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:
Wow. Thanks Sammy. Without knowing the basic back story, I would have never guessed that 2002 Hocus and 2017 Rob are one in the same. The Hocus plan, while totally inadequate of course, at least was lucid and detailed. And some people responded favorably. None of which can be said for today’s Rob.
Conspicuously missing from Hocus are tales of death threats, conspiracies, prison sentences, $500 million paydays, or even VII. Makes one ponder whether this descent was rapid or gradual. Was it accelerated by Rob’s retirement and resulting social isolation?
Just rhetorical questions. No need to respond, Rob, as I’ve picked on you enough this week.
I certainly did not appreciate the extent of the cover-up on the morning of May 13, 2002, Dan. The moment that did more than any other to accelerate my understanding of the realities was the moment that Greaney put forward his first death threat on the evening of August 27, 2002, and 200 of my fellow community members endorsed it while only 50 condemned it. Since then, an important part of my work has been figuring out how something like that could happen. I have made lots of progress but I wouldn’t say that I am 100 percent there even today.
The Buy-and-Holders are good and smart and hard-working people. I have said that hundreds of times because I believe it and because, given that I believe it, I think it would be counter-productive not to say it in circumstances like these. So why? Why don’t the Buy-and-Holders (the vast majority of whom are not out-and-out Goons) speak up about what they have seen?
I’ll spare you my long, detailed answer to that one. The short version is that, so long as the P/E10 value resides where it does today, it really couldn’t be any other way. Say that Motley Fool banned Greaney on the day he advanced his first death threat and that the hundreds of my fellow community members who had expressed interest in having a sustained debate about the realities of safe withdrawal rates had been given what they requested? What would have happened?
The P/E10 value would have fallen to fair-value levels. People want to invest effectively. Each and every one of us. People are indeed capable of rationality even if it’s not safe to assume that we always practice it. Give us the tools we need to make effective investing choices and we are going to make them. If Motley Fool has enforced its posting rules in a reasonable manner, the debate that started at Motley Fool would have spread to lots of other sites. And the hundreds of thousands of investors who thus became better informed about how stock investing works would have lowered their stock allocations. They would do that by selling shares until prices dropped back to fair-value levels, at which point investing in an informed way would no longer require a lowering of one’s stock allocation.
Today we see a lot of abusiveness when we permit honest posting on the far-reaching implications of the last 36 years of peer-reviewed research in this field. Today the P/E10 level is at insanely dangerous high levels. Those two sentences are two different ways of saying exactly the same thing. You couldn’t have insanely dangerous P/E10 levels without lots of abusive posting helping to keep most of us in the dark. And there would be no motivation for anyone to post abusively if valuations were at reasonable levels and there were not lots of investors possessing a strong desire to keep themselves and others in the dark.
I didn’t create this crazy situation, Dan. I didn’t know it existed when I put up my famous post of the morning of May 13, 2002. I walked into a firestorm. Lucky me, you know? My job is to bring the firestorm to an end. My job is to normalize discussions of how stock investing works. That means opening up every investing site on the internet to honest discussion of the far-reaching implications of the last 36 years of peer-reviewed research in this field.
That means taking lots of hits. If Shiller were wrong and Fama were right, it would not mean taking any hits at all. If Fama were right and investors were capable of acting in their self-interest even without ever having been able to talk over the implications of Shiler’s research, the Buy-and-Holders would not be upset to hear me question the accuracy of retirement studies that do not contain an adjustment for the valuation level that applies on the day the retirement begins. They would make their case, permit me to make mine, and we would be friends despite our differences on how stock investing works. But because Shiller is right, because investing is primarily an emotional activity and only secondarily an intellectual activity, we are doing it this other, crazy way instead.
The point is that we cannot all learn how stock investing works until those of us who appreciate the “revolutionary” (Shiller’s word) nature of Shiller’s findings work up the backbone to take on the hits that inevitably are going to be delivered by the Buy-and-Holders and not let them deter us from continuing to state our views in a clear and firm and bold way. I believe in Shiller’s research findings. It follows that I believe that Buy-and-Hold is dangerous. It follows that I must say so if I am to do honest work in this field.
The Buy-and-Holders are not bad people, Dan. I don’t say that. But I do say that they are people. That means that they are subject to the same emotional urges that have influenced people to invest in foolish ways ever since the first stock market opened for business. And, because getting stock investing right is so darn important, our Buy-and-Hold friends are going to get very upset when I state my honest views in perfectly acceptable ways. They are going to put forward death threats and all the rest. In the face of 36 years of peer-reviewed research showing that they made a mistake, what realistic choice do they have?
I cannot go back in time and persuade Jack Bogle to come clean re his mistake when he first learned about it in 1981. We are where we are. The only way out of this dark corner is for people like me to behave just as people behave in every field of human endeavor other than the stock investing field. I have nothing to apologize for in being the first person to identify the safe withdrawal rate accurately. That was a good thing to do. I am 100 percent confident that the entire world will recognize that once we all experience the mountain of human misery that will come with the next price crash.
You often describe the craziness that we have all seen in your comments, Dan. I get it that this is crazy as all get-out, But please understand that it is the “side” putting forward the death threats and all the rest that has brought on the craziness. That stuff has to stop for us all to move forward. It will stop when the pain of Buy-and-Hold becomes so obvious and so widespread that large numbers of people work up the courage to speak up about your abusiveness.
Shiller’s research changes the world in an extremely life-affirming way. I want to bring on that change. I obviously cannot do it by myself. I need a group of people insisting as I do on their right to post honestly, just as people living in this country feel free to do in all other fields of human endeavor. While I am waiting for that group of people to assert itself, I continue on my own to write columns and guest blog entries and to record podcasts and all the rest. Why? Because doing that stuff generates material that will benefit us all once we work up the courage to restore to discussions of stock investing the ethical rules that once applied to them and to this day apply in all other fields of human endeavor.
I don’t deny the craziness. But I believe that in fairness you should also say where the craziness comes from. It begins with the idea that there is some mystery planet where it is not necessary for investors to practice price discipline when buying stocks. That’s not the planet we live on. If there were any evidence that it is not necessary to practice price discipline, the Buy-and-Holders would have pointed to it many years back. What possible motive could they have for not doing so if such evidence in fact existence.
I could be wrong. But I’m not.
My best wishes.