In The Three Skills of Top Trading: Behavioral Systems Building, Pattern Recognition, and Mental State Management, Hank Pruden points out a common condition that afflicts many an individual investor: the prejudice that arises the minute a portfolio position is taken, or a strategy is adopted:

… flexibility is difficult when you have made a financial commitment. Once you’ve gone long or short, you’re no longer an unprejudiced observer. If you’re long, you tend to see new items, charts, and statistics in a bullish light; if you’re short, you’ll probably see the very same data in a bearish cast. Either way, you are cleverly rationalizing your position to your heart’s (not your pocketbook’s) content.

And, alas, this is a condition of the investment advice industry as well. I often say to clients “you have to beware of folks in our business, we’ve all been reared on the notion that stocks are always and forever the best place to house your long-term money.” I.e., we can be the cleverest of rationalizers when the market goes south.

Now, sure, long-term market history doesn’t necessarily argue with the hold-stocks-for-the-long-term notion, but it sure shakes the sound out of it from time to time. Hence, one has to remain open-minded to all possibilities and accept, and compensate for, the true message of the underlying data.

We can also apply the quote’s message to the folks who the media trots out to tell us with unbridled and, in virtually every instance, undeserved confidence precisely where the market’s going from here. While I suspect most of them feel fully just in their presentations, make no mistake, they’re singing the tune they’ve adopted in their own portfolios (personal and/or managed for others) and/or the messages of their recently published books.