Set forth below is the text of a comment that I recently posted to another blog entry at this site:
who exactly is in the buy and hold mafia and how did they get so much power? do you have any real names of people who wield this type of influence over the universe?
The owners of the Motley Fool site.
The owners of the Index Universe site.
The owners of the Morningstar.com site.
The owners of the Bogleheads.com site.
And on and on and on and on.
They got their power legitimately. There really was peer-reviewed research published in 1965 that appeared to many good and smart people to support the Buy-and-Hold concept. That wasn’t fraud. That was good stuff. I can go a step farther than that. I can say that that was heroic stuff. The Buy-and-Hold Pioneers took us out of the dark ages re our understanding of how stock investing works. Their huge insight — that short-term timing never works — is the second most powerful insight ever developed in the history of investing analysis. We all owe a great debt of gratitude to the Buy-and-Hold Pioneers.
It became fraud sometime between 1981, when Yale Economics Professor Robert Shiller published his “revolutionary” (his word) research showing that, while it is indeed so that short-term timing never works, long-term timing (price discipline) ALWAYS works and is ALWAYS 100 percent required for investors hoping to have any realistic hope of long-term success, and the morning of May 13, 2002. On the morning of my famous post pointing out the errors in the Old School SWR studies, the Buy-and-Holders responded with an insane level of defensiveness. So they obviously were aware on at least one level of consciousness that the research showed that Buy-and-Hold could never work. I have seen no evidence that they were aware of that in 1981. It appears to me that their confidence that Buy-and-Hold could be defended in civil and reasonable debate gradually declined over those 21 years until things got to the point where they stood on the morning of May 13, 2002. I can obviously only give personal testimony as to events that took place after that date.
They keep their power through the use of brutal intimidation tactics. The most obvious case is where they threatened to get Academic Researcher Wade Pfau fired from his job if he continued to publish and promote honest research. There are thousands of researchers who would love to be doing honest research today. But, like Wade, many of them have families and, thus, do not dare to “cross” my good friend Jack Bogle and the other Wall Street Con Men trying to keep the Buy-and-Hold fantasy alive another week, another month, another year.
The con men want to come clean. It was an honest passage in Bogle’s book that taught me that the Old School SWR studies were in error. Bernstein gave a partly honest response when one of you Goons sent him an e-mail asking if the methodology used in the Old School studies is analytically invalid. Swedroe stood up to Linduaer once and got himself banned from the Bogleheads Forum. Pfau wrote to the authors of the Trinity study and asked them to correct the errors in their study. And on and on and on.
The problem is that the Wall Street Con Men know that, if they come clean, they go to prison. Bogle should have acknowledged his mistake when Shiller first published the research discrediting the Buy-and-Hold Model. He rationalized not doing so. I presume that he told himself that it would all somehow work out. And now that 33 years has passed, it is 1,000 times harder for Old Saint Jack to work up the courage to say the Three Magic Words.
Everybody who works in this field knows that his career will be destroyed if he tells the full truth re these matters. So everyone keeps it zipped.
But keeping it zipped re financial fraud only causes the financial fraud to spread. Financial fraud is a cancer. The longer it continues, the more lives are ruined. The more lives that are ruined, the longer are the prison sentences that are ultimately assigned to those participating in the massive act of fraud.
My job is to bring it to an end and get us back to the original Buy-and-Hold idea — rooting one’s strategies in the peer-reviewed research.
I hope that helps a bit, Laugh.