“We Are the First Generation of Investors Who Has Available to Them the Research Needed to Turn Stock Investing Into a High-Return, Virtually Risk-Free Endeavor”

Set forth below is the text of a comment that I put to the blog in response to a comment by one of the Greaney Goons that “there is no ‘we,” just ‘you.’”

Everyone in this field faces an important question today, Trebor.

We are the first generation of investors who had available to them the research needed to turn stock investing into a high-return, virtually risk-free endeavor. No group of investors who came before us was so blessed. We can all live far richer lives than we ever dreamed possible if we elect to acknowledge mistakes we made in the past and move forward into an exciting future for all of us and all our friends, neighbors and co-workers.

The alternative available to us is that we can continue the Campaign of Terror, thereby bring on the Second Great Depression, and spend the remainder of our days regretting our foolish and powerfully sad choice.

Wade can contact me if he elects to take the better path. Bogle can do the same. Bernstein can do the same. Swedroe can do the same. The hand of kindness remains extended.

There will be no dishonest posts about safe withdrawal rates going up with my name on them. The odds of that one coming through were precisely zero on the morning of May 13, 2002, and remain precisely zero today.

I of course wish you well in all your future endeavors, my long-time abusive posting friend.



  1. Evidence Based Investing says

    We are the first generation of investors who had available to them the research needed to turn stock investing into a high-return, virtually risk-free endeavor.

    And in one sentence you demonstrate that you simply don’t understand the relationship between risk and reward.

    Your knowledge of economic and investing history is non existent.

  2. Rob says

    The correct way to say it is that I challenge the conventional view of the relationship between risk and reward.

    The “experts” in this field say that stocks are always a better long-term investment that risk-free asset classes like TIPS and IBonds because stocks are riskier. The academic research of the past 30 years shows that the most likely annualized 10-year return for stocks purchased at the prices that applied in 2000 was a negative 1 percent real while the certain return for TIPS and IBonds was 4 percent real. Multiply that 5 percent differential by the 10 years and at the end of the decade following the “expert” advice leaves you with a loss of 50 percent of your starting-point portfolio value.

    Following the “expert” advice just that one time could easily delay your retirement by 10 years. If the Wall Street Con Men manage to push out enough Get Rich Quick garbage to persuade large numbers of people to follow strategies that cause them to lose that much money, we should expect to see an economic crisis. Hmmm… I wonder…..

    What I don’t “understand” is the unwillingness of the “experts” in this field to correct the errors they made that were uncovered by academic research published 30 years ago. You don’t want me to “understand” the errors. You want me to accept them or at the least to keep quiet about them.

    Please try to find somebody else.

    That sort of thing is not my particular cup of tea, Evidence.

    I can’t go for that.

    No can do.


  3. Rob says

    I’ll let you in on a little secret, my old friend.

    A lot of the “experts” in this field would love to be able to drop the Buy-and-Hold garbage and start telling the truth about what the academic research says. They feel boxed in. If they tell the truth, they know that the Buy-and-Holders will destroy their careers. But they didn’t get into this field for the purpose of destroying millions of middle-class lives.

    How do I know this? I have had a number of people tell me in telephone conversations. And there of course are even more numerous cases in which the “experts” have hinted at this in public comments. The fellow at the Wall Street Journal (Brett Arends) didn’t go out on a limb when he said that Buy-and-Hold is a big bunch of hooey. I think it would be fair to say that, when Brett talks to people in this 100 percent corrupt field, they tell him the same things they tell me when I talk to them.

    People cannot live like this indefinitely, Evidence. Yes, people in this field like to make money. They also like to be able to sleep at night. The corruption will be exposed and people will come clean. And we will then all get about the business of rebuilding our broken economy.

    But until then –



  4. says

    Rob – You know we share thoughts on this front. I am in support of what you are saying. I think you would agree that telling people that buy-and-hold is dead would be like telling people that we are about to enter a recession. The words recession would cause a massive sell off that would fulfill the prophecy. If others do not still believe in Buy and Hold, it will cause a market sell off like never before.
    Just my opinion of course.

  5. Rob says

    This is a super point. Thanks much for stopping by to share your thoughts with us, Derek (Derek and I had a long talk about this stuff at the Financial Bloggers Conference in Denver last month).

    Yes, telling people that Buy-and-Hold does not work will scare them. That will cause a sell-off. And the sell-off will bring on a deepening of the recession. I agree with the point you are making and I believe that it is an important point. I believe that a concern over causing a sell-off that is one the considerations that people like Bogle and Buffett and Malkiel have in mind when they put out words trying to increase confidence in the stock market (and, indirectly, in Buy-and-Hold).

    I have a different take. I will try to explain why.

    We are today at a P/E10 of 22. We have to fall to 15 (fair value). The entire purpose of a market is to set prices properly. So that cannot be avoided. We have to accept that we will have a drop to 15. And, yes, that will cause a deepening of the recession. That was set in stone when we let prices get so out of hand in the late 1990s. There’s nothing that can be done about it today.

    But –

    The further fall to 7 is NOT set in stone. We have seen a fall to 7 or 8 following every earlier secular bull market. So that is the default outcome. But we can avoid this outcome! We should very much want to do so. A fall to 7 will cause so large an additional loss of wealth as to bring on a Second Great Depression. it should be Priority #1 of every person with any hope of seeing our free-market economic system survive another day to see that we avoid a drop to 7.

    How do we avoid it? By being straight with people!

    A drop to 7 is irrational. It is insane. To be at a P/E10 of 7 means that we are all deliberately pricing our stock portfolios at one-half of fair value. Why the heck would we want to do that?

    We do it because of the economic crisis we cause with the loss of wealth we experience when we fall from bull-market price levels to fair-value price levels and because of the fears we experience as a result. But we do not have to drop so low. We have always dropped so low in the past only because we did not know how stock investing works — we did not have Shiller’s research available to us in prior bear markets. Now we know! We no longer need to experience such shock when prices fall to fair-value levels. Now we know why this happens!

    Actually, most of us do NOT know. The word has not gotten out because of the Ban on Honest Posting. But what if we lifted the ban? Then word would get out. Then no one would be shocked and afraid and depressed. Then we would see a fall to 15 but not to 7. Then we would avoid an unnecessary loss of trillions in wealth. Then we would avoid a Second Great Depression.

    The First Great Depression was unavoidable. We did not have available to us the research needed to teach people the realities and thereby make stock investing a virtually risk-free enterprise. Now we do. Now we can save ourselves trillions in losses and spare ourselves an economic crisis.

    What is holding us back? It’s that same old story. Bogle needs to say The Three Magic Works (“I” and “Was” and “Wrong”). Once he says those words, all our troubles come to an end and we begin the process of building our broken economy. Once Bogle says those words, all the ugly, smelly stuff comes to an and and all the exciting, fun stuff begins. It’s by persuading Bogle to say those words that we all make our way to the other side of The Big Black Mountain and make it possible for us all to work together to make our lives richer and fuller and better than they we ever before imagined they could become.

    I cannot wait!


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