Set forth below is the text of a comment that I recently posted to the discussion thread for one of my columns at the Value Walk site:
Instead of going out and getting a job, Rob is over at his website posting nutty nonsense like this:
“I long to see EVERYONE using words and terms like “Goons” and “financial fraud” and “prison sentences” on a daily basis. You don’t bring a massive act of financial fraud to a complete and total stop by covering it up. You bring a massive act of financial fraud to a complete and total stop by EXPOSING it. This is just common sense. This is how it is done in every field of human endeavor other than investing analysis and this is how it will have to be done in the investing analysis field as well.”
I definitely stand by those words, Sammy.
Today’s economic crisis has its roots in the fact that too many of us have for too long been too reluctant to use words like “Goons” and “financial fraud” and “prison sentences.” That’s really the entire deal. Everything follows from that. Once a good number of us work up the courage to say those words often and clearly and everywhere, we put all the ugly, nasty stuff behind us and move on to enjoying all of the hundreds of amazing insights into how stock investing works in the real world that were opened up to us through the publication of Robert Shiller’s “revolutionary” (his word) research findings.
Bogle should have come clean on the day in 1981 when Shiller showed with peer-reviewed research that valuations affect long-term returns. If that’s so, then risk is not static but variable and every investor has to be willing to adjust his stock allocation in response to big shifts in valuations to have any hope whatsoever of keeping his risk profile roughly stable. Shiller changed our understanding of how stock investing works in a fundamental way and Bogle’s decision to engage in a cover-up rather than to come clean about his mistake in thinking that the market is efficient made everyone who has come after him feel awkward about pointing out the mistake.
When someone fails to own up to so important a mistake, it gets harder and harder over time to do so. Had Bogle come clean three decades ago, we would have seen a rewriting of all the textbooks in the days since and we would have seen hundreds and hundreds of exciting investing insights developed in the days since and we would have seen hundreds of accurate and helpful calculators developed in the days since. It is by owning up to our mistakes that we open ourselves up to new learning experiences. When we fail to own up to mistakes, we lose out on those opportunities and we can easily find ourselves over time traveling to some very dark places indeed.
It can never get better for the Buy-and-Holders for so long as the cover-up continues. It can only get worse and worse and worse. I do believe that the vast majority of Buy-and-Holders follow Buy-and-Hold strategies themselves. So there is an important sense in which they believe in the strategy that they are promoting to others. So I certainly think that they should say that they believe. The Valuation-Informed Indexers need to hear challenges to their understanding of how stock investing works as much as the Buy-and-Holders need to hear challenges to their understanding of how stock investing works.
But overlooking acts of financial fraud takes the spirit of tolerance of other “ideas” too far. A death threat is not an argument, it is an act of intimidation. There is no place for death threats in discussions of what the peer-reviewed research tells us about how stock investing works in the real world. Nor is there any place for demands for unjustified board bannings. Nor is there any place for tens of thousands of acts of defamation. Nor is there any place for threats to get academic researchers fired from their jobs. That sort of behavior constitutes financial fraud. That sort of behavior constitutes a felony. That sort of behavior leads to a prison sentence. Yuck!
That sort of behavior reflects poorly not only on the Buy-and-Holders who directly engage in it but also on the Buy-and-Holders who tolerate it by failing to speak up in opposition to it when they see the sorts of individuals who have put up posts in “defense” of Mel Lindauer and John Greaney making appearances at discussion boards and blogs that they frequent. I have a zero tolerance policy re those sort of thing. The Great Buy-and-Hold Con is in the process of destroying millions of middle-class lives. I have made it a practice to speak up in opposition to the criminal behavior of you Goons wherever and whenever I see it (while naturally inviting and encouraging and showing gratitude for the contributions of my many Buy-and-Hold friends who stay within the norms of civil human behavior when making points in favor of Buy-and-Hold that have convinced them and that we all need to consider).
These are my sincere thoughts re these terribly important matters in any event, my long-time Goon friend. I naturally wish you the best of luck in all your future life endeavors.