Set forth below is the text of a comment that I recently posted to another blog entry at this site:
The market crash which, in part — not in whole — caused the Great Depression, was due to mass and hyper-speculation — NOT Buy-and-Hold!
So you say, Honest.
The P/E10 value prior to the crash was 33. That’s more than double fair value. That’s the highest P/E10 value we have ever seen in U.S. history prior to the late 1990s.
Market prices are self correcting so long as all investors know that it is in their best interests to exercise self-discipline. The investors of that day were NOT lowering their stock allocations in response to price increases. If they had been, the P/E10 value never could have gone that high. They were following Buy-and-Hold strategies, not Valuation-Informed Indexing strategies.
To be fair to the Wall Street Con Men of that day, we did not then have 33 years of peer-reviewed research showing that the widespread promotion of Buy-and-Hold strategies ALWAYS causes a price crash and an economic crisis. We do have that today.