I’ve posted Entry #352 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Undervaluation Is As Bad as Overvaluation.
Juicy Excerpt: When the market is priced at one-half of its real value, millions of people who could be productively employed are left without jobs because the businesses that would be happy to hire them in a world where stocks were priced properly do not have the finds needed to pay them.
When the market is priced at one-half of its real value, thousands of entrepreneurial projects that would make all of our lives better in thousands of different ways don’t get off the ground because the executives who would need to set aside money to finance them in their start-up years don’t dare risk the capital needed to do so because money is so tight.
When the market is priced at one-half of its real value, millions of people who otherwise might be good savers lose confidence in the saving project because their stock investments of earlier years have offered such disappointing returns.
Those 15 percent returns aren’t looking so hot anymore, are they?