The "Long Run" is Always Far in the Future

When does the "long run" arrive?

Whenever you read about value investing, you hear that although stock prices bounce around, up and down, in the short term, in the "long run," value the market recognizes value. I don't know about you, but haven't noticed that any stock's price ever stops bouncing around from day to day. Only when trading stops.

Doesn't matter whether it's General Electric or Coca-Cola, which have been trading for over 100 years, or the latest IPO -- the stock's price bounces up and down throughout every trading day.

So, just when is the "long run?" Both stocks have been doing well now for several decades, but both companies went through periods when they didn't look so hot, and their stock prices suffered. Yet those bad periods were still 60 years or more after their IPOs. So were they still not in the "long run?"

It's clear to me that there can be no one, set, truly "correct" price for any company's stock, because during active trading that is going to bounce around constantly due to the flow of sell and buy orders, by the constant battle between bulls and bears, supply and demand. And in the larger picture, that ebb and flow will often produce an up and down trend line.

Did the people who bought General Electric when it was doing a lot worse than now somehow know that Jack Welch would become its CEO? Or did they just figure that GE would somehow attract, find and hire the right person?

With the great increase in interest in the investing culture in investing for capital gains in the past 40 to 50 years, you'd think that somebody pay attention to how ephemeral capital gains actually are, with the vast swings in price. What goes up today can go down tomorrow. What gains are actually permanent? Some price gains are most likely permanent, but nobody knows when that point is reached. Bear markets have in the past taken even good companies down to prices their stocks hadn't seen in many years. And that's just counting the ones that stay in business!





stocks long run
stocks long run