I’ve posted Entry #709 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Getting the Stock Price Wrong Is Never a Positive, It’s Always a Big Negative.
Juicy Excerpt: I’ve had people argue with me that the many years of bad pricing that we have seen in the U.S. market in recent decades shows that Buy-and-Hold is a sound strategy. An investor who lowered his stock allocation because prices rose so high would have “missed out” on these years of high prices. Double gak! One cannot miss out on a mistake! Mispricing is bad. Always. No exceptions.
So stock has been mispriced, in your mind, for the last 25 years. Look at how all that has worked out for you. You are in your 60’s and broke.
Stocks have been mispriced for 28 years, with the exception of a few months in the immediate aftermath of the 2008 economic crisis. That’s been bad for each and every one of us. When stocks are mispriced, both individuals and businesses cannot engage in effective financial planning. Ineffective financial planning diminishes wealth. So the high stock prices of the past 28 years have left us all poorer than we would have been if more of us had been following research-based investment strategies.
The difference between Buy-and-Hold and Valuation-Informed Indexing is that Buy-and-Holders accept whatever stock price happens to apply as real while Valuation-Informed Indexers distinguish between stock price gains caused by real economic factors and those cause by irrational exuberance. We believe that all investors should be practicing valuation-based market timing at all times with the aim of keeping noninal prices as close to fair-value prices as possible for the benefit of all concerned.
Irrational exuberance is the enemy of stock investors, in the eyes of Valuation-Informed Indexers. Buy-and-Holders are complacent about irrational exuberance. They do nothing to overcome it. If anything, they celebrate it. They act like it is a good thing. Yucko to the Max, you know?
Rob
And just look at how things all turned out for you with the opinion that stock was overpriced for 28 years. Was your outcome good or bad? It was a disaster. You are broke, while everything worked out for those following buy and hold. Now here we are at the time that we have all been planning for. We are in our 60’s and in retirement. The buy and holders have the big next egg, while you are broke. It is easy to see who ending up winning the argument.
The outcome of me working up the courage to point out the error in the Greaney retirement study was excellent. I said that his study lacks a valuation adjustment and no one has presented one iota of evidence that it contains one in 22 years now. My regret is that I didn’t start pointing out the error in May 1999, when I joined the Motley Fool board. I was too afraid of you Goons to do the right thing.
I was a coward for three years. But I did eventually get over it.
Rob
How was the outcome good for you. You made a mistake about Greaney. Everyone pointed it out to you and made you look foolish. It just added to the long list of everything else you got wrong.
Here you are in your 60’s and you are broke, divorced and cut off from the investment community. I would say that it was a complete failure for you.
Okay, Anonymous.
I do wish you all good things, in any event.
Rob
Seriously Rob. How is it anything but a disaster? How is your outcome a good thing for you. How was it a good outcome for your wife (now ex-wife). Isn’t the whole conversation about having a fully funded retirement when you hit 60?
WHILE BEING HONEST IN YOUR DEALINGS WITH YOUR FELLOW COMMUNITY MEMBERS.
You always skip that part.
That part is important.
Rob
We have different definitions of being honest. In my book, being honest means being truthful.
Okay, Anonymous.
Rob