Another super post and discussion thread at the Balance Junkie blog. This one is called History Only Rhymes.
Juicy Excerpt: Now I know that neither the Potato investors nor the Valuation Informed Index investors would claim that history will repeat itself exactly. They’re just using it to determine investment probabilities. That’s how I use historical data too. But I also like to incorporate a few other variables, which others may or may not find useful, but have served me well so far.
Juicy Comment: Hmmm. I never thought about the idea that high valuations cause market downturns, which in turn cause political unrest. I suppose it gets to be a chicken/egg thing.
I find this last comment highly encouraging. And I think it would be fair to say that we could all use some encouragement today.
There is no blogger who has been as supportive of my work as Balance Junkie. So there is precisely zero chance that her words are the result of any bias against me or against the Valuation-Informed Indexing strategy. Balance Junkie is shooting 100 percent straight, she is just reporting to us what she believes at this point in time.
Say that I am right that the promotion of Buy-and-Hold always causes an economic crisis and political unrest. I can point to four cases in the historical record in which this is so. There has never once in 140 years been a time when Buy-and-Hold became popular and we did not see an economic crisis and political unrest. Nor has there ever in 140 years been a time when we had an economic crisis that was not preceded by a time when Buy-and-Hold became a popular strategy (there have been times when we had political unrest seemingly unrelated to economic factors — for example, the Vietnam war caused political unrest in the 1960s even though economic times were good). So fair-minded people should be able to acknowledge at this point that it is at least possible that I am right about this.
Think what we are discovering here, people! We are discovering how to reduce dramatically the possibility of us seeing future economic crises. Is that not a big deal? Is that not positively huge? Does that not put a different light on current events? Does discovering how to reduce dramatically the possibility of us seeing future economic crises not make the little unpleasantness we are living through today worth it by a factor of 50?
It sure seems so to me.
There’s a catch phrase that I used to use back in the days when the Buy-and-Holders were expressing doubts as to whether the Old School SWR studies really got the numbers wrong or not. I used to tell people that, before I put up the May 13, 2002, post, I checked to see what happens on the last page of our little saga and that it all turns out just fine.
I have the impression that many of my readers think I was kidding around. I was not kidding around!
I always read the last page of a novel before reading the first page. I don’t like surprises.
The story ends with us all learning how we need to invest to be able to retire many years sooner than we even dreamed was possible during the Buy-and-Hold years. It gets better and better and better and better. It’s all good stuff piled on top of good stuff and there is zero potential downside.
Thanks, John Bogle! We couldn’t have done it without you, man!