Set forth below is the text of a comment that I posted to the discussion thread for another blog entry at this site:
How many people went to prison during previous crashes?
I don’t know. I recall Bernstein saying that there were congressional hearings re Wall Street Corruption following one of the earlier crashes. But I don’t know if people went to prison or not.
But this is a very different situation. The three earlier crashes came before the publication of peer-reviewed research showing that there is zero chance that a strategy not calling for the exercise of price discipline (long-term timing) could ever work for even a single long-term investor.
We did not as a people know what worked in stock investing prior to 1981. It’s unfortunate that we suffered those three earlier economic crises. But I think you have to say that crashes were just one of those things in those days.
From 1981 forward, we knew. Or at least those who claim to be experts in this field certainly should have known. If you know about the last 34 years of peer-reviewed research and continue to advocate a Buy-and-Hold strategy, you are in an objective sense engaged in financial fraud. If you claim to be an expert and have not bothered to educate yourself about the last 34 years of peer-reviewed research, that’s also fraud.
Please note that I used the phrase “in an objective sense.” There are millions of good and smart people who today possess a sincere belief in Buy-and-Hold. Those people are not guilty of fraud. They are wrong, according to the research. But one element of fraud is bad intent. Someone who is wrong because the subject has not been discussed widely and because he thus does not possess a full understanding of the realities is not guilty of fraud.
But those who have put up posts in “defense” of Mel Linduaer and John Greaney cannot claim that they do not possess bad intent. Their actions show their bad intent and their actions have been recorded in our Post Archives.
I don’t believe that even all of those who have put up posts in “defense” of Mel Limdauer and John Greaney will be going to prison. I believe that we will have Congress pass some sort of amnesty that will let lots of people off the hook. I see that as a sensible way to go.
But I find it hard to believe that the amnesty will cover those who have posted in “defense” of Mel Linduaer and John Greaney on numerous occasions and at numerous places and over a long period of time. I am not God. I could be wrong. But I cannot honestly say that I am able to imagine a scenario in which there will not be a good number of people going to prison following the next crash.
And you of course feel the same way about it, Anonymous. If you didn’t, you wouldn’t be posting here today. And of course the members of your jury will come to the same conclusion when they read the words of your posts here. I mean, come on.
I hope that helps a small bit.