Set forth below is the text of a comment that I posted to the discussion thread for one of my columns at the Value Walk site:
According to you, I am just driving around in my cotton candy car and that my car and that I probably don’t really have a car as it is all make believe.
Please think about what the word “overvalued” means, Sammy. It means “mispriced.” If your stock portfolio is mispriced, then what you say here is so — that wrong number that you are telling yourself is the amount of your life savings is a make-believe number. It’s not just me who is telling you that. Every time you read an article that cites today’s valuation level — the stock market is today priced at two times its fair value — the person saying that is in an indirect way telling you that you need to divide your portfolio value by two to know the amount that you actually have put aside to provide for your old age.
The only thing that I do that is different is that I say it in a direct way. I don’t dance around the topic and put forward all sorts of happy talk. I tell people “if you have barely enough to retire going by how stocks are priced today, you are going to only have half of what you need once prices return to reasonable levels, as they always do.” People HATE when I do that. You are one of those people. You hate me with a burning hate because I have been stating these obvious truths in your presence for 15 years now.
But am I the bad guy or is it the people who are putting forward Buy-and-Hold happy talk who are the bad guys? I believe in planning. You cannot plan effectively if you don’t even get the numbers roughly right. So I believe very strongly that you need to be taking stock valuations into consideration when you develop your investing strategies. Without doing what you need to do to get the numbers right, you are shooting in the dark.
The rarely spoken truth here is that you are not really angry at me. You are angry at yourself. You know on one level of consciousness that you should have been taking valuations into consideration all along. You talked yourself into not doing so because like all humans you possess a Get Rich Quick urge that entices you to ignore common sense and live in a fantasyland and because the vast majority of people who work in this field have noticed that there’s a lot more short-term money to be made encouraging people to live in fantasylands than there is in telling people what the last 36 years of peer-reviewed research shows us.
I am not your enemy, Sammy. Your Get Rich Quick urge is your enemy. Buy-and-Hold is your enemy. You won’t have these feelings of hate toward anyone once you bring your investing beliefs into accord with your common sense. There’s a powerful feeling of peace and confidence that comes with doing that. You are living in a fantasyland today and it doesn’t feel good. But you can give that up and start feeling better about your financial future anytime you want.
That’s my sincere take re these matters in any event, my good friend.