I’ve posted Entry #312 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Was the 37 Percent Loss for U.S. Stocks in 2008 Mostly a Mirage?
Juicy Excerpt: We see huge unforeseen negative developments in one year, followed by huge unforeseen positive developments in the following eight years. The net effect is that for the entire time period from January 2008 through July 2016, we saw an annualized real return of 5.7 percent, a number not too terribly far off from the 6.5 percent average long-term return that we would expect to see apply if there had been no particularly negative or positive economic developments at all.
My thought is that investors overshot the mark in their 2008 reassessment of the value of U.S. stocks. There really were serious economic negatives that turned up in the news in 2008. But they weren’t quite such the big deal as investors made them out to be in their first reaction to them.
And investors have overshot the mark on the up side in the years since. We were so frightened in 2008 that even average economic news would have come as a big relief. Perhaps the news was just average and the reason why we pushed stock prices up to a degree greater than average is that we were compensating for having pushed them down to an excessive extent in the overreaction of 2008.
Anonymous says
The market reacted correctly. With the uncertainty of the banking crisis, the market dropped. As the government stepped in and greater stability became more assured, the market responded positively.
Rob says
Thanks for stopping by, Anonymous.
Rob
Anonymous says
You might want to insert a correction in your post or you might be guilty of fraud.
Rob says
I’m not guilty of financial fraud, Anonymous.
There’s a difference in how we handle things.
I believe in Valuation-Informed Indexing, which is rooted in the research of a Nobel-prize-winning economist.
You believe in Buy-and-Hold, which is rooted in the research of a Nobel-prize-winning economist.
I acknowledge that there are two schools of academic thought as to how stock investing works.
You do not. You engage in abusive trickery to deceive people into believing that there is only one school of academic thought as to how stock investing works.
That’s the fraud part. That’s the prison part.
I don’t do that and I have zero intention of ever doing that. Not in 14 years. Not in 14 billion years.
It’s a very, very, very big difference and a very, very, very important difference.
If I turn out to be wrong, I will have hurt no one because everyone who was persuaded that Valuation-Informed Indexing is the best strategy knew that Buy-and-Hold was an alternate school of thought and decided for himself or herself which school of thought to follow.
If you turn out to be wrong, you will have hurt millions in very serious ways because you have persuaded people to follow Buy-and-Hold that do not even know that there is 35 years of peer-reviewed research throwing doubt on the merit of Buy-and-Hold. Those people have a perfect right and responsibility to seek compensation for their losses from you and from all other Buy-and-Holders who have engaged in trickery. In cases like your own in which there has been ongoing abusive behavior that has hurt millions, those people have a perfect right and responsibility to insist that the laws against financial fraud be enforced to insure that you are put away in prison for a long time.
A society has a right to defend itself against predators seeking to bury it. Millions of people are today unemployed as a result of the Buy-and-Hold Crisis and millions more will be suffering failed retirements in days to come if the crisis continues. I want no part of the cover-up except to play the lead role in EXPOSING it and thereby helping the citizens of this country get about the business of rebuilding the economic and political systems that those posting in “defense” of Mel Lindauer and John Greaney and Jack Bogle have been so intent on destroying for their personal profit (whether financial or psychic) for 14 years now.
I hope that helps a bit, my old friend.
Rob
laugh says
But the Nobel winner who created the research you are basing your strategy off of – insists that his research cannot be used for said strategy.
Rob says
When your jury is determining the length of your prison sentence, one of the things that it will be taking into consideration is what Shiller says re this subject when he testifies under oath. I am confident that what Shiller says under oath is going to be a lot more supportive of what I have been saying for 14 years than it will be supportive of what you have been saying for 14 years, Laugh.
But we are all going to find out for sure as events play out following the next price crash, no? Can you exercise a little patience? You Goons and I do not need to work this out amongst ourselves. There are millions of people whose lives are in the process of being destroyed by your massive act of financial fraud. Their take on all this is obviously going to change following the next price crash. And when their take changes, the way in which Robert Shiller expresses himself is going to change too. And then everything is cool.
Or so Rob Bennett believes in any event. I certainly possess no power to stop you from believing something different for so long as that is your preference. Let’s see how it plays out in the real world. Fair enough?
My best wishes to you.
Rob
Laugh says
I am going to believe that shiller is saying what he believes. Until there is actual evidence to the contrary.
So far the evidence is that he is a brilliant man who says what he believes. And he in fact has been rewarded for it with a great deal of success.
As opposed to believing in some kind of massive conspiracy to justify a 20 year investing failure by a marginally functional Rob Bennett.
Rob says
I am also going to believe that Shiller is saying what he believes, Laugh. His entire book makes the case for why Buy-and-Hold can never work for a single long-term investor. I believe that Shiller believes that stuff. When he was awarded his Nobel prize, scores of news articles commented on how Shiller believes the OPPOSITE of what Fama believes. I am going to continue to believe that Shiller believes the OPPOSITE of what Fama believes, which of course means that Shiller believes the OPPOSITE of what Bogle believes.
I guess we’re even.
I wish you all good things.
Rob