I’ve posted Entry #279 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Where Does the Money Come From to Support the Higher Returns Enjoyed by Valuation-Informed Indexers?
Juicy Excerpt: The final explanation of where the money comes from to support the better results of Valuation-Informed Indexing is that effective investing makes the economy more productive. Look at how many great businesses were destroyed in the economic crisis that began in 2008 and that was caused by the out-of-control bull market of the late 1990s. Entrepreneurs struggled for years to build those businesses and then lost everything when most of their customers lost so much money in the inevitable price crash that they could not longer afford to purchase their goods and services. It’s not only entrepreneurs who lose something of value when good businesses fail. We all do.
We should all want more stable stock prices. The only way to avoid huge price drops is to avoid huge price gains. The only way to avoid huge price gains is to educate investors re the research showing that stocks offer a poor long-term value proposition when prices reach insanely dangerous levels.