Is this $9 billion splurge really a bull market, or an entirely different kind of bull?

It may just be misplaced Australian confidence built on our resilience to deal with floods and fires that leads us to believe we can get through this unscathed.

Feeding into that is the fact that a fair swag of the Australian population has not lived through a recession and has no idea what’s about to occur.

And there won’t be a mining boom this time around. China is not going to bail us out like it did during the global financial crisis or what Americans call The Great Recession.

The economic snapback once forecast by the federal government does not exist. It’s a myth. There will be a recovery in growth but Treasurer Josh Frydenberg pointed out this week that we have unemployment somewhere around 13% when all the people on JobSeeker are accounted for.

That is a giant hole in the economy.

A worrying report from Vesparum Capital this week showed that since March, Australian retail investors have pinned their ears back and thrown $9 billion into share investments.

At the same time, institutional investors have sold about $11 billion.

By way of explaining that, anyone with a bit of experience in the markets will tell you they are ruled by fear of missing out. Retail investors, the so-called mums and dads, experienced FOMO in March when stocks looked cheap and followed the herd into the market.

But stocks were cheap because institutional investors, the smart money, was experiencing fear and running for the exits.

This is no longer just a confidence blip. The markets have run amok.

A great example of this is Afterpay. It seems like a good company but it may also be a classic example of a speculative bubble.

Afterpay is currently valued at about $20 billion. Before the lockdowns its shares were around the $40 mark. Now its shares are above $70 each after falling to $8.90 when things went awry in March.

Even its founders, Anthony Eisen and Nick Molnar, have sold down their stake and why wouldn’t they?

Any smart money on Afterpay is there waiting for the suckers. Sure, speculation can be good, but this is not based on a sound investment strategy.

That’s not to say the company isn’t doing terrific things. It just means that it’s not worth anything near $20 billion.

History is littered with these examples right back to the tulip bubble in the 1600s. We never learn.

So when you hear your mates telling you that this is just a flu and you should throw everything at the market, walk away slowly, don’t make eye contact.

This article first appeared at InQueensland.