I’ve posted Entry #567 to my weekly Valuation-Informed Indexing column at the Value Walk site, It’s called Shiller’s Research Doesn’t Permit Us to Predict the Future, It Permits Us to See the Present More Clearly.

Juicy Excerpt: The reality is that Shiller’s research does not permit us to predict the future, it permits us to see the present more clearly. Shiller showed us the need to make a distinction between stock gains rooted in economic realities (such as increased productivity) and stock gains rooted in nothing more than irrational exuberance. Stock gains rooted in economic realities last forever and can be counted on when one is planning one’s financial future. Irrational exuberance gains are fake and temporary. They disappear into the mist when investor emotions swing in a new direction. 

I’ve posted Entry #566 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Each Day’s Stock Market Action Reaffirms a Belief in Buy-and-Hold.

Juicy Excerpt: One reason why bull markets can remain in place for a long time is that the investors who contribute to them are regularly reassured that their thinking about how stock investing works is reaffirmed on a daily basis. It is only price crashes that cause concerns about the effects of overvaluation and those are of course rare events.

I’ve posted Entry #564 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called We Are All Responsible for the Popularity of Buy-and-Hold.

Juicy Excerpt: I recall one year looking at the numbers for our stock portfolio in preparation for the budget-crafting task and being delighted at how much the stock gains for the year had made it so much easier to achieve my goals. Spending cuts? Who needs spending cuts when you can create imaginary money with bull market gains and thereby get to the same place? I obviously didn’t see it that way at the time. But I try to bring that moment to mind when I am struggling to understand how Buy-and-Hold became so popular despite the obvious danger of going with an approach that disdains market timing/price discipline. I made Buy-and-Hold popular! At least at that moment in time I did! Because I experienced the same Get Rich Quick impulse that everyone else experiences. And so I felt that same warm feeling when hearing about bull market gains that everyone else feels.

I’ve posted Entry #563 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called How Much Better Would Life Be If Today’s CAPE Value Was 17?

Juicy Excerpt: It is not just the dark cloud of a possible price crash that makes today’s CAPE value unappealing to me. Stock overpricing messes up just about everything in the society that tolerates it.

I have posted Entry #562  to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called An Important Purpose of Investment Research Is to Reveal unpopular Truths.

Juicy Excerpt: The biggest problem, though, is that the Buy-and-Holders are not entirely sincere in their belief in the power of research. They do believe in research. It is clear to me that that is so. But one element of the scientific mindset is always to question, never to fall into the trap of believing that you have it all figured out. The Buy-and-Holders have fallen into the trap of believing that they have it all figured out. They no longer are open to questioning of their claim that market timing doesn’t work. The Buy-and-Holders of today disdain the recent research.

I’ve posted Entry #561 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called It’s Not Possible for One Asset Class to Always Be the Best Asset Class.

Juicy Excerpt: All of the asset classes that investors invest in are part of one large market of investment choices. If one asset class is always best, word would get out that that was so and investors would drive up the price of that asset class until it no longer was best. The appeal of all of the asset classes waxes and wanes. No one asset class is best at all times.

I’ve posted Entry #560 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called High Stock Prices Are Sticky.

Juicy Excerpt: This resistance to stock price drops is a fundamental force in the market. Without it, the market could test various price points and settle on the one that makes the most sense given the economic realities. But investors always favor high prices. It takes more in the way of bad economic news to pull prices down than it takes in the way of good economic news to pull prices up.

I’ve posted Entry #559 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called We Need More Information to Get Stock Prices Right.

Juicy Excerpt: The market can only perform the function of setting prices properly if there is a free flow of information to the investors who are causing the market to move in one direction or the other. For so long as people do not feel free to state their views clearly (including the view that the retirement calculator of the owner of the site gets the numbers wrong), the market cannot do its job. I do not believe that our stock market is doing its job today.

I’ve posted Entry #558 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Term “Irrational Exuberance” Is a Synonym for “Scam”

Juicy Excerpt: Irrational exuberance is a scam. Is that not so?

Even people who are generally sympathetic to Shiller’s ideas usually do not refer to it as such. People think of irrational exuberance as one more thing to take into consideration when settling on a stock allocation. It’s really much more than that. Shiller’s showing that there are times (like today!) when more than half of the wealth held in the stock market is artificial is a cry of “foul!” as to the entire working of the market. For so much false wealth to be created, pretty much all of us had to be in on the scam. We are not talking about some small act of corruption. This is pervasive.

I have posted Entry#557 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Buy-and-Hold Is Only Popular At Times When It Is Dangerous.

Juicy Excerpt: Few investors are shy about acknowledging that they follow a Buy-and-Hold strategy today. It makes them feel smart to say that they have been following the strategy that pushed stock prices up to one of the highest levels ever achieved. Not so many will acknowledge following the strategy when prices have fallen hard. Investors are much more inclined to brag about their successes than to bemoan their mistakes. When the flaws of Buy-and-Hold become evident to all, few will own up to once having followed the strategy.