I’ve posted Entry #310 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Once There Is a Bubble, It’s Too Late to Do Anything About It.
Juicy Excerpt: But the problem of a lack of price discipline can be addressed through education. The reality is that all overvaluation is a bad thing; small amounts of overvaluation lessen the value proposition in the same way as the large amounts of overvaluation that are referred to as “bubbles,” just to a lesser degree. Investors taught to object to all overpricing (as the participants in all markets other than the stock market have been taught to object to all overpricing) will tap the brakes each time a little bubble-generating irrational exuberance is applied to the engine.
Bubble cannot be prevented in markets lacking price discipline and cannot develop in markets possessing price discipline. Talk about bubbles wastes our time. Our focus should be on educating investors on the need to always exercise price discipline so that bubbles become a thing of the past.