What exactly happens when an stock market bubble "bursts".

blah.. blah.. blah..

here's the real answer:

Exuberance causes people to over-leverage & borrow money to by stocks cause you "can't lose"

At some point all the money that is coming is in the market & everyone is leveraged to the hilt.

There are no more buyers to hold up the market, and finally some black swan event hits.

The whole pyramid scheme comes crashing cause the people on margin get wiped out and their account liquidated. This wipes their whole portfolio, good with the bad.

The sudden drop in the market causes all the other peoples stop loses to trigger and to auto sell.

Algos start selling and institutions start heading to the door in order to lock in profits and to raise cash.

This all causes the market to plummet until it hits a floor, some magical support level from the last recession, some mythical percentage drop that makes the risk to reward too good to pass up.

/r/investing Thread