I’ve posted Entry #587 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Shiller’s Research Is a Money Maker for the Investment Advice Field.

Juicy Excerpt: Buy-and-Hold does make money for investment advisers. Lots of it. But you know what would make more? Valuation-Informed Indexing, the opposite of Buy-and-Hold, the strategy that says that it is critical that investors practice market timing (price discipline!).

I’ve posted Entry #586 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Can Buy-and-Hold and Valuation-Informed Indexing Co-Exist?

Juicy Excerpt: The reality is that the case that market timing is not needed is very weak. It’s a strange reality that that idea ever caught on. There obviously is research showing that short-term timing doesn’t work. So I don’t expect to see any change in the conventional view re that one. But the claim that market timing isn’t needed is not rooted in a research finding. It is rooted in an assumption, nothing more. 

I’ve posted Entry #585 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called If Irrational Exuberance Is Real, Then It’s Appeal Will Diminish When Stock Prices Drop.

Juicy Excerpt: Stock prices have not been at low levels since the earlier 1980s. So there has never yet been a time when we had available to us Shiller’s Nobel-prize-winning research showing that irrational exuberance is a thing and when we saw the price that is paid for paying it no mind while it grew to a fearsome size. I believe that the combination of those two realities will deal a lethal blow to the Buy-and-Hold project.

I’ve posted Entry #584 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Investors Should Cultivate Negative Views Toward Stocks.

Juicy Excerpt: All of this is baby talk. What I am saying here is so obvious that it should not need to be said. Unfortunately, recent stock market history shows that it does need to be said. Today’s CAPE level is an obscene number. It puts a dark cloud over our nation’s economic future because high stock prices cause price crashes and price crashes cause economic contractions. Today’s CAPE level is telling us that we have come to love stocks too much, that we have become so blind to the negatives of stocks that we are hurting ourselves.

I’ve posted Entry #583 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Even People Who Believe in Shiller’s Research Aren’t Getting the Full Benefit Of It.

Juicy Excerpt: What Shiller showed is that stock investing is not strictly an individual activity but to a large extent a community endeavor. No one individual causes a bull market. Bulls are achieved when the entire society goes more than a little bit nutso. And of course we all suffer together when prices find their way back to earth. The stock market is in many respects a public resource, like clean air and clean water. Overvaluation of stocks is a form of pollution that ruins things even for those who are fully aware of how dangerous it is.

I’ve posted Entry #582 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Efficient Market Concept Is Wrong But Not Absurd.

Juicy Excerpt: 

It’s the idea that the stock market is efficient that started all the trouble. If no one had ever thought of that one, we all would have been market timing all along. In every other market that exists, people buy more of the thing offered for sale when it is priced well than they do when that thing is not priced well. So why doesn’t that rule apply for stocks? It’s because there were people who said that the market is efficient. If that were so, stocks could never be mispriced. So there would be no need for market timing and it wouldn’t serve any good purpose.

I’ve posted entry #581 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Benjamin Graham Was Skeptical of One Aspect of Valuation-Informed Indexing.

Juicy Excerpt: Graham, however, doubted that the majority of investors could ever find appeal in the strategy. He said: “These copybook maxims have always been easy to enunciate and difficult to follow — because they go against that very human nature which produces the excesses of bull and bear markets. It is almost a contradiction in terms to suggest as a feasible policy for the average stock owner that he lighten his holdings when the market advances beyond a certain point and add to them after a corresponding decline. It is because the average man operates, and apparently must operate, in opposite fashion that we have had the great advances and collapses of the past; and — this writer believes — we are likely to have them in the future.”

I’ve posted Entry #580 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Stock Investors Don’t Want to Know the True Safe Withdrawal Rate.

Juicy Excerpt: There’s recently been a development in the 19-year saga. One of the members of the ferociously abusive group that has defended the Greaney study for 19 years now acknowledged in a recent comment to my blog that he agrees that the study lacks a valuation adjustment. Until that comment, the only response that I have received from this group to my question as to where in the study the valuation adjustment is located, has been the demand that I “shut up.” I have not found that one terribly persuasive. So I was happy to see “Evidence-Based Investing” (the screen-name for the poster who offered the recent comment) acknowledge that I was right all along. In fact, Evidence went a step farther. He said that “nobody” truly believes that Greaney included a valuation adjustment in his study. This is so even of Greany, according to Evidence.

 

Problem solved! Right? Um– not quite.

I’ve posted Entry #579 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Is It Good Public Policy to Prop Up the Stock Market?

Juicy Excerpt: The market should be permitted to price stocks properly, which it cannot do if policymakers knowingly promote policies that they believe will keep stock prices up. So, no, policymakers should not prop up the stock market. If anything, at a time when prices are above fair-value levels, policymakers should promote policies that will bring stock prices down to levels closer to their fair value. I can not recall ever hearing a policy advocated on grounds that it will bring stock prices down. I think that’s unfortunate. We should all want stocks to be priced properly. When prices are too high, we should all at least generally favor policies aimed at bringing them down.

I’ve posted Entry #578 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Best Way to Discourage Short-Term Timing Is to Encourage Long-Term Timing.

Juicy Excerpt: Their mistake was not to test long-term timing. They did test short-term timing and found (rightly, I believe) that it does not work. The unfortunate logical leap was to conclude from this that no form of market timing works and that no form of market timing is required. Shiller showed that valuations affect long-term returns. Knowing this, it appears looking backwards that it was an absurd idea to think that market timing was not required. In a world in which valuations affect long-term returns, long-term market timing is price discipline, nothing more and nothing less. Price discipline is critical to the functioning of all markets. How could it ever be that market timing would not be required in the stock market?