Frank Thoughts: The Secular Bull Market
Frank Boland
April 22, 2013

A two-hour college lecture can seem extraordinarily long when you’re in your early 50s, even with a ten-minute break!  But there I was sitting in Massachusetts Hall in Harvard Yard –surrounded by over a hundred “kids”- listening to Professor David Dressler talk about the life cycle of scientific breakthroughs.  And I had brought this tedium on myself!  I had called the professor some months before and had arranged a meeting at the Faculty Club.  In the catalogue it listed the prerequisites for taking his upcoming course and I had none of them.  I was totally unqualified.  But there in small print it said, “Or with the professor’s permission.”  So I called him and we set up a meeting at the Faculty Club.  

Professor Dressler, fortunately for me, had a strong interest in the stock market; it matched my interest in biotechnology.  But he seemingly had little understanding of the stock market; and I was equally ignorant in his field.  “Let me ask you a few science questions,” he began.  I tried to answer them as best I could.  “How did I do?” I finally asked.  “About as well the average incoming freshman, which is to say, you know virtually nothing,” he replied.  After that comment we ordered two glasses of wine and toasted our deal.  I could audit his courses (There would be three.) and, in turn, I would manage his money.  And so there I was sitting in Massachusetts Hall, the oldest person in the hall. 

In this particular lecture David was discussing major scientific breakthroughs and the time structures they go through.  In the beginning he said, “A major breakthrough is held up to unrelenting ridicule.”  “As time goes by it is ultimately accepted.  The third, and final stage, is that the breakthrough is considered patently obvious to all.” The latter comment was said with a voice dripping in sarcasm.

That particular lecture came back to me in thinking about the stock market’s performance and how markets go through similar cycles.  From March of 2009 the market has gone unrelentingly higher and recently hit an all time high!  But it has been overwhelmingly disbelieved.  It has even been ridiculed.  

Moreover, this has been a feared bull market!  It is wrongly called the “rally.”  While there is no dictionary time line for the word rally, connotatively the word suggests a short term recovery after a decline.  Rallies do not last four years.  Bull markets do.  Yet investors are focused every morning on the immediate direction of the market.   Virtually no one is focused on individual stocks.   This is why few investors have been able to equal, let alone exceed, the S&P 500 for years. 

Nothing is more company or stock specific than a compound in biotechnology.  The industry has nothing to do with macro events or the immediate direction of the stock market. It is stock specific, which is probably why it has been one of the best performing industries during this secular bull market.           

FRANCIS PATRICK BOLAND

4-19-2013                                

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