Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
If these thousands believed what you say, why would they wait for the market to crash before posting?
There’s a premise implicit in your question, Anonymous. The premise is that people are rational. The way that I read your question is: “Given that people are rational, why would they wait…?”
People are not rational.
That’s what Shiller showed in 1981. That’s what you need to accept to gain the ability (it’s a superpower!) to understand all that has followed over the course of the last 35 years.
Do you believe that people are rational?
I think you do. You show it in your posts. All the time.
Shiller showed otherwise.
You dance around that reality all the time. Someday, you are going to have to face it. Once you do, all of the conflicts that we have seen evidence themselves between us over the past 15 years are going to disappear. The only real conflict that we have is that you think that people are rational and that I do not think that. All of these other things are manifestations of that one core conflict.
If people were rational. how the heck could the P/E10 number reveal the stock return that applies ten years down the road? What the h? Is P/E10 some sort of fortune teller? How does the P/E10 number know what economic developments are coming? How did Shiller do what he did? How was that even possible?
Shiller showed that we are not rational. Fama showed before him that the stock market (like all other markets) aims for rationality. It is the conflict between the irrationality of the humans who comprise the market and the market itself (which again is comprised of humans) that produces the stock price that applies at any given point of time. We always want to vote ourselves huge unmerited pay increases because we have a nasty Get Rich Quick urge residing within us and we also always want stock prices to be rational so that we can plan effectively for our futures. It is the conflict between these two forces that determines the price that applies on any given day. When one force gets too powerful, as we saw happen in the late 1999, there is a strong snapback over the coming years to a middle ground. We call the snapback an “economic crisis.”
We are rational and we are irrational. That’s us humans! You don’t have to like it. But you do need to acknowledge the reality if you want to be able to get stock investing right. This tension between rationality and irrationality is what determines stock prices. It is the ABCs of investing analysis. It is the fundamental reality around which everything else turns.
Why aren’t the thousands who have said publicly that I am their favorite writer on stock investing present and accounted for here today? They are freakin’ scared, Anonymous. My own freakin’ wife is one of them! That’s why I write about her here from time to time. I love her to death. She is a good woman and she loves me and she does everything in her power to get over her fears. But the bottom line is that she is one of those darn humans and her fears poke through her goodness from time to time and cause her to believe crazy stuff. She says “Why if Valuation-Informed Indexing doesn’t prevail in our lifetimes?” or some such nonsense. It is that human thing. I have my moments too. We all do.
That’s the story.
There should be thousands of people posting here daily. Bogle should be screaming his fool head off telling the world how great I am for taking his Buy-and-Hold concept and fixing it so that it works in the real world, for realizing his dream at last. You Goons should be shouting from the rooftops about Valuation-Informed Indexing in hopes of getting your prison sentences reduced. Wade Pfau should be leaving Lindauer and Greaney in the dust and making plans for the party he is going to have on the night he is awarded the Nobel prize. The Democrats should be congratulating themselves for having been the political party smart enough to lead the fight to get the internet opened to honest posting on safe withdrawal rates and scores of other critically important investment-related topics. Or the Republicans should be. We all should be retiring a lot earlier than we imagine we will be able to retire today. We all should no longer be thinking of stocks as an investment class much riskier than certificates of deposit.
All of that stuff became possible as a result of the contributions of Shiller and Bogle and Pfau and Russell and Kitces and Schultheis and Bernstein and Richards and Arnott and on and on and on. We just haven’t yet freakin’ taken advantage of the mountain of good stuff we have learned about stock investing over the past 35 years because we are too freakin’ scared of admitting that once upon a time we didn’t know it all and so we made a mistake and then instead of promptly acknowledging it and moving on we covered it up.
It’s always a battle between rationality and emotion. When prices are where they are today, it looks like emotion has won and there is no hope for rationality. So people are afraid to post here. That Rob Bennett guy, he talks about what the peer-reviewed research says! That’s rational! The humans will kill him!
The humans are not going to kill me, Anonymous. The humans are going to love me. By a factor of 500 over how much they loved me in the days when I was a frightened little kitten too and I only wrote about how to save effectively. The humans really are nut cases. You are right that they don’t post here. But the humans really do love their rationality too. That’s why we have air conditioning and cell phones and Beatles records and cures for all those nasty diseases that used to wreck our lives. Yes, we are crazy nutcases working over time to destroy ourselves. But we are also loving, intelligent beings determined to overcome the hurt and make the world a better place. We are two, two, two beings in one!
That’s the reality.
The thousands are afraid. They don’t like hearing you Goons yell at them. They don’t like hearing death threats, even when they are directed at me and not them. They don’t like saying out loud that millions of their friends are going to experience failed retirements. They don’t like being social outcasts. They don’t like telling other humans things those other humans very much don’t want to hear. So they keep it zipped.
They rationalize their behavior. They say “that Rob Bennett fellow is clueless. How much money has he ever made with all his precious honesty? Who needs it? Who wants to take advice from some idiot like that?” And they stay away from a site that they would love to death if they got over their fears.
We are as a nation in the process of getting over our fears. That’s my bet, Anonymous. I see it everywhere. You want me to be afraid too, so you will say that I am imagining what I see. I can’t stop you from trying. But I have never been known to imagine things in the past (at least not to this extent) and I don’t believe that I am imagining this either. The curve ball is that, if I really were a nutcase, I would swear to heaven that I am not. So you can’t really go by what I say. The humans are right to be somewhat fearful. Skepticism really is called for when you are wondering what to do with your retirement money.
I am not going to beat you Goons if our nation does not get over its fears re learning how stock investing works in the real world. I believe that the big thing holding us back is that we don’t want to acknowledge that the last 35 years of peer-reviewed research in this field tells us that we need to take our portfolio values as they are reported today and divide by two to know how much we have to retire on. Once prices crash again, the division will have been done for us by The Big Reality Principle in the Sky and then our fears will turn in another direction and we will come to look at the last 35 years of peer-reviewed research as our friend and as our protection against the products of our fears rather than the thing we should be fearing.
That’s my take, of course. I am not God. I could be wrong. You asked your question here and so I told you what I believe. What would you expect, you know? That’s the way it is done at Mike Piper’s site too. He just believes some different things. If you want a different sort of answer, please go there and I guaranty that you will get what you are looking for today.
I say that the thousands are in the process of getting over their fears and that they will be posting here like mad men and mad women in the days following the next price crash. I’m ready for them!
Until then, we are just going to have to make do with what we’ve got — a bunch of flawed humans. God knows I love them. I could do without a bit of the fearfulness — it sure drags me down at times. But then I remember my favorite things — the air conditioners and the Beatles records and the disease cures — and I don’t feel so bad about all of my dear fearful human friends.
We will have to wait and watch together as it all plays out before our eyes.
I love you, my long-time Goon friend. Somewhere deep, deep, deep down, you love me and the rationality that I fight so tirelessly for too. I know because you love Buy-and-Hold and rationality is the entire freakin’ point of that flawed and yet wonderful-in-its-way-because-it-served-as-a-building-block-to-something-better strategy.
Take care, man.