A Rich Life

The Old Ideas on Saving & Investing Don't Work -- Here's What Does

“How Do You Think We Get CAPE Levels of 8 at the End of Every Bull/Bear Cycle? That’s Insane. When the CAPE is 8, the Entire Market Is Priced at One-Half of its Real Value. It’s Disillusioned Buy-and-Holders Who Make that Possible. We Could Never Have Insane Bear Markets If We Didn’t Have Insane Bull Markets First.”

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Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

Even long term timing involves getting in and out of the market and getting it right. Show me just one person that has done this successfully as I have yet to see this person.

To the opposite, the buy and holder doesn’t have to change a thing.

By the way, it is not true that a drop does not concern a Buy-and-Holder. Take a look at the comments that appeared on the Bogleheads Forum in the days following the 2008 price crash. Lots of the Buy-and-Holders who comprised that board community were deeply concerned.

Prices recovered quickly in that case. So the concern never deepened into an all-out panic. But, if prices had continued to drop hard and if the low prices had remained in place for years, we would have seen a panic. How do you think we get CAPE levels of 8 at the end of every bull/bear cycle? That’s insane. when the CAPE is 8, the entire market is priced at one-half of its real value. Huh? What the f?

It’s disillusioned Buy-and-Holders who make that possible. Insane bear markets are just the mirror image of insane bull markets. We could never have insane bear markets if we didn’t have insane bull markets first. Emotional extremes beget emotional extremes.

Rob

Comments

  2. You are obviously free to move on at any time you please, Anonymous.

    I obviously do not believe that Buy-and-Hold works. There’s a lot in it that I like. I sign on to everything in Buy-and-Hold except for this crazy idea that market timing/price discipline is not required. Without market timing/price discipline, prices rise to insane levels. Then they eventually crash, causing an economic collapse. I don’t call that “working.”

    I wish you all good things.

    Rob

  4. Such is life, Anonymous.

    I said on the morning of May 13, 2002, that the retirement study posted at John Greaney’s web site lacks an adjustment for the valuation level that applies on the day the retirement begins because I sincerely believed that to be the case. I still believe that to be the case. Sue me.

    Rob

  5. That has been answered thousands of times. You just refuse to accept the answer. Wade tried, and you still ignored it.

  6. Any explanation that doesn’t include a screen shot of the page in the Greaney study containing the valuation adjustment doesn’t get the job done for this boy, Anonymous.

    Please feel free to quote me re this matter all over the internet. I would feel that you were doing me a favor.

    Rob

  8. You can do what you like, Anonymous.

    I am going to continue posting honestly. I had made a lot of friends at the Motley Fool board. Those people mattered to me. The millions of others that are affected by this matter too, just not in as direct and personal a way. If I truly believed that the Greaney study contained a valuation adjustment, I would say that. I truly believe that it lacks one. So I say that.

    I’ve done my part. We’ll see what others do in the days following the next price crash. I believe that we are all going to make it together to a far better place. But we will have to let things play out to find out for sure.

    My best wishes.

    Rob