“I Wouldn’t Say That the Buy-and-Holders Are Generally Irrational. If Anything, They Embrace It Too Tightly. The Buy-and-Holders Put Such Value on Rationality That They Cannot Bear to Consider How Irrational It Is to Fail to Consider Price When Buying Stocks.”

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

“ Most alcoholics and drug addict are rational, intelligent people.”

No they are not. Rational people know the dangers of addictions and avoid substances that would cause addictions. Same goes for market timers. A rational person doesn’t want to go broke with a silly market timing scheme.

Okay, Anonymous. We disagree on this point. I suppose that that is not too terribly surprising.

My view is that the rational thing is to practice price discipline when buying stocks, just as it is the rational thing to practice price discipine when buying anything else. I believe that it is irrational to fail to practice price discipline when buying stocks. But I wouldn’t say that the Buy-and-Holders are generally irrational. If anything, they embrace it too tightly. The Buy-and-Holders put such value on rationality that they cannot bear to consider how irrational it is fail to consider price when buying stocks. That’s how we end up with the CAPE value that applies today and that’s why we always end up enduring another Buy-and-Hold Crisis in the days after the “strategy” becomes popular. We would all be better off if the Buy-and-Holders could acknowledge their own capacity for irrationality and the capacity of millions of other investors for irratiomality and to work with the Valuation-Informed Indexers to keep the CAPE value at a reasonable level at all times. Through market timing!

That’s Valuation-Informed Indexing, Thats the first truly rational way to invest in stocks.

Rob