Is Buy-and-Hold Just a Marketing Pitch?

[RobBennett]

My name is Rob Bennett. I write the "A Rich Life" blog.
This is my first post at this forum. But I have long questioned the Buy-and-Hold Investing strategy. It doesn't make sense to me. My reasoning is that the risk of crashes must be higher when stocks are insanely overpriced. So I don't see why you would want to be at the same stock allocation when stocks are insanely overpriced as you are at when they are reasonably priced. I believe in Valuation-Informed Indexing, where you change your stock allocation in response to big valuation shifts.
There was a Wall Street Journal article recently that backed up this view. The author described the claim that "You Can't Time the Market" as a "myth." He said: "This hoary old chestnut keeps the clients fully invested." They tell us that we can't tell the market so that we will be heavily invested in stocks even at times when the long-term return is likely to be negative, as it has been from 1996 forward.
Here is the URL for the article:
http://online.wsj.com/article/SB1280001 ... primary_hs
I'd be interested in hearing thoughts both pro and con. I am a strong anti-Buy-and-Hold guy myself but I have learned a lot from Buy-and-Holders. I certainly think of them as being smart people.
Rob

[JohnnyH]

Risk control is rule number 1 and buy and hold has none. Faith doesn't seem like a valid investment strategy. Always have an exit plan, always limit your losses... You can't win if you can't play.
Stocks are flat over the last decade. Many, myself included, think the risk far outweighs the reward right now. Stocks take the stairs up and the elevator down.
The rally is out of steam, volatility is high, fundamental problems have been swept under the rug. Lookout below!

[Kevin M]

Welcome Rob, I recognize you from your comments on GRS.
Like JohnnyH said - faith isn't a good investment strategy. I stopped passive/index investing when I realized it was based on the assumption (hope) "the market" would always go up. It took 2 bubbles for me to realize this. Now I invest for income, mostly buying dividend stocks at good prices. I will probably buy and hold most of them, but not in the way you mean, I think.

[OurLifeInc.]

Fundamentally, your post makes sense. Here is my problem with it though...
Assume that I have achieved my early retirement, or enough flexibility where I can work part time and make up the difference in investment income. By moving in and out of the market, you are really forced to sell of pieces of your investments in order to meet your income needs.
That said, in my opinion, if Johnson and Johnson (for example) is overvalued I only care in that I will not commit new money to that stock. Otherwise, JNJ can continue paying me my quarterly dividend and I will be pleased as pie.
I think valuation is important, however I think it is more important to consider the cash flow or income stream. Of course, this is coming from a die hard dividend investor. There is certainly more than one way to skin a cat and as you said, I love learning from investors of all types.

[Maus]

And if B&H is dead, what are we to do with our 401(k) holdings? Our plan trustee won't even allow a particpant to park the money in the MMF because it won't "guarantee sufficient long-term returns adequate to the needs of retirement." Hoakum.

[Steve Austin]

Maus, could you try to call the 401(k) Sponsor(s) on the mat be expressing to them that you don't feel they are living up to their fiduciary duty to provide you with a wide enough range of investment / sector options to encompass your risk aversion? (Throw lots of corporate words around like that so that they know that you can play the game, and escalate to the Department of Labor if necessary.) Maybe you're close to pulling the plug on your employment contract with that organization, and not too worried about the long-term repercussions of your aggressive inquiry? Another good source to quote is ERISA, by which you'll be letting your Sponsor know that you are well aware of the regulations which govern their administration of the 401(k) plan.
If they get exasperated, say they can't/won't add a short-term bond / MMF option, but they ask what they can do to make you happy instead, try this:
"annually allow me to rollover my entire 401(k) balance into my own IRA where I can invest as I wish; and then allow me to immediately re-enroll in the 401(k) plan and start contributing for the new tax year"
At my "pre-retirement" employer, never got them to do that for me (they were pretty good about responding to requests for lower-expense ratio fund options though), but it's worth having that request queued up, in case they are desperate to get you to keep quiet about some ERISA violation that you've inadvertently uncovered.
Stick It To The Man(tm).

[RobBennett]

Wow.
I think this may be the warmest reception I have heard to my criticism of Buy-and-Hold at any place on the internet. Usually, I duck immediately after pushing the "Send" button to avoid the bricks being thrown at me. Here, I almost feel that in fairness I should jump in and defend the Buy-and-Hold position!
I understand your point about the 401(k), Maus, and it is a scandal. Back when I held a corporate job, I faced this issue. They did permit investing in a safe asset class but they provided a graphic with your statement in which the non-stock choice was just a black blob. I had 100 percent in that option and so my pie chart looked like The Pie Chart of Death. I was stubborn enough to stick with my choices but I didn't feel like it was exactly an encouraging or fair way of presenting things.
It's really hard to accept that employees who want to protect their assets from the effects of overvaluation in stocks do not even have an option open to them to do so. Could things get any worse? We are in some cases not only encouraging bad behavior (irresponsible investing is bad behavior -- it does harm to the entire economy), but insisting on it. Is it any wonder that we are today living through the second worst economic crisis in U.S. history?
Do people here have ideas re how to change things? I have put a lot of work into developing attractive alternatives to Buy-and-Hold. Lots of people have responded positively but a large number has responded with hostility. That sends a bad signal to me. When I hear hostility to an investing idea, I view it as a sign that the person lacks confidence in his or her own strategies.
I believe that lots of people are following Buy-and-Hold today but lack confidence in it. I see bad things coming as a result. If people here know of things that are being done to turn this around, I would be excited to hear about them. I worry that we need to supply investors with positive news and good options or this doom and gloom is going to send up all over a cliff.
Rob

[George the original one]

Apart from those strategies that rebalance based on a calendar date (e.g. Dogs of the Dow), all other methods perform market timing.
In a rising market (e.g. 1994-2000), then Buy & Hold is a fantastic scheme. You reduce transaction costs to a minimum and get a lot of gain for minimal study of the market (or individual stocks). It keeps you from doing stupid things, like selling too soon.
In a dropping or sideways market, Buy & Hold sucks rocks. Sell & Sell Short is the way to make money in a dropping market... even selling & putting money in CDs is a winning strategy then!
Sideways markets require trading and yield.
So... 2 out of 3 strategies involve selling, 2 out of 3 strategies involve buying. That means that the trader has an overall edge unless you believe the market only goes up.

[jacob]

*waves arms and mumbles something about "in the long run"* ;-P

[Robert Muir]

1. I don't think "Buy and Hold" index investing is a marketing ploy. I think the authors who "push" the philosophy genuinely think it's a good idea and base their opinion on "long term" data.
2. I think it is very possible for common folk to invest wisely without limiting themselves to dollar cost averaging into a buy and hold strategy. They just need to educate themselves.
3. That said, I also think > 90% of common folk would not be willing to educate themselves as required and the best strategy for them *is* dollar cost averaging into invest and forget index funds.
It's hard enough to keep people from selling off their funds *after* the market takes a dive much less teach them value investing.

[Matthew]

Incoming!
I agree with Robert. I also think the rules will always change. How much is too much of a drop before you sell? Buy? It all sounds like gambling to me. Nothing wrong with chosing stocks, but I think you need to be diversified and it makes sense to hold until you need the money to avoid buy/sell fees. Index are some of the cheapest in management fees which is a huge negative long haul. Usually negative enough that the index wins.

[Cashflow]

I own many businesses. I look at a business's free cashflow (FCF), where that FCF has been, and where I think that FCF is headed. If I believe a business's FCF will continue to be great, I will continue to own it. Otherwise, I will sell it and buy another one with better FCF prospects.
The other aspect of my businesses is that they are available to buy and sell on a public exchange (and I own only a small fraction of each business). Rather than own a portfolio of local drycleaning stores or single family homes, I prefer the liquidity of public markets.
I review my businesses a couple times a year and make any needed adjustments at that time. I've owned some of them for many years and others for only a few years. It all depends on what the business actually does, rather than what some idiot (i.e., "Mr. Market") thinks about the business.

[RobBennett]

<i>It's hard enough to keep people from selling off their funds *after* the market takes a dive much less teach them value investing.</i>
Value Investing is too difficult for the average person. I agree with you re that one, Robert. I believe that the average person should be following Valuation-Informed Indexing. It's every bit as simple as Buy-and-Hold but the Get Rich Quick (ignore valuations) element is removed. Valuation-Informed Indexers change their allocations once every 10 years or so on average, only when there are big swings in stock valuations.
That might seem like a small thing on first glance but it is actually a very big thing. If people were taught to lower their allocations when the long-term value proposition for stocks is small, we could never again have a runaway bull market. Each time prices started to get out of hand, people would sell stocks. The sales would bring prices back to reasonable levels. Stocks could never again reach insane prices if we allowed investors to learn the realities.
If we never had another bull market, we would never have another bear market. Bears are just the other side of the emotional coin that produces bulls. It is the out-of-control bull of the late 1990s that caused today's economic crisis. Stocks were overpriced by $12 trillion in 2000. Since stocks always return to fair value after 10 years or so, we knew (or we should have known) that we were going to see $12 trillion of wealth disappear from the economy over the past 10 years. Viola! Economic Crisis Supreme!
If we permitted average people to learn what they need to know to invest effectively, our entire economic system would function far more effectively. And there would be no added work for the average investors. Each time the television reported the DOW, it would also report the valuation-adjusted DOW figure, so people would know that the value of their holdings was not really increasing because of increases in valuations. When stocks were priced at three times fair value, as they were in 2000, we would tell people that the real value of a portfolio priced nominally at $30,000 is $10,000. Nobody would get excited about the $20,000 in funny money if we told them the realities.
The full reality is that we would never again see wild overvaluation if we let people know the realities. If people knew that two-thirds of their money was going to purchase cotton-candy nothingness, they would refuse to buy stocks until prices dropped hard. The refusal to buy would cause prices to drop hard. So all our problems would be solved. There would be no bulls, no bears, fewer economic crises. And investors would know the true value of their portfolios and be able to engage in effective financial planning.
Rob

[RobBennett]

<i>How much is too much of a drop before you sell? Buy? It all sounds like gambling to me.</i>
I have a calculator at my web site ("The Stock-Return Predictor") that aims to answer this question, Matthew. It performs a regression analysis of the historical stock-return data to tell investors the range of possible returns that they will see in 10 years (starting from any of the possible valuation levels) and the probabilities that apply for each of the possibilities. There is indeed a small amount of "gambling" involved because we cannot predict stock returns with precision. But there is much less gambling for those who inform themselves of the odds than there is for those who practice Buy-and-Hold and just stick with the same stock allocation at all valuation levels.
The data shows that the most likely annualized 10-year return in 1982 was 15 percent real. The most likely annualized 10-year return in 2000 was a negative 1 percent real. What one stock allocation makes sense in both circumstances? 90 percent stocks makes sense when the most likely return is 15 percent real but makes no sense at all when the most likely return is a negative 1 percent real. 10 percent stocks makes sense when the most likely return is a negative 1 percent real but makes no sense at all when the most likely return is 15 percent real.
Just about everyone in the field agrees that the most important thing that an investor does is to set his stock allocation. But the most important factor that needs to be taken into consideration when setting your stock allocation is the valuation level that applies. How can you ever get the most important strategic call right when you ignore the most important factor bearing on that call? It cannot be done.
It is horrible to look at what Buy-and-Hold has done to retirees. The Buy-and-Hold studies say that the safe withdrawal rate is always 4 percent. The reality is that the safe withdrawal rate varies, depending on the valuation level that applies on the day the retirement begins. In 1982, the safe withdrawal rate was 9 percent. In 2000, it was 2 percent. There are millions of people who put their trust in the Buy-and-Hold SWR studies to plan retirements during the years (from 1996 forward) when those studies got the numbers wildly wrong and who will be suffering failed retirements as a result. Why not just tell people the accurate numbers? The reason is, if we do that, Buy-and-Hold is finished.
If you think about it, I think you'll see that Buy-and-Hold is an extremely counter-intuitive strategy. We consider price with everything we buy -- cars, computers, cucumbers, comic books. Why not take price into consideration when buying stocks? The reason is that, at the time Buy-and-Hold was being developed, a lot of smart people believed in the Efficient Market Theory. If the EMT applied, Buy-and-Hold would indeed make sense; under the EMT, stocks are always priced properly and overvaluation is a logical impossibility. But the academic research discredited the EMT in 1981. So for 30 years now The Stock-Selling Industry has been promoting a strategy that no longer has any support in the academic literature.
I don't deny that there is some element of gambling involved in stock investing. I think the extent to which stock investing is gambling is overstated, but there is some small amount of guesswork involved (I would put it at about 20 percent of the total decision-making process). The question is -- Is there more gambling with Valuation-Informed Indexing or with Buy-and-Hold? I say that there is far more gambling with Buy-and-Hold because the investor does not inform himself of the realities before putting his money on the table.
Buy-and-Hold is not a neutral choice. We all have to choose some stock allocation, Buy-and-Holders and Valuation-Informed Indexers both. The difference is that VIIs look at the data to try to determine the best choice in a given circumstance. Buy-and-Holders elect out of the analytical process entirely. They <i>always</i> choose a high stock allocation. The result is that the entire economic system breaks down. A market cannot function without price discipline and, when millions of investors follow Buy-and-Hold, all price discipline is removed from the market.
Rob

[RobBennett]

<i>I think valuation is important, however I think it is more important to consider the cash flow or income stream.</i>
I agree that investing in companies that pay good dividends is an alternate way of attaining the protection that some others obtain from paying attention to valuations, OurLifeInc. My concern is with people who are buying the entire market through purchases of index funds.
There are always good stocks to be had, even at times of insane valuations. Investors who are willing to put in the time and effort to identify them can do well in any type of market. The reality, though, is that most are not able or willing to do that sort of work. It is to those people that Buy-and-Hold is doing huge damage, in my assessment.
Rob

[RobBennett]

<i>even selling & putting money in CDs is a winning strategy then!</i>
That's pretty much what I am advocating, George.
I don't think that average investors should be shorting. That takes a lot of knowledge and work. But average people should not be heavily invested in stocks at times when prices are likely headed down hard.
The controversial question is -- Can we know when those times are coming in advance? The historical record says "yes." There have been four times in U.S. history when we went to a P/E10 level of 24. On the first time, we saw huge losses for stock investors and an economic crisis. On the second time, we saw huge losses for stock investors and an economic crisis. On the third time, we saw huge losses for stock investors and an economic crisis. On the fourth time, we saw huge losses for stock investors and an economic crisis. I am beginning to detect a pattern.
There has never been a time (going back to 1900) when we went to a P/E10 level of 24 and did not see an economic crisis. There has never been a time when we had an economic crisis and did not first go to a P/E10 level of 24. The correlation is perfect.
It's not at all hard to understand why there is such a strong correlation. The fair value P/E10 level is 14. To go to 24 means that we are pricing stocks at nearly double their fair value. Think of what that means for the millions of financial transactions that take place in our economy every day.
In 2000, stocks were priced at three times fair value. That means that every investor who thought he had $300,000 in his portfolio really had a portfolio valued at $100,000. Thinking that you have three times more wealth than you in fact possess affects all of your financial decisions. You save less than you would if you understood the realities. You buy more cars. You buy bigger houses. You go on more vacations.
This can go on for many years. We were at insanely high stock prices from 1996 through 2008. So people were making these bad choices year after year after year, not even knowing that they were bad choices. The free market economy was rewarding companies selling luxury goods that would have been driven out of business had people known the realities. Companies selling lower-priced goods that would have been rewarded if people knew the realities were being driven out of business. Buy-and-Hold redirects the Invisible Hand to encourage not good economic decisions but bad ones. After many years of this, the bad decisions add up and we are sent into a prolonged recession or a depression.
Why do this to ourselves? Why not just let people know the real (valuation-adjusted) portfolio amounts at all times?
In 2000, the historical data showed that the most likely 10-year annualized return was a negative 1 percent real. TIPS were paying 4 percent real. That's a difference of 5 percent real for every year for 10 years running. Do the math and it shows that the Buy-and-Hold Investor lost 50 percent of his initial portfolio value for putting his confidence in the "experts." What sorts of "experts" are these people when they are encouraging people to follow strategies that cause such massive losses of accumulated wealth?
The average person does what they are told on television and in magazines and all this sort of thing. No, we cannot expect average people to become investment experts engaged in all sorts of sophisticated transactions. But can't we at least warn them not to invest in stocks at times when investing in stocks is likely to cause a wipeout? We warn people not to smoke. We warn people not to drive drunk. What's the difference?
There are consequences that follow when as a society we permit marketing considerations (I think it would be fair to say that Buy-and-Hold is a marketing powerhouse -- all Get Rich Quick approaches are) to dominate. What is going on today in our economy is the result of our tolerance of heavy promotion of Buy-and-Hold strategies in earlier years, in my view.
I believe that, if we turned this around, we could enter into the greatest period of economic growth we have ever seen. If we allowed people to learn what it takes to invest effectively, the benefits of capitalism would be spread to millions of middle-class people who today are not seeing any. That would restore confidence in our economic and political system and give people optimism re their financial futures. We need to talk straight with people and start offering realistic, data-based investment advice.
Rob

[RobBennett]

<i>*waves arms and mumbles something about "in the long run"* ;-P</i>
Too funny, Jacob!
This is why I say that Buy-and-Hold is a marketing gimmick. If you look at the claims made for Buy-and-Hold, you find that nearly all of them are half-truths. They are entirely true when looked at from one angle and very, very dangerous when looked at from another. It's a little hard to believe that this is the result of pure coincidence.
Are stocks always best for the long run? It depends on what the meaning of the phrase "long run" is. If you go 30 years out, stocks really are always best. If you go 10 years out, stocks are at the prices they have been selling in recent years a total disaster. Why not tell people both realities? The proper way to say it is that stock returns are highly PREDICTABLE in the long run. At some prices, stocks are the best bet for the long run. At other prices, stocks are the worst bet for the long run. Most middle-class investors think "ten years" when they hear the phrase "the long run." Just about none are thinking that they are going to need to wait 30 years for their investment choice to pay off. Yet the "experts" cite the "Stocks for the Long Run" phrase all the time.
It's the same with "You Can't Time the Market." There is evidence that it is very hard to time the market in the short term, that the average person shouldn't be playing with it. But there is zero evidence that it is impossible or even difficult to time the market in the long run. Long-run timing has been working since the first day the market opened for business. I have asked thousands of Buy-and-Holders to show me a single study indicating that long-term timing might not work. No one has ever come forward. Why? Is this not a sign that we are dealing with a marketing slogan rather than genuine investment advice?
It's also the same with "There's No Such Thing as a Free Lunch." All progress is a free lunch. All learning is a free lunch. I have had this phrase repeated to me on hundreds of occasions by people saying that, if there were any better way to invest than Buy-and-Hold, everyone would already be following it. How so? Did people know how to fly before the Wright Brothers put a plane in the sky? Did people use computers before they were invented? Did people toast marshmallows before they knew how to make fires? I believe that Buy-and-Hold was a big advance at the time it was developed. But it was not the last word in investment analysis. Advocates today are just using the phrase "There's No Such Thing As a Free Lunch" to stop people from exploring exciting possibilities.
How about the idea that you must take on risk to get a good return? There is some truth to this. If you bury your money in the yard, you are not going to get a good return. But stocks were the most risky they have ever been in history in 2000. Did stock investors get returns to compensate them for the risks they were taking on? They did not. This "you need to take on more risk to get more return" stuff is just a marketing slogan to stop people from considering good alternatives to stocks at times when stocks offer a poor long-term value proposition.
Rob

[RobBennett]

<i>Incoming!</i>
I feel that I should stress here that I am grateful for your comment, Matthew.
You probably can tell at this point that I am a big-time critic of Buy-and-Hold. My hope is to become known as the most severe critic of Buy-and-Hold alive on Planet Earth today. That doesn't mean that I have not learned a huge amount from Buy-and-Holders (i have indeed!) or that I do not want to be friends with as many Buy-and-Holders as possible. It is the people who challenge my ideas from whom I learn the most (I hope that some Buy-and-Holders are able to accept my challenges to their thinking in the same spirit!).
Back in the late-90s, I used to have lunch with my friend Brian several times a week and we would often talk about this stuff. We had lots of great discussions. Brian would often turn to me at the end of one of our talks and say "Now, Rob, I just want to be sure that you understand that you are nuts, right? I would feel that I was not doing the right thing not to point that out to you. Stocks are going up by 20 percent a year and you have a zero stock allocation. You're a nice fellow and everything but you do get it that you are 100 percent nuts, right?"
And I would say: "Yes, I get it that I am 100 percent nuts, Brian. I know all about the 20 percent returns. I read it in all the papers."
That's the spirit in which I wish everyone could participate in these sorts of discussions. I like all Buy-and-Holders as people. A good number of them see me as their enemy. That makes me sad. I feel that I am helping them out by giving them some new ideas to consider. To me this is all just about learning together. So I certainly didn't view your skeptical post as being "incoming" (I I of course also understand that you were just kidding around in using that word). I just wanted to put forward those words in case there is anyone reading here who without seeing them might get the wrong idea.
Rob

[RobBennett]

<i>I don't think "Buy and Hold" index investing is a marketing ploy. I think the authors who "push" the philosophy genuinely think it's a good idea and base their opinion on "long term" data.</i>
When it comes to motive, all that any of us can do is speculate. None of us can see into the hearts and minds of others.
I half agree with the comment above and I half do not.
I agree that the people who push Buy-and-Hold believe it to be a good idea. I don't think these people wake up in the morning saying to themselves "What can I do to destroy the global economy today?" They are smart and good people who have found themselves on the wrong track and are having a very difficult time acknowledging what was happened.
That said, there is much evidence that they understand that the failure to consider valuations is the Achilles heal of the Buy-and-Hold approach and that their advice would not sell as well if they included valuation adjustments in their analysis. I'll give one shocking example. I wrote Dallas Morning News Columnist for over six months trying to persuade him to write a column telling people how far off the Buy-and-Hold SWR numbers are (I have a calculator at my site that provides the accurate valuation-adjusted SWR numbers). Scott finally wrote the column. But he said something very, very strange in it.
He had a line where he explained why none of the experts in this field had acknowledged the errors in the Buy-and-Hold SWR studies for three years after we had discovered them in discussions that we had at a Motley Fool board. Scott said that the reason why no one was warning people about the errors in these studies was that: "It is information most people don't want to hear."
Huh???!!!!
He is saying that the experts in this field are not telling us what we need to hear to invest effectively but only what we want to hear to think that our Buy-and-Hold strategies are going to work out. Is that not what he is saying?
I don't say that Scott or any of the others fully appreciate the damage that is being done. I do not believe that he does. But I do believe that marketing considerations influence what he writes in his column. And I believe that marketing considerations influence what a lot of bloggers write and what a lot of the people who write books in this field write and what a lot of the people developing calculators put into their calculators.
This is a very dangerous game. Buy-and-Hold purports to be scientific, data-based. A lot of investors have confidence in it because they believe in science. But if marketing is the primary driver in how all the studies are set up, this is all faux science. Once you let marketing considerations determine your methodology, you can generate any numbers whatsoever with all of your "studies." The studies are all analytically invalid. They generate not accurate numbers but misleading numbers.
The root problem is the Efficient Market Theory. The question of whether valuations affect long-term returns is fundamental. If the market is automatically efficient, then everything argued for Buy-and-Hold really does follow. But there is now 30 years of academic research showing that the market is NOT automatically efficient. That means not that Buy-and-Hold is a little off but that it is the most dangerous strategy imaginable for the long-term investor (and for the society in which promotion of this strategy is being tolerated). This is an either-or situation. We need a national debate to settle once and for all whether the market is efficient (as the academics believed in the 1960 and 1970s) or is not efficient (as the research of the past 30 years shows).
My take is that the market very much wants to be efficient, that the market WOULD be efficient if only investors would play their part. For the market to become efficient, investors need to be willing to invest pursuant to their own self-interests. Today few are willing to do that because The Stock-Selling Industry has spent hundreds of millions of dollars persuading people that there is no need to change your allocation in response to big valuation swings and this is the key to long-term investing success.
If we could find a way to get the word out to middle-class investors that the Buy-and-Hold Model is rooted in the biggest mistake ever made in the history of personal finance, from that point forward the market really would be efficient. We would all be engaging in long-term timing and there could never be a runaway bull market or the economy-destroying runaway bear market that inevitably follows a runaway bull market.
There can never be a bull market or a bear market in an efficient market. Ironically, the one thing blocking us from enjoying an efficient market today is the massive advertising push for Fama's claim that the market is AUTOMATICALLY efficient, that there is no need for investors to invest rationally to bring the dream of an efficient market into place in the real world.
Rob

[Marius]

@RobBennett
"the academic research discredited the EMT in 1981. So for 30 years now The Stock-Selling Industry has been promoting a strategy that no longer has any support in the academic literature."
I'm no EMT fan. But which specific 1981 research are you referring to?
"If people were taught to lower their allocations when the long-term value proposition for stocks is small, we could never again have a runaway bull market. Each time prices started to get out of hand, people would sell stocks."
I agree that buying may when valuations are low may offer better chances than buying when they're high. But doesn't what you write about selling also mean that you won't own much stocks during bull markets?
I'm not one to hold a man's reputation against him. After all, every saint has a past. But in the interest of full disclosure:

http://www.retireearlyhomepage.com/bennett.html

http://www.google.be/search?q=hocomania