Set forth below are the words of a comment that I recently put to the Goon Central board:
I’m afraid you’re going to have to settle for the “cotton candy” money everyone else accepts without question but which you turn your nose up at!
There’s a limited sense in which it is so that I have to “settle” for the cotton candy money that many accept without question. I don’t need to invest in stocks at times of insane overvaluation. But I am affected by the economic crisis that follows when all others learn that the gains they were counting on to finance their retirements were just cotton candy nothingness. We ALL lose when that happens, Buy-and-Holders and Valuation-Informed Indexers alike. There is no way to avoid these losses other than to open the internet to honestzz posting on stock investing issues, so that we can all become more effective long-term investors and stop bringing these economic crises on ourselves.
I DO turn my nose up at the phony gains. I think all others should too. It is insulting for people trying to sell me something to think that I would fall for such an obvious trick as them saying “oh, look, we will flatter you by pretending that you are an investing genius and much farther along in your retirement planning than you really are if in return you will just agree to buy our product even when we offer it to you only at insanely inflated prices.” Yuck! It is degrading for people of intelligence to make such offers and it is degrading for people of intelligence to accept such offers. I want no part of it other than to educate people to the dangers of buying into such baloney.
The one part of the statement above that is off is the part that says that “everyone else accepts without question” the phony money. This is not so. There are many, many people who question the phony money. John Bogle is the King of Buy-and-Hold and it was John Bogle who taught me what I needed to know to know that the Old School safe withdrawal rate studies get the numbers wildly wrong. Bogle wrote in his book that Reversion to the Mean is an “Iron Law” of stock investing. If Reversion to the Mean is an Iron Law of stock investing, there ain’t no way on God’s green earth that a study that does not consider valuationszzz can get the SWR right. The logic chain there is 100 percent rock solid.
Should Bogle be more clear about what he knows? Instead of talking in convoluted riddles, should he say in clear and firm and certain terms that “the Old School SWR studies get the numbers wildly wrong”? Of course.
But this is not all Bogle’s fault. We have a role too. His responsibility is greater because he puts himself forward as an “expert.” But we have a responsibility to handle our personal financial affairs in a reasonable way and it is obviously not reasonable to fail to divide our portfolio values by three at a time when stocks are overpriced by a factor of three and we are trying to determine whether we have large enough portfolios to support early retirements. So we are complicit in the giant act of financial fraud. They did not do this to us, at least not entirely. They were able to do it to us because we so desperately wanted them to do it to us and we made our desires to be taken in this way so evident that the Get Rich Quick Con Men could not resist the bait.
It is false to say that we all “accept without question” the phony numbers. The proper way to say it is that we all feel intense emotional pain over our decision to PRETEND to accept without question the phony numbers. If there were true acceptance of the phony numbers, we would not become defensive when the numbers were questioned. Our defensiveness, evidenced through death threats, board bannings, tens of thousands of acts of defamation and threats to get academic researchers fired from their jobs, tells the true tale. We don’t accept the phony numbers. We fear the emotional pain we experience when our longstanding game of Let’s Pretend is exposed to daylight. We are ASHAMED of our deeply irresponsible behavior.
If we are ashamed, we are ashamed. The realities are what the realities are.
What I say is that we are in an economic crisis on its way to becoming the Second Great Depression. So we had better get sufficiently over being so ashamed before too much more sand passes through the hourglass or we are going to cause ourselves a whole big bunch of human misery.
It is certainly part of my job to care enough about my fellow humans to take care to be as gentle as possible in exposing the source of shame. Re that part, I am on board 100 percent.
But I cannot lie to myself by telling myself that I have done all that a person can do and that it is okay for me to let the ashamed humans cause themselves ten times more pain than they have already experienced and thereby bring on themselves ten times the shame than the amount that they are trying to cope with today.
The job is to be as honest as I can possibly be without crossing the line and becoming unloving while also being as loving as I possibly can be without cross the line and becoming dishonest.
No, I am not in favor of the idea of my friends making retirement plans based on phony numbers, Dab. I’ll tell you why. I believe that the Buy-and-Holders achieved a great advance when they promoted the idea that investing strategies should be rooted in academic research and in historical data. Had they remained true to that fundamental principle when Shiller published his breakthrough research in 1981, we would today be living in the greatest period of economic growth ever experienced in this nation. We betrayed our Buy-and-Hold principles when we imposed a Ban on Honestzzz Posting. When I post, I post honestly. So long as I allow the research to guide me, that will always remain true.
It’s not true for you today because you elected somewhere down the line to betray the fundamental principle of Buy-and-Hold Investing so that you could appease the voice within you asking you to indulge in Get Rich Quick investing just this once and just a little. It always starts out just this once and just a little. It always ends up where we are today.
The hand of kindness is extended to you, Dab. That’s not a time-sensitive offer. It will never be an act of kindness for me to indulge your Get Rich Quick fantasies. I would be grateful if you could try to evidence the respect that I know you deep down inside feel for your old friend Rob by trying to stop asking me to take this dark path. Re that sort of ugliness, I need to ask you to please try to find someone else. I am not your guy. I was not cut out for that line of work. Not this boy. No way, no how.
I can’t go for that.
It’s not my particular cup of tea.
No can do.