I’ve posted Entry #658 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Is the Opposition to Market Timing Just a Marketing Gimmick?

Juicy Excerpt: Market timing is a great strategy for achieving superior long-term results. But the marketing case for it is at times dubious. Could that be the reason why so many of the experts in this field are reluctant to endorse it?

I’ve posted Entry #657 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called More Thinking About Market Timing Leads to More Thinking About Market Timing.

Juicy Excerpt: Most people put the market timing concept in a box. Most don’t think it’s a good thing. But even those who are open to thinking of it as a good thing don’t think of it as being a big deal. There are lots of things to know about stock investing. Market timing is just one of those things. The topic of market timing is about 5 percent of what you need to understand to become an effective stock investor.

I do not see it that way. I would say that market timing is the most important stock investing topic. To understand the ins and outs of market timing is to understand 65 percent of what you need to know to become an effective stock investor.

I’ve posted Entry #656 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Irrational Exuberance Is Like Deficit Spending, Only Worse.

Juicy Excerpt: Do you want to know the true value of your stock portfolio? Of course you do! You need to know the true value to be able to develop an effective plan for your financial future and to assess how well your investment strategies have been working out. But you don’t really want to know the true value. If you did, all of the web sites that report on stock developments would be sure to tell you how much you need to subtract from the official numbers to account for the effect of irrational exuberance.

I’ve posted Entry #655 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Shiller’s Research Findings Are Both Amazing and Completely Unremarkable.

Juicy Excerpt: To say that valuations affect long-term returns is to state the obvious. There are thousands of markets in existence. There is a market for pencil sharpeners and there is a market for paper clips and there is a market for cotton balls and there is a market for bowling balls. In every last one of them, the price that is paid for the product being offered for sale affects the value proposition obtained by making the purchase. What Shiller showed is that it works that way with stocks too. Common sense could have told us that. It’s certainly a nice thing that he reaffirmed the merit of looking at things with a common-sense perspective. But I think it would be fair to say that it’s more than a little odd that someone would be awarded a Nobel prize for doing that.

I’ve posted Entry #654 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Shiller’s Book Title Does Not Have an Exclamation Point at the End.

Juicy Excerpt: Irrational exuberance – it’s a bad thing. Shiller’s book title does not have an exclamation point at the end.

It’s a silly thing to say. Of course irrational exuberance is a bad thing. Who ever thought otherwise?

Only everyone.

I’ve posted Entry #653 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called It’s a Confounding Reality That Stock Prices Revert to the Mean.

Juicy Excerpt: The widespread belief that stock prices revert to the mean is not intuitive. Most people believe that the market sets stock prices through a rational process, that all of the economic developments of the day are taken into consideration by millions of investors and that prices are recalibrated and set in their new proper place. If that were the reality, the mean stock price (a CAPE value of 17) would have no significance. Each day of stock pricing would be independent of all the others. What happened at earlier times would tell us nothing about what the stock price should be today.

 

But it clearly does. Bogle was the king of Buy-and-Hold. He was disdainful of market timing (in fairness, he softened his view a bit in some comments that he made as part of a long-running debate on safe withdrawal rates that I started way back in 2002). The objection to market timing is that no investor can know better than the market where prices should be. But that is clearly not so if reversion to the mean applies. All that the investor needs to do is to take note of how far from the mean the current price is. He can safely predict the direction in which prices will be headed in the long term and the strength of the pull that will be felt in that direction.

I’ve posted Entry #652 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called It’s Irresponsible for Someone Who Has Doubts About Buy-and-Hold Not to Mention Those Doubts.

Juicy Excerpt:  Buy-and-Hold is popular because it is popular. But it is not nearly as popular as most people think. If everyone who held doubts worked up the courage to express their doubts, Buy-and-Hold could fall very hard very quickly.

I’ve posted Entry #651 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Why Stock Investing Is So Emotional.

Juicy Excerpt: The case for believing that the market is efficient (and that thus market timing is not required) is that investors all want to achieve good long-term results. It is their retirement money that is at stake. For so long as investors make decisions in accord with their self-interest, stock prices should be set properly and timing should not be required. All of that really does follow logically.

What Robert Shiller showed is that what follows logically simply is not so. There is a good reason why the title of his book is Irrational Exuberance. Investors do NOT act in their self interest, according to Shiller’s research findings. They push stock prices higher than the price that is justified by the economic realities. They hurt themselves by doing so. They cause themselves to suffer failed retirements. They cause economic distortions and in time economic collapses. The worst of the economic collapses exacerbate political frictions. Irrational exuberance is no joke.

I’ve posted Entry #650 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Four Flaws in the Thinking That Retirement Plans Calling for Excessive Withdrawals Can Be Fixed Through Ongoing Adjustments.

Juicy Excerpt: Actually, it’s not entirely settled. Intellectually, it is. But emotionally, lots of us have been reluctant to acknowledge the far-reaching how-to implications of Shiller’s amazing research. There are people in this field who to this day cite the “4 percent rule” as if it were a real thing. And many investors go along. Acknowledging the effect of valuations would mean coming to terms with the reality that our stock portfolios do not possess nearly the real and lasting value that we have been led to believe they possess. So we pretend.

I’ve posted Entry #649 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Shiller’s Research Should Bring on a Reconsideration of the Great Depression.

Juicy Excerpt: Wouldn’t the sudden disappearance of trillions of consumer spending power cause a massive economic contraction? It sure seems to me that it would.