Set forth below is the text of a comment that I recently posted to another blog entry at this site:
So which of the Vanguard funds and underlying securities are run as a Ponzi scheme similar to Bernie Madoff?
They all are. Every last one of them.
That’s like asking: “How many of the soda fountains in the pre-Civil Rights South discriminated against blacks?” They all did. Every last one of them.
The reason why the answer is the same in both cases is that the underlying dynamic is the same in both cases.
There was no justification for discrimination against people with black skin. There was an historical explanation of the phenomenon. But there was no justification that made sense to people in the years just before the Civil Rights Revolution took place. For anyone to practice racial discrimination, everyone had to do so.
There were soda-fountain owners who did not want to practice racial discrimination. It was made clear to them what would happen to them if they failed to do so. If one soda-fountain owner treated blacks fairly, it made all the soda-fountain owners who did not do so look very, very bad. So a Social Taboo was created prohibiting fair treatment of blacks.
Not everyone believed in racial discrimination. But everyone practiced it. That was so by definition. If you didn’t practice racial discrimination in the pre-Civil Rights South, you were removed from the society. So, once again, everyone in the society practiced racial discrimination. The practice was too horrible to survive unless it was universally practiced (and therefore never challenged).
That’s where things stand today with Buy-and-Hold.
There has never been a sliver of support in the peer-reviewed research for this smelly Get Rich Quick garbage. It is impossible for the rational human mind to imagine how there ever could be a sliver of support. So to keep it going, we must force everyone to pretend to believe in it. The day Buy-and-Hold is subject to questioning in the same way that every other idea is subject to questioning in our society is the day that Buy-and-Hold falls.
How can an “idea” survive when it is plainly absurd (the claim that price discipline is not required in the stock market is the OPPOSITE of what is true in every other market — price discipline is the thing that makes every other market work!) and 100 percent at odds with all of the peer-reviewed research available. Huh?
For Buy-and-Hold to survive, everyone must pretend to believe in an absurdity. There is 34 years of peer-reviewed research showing us all that Buy-and-Hold is dangerous as all get-out. So in ordinary circumstances we would all move on to better things (Valuation-Informed Indexing). The problem is the 34-year cover-up. If as a society we permit honest posting re what works with stock investing, lots of wealthy and powerful people will be going to prison for a long time. They don’t want to go to prison. So they are using their power and wealth to keep the cover-up going another day, another week, another month, another year.
The problem with that strategy is that each day the cover-up remains in place we destroy thousands of additional middle-class lives. That means that the anger will be even greater following the next price crash. And that means that the prison sentences for those who continued to advocate Buy-and-Hold with 34 years of peer-reviewed research showing that there is precisely zero chance that it could ever work for even a single long-term investor grow even longer. Not good.
My job is to help BOTH the millions of middle-class investors AND the Wall Street Con Men. By exposing this massive act of financial fraud, we let the millions of middle-class investors learn about the first true research-based strategy. At the same time, we shorten the prison sentences for the Wall Street Con Men and for the members of their Internet Goon Squads. Pretty darn cool trick, huh?
I sure think so.
I wish you all the best that life has to offer a person, Anonymous.