Set forth below is the text of a comment that I recently put to the Joe Taxpayer blog:
There are those who swear by gold. I think it’s an ancient relic (only for the fact that Milton Freedman used those words, else, I’d just think it a pretty metal.) There are day traders. I think that’s a losing proposition. It goes on.
There are no Bans in effect on discussion of those other subjects, are there?
What is so different about the 32 years of peer-reviewed academic research showing that Buy-and-Hold is the purest and most dangerous investing strategy ever concocted by the human mind?
I think the difference is that the Buy-and-Holders say that the research SUPPORTS them. That’s their marketing gimmick. They push a Get Rich Quick scheme because we all have a weakness for Get Rich Quick schemes and so that is where the easy money is. But their particular Get Rich Quick scheme is adopted by millions more middle-class people because those people have been told that there is some mystical, magical research somewhere supporting it. Ask to see the URL for the research and they threaten to kill your loved ones. Academic researchers have spent a lot of time trying to identify this magical, mystical research that we hear about so often and no one have ever been able to put his or her finger on it.
I have a funny feeling that the mystical, magical research doesn’t exist. Ssshh! We’re not supposed to say that out loud. It’s sort of rude given how many people are making a buck off this thing, you know?
It’s a marketing gimmick.
Two types of people get very angry when this is pointed out.
The people making a buck off the marketing gimmick (my friends in Northeast Philadelphia where I grew up refer to this sort of thing as a “lie” — it’s a technical term) don’t want to have to climb down off The Big Money Train.
And the people who were taken by the lie are ashamed that they fell for such an obvious untruth and thus cannot bear to look at the actual research and data.
Here’s my question –
What happens when the millions of people who were tricked lose their life savings and then learn that the curious idea that it is not necessary to consider price when buying stocks was a lie all along?
Do you think we might experience a wee bit of political unrest in these here United States when that one gets out?
Yeah, I think so too.
That’s one of the reasons why I think it is important that we all do everything possible to get the word out BEFORE the next price crash, when it might be possible for responsible people to calm the population down by referring to things like cognitive dissonance.
I have a funny feeling that my cognitive dissonance story is not going to go over so well when I try to use it in the midst of a Second Great Depression.
The Buy-and-Holders think of me as Public Enemy #1. My own take is that I am the best friend that any of them ever had by a country mile but they are too blinded by shame and embarrassment over things they did long before I ever came on the scene to acknowledge it.