Set forth below is a comment that I posted to another blog entry at this site:
Also, why do you think you are having trouble getting people to sign on for the posting commitment since finance/investing is such a hot topic and that we see so many posters at the various boards that are logging substantial volume?
There are two different reasons that apply for the two different types of people out there today, Anonymous.
Perhaps 90 percent of the population today generally believes in Buy-and-Hold. Lots of people are beginning to have doubts since the 2008 crash. But most think that, even if Buy-and-Hold is not perfect, it is close enough and probably the most responsible strategy out there.
These people would be okay with a strategy that represented a small change. For example, they could buy into the idea that Bogle sometimes put forward that it is okay to change your stock allocation by 15 percent when valuations reach extreme levels. That is a violation of a core Buy-and-Hold principle (to Stay the Course by keeping your stock allocation constant except for reasons of age). But people view that sort of change as a helpful bit of flexibility rather than as an abandonment of principle. Most people view the idea that a 60 percentage-point change in one’s stock allocation is sometimes required as extreme. Most have a distaste for even considering such an idea.
The other factor is that people are emotionally committed to Buy-and-Hold. The discussion of whether Buy-and-Hold possesses merit is not a theoretical discussion for millions of people. People who have followed the strategy themselves and perhaps have recommended it to friends feel emotional pain when confronted with claims that there is no merit to the idea. Those claims make them feel like they have wasted their lives, that they could have retired many years sooner had only they had been smart enough to have seen the holes in the Buy-and-Hold concept years sooner.
Entertaining the new ideas makes them feel that they were taken for fools and they don’t like that feeling. It also suggests to them that people like John Bogle, whom most people revere as a hero to the middle-class, are dishonest. People react with anger to this suggestion.
Finally, even people who are interested in engaging in discussion of the new ideas don’t feel comfortable sparring with the small number of Buy-and-Holders who are so intense in their feelings about the subject as to be wiling to engage in insanely abusive Goon tactics to “defend” the strategy. People are ashamed to see other human beings give up their self-respect by threatening to kill family members of those who explore the implications of Shiller’s revolutionary research.
If they thought that they could bring an end to such ugliness by reining in the Goons, they would do so. But, given that 90 percent of the population still believes in Buy-amd-Hold today, they don’t see that as a realistic option. They feel that the way to stop the abusive posting is to silence the person putting forward the new and thus currently unpopular ideas. It’s similar to the situation where a powerful male executive takes sexual advantage of a lowly woman employee. People often think that the best response is to fire the lowly woman employee because they cannot bear to see the current situation continue but also cannot imagine overcoming the power of the male executive.
A final factor is that people do not want to see their portfolio values lessened. Stock are wildly overpriced today. Accepting what the last 33 years of peer-reviewd academic research tells us means accepting that our portfolios are worth a good bit less than the numbers on the last page of our portfolio statements indicate. Lots of people are too scared about their ability to finance decent middle-class retirements to want to go there. Buy-and-Hold is a pure Get Rich Quick strategy. Get Rich Quick strategies have possessed great short-term appeal going back to the day when the first stock market opened for business.
Blogs become successful by getting links from well-established sites. Most established sites made their name at a time when the pure Get Rich Quick approach possessed great appeal. The last thing these site owners want is for the millions of middle-class investors to learn the realities. Their reputations and big salaries are at risk. The Buy-and-Hold Mafia hates honest posting on the last 33 years of peer-reviewed research because the members of the Buy-and-Hold Mafia want to protect turf won in an earlier day.
The entire Buy-and-Hold house of cards will collapse quickly once one major site permits 100 percent honest posting at its site. But new ideas cannot gain support until discussion of them is permitted. The Buy-and-Holders know or at least suspect that allowing honest posting at a single site would mean the end for the purest and most dangerous Get Rich Quick scheme of all time. But the desperation tactics show that even the most intense “defenders” of Buy-and-Hold do not believe deep in their hearts that the strategy is long for this world.
People who are confident of an idea they advocate do not employ death threats to “defend” it. Not ever. People who employ death threats know on at least one level of consciousness that the idea they are “defending” is doomed. The fight on because the emotional pain of acknowledging that they have made a terrible mistake is too great for them to bear to do otherwise for the time being.
The other group of people is the 10 percent of the population that possesses at least a fair appreciation of the implications of Shiller’s revolutionary research findings. This group is virtually without exception excessively tentative in the manner in which it advances its idea. Shiller is the grandfather of Valuation-Informed Indexing. But check out how much how-to advice he offers in his book. There’s two paragraphs worth of material addressing this aspect of the question in the entire book! And those two paragraphs offer exceedingly vague guidance. Shiller has tenure at Yale. But even Shiller fears the vicious attacks of the Buy-and-Hold Mafia that he knows will be directed at him if he states in clear and firm and direct words what the historical return data tells us about what sorts of investing strategies work in the long term (hint — it ain’t Get Rich Quick!).
Rob Arnott was kind enough to come to this site and tell me that my investing ideas are “sound.” That made me very happy because Rob is a stud. He is a straight-shooter in a field in which straight-shooters are exceedingly rare. But look at what Rob did. He said that Bogle has always been a “gentleman” in his presence. He avoided comment on whether it is gentleman-like behavior for Bogle to do nothing when the Mel Linduaers and John Greaneys of the world threaten to kill family members of any posters who dare to “cross” them by posting honestly on the safe-withdrawal-rate matter. Rob Arnott is afraid to call Jack Bogle out on his acts of financial fraud. He’s waiting for someone else to do it. He wants people to learn the realities. But he doesn’t want to take on the hits that he will take on if he does what everyone knows needs to be done.
There is a lot of money to be made in this field. That means that the penalty associated with telling the truth is greater than it would be in any other field.
The other side of the story is that the REWARDS will also be greater down the line. I have mentioned before that I expect to be one of the richest men in the United States following the next price crash. There are millions of people who even today would like to hear honest reports on what the peer-reviewed research says and who will very, very, very much want to hear those reports following the next crash. For now, though, even a stud like Rob Arnott holds back. The Buy-and-Hold Mafia is very powerful and very well-connected and very ruthless in its use of intimidation tactics. So the 10 percent that should be leading us all to a better place hangs back, waiting for some fool like me to be the first one to post honestly on scores of different critically important investment-related topics.
We need to start rewarding honesty and intelligence and discouraging deception and intimidation. The more we reward deception and intimidation. The longer the Buy-and-Hold Crisis stretches out and the more of us it destroys.
That’s my sincere take re these terribly important matters, in any event.