I wrote this as a reply to a post on Creative Destruction, as it relates to innovation. It contains some new thoughts for me, so I wanted to include it here.
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Interesting thoughts. Do you have a good reference for the JP Morgan
engineering of the 1907 Bank run? I would like to learn more about
this.
I think the dramatic spikes before the drops are an
interesting phenomenon, and do seem to infer some larger event
occurring. @gregormacdonald on Twitter, wrote that: " When ability to
deliver a physical good reaches hard constraint, price amplitude soars
(both up and down). 2006 forward". By this he said for example: "The
inability to increase production of oil. The fact that non-OPEC
production has been flat, for example, for 6 years." lead to the huge
spikes and now drop in the price of oil.
But we have to remember
that _human relationships_ are involved in the "ability to deliver a
physical good", as mentioned by a previous poster. In the case of oil,
a recent OPEC member's willingness to curb production last week,
created a spike (up), in oil-related stocks. Take a look at the
interesting formation in this stock's intraday chart because of this
event. See the big cavern, around 1:30, and then the spike up:
This
stock's chart, is a diagrammatic slice of all our free markets, our
trade, our businesses. The fact that the information age has produced
new innovations which eclipse the industrial age is only a small step
in a normal cycle.
The relationships between people, in
governments, in families, in schools, in businesses, and how they
impact profit,(as with wars, OPEC, or Banking), or loss, (as with
Madoff), have much more impact on the tipping of the economic cycles,
in a stock, a company, or a country.
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