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 am going by what has happened over the past 145 years.”
There are all sorts of patterns we can tease out of 145 years of data. Example: When stocks rose over 19% for 2 years in a row, they fell at least 14% within 132 weeks after! Unfortunately, the market doesn’t check the “rules” before it moves. It moves randomly based on new information.
So the Buy-and-Holders say, Anonymous.
But do you know for certain?
An alternate explanation is that, when stock prices rise 19 percent in a year,that reflects a 6.5 percent increase in the value of the underlying assets rooted in economic productivity and a 12.5 percent increase fueled by investor emotion that will be reversed over the course of 10 years or so. If this is the case, the 6.5 percent gain can be relied on to finance an old-age retirement and the 12.5 percent gain cannot. If this is the case, it is important for investors to know this.
If your explanation is the right one, looking at valuations is pointless. If your explanation is the right one, the people who handed Robert Shiller a Nobel prize in economics were fools. I don’t buy it. I think valuations matter.
And, as we have seen during the first 14 years of our debate over whether honest posting re the last 35 years of peer-reviewed research in this field, so do a lot of academic researchers and professors and journalists and economists and policymakers and bloggers and ordinary investors. All of these people have a right to post their sincere views re how stock investing works wherever opinions re how stock investing works are advanced. All of the people listening in to such conversations have a right to hear both schools of thought articulated with the full force and clarity and depth at which those following them are able to put to the task.
Once your prison sentence is announced, all of these people will feel free to express their sincere views and the investing advice field will no longer be 100 percent corrupt and we will able to bring the Buy-and-Hold Crisis to an end. We adopted the laws against financial fraud for just this purpose. Financial fraud hurts people in very serious ways. When we fail to prosecute it, we permit further damage to be done.
You don’t like the idea of our laws against financial fraud being enforced because that would mean you going to prison, perhaps for a very long time. I get that. But have you really thought this through? The cover-up showing that Buy-and-Hold is a big pile of smelly garbage didn’t begin in 2002; it began in 1981. Say that someone in the time-period from 1981 through 2002 had had the courage to stand up to the Buy-and-Hold Goons of that day. If that had happened, Greaney would never have reacted the way he did when I posted honestly about safe withdrawal rates and neither he nor any of his friends (you!) would be headed to prison today. By going to prison yourself, you are helping some potential future Goon from sharing your fate.
While also helping yourself. The number of lives you destroy is obviously going to affect the length of your prison sentence. The sooner you come clean, the fewer lives you destroy. So helping out future Goons ends up helping the current-day Goons too. And of course you would be helping out the millions of middle-class investors at the same time. You would even be helping out the Wall Street Con Men. They will be able to sell MORE stocks once honest posting is permitted at every site on the internet. The single thing that holds people back from buying this wonderful asset class is the risk associated with it. The peer-reviewed research that I co-authored with Wade Pfau shows that investors who follow the first true research-backed strategy thereby reduce risk by 70 percent. Wow!
And of course you would be helping restore confidence in our political system by coming clean today. The laws against financial fraud are a key guardrail in our system. The millions of people who worked for decades to earn the money they need to retire on should not lose that money to a small group of Wall Street Con Men just because it is so easy to turn a buck by exploiting the Get Rich Quick urge that resides within all of us. Being an investing advisor isn’t all about turning a quick buck. There are ethical responsibilities involved. One of those is to speak out in strong and blunt and simple and uncompromised terms when Goons like you show up on the scene. It was the continued promotion of Buy-and-Hold “strategies” that caused the economic crisis and that thereby cost millions of your fellow citizens their jobs. The people of the United States need to see us address this matter effectively by sending you away to prison for a long, long time. It is a simple matter of basic justice.
These are all my sincere thoughts re these terribly important matters.
I naturally wish you the best of luck in all your future life endeavors.