Ten steps to see if you are in a bubble.

Fred Wilson (who is a generally smart fellow and a VC) thinks, like we do, that we are in the early stages of a Frothy Period (never say Bubble, says Fred :0 ). He is on these videos on TechCrunch. Chris Dixon makes the point that its mainly people coming out of "Hot Stocks" (eg people coming out of Facebook to start Quora, get $85m valuation) and that the market isn't doing it for everyone.

Then we have the Bubble Deniers - Other VC Roger Ehrenberg does a quick analysis of Groupon, Facebook, Twitter et al and concludes that, yup, they are correctly valued.

So, we have Newton's Law of Bubble Declaration - For every bubble caller, there is an equal and opposite non-bubble caller. What's a Rational Economic Decison Maker to do? Well, when the going gets tough, the tough make lists - so here is the Broadstuff Bubble Beaufort Scale, aka "10 Things That let you Know You are in a Bubble" guide.

1. There is a New New Thing that trancends the Old Economics, and you cannot value It the Old Way. This Time It will Be Different. Dumb Money companies start paying over the odds for New Thing acquisitions.

2. Smart people who have been there before start calling it a Bubble (or at least a "Frothy Market"), New New Thing apostles make ever more glowing claims of the dizzy heights available, while "Startup Networking Events" start to proliferate.

3. Companies with founders deemed to have "rubbed off the right stuff" (ie sons of, ex employees of, etc etc) get funded straight off at eye watering valuations for next to no product proof or traction.

4. There is a flurry of new incubators started by (newly minted) VCs

5. Companies start getting funded "off the slide deck" with no actual product

6. MBAs start leaving banks to start up companies

7. The "Big IPO" happens (Netscape et al)

8. The big Investment Banks start to make a market in the New New Thing, punting in your pension money, and have "entrepreneurial" options and divisions to retain les autres MBAs

9. Your Taxi Driver gives you advice on what stock to buy - you punt in your own pension money

10. A New New Thing darling buys an Olde Industry thing at Stupid $$$. This is the Top Of The Bubble.

By my reckoning we are on a Force 4, gusting 6 Bubble Inflation stage. By Force 3 you are defintely seeing foam, by Force 4 its White Horses, by Force 6 its like the top of a Latte.

Just to remind you - what a "Not Bubble" market looks like:

(i) Experienced people with good ideas have to hustle to get funding

(ii) VC's do not have secret meetings to try and restrain startup price inflation

(iii) You cannot look at any deal by a Russian Billionaire / Financial Arbitrageur of your choice (because there are none) and suspect its a smart guy playing the Greater Fool Game.

Update - a few hours after this, I read TweetDeck has apparently been sold for $30 - 35m (not certain if its cash or stock). While I say kudos to Ian Dodsworth, I also say that its a bubble sign - they have about 20% of the Twitter Ecosystem of about 200m (say 40m), so in theory a user is valued at c $1 - but its a free service. So its more accurate to say they think each user is worth 10,000 ads per annum (at a Social Media bubbletastic CPM of $ 0.10, and before dividing by % defunct users ), but the problem they have is that the first time they pop up an Ad, I (and I suspect many users) will defect to the next VC funded free platform, as at the end of the day its just a front end to the actual Twitter platform.