Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
Yep. Market timers are selling there stock and just look at how everything has been consolidated at the top. Not surprising and it is not just stock. Take a look at real estate holdings and how that has changed over the years. You can decide if you want to follow those that have been successful or you can go with the 90% that struggle.
The people who you are calling “market timers” are just Buy-and-Holders who have lost confidence in their strategy. Buy-and-Hold is a confidence game. Excessive confidence causes prices to go to crazy high levels and excessive pessimism causes prices to go to crazy low levels.
The idea behind Valuation-Informed Indexing is to take the emotion out of the stock investing project. Those times of low prices are horror stories. We should all want to bring an end to them. To do that, we need to focus on what causes them. It’s high prices that cause the insane price drops. All that we need to do to stop the horrible losses is to stop the insane highs. That’s done with valuation-based market timing. Valuation-based market timing is the key to long-term investing success.
Irrational exuberance is a snare and a delusion, Anonymous. It is not real. It hurt us. We should all work together to to keep it from getting out of control. We should all work to keep the CAPE level at a reasonable levels.
My sincere take.
Rob
https://finance.yahoo.com/news/wealthiest-10-americans-own-93-033623827.html
Notice the following section from this article:
The richest Americans own the vast majority of the US stock market, according to Fed data.
The top 10% of Americans held 93% of all stocks, the highest level ever recorded.
Meanwhile, the bottom 50% of Americans held just 1% of all stocks in the third quarter of 2023.
The wealthiest Americans have never owned so much of the stock market, with the top 10% now holding a record 93% of US equities, according to Federal Reserve data.
These people not only hold stock, but they also had vast amounts of Treasuries, bonds, CD’s, etc and have other sources of income. They have capitalized off of the weak hands of the market timers. They just keep buying up assets (playing out like a game of monopoly) and now we have a clear division of the have’s and have not’s. These rich people are not impact by the swings in the market. To the opposite, the market timers are left out in the cold and just complain about how unfair everything is and play the role of a victim.
It’s the people who own stocks who CAUSE price swings. The last 44 years of peer-reviewed research shows that investors must practice valuation-based market timing to keep their risk profile stable over time. If they do that, you cannot have big price swings. Every time there are price increases, investors lower their stock allocation. The sales pull prices down to reasonable levels.
Stock prices are self-regulating so long as most investors practice market timing. The problem is that there is so much money to be made in encouraging people to ignore the research and follow a Buy-and-Hold strategy.
Rob
It is the market timers that are selling. Buy and holders (the top 10%) just keep buying more. Look at you as an example. You got out of stock and now you have nothing. Great strategy, Rob.
“It is the market timers that are selling. Buy and holders (the top 10%) just keep buying more. Look at you as an example. You got out of stock and now you have nothing. Great strategy, Rob.”
Valuation-Informed Indexers go with the same risk profile at all times. When prices are higher, they go with a lower stock allocation.
It’s not clear what you mean when you say that Buy-and-Holders “keep buying more.” Valuation-Informed Indexers continue buying through a bull market but go with a lower stock allocation. I don’t think that’s what you mean, I pray that you don’t mean that Buy-and-Holders go with a higher stock allocation when prices are higher (there’s probably a small percentage that do — that’s how prices get too high). I think that you mean that Buy-and-Holders stick with the same stock allocation when prices are high, thereby causing their risk profile to get out of whack. I think it would be better to Stay the Course in a meaningful way.
Rob
And Rob Bennett is the expert on valuation……as proven by his multi-million dollar portfolio.
I don’t have a million-dollar portfolio. But I pointed out the error in the Greaney retirement study (it lacks a valuation adjustment) on May 13, 2002. I think it would be fair to say that that’s a much bigger accomplishment than having a million-dollar portfolio would be.
My sincere take.
Rob