On December 5, 1996, Fed chairman Alan Greenspan was addressing the American Enterprise Institute when he uttered a phrase that went down in history:

Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?

Now, former Reagan OMB director David Stockman is issuing a similar warning about markets today.

Mania in financial markets has raged so far out of control as to place them outside the realm of rationality, says former White House budget director David Stockman.

“There are no markets left in any meaningful sense of the word, just a raging casino infected with the madness of the crowds and the central bank pied pipers who mesmerize them,” he writes on his blog.

That madness is illustrated in the months-long rise of Chinese stocks and the rebound of McDonald’s shares last week, Stockman says.

As for China, the Shanghai Composite Index has soared 121 percent in the last year. “And what has transpired in the land of red capitalism during that parabolic move?” Stockman asks.

“Why everything has gone virtually straight south because the most fantastic credit bubble in recorded history is beginning to burst.”

When it comes to McDonald’s, the stock has jumped nearly 4 percent since Tuesday, despite a weak earnings report Wednesday.

That move can’t hide the fact that McDonald’s business model “is visibly failing (because people are tired of getting fat on its products), and has been for several years,” Stockman contends.

Bottom line: “this is a mania — an outbreak of herd irrationality that would make Graham & Dodd and any other true value analyst as welcome as a skunk at a garden party,” he says.

Meanwhile, as the Nasdaq Composite Index advances to a record high for the first time since 2000, it pays to look back at the dot.com bubble which burst that year.

The lesson: “investors weren’t wrong,” writes Wall Street Journal columnist Jason Zweig. “They just paid too much to be right.”

So, before you lose your lunchbox over the current Nasdaq rally, “make sure you aren’t repeating the mistakes of the past,” he says.

The problem 15 years ago, of course, was that “investors were so infatuated with how technology would transform the world that they were willing to pay any price to buy stocks connected with the Internet and telecommunications,” Zweig explains.

That focus now is on social media and other stocks connected to the “sharing economy.”

Last year, another Fed chairman, Janet Yellen, also warned of overvalued tech stocks:

Equity valuations of smaller firms as well as social media and biotechnology firms appear to be stretched, with ratios of prices to forward earnings remaining high relative to historical norms..."

"Irrational exuberance," indeed.

A collapse in the value of equities would ignite another financial meltdown – worse than 2008.  Supposed "Wall Street reform" did nothing to curb the very same activity in the derivative markets that brought the house down back then. 

Many analysts believe that a blow-up is inevitable.  Any shock to the system – a general war in the Middle East, Grexit, or a bursting of the tech bubble – could initiate a chain reaction to lay the economy low in a matter of hours.  Stockman is not being particularly prescient.  But his dot-connecting appears sound, and it wouldn't do anyone any harm to prepare for the worst.