Set forth below is the text of a comment that I recently added to another blog entry at this site:
You need to correct your mistakes. Start with your “I was wrong” speech and then we can go from there. After you give the speech, I will give you your list of mistakes to correct.
Again with the sarcasm.
I say that Bogle needs to give an “I Was Wrong” speech. So I presume that what you are suggesting here is that I have not been clear re what errors Bogle has made.
His error (one that LOTS of good and smart people made) was in believing that the research showing that short-term timing does not work showed that timing IN GENERAL does not work.
There has NEVER been even the slightest indication in any study that long-term timing might ever not work or might ever not be 100 percent required. That was a MISTAKE.
It was an understandable mistake at the time. No one had ever tested long-term timing at the time when Buy-and-Hold was being developed. But Shiller published the first research showing that long-term timing (price discipline) is ALWAYS 100 percent required in 1981. That’s 33 years ago. You cannot say that the mistake remains understandable today. For at least 12 years now (and almost surely longer than that, although I cannot personally testify to things that happened prior to May 13, 2002), the 1981 finding that long-term timing (price discipline) is always 100 percent required has been COVERED UP.
Do you now understand what the mistake is that I am asking my good friend Jack Bogle to own up to, Anonymous?
When Jack comes out and says publicly in clear and firm and understandable words that there is precisely ZERO support for Buy-and-Hold strategies in the academic research, we will never again see a retirement study published that does not contain an adjustment for the valuations level that applies on the day the retirement begins. We will never again hear anyone say that a 15 percentage point change in one’s stock allocation might be sufficient at a time when valuations have reached insanely dangerous levels. We will never again see a bull market. We will never again see an economic crisis. We will never again see discussions of investing marred with death threats or demands for unjustified board bannings or tens of thousands of acts of defamation or threats to get academic researchers fired from their jobs.
Such garbage will no longer serve any purpose once everyone knows about the mistake and about how much damage it has done to millions of middle-class people and even to the confidence that millions of people hold re our free-market economic system and re our political system. This mistake is the biggest mistake ever made in the history of personal finance. It caused our economic crisis. There are now millions of people unemployed because of our unwillingness as a society to acknowledge this mistake and fix it.
Once we fix the mistake, stocks will be transformed into a virtually risk-free asset class. The Bennett/Pfau research shows that it is the belief that there is some mystical, magical world in which Buy-and-Hold strategies might work for one or two long-term investors that is responsible for 70 percent of the risk of stock investing. There is no such magical, mystical world. Stocks are just like anything else you can buy in this Consumer Wonderland. You MUST consider price when making purchases. If too many people fail to do so, the entire market collapses because it is price discipline that permits markets to work their magic.
Bogle is of course just one guy. But he is the lead proponent of Buy-and-Hold. When he gives his “I Was Wrong” speech, it will be written up on the cover of the Wall Street Journal and the New York Times. That will launch a national debate. Every blog on the internet will be writing about the mistake and how it nearly brought down our economic system and about how all of our financial futures will be looking so much better once we all gain the power to talk openly about the first true research-based strategy (Valuation-Informed Indexing, or Buy-and-Hold 2.0).
It was all a mistake, Anonymous. There was never a grain of truth to any of it. Getting the mistake fixed promptly is the most important economic/political item on our nation’s agenda today.
All of the ugliness comes to an end on the day that Bogle gives that speech. Because the ugliness serves no purpose once the mistake has been acknowledged and fixed. We ALL should be working together to persuade Old Saint Jack to give that speech by the close of business today.
That’s my sincere take re these terribly important matters, in any event.
Thanks for asking an important question (albeit in a backhanded sort of way).
And please know that I extend my best and warmest wishes to you and yours.