Set forth below is the text of a comment that I recently posted to another blog entry at this site:
“How will I profit? It’s impossible even to count the ways, Yogi. ”
Just one would be a start.
We now know that emotion (valuations) is 80 percent of the stock investing story, Yogi.
I think it would be fair to say that I am the world expert on the ways in which investors engage in self-deception to persuade themselves that the inflated numbers on their portfolio statements are real. There are THOUSANDS of articles and blog posts and podcasts and columns at this site detailing in great depth how it is done. I will be making money for many years to come using that material to help investors understand how stock investing works in the real world through the publication of books and by giving speeches and by creating CD products and through personal consulting and on and on and on.
Shiller’s 1981 finding changed the history of investing analysis in a profound way. He “revolutionized” (the word is Shiller’s) the field. We have as a society delayed our recognition of his earth-shaking accomplishment. But we are not going to have any choice about going forward following the next price crash. From that point forward, nothing will ever be the same again.
Shiller and Fama say opposite things. They cannot both be right. It is a logical impossibility.
If Fama is right, we are doing fine. 95 percent of the investing advice that the average investor hears is rooted in Fama’s research.
But what if Fama is wrong? What if Shiller is right (there is now 33 years of peer-reviewed research showing this to be so)? If that’s so, then we should be in an economic crisis today. If that’s so, we are on our way to the Second Great Depression. If that’s so, we should be seeing threats of violence and career destruction on the part of the Buy-and-Holders in a futile effort to keep their strategy going for a few more months or a few more years.
If Shiller is right (and I obviously believe strongly that he is), the investing advice field is today in the process of being rebuilt from the bottom up. That’s why the Buy-and-Holders fight so hard. They know the stakes as well as I do. If valuations matter, Buy-and-Hold is not just wrong, it is the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind.
Valuations (investor emotion) is no small thing, Yogi. Either it is nothing (as Fama theorized) or it is 80 percent of the stock investing story. I have played the lead role for 12 years now in getting accurate and honest reports of what the last 33 years of peer-reviewed research says out to millions of middle-class investors. I have zero fear that there will not be thousands upon thousands of money-making opportunities opening up to me once we pull together as a society to open every board and blog on the internet to honest posting. I will have far too many money-making opportunities available to me following that day than I will possibly be able to handle by myself. I will be hiring teams of people to help me take advantage of all the opportunities that will be open to me once this story gets out.
Does Jack Bogle have ways to make money?
Does Robert Shiller have ways to make money?
Does Rob Arnott have ways to make money?
Does Bill Bernstein have ways to make money?
The shift from Buy-and-Hold to Valuation-Informed Indexing is a bigger accomplishment than anything that any of those four has enjoyed. It was Shiller who showed that Buy-and-Hold doesn’t work, not me. But Shiller has not yet written clearly about the practical how-to IMPLICATIONS of his amazing research findings. I am the first to have done that in a comprehensive way. That’s huge. And achieving huge breakthroughs like that lead to tons of money in the long run in the society in which we live in today. (I think that’s entirely appropriate. Some might disagree. But, whether one agrees or not that it is appropriate, that certainly is the case).
It won’t just be me making tons of money once the internet is opened to honest posting. There will be hundreds of us, thousands of us. There are hundreds of smart bloggers who would LOVE to be making millions from their blogs and who today are not doing so. All they need to do is to turn their efforts to further development of the Valuation-Informed Indexing concept. The only reason why they don’t do it is that they fear what you Goons would do to them and their businesses if they began posting honestly.
Do you really think that they are going to continue to live in fear following the next price crash?
They are not. They are going to work up the courage to go for the money. And we are all going to be a lot better off as a result. People SHOULD be rewarded for giving accurate and honest investing advice. Seeing that the thousands of people who will be further developing the Valuation-Informed Indexing concept receive financial rewards for their efforts is in the best interests of every person alive in the United States today.
We have had big advances in the computer field since 1981, no? There was no internet in 1981. Now there is. Thousands of people made fortunes as a result of the development of the internet. There was no YouTube in 1981. Now there is. Thousands of people made fortunes as a result of the development of YouTube (there was an article on the front page of the New York Times on this just last Friday). There were no laptops or tablets or smart phones in 1981. Now there are. Thousands of people made fortunes as a result of the development of laptops and tablets and and smart phones.
Say that there has been a Typewriter Mafia back in 1981 that has devoted hundreds of billions of marketing money to seeing that no one could succeed in selling computers. We would today be a poorer people as a result. The advances that we have seen in the investing advice field over the past 33 years are 50 times greater than the advances we have seen in the computer field. The only reason why we have not seen thousands and thousands and thousands of millionaires made through the promotion of the first true research-based strategy is that the Buy-and-Hold Mafia has possessed the power to keep us all in the Dark Ages re our understanding of how stock investing works in the real world.
But for how much longer?
The next step down is the Second Great Depression, Yogi. Do you think people are going to stand for that? I do not. I love my country. I have noticed by reading history that my country has in the past always possessed the intelligence and fortitude and love to overcome forces like the Buy-and-Hold Mafia. I believe that we will prevail once again. When we do, no one is going to be able to count the money that will be flowing in to those who worked up the courage to post in support of those offering honest investing advice.
Money is what this whole freakin’ saga is about. If there weren’t so much darned money in pushing Get Rich Quick garbage, everyone in the field would have made the shift from Buy-and-Hold to Valuation-Informed Indexing by January 1982. The problem is that the big shots in this field love the marketing edge that comes from saying that their advice is research-based but cannot bear to give up the short-term wealth that comes from pushing Get Rich Quick garbage. Buy-and-Hold gives them the best of both worlds, in their eyes. It is pure Get Rich Quick garbage. So it makes them all rich beyond their wildest hopes. But because Fama made a mistake back in 1965 and many of us have been too afraid to say that in clear and firm and simple language in the three decades since, they have been able to make claims that there is research supporting these “ideas.”
The problem with spending billions of dollars promoting the purest and most dangerous Get Rich Quick strategy ever concocted by the human mind is that doing so eventually causes the collapse of the economic system in which you live. And the collapse of the economic system eventually causes the collapse of the political system. Lots of the people who push Buy-and-Hold are very wealthy people as a result of doing so and don’t want to get off the gravy train. But do they have any real choice? Where are they going to spend their money when the economic and political system of the United States collapses? In an ultimate sense Jack Bogle has as much of a motivation to see that honest posting be permitted as I do.
These people are today suffering from cognitive dissonance. They are telling themselves that pushing the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind might work out in the long run, they are trying to hang on to a belief that we will NOT see an economic or political collapse.
But based on what do they believe this?
In 12 years they have not been able to find any support in the peer-reviewed academic research for this belief of theirs.
I am a research-oriented guy, Yogi. I believe that we are going to see the economic collapse that the last 33 years of peer-reviewed research says we are going to see.
And I believe that my many Buy-and-Hold friends are going to flip shortly after we see that collapse. I believe that my good friend Jack Bogle is a good man. I believe that he is going to be my biggest booster in days to come. With Jack’s help, I am going to experience no problems receiving that $500 million paycheck or taking over ownership of the Bogleheads Forum or being invited to give the keynote address to the next FinCon event or bringing thousands upon thousands of community members to this site or profiting from books and speeches and CD packages and consulting arrangements and on and on and on.
I am not a multi-millionaire today only because my good friend Jack Bogle has not yet worked up the courage to say the three magic words “I” and “Was” and “Wrong.” But Jack is going to work up the courage to do that. He has no choice if he wants to save from economic ruin the country he loves and that has blessed him in so many ways. So Old Saint Jack is in days to come going to work up the courage to do what he should have done 33 years ago. And from that point forward we will ALL be in much more favorable financial circumstances. But that will be so for me especially. Because I am the one who has been fighting so hard for 12 years now for a principle that Old Saint Jack first articulated many years back — INVESTORS SHOULD BE ROOTING THEIR INVESTING STRATEGIES IN THE PEER-REVIEWED RESEARCH.
I’m not too worried about making money, Yogi. I would like to see it happen soon. I would like to have seen it begin happening on the morning of May 13, 2002. So I do want to see a change in that department. But that is not the thing that I worry about most.
I worry that the economic collapse will get out of hand and that even working together we will not be able to turn things around in time. I don’t think that that is how things will play out. But the fact that there is even a small chance that things might play out that way scares me to death.
That’s my primary worry, not the money thing. The money thing will work out more than fine so long as Jack eventually works up the courage to say The Three Magic Words. And he doesn’t exactly have much choice, does he? He loves his country, does he not?
I say that Jack Bogle loves his country. I am sure.
So I see good things happening for all of us in days to come, Yogi.
My best and warmest wishes to you and yours.