I’ve posted Entry #545 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Is Shiller Losing Confidence in His Own Research?

Juicy Excerpt: I believe that Robert Shiller is gradually losing confidence in his own research. He still has confidence in the findings. The findings are rock-solid and there is no reason to doubt them. But what really matters are the how-to implications of the research — what should investors be doing differently because of Shiller’s finding that valuations affect long-term returns? Shiller has made several statements in recent months indicating that he is pulling back from an expansive understanding of the significance of his work. 

I’ve posted Entry #544 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called I Like Case Because I Like Stocks.

Juicy Excerpt: Investing in cash when stocks are insanely overpriced permits me to own more stocks over the course of an investing lifetime. And stocks purchased at reasonable or super-reasonable prices are the best investment class out there. I don’t invest in cash because I like the direct return provided. I invest in cash because doing so permits me to buy more stocks when they are priced to offer a solid return. I love cash because I love stocks.

I’ve posted Entry #543 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Why I Am Obsessed with the Topic of Stock Valuations.

Juicy Excerpt: That changes everything. It puts us, the investors, in charge of our fate. Under the old understanding of how stock investing works, we had to hope for positive economic news. We of course still want to see the economy do well. But Shiller’s research shows that economic developments are not the primary factor driving stock price changes. The bigger factor is shifts in investor emotion. That should be our focus.

I’ve posted Entry #542 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called What Is the Worst Price Crash That Is Within the Realm of the Reasonable?

Juicy Excerpt: Intelligent stock investing is all about risk analysis. Stocks are a high-return asset class. If there were no risk, we would all invest all of our money in stocks all the time. It’s the desire to avoid unacceptable risks that keeps us from doing that. So it seems to me that we should all want to gain an accurate take on the sort of risk that we are taking on when we invest in stocks. The level of risk associated with stock investing is very high today. Shouldn’t we acknowledge that? Shouldn’t we quantify the problem by pointing out that a 75 percent price drop is not out of the question?

I’ve posted Entry #541 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called It’s Not Economic Developments  That Cause Market Turns.

Juicy Excerpt: What matters is not the economic development, what matters is the investor reaction to the economic development. Investors who are emotionally open to a price drop will respond differently to a change in interest rates or energy prices or political turmoil than will investors who are not emotionally open to a price drop. We need more investigations into what makes investors more open or closed to price drops.

I’ve posted Entry #540 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Power of Market Timing Is Counterintuitive.

Juicy Excerpt: Everything about the world of stock investing is serious and sober and controlled. Shiller is saying something discomforting. He is saying that underneath the serious and sober and controlled exterior is a bubbling cauldron of investor emotion that tells the true story of what is going on. Shiller once said:  “There is a growing behavioral economics movement, but it has so far had limited impact. Economists are not fond of the softness and imprecision of psychology. These notions are considered vaguely unprofessional and flaky.” And scary!

I’ve posted Entry #539 to my weekly Valuation-Informed Indexing column at the Value Walk<I’vesite. It’s called We Don’t Acknowledge Our Get Rich Quick Urge cause It’s Irrationality Shames Us.

Juicy Excerpt: The psychological block is the shame we feel over what we have done. The damage done by a bull market is small in its early years. So the shame felt over it is limited. But as prices rise higher and the risk attached to them grows greater, the shame we feel over our irrational behavior grows stronger. When a bull market has been in place for a long time (this one has been in place for a longer time than any earlier bull market in U.S. stock market history), the shame grows so strong that discussion of the dangers of bull markets becomes taboo. Irrational exuberance is fun in its early days, In its later days, it becomes something that we cannot bear to look at closely.

I’ve posted Entry #538 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Every Investor Should Know the Basics of How the Stock Market Works.

Juicy Excerpt: Trillions of dollars of market value were lost in the space of a few days during the 2008 economic crisis. There was one fellow on a discussion board who asked: “Where did all the money go?” I loved that because it is such an obvious and important question. It is my belief that fewer than one in ten of all investors know the answer to that question and that no one should invest one dollar in the stock market until she does.

I’ve posted entry #537 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Believing in Shiller’s Research Is a Money Loser.

Juicy Excerpt: What would happen if Shiller were to give a speech so powerful as to persuade all of the investors of the world of his case. U.S. stock prices would fall overnight by 50 percent. That would certainly be a show of the power of his ideas. But would it be a good thing? The millions of people who saw their retirement plans fail probably would not think so. The owners of the hundreds of thousands of businesses that went under probably wouldn’t think so. The millions of workers who would be thrown out of their jobs probably wouldn’t think so. The policymakers who would be left with the task of picking up the pieces of a broken country probably wouldn’t think so.

This Shiller fellow did something very important. But did he do something good?

I’ve posted Entry #536 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Hill-and-Valley Pattern of Stock Prices Is Strong Evidence That Shiller Is Right.

Juicy Excerpt: I believe that a factor that is not given sufficient attention is the way in which prices have always headed upward for a long stretch of time and then downward for a long stretch of time. If the market were efficient, prices would play out in the form of a random walk. But that is not at all what we see when we look at the historical return data. It’s not just that the data shows a strong correlation between valuations and long-term returns. The pattern in which prices play out supports Shiller’s idea that it is shifts in investor emotion that drive stock price changes rather than economic developments. Investor emotions are slow to change. Once the idea gets locked in that prices will he headed upward, irrational exuberance rules the day for a large number of days Then, once the idea gets locked in that prices will be headed downward, irrational depression rules the day,