A Rich Life

The Old Ideas on Saving & Investing Don't Work -- Here's What Does

“If Shiller’s Nobel-Prize-Winning Research Is Legitimate Research, Everything That Anyone Said on Any Investing Subject Before He Published That Research in 1981 Is Wrong. And There Are a Lot of Wealthy and Powerful and Well-Connected People Who Very, Very, Very Much Do Not Want Millions of Middle-Class Investors to Find Out.”

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Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

Who threatened Dr. Bernstein? Why do you call him a liar, just like you call Wade Pfau a liar and Robert Shiller a liar? If they are lying about this stuff, then that makes everything else suspect. If so, there is no need to listen to anyone but you, right Rob?

When I say that these people are liars, I make it a point to note that that is the human condition — we are ALL liars. And I make it a point to include myself in the group suffering from that human condition. I knew that Greaney’s study lacked a valuations adjustment for three years before I worked up the courage to tell the truth about it.

It’s good to be at least a tiny bit skeptical about everything you hear. I can go along with that much, But we need to know stuff. So we do need to hear people out. I believe that the answer is to permit honest posting from everyone. Then you hear the claims but you also hear challenges to the claims. That’s perfect. That’s the path to a great learning experience.

What threatened Bernstein was the “hostile atmosphere” at the Bogleheads Forum that Wade Pfau often referred to. The idea that market timing is not required was the one huge error that the Buy-and-Holders made. It was discovered in 1981. The defensiveness today is not just over the error itself, it is over the 39-year cover-up. So the atmosphere there is very, very, very, very hostile to discussions of the far-reaching implications of Shiller’s Nobel-prize-winning research.

Just about everybody would prefer to be doing honest work. If the Buy-and-Holders had never said that timing was not required before Shiller came along. we all would have been Valuation-Informed Indexers from 1981 forward. But that is not the way the history of the thing played out. As a society we got it wrong before we got it right. So getting it right has always required saying the words “I” and “Was” and “Wrong.” That’s been the hold-up for all of us for 39 years now.

The thing that threatens Bernstein is the same thing that threatened me for the three years before I worked up the courage to point out the error in Greaney’s study. He wants to be popular. He wants to be able to make a living. He does not want to see his loved ones killed. These are all perfectly normal things.

The one mistake that the Buy-and-Holders made was no small thing. If the most important thing in stock investing is that we are all always sure to practice market timing and the Buy-and-Holders suggested that market timing might not be required, how do you think it makes them feel for people to learn now that they had it wrong all those years? It makes them feel really, really, really, really bad, Anonymous. And they act accordingly.

That’s what Bernstein is up against. That’s what Wade Pfau is up against. That’s what Michael Kitces is up against. That’s what Robert Shiller is up against. That’s what Rob Bennett is up against. That’s what anyone who has ever thought to put forward an honest, helpful word about how stock investing works is up against. If Shiller’s Nobel-prize-winning research is legitimate research, everything that anyone said on any investing subject before he published that research in 1981 is wrong. And there are a lot of wealthy and powerful and well-connected people who very, very, very much do not want millions of middle-class investors to find out.

But they have to find out. Our system cannot continue if we do not fine some means to get accurate and honest and research-based investment advice out to people. The safe withdrawal rate is not one number but a number that varies depending on the valuation level that applies on the day the retirement begins. Everyone needs to know. It is a painful process getting the truth out there. But there is no other way to do it than just to do it. The sooner that the truth gets out, the less painful it will be for all of us. So we just need to grit our teeth and rip the bandage off.

My sincere take.

And my best wishes.

Liar (Some of the Time!) Rob

“If You Dropped All the Criminal Stuff and All the Non-Criminal Abusive Stuff, Bernstein Would Be Happy to Participate in Our Discussions in a 100 Percent Honest Way and We Would Learn What He Really Thinks About All These Matters. Full Truth Be Told, HE Would Learn for the First Time What He Really Thinks re All These Matters.”

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Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

William Bernstein does not time the market and says Rob Bennett is wrong.

If you dropped all the criminal stuff and all the non-criminal abusive stuff, Bill would be happy to participate in our discussions in a 100 percent honest way and we would learn what he really thinks about all these matters. Full truth be told, HE would learn for the first time what he really thinks re all these matters.

I was a Buy-and-Holder once. I detected some of the contradictions. But there were so many good and smart people who thought that Buy-and-Hold was a good strategy that I didn’t trust my own instincts. I finally worked up the courage to express my doubts out loud and then I saw that there were a good number of smart and good people who shared my doubts and that there was an insane amount of defensiveness on the Buy-and-Hold side of the table. So those doubts grew. And over time I was able to put all the pieces of the puzzle together and become a confirmed Valuation-Informed Indexer (which is just Buy-and-Hold with the one huge error (that market timing is not required) corrected.

Bernstein already believes that the Buy-and-Hold retirement studies get the numbers wildly wrong. That’s a good start. Chapter Two of his Nine Pillars of Investing book is the best concise statement of the case for Valuation-Informed Indexing that I have ever seen. So we are not going to have much trouble bringing Bill Bernstein on board once we open the internet to honest posting and he is expressing his sincere views and hearing lots of others express their sincere views. We just need to take that one critical step. We need to follow the laws of the United States in discussions of stock investing just as we follow them in every other field of human endeavor.

I think we are going to get there, Anonymous. In the event that stocks continue to perform in the future at least somewhat as they have always performed in the past, we will be seeing a devastating price crash in the not too distant future. That will give a lot of people the courage they need to stand up to you Goons. And then we are on our way. It will not be too long a time after that when we will see people like Bill Bernstein singing the praises of market timing to the skies. I am sure.

Perhaps not 100 percent sure. But pretty darn sure. The intellectual case for market timing is just too strong for me to imagine that we could not get a guy like Bernstein to join the party once he could see that it was safe to do so. And I think that it is going to become an entirely safe thing in the days following the next price crash, when irrational exuberance over Buy-and-Hold/Get Rich Quick becomes irrational depression over Buy-and-Hold/Get Rich Quick.

We’ll see.

Bernstein Fan (The Chapter Two Version!) Rob

“The Way in Which Things Are Handled in the Investment Advice Field Runs Counter to Our Most Basic Cultural Norms.”

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Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

Why do you post these if you don’t get a response?

Because I believe that we all should be doing everything in our power to open every discussion board and blog on the internet to honest posting re the last 39 years of peer-reviewed research in this field. Our retirement accounts matter. We all should be doing everything we can to protect them. Even if you are a Buy-and-Holder (most of us are), you should want to hear both sides of the story, just in case. We permit honest posting in every field of endeavor other than the investment advice field. I think we should do it in the investment advice field.

It would be hypocritical if I asked others to take action but I never took action myself, would it not?

The fact that I rarely get responses shows how important it is to send out these e-mails. If I got responses, I wouldn’t need to send out e-mails.If I was getting responses, there would be no problem. we could just follow the normal procedure of permitting all to post their honest views. The reason why I do not get responses is that we all feel so had about what we have done to ourselves, we don’t want to face it. Is it going to be any easier to face after the refusal to look at the last 39 years of peer-reviewed research extends another week or another month or another year? It sure does not seem so to me, Anonymous.

The way in which things are handled in the investment advice field runs counter to our most basic cultural norms. We all need to keep chipping away at that wall of fear of Shiller’s research findings. We are a good people. We will get to where we need to go sooner or later. We just need to keep at it. Those of us in the 10 percent who believe that Shiller’s Nobel-prize-winning research is legitimate research need to keep making the case, NOT to give in to the brutal abusiveness of you Goons. Each time one of us gives in, it makes you Goons stronger. We want the American people to win this one, not to lose it.

I keep sending the e-mails because I rarely get responses. If I got lots of responses, we would know that the problem is gone and we could all just post our honest views at every site with no fear of what the Buy-and-Holders would do to us in response. That’s the normal procedure. That’s what we would all be trying to achieve, if we all were thinking clearly.

I hope that that helps at least a tiny bit.

E-Mail Sending Rob

Valuation-Informed Indexing #492: Every Economic Stimulus Should Be Matched With an Economic Deterrent

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I have posted Entry #492 to my weekly Valuation-Informed Indexing column at the Value Walk site. It is called Every Economic Stimulus Should Be Matched With an Economic Deterrent.

Juicy Excerpt: There is a sense, of course, in which every price crash is a black swan event. Had most of us known the crash was coming, we would have taken money out of the market and the price crash would have arrived at an earlier time. By definition a crash has to come as a shock.

But both the 2008 crash and the 2020 crash are similar in one very important way. Both began at times of insanely high CAPE values. All crashes of lasting significance do. So it could be said that black swans become predictable when stock prices rise to unsustainable levels. The particulars cannot be known in advance. But when we reach the price levels that applied prior to the 2008 crash and the 2020 crash, we know that in not too long a time we will be seeing some terrible economic development that will send prices falling hard.

“There Is Not One School of Academic Thought re How Stock Investing Works Today. There Are Two. Everyone Needs to Acknowledge That So That We Can All Feel Comfortable Posting Honestly and Learning Together.”

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Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

Notice that Robert Shiller has never said one negative thing about Buy and Hold, yet he has warned against market timing on a consistent basis.

Notice that John Bogle put up a post at the Bogleheads Forum in which he said that he believed that Valuation-Informed Indexing can work. That’s market timing, Anonymous. Bogle has said both positive and negative things about market timing, just as has Shiller.

If irrational exuberance is real, market timing MUST work. In a world in which irrational exuberance is a real thing, stock investment risk is not constant but variable. So any investor seeking to keep his risk profile constant over time MUST engage in market timing. And yet, as you say, Shiller does not openly state that all investors need to engage in market timing. Shiller’s public statements are as confused as Bogle’s were.

No one can speak clearly about this stuff for so long as they are putting on this charade that Shiller’s Nobel-prize-winning research did not change our understanding of how stock investing works in a fundamental way. We all need to be talking about the Shiller Revolution at every investing discussion board and blog on the internet. That’s the only way that we can all learn what we need to learn. It’s the only way out of this mess.

I don’t know it all, Anonymous. I don’t claim that I do. But I sincerely believe that the retirement study posted at John Greaney’s web site lacks an adjustment for the valuation level that applies on the day the retirement begins. So I need to say that. If I fail to say that, I am committing financial fraud. If I fail to say that, I am betraying my fellow community members.

Bring all the abusive stuff to a full and complete stop and Shiller will begin saying things that he has never said before. So will just about everyone else who works in this field. There is not one school of academic thought re how stock investing works today. There are two. Everyone needs to acknowledge that so that we can all feel comfortable posting honestly and learning together.

I think that Shiller will heartily endorse market timing if we do what we have to do to make him feel comfortable to share his sincere thoughts re these matters with us. I could be wrong. I don’t think that I am. But it is possible. I am not wrong that we should all do everything in our power to make him and everyone else feel comfortable sharing his sincere take. I am not wrong re that one, Anonymous. We all need to be working for that. That’s the only way to take this thing to a positive place for every single person concerned.

That’s my sincere take.

I wish you all good things.

Process-Oriented Rob

“If Anyone Questioned Whether Price Discipline Is Required in Any Other Market, Everyone Would Laugh at Him. The Stock Market Is the One Big Exception.”

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Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

Yes, I still expect those things.

Shiller revolutionized our understanding of how stock investing works with the Nobel-prize-winning research that he published in 1981. In every other market that has ever existed, price discipline is 100 percent required. If anyone questioned whether price discipline is required in any other market, everyone would laugh at him. The stock market is the one big exception. In the stock market, investors exercise price discipline by engaging in market timing (changing their stock allocation in response to changes in valuations). But the idea that market timing might not work became popular because before Shiller there was a belief among academics that the market is “efficient.” If that were so, Buy-and-Hold (failing to engage in market timing) would be the ideal strategy. Shiller blew that one of of the water in 1981. Since then, it has been a cover-up. Our Wall Street Con Men friends don’t want to admit that they made a mistake. So they are in the process of destroying millions of lives with the relentless promotion of the Buy-and-Hold strategy 39 years after it was discredited by the peer-reviewed research.

Do I think that is going to change? Absolutely. It has to. Our economy cannot continue to function if we do not find some means to get honest and accurate investment advice out to millions of investors. This is not optional, it is 100 percent imperative. I believe that the only reason why it did not happen long ago is that we all have a Get Rich Quick urge residing within us and so we find a lot of appeal in the Buy-and-Hold lies. That appeal is going to diminish dramatically when prices fall to a CAPE of 8, which is nearly 70 percent down from where we were before the Coronavirus came on the scene. People are going to be angry at seeing their retirement hopes destroyed. They will all be a lot more willing to stand up to you Goons at that point and we all will be able to make enormous strides in our understanding of how stock investing works once we have placed you in prison cells, where you belong.

Once I learned that Buy-and-Hold is garbage (this happened for me on the evening of August 27, 2002, when John Greaney advanced his first death threat), I refused to write another word supporting that strategy. All of the work that I have done since is rooted in the Valuation-Informed Indexing strategy, which is identical to Buy-and-Hold in all respects except that it corrects the one error that the Buy-and-Holders made — it says that market timing always works and is always 100 percent required.

I have an encyclopedia’s worth of material on Valuation-Informed Indexing, which is the first true research-based strategy. Millions of middle-class people need access to this material. Nobody else has ever supplied it because everyone else is afraid of the criminal acts that you Goons employ to keep people in this field from offering research-based (that is, non-Buy-and-Hold) investment advice. I have a monopoly on the good stuff today. Not because I want to have a monopoly. Because everyone else is intimidated by the threats of physical violence and of career destruction that have keep Buy-and-Hold handing on for years after it was discredited by the peer-reviewed research.

My site goes 500 miles deep on how stock investing works. It is an amazing asset.

But it only goes about three inches wide because the penalty is so great for any other site that wants to link to my material. So the insights set forth here have not reached many people.

That is going to have to change if our economic system is going to survive. So I think it is going to change. Lots of people love this country. As prices continue to drop, people are going to work up the courage to stand up to you Goons and things will begin getting better and better and better for all of us. The site will no longer be only three inches wide — it will reach all over the internet. But it will still go 500 miles deep. Everyone in the country will enjoy an amazing leaning experience because of the thousands of powerful investment insights that I have developed over the past 18 years by working with the thousands of our fellow community members who have a genuine interest in learning how stock investing works and in passing along what they learn to others.

After your prison sentence is announced, the long national nightmare is over, Anonymous. It will be all downhill sledding from that point forward.

My sincere take.

Downhill Sledder (Not Quite Yet, But Soon!) Rob

“Drop All the Criminal Stuff and Tell Shiller That You Have Done So and Ask Him to Come to the Bogleheads Forum and Tell People There Whether He Believes That the Safe Withdrawal Rate Is Always the Same Number. I Am Personally 100 Percent Certain What He Will Say If You Do That. But There Is Only One Way to Find Out, Right?”

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Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

The fact that Robert Shiller has NEVER blamed buy and hold, it makes your whole campaign worthless and lacking any support or substance.

He’s talked about irrational exuberance. It is the title of his book.

If there is irrational exuberance, it is something that hurts us all. It is something that we should all be working to diminish. It would be wonderful if Shiller and thousands of others did that on a dally basis. I certainly don’t think that it would help if I did less of that. We need more people making the effort, not fewer.

I have a chapter in my book titled “Robert Shiller Is a Failure.” I of course love and respect Shiller. All of my work is based on his research. So why would I call him a failure? I call him that because the CAPE value in recent decades has been higher that at any earlier time in history. Shiller’s research shows the horrors of irrational exuberance and yet it has gotten more out of control since his research was published. Huh?

That’s because of the factor that you point to. Shiller are many, many others are afraid to call the Buy-and-Holders out on their b.s. They try to be “nice” and not mention that the Buy-and-Holders made a terrible mistake in thinking that market timing is not required. We have to stop thinking like that. There’s nothing nice about it. The Buy-and-Holders were trying to help people and by making that horrible mistake they have instead ruined millions of lives. If they were thinking clearly, they would want us to point out their mistake and to do everything in our power to get it corrected.

Drop all the criminal stuff, Anonymous. Drop all the criminal stuff and tell Shiller that you have done so and ask him to come to the Bogleheads Forum and tell people there whether he believes that the safe withdrawal rate is always the same number. I am personally 100 percent certain what he will say if you do that. But there is only one way to find out, right?

We all are in the same boat. We all want to know how to invest effectively. Find out what Shiller really thinks re these matters and you are helping every single investor on the planet, including yourself.

I don’t think you will do it. But I wish you would. And I believe that Shiller is going to address the matter sooner or later, whether you do or not. Sooner is better for everyone, But this sort of thing just cannot be covered up indefinitely in a free society in any event. Not in Rob Bennett’s sincere assessment of the matter.

My best wishes.

Rob the Campaigner

“The Last 39 Years of Peer-Reviewed Research Is Information. Investors Should Be Considering That Information When They Decide on Their Stock Allocation. The Stock Market As It Exists Today Is Not Even a Market in the True Sense of the Word. When the Most Important Information Is Prohibited, the Market Cannot Perform Its Very Important Job of Processing All Information Available to It.”

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Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

It appears that you didn’t see that the Fed had to step in as a backstop to even money market funds.

They’re trying to keep things from getting out of hand. That makes perfect sense. I applaud them for that.

The question is — Why did we as a nation set things up so that sooner or later we were going to need to take desperate steps to keep things from getting out of hand? Had we been permitting honest posting at every site on the internet all along, the CAPE could never have risen so high. Then you still have the problem of the economic effects of the Coronavirus. But you don’t have the problem of seeing trillions of dollars worth of irrational exuberance disappear into thin air at the same time. Buy-and-Hold takes any economic problem that we face as a nation and magnifies it.

And always at the worst possible time. To achieve what good purpose, you know? A temporary feeling that we all “outsmarted” the market by getting to enjoy the “benefits” of the pure Get Rich Quick approach for a few years? Huh? I’d rather have a stable economy. I’d rather be able to count on most of the money in my retirement plan remaining there for when I need it. I can live with a 6.5 percent real return each year. I don’t need the phony exaggerated returns that the widespread promotion of Buy-and-Hold brings us followed by the horrible economic destruction that always comes in its wake.

The same thing happened in 2008. Shiller predicted the 2008 economic crisis in his book, which was published in March 2000. How was he able to do that? He studied the historical return data. He saw what always happens in the years following a time when the Buy-and-Hold “strategy” becomes popular. Always widespread economic destruction. It’s a logical impossibility that it could ever end any other way.

Irrational exuberance doesn’t last. The market’s core function is to get prices right. That’s what markets do. So, let irrational exuberance go wild (It always does once a large number of investors come to believe that market timing is not always 100 percent required), and you are sooner or later going to see a wipe-out.

No one can say when. Short-term timing really doesn’t work, just as the Buy-and-Holders say. But discourage market timing in general and sooner or later you are going to see a wipe-out. It happens every time because it MUST happen every time. Once most investors refuse to engage in market timing, there is no other way for the market to get prices right, and that is the market’s core function.

Markets are information processing machines. Information comes in and causes ups. And then information comes in and causes downs. The market works things out. That’s what it DOES. That’s what a market IS — it’s an information processing machine. Fill people’s heads with the crazy idea that there might be some magical, mystical alternate universe where market timing is not 100 percent required and the means by which the information processing is achieved breaks down.

We have had mountains of information coming in over recent years telling investors that they need to lower their stock allocations. Have you seen many do it? Investors are afraid to lower their stock allocations. They understand that lowering your stock allocation because prices have risen too high constitutes market timing and they have heard the marketing slogan “timing never works” so many times that some part of their brains believes that there might be something to it. They are afraid to do the right thing, the sensible thing, the prudent thing, the research-based thing.

Buy-and-Hold started out telling people that they should root their investment strategies in the peer-reviewed research and it has evolved over the years into insisting that, no matter what they do, investors must never,never, never give the last 39 years of peer-reviewed research in this field the slightest consideration. I am the true Boglehead. I am the one who says that investors should do what Bogle said they should do in his early years — follow the peer-reviewed research. The Lindauerheads abandoned Bogle’s early teachings because to follow them would mean acknowledging that Bogle (and everyone else!) made a mistake back in the 1960s when they came to believe that Fama’s research showing that short-term timing never works can be interpreted as showing that no form of market timing is required. Huh?

The last 39 years of peer-reviewed research is information, Anonymous. Investors should be considering that information when they decide on their stock allocation. When discussion of 39 years of peer-reviewed research is banned at every site on the internet, the purpose of the market is defeated. The market cannot process information when it cannot even hear it The stock market as it exists today is not even a market in the true sense of the word, When the most important information is prohibited, the market cannot perform its very important job of processing all information available to it.

This is a repeat of what happened in 2008. There were genuine mortgage problems in 2008. Those problems set off the crash. But it was the insane CAPE values that applied that made the crash and the economic crisis that followed from it so devastating. The Fed stepped in and saved us from a Great Depression. That was a good thing. But you can’t just pump prices up to crazy levels and leave them there and expect that to work out in the long term. If you are going to pump prices up to stop a depression, you need to come back in a year or two and let prices drop back to reasonable levels. That’s where the Fed let us down. They let prices remain at crazy levels and thereby insured that we would sooner or later be facing the same sort of problem again. And here we are.

The only long-term solution is to open every discussion board and blog on the internet to honest posting re the last 39 years of peer-reviewed research in this field. I am 100 percent sure.

Fed Supporter (For the Things It Does Right) and Detractor (For the Things It Does Wrong) Rob

“The Buy-and-Holders Preach Price Indifference. And That Just Doesn’t Get the Job Done. Without the Presence of Market Timing, Prices Always Drift Upward As a Result of the Get Rich Quick Urge That Resides Within All of Us. Only a Sound Knowledge of the Benefits of Market Timing Can Rein in the Powerful Get Rich Quick Urge That Causes Price Crashes and Economic Crises.”

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Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

Robert Shiller says Rob Bennett is still wrong.

https://www.ibtimes.com/what-do-prominent-economists-say-about-coronavirus-paul-krugman-robert-shiller-joseph-2943646

If Robert Shiller felt the market was overvalued, he wouldn’t tell people to stay in the market. Also notice how he blames the drop on Coronavirus and does not put any blame on buy and hold.

Thanks for the link, Anonymous.

I certainly agree with Shiller when he says: “I would advise people not to take any extreme measures. Don’t think it’s the time to sell out completely, but also, don’t conclude it’s a big buying opportunity and push into leveraged positions in the market.”

He makes reference to the critical issue of investor emotion (irrational exuberance possibly being transformed into irrational depression) when he says: “I call this a co-epidemic: One is the coronavirus, and the other is like a narrative epidemic, about our confidence and outlook for the economy. That’s a new one, it’s happening fast, and it’s very contagious. Everyone’s talking about this.”

Shiller often used the term “narrative” when he is making reference to irrational exuberance. He is saying here exactly what I believe about this price crash. There is an economic side to it. And there is an investor emotion side to it. The part that I wish he would be more clear about is that the risk that we are going to take a huge hit on the investor emotion side of things is far, far greater when the CAPE value is 30 than it is when the CAPE value is 16. So as a society we should all be working at all times to keep the CAPE from rising much above 16.

The practical means for doing that is through market timing. There is no other way. The Buy-and-Holders preach price indifference. And that just doesn’t get the job done. Without the presence of market timing, prices always drift upward as a result of the Get Rich Quick urge that resides within all of us. Only a sound knowledge of the benefits of market timing can rein in the powerful Get Rich Quick urge that causes price crashes and economic crises.

Please mark me down as placing a good bit of the blame for this price crash on Buy-and-Hold. The Coronavirus was the precipitating event. But the size of any crash is largely determined by the CAPE value that applied when it begins. It is Buy-and-Hold that discourages market timing. The Buy-and-Holders took away the tool that we need to prevent this sort of things from happening.

Buy-and-Holders act like price crashes are acts of God, something that no one can do anything about. There’s a lot that we can do. If we educated investors re the benefits of market timing we would never see a devastating price crash. We would still see small ones. A Coronavirus-type event could show up when the CAPE was at 16. But the crash that would follow would not be nearly as devastating in those circumstances. The thing that has the potential to make this one so devastating is the huge amount of irrational exuberance that was present in the stock price before the Coronoavirus appeared on the scene.

That’s my sincere take re these terribly important matters, in any event.

My best and warmest wishes to you, dear Goon friend.

Shiller Follower Rob

Valuation-Informed Indexing #491: We Overestimate the Extent to Which Economic Factors Cause a Price Crash

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I’ve posted Entry #491 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called We Overestimate the Extent to Which Economic Factors Cause a Price Crash.

Juicy Excerpt: When the CAPE is near 30, as it was in the days before the coronavirus became a major concern, the entire market is essentially a house of cards waiting to be toppled by the next gust of wind. We never can know in advance when that gust of wind will appear. But we know that the risk of a big price drop is much greater when prices are high than it is when they are reasonable.