The PSEi staged another mighty 1.47% rally today. With yesterday’s 1.1%, the cumulative two day gains have accounted for a whopping 2.58%!
That’s aside from last week’s weekly gain of 1.38% and the other week’s 1.54%. So the vertical or blowoff phase has only been escalating.
The two day pump has also sent the PSEi past 7,700.
As I said during the weekend, such panic buying (combined with manipulations) seems to indicate that the Philippines is about to attain ‘nirvana’. And since paradise means abundance, there would be no need for money, prices, trade and production. So better take the chance of enjoying the last vestiges of the world of scarcity.
Sarcasm aside, English novelist Aldous Leonard Huxley once wrote “That men do not learn very much from the lessons of history is the most important of all the lessons that history has to teach.”
Let me showcase the history of Ayala Corp in the face of its experiences with the VERTICAL CLIMB dynamic.
Ayala Corp closed unchanged today.
The long term chart of AC shows of the various blowoff phases it had encountered since 1984. Question is: What does history tell us of the lessons of blowoff phases?
From the depth of January 21 2016, AC has skyrocketed by a stunning 42.5% (so far)!
Yet the previous path to April 10 2015’s 8,127.48 was hardly the same as what is being experienced today.
Current activities look more like the how the first PSEi 7,400 was attained in 1H 2013. Then or in 2013 AC soared by a staggering 64.91% with the vertical climb occurring at the final runup phase (March to May). Unfortunately, what followed was a crash -25.82% to the bear market levels
Through another colossal vertical +60.25% post crash ascent from August to November 2007, AC also beat its July 2007 high. Sad to say, this ended in tears as AC plunged by wretched 66.35% through the close of 2008.
Oh, in the 1996-97 episode, AC experienced THREE parabolic runs.
The first wave (leftmost arrow) delivered a mammoth 59% return in over 6 months. But like the 2013 and 2007 counterparts, the same bidding mania eventually hit the wall. AC tumbled 30.19% or regressed almost back to the price level where the blowoff run started.
Like today and 2007, the 30.19% crash resulted to a violent upsurge (the second wave see middle arrow) where AC soared by 31.76%. However, like the modern day peers such momentous rally faltered. AC plummeted 41.02% from end April to June 1997. The crash prompted AC to reach a price level below the origin of the parabolic pump in 1996.
Nonetheless, like today, bulls will have none of such retreat. So AC stormed back with a dazzling 3 month 73.91% vertical run. This marked the third wave. But then again, violent upside transformed into violent downside. When AC hit its exhaustion, the firm's share prices suffered an eight month titanic 79.75% collapse!!
Rewind back to the seeds of the boom of the 90s or the post balance of payment crisis and the post Marcos era.
AC which partly represented the very cheap Phisix skyrocketed by a fantastic 206.53% in the 2H of 1989. The vertical climax was however draped by a political event—a botched coup d'état. AC consequently crashed 40% in less than a month! Notwithstanding the minor vertical climb in March to April, AC resumed its horrifying decline. At the end of the cycle, AC lost a monumental 65%! Importantly, AC returned to its July 1989 level.
This serves as a wonderful example of the Newton’s Third law: For every action there is an equal and opposite reaction! Much of the occurrences above have manifested signs of Newton's Third Law of motion.
Yet it didn’t take too long for AC and the Phisix to recover and initiate a second parabolic climb. This new cycle began in early 1991 and culminated in May for a 122.2% return. But then again, violent upswings led to violent downswings. So after the peak, AC dived by 40.7% in 3 months!
For the current cycle, at 42.5% returns, AC could still have room to climb—if it were to mimic gains of the recent episodes. Most of which had about 60% gains. But at what costs would such price chasing actions be? A tradeoff of a potential less than 18% gains with probable losses of 25% and up? And what if AC won't follow past patterns of 60% return?
If there is anything history has to share to us, it is that destabilizing mania will end up badly. Or said differently, the obverse side of every mania is a crash.
That’s of course unless "this time is different"
No comments:
Post a Comment