Wednesday, August 20, 2008
Financial "Bubbles" & Barack's Campaign
Everyone has heard the term "Bubble" used in reference to various markets.
There was the Tech Bubble of the late 1990s when technology stock prices kept rising at an ever-increasing rate and everyone thought the sky was the limit. The Bubble burst, of course.
Then the housing market embarked on a rocket-ship ride straight up, roughly from 1999 to 2005. Prices doubled, went up 13% in a month sometimes. Everybody was going to be a millionaire. The Bubble burst, of course.
Recently the oil and other commodities had their turn in the Bubble bottle---a barrel was going to go to $200+, maybe more. That Bubble, too, seems to have burst.
It's been found that real, sustainable upward movements in price occur gradually, slowly, over time. And over that time, there are clear price setbacks that occur---periods of Consolidation, the Wall Street types like to call it, where the market pauses and digests its gains, moving back a bit, catching its breath, so to speak, before it begins its steady climb up again.
Barack's campaign is going through one of those Consolidation phases right now. Its catching its breath after a long, solid upward run...it is, thereby, avoiding the trap of being a Bubble.
These consolidations aren't fun in the stock, housing, commodities or any other financial market. It makes the weak-kneed bail out, selling to those who believe the long-term trend is still very positive. That dynamic is called, in Wall Street terms again--aren't those guys great!--a Shakeout. The weak get shaken out by fear that the upward trend is over, and sell to others. The buyers then reap the rewards when the price resumes its steady upward trend.
There's no shortage of Obama supporters on the verge of being Shaken-out right now. No, they are not about to convert to McCain; they merely want their candidate, Barack, to abandon the principles that have gotten him to where he is, and jump on the cynical-sleaze bandwagon of his current and former opponents.
This interlude of Consolidation will make Obama's candidacy all the more formidable when it resumes its relentless march to the White House. Those of his supporters who don't get Shaken-out will have an even stronger candidate to work for. Those that do get Shaken-out will miss out on the "profits" to come.