I’ve posted Entry #472 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Strategic Assessments in the Investment Realm Involve Both Short-Term and Long-Term Considerations.

Juicy Excerpt: A random walk pattern would tell us that Buy-and-Hold is the ideal strategy. If prices played out in the form of a random walk, it would be fair to say that the risk of a big price drop is the same at all times; so it would not be possible to predict future returns and the best practice would be to stick with the same stock allocation at all times. But, if prices play out in the form of a hill-and-valley pattern, the knowledgeable investor can predict his long-term return by noting in which direction (hill or valley) prices are headed. And if prices can be predicted, risk is not static but variable. If risk is variable, investors who wish to keep their risk profile roughly constant over time must be willing to engage in market timing to have any hope of doing so.

I’ve posted Entry #471 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Mathematics of Investing Is Not Difficult, But It Is Flat-Out Intolerable.

Juicy Excerpt: I am a big fan of the following quote from Rob Arnott regarding true value of stocks: “Returns are for the most part a matter of simple arithmetic…. Much of our industry seems fearful of basic arithmetic of this sort.” These are such strange words. The experts in the investment advice field are fearful of simple arithmetic. That cannot be so. Yet I know from personal experience that it is so. So it is an exciting reality that Arnott worked up the courage to tell it like it is.

I’ve posted Entry #470 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Economic Crisis Did Not End, It Has Been in Remission.

Juicy Excerpt: So the economic crisis never really ended. It went into remission. If the economy was booming with stock prices at reasonable levels, we could take comfort that good times really had returned. But I don’t feel able to trust a recovery that is financed by an overpriced stock market. Overpriced stocks makes us feel that it is safe to spend again. But the financial security pushing spending forward is illusory. There is no “there” there when stock prices could fall to fair-value levels at any moment and trillions of dollars of spending power could be taken off the table again.

I’ve posted Entry #469 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Shiller’s Breakthrough Was Not to Show Us How Stock Investing Works, It Was to Show Us How to Change How It Works.

Juicy Excerpt: Shiller did indeed describe how stock investing works. But his primary accomplishment reaches far beyond the descriptive. He showed us how to make stock investing a less risky and more profitable investing choice. His research does not just describe what is going on in the market. It gives us all the tools we need to change what is going on in a very big and very positive way. Three cheers for market timing!

I’ve posted Entry#468 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called If Stock Prices Reflected Something Real, Nothing That Shiller Said Could Cause Them to Collapse

Juicy Excerpt: Do Buy-and-Holders face these sorts of concerns? When they appear on television programs, do producers warn them not to say anything that might cause stock prices to rise too high? The idea is laughable. We know that that does not happen.

I’ve posted Entry #467 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Fact That the Safe Withdrawal Rate Changes Tells Us More Than the Number Itself.

Juicy Excerpt: That was 17 years ago. I have crafted millions of words over those 17 years in response to criticisms of me and my work advanced by my Buy-and-Hold friends. Would you care to guess what percentage of those words were aimed at coming to a better understanding of what the safe withdrawal rate is when each of the various CAPE levels apply?

The answer is: zero.

I have put forward words saying what the safe withdrawal rate is at the various CAPE levels. So I have done my part to get discussions started on this question. But there has never once been a case in which a Buy-and-Holder engaged. I have seen cases in which Buy-and-Holders have acknowledged that it might make sense to use a somewhat higher withdrawal rate when valuations are high. But there is not one case in which someone on the other side of the table was willing to say that the safe withdrawal rate can ever be a number other than 4.

I’ve posted Entry #466 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Paragraph in Shiller’s Book warning of the 2008 Economic Crisis Has Been Removed.

Juicy Excerpt: I do not know of another passage from Shiller’s work or from the work of others who believe that valuations matter that conveys the essential message so clearly. When Shiller says that “the real losses could be comparable to the total destruction of all the schools in the country, or all the farms in the country, or possibly even all the homes in the country,” it sends a chill down my spine. He is coming close in those words to describing a Second Great Depression.

And, indeed, there were articles in respectable newspapers like the Wall Street Journal in the days following the 2008 crash speculating that we might be headed into a second Great Depression. So that scary possibility was a live possibility for a few months. It was the relentless promotion of the Buy-and-Hold investment strategy, which posits that it is not necessary for investors to lower their stock allocations no matter how high prices rise, that made the crazy price levels that brought on that crash inevitable.

I’ve posted Entry #465 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Buy-and-Hold Rules Out the Possibility of Investors Exercising Price Discipline When Buying Stocks.

Juicy Excerpt: What is my beef with Buy-and-Hold?  It’s that it is a discipline indifferent strategy. If you don’t time the market, you are going with the same stock allocation regardless of the price at which stocks are selling. That makes no sense. How could price not matter? We consider price when buying everything else we buy. How could it be a good idea to ignore it when it comes to buying stocks? It’s worse than that. Buy-and-Holders aren’t just price indifferent. They are outright hostile to the idea of exercising price discipline when buying stocks.

I’ve posted Entry #464 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called It Is Not Possible to Make Sense of Stock Crashes.

Juicy Excerpt: Stock prices crash from time to time. Everyone gets this. It’s such a widely appreciated reality that we have come to accept it as normal. I don’t think we should. I view the phenomenon of the stock crash as a very strange reality. I think that it is a reality that we need to understand better. It is my belief that, if we came to understand stock crashes better, we would not see so many of them.

I’ve posted Entry #463 to my weekly Valuation-Informed Indexing column at the Value Walk Site. It’s called There Is No Polite Way to Challenge Buy-and-Hold.

Juicy Except: When I see people getting angry on an investing discussion board, my usual response is to explain that humans are emotional creatures and that logic is thus not necessarily our strong point. When we want to believe that the numbers on our portfolio statement are a good indicator of the true value of our stock portfolio, we rationalize our way into believing that regardless of any peer-reviewed research published by any Nobel-prize-winning economist. I have never seen people calm down when I say that. Me saying that makes my Buy-and-Hold friends even more angry. At that point I am seen as not only saying that Buy-and-Holders are dumb in their choice of investment strategies but that they are too dumb to even want to be educated about these matters.