Secular Trend

People don't read the newspaper on paper anymore. People die older. Americans smoke less. And yeah, maybe that's related to the dying older thing. Americans text while going to the bathroom a lot more than they did 20 years ago. All secular trends. Things that are happening “forever,” i.e. not just in a cycle.

Like...the decline of the economy’s growth is cyclical. Not secular. Unless you believe we’re going to be nuked by North Korea then, um, yeah, probably decline is secular. But assuming the no-nuke solution, the economy grows then dips in roughly 7-8 year cycles...which is approximated by the stock market cycle.

Why does all this matter? Cyclical versus secular? Well, with your stock market investor hat on, a cyclical bet is kind of like a white mark on a bike tire. It’s going to roll up up up. And then down down down in an, um…cycle, such that it doesn't really go anywhere.

That’s a cyclical bet. Think: airlines. Over time, they don't really get all that more valuable, but if you buy them right, like just when The New York Times is declaring that Whateverwest Airlines is certain to now go bankrupt, and then sell them when The New York Times declares that Whateverwest Airlines is certain to be the next Google…yeah. You'll have “ridden the cycle” nicely. There’s good coin to be made along the way.

But a secular trend is different. Like…one thesis might be: the world is getting hotter, so people will want to drink more liquid. That’s a bullish secular trend for Coke and Pepsi. Or you might notice that the internet, along with Skype or Google Hangouts, has made where you live...not nearly as important as it used to be. So there is a secular trend to live wherever you want...and that might mean a mass exodus away from the high tax, expensive-to-live-in blue states to the cheaper red states.

Secular. Long-term. Non-cyclical. Watch out for those nukes.