I’ve posted Column Entry #40 at my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Overvaluation Is Theft.
Juicy Excerpt: What throws us is that the theft being practiced when stocks are selling at three times fair value (as they were in January 2000) is a strange kind of theft. In the ordinary kind of theft, Ralph takes what belongs to Dan. The wrong is clear; Ralph needs to give back what he took so that Dan can be made whole. In the theft being practiced when stocks are overpriced, the Year 2000 version of Ralph and the Year 2000 version of Dan take from the Year 2011 version of Ralph and the 2011 version of Dan.
Overvaluation is a form of mispricing, which means it is a form of theft. But there is no person available to file the police report because it is not a person from whom the money to cover the improper charge is taken. A mispricing of stocks is a form of theft in which stock returns that properly belong to one period of time are taken from it and enjoyed in an earlier period of time instead.