Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
Before you would always say that you know how investing in the stock market works. In light if the recent article referenced above, you are now saying that the stock market is not acting the way it should act.
Should a strategy be based on how it is likely to act in order to be successful?
The stock market has always acted the same way, Anonymous. 100 percent of the evidence available to us shows that valuations are 80 percent of the story (just as you would expect — price is 80 percent of the story in ALL markets). Zero percent of the evidence supports Buy-and-Hold. All that is clear to anyone who is familiar with the last 35 years of peer-reviewed research.
It is not a major change that a decision by the Wall Street Con Men to push the pure Get Rich Quick approach (IGNORING price) harder than it has ever been pushed before caused prices to get more out of whack than ever before. That’s just what you would EXPECT to see happen.
The reason why Shiller and I did not get it perfectly right all along is that we are human. No one has ever seen anything like this before. The Wall Street Con Men have always pushed Get Rich Quick schemes; there’s tons of money in them and the Wall Street Con Men LOVE taking money out of the pockets of millions and putting it into their own pockets. But never before did they make the false claim that there is actually peer-reviewed research showing that the pure Get Rich Quick approach might work. That’s the something new under the sun that made it hard for Shiller and me (and thousands and thousands of others) to appreciate just how dangerous this Buy-and-Hold stuff really is.
Now we know.
Not all of us, of course. If we all knew, you would not see a Ban on Honest Posting at a single site. Honest posting on the past 35 years of peer-reviewed research is today banned at every large investing site on the internet. It’s a shame, you know? But it is what happened. You can’t continue to push Get Rich Quick strategies if you permit honest posting. There is now 35 years of peer-reviewed research showing that Buy-and-Hold can never work, that it is nonsense, that it is a scam, a money-making thing.
So Buy-and-Hold will go down. I expect to see that happen following the next price crash. Then we will all pull together. We all want the same things. We all want to know how stock investing works in the real world. So why wouldn’t we all pull together? Bogle wants us to invest effectively. So he will flip to the Valuation-Informed Indexing “side” following the next crash. What do you think is going to happen to you Goons after Bogle flips? I think it is fair to say that you will be placed in prison cells, where you belong. Is that not a fair supposition?
With you Goons in prison cells, what the heck would there be to hold the rest of us back? There’s nothing that I can think of. On the morning of May 13, 2002, we had 20 percent of the Motley Fool community saying that Valuation-Informed Indexing was the greatest thing they ever learned about and that they wanted to explore the entire story. We had another 60 percent saying that, while they were not yet convinced, they sure wanted honest posting to be permitted so that, if the case turned out to be strong enough, they would become convinced. You Goons never constituted more than 20 percent of the community.
Once the 20 percent that has engaged in criminally abusive behavior is placed behind the cells of prison bars, I really don’t see how things could ever stop getting better and better and better as time passes. That’s the American way, is it not? That’s the reason why we made financial fraud a felony in the first place, to protect the American way when it came under attack by the sort of individuals who have put up posts in “defense’” of Mel Lindauer and John Greaney.
Did Robert Shiller or Rob Bennett get it all 100 percent right at every stage of the proceedings? We did not. We are human like all the rest. I was a freakin’ Buy-and-Holder on the morning of May 13, 2002. I obviously had come big gaps in my understanding of how stock investing works on the day when I put forward that fateful post. So what, you know? I stuck to my guns. I know that I cannot do good work posting dishonestly and so I insisted on recognition of my right to post honestly. And that has made all the difference. I know a lot of things today that I did not know 15 years ago as a result of that fateful decision. And I have every reason to believe that I will know a whole big bunch more 15 years from today than I do today so long as I continue to insist on my right (and the right of all my fellow community members) to post honestly.
The stock market has always performed the same way as every other market that has ever existed. Paying attention to price has always been 100 percent critical. Buy-and-Hold has always been pure garbage. I was fooled because I am a human and we humans learn by talking things over and I happened to become an investor during a time when a lot of people believed that Buy-and-Hold was a real thing. Naturally I made mistakes. We all did. People cannot learn in an environment in which the sorts of individuals who have put up posts in “defense” of Mel Lindauer and John Greaney are permitted to participate in internet discussions. I mean, give me a freakin’ break.
You Goons are going to prison. That brings the problem to an end. Shiller won’t be making so many mistakes once honest posting becomes the norm in this field. Neither will I. Neither will Bogle. Neither will anyone else.
In an ideal world, Bogle would have acknowledged his mistake on the day that Shiller’s “revolutionary” (his word) research was published. It didn’t happen. That’s unfortunate. But it’s certainly no reason not to believe that the mistake will not be corrected down the line. Any mistake that causes as much human misery as Buy-and-Hold has caused is going to be corrected in time by the society suffering that human misery, Again — please give me a freakin’ break.
It’s a process. We are a long ways away from the state of confusion that caused us to tolerate Bogle’s unwillingness to come clean back in 1981. We know more all the time. We understand more all the time. We are well on out way to experiencing the biggest surge in economic growth in U.S. history. It is happening, Anonymous, and there is nothing that you and your Goon pals can do to hold us back. The people of the United States possess more power than a band of internet Goons backed by a band of Wall Street Con Men. It’s not a close call. There has always been only one way that this thing could turn out in the long run.
Or at least so Rob Bennett believes. I could be wrong. We will have to wait a bit to see how it all plays out following the next price crash. I naturally wish you the best that life has to offer a person in any event, Goon friend.