It has been. However, it doesn't address valuation. The best time to invest is not when virtually everyone (including foreign investors who despised the US market as recently as 1997 because it was "too expensive") believes that the stock market is a "no brainer". This holds true in all markets, be it fine art, beanie babies or pieces of paper that very few holders understand.
When stocks tack-on billions in market cap because they announce splits, it's just another sign that it's time to split. At some point in time, and I believe we are close, greed will inevitably turn into fear.
I think the biggest mistake that most who formulate market theories make is to assume that investing is simply an intellectual process. I have found that it is by far a more emotional process, which is difficult (impossible?) to neatly fit into equations.
As for many US stocks, Of course one could ignore all the "noise" for decades and still get a decent return. The S&P works well because it is a moving target. That is, losers are dropped and replaced by more attractive companies, so one won't get stuck in a modern day buggy whip company. I'm otimistic that our system will last, and the economy grow, although that runs against history over the very long-term. If the market goes down 50%, anyone invested in the S&P only over the past 4-years will still have a good return. I just think it's better to be aggressive when prices are cheap and have reduced exposure when they are very dear. The primary reason that that's important to the average investor is that many of them will panic and sell when they would otherwise be more rational and perhaps buy if they had cash in reserve. Very few that are fully invested will stay the course. There is little doubt, except on the part of those who think this is the first "New Era", that most stocks, especially the very narrow leadership, are grossly overvalued. That's the most important reality, certainly it's more important that the fact that there's money to burn. |
