The Oil Drum: Europe

Now try extrapolating Nortel stock from IPO to 1999.

I think your a tad low in the sense your not adjusting for inflation. Inflation adjusted your probably looking at 1200 in 2012 dollars. Other than that about right.

Interestingly, if you shift the 2007 onwards curve upwards to remove the 2006-2007 downwards blip - then you do get a continuous exponential, but with a slight excursion recently. $25-30 offset. The resulting curve shape with dates feels about right, with prices rising $100 a year by 2012.

There is a hypothesis that can be made about this. On an underlying basis as 'possible supply' and 'demand' meet there is an exponential price rise expectation as users fight it out for supply. The market however is very human, certainly far from perfect, and can react to sentiment to introduce shocks into the price curve, offsetting the progress of the underlying price rises. Similar events can be seen around points of recession - the curve trend shape on either side is the same, the period of the shock is chaotic.

Thus the expectation is defined by the general curve, with periods of chaotic drift before the curve re-establishes itself. When does it end? Well I'd suggest that once people realise the available supply is on the way down the rules of the game change and we get a discontinuity in the price curve. I wish I could say I think that's going to be a plateauing, but Instead I think it may well be an upwards jump as active hoarding begins.