Set forth below is the text of a comment that I recently posted to a discussion thread for one of my columns at the Value Walk site:
Buy, hold and rebalance is certainly a lot better than your plan, Rob, given your failed retirement and overall lack of success.
Your comment evidences emotion, Sammy.
If you were confident that Buy-and-Hold works, you wouldn’t car whether my retirement failed or not. You obviously care a great deal. You are not confident. You WANT to believe in Buy-and-Hold with your entire heart, mind and soul. But you can’t quite pull it off. So you lash out as those who encourage your doubts.
Shiller showed us that is it primarily INVESTOR EMOTION that determines stock prices, not economic developments. So we all need to make a switch to talking primarily about investor emotion, not interest rates and new products and management ability and all the other things that most people in this field write about today. We should be looking for signs of emotion and then trying to explain them.
There are TONS of signs of emotion in Buy-and-Hold communities. But people don’t write about them. They act as if this sort of thing is normal. I sure don’t think it is normal. But even I hold back sometimes because the new way of understanding how stock investing works shocks people accustomed to the old way. This is a transition that can only be achieved gradually over time.
I don’t think that Buy-and-Hold ever works for anyone. I think it is an unmitigated disaster. But so what? You believe in it. Why do you care what I think?
You obviously care deeply. That’s the problem. That’s the emotion that is driving today’s insanely high stock prices. That’s the emotion that today’s P/E10 level is trying to warn us about. The difference between me and you is that I think that we should be listening to that warning and you cannot bear the thought of doing so. That’s why you dislike me so.
I was a Buy-and-Holder myself until the evening of August 27, 2002. It was on that evening when a poster at a discussion board (a fellow who had been a good friend of mine until then) threatened to kill my wife and children if I continued posting honestly re the errors in the Old School safe-withdrawal-rate studies (these studies do not contain an adjustment for the valuation level that applies on the day the retirement begins). That amazed me. What amazed me even more was that 200 of our fellow community members endorsed his post (50 endorsed a post saying that the tactics being employed by the Buy-and-Holders were so sub-human that the board should be shut down). That told me what I needed to know about Buy-and-Hold to know that I wanted nothing more to do with it, that the days of rationalization had to come to an end
That’s where I stand, Sammy. I wish the best for you. But I don’t think that Buy-and-Hold is the answer. I think that it is hurting lots of people. I need to tell my readers that. I love my many Buy-and-Hold friends and I will always tell the story in the most charitable way that I can think to tell it. But I feel strongly that I am leaving out something important if I leave out how emotional the Buy-and-Holders become when their ideas are challenged.
It is that emotion that tells me that the Buy-and-Holders are on the wrong track. I don’t think the Buy-and-Holders are bad people or dumb people. I think that they are very smart and I think that we all owe them our respect and gratitude for all the powerful and genuine insights that they have advanced. But I also believe that they are on the wrong track re the valuations question and that their emotion shows that even they realize that on some deep level of consciousness.
I think we all need to be talking about that.