Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye CEO Keith McCullough. Click here to learn more about the Early Look.
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After a day like yesterday, I just had to bring back our boy, The Brot! In a must-read-and-study chapter of one of the most important books that has influenced my risk management #process, The (mis) Behavior of Markets by Benoit Mandelbrot, he reviews the Cisco (CSCO) chart from 1999-2001: “You can see how enthusiastic investors extrapolated the earnings trends of 1999 into a soaring stock price. In 2000, as earnings flattened, investors started sobering up and the bubble began deflating…” (pg 205) Is a Facebook (FB) data breach the beginning of the end? Or do Oracle’s (ORCL) cloud sales slowing matter more? Were either of these stocks bubbles? Or have there been far larger ones that gave birth to the narratives embedded in their stock prices? |
