chapter 12

Extreme market movements

The great advantage of studying the history of the stock market – and specific price trends in particular – is that we can quickly identify certain patterns forming that bear a scary resemblance to ones from the past. History may not repeat itself in exactly the same way, but, in some cases, it gets eerily close. That’s why the words ‘It’s different this time’ are probably the most misused words in financial circles. It is very rarely different. In fact, when these words are used by financial experts – as was the case at the top of the boom and the credit cycle in 2007 to justify heady sky high valuations and rock bottom yields on financial assets – then this is a warning signal that a market top ...

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