Valuation-Informed Indexing #578: The Best Way to Discourage Short-Term Timing Is to Encourage Long-Term Timing

I’ve posted Entry #578 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Best Way to Discourage Short-Term Timing Is to Encourage Long-Term Timing.

Juicy Excerpt: Their mistake was not to test long-term timing. They did test short-term timing and found (rightly, I believe) that it does not work. The unfortunate logical leap was to conclude from this that no form of market timing works and that no form of market timing is required. Shiller showed that valuations affect long-term returns. Knowing this, it appears looking backwards that it was an absurd idea to think that market timing was not required. In a world in which valuations affect long-term returns, long-term market timing is price discipline, nothing more and nothing less. Price discipline is critical to the functioning of all markets. How could it ever be that market timing would not be required in the stock market?