Set forth below is the text of a comment that I posted to another blog entry at this site:
You made an important point when you noted that you used to be a Buy-and-Holder, Canuck. That’s true of me as well. It was also true of John Walter Russell (John is the co-developer of four of the calculators at the site). It was also true of Wade Pfau (Wade is an academic researcher who has a Ph.D. in Economics who co-authored with me the peer-reviewed research that shows investors how to reduce the risk of stock investing by 70 percent [by abandoning Buy-and-Hold strategies]).
The same point is demonstrated again and again and again. There is nothing dumb about Buy-and-Hold. Millions of smart and good people believe in Buy-and-Hold. Buy-and-Hold was once a legitimate thing. There once really was research that seemed to support it. The vast majority of people who believe in Buy-and-Hold are NOT Goons.
Our nation’s problem is that the peer-reviewed research has shown for 33 years that there is zero chance that a Buy-and-Hold strategy could ever work for a single long-term investor. Yet very few know this! Most people believe that Buy-and-Hold is a real thing to this day.
Our political system is set up to make this sort of national tragedy impossible. We have free speech. So people who see the holes in the Buy-and-Hold claims are free to tell people about them. The investing field is a money field. People could in ordinary circumstances make millions or even billions of dollars telling people about new strategies that reduce the risk of stock investing by 70 percent. Why haven’t we seen many people make the transition from Buy-and-Hold to Valuation-Informed Indexing?
There are three reasons.
One, there is a lot of money to be made with Buy-and-Hold. The secret to marketing is forming an emotional connection with your customer. Buy-and-Hold is pure emotion; it misleads people into believing that their phony and temporary bull-market gains are real and of course people love hearing that even though it destroys their hopes for a decent retirement in the end. The $12 trillion of phony gains created out of thin air during the bull market was essentially $12 trillion worth of marketing money used to promote this Get Rich Quick scheme. You can buy a lot of supporters with $12 trillion in marketing money.
Two, there are a lot of reputations that have been built through the promotion of Buy-and-Hold. The way you succeed in this field is by getting Big Shots to put in a good word for you. Most of the Big Shots are Big Shots because they backed Buy-and-Hold during the insane bull market and tricked (not intentionally — but still…) millions of investors into thinking that the gains being produced by the strategy they were following were real. These people are aware of Shiller’s research. But they have a huge personal stake in doing everything in their power to keep millions of middle-class investors from learning about its implications. Human nature being what it is, they keep it zipped. And they make it clear to others in the field that it would be in their best interests to keep it zipped as well. The sad reality is that most people in this field are out for themselves first, second, third and fourth and, if that means that their customers and their readers suffer failed retirements, that’s a price that just has to be paid as part of an arrangement that makes them multi-millionaires themselves.
Three, the Goons will stop at nothing to destroy the reputations and businesses of anyone who dares to “cross” them by telling people about what the last 33 years of peer-reviewed research really says.
Most people believe in Buy-and-Hold. But most people are open to hearing the other side of the story too. In fact, most people very, very much like the idea of being able to hear the other side of the story.
Here is a link to an article I wrote years ago pulling quotes from 101 comments from posters expressing a desire that honest posting be permitted:
THAT’S how most people feel about this stuff.
Most people believe in Buy-and-Hold because that’s all they have ever heard about. Most people are open to hearing about research-based strategies. But they are not going to buy into them in one day or two days or two months or perhaps even two years. Changing the strategy you use to achieve your retirement goals is a big deal. People want to be sure before they abandon Buy-and-Hold. They need to hear about the research-based stuff on a daily basis. They need to be able to ask questions. They need to be able to express concerns. They need to ponder things and come back and explore things from multiple angles. This process of exploration is not taking place and that’s why we are in such a terrible jam.
The reason why it is not taking place is not that people are dumb or not interested in learning. The reason it is not taking place is because not enough of those of us who understand that Buy-and-Hold is a big pile of smelly garbage have the courage to stand up to the Goons and insist that they obey the laws that this nation has adopted to protect us from their ugly, abusive tactics.
Shiller doesn’t like to talk about that. He has faced a LOT of abuse because he has put forward the research that shows that Buy-and-Hold can never work. But he tries to limit the abuse by not speaking clearly and firmly and boldly about the insane abusiveness of the Buy-and-Hold Goons. And until Shiller and a good number of others start doing that, it is very hard for us to move forward. Lots of people have good insights. But they don’t get shared. If you are not going to share what you know, the society you live in doesn’t realize much in the way of benefits from what you know.
So that sort of thing has to stop.
The Get Rich Quickers have zero problem speaking up about what they believe and sticking up for each other. Those of us who believe in research-based strategies are exceedingly tentative in most of our claims and statements. We see academic researchers threatened and we hesitate to call it financial fraud. We see people refuse to correct errors in retirement studies for 12 years and we worry that it might be too “extreme” to note that they are going to end up in prison cells following the next price crash.
People see this. People see the cowardice (that’s what it is, isn’t it?) of the Valuation-Informed Indexers and they hold back from joining the cause or from expressing full support for it or whatever. I don’t play this game. I offer zero apologies for being the person to discover the errors in the Old School SWR studies. I offer zero apologies for being the co-author of peer-reviewed research that shows million of middle-class people how to reduce the risk of stock investing by 80 percent. I am proud of those contributions, which have served a huge positive purpose.
I hope to come up with plenty more breakthroughs of that nature. And I want to encourage lots of others to do so. I give the Goons the back of my hand. We adopted laws to protect ourselves from them because they are a destructive force. They have chosen to walk a path that leads to prison terms. I am happy to try to help them out. But I fail to see how it would be a life-affirming act for me to agree to commit felonies and end up in prison with them. My efforts are directed at getting their prison sentences reduced a bit, not at adding one for myself.
We need to see an attitude change. That’s the point here. We need to stop asking permission to post honestly and start demanding and insisting that our right to do so be respected — and no backtalk!
We need to change the incentives and disincentives that apply for those giving investing advice. Today there are huge rewards for those who push the smelly Buy-and-Hold garbage. We need to see that penalties apply for those putting their own interests above the interests of their clients and readers. And we need to see that huge positive incentives apply for those who call out the Wall Street Con Men and their Internet Goon Squads on their b.s. The more rewards people experience for posting honestly about investing issues, the more honest posting on investing issues we will see. We want to draw people of high integrity back to the investing advice field.
People have been telling me for 12 years that they want a place where they feel safe expressing their sincere thoughts. It amazes me that no such place exists on the internet today. We need to create such a place.
I am going to start a discussion board at this site when I have 10 people who have agreed to post at least once per day at that board. When newcomers to the site see that board and listen in to the discussions and see how wonderful and real and positive and life-affirming they are, they will join in and then spread the word to their friends and neighbors and co-workers. And the 10 posters will quickly become 100 and the 100 will become 1,000 and the 1,000 will become 10,000 and so on and so on. We have a winner here. We just need to make people feel safe for the flower to be able to bloom.
I’m am inviting you to become The Second Poster at that board, Canuck.
There are no hard feelings if you say no. I will 100 percent understand.
But if you say “yes,” that answer will make it that much easier for me to attract Poster #3. And a positive response from Poster #3 will make it that much easier to attract Poster #4.
That’s how it is done. Every great idea starts with one person and then grows and grows and grows and grows. The growth of this great idea has been hindered by the Goons. But the trick of all bullies is to make people feel intimidated and thereby to gain a power over people that they have not won through legitimate means. The Goons have been cutting off the heads of good people one by one for 10 years now. Once we have a board with 10 regular posters in place, that can never happen again. Then people who are attacked will have a place to turn to for protection.
Then the idea will grow and grow and grow and grow.
We are in the process of changing history in a very big and very positive way.