No. of Recommendations: 4
Case in point, as a trend follower you can avoid getting caught up in the endless debate about whether or not the market is overvalued.
No doubt this has merit. Whether the market is overvalued or not has almost zero bearing on whether prices will go up or down next, so it is almost perfectly useless as a buy or sell indicator.
But valuation has a lot to say--more than anything else--on what a sensible expectation is for the next 5-10 years, for retirement planning or whatever. Anybody holding the broad US market and planning to hold it for several years should be entirely prepared for poor real total returns. They might get more, they might get less, but the best central guess is "not very much at all".
One's choices are limited at such times. Don't hold the broad US market. Plan for and accept the likelihood of low returns. Buy things which are individually reasonably priced relative to their prospects, with or without looking outside the US. Try your hand at timing, whether it's trend following or something else. Invest in things other than stocks. Start a company. Head to Vegas or try day trading. Give all your money away and become a monk.
All that being said, there is a saying: when Mr Market is offering you a crazily high price for something you own, you should at least think twice before turning him down : )
Jim
