Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
I’ve yet to meet a middle class person who ‘lost it all’ through buy and hold. Most of them appear to be in serious debt, which has everything to do with spending habits and nothing to do with investing habits – which normally are erratic and undisciplined – the farthest thing from buy and hold.
What universe do you live in where middle class people have stock portfolios and have been ruined by buy and hold? Let’s take the past 30 years, which has had 2 major recessions. The US market has returned about 7.9% real. Looks like those middle class folks that actually invested in stocks did very well.
Stocks are an amazing asset class, Laugh. There is certainly no disagreement there.
The question is — Presuming that stocks are an amazing asset class that everyone should be using as the primary means of supporting his or her retirement, is it better or worse that people be taught to exercise price discipline when buying stocks? The last 35 years of peer-reviewed research shows that it is far, far better if people are taught to exercise price discipline.
Failing to exercise price discipline adds nothing to the equation except to help turn a quick buck for the Wall Street Con Men. And they could make plenty of bucks offering honest, research-based advice. The Wall Street Con Men themselves would love to make the transition from Buy-and-Hold to Valuation-Informed Indexing. I have never seen any evidence that Bogle was not sincere when he developed the Buy-and-Hold concept as a first-draft effort at developing a research-based strategy. If Bogle is okay with people following a research-based strategy, (at least according to most of his public words — I of course understand that he has offered an implicit endorsement of Mel Lindauer’s abusive posting), who are you to object?
Shiller’s “revoltionary” (his word) 1981 findings represent an advance in our understanding of how stock investing works. They help everyone: the Wall Street Con Men; the millions of middle-class investors who need to finance their retirements; even the millions of non-investors who would like to see the economic recessions and depressions that cause such economic and politicsl turmoil put to an end. A huge advance in knowledge is a win/win/win/win/win.
The only thing that has been holding us back now for 35 years is the unwillingness on the part of the Buy-and-Holders to acknowledge having made a mistake. It was an honest mistake. And it was certainly not a dumb mistake. So there is nothing to be ashamed about re the mistake. What the Buy-and-Holders are ashamed about is the 35-year cover-up of the mistake. It is the shame re the long cover-up that is causing all the problems.
That should be our focus. That’s why I often make reference to your prison sentence. The announcement of your prison sentence will give people the confidence that our system is operating properly, that we have overcome the wealth and power of the Wall Street Con Men and the hate of the members of their Internet Goon Squads. Once we have more and more people speaking out honestly every day re their sincere views re how stock investing works, we will all come to feel better and better about ourselves every day. We need to bring an end to all the ugliness and just let the same process of gradual learning that applies in every field of human endeavor other than stock investing apply in the stock investing realm as well. We need to overcome the corruption that has been keeping us in ignorance for over three decades now. We need to let our system work in the investing realm in the same manner that it works in all other realms by applying U.S. law in a reasonable manner when we see people like you committing financial fraud.
There is nothing wrong with stocks. If you somehow got the idea that I am saying something negative about stocks, you dialed a very wrong number. But I do see something wrong with those two major recessions that you made reference to. We now know how to describe how stock investing works in a way that helps us either do away with recessions or at least greatly reduce their impact. All we need to do is to be honest with people re what the peer-reviewed research says about how stock investing works. Why not do that? What’s the downside? The only downside is that Jack Bogle will need to say the words “I” and “Was” and “Wrong.” But once he does that, he gets applauded as a hero for the remainder of his days and long into the future. Is that so terrible an outcome for a fellow who was intending to do good for everyone going back to his early days? I don’t see this as a terrible outcome.
Say that someone goes bankrupt because he over-extends himself using credit cards irresponsibly. That happens all the time, right? Does that mean that credit cards are bad? I don’t see it that way. I say that it is the irresponsible use of credit cards that is bad. We need to help people to understand how to spend reasonably in the present while also planning effectively for their futures.
So it is with stock investing. There is nothing even a tiny bit wrong with people investing in stocks and earning that 6.5 percent real return that stocks really do reliably provide. The problem comes when people start believing that they can earn MORE than 6.5 percent real just by believing in the Buy-and-Hold fantasy that it is the economy producing those oversized returns rather than their Get Rich Quick impulses left untethered and out of control. The message of the last 35 years of peer-reviewed research is that Buy-and-Hold investing strategies are every bit as bad as irresponsible spending strategies. Failing to rein in our irrational emotional impulses hurts us big time in the personal finance realm (as well as in all other realms, to be sure). We need to update the investing advice that we provide people to reflect the last three decades of research-based learning experiences.
I am saying that we should tell people the truth about stock investing. Stocks provide an awesome return. They are the best asset class for middle-class people seeking to finance their retirements. But stocks don’t ever provide returns of 20 percent or 30 percent in a single year. That’s what the Buy-and-Holders were telling people in the late 1990s. The Buy-and-Holders caused a great deal of human misery by telling those lies and I am asking them to knock off the darn funny business. I am telling them to continue to encourage people to buy stocks to finance their retirements but to begin doing so RESPONSIBLY. Doing so irresponsibly adds nothing and subtracts a great deal indeed.
John Greaney destroyed many lives with his lies about safe withdrawal rates. The people who met at the Retire Early board were friends of mine. I wanted to tell them the truth about what the peer-reviewed research in this field says. Those people made clear that they wanted to hear the truth. I have every right in the world to tell them the truth. We even have laws in place to protect me and those people when Goons like you enter the scene and engage in insanely abusive posting practices to block people like that from being able to engage in the conversations that they need to engage in to learn the truth. Those laws need to be enforced in a reasonable manner. Otherwise lots of people (including you Goons) get hurt. It’s a lose, lose, lose, lose, lose for us to fail to enforce our laws against financial fraud.
I believe that Greaney himself wanted to help the people who met at the Retire Early board. I believe that he knew all along on at least one level of consciousness that his retirement study lacked a valuations adjustment and that that was a problem. His problem is that he saw that Bogle and the other Wall Street Con Men were not including valuation adjustments in their studies and so he felt that he didn’t need to include one in his study either. It’s worse than that. If he did include a valuations adjustment, his study would generate accurate numbers. But those accurate numbers would look funny because they would differ from the numbers being generated by the Wall Street Con Men. Once Buy-and-Hold became dominant, any studies rooted in reality began to look funny. Greaney got trapped by that insanity. He took the easy route of pretending that he didn’t understand why it was wrong not to include a valuations adjustment and look where he ended up as a result.
Greaney was wrong to conclude that it was okay for him to commit financial fraud because Bogle is a big shot and Bogle was doing it long before Greaney came on the scene. Greaney should have reported the numbers honestly. At the very bare minimum, he should have pointed out in the study that it lacked a valuations adjustment, that there was research showing that such an adjustment is required and that the study would generate very different numbers if the adjustment were included. That way the readers of his study would be put on notice that they were following a Get Rich Quick approach and Greaney would be off the hook for committing financial fraud. There has to be deception for there to be financial fraud.
The same is of course true of Bogle. Bogle thought he was doing good when he developed the Buy-and-Hold concept. And of course he did do a great deal of good in about 20 different ways. But he messed up re the valuations question because the world just did not know at the time he was developing the Buy-and-Hold concept how stock investing really works. Then Shiller provided us the missing piece of the puzzle in 1981 and it became possible for us to develop a research-based approach that really works, Buy-and-Hold 2.0 or what we today call Valuation-Informed Indexing. All of Bogle’s many years of hard work were about to pay off.
The man dropped the ball. Like Nixon, he went into cover-up mode. Nobody destroyed him. He destroyed himself. Like all of the humans are tempted to do from time to time. And Greaney a number of years later elected to follow Bogle down the road of self-destruction. And of course Mel Lindauer eventually did the same.
When does the madness end, Laugh?
It ends when enough of us join together and form a resolve to send you Goons to prison. That’s my sincere take, in any event.
There is nothing whatsoever wrong with investing in stocks. The thing that is wrong is financial fraud. Those who report honestly what the last 35 years of peer-reviewed research says never feel the slightest temptation to commit financial fraud. Buy-and-Holders feel that temptation ALL THE TIME and give in to it over and over again when “forced” to do so by people like me who stubbornly continue to post honestly despite the many warnings dished out by their Buy-and-Hold friends re what will happen to them if they continue to do so.
I post honestly, Laugh.
That one is non-negotiable.
There is nothing whatsoever wrong with stocks. Stocks are wonderful. For all the reasons that both Buy-and-Holders and Valuation-Informed Indexers cite.
It is financial fraud that is not so wonderful. The financial fraud practiced by the Buy-and-Holders has caused a mountain of human misery over the past 35 years. I want no part of it. I have led the effort to EXPOSE the financial fraud of the Wall Street Con Men and their Internet Goon Squads for 14 years now. I intend to continue until we all achieve a second Independence Day and we all feel free to state our sincere beliefs re the last 35 years of peer-reviewed research at every investing discussion board and blog on the internet.
I hope that’s okay by you.
I intend to soldier on in either event.
I naturally wish you all the best things that this life has to offer a person.