I’ve posted Entry #435 to my Valuation-Informed Indexing column at the Value Walk site. It’s called Why I Call Buy-and-Hold a Get Rich Quick Strategy.
Juicy Excerpt: If Fama is right, stock investing risk is a constant. How could any one investor know better than the market as a whole what the price of stocks should be? Since you cannot outsmart the market, all that you can do in deciding on a stock allocation is to assess how strong of a value proposition is offered by stocks in general. There are no better or worse times in which to own stocks.
However, if Shiller is right,stock investing risk is variable. The P/E10 level that applies tells the investor the amount of emotional content present in the market price at that time. Stocks offer a better long-term value proposition at low prices than they do at high prices. So informed investors adjust their stock allocation in response to big price shifts to keep their risk profile roughly constant over time.
You seem to think that people have to convince you that you are wrong. In fact, it is just the opposite. Despite your claims to the contrary, you have failed to provide sufficient proof of your points. You keep referring to what you believe the research says. What you are really referring to is your opinion of what you want it to say. To support research, you must present outcomes data that is also reproducible.
I say that there are two schools of academic thought as to how stock investing works. Both Robert Shiller and Eugene Fama were awarded Nobel prizes for their research. But both cannot be right. Fama says that stock prices are set through a rational process. Shiller says that stock prices are set through an emotional process. Buy-and-Hold is rooted in a belief in Fama’s research. Valuation-Informed Indexing is rooted in a belief in Shiller’s research.
I don’t say that people have to convince me that I am wrong and I don’t say that I have to convince any others that they are wrong. What I say is that both Valuation-Informed Indexers and Buy-and-Holders should post honestly and avoid the use of acts of intimidation against those who subscribe to the other school of thought. That’s what the laws of the United States require and that’s what the published rules of every site to which I have ever posted require.
You and I do not agree re how stock investing works, Anonymous. You are a Buy-and-Holder and I am a Valuation-Informed Indexer. It doesn’t have to be a problem that we disagree. It can be a plus. I can learn from you and you can learn from me. But death threats are a problem. And demands for unjustified board bannings are a problem. And thousands of acts of defamation are a problem. And threats to get academic researchers fired from their jobs are a problem. That sort of thing needs to come to a full and complete stop by the close of business today.
Does that help?
Rob
“Does that help?”
Either the point made went over your head, or you decided to do what you normally do, which is to just stick with your canned responses.
Okay, Anonymous.
I do wish you all good things, in any event.
Rob