“We All Need to Understand Our Goonishness on a Deep Level If We Are to Become Effective Long-Term Investors. Saying That You Don’t Want to Hear About Goonishness is the Equivalent of Saying You Don’t Want to Hear About How to Reduce the Risk of Stock Investing by 70 Percent.”

Set forth below is the text of a comment that I recently put to the Goon Central board:

And it’s very important to those new folks clicking on your site for the first time imagining it might be a place where they could learn something about the S&P 500 Index market timing scheme you’re trying to peddle to watch you rehash all those old comments. At least it won’t take them long to realize they’re wasting their time if they thought the Plop would be a source of how one could actually use Lucky Seven. 
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Following the next price crash, you and your Goon pals will be going to prison for a long time, Yip.At that time, people won’t be going to one particular web site to learn what the peer-reviewed academic research of the past 32 years says about stock investing. Every blog and discussion board on the internet will permit honest posting at that time. We will all be Learning Together.
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My site will have many years of Post Archives reporting on the Goon phenomenon, which is the Get Rich Quick phenomenon. Buy-and-Hold has so far caused four economic crises. I think it would be fair to say that there is not one person alive on Planet Earth who wants to see it cause a fifth. We all need to understand our own goonishness on a deep level if we are to become effective long-term investors and make stock investing an essentially risk-free endeavor in the real world. The archives available at my site will help all of us in that day.If you want to learn how to invest effectively for the long term, you need to be willing to face Your Inner Goon. There is no other way, Yip.There are lots of people who don’t want to hear about goonishness. I get that loud and clear. Saying that you don’t want to hear about goonishness is the equivalent of saying you don’t want to hear about how to reduce the risk of stock investing by 70 percent. Take you Goons out of the equation and we are not in an economic crisis today. Take you Goons out of the equation and we are enjoying the greatest period of economic growth ever seen in U.S. history today.

My site teaches people what we need to do to end the economic crisis and to bring us to the greatest period of economic growth ever seen in U.S. history. I report on the behavior of you Goons extensively. No apologies whatsoever. That’s the job.

You are right that there are lots of people who don’t want to hear about you Goons today. It’s too ugly a subject for them. They feel complicit and ashamed. I get that loud and clear.

If we decide as a society that we want our economic system to survive, we will need to deal with you Goons.

If we decide as a society that we are not willing to do what it takes to save our economic system, then that’s the decision we make and there is nothing that I can do about it. At least I will have the small consolation of knowing that I gave it my very best shot. That ain’t much. But it’s a notch better than zero.

I will continue posting honestly on the numbers that my friends use to plan their retirements in any event.

Non-negotiable.

I naturally wish you the best of luck in all your future life endeavors.

Rob

Comments

  1. Anonymous says

    More old recycled anger extracted from comments on a different site, along with the same old invented arguments against a bogey-man/straw-man, instead of simply focusing on providing specific information on how a person (and Bennett personally) can effectively employ Lucky Seven to supposedly get higher returns with less risk?

    Why am I not surprised?

  2. Rob says

    Oh, sure.

    But this particular bogey-man/straw-mean is a real meanie, Anonymous.

    Don’t you see that?

    Rob

  3. Anonymous says

    No. All I see is more failure:

    “instead of simply focusing on providing specific information on how a person (and Bennett personally) can effectively employ Lucky Seven to supposedly get higher returns with less risk? “

  4. Rob says

    You get dramatically higher returns at dramatically less risk by taking price into consideration when setting your stock allocation, Anonymous. That’s the magical secret.

    If I told you that your car-buying dollar would go farther if you negotiated with the dealer, you would agree in two seconds. You wouldn’t demand that I spell out exactly what to say in every possible negotiation in 8 words or less. Saying “price matters” covers it in every field of human endeavor other than stock investing.

    In stock investing, all the rules are stood on their heads. In stock investing, we are told that considering price might not be absolutely required or might not even be a terribly good idea.

    And just by happenstance it turns out that the people giving this advice make millions when people buy stocks. Gee, I wonder why it is that so many “experts” tell us the OPPOSITE of what the last 33 years of peer-reviewed academic research says rather than reporting honestly and accurately what the last 33 years of peer-reviewed research really says.

    I wonder why it is ONLY Buy-and-Holders who advance death threats.

    I wonder why it is ONLY Buy-and-Holders who demand unjustified board bannings.

    I wonder why it is ONLY Buy-and-Holders who engage in tens of thousands of acts of defamation.

    I wonder why it is ONLY Buy-and-Holders who threaten to get academic researchers fired from their jobs.

    It’s because Buy-and-Hold is rooted in science. It is because the Buy-and-Holders are confident in their strategies.

    I am so totally sure.

    Rob

  5. Evidence Based Investing says

    If I told you that your car-buying dollar would go farther if you negotiated with the dealer, you would agree in two seconds.

    Negotiating with the seller is exactly what goes on in stock markets all over the world. That is how they work.

  6. Rob says

    The nature of the negotiations are very different in the stock market and in the car market, Evidence.

    Say that you were about to buy a particular car and the day before you made the purchase, the dealer cut the price by 50 percent. Maybe they were coming out with a new model and they wanted to get rid of the old model (which was perfect for you). You would be thrilled, right? You would be dancing around the room on learning of your good fortune.

    Now say that you were planning to buy $10,000 worth of stock on February 1. And on January 31, stock prices fall 50 percent. Are you dancing? You’re not. You’re depressed. Most stock investors think of lower prices as a terrible thing.

    That’s why the stock market is dysfunctional. That’s why we have crashes. The market MUST eventually bring prices back to fair-value levels. But those darn investors keep bidding prices up or stopping them from falling down as far as they need to fall.

    Yes, the person buying might put in a bid slightly below what the person selling initially asked. That’s not much of a negotiation. When stocks were priced at three times fair value, every bid should have been at one-third of the last selling price. My guess is that virtually none were. Investors as a class ACCEPT high prices, they even applaud them.

    That is not true in any other market. That’s why the stock market does not behave like any other market. There are no crashes in the car market or the banana market because there is no need for them. Those markets really are rational in the way that Fama ASSUMES the stock market is rational.

    If we gave investors the tools they need to pursue their self-interests, the stock market would be rational too. But this dream can never come true for so long as we tell people that there is no need to consider price when buying stocks.

    Rob

  7. Anonymous says

    Comparing stock investing to buying a car is apples to apples. A car does not generate value over time. It is a depreciating asset. A company produces something and can grow.

  8. Rob says

    The thing we are comparing are the markets, Anonymous.

    Markets serve a purpose. The purpose is to set prices properly.

    The stock market doesn’t do the job. When stocks are priced at three times fair value, the most likely annualized 10-year return is a negative number. That hurts us all. None of us should ever want those sorts of prices to apply.

    So why do they?

    We all want to get value for our money. If we all sought value for out money, prices could never get so high. What is messing things up?

    What is messing things up is that we are telling people that they don’t need to consider price when setting their stock allocations.

    They do.

    That’s 80 percent of what it takes to be a successful long-term stock investor.

    The research shows that it is almost impossible for those who consider price when setting their allocations to fail. The odds are too strongly in their favor. And the research shows that just the opposite is so for those who fail to consider price. By that one act they have gotten 80 percent of stock investing wrong, making it virtually impossible for them to obtain good long-term results.

    Stocks are not cars. But we would all be a lot better off if the stock market functioned as well as the car market. And, with the research available to us today, there’s no reason why it shouldn’t. All we need to do is to explain to people what the last 33 years of research shows us and then provide people with the tools they need to take advantage of the huge advances we have achieved over the past 33 years.

    It’s all upside. It is not even possible for the rational human mind to imagine how anyone could experience any negative from knowing what the research says.

    There are millions of people who could use a big improvement in their financial futures today. The package is sitting on the table. Why not open it up and start reaping the benefits?

    The tag says: “Open Immediately!!! Please Do Not Wait Until Next Christmas!!!!”

    Rob

  9. Anonymous says

    Rob,

    Again, that is just a stupid comparison. They are 2 different markets with different dynamics. There is nothing that provides for a proper comparison.

  10. says

    Good ranting Rob. But I need to see your advises and ideas to understand what you are on about. Generally it is easier to oppose an idea than produce one yourself. I will be checking on you to see what is your strategies.

    One thing you need to understand is that you may spend hours on your stock market and investment strategies. Many people have their daily work and struggles that they cannot analyze the market every so often. For them, buy and hold is the only option.

  11. Rob says

    Valuation-Informed Indexing is FAR more simple than Buy-and-Hold, Terry.

    Buy-and-Hold possesses surface simplicity. But when you live through a price crash and you see a big percentage of your accumulated savings of a lifetime disappearing into thin air, it causes a great amount of anxiety, anxiety that complicates your plans to enjoy a decent retirement someday.

    Valuation-Informed Indexing has all the simplicity benefits of Buy-and-Hold. You never have to research a stock because you invest only in indexes. You only have to check the P/E10 value once a year, which takes less than five minutes. And you only have to change your allocation once every 10 years or so, which takes perhaps 15 minutes. In return, your returns are so so much higher that you are able to retire five to ten years sooner. And the research that I co-authored with Wade Pfau (Wade has a Ph.D. in Economics from Princeton) shows that you reduce your risk by 70 percent by switching to a VII strategy.

    Strategies that work in the long term are more simple than strategies that do not work in the long term. That’s the bottom line here. A strategy has to really work to be truly simple. VII truly works. Buy-and-Hold does not, according to the last 33 years of peer-reviewed academic research in this field.

    Here’s an article that provides background on VII:

    http://arichlife.passionsaving.com/2011/02/04/about/

    Here’s the research paper that I co-authored with Wade Pfau:

    http://mpra.ub.uni-muenchen.de/29448/

    Thanks much for stopping by.

    Rob

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