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:
Rob,
You can’t argue facts. Your own example proves that you can’t time the market. Anyone following your advice would have had a disaster on their hands.
My example shows that you CAN time the market. In fact, the entire history of the market shows this.
Stocks are priced today for a price drop of between 50 percent and 75 percent. Look at where you will stand after such a price drop and you will see that you would have been better off if we had just let stock prices increase each year for the amount of economic growth experienced that year and did not pump it up with any of the irrational exuberance stuff. Phony gains that do not remain in place HURT investors. You don’t have to worry about missing out on that stuff. You WANT to miss out on that stuff. Irrational exuberance is not a plus, it is a minus.
Irrational exuberance, which Buy-and-Hold encourages, is a poison. When the irrational exuberance disappears (it always does), trillions of dollars of consumer buying power leave the economy. Hundreds of thousands of businesses go belly up. Millions of workers lose their jobs. This is a good thing how?
We would be better of just reporting the numbers accurately. It is only our Get Rich Quick urge that objects to this. We should be encouraging investors to RESIST their Get Rich Quick urge, not telling them to give in to it.
That’s my sincere take, in any event.
Rob
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