Set forth below is the text of a comment that I recently put to another blog entry at this site:
Did you sleep through the 53% crash that hit bottom in 2009? Where were the buy-and-hold lawsuits? Why isn’t John Bogle in prison? And most importantly, where is your multi-million dollar judgement?
These are intelligent questions.
We are halfway through a PROCESS.
At the high, we were at a P/E10 of 44. At the low, we are always at a P/E10 of 8. We are now in the low 20s. That’s a big change from 44. But it is another big change going to 8. We are halfway through the process.
No one got sued in the 2008 drop. That’s so. But we saw VERY BIG CHANGES with that drop. The level of emotionalism in the market diminished dramatically. I was effectively banned at just about every personal finance blog prior to 2008. Since that drop, I have had Guest Blog Entries posted at scores of places that wouldn’t give me the time of day pre-2008. We have already seen huge changes.
We have not yet seen the amount of change needed to get people sent to prison. That much is so. But why would you think that is not going to happen following the drop to 8?
Please consider what a drop to 8 means. It means that EVERYONE sells. You can’t get to 8 without massive, insane selling. When the P/E10 is 8, stocks are selling at half of their real value. Please consider what that signifies. We all want to be able to retire. To have a P/E10 of 8 means that we are deliberately setting the price of our portfolios at HALF of their true value. Why would anyone do that?
The answer is — There is no rational answer to that question. No one would choose to do such an insane thing. It will happen because, following the next crash, investors will no longer be sane. They will be mad. They will be furious. They will be out for blood.
That’s why there will be lawsuits. That’s why there will be congressional hearings. That’s why there will be prison sentences.
I am not advocating these things. I am saying that these things will evidence themselves. Angry people act in angry ways.
The question we all should be asking ourselves is — How do we stop people from getting so angry?
The answer to that one is — We tell them the truth!
And there is not one of us, including the great (no sarcasm intended) Jack Bogle who possesses all truth within him. To tell the truth, we must permit honest posting by EVERYONE, Valuation-Informed Indexers and Buy-and-Holders alike.
That’s why our system is set up the way it is. That’s why every board and blog on the internet has published rules prohibiting the tactics that have been employed by the Lindaurheads and the Greaney Goons. We don’t want people to get so carried away with their personal beliefs that they end up committing acts that down the road get them thrown in prison.
You Goons have committed the felonies. So I cannot say it is wrong for you to be imprisoned. But I WILL say that you are not the only ones who did wrong things. Every site owner who failed to ban you when you committed felonies did wrong as well. You Goons deserved better. You Goons deserved journalists and site owners and investing experts and policymakers who would call you out on your garbage. You didn’t get that. For that, we all should be ashamed.
We didn’t see prison sentences following the last crash. But we did see a lot of political turmoil. And we did see a lot of opening of minds to the idea that Buy-and-Hold is garbage. And we HAVE seen congressional hearings at the end of other secular bear markets (We didn’t see prison sentences but we did not have 32 years of peer-reviewed research showing that Buy-and-Hold can never work for even a single long-term investor at the end of earlier secular bear markets — that’s a big change from a legal standpoint).
We are working our way through a process. It is to every single citizen’s benefit that we limit the prison sentences of our Buy-and-Hold friends to the extent possible. We do that by opening every board and blog to honest posting on safe withdrawal rates and scores of other critically important investment-related topics. We are the luckiest generation of investors that ever lived. We are the first generation that has access to peer-reviewed academic research showing us how to reduce the risk of stock investing by 70 percent. It is by telling people how to do that that we appease their anger. Appeasing the anger of the millions of middle-class people whose lives have been destroyed through the reckless and relentless and ruthless promotion of Buy-and-Hold investing strategies should be job #1 of every person who cares about the future of our economic and political system.
My warmest wishes to you and yours.
Rob, the Fellow Who Knows That He Is Part of the Luckiest Generation of Investors Who Ever Walked Planet Earth