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the most difficult intellectual aspect for most people to accept in the practicality of their investing lives as it relates to capital markets is the degree to which capital markets in the stock market in particular pre-price they're in the business as if it was the market's job to take all those things that are commonly known information widely banted opinion so-called facts newspaper stories and all the rest and pre-price them as probabilities and it does that very efficiently this is the definition in almost every respect of the so-called efficient or semi-efficient market the fact is that when stories become widely dispersed facts news reality or opinions those widely dispersed notions have already been acted on by investors they don't wait so so many features that people get so concerned about end up having no impact at all on stocks when they actually occur because they've been talked about for a long time we can see that abundantly in everything that we ever wrote about how kovitt worked last year the surprise of the government lockdowns caused a market to buckle but after that the market moved in very predictable ways the fact of things like tax hikes where we've repeatedly told you tax hikes don't have the market impact that people fear because they're talked about for so long and priced into stocks long before the tax hike ever occurs that's hard for people to embrace in their bones because what they want to believe is that subsequent realities move subsequent stock prices but actually it's the anticipation of those realities and the probability of them that gets priced in advance and as i've said often and for many years without precision the market only pre-prices the next approximate three to thirty months it doesn't really care at all about what happens next week it doesn't really care at all about what will happen 10 years from now it doesn't believe if if you can think of it as believing what might happen 10 years from now when that 10 years gets closer it might price it and it might not depending on whether it was already something that had been too digested too long there are all these features that people it's in my lifetime i've heard an endless list of them you could go through the tax ones that i mentioned which were recurring ones debt you can go through government debt usually at the discussion point demographics uh people talk about things like the the much discussed notion of k-12 public education not being good enough about climate change well these things can all be very real and many are but that doesn't mean they impact stock pricing because they were already pre-priced unless they're too far out in the future in which case they have no impact at all or in case they're just about next week in which case they have no impact at all so it's important to remember that whatever these things are the market's pre-pricing probabilities of reality in the next approximate three to thirty months a little bit shorter sometimes a little bit longer sometimes but not much and that reality is the only reality anyone should actually practically be focused on you
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