“Picking the Precise Day That a Crash Is Going to Come is a Parlor Trick. It’s Such a Trivial Thing to Do That It Doesn’t Interest Me. But Being Able to Avoid Crashes By Explaining to Investors How to Practice Price Discipline When Buying Stocks (By Engaging in Market Timing!) Is a Wonderful, Wonderful Advance, the Biggest Advance Ever Seen in This Field.”

Set forth below is the text of a comment that I recently posted to the discussion thread for one of my columns at the Value Walk site:

You have been making your predictions of a crash for a very long time. You have been wrong time and again. All you have done is proven you can’t time the market. Despite your continued bashing of buy, hold and rebalance, you have actually provided us a case study in which people would be better off following such a strategy. Despite market corrections, stock have always gone up in the long run. Given your failed retirement strategy, you would think you would have learned by now.

It’s true that I have been expecting to see prices crash for a long time. And it’s true that it hasn’t happened yet. We don’t disagree on those basic facts.

We disagree on the idea that this shows that “you can’t time the market.”

What matters is whether today’s portfolio values are real and lasting or not. I say that they are comprised 50 percent of irrational exuberance. So we know that a crash is coming. No, we do not know precisely when it will hit. But we know with something close to certainty that it will. And that we should be taking that reality into consideration in all of our financial planning.

If someone smokes three packs of cigarettes per day, can you say precisely when he is going to die from cancer? You cannot. But we can say with certainty that smoking three packs of cigarettes per day is not a good idea. If someone is 150 pounds overweight, can you say precisely when he will have a heart attack? You cannot. But we can say with certainty that it is not a good idea to eat so much that you are 150 pounds overweight.

You focus relentlessly on the question of whether price crashes can be predicted to the day. I don’t see why it is such a big deal in your mind. If we know that high stock prices cause price crashes and that price crashes cause horrible pain to millions of people, it seems to me that we know all that we need to know to know that we need to do all that we can to keep stock prices at reasonable levels. To me, picking the precise day that a crash is going to come is a parlor trick. It’s such a trivial thing to do that it doesn’t interest me. But being able to avoid crashes by explaining to investors how to practice price discipline when buying stocks (by engaging in market timing!) is a wonderful, wonderful advance, the biggest advance ever seen in this field.

If we still haven’t seen a crash in the next two years and prices are still as high as they are today I will still be predicting a crash and urging people to sell some stocks, enough to get price back to reasonable levels. And you will still be criticizing me for it. And I will still be not understanding the criticism,

We see things from different perspectives.

Rob