Valuation-Informed Indexing #439: Buy-and-Holders View Shiller’s Ideas About Stock Investing as Akin to Astrology

I’ve posted Entry #439 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Buy-and-Holders View Shiller’s Ideas About Stock Investing as Akin to Astrology.

Juicy Excerpt: Say that evidence existed that astrology works. Say that scientists came forward saying that we all should check out our astrological reading for the day and permit it to influence the decisions we make during the course of that day. I would be extremely uncomfortable doing that. If my reading said “do not take on financial commitments today,” I would feel foolish if I let that persuade me not to take out a mortgage or to buy a season ticket to attend Phillies games. I would feel like I was abandoning the use of human reason to go down that road.

I think that that’s how Buy-and-Holders feel about the idea of believing that long-term stock prices are predictable, as Shiller has shown. How could it be? If people knew in advance what stock prices were going to be 10 years down the road, they would take advantage of that information and their efforts to take advantage would change prices enough so that the predictions would no longer work. Overvaluation is an impossibility to the logical, reasoning mind. Shiller’s research findings are “unprofessional and flaky.”