Set forth below is the text of a comment that I recently posted to another blog entry at this site:
But, now, how is it that “Wall Street Con Men” can supposedly get wealthy over Grandma Betty buying and holding a market basket of stocks, cash-equivalents, and a dollop of bonds for thirty or forty years, with perhaps some annual rebalancing thrown in?
Taylor Larimore, co-author of The Bogleheads Guide to Investing, had a line that he often used during the time I posted with him at the Bogleheads Forum. He would point to his retirement home and refer to it as “the house that Jack built.” The idea was that it was by following the Buy-and-Hold strategies advocated by Jack Bogle that he earned the money to buy that house.
The Wall Street Con Men get rich by lying to people about the nature of the “gains” they “earn” in bull markets.
Taylor earned 6.5 percent real per year on his stock investments, just as everyone investing in the U.S. stock market has earned for 140 years now. To the extent that he overpaid for his shares, he obviously brought that return down. Bogle’s phony baloney investing advice obviously pulled down Taylor’s return dramatically. Get Rich Quick strategies always do. We now have 33 years of peer-reviewed research showing that not only are Get Rich Quick strategies not the answer, they are the problem.
There are millions of people like Taylor, people who have fooled themselves into believing that the Wall Street Con Men are doing them some sort of favor by lying to them about what the peer-reviewed research in this field says about how stock investing works in the real world. The Wall Street Con Men love to pretend that this might be the first time in history when a Buy-and-Hold strategy will work for one or two long-term investors because, when they can trick people like Taylor into believing that, the Con Men get credit for creating those false and phony and temporary and meaningless “gains.”
When Bernie Madoff was exposed, there was a thread in which people were referring to what he did as “fraud” and one guy came on the thread and said “oh, it wasn’t fraud.” Why wasn’t it? Because this fellow got out of the fund before it collapsed and was ahead by more than $1 million. This fellow had “a house that Bernie built” So to this fellow it was Saint Bernie who was operating the fund, not some con man who merited prison time for his trickery.
But of course the reality is that Bernie was a con man. And of course the reality is that Old Saint Jack is one too. If Buy-and-Hold weren’t a con, we never would have seen the Buy-and-Holders put forward a single death threat or a single demand for a single unjustified board banning or a single act of defamation or a single threat to get a single academic researchers fired from a single job. People who are promoting legitimate strategies do not behave in that manner. Not ever.
People who make use of such tactics have something to hide. People who make use of such tactics are operating a con. It may be that they conned themselves before they conned others. That happens. Saint Bernie told a reporter for New York magazine that he felt that he was doing good for others. My good friend Jack has said similar things.
The bottom line is that those are the marks of a con and Academic Researcher Wade Pfau checked the entire literature and never was able to find the tiniest sliver of research-based support for Buy-and-Hold anywhere in the academic literature. And of course the response of you Goons was to threaten to get him fired from his job. And Old Saint Jack had no problem with that. That tells the tale, Yogi.
There are always some people who make money from a Ponzi scheme. The difference between the Ponzi scheme built by Old Saint Bernie and the one built by Old Saint Jack is that the one built by Old Saint Jack destroyed 10,000 times more human lives. Old Saint Bernie let us all off easy. Old Saint Jack has us on the path to the Second Great Depression.
If you think that’s funny, then you think that’s funny.
I don’t get the joke.
And you know what else? I have a funny hunch that Grandma Betty is not going to find the joke too terribly funny when we all find ourselves on the other side of the next price crash.
But we’ll see, right?
I’ll be there and you’ll be there and Old Saint Jack will be there and Grandma Betty will be there. We’ll all talk it over at that point in the proceedings and decide together how long the prison sentences shall be.
Could anything be more fair?