Valuation-Informed Indexing #174 — Why Should Economic Developments Affect Stock Prices?

I’ve posted Entry #174 to my weekly Valuation-Informed Indexing column at the Value Walk site. it’s called Why Should Economic Developments Affect Stock Prices?

Juicy Excerpt: Any investor who bought stocks expecting a long-term return of 6.5 percent knew when she did so that there were going to be positive economic developments during the time-period in which she held her stocks. So why should she be impressed that the recovery was picking up steam? She expected something like that to happen all along. Didn’t she?

So it’s not news. It’s not cause for excitement about where stock prices are headed. It’s not a positive development. It’s a development entirely consistent with the understanding on which the stocks were purchased in the first place. So it shouldn’t cause prices to rise.


  1. Anonymous says

    No comments here. No comments at ValueWalk.

    Rob, the concept is that you have a back and forth discussion that is generated by insightful observations from your articles. Why the lack of any interest?

  2. Rob says

    It’s not a lack of interest, Anonymous. No one gets banned at 15 different sites because his contributions are not generating a sufficient amount of interest.

    The story here is that the Buy-and-Hold Pioneers tried to do good things and they in fact did do many good things but they also made one mistake. The mistake they made is 80 percent of what matters in stock investing. The mistake ruined all the good stuff.

    They weren’t really sure how bad the mistake was at the time they discovered it. So rather than coming clean about it they elected to cover it up. The cover-up had been going on for a long time when I showed up on the scene on the morning of May 13, 2002. The plan then was that, if we can destroy this Rob Bennett fellow, we can keep the cover-up going a bit longer.

    That one didn’t work out so hot.

    People don’t comment because they are ashamed. People don’t comment because they are afraid. People don’t comment because they are confused. People don’t comment because they want to make a buck. There are all sorts of reasons why people don’t comment. None of them are good.

    The promotion of Buy-and-Hold strategies for 33 years after the peer-reviewed academic research showed that there is zero chance that they can ever work for even a single long-term investor has put us in the biggest economic crisis in our history. We are the luckiest generation of investors that ever walked Planet Earth. So it is 100 percent unacceptable that we be living through an economic crisis today and that we are causing it to grow worse and worse and worse. So we very, very, very much need to be talking about this stuff.

    We need to feel safe and good about talking about it.

    To feel safe and good talking about it, we need to persuade Jack Bogle to walk to the front of a room and say the words “I” and “Was” and “Wrong.” No one is going to be afraid of what the Wall Street Con Men will do to him for posting honestly once Bogle does that. You Goons aren’t going to be able to get away with any of your nonsense once Bogle does that. People will no longer be afraid. People will still be ashamed and confused in the beginning. But the things they learn as a result of talking things over will take care of that. People will still want to make a buck but talking things over and seeing how people react will show them that there is ultimately a lot more money to be made promoting the first-true research-based strategy than there is promoting the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind.

    My job is to persuade my good friend Jack to give that speech. I do that by contacting bloggers and journalists and policymakers and economists and investing advisors and academic researchers and venture capitalists and people who care about the survival of our free-market economic system and urging them to do all in their power to persuade my good friend Jack to give that speech he needs to give by the close of business today.

    Once Jack gives his speech, we won’t see any shortage of comments here or at any blog that permits honest posting on safe withdrawal rates and other critically important investment-related topics. We will see a DELUGE of helpful comments soon after my good friend Jack gives his speech and it is written up on the front page of the New York Times.

    I would be grateful for any help you can offers persuading Old Saint Jack to work up the courage to give that very important speech by the close of business today. You live in this country. You have enjoyed the benefits of our free-market economic system. Can I count on your support?


  3. says

    “No one gets banned at 15 different sites because his contributions are not generating a sufficient amount of interest.”


    NOTE: ‘annoyance’ does not equal ‘interest’.

  4. Rob says

    Annoyance is certainly a form of interest, Helper.

    If you lack interest in something, it doesn’t bother you.

    If you are annoyed by something, it bothers you.

    If something bothers you, there is a reason.


  5. Anonymous says

    If my neighbor’s dog craps in my yard, it is an annoyance. It doesn’t mean that I am interested in the dog crapping in my yard.

  6. Rob says

    I didn’t crap in your yard, Anonymous.

    I told you about the errors in John Greaney’s retirement study.

    If anyone crapped in your yard, it was the guy who got the numbers in a retirement study wildly wrong, not the fellow who pointed out the error.

    Your behavior showed that you would have preferred not to have learned about the errors in Greaney’s study.


    Why would anyone prefer not to know about errors in a retirement study?

    It’s not just you. There are others who don’t want to know about those errors.

    That’s why I am banned at those sites.

    The job of an investing analyst in the year 2014 is to explain why there are so many who don’t want to know about the errors in those studies.

    We cannot move forward until that one has been addressed.

    You are annoyed that I am trying to get it addressed. I get that.

    It has to be addressed. We are in an economic crisis today because as a society we have elected for 12 years not to address that important piece of business. My job is to push for addressing it prior to the next crash.

    If I fail, we will address it following the next crash.

    That will be a worse time for addressing it for every single person alive on the planet.

    You didn’t demand that I get banned because I crapped in your yard. You demanded that I get banned because I told you the truth about safe withdrawal rates and lots of other critically important investment-related topic.

    Your beef is with the people who told you fairy tales to enrich themselves at your expense, not with the fellow who acted like a true friend to you.

    My best wishes.


  7. Rob says

    I crapped all over Buy-and-Hold.

    That much is more than fair to say.

    I don’t approve of Get Rich Quick schemes.

    I prefer research-based strategies.

    Sue me.


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