, investors are clearly aware of what’s going on.

And it reminds me of the real estate bubble in that at the peak of the bubble everyone knew it was a bubble.

Still, they couldn’t help but throw their hats into the ring. The same is true today. This is why it’s also sometimes called a “mania.”

This mania is unique in that it’s a less direct form of bullishness. Investors aren’t necessarily going gaga for residential real estate or dotcom stocks. They are going gaga for passive investing.

And this is probably a much greater indication of risk seeking than most currently appreciate.

Over the past decade investors have increased this risk-seeking behavior in a huge way.

The trend has accelerated greatly in recent months.

Make no mistake, this is quite possibly the ‘greatest bubble ever.’

At this point, it’s entirely taken over the markets.

So much so, in fact, that the major media outlets are proclaiming the death of active investing.

At the same time, they extrapolate the current euphoria indefinitely into the future.

But there are signs that these massive flows into passive ETFs may have actually exhausted themselves.

And if that’s the case, what besides massive price-insensitive buying is going to sustain the unprecedented valuations of financial assets?