I’ve posted Entry #68 to my weekly Beyond Buy-and-Hold column at the Out of Your Rut site. It’s called How Our Stock Addiction Grew Gradually Worse Over Time.
Juicy Excerpt: It happened gradually and without me taking much notice of it. Once I had a habit of drinking one cup per day, going to two cups per day did not seem like a big deal. Once I had a habit of drinking two cups per day, going to three cups per day did not seem like a big deal. You get the idea.
This is how it works with stock valuations. Stocks were priced insanely low in 1982. Then valuations went up a bit. But it didn’t matter because prices were so low. Then valuations went up a bit more. But it still didn’t matter because prices were at fair value. Then valuations went up a bit more. But it still didn’t matter because stocks offer a strong value proposition even when they are selling at prices a bit above fair value. Then there came a day when stocks were priced at three times fair value.
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