James Montier (via John Mauldin) observes that the average holding period for New York Stock Exchange stocks is now down to six months.

We imagine this has something to do with the boom in high-frequency trading, in which stocks are sometimes held for all of six seconds. But week-to-week performance benchmarking of professional fund managers probably has a lot to do with it, too.

In any event, can we please stop pretending that what most fund managers are doing every day is "investing"? Holding stocks for six months isn't investing. It's trading. And because trading is a negative-sum game--one largely focused on trying to figure out what everyone else is doing--it is really speculating.

When you're speculating, there's no reason to pay attention to things like fundamental analysis, valuation, future cash flows, and all the other stuff they teach you in security-analysis school. For holding periods of less than six months, those things don't mean jack. Over holding periods that short, the game is all about figuring out what everyone else thinks and then gambling that you'll be right and they'll be wrong.

So remember that next time your favorite fund manager sends you a note patting himself on the back for his investing prowess. What he's really talking about is speculating.

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