Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
How long should we wait for the crash, Rob?
You can wait as long as you want to wait, Anonymous.
Or don’t wait at all, if you prefer.
It’s up to you. It always has been. It always will be.
I believe that we will see another price crash that will take the P/E10 value below 8. I don’t believe that because I have a crystal ball that shows me that when I look into it. I believe that because there is now 35 years of peer-reviewed research showing that stock price changes are caused by shifts in investor emotion and, every time in history in which we have seen the positive shifts that cause a secular bull market transformed into the negative shifts that cause a secular bear market, we have ended up at a P/E10 level of 8 or lower.
I am going to wait until it happens. Or until I come across some reasoned argument for why it may not happen. One of those two.
When people ask me what I believe, I am going to tell them. When they ask why I believe what I believe, I am going to tell them that. When they ask me what I think follows from the 35 years of peer-reviewed research that forms the foundation for this new way of thinking about how stock investing works, I am going to offer whatever thoughts along those lines that I am able to muster. I am going to continue to encourage challenges to those thoughts because I think we need to have lots of smart people offering their thoughts re these matters and because I think that I could make mistakes and I worry that if people put too much confidence in what I say, they could get hurt by doing that and I don’t want to see that happen. Also, I learn new things when people criticize my ideas in reasonable ways and I like to learn new things.
I am just going to continue exploring this path for so long as it seems to be generating a bigger payoff than anything else that I could be doing with my time. I believe strongly that the last 35 years of peer-reviewed research in this field is the most important 35 years of peer-reviewed research in the history of investing analysis. I believe that Buy-and-Hold is the past and that Valuation-Informed Indexing is the future I naturally intend to devote my energies to exploring the model for understanding how stock investing works of the future rather than the model of the past. It wouldn’t make even a tiny bit of sense for me to play it any other way. For reasons that are perfectly obvious to any human beings capable of thinking clearly about these matters (but of course not necessarily for those suffering the pains of cognitive dissonance because they invested too much of their emotions in a model that advanced our understanding of how stock investing works in some very big ways but that failed in its treatment of valuations and that has not yet been corrected by its lead promoters).
Does that help?
I am going to continue to give credit to my Buy-and-Hold friends for their many amazing contributions and I am going to continue to try to explain how they got on the wrong track and why as a society we need to make special efforts to be forgiving of their mistakes rather than judgmental. I see it as my job to pull us all together and to focus on the positive side of this story (which is huge indeed). That’s my most important job of all, in my assessment. So I am going to put a particular emphasis on that aspect of the question. My aim over the next year or two is to shift my energies away from investing sites to political sites and to social media in general in an effort to explain to those outside of the industry how this industry got so fucked up at the very moment in history when it came within inches of achieving the amazing promise of the early days of the Buy-and-Hold Era.
I am going to continue to make the point that we need to pull together and demand prison sentences for those who have posted in “defense” of Mel Lindauer and John Greaney and Jack Bogle because I view it as cowardly for us all not to do what we can to help shorten the prison sentences of those friends of ours who have come to find themselves walking down a very dark path indeed. We are all going to feel better about ourselves if, when those prison sentences are announced, we are able to say that we did everything we could when there was still time to take positive steps. I would want my friends to help me out if the tables were turned. So I hope to continue to be able to work up the courage to do for my Goon friends what I would want you to do for me were I sitting on the other side of the table.
Does that cover it?
Wait as long as you like, Anonymous. Please don’t feel any push from my side of the table to wait one second less than you like or one second more than you like. God created lots of different people and each of those people needs to put forward his or her particular take for the right result to be achieved through the process through which ideas are advanced, challenged and replaced in the Marketplace of Ideas. We all need you to decide how long you should wait and we all should be encouraging you to wait precisely that long.
I will wait until the crash arrives or until a better model than the one supported by the last 35 years of peer-reviewed research (based on 145 years of stock market history) comes along. I am a peer-reviewed research guy. I learned that one from my good friend Jack Bogle. Nice fellow. Pretty darn smart guy too. You should check him out.
That’s my sincere take re these terribly important matters, in any event.
Love is the answer.
I am sure.