There are very few long-term bull markets that an investor can take advantage of in his lifetime. In fact, they are counted on the fingers of one hand. And there are plenty of fingers. That’s why it’s a shame to miss them.
The financial sector professionals of my generation have lived one and a half, but we have really only enjoyed one. The first, which began in the 1980s and ended in 2000 (with the explosion of the burbuja.com) we only half enjoy it, at least those of us who started working in the late 80s.
The next very long-term bull market started after the financial crisis of 2008 and lasts until today. That is the one that we have been able to fully enjoy to date.
But if those of us who are dedicated to this have only been able to enjoy a super bullish cycle and a half, most investors have had it worse: only have been able to access one. Since you don’t start investing until you start saving and normally that doesn’t happen until after 40, investors and savers of my generation have only been able to enjoy the super cycle that begins in 2009 and lasts until today.
In my News Letter “Los Cuadernos Del Mercado” of December 2017 I insisted on my theory that we were – and we are – in a stock market super cycle.
Unfortunately, at that time what was “selling” and attracting clients and followers was talking about “the crisis” —that would return— and “the bubble” —that would explode—, which evidently advised avoid investing in equities. Obviously my theory of the super cycle was totally diluted and limited to the then few subscribers of “Los Cuadernos”. Luckily it was in writing. They have it in the newspaper library on my personal website. I recommend reading it, because the approach is still valid (and access to old articles is free).
Most investors missed not only the first part of the bullish super cycle, but also the second
The result of so much “crisis”And so much“ bubble ”was that most investors not only missed the first part of said super bullish cycle, but also missed the second, which begins in mid-2017 and it ends with the arrival of the virus.
Now we are in the third “leg” of the stock market super cycle of which I spoke in those “Notebooks”. Most investors have lost two-thirds, but still have a chance to seize the last. It’s probably a little less profitable than the other two and probably a bit shorter as well, but it’s still more than worth taking advantage of.
Let us bear in mind that we entered it with a liquidity flood and plans economic stimulus unparalleled in history. And just when the competition, which is usually fixed income, has ceased to be and will be less and less. And, for the moment at least, the same can be said for gold.
Those who told investors not to invest because of the risk of a new crisis and the bubble that was going to explode as soon as they started investing tell them now not to do so because inflation is coming. If you listen to them, the result will be the same as in the two previous occasions: you will lose what is left of the stock market super cycle. And, as history teaches us, there won’t be another for a long time.
They will also tell you that the market is “very expensive” (like when “the bubble”). That is a simplification. What has risen like foam is technology. And you just have to look around us and at our current way of living to understand that it has done so for more than justified reasons. The rest of the market is not nearly as expensive, especially if we consider the improvement that corporate profits will have as a result of the strong economic rebound that will occur with the outbreak of the pandemic.
Since we are going to leave this terrible debt to our children and our grandchildren, let’s also leave them some patrimony to pay it.
We have indebted our children and our grandchildren to levels that will be unbearable for them., but in return “leveraged” economic growth (based on debt) is guaranteed in the medium term. Since we are going to leave them this terrible debt, let’s also leave them some assets to pay it off.
And if they tell you that there has to be a great correction, remind them that there has already been one. Over 40%, to be exact. As a consequence of the arrival of the covid.
Obviously this bullish super cycle will end as badly as the previous ones. But it would be a serious mistake not to take advantage of what is left. If my super cycle theory is true — and it has been — the third leg is worth it. Then, as it matures, we will gradually reduce exposure to risk.
And where will we take the money? Well, to everything that will rise when the bags fall. Because whenever a financial asset falls, others rise. And today with investment funds and ETFs we can invest in any asset, sector or country. Even bet against them. But we’ll cross that bridge when I get there. At the moment, what “touches” is to take advantage of what remains of the super cycle according to the risk-taking capacity of each investor.