Tuesday, June 14, 2005

Massive capital misallocation

Triple Waterfalls: excerpt from Basic Points
In the biology of markets, a Triple Waterfall (TW) is a spectacular metamorphosis which takes all or part of three decades. The process is asymmetric: the easy money phase takes close to a decade, followed by two decades of decline, disappointment, and despair.

What a TW gives investors is a set of bookends for the market. In each TW plunge, the precisely-opposed asset classes outperform on a secular basis. One knows what both the best and worst asset classes will be--for years and years.