Tuesday, February 24, 2009

Pop Goes the Weasel

I started working for VERITAS Software (now part of Symantec) in February 2000. I wanted to get a piece of the “high life”; to make some serious money like everyone else was at the time.

In the year before my arrival, the stock had split 3 times, and when I got my initial stock grant of 600 shares I expected that to continue. Their stock was trading at around $260 a share at that point, and by the time my first week was over, I had already “made” over $10,000.

And then the dot.com bubble burst. - POP! -

I never did get to “cash out” that initial 600 share grant.

In October 2005 I quit the company, we sold our house, and moved to Liberty, KY. Our departure was timed perfectly; we sold our home for over 2-1/2 times what we had bought it for only 6 years before. Within just the next few months, property sales in Florida started to turn down.

- POP! -

I never had a lot of money in the stock market, but in the summer of 2007, I sold off every share and option that I had left. In October 2007, the stock market peaked at over 14,000 and has now dropped by almost 50%.

- POP! -

Less than a year ago oil reached over $145 a barrel. Now it is trading at less than $40.

- POP! -

In each of these cases – the dot.com bubble, housing boom, stock market, and oil – prices experienced a rate of increase that rose faster & faster until the rate of increase reached an almost vertical pitch (check historical graphs if you don’t believe me). And in each case, just like an airplane trying to fly straight up, they stalled and then came hurtling back down.

So what's next?

Well, I’m not a betting man, but if I was, I’d be watching our entire healthcare system very closely. From pharmaceuticals to health insurance, the costs – and profits – are rising at an ever increasing rate. Faster & faster. Higher & higher. Sound familiar?

Health care costs to top $8,000 per person

If that rate of increase ever nears vertical, you may want to watch for falling objects. Just listen for the “pop”.

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