I’ve posted Entry # to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Stock Overvaluation Hinders Economic Growth Far More Than Does the Budget Deficit.
Juicy Excerpt: The sad reality is that the same human weaknesses that causes the budget deficit draw us to Get Rich Quick investing strategies. The politicians aren’t doing the job they need to do, that much is so. But it’s not because politicians are by nature bad people. It’s because politicians need to get elected to remain politicians. And the politicians who take serious steps to address the deficit problem don’t win elections. The people doing the voting don’t want to hear the realities spoken out loud.
It’s the same story in the investing realm. The big shots in this field recommend Buy-and-Hold strategies. Not because they are bad people. Because that’s what sells. Everybody knows that spending more than you earn cannot lead to anything good and everybody knows that not taking price into consideration when buying stocks cannot lead to anything good. But we all like to pretend that we do NOT understand. So those who want to make it in the political realm play along with us. And those who want to make it in the investing realm do the same.
The problem is actually worse in the investing realm. The level of stock overvaluation that we have seen in recent years does far more harm to our goal of achieving economic growth than do today’s budget deficits.