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Finance: What is a secular trend?
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Finance: What is a secular trend? 13 Views


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A secular trend is something that changes over time, but is not necessarily an element in a repeated, continuing cycle.

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Transcript

00:00

finance a la shmoop what is a secular trend well people don't read the

00:07

newspaper on paper anymore people die older Americans smoke less and yeah [Man reading newspaper]

00:14

maybe that's related to the dying older thing Americans text while going to the

00:19

bathroom a whole lot more it's more than they did 20 years ago [Man with phone in bathroom]

00:23

these are all secular trends meaning people will likely text even more while

00:28

they're going to the bathroom in the future [Man using smartphone]

00:31

all right well things that are happening quote forever unquote I eat not just in

00:35

a short-term cycle like an economic cycle like the decline of the economy's [Economic cycle appears]

00:40

growth is cyclical not secular and unless you believe we're gonna be nuked

00:45

by North Korea then oh yeah probably decline is secular but assuming the no [Missile explodes]

00:49

nuke solution the economy grows few percent a year then dips for a percent

00:54

in roughly seven or eight year cycles its approximated by the stock market

00:58

cycle in more or less why does all this matter cyclical versus secular well with

01:04

your stock market investor hat on a cyclical bet it's kind of like a white [Man puts stock market cap on]

01:09

mark on a bike tire it's gonna roll up up up and then down down down in a cycle

01:15

such that it won't doesn't really go anywhere over time like the paper and

01:19

pulp industry it kind of just stays flat but you can double your money triple [Cash piles appear]

01:23

your money if you buy it right at the bottom of the cycle and then sell it

01:26

right at the top of it right that's a cyclical bet and you can think airlines

01:30

well over time yeah they too don't really get all that more valuable but if [Aircraft lands on runway]

01:34

you buy them right like just when the New York Times is declaring that

01:38

whatever West Airlines is certain to now go bankrupt and then sell them when the

01:42

New York Times declares that whatever West Airlines is certain to be the next [Man reading newspaper]

01:46

Google yeah you'll have quote ridden the cycle unquote nicely there's a good coin

01:51

to be made from here to here but a secular trend is different like one

01:56

thesis might be while the world's getting hotter so people will want to [Man discussing secular trend]

02:00

drink more liquid that's a bullish secular trend for Coke and Pepsi or you

02:05

might notice that the internet along with Skype or Google Hangouts has made

02:09

where you live not nearly

02:12

as important as it used to be so there's a secular trend to live wherever [New York Times Square appears]

02:15

you want and that might mean a mass exodus away from the high tax expensive

02:20

to live in blue states to the cheaper red states secular long-term non

02:26

cyclical and yeah just to watch out for those nukes [Nuke with north korean flag on it appears in the sky]

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