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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era
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To: porcupine --''''> who wrote (711)9/1/1998 7:19:00 PM
From: Axel Gunderson  Read Replies (2) of 1722
 
Notwithstanding the hue and cry over the shift from a manufacturing based economy to a service based one, and the decline of unionization in the private workforce, incomes are at an all time high

On what basis did you reach this conclusion?

If one believes the outlook is good for the macro economy over the
coming 20 years, get in the market and stay in. If not, do the reverse.

This ignores valuation and margin of safety issues. Whatever one believes, one can be wrong, hence the need for a margin of safety. Witness the Japanese market in the past decade. No doubt ten years ago the Japanese believed that their macro outlook was good for the forthcoming 20 years.

Now it may well be that an investor who monthly made purchases on the Japanese market over the past decade came out ahead, compared to investing in competing instruments. But that kind of investing is almost independent of the macro course of events.

History has shown that lump sum investing beats either real DCA or regular periodic investing the vast majority of the time. But there are exceptions, such as 1929 for the following 10 years, or Japan over the last 10 years.

So the question I pose to you is this: even given the rosiest of expectations, at what level of valuation would you advise against investing a lump sum in the market?

Axel
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