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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: Perspective who wrote (36032)8/26/2005 5:04:18 PM
From: skinowski   of 116555
 
About bubbles... If you want to buy my house, I'll sell it to you, but I'll demand a very high price. Besides being driven by a normal desire to get paid as much as possible, I - the seller - will also worry about the fact that just about everyone who sold a house during the last few years was wrong - they sold too early. I will also worry that - if the bulls are right - I may never be able to buy another house... that I would get priced out of the market by the runaway boom.

So, I will demand a "premium" on the price.

As RE market keeps "proving" that the seller's concerns are justified, they will demand still higher prices. Eventually, the music will stop.

I may have felt somewhat similarly about selling you my QQQ's back in 1999.

The purpose of this exercise is to show that - apparently - in just about every bubble there must be a stage when prices experience a rapid acceleration, a blow off -- followed by an inevitable decline.

Along the same lines, on Wall Street, market makers and specialists at some point will get tired of selling into a rally - as the prices keep going higher. Eventually they will run out of inventory and will have to short into accelerating strength, which is painful. So, they will have prices go parabolic - and kill the rally.
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