Embrace the Entropy
An antidote to the chaos of today's stock market
Since last night, many stocks worldwide have been trading in the dark green, following a period earlier this week when the market was steeped in dark red. Currently, these market movements are being driven by one single individual: Donald Trump.
The status that individuals can attain today is far greater than it was in the time of our ancestors. In the past, when people lived in smaller groups, the influence of a single person extended only as far as that group. However, as society evolved, the stature of certain individuals grew significantly. Collective groups formed settlements, which expanded into urban regions—regions that gradually united culturally and politically. Over time, these regions developed into city-states, provinces, and kingdoms, eventually becoming what we now recognize as nations. As a result, the responsibility—and influence—of individuals in the highest positions has increased dramatically.
In earlier times, people invested in their own ventures or those of others within close-knit circles—often with time or barter rather than money. Today, companies have grown into entities capable of exerting considerable influence over an expanding group of people. Conglomerates, with deep roots in our society, have emerged, bringing both benefits and challenges.
Whereas news from distant lands once took days or even weeks to reach us, a single tweet can now instantly connect with a global audience of hundreds of millions. As an individual, one can choose to be burdened by the suffering occurring across the world. Humanity has survived through intelligence and problem-solving—skills that were crucial for survival in small groups, where resolving issues was key to endurance. Yet, in today’s interconnected world, it is wise to take a step back from the global challenges continuously unfolding around us. After all, more than 99.99% of the Earth’s population has no direct control over these matters. In other words: focus on what you can influence. This starts with taking control of your own life, then contributing to those in your inner circle, and ultimately extending your efforts to the people in your community.
Back to the stock market. At its core, the stock market is a marketplace where (previously) issued ownership certificates of companies are traded. Initially, this occurred between individuals, but over time, entities were created to capitalize on perceived inefficiencies in the market. Only recently have artificial algorithms been developed, which now influence the pricing of financial assets.
All these actors—individuals, entities, and algorithms—are driven to exploit what they perceive as emerging inefficiencies. This creates an interesting contrast: for every individual buying shares, another must sell them. Who ultimately benefits remains to be seen.
But one thing is clear: the average holding period for stocks is steadily decreasing. According to the New York Stock Exchange, the average holding period dropped from 6 to 8 years in the 1950s to just 5.5 months by June 2020.
This shift contrasts with the essence of investing: committing to companies for the long term. Rather than purchasing units for short-term fluctuations in a digital trading environment, true investing involves acquiring stakes in companies within the real economy. Unfortunately, this distinction seems to be increasingly lost on many new investors.
They are not entirely to blame, however, as our ever-digitizing world has created platforms where individuals can broadcast their narratives. Whether it’s Bitcoin, altcoins, NFTs, or hype stocks, in 2025 it’s possible to inflate the value of digital assets—with no intrinsic cash flows—or trade weak companies far above their actual worth. This is driven by demand outstripping the supply of such financial products: the narrative dominates.
As a result, short-term price setting—driven by algorithms, day traders, and "investors" with increasingly brief holding periods—becomes more dependent on the whims of the moment, dictated by whichever narrative takes precedence at the time.
This unfolds within a tension between narratives striving to become viable versus the power of time on reality. When it comes to market hypes, time has—so far—thankfully kept us on the right path in the long term.
Nevertheless, chaos is increasing in our world, and the stock market is no exception. However, where entropy is high, opportunities emerge. As an investor, you can seize these opportunities, provided you are willing to detach yourself from the herd—a herd that shifts direction daily.
To do so, you must first adopt a long-term mindset. Invest only money that you can afford to set aside for an extended period. With this approach, it should, in principle, make no difference if a stock you’ve purchased drops by 50% and remains at that level for 10 years, only to eventually surge toward its intrinsic value. Ultimately, suppressed intrinsic value is like a ball held underwater: as the narrative weakens and the intrinsic value develops, it’s only a matter of time before the ball surges upward with full force. In reality, this period is likely to be much shorter, especially as the trajectory of intrinsic value steepens.
Therefore, you must adopt a stoic perspective when observing short-term price movements—both upward and downward—driven by the aggregate of buy and sell orders on the exchange, shaped by a complex mix of narratives, discounted future expectations (at both company-specific and global levels), and the inefficiencies they generate, alongside the flow of efforts to capitalize on these perceived inefficiencies.
In this context, all buy and sell transactions should be independent of prevailing market sentiment and the historical path that led to the current moment.
Quality stocks can thrive in a world of increasing entropy: opportunities are seized by companies with the capital, capacity, and expertise to navigate such environments; not by the companies merely focused on their short term survival during times of crisis. Yet, during periods of chaos, even quality stocks may see their market prices negatively affected when broader sentiment is swayed. This, in turn, presents an immediate advantage for the discerning investor.
When you conduct thorough research into companies, you know exactly what you're acquiring when you press the buy button. This stands in stark contrast to those who, for example, chase hype stocks simply because their favorite financial influencer is raving about them. Self-developed conviction is unbeatable.
If your research into a company leads you to conclude that it is trading at an attractive level, you can proceed with a purchase. In doing so, don’t fixate on how the current price level came to be. Whether the stock is at an all-time high (ATH) or in a dip matters little to the conviction you should hold. What counts is the gap between the current price and the eventual development of its intrinsic value, as reflected in its future per-share price—not the prevailing sentiment. Nor should it depend on the initial price you paid for the stock. For example, if a stock drops by 50% tomorrow, this should, all else being equal, not alter your investment thesis. Consequently, it should have no impact on your emotions.
By maintaining a watchlist of quality companies and their corresponding prices (or price ranges) at which you’d consider entering, you can rely on this framework during chaotic times, avoiding the influence of fleeting sentiment.
What a time to be alive. Times in which the small cohort of long-term investors currently finds itself vastly outnumbered. Yet, they remain resolute in their mindset. The only course of action available now is to capitalize on the increasing chaos in the market—exploiting inefficiencies and refusing to be swayed by shifts in sentiment, whether upward or downward.
Stick to your strategy. And embrace the entropy.
Eelze Pieters
April 10, 2025
Disclaimer: The information above is provided for general informational purposes only and should not be construed as investment, accounting and/or financial advice. You should consult directly with a professional if financial, accounting, tax or other expertise is required.