My secretary Gail made a mean meatloaf from a recipe that had been in her family for generations. She passed the recipe on to her daughter, who made the dish the traditional way, too. One evening, when Gail's daughter was preparing meatloaf for a family dinner, she carefully discarded the ends of the meatloaf as she'd been taught. As she did so, she said, “Mom, I know I should slice off the ends of the meatloaf, but why?”
Gail stared at her. “You know, I'm not sure. My mom just always served it that way. She'll be here in a few minutes. Let's ask her.” When her mother arrived, Gail and her daughter were anxious to solve the mystery of the meatloaf. “Why did I cut off the ends of the meatloaf?” said Gail's mom. “Easy. My serving tray was shorter than my baking pan. The meatloaf didn't fit unless I sliced off the ends.”
Gail had fallen into that old trap: “We do it that way because that's how we've always done it.” The meatloaf mystery is a great example of generational amnesia—a big part of the buy-hold backstory.
Prior to the bear market of 2000, the market had gone up for nearly 20 years almost uninterrupted. Twenty years—that's basically an entire generation of investors. Figure 7.1 is what the market looked like during the time this lucky generation was investing, from 1981 through the end of 2000.