The mania phase is the last stage of a bull market. It is when a particular market goes vertical. It should be the most profitable period for the bulls. It is not. Contrary to popular belief, bulls actually lose money in the mania phase. The bears make money. The bulls marry their investment. They think it should continue to go up. They don’t know when its time to jump ship.
There are three components to every market top.
1- It has gone parabolic.
2- Everyone is talking about it.
3- There is mass stupidity at the top.
If you ever invest in anything memorize these three points. Get a tattoo on your chest backwards if needed. Look in the mirror. Ask yourself the three points above in a question format.
Has it gone parabolic?
Is everyone talking about it?
Is there mass stupidity?
The best example today is bitcoin. I have wrote about it to the point of boredom so I will not digress. John McAfee actually said bitcoin can not go into a bubble. He wrote an idiotic op ed. He has given numerous interviews on the subject. He ignores 5,000 years of market history. He will be the poster boy of point 3-mass stupidity.
Conclusion
Never marry your investment. There is a time to sell. Always have an exit strategy. Read this book. Ask yourself this:
Am I the wolf or the sheep?