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:
17 years is long term (as you have even stated yourself). For your system to work, you need to have not spent down a considerable portion of your nest egg in order to take advantage of a market downturn. Time is your enemy when you market time. Of course, you are still doing the same as before by changing the topic and spouting lies in order to divert from the question that has been asked so many times.
Once again, answer the question:
Your timing strategy didn’t work and you did not get the returns you said you would. Why should anyone follow your advice or the VII strategy when you failed?
The reason why people should follow it is because it has always worked. There has never been one exception in the historical record.
In the event that stocks continue to perform in the future at least somewhat as they always have in the past, I will get the returns that I expected. Now, I obviously cannot get those returns on amounts that I sold off. But that’s a separate matter. I only sold off because I wanted to take advantage of huge opportunities that were presented to me. If I retained the assets, I would get those returns.
It will have taken longer to get them than I anticipated. You’ve got me there. 17 years is indeed a long time. A very long time. Stock prices have remained at very high levels for longer in this bull/bear cycle than they have in any earlier one. That’s real. That’s a fact.
But are you willing to act as if this strange situation will continue forever? I am not willing to do that. If stock prices are determined in the way that Shiller’s research shows they are, those high prices will end in not too much more time.
You say that” “Time is your enemy when you market time.” That’s probably true to a small degree. But I do not think that it is true nearly to the extent that you think it is true. Look at all the times in history when market timing has eventually worked (that’s every case currently available for our review). There were lots of cases in which Buy-and-Hold had gone ahead for a significant length of time. But in every case market timing won the day in the end. Do you think that’s coincidence? I sure don’t. I think market timing always prevails because it is rooted in a realistic understanding of what causes stock price changes while Buy-and-Hold is rooted in a mistaken understanding.
The one point that you are making that is somewhat valid is that prices have remained high for a longer period of time this time than ever before. That is so. If people want to go with Buy-and-Hold because of that, they should do that. But that is sure not what I am going to do. I don’t see any reason to believe that all of the laws of stock investing have suddenly been turned on their head. I believe that the fundamental rules will continue to apply as time goes by. We will just have to wait and see to know for sure. But I feel a lot better going with what has always worked than abandoning it for something very different for no good reason other than a hope.
I hope your strategies do for you what you are hoping they will do for you, Sammy. I obviously don’t expect to see that happen. But I am a fallible human and it could be that I will be proven wrong. If that turns out to be the case, I would like to think that at least my friend Sammy will see good results as a consequence. So there is no way that this can turn out all bad.
Rob
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