Set forth below is the text of a comment that I recently posted to another blog entry at this site:
The stock market continues to drop and it is being blamed on the drop in oil, the slowdown in China and the change in interest rates. For your plan to work, the blame needs to be pushed on buy and hold. What will cause people to blame buy and hold versus economic issues, such as what is being blamed in the current market?
What you say here is correct. It is the overvaluation caused by the continued promotion of Buy-and-Hold strategies that is the primary cause of the price drops. Prices ALWAYS drop hard once they reach insanely dangerous levels. Economic factors can be a secondary factor. For example, changes in interest rates can be the precipitating factor in changing investor psychology. But it is the investor psychology itself that is the primary factor causing stock price changes. When prices are as high as they are today, we are going to see price drops. The economic factors can of course influence the timing of the price drops.
Everyone will properly blame the promotion of Buy-and-Hold strategies once they are educated as to the implications of the last 34 years of peer-reviewed research. To educate people, we need to open every discussion board and blog on the internet to honest posting on safe withdrawal rates and scores of other critically important investment-related topics. That’s it. No one wants to endure a deepening of the economic crisis. We just need to collectively permit ourselves to benefit from the reality that we are the luckiest generation of investors ever to walk Planet Earth and then we make it over the Big Black Mountain and bring on the greatest surge of economic growth ever seen in our history.
The key is getting people to abandon their Buy-and-Hold fantasies. So long as people continue to delude themselves into thinking that the numbers on their portfolio statements are real, they view the last 34 years of peer-reviewed research as a threat to their ability to fool themselves. Once the Pretend Gains are gone, there will no longer be any appeal in self-delusion. Then we will all be working together to achieve learning experiences, just as we today do in every field of human endeavor other than stock investing.
We obviously would have been better in about 500 different ways if we had launched a national debate re these matters back on the morning of May 13, 2002. That said, the good news here is 50 times better than the bad news here is bad. It takes what it takes. No one is going to question whether this was worth the effort it took to get us turned around after we get to the other side and we are all obtained far higher returns at greatly reduced risk. It’s a process. We are today on the one-yard line. We are a blessed people.
I hope that helps a bit, my long-time Goon friend.
I naturally wish you the best of luck in all your future life endeavors.