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Well, I would like to see something with a bit more predictive power than that valuation model. Something that works only in the very long term may be valuable as a reasonableness check, but it does not help me to pick stocks or mutual funds, or to know when to buy and sell. This is particularly true when prices are out of synch with the model for a number of years.

The important thing is to get those high stock returns when they occur, and to avoid the losses when, as is the case now, we are in a period of decline. Many people knew that the sharp run-up a few years ago was not sustainable. That was not a reason to fail to profit from it, nor is it a reason to have held throughout the subsequent period.

And yes, the "social instincts" are poison.
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