My father Stefan MD, DDS, used to say that human gullibility is the richest gold mine. Witness permabear Harry Dent’s book sales. All were wrong, yet many had five-star reviews. They helped him become a multimillionaire.
In their respected book “This Time Is Different”, Reinhart and Rogoff argue that similar characteristics precede all stock market crashes.
Soaring home prices, financial innovations, inflation and more — all are in place at this time.
The Buffett indicator (the ratio of total US stock market valuation to GDP) has shown an overpriced market for several years now, yet it keeps getting more overpriced.
Could Harry Dent be right for a change?
Spotting market tops correctly is impossible. We are seeing the longest bull market in history; it has to end. But when?
With the lowest interest rates in living memory and the larges amount of money looking for something to do, the bull market might continue.
History shows that habit number four, buy and hold, has always done better than any other strategy over the long term. Time in the market has always outperformed attempts at the market timing.
There have been 12 bear markets since World War II. They averaged a 30% drop over 14 months and needed two years to recover.
Keeping a long-term view is an important part of a proven, effective investment strategy. It was ever thus and will likely continue to be so.
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