Set forth below is the text of a comment that I recently posted to another blog entry at this site:
a) An attack on steam as unscientific, ungodly, an evil con job, a 100% unworkable method that could never transport a single passenger or package to anywhere (though people used it every day for decades with apparently wonderful and expected results), a method promoted by nasty bigoted horrible people bent on destruction, who were harassing and threatening you, a smelly approach that needed to be buried 100 feet underground… etc, etc, etc,
There’s another aspect of this that jumped out at me upon reading your words, Anonymous.
Electric engines were indeed a huge advance over steam engines, just as Valuation-Informed Indexing is a huge advance over Buy-and-Hold. But there is a particular problem that comes up in making the case for VII that often causes a lot of friction and that did not exist when those promoting electric engines were making their case.
The thing that makes VII so wonderful is that it calls for the exercise of price discipline (long-term timing). Buy-and-Holders say that price discipline (long-term timing) is a bad thing. So Buy-and-Holders actually DISCOURAGE the thing that the last 33 years of peer-reviewed research in this field shows to be the key to long-term success.
You put a lot of nasty words in my mouth in your comment. I do not hate Buy-and-Holders. I LOVE Buy-and-Holders. I do not say that Buy-and-Holders are bad people. I say that they are good people. I do not say that Buy-and-Holders are dumb. I say they are smart. I do not say that Buy-and-Holder are evil. I say they made a mistake.
There is a big difference between what you say I say about Buy-and-Holders and what I say I say about Buy-and-Holders.
I do say that a good number of Buy-and-Holders have committed financial fraud in their efforts to defend Buy-and-Hold. That’s obviously a very, very, very bad thing.
But I obviously say that because I care about my Buy-and-Hold friends and because I want to persuade them to STOP committing financial fraud.
There would be no Valuation-Informed Indexing but for the foundation built for it in earlier years by the Buy-and-Hold Pioneers. I obviously am very proud of the work I have done over the past 12 years developing the VII concept. Well, guess what? There would be no VII but for the work done by the Buy-and-Holders before I came along.
The Buy-and-Holders did a lot of the heavy lifting. I try to give them credit for that every chance I get. I will be giving the Buy-and-Holders credit for all their wonderful contributions until the day I die. I took my friend Jack Bogle’s work and took it to places that he never imagined it could go. Jack didn’t do it all on his own and I didn’t do it all on my own. Jack and I created the first true research-based strategy TOGETHER. I only wish he would accept credit for his wonderful accomplishment!
There is no way to make the case for VII without pointing out the dangers of Buy-and-Hold AS IT IS CURRENTLY BEING PROMOTED. The peer-reviewed research in this field shows that nearly all the risk of stock investing comes from the failure of investors to practice price discipline (that is, the failure of investors to practice long-term TIMING).
Practicing long-term timing is 80 percent of the game! It is the key to everything!
And Buy-and-Holders say NOT to practice any form of timing!
That’s the entire problem right there. When we work that one out, we have worked it all out.
I love Buy-and-Hold when it sticks to first principles. The first principle of Buy-and-Hold was to use the peer-reviewed research as a guide to how to invest. The last 33 years of peer-reviewed research says that investors must, must, must, must, must ALWAYS practice long-term timing (while of course never, never, never, never, never practicing long-term timing).
This is going to end when Jack acknowledges his mistake and the speech in which he does so is written up on the front page of the New York Times. Starting on that day, everyone working in this field will be exploring every angle of how to practice long-term timing. The first chapter in every textbook will explain why long-term timing (price discipline) is the key to everything.
Everything else stays the same. When the Buy-and-Holders acknowledge the mistake that was uncovered by the peer-reviewed research 33 years ago, Buy-and-Hold works. Then there is no cause for friction, right?
ALL of the friction results from Bogle’s failure to acknowledge the mistake when it was uncovered 33 years ago. We all should be working to get him to make that all-important speech.
There’s no way to say what works in stock investing without talking about what the Buy-and-Holders got wrong. Price discipline is 80 percent of the game. And the Buy-and-Holders advocate that investors exercise zero price discipline (they advocate staying at the same stock allocation even when prices change — this is called RE-balancing).
We are on the same side.
You are just 33 years behind the Valuation-Informed Indexers because Jack hasn’t yet given his “I Was Wrong” speech. Once he gives that speech, it’s good stuff piled on top of good stuff piled on top of good stuff for all of us. Even those of us in prison will be better off to be living in a country with a strong economic system rather than one in a state of collapse.
I LOVE Buy-and-Hold. That’s why I want to fix it. That’s why I want it to work. That’s why want to be sure to do everything I can to get the prison sentences of my Buy-and-Hold friends shortened a bit.
I hope that all makes good sense to you, my old friend.