The summertime talk all around us about the advanced age of the current stock market bull is incessant.
Though all that intelligent sounding "late stages" chatter from an endless stream of pundits rarely seems to offer any air time for the other side of that discussion; that the length of this "recovery" might actually go on for far longer than the vast majority of investors believe.
So which perspective do you choose? The one you always hear or the one that’s rarely in the headlines?
My view would be to align your opinions towards patience and discipline…
How Long is this Piece of String…?
If you think about it the length of a bull market is actually a meaningless argument.
It will end when it ends.
And that ending will be followed by a bear market which, historically speaking, will likely last for a far shorter period of time than the previous and subsequent bull markets it separates.
But the bear markets in between tend to shower us with layers and layers of new fears that keep you emotionally distracted and oftentimes blinded to the next bull market’s arrival.
Then, by the time you “feel good again” the next series of "late stages" chat will be in every headline from another set of so-called experts.
How about this from Collen Roche:
"On that note – have you heard the amazing news? The current rally is the longest bull market in history clocking in at 3,453 days.
“Of course, a bear market is defined as a 20% decline so never mind that the S&P 500 dropped 21.6% intra-day in 2011 because, technically, the max closing decline was just 19.2%.
“So I guess we don’t get to count that.
Also, never mind that the 20% figure is totally arbitrary. So, we have an arbitrary statistic that was technically breached…
“The point is that we are masters at creating interesting sounding narratives based on statistics that are mostly meaningless."
The Real Dragon in the Ointment
Having followed the demographic waves of the last 35 plus years, it is clear to me that investing based on a long-term, reality and demand-focused perspective is the farthest thing from the short-termism constantly plaguing the mind of the investor world today.
If I had to pinpoint the biggest problem for most investors I'd likely choose that "short-termism" fever making many ill.
What Does That Mean?
Short-termism is the tendency to judge financial markets and appropriate investment decisions in periods that are so short that it can result in long-term terrible decisions, higher fees, higher taxes and lower average performance over time.
And we’ve become accustomed to judging the financial markets in quarterly or annual periods (and in some cases, monthly and weekly), which contributes to this terribly unproductive perspective of short-termism.
This makes very little sense for the vast majority of the time when viewed in the context of the larger picture around us.
This has become an increasingly problematic reality for the investor audience today as we are bombarded with investment options.
Add in the 24-hour financial news cycle and the idea that ads often tell us we’re stupid if we can’t “beat the market” (even though 80%+ of the pros consistently fail to beat the market also).
Mix this all together and a toxic venom results; a dramatic decline in the average holding period of stocks.
How Much So?
Well, in 1940 the average stock was held for seven years, whereas today the average stock is held for 1 month!
Too much information does not make you better it merely makes you more confused and tense.
In the end, all of this information and “news” actually makes us into far worse investors over time while feeding our weakest emotional and behavioural biases.