Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
“Robert Shiller is the one who published peer-reviewed research in 1981 showing that valuations affect long-term returns. If Shiller’s research is legitimate (he was awarded a Nobel prize), then the market is not efficient and Buy-and-Hold (which is rooted in a belief in an efficient market) is indeed a lie. Shiller doesn’t say it that way.”
Schiller doesn’t say it that way because he is not a mentally ill internet troll. Rob Hocus No 2 Step Bennett is.
What I add is that I say things clearly and simply and firmly and boldly. Everything that I say is rooted in Shiller’s “revolutionary” Nobel-prize-winning research finding that valuations affect long-term returns. But, yes, I say things differently.
I have advanvced the ball in a very important way by doing that. People need to know the practical, how-to stuff. They need to know whether they have saved enough to retire. They need to know what stock allocation they should be going with to keep their risk profile stable. They need to know what caused this darn economic crisis. Shiller hints at the answers to those questions but pulls back from stating the answers in way that most investors can understand the practical import of his message.
I certainly don’t apologize for advancing the ball in a major way, Long-Time. Everyone who has doubts about Buy-and-Hold should have started doing this 36 years ago. We would all be in a lot better shape if they had. There obviously can never be any downside to exploring new ideas. Everyone who is exposed to the ideas in clear form has the option of accepting them or rejecting them. So this is a win/win/win/win/win.
Buy-and-Holders perceive a downside because hearing the ideas expressed clearly stirs up their own inner doubts about the long-term merit of their investing strategy. Shiller showed that it is investor emotion that causes bull markets, not the economic realities, and the Buy-and-Holders show just how emotional investors get during bull markets in the reactions they offer to clear statements re the implications of Shiller’s research findings.
We need to work through this process as a society, Long-Time. We cannot make the journey from a place where most of us believe in Buy-and-Hold to a place where most of us believe in Valuation-Informed Indexing without passing through a place where lots of Buy-and-Holders are going to experience upset that they for a long time followed a gravely flawed investment strategy. If this could be done in way that didn’t cause any pain to Buy-and-Holders, I would do it that way. But I am not sparing my Buy-and-Hold friends pain by keeping my mouth shut, not if the last 36 years of peer-reviewed research is legitimate. If the last 36 years of peer-reviewed research is legitimate, the Buy-and-Holders need to hear the case for Valuation-Informed Indexing stated as clearly and simply and firmly and boldly as it can possibly be stated. Then they need to have the opportunity to ask questions. They they need time to ponder the new ideas and to determine for themselves whether or not to integrate them into their thinking about how stock investing works in the real world.
I am your best friend in the world, Long Time. You don’t see it, but I am. I paid a price to achieve benefits for you that no one else was willing to pay. I put my neck on the line so that you could learn something new. That cannot possibly hurt you. It could possibly help you in a huge way. But there’s zero chance that it could hurt you. If I am wrong re every single thing that I have ever said about stock investing, you would have ended up ahead had you permitted me to speak on the same terms that every other community members speaks because you would have been able to see Buy-and-Hold survive a challenge that it has never faced before and to see it survive that challenge and that would have given you added conference in a strategy that must inspire confidence in those who follow it if it is to work in the long term.
Every word I write benefits you. If you let it. You have to be willing to let the words in for them to have their desired effect. But that part is out of my hands. My job is to always screw up the courage to put the words forward in a clear and simple and firm and bold way. Once I have done that, I have done all that I can do. Once I have done that, I have done something very important and loving.
I was a Buy-and-Holder on the morning of May 13, 2002. I thought that the errors in the Buy-and-Hold retirement studies were going to be corrected once I pointed them out. It never occurred to me that what happened could possibly happen in this country, in which we and have laws protecting us all from this sort of thing. When the Greaney Goons came after me and my fellow community members, I looked on the internet for sites where the implications of Shiller’s revolutionary insight of 1981 were being explored on a daily basis so that I could ask some of those people to visit the Retire Early board at Motley Fool and help us all out. I learned that there are no such sites! What the h?
Shiller holds back from talking about the how-to aspects of his Nobel-prize-winning research. And no one else has picked up the ball in 36 years. Why? Because Valuation-Informed Indexing is very, very, very different from Buy-and-Hold. They both claim to be research-based strategies and yet one leads to one set of strategic recommendations and the other leads to a very different set of strategic recommendations. It is upsetting for Buy-and-Holders to hear that they are walking down a dark path, that they may be hurting themselves rather than helping themselves, that they may be hurting their friends to whom they recommend Buy-and-Hold rather than helping them.
None of that is my doing. I wasn’t around in 1981. I cannot even speak with any certainty as to why the people who were around at the time made the choices they made. What I can say is that they made a choice to delay the national debate that we very much need to have to determine once and for all whether Fama is right or Shiller is right. And, 36 years down the road, the result has been death threats and demands for unjustified board bannings and tens of thousands of acts of defamation and threats to get academic researchers fired from their jobs. This is what we have become as a result of the 36-year cover-up. The 36-year cover-up was not a good thing. This ain’t the way.
It is my job to take it the other way, the American way, the ‘the other fellow gets to have his say as well” way. That way is best for every single person involved. I love my Buy-and-Hold friends. I want to help my Buy-and-Hold friends out in every single way available to me. Lying to my friends about the numbers that they use to plan their retirements is not one of the ways available to me. For obvious reasons. It is my job to search for things OTHER THAN THAT that I can do to make the lives of my Buy-and-Hold friends easier.
I can’t do it by myself. We have 15 years of Post Archives showing that. I need at least 10 good and strong people who will stand with me to get this job done. I believe with 100 percent certainty that I will have that in the days following the next price crash. That’s Door One.
Or the Buy-and-Holders themselves could elect to act in a way that would make life better for every single person involved. That’s Door Two. A better and quicker door. It makes all the sense in the world for us to collectively choose Door Two. But it would be an exceedingly non-Goonish thing for us to do. I don’t think we will do it. Not after what I have seen. But the door remains standing before us. I can point out the opportunity to my Buy-and-Hold friends, knowing that the odds that they will choose the life-affirming door are something less than great.
And that’s it. Those are the two doors, Long Time. Door One opens for me regardless of what you do. Door Two requires your cooperation. So the odds are strong that it is going to be Door One. But there is something about the fact that you show up here on a daily basis week after week, month after month, year after year, that tells me that you feel some unease about going through Door One. Good for you. Door One is a terrible door. For all of us. But for you in particular.
If you want to choose Door Two instead, I am with you 100 percent. I think that would be super.
But please don’t ask me to join Shiller and all the others in talking about his “revolutionary” (his word), Nobel-prize-winning insights in the guarded and hesitant and fuzzy and cautious way that most others talk about them. This decision not to risk upsetting the Buy-and-Holders was no doubt motivated by a feeling that it is the charitable way to go. I have 15 years of Post Archives showing me that there is nothing even a tiny bit charitable about it. It is not the charitable way to go, it is the cowardly way to go. The 36-year cover-up is killing us all. The 36-year cover-up of the implications of Shiller’s 1981 research finding that valuations affect long-term returns was the primary cause of the economic crisis that in turn was the primary cause of the political frictions that we have been seeing on both the left and the right in recent years. Not this boy. Please try to find somebody else, you know?
I naturally wish you the best of luck in all your future life endeavors, old friend.