“If Market Timing Always Works and Is Always Required (It Does and It Is), That Changes Everything.”

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

You’re the one making up stories about criminal behavior. Your opinions around the paper of one person foes not constitute 39 years of research.

The 39 years of research constitute 39 years of research.

There has never been a single paper published showing that long-term timing doesn’t work. So why make such a claim?

The claim is the product of a mistake. There was a time when people didn’t realize the need to distinguish short-term timing from long-term timing. And research was published showing that short-term timing doesn’t work. So people got in the habit of saying that timing in general doesn’t work. Which is a false claim.

We learned that it was false in 1981, when Shiller published his Nobel-prize-winning research. The national debate about how to move forward should have been launched then. It didn’t happen because of cognitive dissonance. So now we are stuck in a place where we not only need to persuade the Buy-and-Holders to acknowledge their initial mistake but also the 39-year cover-up. Making it a 40-year cover-up makes it worse for everybody.

Wade Pfau spent months trying to locate a paper justifying the claim that long-term timing doesn’t work. He came up empty-handed. Every investor on the planet needs to know that. If market timing always works and is always required (it does and it is), that changes everything.

Market timing is price discipline. Price discipline is what makes markets work. You can’t have stock investing without market timing. If you do, you will eventually bring on an economic collapse. Economic collapses are bad. We should be trying to avoid them, not to be bringing them on.

Rob