You may hear it associated with a bull or bear market. You could hear it used to describe the new darling stock of Wall Street or a new investment strategy guaranteed never to fail.
Whenever you hear it, you are wise to ignore it.
The phrase is almost always used to describe a phenomenon that defies conventional investing or market wisdom.
Stock Boom
Remember how the tech boom of the late 1990s was “different this time?”Earnings didn’t matter. Balance sheets didn’t matter. Sometimes even products didn’t matter. This was the new age – the new economy.
In truth, many things have changed thanks to technological advances.
However, they changed because real companies produced real products and services and found a way to make money doing it.
The hundreds of companies the flamed out when the dot.com boom went bust may have had great ideas, but they were unable to translate those ideas into viable businesses.
Stock Ideas
The lesson for all of us is that assuming a good idea will become a good business is a mistake.It is also a mistake to assume that there are many new situations facing the market.
It is easy to get caught up in daily headlines and assume the stock market is facing a new and unprecedented crisis.
In most cases, this is not true. Credit crunches, liquidity problems, crashes in particular stock sectors, and other major problems have all rolled through the market before.
This is not to say the market won’t react badly to severe problems. However, experienced investors know there is usually an end to any crisis and the market will be back on track.
Stock Challenges
There are new challenges for investors and the stock market, but it is unlikely that any, barring an extreme external event, will permanently change the basic principals of how the market works.Companies still need to earn profits to stay in business. Businesses that are better at earning profits and have greater future potential will command a higher price in the market.
That isn’t likely to change.
