Set forth below is the text of a comment that I recently posted to another blog entry at this site:
|So basically the difference is that he doesn’t believe in a global conspiracy that somehow subconsciously acts in a coordinated way
If you can put forward a better explanation of the realities that have appeared before us, I would sure like to hear it, Laugh.
Greaney’s retirement study does not contain a valuations adjustment. That’s a stone cold fact. So the study obviously gets the SWR number wildly wrong.
Why did no one point this out until the morning of May 13, 2002? And why do so few object that the study has not been corrected to this day?
We should all want to know the answers to these questions.
There are millions of people affected by this. So we ought to be able to agree that it would in ordinary circumstances be impossible to keep the errors in the Old School SWR studies covered up this long. Yet the reality remains that they have not been corrected to this day.
How do you explain this?
Yes, there is a sort of conspiracy. All people who have either advocated Buy-and-Hold strategies or followed Buy-and-Hold strategies feel emotional pain in coming to terms with the mistake they made. They have delayed their retirements by many years. They have hurt their friends. They have been taken for fools. It hurts to accept these realities. So they rationalize away what the research says and try desperately to hang on to their long-discredited beliefs about how stock investing works.
That’s a conspiracy in the sense that lots of people with similar interests are acting in the same way. But it is not a conspiracy in the way that the word is usually used. No one met in a smoke-fiilled room and arranged for people to act in concert.
And the people who are engaging in deceptions and making use of intimidation tactics follow Buy-and-Hold strategies themselves. They are hurting others. BUT THEY ARE ALSO HURTING THEMSELVES. That’s not the way that we generally think of conspiracies playing out. We usually think of conspirators as people acting in their self-interest. This is a case where the conspirators are hurting themselves financially because they cannot bear the emotional pain that follows from learning what the last 33 years of peer-reviewed research tells us about how stock investing works.
That’s “a global conspiracy that somehow acts in a coordinated way.”
You try to make it sound as if this is an incredible event. It IS strange stuff. But it is by no means unprecedented stuff.
I have heard that Galileo was put under house arrest for saying that the earth revolves around the sun rather than the other way around. Would it be fair to say that he lived at a time when there was a global conspiracy to tell people that the sun revolves around the earth that somehow acted in a coordinated way?
It’s easy to get lots of people to act in a coordinated way when lots of people believe the same thing.
And, whenever there is a huge advance in human knowledge, we have lots of people believing in the same WRONG thing.
That’s what we have here. People really believed in Buy-and-Hold for a long time. Many staked their retirements on it. Many staked their careers on it. Many devoted years of their lives writing books about it or developing calculators rooted in a belief in it.
Then this Shiller fellow came along and published peer-reviewed research showing them that they were wrong. Not by a little bit. Shiller showed that the Buy-and-Hold concept is the OPPOSITE of what works. His research implies that exercising price discipline is the key to long-term investing success. Practicing long-term timing is 80 percent of the game. Shiller showed something very, very important. The implications of his insight are so far-reaching that he caused a lot of good and smart people to feel an intense emotional pain.
So, yes, they looked the other way. They patted him on the head and said “Shiller is great” and then returned to what they were doing before he came along as if his research didn’t exist. There is not one way in which Buy-and-Hold changed as a result of Shiller’s “revolutionary” (his word) findings.
The huge bull market aided those who looked the other way. No one was mad at them for doing so because everyone was enjoying the Pretend Gains of the runaway bull. To recognize the import of Shiller’s findings would be to acknowledge that those gains were Pretend. Who needed that? Everyone was “successful.” Everyone was rich. Everyone was having a ball. The Buy-and-Holders had figured it all out and were not to be questioned.
Now we are in the early years of paying the price for looking the other way.
We have intellectually achieved the greatest advance in the history of personal finance over the past 30 years. But anyone who either advocated Buy-and-Hold or followed a Buy-and-Hold strategy does not want the word getting out. They feel shame because of how they have hurt themselves and millions of others. Looking the other way caused an economic crisis. Buy-and-Hold is the lie so huge that it cannot be acknowledged.
Humans don’t like to think that they have been responsible for so much human misery. So they tell themselves stories. They rationalize. They say “Sure, valuations matter, but it is impossible to take advantage of this reality.” It’s a claim that makes zero sense in the logical sphere and that enjoys zero support in the historical data but one that offers some temporary emotional relief to those who have been looking the other way for so long now that they cannot bear the thought of ever acknowledging the obvious (and highly encouraging once you accept them!) truths.
Most of us are engaged in a “global conspiracy that somehow unconsciously acts in a coordinated way.” That’s because most of us are ignorant of the realities. That’s because most of us continue to look the other way. That’s because most of us DON’T WANT TO KNOW how stock investing works in the real world.
None of that is criminal behavior. It’s sad. But human beings have been ignorant of lots of important truths at earlier times in history. It happens. It’s one of those things.
Fortunately, we have means to overcome our ignorance over time. We have discussion boards. We have blogs. We have newspapers. We have magazines. We have studies. We have calculators.
This is where the criminal stuff — my focus nowadays because it must be addressed before we can all enjoy the wonderful blessings that have been bestowed on us as a result of the last 33 years of peer-reviewed research in this field — comes in.
Those who want to continue looking the other way have seen what happens when the truths are spoken in clear and firm and direct and understandable ways. PEOPLE OVERCOME THEIR IGNORANCE. The horror! Something must be done.
That’s where you Goons come in.
Punish people who dare to “cross” the Buy-and-Holders by reporting honestly and accurately what the last 33 years of peer-reviewed research says severely enough and you can stop them from continuing to do so. You can stop others who have similar ideas as well. As the holes in the Buy-and-Hold concept get more and more noticeable, it takes harsher and harsher pubishments to keep the house of cards from collapsing to the ground. But the Wall Street Con Men have lots of money and power and influence and the majority of middle-class investors remain largely ignorant of the realities today. So this remains a viable strategy for keeping people in the dark. Less and less so all the time. But still at least barely viable as of this morning.
I am not playing this stupid game, Laugh.
I am telling.
That’s my job.
That’s what I am going to do.
I naturally wish you the best of luck in all your future endeavors regardless of what investing strategies you elect to pursue.