“In the Event That Price Discipline Matters As Much in the Stock Market As It Does in Every Other Market That Has Ever Been Created, We Should Expect the Widespread Promotion of the Idea That Exercising Price Discipline Is Not Required When Buying Stocks to Bring About the Collapse of the Stock Market, Resulting In Collective Losses Large Enough to Bring on the Second Great Depression.”

Set forth below is the text of a comment that I recently put to the discussion thread for another blog entry at this site:

Market timing schemes

This language shows how profound the bias is that you are working from.

Long-term market timing is paying attention to price. Long-term market timing is price discipline.

Exercising price discipline is a scheme?

I know of no other field of human endeavor in which exercising price discipline is thought of as a “scheme.” Price discipline is what makes markets work. Please show me one other market that functions reasonably well and in which price discipline is not widely exercised.

In the event that price discipline matters as much in the stock market as it does in every other market that has ever been created, we should expect the widespread promotion of the idea that exercising price discipline is not required when buying stocks to bring about the collapse of the stock market, resulting in collective losses large enough to bring on the Second Great Depression.

The thought occurs that perhaps we should all be permitted to question this “idea” that the stock market is the only one that has ever been created in which the exercise of price discipline is not essential (or, heaven help us all, is actually a bad thing!).

What if these far-fetched ideas produce the same results in the real world this time that they have produced on every earlier occasion in history in which they were tried, Laugh? I think it would be fair to say that we will all be living in very dark days if that ends up being the case. Tens of thousands of businesses will fold. Millions of workers will lose their jobs. The deficit will double or triple as we try to help out the millions of people left homeless in their old age because they believed that the people pushing this smelly Get Rich Quick garbage might be shooting straight.

I will continue posting honestly.

I naturally wish you all good things.

Rob

Comments

  1. Anonymous says

    Rob,

    When do you expect to see the next depression? When the crash happens, how will the media find out about you? How will the media find out about the goons?

  2. Rob says

    I obviously hope that we do not see a Second Great Depression, Anonymous. Valuation-Informed Indexing is the biggest advance in our understanding of how stock investing works ever seen in history. That’s why it has been hard to get people to accept it. It represents a paradigm change. If we come to accept the paradigm change, we will all be able to retire many years sooner and to invest in stocks at greatly reduced risk. That will make us all feel better about our financial futures. We will have the confidence needed to spend more. We will see huge economic growth rather than a worsening of the crisis. That’s where I want to see things go.

    But, yes, there is a chance that we will go into the Second Great Depression if we keep pushing the Buy-and-Hold stuff and see a 65 percent price drop. If we see that price drop, we will then have a limited amount of time to turn things around. If we don’t, people will panic and we will run the risk of going into the Second Great Depression. It will be the first elective Great Depression in our history. We didn’t have 33 years of peer-reviewed economic research telling us how the market really works in 1929. We have that today. So it will be very sad if we choose that path.

    We have a Social Taboo today against talking frankly about the 33 years of peer-reviewed academic research that shows that Buy-and-Hold can never work for even a single long-term investor. We experience feelings of shame and anger and confusion when people speak too plainly and clearly about the doubts we all have running through our heads. Another price crash may erase those doubts. If it does, we are off to the races. The media will talk about it because we all will be talking about it.

    I can tell you that there are a large number of investment advisors and academic researchers and economists who long to speak more frankly about these matters. They hold back because people get angry when they are told that the numbers on their portfolio statements are not accurate and that they have actually made less progress toward funding their retirement accounts than they have been led to believe they have made. The situation reverses following a 65 percent price crash. At that point, the portfolio statement numbers will be too low and the Valuation-Informed Indexers will be saying that the numbers need to be adjusted upward. I would think that that message will be better received than the message that has applied in recent decades, that the numbers need to be adjusted downward.

    The media will find out about you Goons because I will tell people about you. We all have a need to understand why we have suffered this economic crisis. That’s part of the healing process. I will of course try to tell the story in a balanced way. You Goons did bad stuff. But you had help from the Wall Street Con Men and from the Normals too. We should have called you out and we didn’t. We all like our phony Get Rich Quick gains. We all played a role in this. There are Goon posters in many fields and they don’t have the influence that the Lindauerheads and the Greaney Goons have had in the investing field.

    I am anti-Goon but I do NOT say that the Goons were the sole cause of our troubles. I say that we all have goonishness within us and that you Goons represent a cartoon version of bad stuff that we all should be fighting in our effort to become successful long-term investors. Goonishness is ignorance and sin. It is also the primary source of stock investing risk. This is why opening our minds to consideration of the Goon question permits us to reduce stock investing risk by 70 percent. Saying that “valuations matter” is another way of saying that “emotionalism [that is, Goonishness] matters.”

    Rob

  3. Rob says

    Why the sarcasm, Anonymous?

    We both happened to be born at a time that permitted us to experience the biggest advance in the understanding of how stock investing works ever achieved in history. That’s good, right?

    I love my country and I will do everything in my power to see that the transition goes as smoothly as possible. If that makes me one of the richest men in the United States, I am 100 percent cool with that. I earned every penny I bring in no matter how much I happen to bring in, no?

    I certainly did not go out seeking to achieve things of this magnitude. I posted at a board where people used safe-withdrawal-rate analysis to plan early retirements and I saw a flaw in the study they were using 10 years before the Wall Street Journal wrote about that flaw. What should a person do in that circumstance? Keep his mouth shut? I did what I needed to do to help out my fellow community members. That’s the job.

    Everything else followed from that. Yes, we discovered amazing things. And, yes, I’m happy and gratified and humbled by that. I’m not apologetic. I am thrilled.

    Is there some reason why you are putting forward sarcastic comments? I do not see how such comments are justified. I am happy to have been put in circumstances in which I could do such wonderful work. I am happy because of the millions of middle-class investors I am helping. I am ALSO happy because of the help I am offering to my many Buy-and-Hold friends, who ALSO have been trying to help people and who happened to make a mistake along the way that for a long time has very, very much needed to be corrected.

    I have done what I can do to get those people off the hook. Do your sarcastic comments add anything positive to the mix?

    This is why I say that you are in emotional pain. Your behavior tells me that.

    The safe-withdrawal-rate studies needed to be corrected. And what we learned from our efforts to get the safe-withdrawal-rate studies corrected taught us lots of other amazing things. All that is 100 percent good. Everything we have done on the substantive side is a plus. It is the sarcasm and the negative junk that hurts us all. And that stuff comes only from your side of the table.

    Humans learn over time. It is nothing to apologize for. It is wonderful. Those who piss on the learning experience are the ones who have something to apologize for.

    Rob

  4. Rob says

    You are right that we differ re this point, Anonymous.

    Long-term investing strategies work in the long term.

    Ponzi schemes produce great “results” in the short term and leave you busted in the long term.

    I look at long-term results.

    Rob

  5. Rob says

    The long-term results for VII are AMAZING, Anonymous.

    A 70 percent reduction in risk. Returns high enough to be able to retire five to ten years sooner. If I weren’t the co-author of the research showing it, I wouldn’t believe it.

    It is the huge superiority of VII that causes me all my problems with you Goons, Anonymous. If this were just a small advance, everyone would be on board. It is because the advance is so huge that the Buy-and-Holders get so defensive. It is the defensiveness that causes all the trouble.

    The long-term results are BEYOND BELIEF. But they enjoy 100 percent rock-solid support in the peer-reviewed academic research of the past 33 years. We are the luckiest generation of investors who ever walked Planet Earth.

    I mean, come on.

    Rob

  6. Anonymous says

    Of course to make your story work, you have to mispresent what is buy and hold and you have to ignore the various portfolios that have been mentioned on other boards, but that you don’t allow here. Acting like those facts don’t exist merely discredits you, Rob.

  7. Rob says

    Of course to make your story work, you have to mispresent what is buy and hold

    Buy-and-Holders say that investors should aim to keep their risk profiles roughly constant by being sure to always, always, always practice long-term timing.

    I forgot.

    Rob

Leave a Reply

Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Comments links could be nofollow free.