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While explaining the complexities involved in pondering "where did all that money go?" to someone today, I realized that there's more to it than I had thought.  The obvious answer is that it doesn't go anywhere.  The value is either there or it's not there.  Another answer is that it's like a parimutuel betting horse track.  The money comes into the markets, the brokers skim off some, and the same money walks out 3 days later when the trades all clear.  A third answer is much more ominous.

Let's say someone puts their stock up as collateral for a loan.  And let's say at first, the stock prices go way up.  So they can borrow more against it.  It's the same thing as the home equity ATM machine syndrome.  When stocks drop, the ATM machine goes in reverse and it's looking for deposits, not withdrawals.

When you apply a lot of financial leverage, then money really does appear and disappear.

When  you have a stock market bubble or housing market bubble or a tulip bubble, from what I've read, it needs large amounts of debt or it won't really have enough fuel to reach bubble status.

It's bad enough when you have a stock market bubble and you get a false wealth effect.  It's much worse when you have a housing bubble because the dollar amounts are much bigger and the impact on lives is very direct.  But what happens if you have a bubble where governments get very big and borrow massive amounts of money to keep running?  It's the large banks that get hit.  But I suspect there's a lot of collateral damage, so to speak.