The markets prove endlessly fascinating, often because the life cycle of an idea can be so unpredictable, especially as to duration.  Some gradually take hold and hang around for years, like the low-volatility, “great moderation” meme that was so widely believed earlier this decade — or the buy-and-hold religion that reigned supreme for a good long time.  Other notions arrive quickly and capture attention like a giant magnet, only to lose their power to attract in no time.

Figuring out the nature of the market sociology is a fun exercise in and of itself, but the real payoff obviously comes from betting wisely on your observations.Don’t worry.  As is always the case, this is not a blog of investment advice, but of advice on the process of investing, so there will be no hot tips for you. Anticipating the arrival of ideas in the mind of the market is particularly tricky.  Take, for example, the abrupt awareness of the issues surrounding high-frequency trading.  The debate changed overnight, and now everyone is talking about it and, if the papers are to be believed, something will be done about it soon.  (Hopefully, even more details will follow on exactly what “it” is, what should be done, and why.)

On the flip side, knowing when to exit an investment means judging how long its supporting theses might be believed — are they resistant to change and only subject to erosion after long years of wear, or will they be washed away shortly by the tides, like today’s sand castle?I must come clean and admit that the title of this posting stems from that great source of inspiration, misheard rock lyrics.  Specifically, I was wrong for many years in thinking that the headline phrase was included in Jethro Tull’s Thick as a Brick.  Alas, it was actually “and the sand-castle virtues are all swept away / in the tidal destruction, the moral melee,” which made more sense given the concept behind the concept album.

A scant five months ago, it looked like the beach was littered with ships.  Not ones built from sand — or even wood that would rot away over time — but hulking destroyers made of steel that had run aground and looked to stay on shore forever as stark reminders of risky behavior.  It was a grim landscape and there was no hope of the mess being cleaned up any time soon.  Yet today it is as if a great flood came and washed the debris away.

Investors and investment organizations can easily get caught up in the norms of the day, especially when chasing relative performance.  One result is an inability to make an independent judgment on what is transitory and what is longer-lasting, resulting in reactive decision making rather than a judicious weighing of the odds.

At any given time, there will be issues and ideas that are central to the belief structure of the market that will be washed away, literally overnight.  Which ones that shape your view (and portfolio) today are most at risk from a rising tide?