I’ve posted Entry #705 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Is Valuation-Based Market Timing Really Market Timing?
Juicy Excerpt: The case for valuation-based market timing is so strong that I sometimes wonder if Buy-and-Holders are not thinking of valuation-based market timing when they advance statements opposing market timing. In fact, there have been many cases in which I have seen a Buy-and-Hold oppose market timing and then describe the problems with the guessing-game approach to market timing to explain the opposition. The Buy-and-Holder might point out that, for market timing to work, the investor needs to be right re both his guesses as to when to lower his stock allocation and when to increase it. That is of course so for guessing-game market timing but not for valuation-based market timing.
Gee, I guess I am not thinking straight. I should be timing the market like Rob Bennett so that I can be broke and divorced just like Rob. Silly me.
I believe that you should be adjusting your stock allocation in response to big price swings with the aim of keeping your risk profile roughly constant over time. In other words, you should be Staying the Course in a meaningful way.
All the best.
Rob
Because that has all worked out great for you, right? Given your track record of massive success, we should all just follow your directions, right?
I think you should go by what the research shows, yes. I think it should be up to you, If you’re not convinced, you should go with what you think best. I won’t endorse it. But I’ll wish you the best of luck with it.
My belief is that the research is telling us something important. Not all stock gains are real. Some are. Some are irrational exuberance. It’s important to distinguish between the two.
Rob
I believe we should follow research and not someone’s opinion on research. Valid research is based on outcomes. We have seen successful outcomes with buy and hold. In fact, it has never failed over ANY 30 year period. People should follow research and practice buy and hold.
I have never seen one single piece of research that discussed Rob Bennett and VII. Rob Bennett, the leader of VII, has had a failed outcome. Rob Benett’s marriage had a failed outcome due to financial issues (as reported by Rob Bennett). Research has told us that we should have a fully funded retirement account by the time we are in our 60’s.
Tell us, Rob, who is following the research?
I am the one following the research.
If there were any research supporting the idea that valuation-based market timing is not required, the Buy-and-Holders would be happy to see every site opened to honest posting and they would present their research and they would prevail in the debate. Shiller’s research had not yet been published when Buy-and-Hold was being developed. So the Buy-and-Holders took a wild shot in the dark on the valuation-based market timing issue and they got it wrong. Now it’s a question of getting the mistake corrected so that we can all take advantage of what we learned from Shiller’s amazing research.
If you don’t believe that Shiller’s research shows that valuations affect long-term returns, what do you believe it shows. It must show SOMETHING. They didn’t give him a Nobel prize because they like his haircut.
Rob
As an unbiased third party observer, I’ve taken a look at the past 22 years of your life and have determined that your results have been nothing short of disastrous and that based on your results the “research” you stand behind is a giant pile of crap.
Yeah, yeah.
Rob
If I risk adjust the Philadelphia Phillies, they have only won 40 games this year. Not 62 games.
There are people who do things like that. Fangraphs takes strength of schedule played and strength of schedule remaining into account when forming an assessment of the likely number of games a team will win over the course of the entire year. Several sites run Power Ranking, where the number of games won is only one important factor in determining a team’s ranks. There are many circumstances in which the fans of a team in second place would feel better about the team’s chance of winning the division than would the fans of a team in first place.
Rob
Based on the research and honest posting about baseball, the Phillies will not be allowed to be in the playoffs this year. They should be kicked out of the major leagues and never be allowed to be part of baseball ever again.
And anyone who speaks out in opposition to that way of handling things just doesn’t like baseball!
Rob
Investing with the VII is like telling everyone that the research says that the Cubs will win the World Series this year.
No.it’s not. Shiller’s showing that irrational exuberance has to be taken into consideration in all stock investing decisions is the biggest advance in the history of personal finance. If you thought that there was even a one-in-ten chance that Buy-and-Hold might prevail in civil and reasoned debate, you would be happy to permit civil and reasoned debate.
Buy-and-Hold was discredited by the peer-reviewed research 43 years ago. If we had all been thinking clearly, we would have moved on at that time. I believe that in time the human suffering that is caused by the continued promotion of a pure Get Rich Quick strategy for investing in stocks will force us to move on. We’ll see.
I know which side I am on. I am on the side of the American people. The Amercian people need to know what the last 43 years of peer-reviewed research says and to be able to discuss the far-reaching how-to implication of that amazing research at every discussion board and blog, without a single exception. I am sure.
My best wishes to you.
Rob
The Phildelphia Phillies have been discredited as a contending major league team. The Chicago Cubs are the marketing timing champs of baseball and will win the World Series this year, according to the peer-reviewed research on baseball.
There were people early in the year who were saying that their schedule was easy and that they were not as good as their record indicated and that it would be a mistake to get overconfident, There were also people who disagreed with that take. I believe that it is a good thing that those on both sides of the debate were able to have their say. That’s how we all learn together over time.
Rob