When asset prices overshoot reality, eventually they have nowhere to go but down.

The main risk is that inflation could overshoot, landing at 20 or 30 instead of 5 6 .

This should create opportunity for investors, especially if there is a downward overshoot as the new equilibrium emerges.

Peak time The peak time is the time required for the response to reach the first peak of the overshoot.

The finance industry already is warning thatnew regulation may overshoot that is, have the unintended effect of sharply impeding growth.

We're not going to put the brakes on in time to stop at 450, so we've got to accept we're going to do an overshoot, and the discussion as we go forward has to focus on how far the overshoot goes and what's the pathway back to 350.

But uncertainty, lack of confidence, and policy paralysis or gridlock could easily cause value destruction to overshoot, inflicting extensive damage on all parts of the global economy.

The finance industry already is warning thatnew regulation may overshoot that is, have the unintended effect of sharply impeding growth. Now, we may soon face the same concerns over energy policy, and not just for oil.

China does not want its large current account surplus to cause the currency to overshoot on the upside, and it may now want to slow the renminbi s appreciation because of concern about the global economic slowdown.

In both of these cases, and in many others, brand power did more than lead to price behavior that was disconnected from fundamentals it also caused a dangerous overshoot, which, when subsequently reversed, damaged the brand.

Lowering volatility and sopping up excess liquidity can be beneficial, but there are risks here as well regulators can easily overshoot the mark, leaving financial markets with weakened capacity for price discovery and too little liquidity.

The second historical rule of thumb is that currencies on the decline tend to overshoot near the bottom, international currency speculators require a substantial risk premium out of the fear that the currency crash might trigger something even worse.

Indeed, because the creation of new assets in developing countries will be slower than the increase in demand for them, the price of existing assets in those markets equities, bonds, real estate, human capital are likely to overshoot their long term equilibrium value.