I’ve posted Entry #670 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Valuations Affect Long-Term Returns — But Why?
Juicy Excerpt: Think of each act of market timing as a tiny price crash. When you sell some stocks because prices have risen too high, you are crashing the market in a small way, are you not? Is it better to have tiny crashes all the time or to listen to the Buy-and-Holders and to avoid crashes until the CAPE value has risen so high that we all experience a gigantic crash?
“ When you sell some stocks because prices have risen too high, you are crashing the market in a small way, are you not?”
No. Stocks are sold every day and we do not see crashes every day. What has been happening over time is that stock ownership is being consolidated by the top 10%, or put another way, the top 10% are increasing their ownership stake in businesses through out the world.
And sometimes the people who own stocks feel a temptation to bid the price up above its fair-value amount. When they do that, human misery results. The human misery is felt both by the people who own stocks and by the people who do not because of the damage done to our economic and political systems in a Buy-and-Hold Crisis.
I would permit honest posting re the research. Market timing/price discipline is the answer.
Rob
The person who is buying the stock is increasing his/her ownership. The person selling stock no longer is an owner of that company. Do you want to be part of the 10% who are the rich owners or do you want to be part of the much poorer 90% non-owners? Put another way, to you want to be a customer or do you want to be an owner?
I want to be an owner. Stocks are an amzzing asset class. That’s why I want to own as much stocks as possible. The Bennett/Pfau research shows that for the entire history that it is investors who practice market timing/price discipline who end up owns more stocks over the course of an investing lifetime. If you lower your stock allocation when prices are insanely high, you suffer smaller losses as pricess work their way down. That pernits you to buy more stocks than the Buy-and-Holder when prices are low and going-forward returns are better than the grrat average return of 6.5 percent real. Folliowng a common sense/research-based strategy is a won.win.win.win.win. It’s not possible for the rational human mind to imagine any possible downside.
Rob
And how much “ownership” do you now have? Would you like to compare our portfolios to see who owners more vs the other so that we can see which strategy worked best?
I am not aware of any Bennett research. The Pfau research says that market timing has failed since the time you started promoting it. We can look at the numbers and see that Pfau was correct with that statement.
I want to be ahead at the even of my investing lifetime, not at any one particular moment in time. The last 42 years of peer-reviewed research shows me how to pull that off. I am grateful to be alive at a time when Shiller’s Nobel-prize-winning research is available to us all.
Rob
If you truly believed that the Bennett/Pfau research did not show the clear superiority of Valuation-Informed Indexing over Buy-and-Hold, you never would have threatened Wade. I meam, come on. Wade’s comment at the conclusion of our research was: “Yes, Virginia, Valuation-Informed Indexing works!” That says it.
Rob
“I want to be ahead at the even of my investing lifetime, not at any one particular moment in time”
It is not one point in time. We can look at any day over the last 27 years and see that you have never been ahead.
As to your other post, Wade has said that your timing scheme failed. He does not recommend it. We can all read his books and listen to the podcasts. You should have listened to Wade. You should have listened to Shiller. You should have listened to Scott Burns. You should have listened to your ex-wife. You should have listened to your priest. You should have listened to the investment community. You didn’t, so now you are broke.
Or you can look at the entite historical record and see that Valuation-Informed Indexing has always put you far ahead over the course of an investing lifetime. That’s good enough for me.
You should work with me to get every site opened to honest posting re the last 42 years of peer-reviewed research. Then we will all get to paritcipate in an amazing learning experience. No possible downside.
My best wishes to you.
Rob
“I want to be an owner. Stocks are an amzzing asset class. That’s why I want to own as much stocks as possible. ”
The problem is you are unwilling to pay the owners the market price for the stocks. Why should I sell my stocks to you for lower than the market price?
We should all want the market price to be equal to the fair-value price. Once we open every site to honest posting re the last 42 years of peer-reviewed research, it would. Investors would then have available to them the information needed to act in their self-interest. They would naturally want to lower their stock allocation when prices got out of hand and the going-forward return dropped. Those sales would bring the price down to where it should be. Stock prices are self-regulating so long as investors have easy access to information about what the peer-reviewed research teaches us about how stock investing works.
Once Shiller published the research that snapped the last big piece of the stock investing puzzle into place, we all should have gotten about the business of spreading the word about it in every way possible. We are all better off with a functioning stock market rather than with one that fools us about the value of our portfolion for a time and then crashes prices violently, causing an economic crisis and a worsening of political tensions.
My sincere take.
Rob
We don’t have to sell you cheap shares just because you don’t want to pay the price. If you don’t want to buy a stock at its current price, you don’t have to. Just don’t expect anyone to sell to you at a lower price just because you say so.
The market sets the price, not me. I am saying that we should permit each investor to become informed as to what the research shows. Informed investors are going to practice price discipline because the benefits of doing so are so great. That would solve the problem.
The price that is set at a time when honest posting re the research is banned is obviously not the price that would apply if honest posting re the research were permitted. We should all want to see the market become empowered to perform its core purpose of getting prices right.
Rob
Research is not banned. You are banned. All the information is out there and the world doesn’t submit to the whims of Rob Bennett.
Okay, Anonymous.
Rob