Marcelle Chauvet, a Professor in the Department of Economics at the University of California at Riverside: “I Totally Agree. The Only Thing Is the Cost of Obtaining Information As Opposed to Buy-and-Hold. Why Would Your Job Be Jeopardized by Such a Sensible Claim?”

I have been sending e-mails to numerous people letting them know about my article on The Silencing of Academic Researcher Wade Pfau by the Buy-and-Hold Mafia.  Marcelle Chauvet wrote in response: “I like it and I totally agree. The market goes through cycles and if we want to or need to sell in the wrong cycle phase all bets are off. The only thing is the cost of obtaining information as opposed to Buy-and-Hold. This would be a good research topic. Why would your job be jeopardized by such a sensible claim?”

The text of my reply e-mail follows:


You are asking the $64,000 question.

There is a clear answer. Once people get it, it sticks. But a person needs to be open to hearing it for it to get through. Getting people to hear the answer to this question is the solution to our economic troubles.

Bull markets are Ponzi schemes.

Shiller says just that in his book. In fact, he goes farther. He says that, since bull markets possess every characteristic of Ponzi schemes, we should assume they are Ponzi schemes until we come into possession of some evidence that they are NOT Ponzi schemes. Of course there has never been any such evidence. Bull markets are Ponzi schemes.

Now —

Think about how many groups in our society benefit from this particular type of Ponzi scheme.

Wall Street benefits. But it is not just Wall Street. Newspapers benefit. Policymakers benefit (people vote for incumbents during bull markets because they are happy with their circumstances). Economists benefit (people want to learn more about how our economic system works when it is booming). Researchers benefit (people want to know more about how to benefit from the booming economy). Airlines benefit (more people can afford travel when their portfolio values are temporarily high). Car manufacturers benefit (more can buy second and third cars). The construction industry benefits (people can afford bigger houses). And on and on.

At the top of the bull, we had $12 trillion in Funny Money sloshing around our economy.

Now —

Did we know it was funny money? We did. We all possess common sense. No one really believes on a deep level that their retirement accounts can increase by 20 percent or 30 percent in a year for no good reason. We all knew all along that there was some sort of funny business going on and that we should look into it. BUT WE DIDN”T WANT TO KNOW. So we silenced the voice within us telling us “this is wrong.”

If you tell an alcoholic that he has a problem, does he acknowledge it? He does not. That’s not because he doesn’t know. He knows better than anyone. He SUPPRESSES the information. Until the consequences become so bad that he can suppress no more. It is when we can suppress no more the voice telling us that our bull market gains are not real that we have a stock crash or a series of stock crashes. It’s what alcoholics call “hitting bottom.”

Please do not be discouraged by this report. The other side of the story is wonderful indeed.

Every economic crisis we have experienced from 1870 forward (that’s as far back as we have records of stock returns) was started by a bull market in stocks. There is not a single exception. So, if we learned how stock investing really works, we could stop experiencing economic crises. Following the three earlier Buy-and-Hold crises, we went right back to committing the mistakes that caused them. This time we will not do that. Because this time we have 30 years of peer-reviewed academic research telling us how the stock market really works.

Many of us cannot bear to have people hear what we have done to ourselves. It is too painful. Hearing these truths spoken out loud makes people feel ashamed and angry and afraid. But it is hearing these truths spoken out loud that is ultimately going to save us.
Think about what happens when we all become free to talk about what the research really says at every discussion board and blog on the internet. Every time stock prices start to rise too high, people will look at what the research says and lower their stock allocations because the value proposition is now poor. Those sales will bring the price back to fair-value levels! Stock prices are self-regulating once we know how stock investing works.

The market really is “efficient” in a sense. Investors truly want to act in their self-interest. The problem until now is that the research was not sufficiently developed for us to know what our self-interest was. Now we know. Now we have 30 years of research telling us. Because of the pain we feel when hearing the news, we have not yet permitted ourselves to discuss the new research. But that will end with the next price crash.

We just have to be sure to have means put in place in advance to help us get the word out about what the research says immediately following that next crash. Otherwise, the losses will be great enough to cause the Second Great Depression. That won’t be so if we get the word out. If we get the word out, we will fall only to fair-value price levels. If we do not get the word out, we will see a negative emotional reaction as strong as the positive emotional reaction we saw in the bull years. That will bring us down to one-half of fair value, which is where every earlier Buy-and-Hold crisis ended.

People’s jobs have been jeopardized because those who still believe in Buy-and-Hold (they number in the millions and they are good and smart and hard-working people) are in great emotional pain today. They are suffering from cognitive dissonance on a massive scale. We all should be doing what we can to help them out and thereby to help all the rest of us out too.

All this is my sincere belief re where things stand today, in any event. I am grateful to you for listening and for your kind words. Hang in there!


Note: I received a comment (see below) on August 2, 2014, in which Marcelle expressed a concern that readers might pick up the impression that she endorsed all of my views on investing. She has never said any such thing and I do not believe any such thing.


  1. banned plop contributor says

    Well, I guess that’s it Rob.

    Since you deleted my last two totally relevant posts, it’s clear you want no further input from me, ever.

    You see, unlike you, I know how to leave with not wanted.


    (Good luck getting grist for your wacky mill in future, mate, since I won’t be providing it any longer!)

  2. sparky says

    I have had many deleted as well. It looks like Rob doesn’t care to have honest posting on this website. I guess I could send out tens of thousands of emails to people that don’t know me and that also don’t care and tell them about mean ‘ole Rob.

    Better yet, I will also leave and let Rob talk to himself like he does most days.

  3. Rob says

    It looks like Rob doesn’t care to have honest posting on this website.

    I cannot permit violations of civil and criminal law in the comments here. If I do, I become responsible myself. Not interested.

    Please adhere to the laws of the United States or feel kindly invited to take your business elsewhere. No death threats. No defamation. That sort of thing.

    If you find that you cannot “defend” Buy-and-Hold without engaging in that sort of behavior, perhaps Buy-and-Hold is sometimes better left undefended.


  4. Rob says

    I guess I could send out tens of thousands of emails to people that don’t know me and that also don’t care and tell them about mean ‘ole Rob

    If the comments you advance are honest, you may indeed do so.

    If the comments are defamatory, you will be held responsible in a court of law.

    That’s how the system works.

    My best wishes to you and yours, Sparky.


  5. Rob says

    Better yet, I will also leave and let Rob talk to himself like he does most days.

    My preference is for you to post your sincere beliefs so that we can all Learn Together.

    But I of course acknowledge that you have every right to refrain from commenting here if that is your preference, Sparky.

    I wish you all good things in either event.


  6. sparky says


    Your comments about “the court of law” and the comment on ” civil and criminal law” could be considered defamatory and threatening. You should think before making accusations like that to anyone.

  7. Rob says

    I’ve taken on The Buy-and-Hold Mafia, Sparky. I’ve been hearing threats every day for 11 years running now.

    My good friend Jack Bogle has all the money and influence and power in the world, Sparky.

    If he doesn’t like it that I call him and the other Buy-and-Holders out on their nonsense, he should sue me.

    Maybe he’ll even win, you know?

    I’m not going to post dishonestly on the numbers that my friends use to plan their retirements. Not in 11 years. Not in 11 billion years.

    That’s financial fraud. If I engage in financial fraud, I could be put in prison for good reason. At least if I go because my good friend Jack pulls some strings, I am being sent to prison without just cause.

    I’m at risk either way. If I post honestly, the Buy-and-Hold Mafia feels that it needs to destroy me. If I post dishonestly, I have committed a real crime. Of the two options, I prefer posting honestly and taking my chances with Old Jack.

    I love the guy. I rank him as the second most important investing analyst in history. I’ll sing his praises even if he sues me or gets me sent to jail. That’s because I like singing the guy’s praises when it is possible to do so honestly. So he can count on me for that.

    When Jack posts in “defense” of Mel Linduaer or John Greaney, he shames himself. I cannot support him when he goes down that dark road.

    Are we clear where we stand?

    If Old Jack does NOT sue me, I’ll be pointing people to this post and noting that he didn’t pull the trigger. That will encourage others to speak up. So having his Goons threaten to sue me and then not pulling the trigger is the worst of all worlds for him.

    I wish you (and my good friend Jack!) all of the best things that this life has to offer in any event, Sparky.

    Don’t let the bad guys get you down, man.


  8. Marcelle Chauvet says

    Dear Robert,

    We have exchanged one or two emails in which you mentioned that buy and hold can be a bad strategy and I agreed with you given the high volatility in the market. However, I think you are mentioning my name outside the context, and you inserted an answer below with your own thoughts, as if I endorse them.

    I would like to ask you to take my name out of this article, please. I do not want to be listed as endorsing your positions blanche card. This does not represent our exchanges and they are misleading. Thanks

  9. Rob says


    Thanks for writing about your concern. It is nice to hear from you again!

    I certainly did not in any way, shape or form intend to suggest to anyone that you endorse all of my views on stock investing. I don’t believe that. I have added a note to the article (in bold type) stating this and directing people to your comment. I hope that helps. If you would like me to add any additional language detailing how your views differ from mine, I am happy to add such language (in bold type) to the note at the bottom of the article.

    I’d be grateful if you would tell me how this came to be a concern. I have learned over the past 12 years that there is a lot of funny business going on in the investing advice area. I believe that we all need to work together to clean up the corruption in this field. I don’t know whether people involved in the corruption have contacted you or not. If they have, I would like to know more about what happened and share it with my readers.

    My best and warmest wishes to you and yours.



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