Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
We have already experienced drops, including the 2008/2009 market, yet nothing changed for you. What would be any different in future market downturns?
There are little drops all the time, Anonymous. If a drop doesn’t take us below fair-value valuations levels, the Get Rich Quick stuff is still making people feel that they are ahead of the game.
There’s only one time in many, many years when we dropped slightly below fair-value valuation levels. That was in early 2009. Then we went to a P/E10 of 13, a wee bit below the fair-value number of 15. And we did indeed see attitudes changing at that time. That’s when we saw people working up the courage to call Mel Lindauer and Taylor Larimore liars at the Bogleheads board. We never saw people saying things that bluntly in the days when I was there.
The dissatisfaction was not strong enough to change ownership of the board. But prices shot back up far above fair-value levels within a few months. What will happen when we see the P/E10 level remain below 10 for several years? That’s what has happened in all earlier bull/bear cycles before the irrational depression that always follows irrational exuberance comes to an end. I believe that we will see the ownership of the board change hands at that time. And, yes, I believe we will see prison sentences announced at that time.
But again — I CANNOT PROVE THIS.
I am telling you what I believe will happen. I am NOT telling you what I want to see happen or what I will push to see happen. If anything, I intend to play it the other way. I intend to put forward some words aimed at getting your prison sentence REDUCED. I want to put the nasty stuff behind us. I believe that any energy wasted on retribution is a big waste of energy and even a dangerous use of energy. I want to see us all working together. I see it as my job to steer things so that we all begin working together to achieve goals that benefit all of us.
So what I am describing is not what I want to see but only what I expect to see. I think about how pissed I would be if people who called themselves “experts” had been lying to me about all this stuff for years. The answer is — I would be pretty darn pissed. The lies haven’t had any effect of me for a long time now. I saw on the evening of August 27, 2002, that Buy-and-Hold is just a con, a money-making thing, with zero support in the peer-reviewed research. So it hasn’t cost me any money (the “defenses” of it of course have, but that’s something different).
I am not going to hold people back from going nuts unless I have credibility in their eyes. That’s why I have worked so hard to get so many posts in my file showing that I have OPPOSED this massive act of financial fraud for 14 years running now in every possible way. Those thousands and thousands of posts will add to my post-crash credibility and help me to help you.
Or at least so I believe. It’s not possible for me to say precisely what will happen. I worry that people are just going to freak out and that nothing I say in your behalf will make much difference. I will give it my best shot, that’s all. I obviously cannot control results. All that I can do is to push for settling this matter BEFORE we see the massive crash and so that’s what I do.
This one will not be like any earlier crash. The amount of money lost in a crash is determined by how much overvaluation there was at the top of the bull market that caused it. In two of the earlier Buy-and-Hold Crises, the highest P/E10 level we saw was 25. The one time we went to 33 we created the Great Depression. This time we went far, far beyond the number that caused the Great Depression. This time we went to 44. So we will be losing an unprecedented amount of phony baloney wealth this time. The Wall Street Con Men have never before pushed Buy-and-Hold so hard as they did this time (for example, they never before told the lie that there is peer-reviewed research supporting the pure Get Rich Quick “strategy”) and so of course we all should be expecting them to cause more human misery this time than they have ever caused before (I am assuming here that stocks may continue in the future to perform at least somewhat as they always have in the past).
Please don’t mis-interpret any of my words here as “doom and gloom.” The reality could not be further from the truth. The last 35 years of peer-reviewed research provides the missing key to understanding how stock investing works that humankind has been looking to find for a long time. The good news here is 50 times more good than the bad news here is bad. Yes, we may go into a Second Great Depression. I hope not but that’s certainly a possibility. But the Second Great Depression should not last as long as the first one did.
We need to get one large web site to permit honest posting on safe withdrawal rates and scores of other critically important investment-related topics. It’s all downhill sledding from that point forward. We all want the same things. Bogle and the other Wall Street Con Men did not INTEND to cause the Second Great Depression. They BELIEVE the garbage that they have been pumping out for decades now. When they see the results of their trickery, I am 100 percent certain that they are going to come clean and flip to the research-based side.
Then it will be easy. We will be able to spread the word quickly re what really works when we have the money of the Wall Street Con Men behind us. We can outdo the damage of the past 35 years in perhaps one year when we are all working on the same side. I think it is entirely realistic to expect us to experience the greatest surge of economic growth in our history in the days following the onset of the Second Great Depression. This is big stuff. We now know how to reduce the risk of stock investing by 70 percent while increasing returns dramatically. It is impossible to exaggerate how big an advance that is. This is how we restore people’s faith in the capitalist system. When we show people that capitalism can work for ordinary people, not just Wall Street Big Shots, we change the political dynamic in a big way.
Anyway, those are my thoughts re these terribly important matters.
I naturally wish you the best of luck in all your future life endeavors regardless of how things play out, my old friend.