I was thrilled to see Kevin at Invest It Wisely link in this post to my article on the intimidation tactics employed by Buy-and-Holders to silence Academic Researcher Wade Pfau.
It is my belief that this is the most important article published in the fields of economics and politics in my lifetime. I believe that the day that the New York Times writes up the story told in this article is the day that we will begin to put today’s economic crisis behind us and begin the move to the greatest period of economic growth experienced in U.S. history. When that day comes, Kevin will be able to say he had it first. He has earned our gratitude and affection and respect with his show of courage re this matter.
The Wade Pfau article is here.
Juicy Excerpt: There is now 30 years of academic research showing that the claim that it is not possible to time the market is false. There really is a wealth of research showing that short-term timing (changing your stock allocation because of a guess at to how stocks will perform over the next year or two) does not work. There is zero research showing that long-term timing (changing your stock allocation in response to big valuation shifts with an understanding that you may not see a benefit for doing so for as long as 10 years) doesn’t work. To the contrary, there is now a mountain of research showing that long-term market timing ALWAYS works. There has never been one time in 140 years (that’s as far back as we have records) when long-term timing did not produce far higher returns at greatly reduced risk.
This article exposes the cover-up. It shows how the academic researchers in this field are pressured to perform only research that helps the industry big shots and to refrain from doing research that would help millions to invest more effectively when publishing such research would undermine the industry’s most cherished marketing slogans (the phrase “timing never works” has been repeated so many times that millions of investors assume that there MUST be research supporting the claim).
The public policy implications are huge. In ordinary circumstances, stock-market prices are self-regulating. When prices get high, the long-term value proposition of owning stocks drops. That should cause investors to sell and the sales should bring prices back to fair-value levels. The relentless promotion of Buy-and-Hold strategies made the market dysfunctional. Stock were overpriced by $12 trillion in 2000. Prices always return to fair-value levels over the course of about 10 years. So we knew in 2000 that consumers were going to lose about $12 trillion in buying power by the end of the first decade of the 21st Century. There’s your economic crisis!