“We Can All Enjoy Returns of 6.5 Percent Real Without Ever Creating Any Irrational Exuberance. Why Isn’t That Enough?”

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

The person that owns stock has more than just a piece of paper with numbers.  They are OWNERS of companies and those companies generate profits for their owners and have done so very reliably.   Those that don’t own companies are merely the customers.   Which would you rather be, an owner or a customer?  You decided to merely be a customer for well over 25 years and it didn’t work out for you.  Meanwhile, the owners have made out very well.

What you are saying here is so. Stocks are an amazing investment class. You certainly get no argument from me.

The question on the table is — Is it better to price stocks at their real value or to at times let one’s Get Rich Quick urge get out of control and price stocks at far more than their real value, causing a price crash and an economic collapse in days to come? I say that it’s better to always price stocks at their real value. That permits investors to plan their financial affairs effectively and avoids all of the dysfunction associated with price crashes and economic collapses. When we make our economy stronger, we make everyone in it richer.

We can all enjoy returns of 6.5 percent real without ever creating any irrational exuberance. Why isn’t that enough? Why do you feel its necessary to create mountains of irrational exuberance and thereby brings on the oceans of human misery we have seen in every Buy-and-Hold Crisis. I would encourage whatever amount of valuation-based market timing was needed to keep stock prices at reasonable levels. We could all retire years sooner and invest with far less risk. That sounds like investor heaven to me. I see all upside and zero downside.

Rob