No Such Thing as a Free Lunch, Revisited - Economix Blog - NYTimes.com:
"The absence of arbitrage possibilities does not imply that market prices always and everywhere reflect some sort of fundamental values. Plenty of housing price changes are predictable, and Las Vegas looked pretty overpriced 30 months ago. But how could I have profited from this knowledge, other than avoiding the folly of buying at the peak? There was no easy way to short Las Vegas real estate."
The article concludes:
"...the existence of bubbles and market irrationality doesn’t mean that markets are inefficient, in the sense that they allow easy arbitrage. A classic paper written more than two decades ago by Brad DeLong, Andrei Shleifer, Larry Summers and Robert Waldmann showed that less-than-rational “ noise traders” (a term coined by Fischer Black) could move markets even when rational traders have arbitraged away all the free lunches. The vicious swings of our asset markets suggest that these markets may often be moved by strange, probably irrational forces, but that doesn’t imply that the Efficient Markets Hypothesis is dead."
"...recognizing the occasional madness of markets can provide a bit of investment guidance. The difficulty inherent in finding free lunches doesn’t mean that buyers should just buy a house, or a mortgage-backed security or a stock, trusting that the market has priced things correctly. A house doesn’t become a good buy just because some other idiot paid a fortune for a similar home down the street. A similar fool may not be around when you are looking to sell."
I would also encourage you to read the comment by Tom Brakke:
"...it generally is good advice to buy asset exposures cheaply (as to fees), but only if you can really buy them cheaply (as to valuation)."