June 2013
Beginner
288 pages
7h
English
Part VII
What Goes Up . . .
As I try to put the last decade in some sort of perspective, perhaps history can provide clues as to what it all means as well as what the future may hold and which dangers to avoid. After all, history is full of Internet stock moon shots, market bubbles, tulip crazes, and other bamboo-type performances that almost always succumb to gravity. So, perhaps the question of the day is whether such parabolic moves are ever maintained at their heights into the future, and if not, what can be done to minimize the risk of their ultimate demises. Said another way, does anyone really ever sell at the top, and if not, why not ?
Let's begin with a review of three charts shown in Figure 7.1—we'll use “area” charts and omit the labels for now—each of which depicts real and exceptional financial performance in one manner or another.
Figure 7.1 Area Performance Charts
To the naked eye, it appears that the item represented by each chart has gotten ahead of itself or at best might have one additional modest upward leg before reverting toward a more normal, gradual slope. After all, trees don't grow to the sky, and what goes up must come down. Or do they? Now let's fast forward in time to see how each chart played out as shown in Figure 7.2.
Figure 7.2 Area Performance Charts, Extended
Amazing? Welcome to reality 101 and land of the bamboos. Imagine shorting any one ...
