The Permanently Sidelined

Stock market discussions are known for their high intensity. Bulls and bears, whether professional or part-time, tend to believe in their position for thoroughly-researched reasons and have that research at their fingertips for hard arguing.

I’ve noticed in this latest market cycle, however, that a lot of my readers and subscribers aren’t as vocal as they’ve been in the past. When I discuss this with them, a lot of what I hear is just this: “I don’t care anymore.” One preempted the predictable bull retort that a mass of discouraged investors is just what a bull market needs to fuel itself higher when those people finally decide to get back into stocks. “I’m not discouraged,” he said, “I’m not angry, I’m not waiting for certain all-clear signals, I’m just out. I’m never going back. I’ve moved on. I closed down my brokerage accounts and have my capital sitting ready for other investments.”

If that’s a growing trend, it’s consistent with what happened in Japan in the 1990s after its big crash. The market jerked up a few times, then took back the gains after each time, and with each up/down cycle, more and more investors just walked away. These days, not a soul outside the financial districts of Japan’s big cities knows or cares what’s happening in the stock market because they don’t own a single share and don’t intend to buy one. “Life’s too short for that nonsense,” one told me.

The sentiment appears to be infectious. The idea of stocks is good when markets are young and investors are actually buying real ownership in real business enterprises, and they can choose which ones with fundamental research that they can see making a difference in the outcomes. Once the fundamental factors matter less, then less, then apparently not at all, then more people come to the conclusion that stocks aren’t driven by anything that they can analyze on their own but rather by puppet-string pullers high up in the towers of government and banking, and they call it quits.

I’m not sure we’re there yet in America, but the green shoots of a different approach to wealth management and preservation are visible. Japan was once covered in those same green shoots. Now, its stock market is all but invisible through the thick forest that the shoots became.

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