It’s the “experts” who got us into our current economic mess. It’s does not make too much sense to think that it’s going to be the “experts” who are going to get us out.
We need new ideas. New ideas come from new places.
That’s why my first choice of a partner for my initiative on getting the word out to middle-class investors about what we have learned about the realities of stock investing over the past seven years was the author of the Frugal Dad blog. Frugal Dad is a smart fellow, a hard-working fellow, a caring fellow. Best of all, he doesn’t view himself as a stock-investing “expert.” That’s what we need! We need someone who is smart and hard-working and caring and who isn’t so caught up in defensiveness over the bad investing advice he has been giving for decades as to be unable to accept how much human misery he has caused with the bad investing advice he has been putting forward for years now. It’s probably not going to be Passive Investing advocates who turn this ship around. It’s going to be people who know enough about personal finance to understand that prices always matter — when spending money and when investing it too.
I don’t know why Frugal Dad is today uninterested in taking on this new job. It may just be that he is up to his neck in responsibilities already taken on (I know the feeling!). My guess is that it’s probably partly that and partly a feeling that he doesn’t possess enough “expertise” to be advancing a new model for understanding how stock investing works. The first possible reason I of course fully understand — that’s just one of those things and we can of course continue contacting good candidates until we find the person who is well-qualified for the task and who happens to have the time available to take it on. The second possible reason is the one that worries me — if Frugal Dad feels that he is not qualified, there are going to be lots of other qualified bloggers who feel that they are not qualified and that’s a highly disturbing thought for all concerned re where the U.S. economy may be headed in coming years.
We have needed to open up discussions of investing to new ideas for decades now. In the past six months, that need has become critical. I think of myself as Frodo taking the Passive Investing ring that binds them all to Mount Doom for its destruction even though I would prefer eating two breakfasts each day with my fellow hobbits in the Shire. I need a Pippin to help out! I need a Merry! (Fortunately, John Walter Russell has done an amazing job serving in the Samwise role.) If you know of a possible Pippen or a possible Merry, please identify these potential victims for me (I mean, please let me know of the individuals who you think might want to take advantage of this wonderful opportunity!).
In all seriousness, we do need help. And I really do think that it needs to be someone who doesn’t feel a personal investment in the continued popularity of the Passive Investing model. If you do indeed know of a blogger who could help us bring these ideas to a wider audience, please do let me know.
We are seeing a much greater openness to the consideration of new ideas since the big price crash. That’s encouraging. My biggest worry today is that too many are electing to give up on stocks altogether rather than to learn about more effective ways of investing in stocks. Many are giving up not on Passive Investing, the failed approach to stock investing, but on stock investing itself! No! Becoming hostile to stocks is just the flip side of the emotional Passive Investing coin that causes us to be open to advice to overinvest in stocks at times of insanely dangerous price levels. Don’t give up on stocks! It’s not stocks’ fault! It’s Passive Investing’s fault!
Passive Investing violates all principles of frugality. Many of us have learned not to overpay for cars or houses or comic books or bananas. We have learned to resist marketing slogans seeking to entice us to enslave ourselves by doing so. So why should we be willing to put our retirement money in stocks when prices are so high that the long-term value proposition is poor? Giving up on Passive Investing makes all the sense in the world to anyone who has learned how to manage money effectively and who has not been compromised by years of advocacy of the Passive Investing gibberish.
Giving up on stocks is not at all a good idea, in my assessment. Give up on stocks and you delay the day you will achieve financial freedom by years or in some cases even by decades. Why should we deny ourselves the benefits of the best asset class available to the middle-class investor? For what purpose?
Those of us who are trying to share the liberating ideas of frugality with others need to come to an understanding that frugality works its magic in the investing realm every bit as much as it does in the spending realm. We need to learn to distinguish between sensible stock investing strategies and nonsense stock investing strategies. Ignoring price is nonsense. We need to distinguish between the use of academic research to promote genuine insights and the use of academic research to promote marketing slogans. The claim that short-term market timing doesn’t work is a genuine insight. The claim that timing in all forms (including long-term timing) doesn’t work is a marketing slogan. This claim is a big help for those trying to sell stocks at times when they offer a poor long-term value proposition, but it is dangerous advice indeed for those investing in stocks with the hope of being able to finance middle-class retirements.
Frugal Dad pointed to the losses suffered by real live people that he cares about in explaining his disgust with stocks. That’s good stuff, that’s the real thing. Our job is to persuade people like Frugal Dad that his disgust needs to be focused on the irresponsible advice that has been used to sell stocks during the Passive Investing era. We need people like him applying his common-sense and compassion to making stock investing a good choice for the millions of middle-class investors who really cannot afford to give up on this fine investing choice for good.
Stocks are good. It’s Passive Investing that has done this to us.
Let’s get the word out!
I’ve read the last page of this saga. The good guys win in the end.