I’ve posted Entry #669 to my weekly Valuation-Informed Indexing column at the Value Walk site, It’s called Did the People Who Developed Buy-and-Hold Understand That Market Timing Is Price Discipline?
Juicy Excerpt: I find it hard to believe that a group of people developing the Buy-and-Hold concept got together in a room and that one of them made a little speech about how they should pretend that they believed that market timing was not required even though it obviously was and that all of the others applauded. My Goon friends often accuse me of believing in conspiracy theories. That would be a conspiracy theory.
I
In reality, buy and hold has performed much better vs your timing scheme. Your typical response for the last 20 years is that the market is about to crash. Unfortunately for you, each of those predictions you made failed to happen. You even admitted a long time ago that if we did not see a crash by 2015, we should question VII. These predictions over 20 are clearly LONG TERM predictions, so your usual response that it was just short term is a bunch of B.S.
To look at this from a practical standpoint, let’s look at you as an example. You are around 65 years old by now. If you had followed buy and hold at the time you started working and we took a measurement today (over 30 years later), you would have done MUCH better with buy and hold vs VII. It is just simple fact. Just telling people that “someday it will crash” has been a complete failed story line from you. Once you go broke, like you have, the market returns no longer matter. You can no longer recover. Game over.
I don’t object to people questioning Valuation-Informed Indexing. Each person has to decide for himself or herself what to do with his or her retirement money.
It is true that prices have remained at high levels for a longer period of time in recent years than ever before in U.S. history.
I still believe in Valuation-Informed Indexing. The Bennett/Pfau research goes all the way back to 1870. I believe that there’s a good chance that a strategy that has been working for 150 years will continue to work long into the future. But we will just have to wait and see a bit to find out for sure. I am not able to think of any other way to resolve the thing.
If irrational exuberance is a real thing, I am not able to imagine any way that it would be a good idea to ignore it. Investors need to take irrational exuberance into consideration when making investing decisions. That’s my sincere take, in any event.
My best wishes to you and yours.
Rob