Set forth below is the text of a comment that I recently put to another blog entry at this site:
What would you do if you found someone operating a blog preaching an approach to investing with obvious flaws; who incorrectly confused correlation with causation; and who improperly believed that the past was bound to repeat itself?
Would you reach out to that person, try to engage them in a discusion of their beliefs in an attempt to illuminate them? Or would you just chalk it up to yet another kook with a website and move on?
What if, as a result of those conversations, that person said you were a goon who deserved jail time for their approach to investing?
What would you do — as a friend?
Ryan Howard plays first base for the Phillies. He was a great player at one time and was signed to a very big long-term contract. He is a horrible player today. But when people talk about trades the team may make, his name never comes up. People are embarrassed to talk about the subject because Howard is a nice guy who once was a great player and because there are no teams interested in taking him today.
Today the front office began to lower the boom. They brought up a possible replacement. And there there were several interviews in which the idea was put forward that they will be releasing before the beginning of next season. Now everything has changed. Now it is considered fair game to mention the realities concerning Ryan Howard.
That’s what is going to happen re Buy-and-Hold following the next price crash.
People are afraid to talk today because the Buy-and-Hold Mafia is powerful and there are still people holding out hope that we will not see another crash. But following the next crash someone big will say things out loud that lots of people have been thinking for many years now. And then everything will open up. People will be rushing for the exits.
Once the taboo is broken, things are never again the same.
When it turns, it turns fast.
Where will you be then?
I am the best friend you have in this world, Curious.
That’s the real deal.
I can help. But only if I get cooperation.
You do deserve jail time. Put yourself in the shoes of the millions of people in the process of suffering failed retirements. Or in the shoes of the millions of people who lost their jobs in the economic crisis.
I have the credibility on this issue to help you get your jail time reduced. And that’s obviously all that I have. I cannot put you in jail and I cannot keep you out of jail. I have no such powers. I can try to help, I can try to put things in the light most positive for you. That’s all I can do.
I haven’t confused correlation with causation. I have explained WHY valuations affect long-term returns. The new model is based on a new understanding of how the market sets prices. The new model is consistent with the data. The old model is not.
I don’t say that the past is bound to repeat. I say that it very well might and that every person working in this field has a responsibility to let millions of middle-class people know what will happen to their retirement money if that turns out to be the case. If you tell the truth while still promoting Buy-and-Hold, you are in good shape if we have a crash and in good shape if we do not have a crash. That’s where you should want to be. That’s sane. Because you don’t know for sure what is going to happen.
I don’t know with certainty what is going to happen either. I have my strong beliefs, just as you have your strong beliefs. The difference is that I have never blocked anyone from hearing the Buy-and-Hold story. Everyone knows the Buy-and-Hold story. You have blocked people from hearing the Valuation-Informed Indexing story. That puts you on the hook for losses if things don’t go as you expect.
The jury wil hear testimony re whether I am just a kook with a web site. Wade Pfau will be testifying. And so will lots and lots of others. And the testimony will be given FOLLOWING the next crash. At that time it won’t be just me saying it might happen. It will be a present-day reality. It will be in all the papers.
I love my country and I will continue to fight to protect her from you, Curious. That’ the bottom line here. I have a funny feeling that love of one’s country is a virtue that is going to be coming into style following the next price crash and that turning a quick buck may be viewed as less of a sign of the ultimate “success” in those days. We will see.
I naturally wish you the best of luck in all your future endeavors regardless of what investing strategies you elect to pursue.
When lots of others are saying that Old Saint Jack cannot get around on a fast ball anymore, I will still be singing his praises. I will be recalling to people the day when he really was something special. The word “friendship” means something to me, old friend.