Rich Man, Poor Man

After nearly 48 years in this business, we have seen a number of cycles and developed a long-term perspective. We have often spoken about the difference between a “secular bull market” and what many consider to be a bull market because it is up 20%+. The reciprocal is that a 20%+ decline represents a bear market. While those may be “tactical” bull and bear markets, they are certainly NOT secular bull markets. Secular bull markets tend to last 16, 17, 18+ years. Are there declines within a secular bull market? You bet! But even the number of ~30% declines in the 1949-1966 or 1982-2000 secular bull markets (including the 1987 Crash) did not deter the bull market. It is much like the story of Mr. Partridge (Old Turkey) in Edwin LeFevre’s book Reminiscences of a Stock Operator. Because he was such a shrewd investor, folks would come up to Old Turkey and ask what they should do in the markets. He would cock his head to one side and say, “It’s a bull market you know!”

That has been our mantra since the majority of stocks bottomed in October 2008. Have we raised cash from time to time? You bet. Have we rebalanced portfolios? Yes. Have we hedged to the downside on occasion? Yes. However, it has always been within the construct of, “It’s a bull market you know!” With the indices at, or approaching, new all-time highs, we thought it would be a good idea to repost one of our letters from a few years ago about bull markets and how smart/wealthy investors operate. In said report, we published a letter from our friend Richard Russell (Dow Theory Letters) titled "Rich Man, Poor Man." I like this story: