Can We Learn from the Past?

After peaking at $747.25/share, Google (GOOG) closed today at $508.95.  It's been a sharp decline over the past few months, but its meteoric rise since its IPO was even more phenomenal.  If you are a Google employee that's been around for, say, 2 years or even longer,  you have vested shares that are worth real money.  Secretly, you calculate your net worth more than a few times a week.  "Holy Sh*t", you think to yourself,  "I'm worth X millions of dollars, not even counting the unvested shares." You are quite pleased and you also rationalize the latest drop as only a temporary downturn.  The stock price will jump back, you say to yourself.  After all, Google *defines* the Internet.  You work for the greatest company ever.  Yet, maybe in the back of your mind, you are a bit concerned -- should you have sold some stock yesterday?  That recent decline looks kinda like the last decline.  And, even after a 30% decline, you are still in the money.  "Might as well stick it out", you tell yourself.  So, you continue to hold out -- selling nothing or only a small amount of your shares.

Maybe you exercised some options but did not sell -- holding out for potentially long term capital gain treatment on your winnings earnings.  You weren't figuring on the decline and maybe you forgot about the AMT implications.  Maybe that worry is another trigger in your mind that you should sell.  Or, maybe you've chosen to ignore it.

You are truly blessed.  You've made a great choice to come work at Google.  You've been rewarded handsomely.  All those free meals, massages, and trips re-affirm your greatness.  And, you are among the select few that get to define the future.  It's all good, isn't it?

Maybe Google is truly a unique experience and the stock will rebound.  It's kinda hard to tell.  However, our past, the repeated boom-bust cycles in the Valley of yesteryears, says something different.  Certainly, Google's success dwarfs the successes of most all other "booms."  But, we've seen this pattern before:



















Can we say with any certainty that the bust is not coming?  For you, the happy Googler, I truly hope this is a temporary "correction" in stock price.  However, I keep thinking that maybe you should take some money "off the table" and be rewarded for your efforts, just in case.