Theory -

The average holding period for a stock on the S&P 500 has plummeted to approximately 6 to 10 months. In the 1950s and 1960s it was 8 years. By 2004 it had dropped to 1 or 2 years.

Basically, the stock market has become a casino. High frequency trading, Robbinhood “zero commission” trading, option trading etc.

In this environment, the present value of future cashflows is considered irrelevant. Narratives about bright futures is what drives prices. The US has a president who has a lot of power and he is prepared to do or say anything to keep markets high. Fighting against that is considered futile. He is going to be around for a while.

Then you have Pavlovian conditioning. As the US pushes further and further into uncharted deficient territory, everyone knows the authorities will basically do whatever it takes to prevent the wheels coming off.

No one knows how it will play out. I fear that a large swath of the population think it’s normal to get 10% investing returns for decades to come. Some even think 10% is not high enough and expect much more.

I guess the party keeps going and the delusional continues until suddenly and painfully reality hits all of us over the head. Maybe owning Berkshire is like wearing a helmet. No guarantees but certainly gives a better chance of survival than otherwise.

Sadly, a financial system collapse, or an economic collapse, perhaps brought about by oil, inflation, emerging market economies defaulting, a credit crisis, food shortages etc isn’t remotely our greatest fear at the moment…

Have a great day everyone!