“The Point That Needs to Be Examined Is Whether Gains That Cause the CAPE Value To Go Above 16 Are Real, Economic Gains, the Same As Gains Earned When the CAPE Is Below 16, or Whether Gains Achieved When the CAPE Is Above 16 Are Just Irrational Exuberance and Should Not Be Counted.”

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

The 2008 economic crisis is a HUGE failure associated with Buy-and-Hold.”

Wrong. It was only a HUGE failure for market timers. Buy and holders didn’t sell and not only seen the market return, but went on to new highs.

Most people see it that way. But if those new highs are comprised of irrational exuberance, they will not be lasting. They will make Buy-and-Holders feel good for a time and then they will disappear. The point that needs to be examined is whether gains that cause the CAPE value to go above 16 are real, economic gains, the same as gains earned when the CAPE is below 16, or whether gains achieved when the CAPE is above 16 are just irrational exuberance and should not be counted. If we all stop counting those gains as real (as Shiller’s Nobel-prize-winning research shows we should, that changes the investment advice field in a dramatic and very positive way.

Also, the fact that prices recovered doesn’t mean that the promotion of Buy-and-Hold did not cause great damage. There were still hundreds of thousands of businesses that went under. There were still millions of workers thrown out of jobs. There was still an increase in political tensions. Economic stability is a plus for all of us. And we will all see more economic stability in a world in which honest posting re the last 39 years of peer-reviewed research is permitted at every discussion board and blog on the internet, without a single exception.

My sincere take.

Rob