Saturday, July 08, 2006

The Beauty Of The Sky Scrapers

Trees never grow to the sky.

There are periods when certain market analysts, specific stocks or asset classes, and general market moods follow a strong trend. There will be analysts in these areas that develop a huge reputation - sometimes even moving markets with a word.

Neither the analysts nor the markets they cover will grow to the sky. There are natural limits on growth - the few short term exceptions are unstable and they are prone to sudden collapse.

Go-go stocks in the sixties, the eighteen year American stocks blow off top from the early eighties until 2000, and the prior and similar roaring twenties.

This is not a revelation to anybody that studies history, it is instead a caution that the present enthusiasms may be just as dangerous as past excesses.

We can present and leave this subject easily. Be cautious.

Follow a market analyst while he seems to have a finger on the pulse of the market - but realize one day their wisdom will fail. Invest in market trends realizing that they can last much longer than you might expect, and end much faster than you can believe.

As you are admiring that tall thin structure - think of the damage an ill wind can cause.



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