OT(?): Developing and bursting of bubbles

I wish instead of only 22% cash I had as much as Elias last year or so said he has. Probably too late now for me to raise more. I was waiting for what Jim’s favourite chart calls “Bull Trap”:


The funny thing: Only now, in hindsight, while looking at a 1 year chart of the S&P, I realize that while I was waiting for it we already HAD exactly that “Bull trap”: In March, with the S&P after falling 15% quickly rising 8% again. So the 15% down apparently caused “everybody” to think:

Puuh, it’s over. Back to normal again [Read: Up! What else?] Now I go shopping for bargains”.

While that “Bull Trap” was developing all I saw in March was a line going upwards, lacking the imagination how that would look like if it suddenly would turn downward - as it did this month.

So the previous years and the last months are following exactly the scheme of how bubbles develop and burst laid out in this chart. In other words: It just begun and the worst is still to come (over the course of this and maybe the next year too).

Any comments from the knowledgeable people here, and the ones having been through several those markets?

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In 1975 I was silver spooned (and repeated assaulted on this board because of that) with 25 shares of Berkshire along with shares of Norfolk, CSX, Coke, Pepsi, Bank of Granite (which as I’ve written here went to zero), and exactly 21 others. The total inheritance was less than $35,000. I was too afraid to ever sell, never had the confidence nor opinionality of my strong sure-minded peers.

In 1983 I (we) bought a 3 person insurance brokerage firm…and 1993 I or we (my insurance brokerage firm of then 35 people) merged with AJ Gallagher and I owned 50.01% of it…for a whopping net $1 mil which all thought was a below reasonable value bailout…and it was. (Note we sold for $2 mil but there was a debt elimination from a previous buy in the sale contract).

The first paragraph is worth about $16 mil and the 2nd is close to 8 figures.

The big question: When was I, or you, supposed to sell, wait for the big capit…and smartly rebuy? Of course we must do this about 20 times over that period…right?

My tiny, tiny, tiny, tiny, and even more tiny “privileged inheritance” of Norfolk Southern has been in the family now for over 80 years and has returned about 11% annual since then.

That NSC stock today? Well honestly if it was my only holding I could live very well off it till I die.

Of course I’m not a genius. I do follow Jim here on his Berkshire views and I have bought several of the stocks he’s mentioned because it follows my less-than-certain “always gray” view.

Just tossing in some long term thinking for those with more years left than me.

Sell and buy is a tough business. You better be very disciplined.


Jeremy Grantham? He writes with incredible intensity as to investment values and cycles. And he has beaten Mr. Market by 3% over time.

But guess what? He doesn’t sell all his stocks…ever.