“Market Timing Is the Brakes on the Car. It Is Market Timing That Keeps Irrational Exuberance (the Enemy of All Stock Investors) in Check.”

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

<i>I really don’t understand this statement. All you have done is repeated about a half dozen lines for the last 20 years. It probably took a total of 30 minutes to come up with that and then it was just hitting the repeat button. You really haven’t done a thing. Meanwhile, others have posted way more volumes of useful information, while holding down jobs and/or running businesses.</i>

The line that I have repeated thousands of times is: Valuations affect long-term returns. That’s what Shiller showed with his Nobel-prize-winning research, You are right that it is a very simple concept. But it is a single concept with far-reaching strategic implications. If valuations affect long-term returns, then stock investing risk is not stable but variable. That means that any investor seeking to stay the course in a meaningful way is REQUIRED to engage in market timing.

We didn’t always know that. There was a time when many smart and good people believed that market timing might not be absolutely necessary or even that there might be circumstances in which it would not be a good thing. There were about 15 years in which people believed that before Shiller published his Novel-prize-winning research “revolutionizing” (his word) the field. So we now have an ocean of material on stock investing that is outdated, discredited by the last 40 years of peer-reviewed research.

I am saying that we should open every internet site to honest posting That would permit us to get rid of all the outdated Buy-and-Hold stuff that is causing so much human misery and replaced it with true research-based stuff that HELPS people. Yes, the finding that market timing is required is only one thing, But it is a very, very big thing. It is like the finding that the earth revolves around the sun rather than the other way around, It changes everything.

You own behavior shows that you appreciate on some level of consciousness the importance of Shiller’s Nobel-prize-winning research. You have spent 20 years of your life blocking people’s ability to discuss and thereby learn about Shiller’s Nobel-prize-winning research, You wouldn’t do that if you didn’t think it was a big deal. It is a life-and-death matter to you that no one be permitted to discuss the new research, If they do, that will be the end of Buy-and-Hold. And you just can;t freakin’ stand it.

You say that people have put forward volumes of information, Lots of people have put forward lots of information, that’s for sure, And much of that information is good stuff considered in isolation. But none of that information is going to do us any good id our economic system collapses. And our relentless promotion of the Buy-and-Hold “strategy” has put is in danger of seeing our economic system collapse. We have to get the market timing thing right for any of the rest of it to amount to anything,

Market timing is the brakes on the car. It is market timing that keeps irrational exuberance (the enemy of all stock investors) in check, These other people are helping us to build a stronger engine and to have a better sound system and an amazing paint job and all the rest. But none of that good stuff counts for anything in a car without brakes. And there is 40 years of peer-reviewed research showing that market timing is the brakes on the car.

I am trying to give value to the good work that all of these other people are doing by opening every sire on the internet to honest posting re the last 40 years of peer-reviewed research, Without market timing, none of the rest works, We all need to be taking valuations into consideration at all times. When calculating safe withdrawal rates. And when doing any other calculation relating to stock investing. If it is true that valuations affect long-term returns (and that the market is not efficient, as was believed to be the case when Buy-and-Hold was being developed) then it is a logical impossibility that the Buy-and_Holders could ever get a single calculation right. Not good.

My sincere take.

Rob