Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
So you perform your valuation on a consumable item (like a car or banana) that also has an endless supply, like you do on an asset generates a profit and has limited supply.
Markets set prices. That’s what they do.
They perform this magic through a process in which both sellers and buyers act in their own self-interests. Sellers focus on all the aspects of the question that suggest that prices should be higher, thereby pulling prices upward, while buyers focus on all aspects of the question that suggest that prices should be lower, thereby pulling prices downward. The price that applies is the price at which the demands of the buyer and the seller meet at a point along the continuum of all possible prices that is acceptable to both. Any market without price resistance becomes dysfunctional.
The reason why we have price crashes in the stock market is that the stock market becomes dysfunctional when Buy-and-Hold strategies become popular. Buyers need access to the information that in a healthy market they would use to act in their own self-interest. But the Wall Street Con Men and the members of their various Internet Goon Squads very, very much do not want the millions of people who buy stocks to finance their retirements to gain access to this information, which is contained in an exploration and understanding of the last 36 years of peer-reviewed research. After your prison sentence has been announced, this critically important information will be available at every web site on the internet. At that time, both parties to stock transactions will be able to act in their self interest and the market will become functional again and prices will return to fair level values again, hopefully on a permanent basis.
Markets work through the magic of information exchange. Your abusive and even criminal posting behavior has blocked access to the information that those of us who want to buy stocks to support our old-age retirements need to perform the job that we need to perform for the market to do its job of setting prices properly. The entire nation — both the millions of middle-class investors who need access to the information and the Goons who deny it to them — suffers as a result. No one benefits in the long run from the presence of a dysfunctional (improperly priced) market. You Goons only believe that you are reaping benefits because you refuse to perform the calculation (dividing your portfolio value by two at a time when prices are at two times fair value) that you need to perform to identify the true and lasting value of your stock portfolios.
Price matters in all markets. Prices are what makes markets work. It is the entire purpose of a functioning market to set prices properly. A market in which prices cannot be set properly (because the information needed is being blocked) becomes a dysfunctional market. Everyone suffers when a market becomes dysfunctional. A functioning market is one of those free lunches we sometimes hear about. Restoring a market to a functioning status is a win/win/win/win/win, with no possible downside. We all should be grateful that the last 36 years of peer-reviewed research supplies us for the first time in history with the “revolutionary” (Shiller’s word) breakthrough in knowledge that we need to make the stock market a functioning market on a permanent basis.
Rob
Curious Carl says
This is a 56 word title, and it’s not even a particularly long one for you. Also, this is your second post of the day. Didn’t you used to take weekends and holidays off and limit yourself to one new post per day?
Rob says
In ordinary circumstances, there would have been a headline at some point saying “Buy-and-Hold Retirement Studies Do Not Contain Valuation Adjustments” and then everyone working in this field would have pulled together and addressed the problem. That was the message of my famous May 13, 2002, post. But we have not pulled together and solved the problem. So we are in this strange twilight-zone world today in which it is public knowledge that the Buy-and-Hold retirement studies do not contain valuation adjustments and yet those studies have not been corrected.
Most of the short-headline blog entries that can be written about these matters have already been written. In the blog I document my conversations with the Goons. Those conversations reveal insights as to WHY we have not all pulled together to correct the discredited studies and to do all the other things that we need to do to get accurate and honest and informed investing advice out to millions of people. I don’t control how those insights are delivered to us. They are delivered via conversations with our Goon friends. I feature at the blog the conversations that have something of value to those trying to understand what has been going on. Sometimes I need to quote a good number of words from one of those conversations to make clear the point being revealed. So that’s what I do.
It’s an unusual procedure. But this entire matter is out of the norm. Given the circumstances we all face here, I think that this approach makes sense. The headlines that I choose are usually quotes from the conversation that sum up a point that either has not been made before or that has not been examined from the same particular angle before. I would prefer to tell the story with the usual sorts of headlines. But it wouldn’t work to post a new blog entry saying “It Is Shown for the 500th Time That the Buy-and-Hold Retirement Studies Really, Really, Really Do Not Contain Valuation Adjustments.” That’s the news that we need to act on. But as a society we have not acted in an effective way as of today. So I use these longer headlines to reveal points that need to be revealed for us all over time to come to an understanding of WHY we have not acted. I believe that we will be taking all these points into consideration in the days following the next price crash, when we can all see before us the downside of failing to act on reports that the Buy-and-Hold retirement studies do not contain valuation adjustments.
I hope that helps a small bit, Carl.
Yes, I used to put up one post each business day. I think that’s plenty. There have been more Goon conversations revealing something of value in recent months and I have fallen behind on posting about the ones that I need to post about. So I have temporarily adopted a practice of having two posts per day seven days per week until I get caught up. I followed a similar practice in the days after Wade Pfau flipped, when I had lots of blog entries examining what had happened and I fell far behind. It is usually possible to report on what needs to be reported with one blog entry each business day. But when things get to a point where I am several months behind re the posting of new blog entries, I feel that I need to make a change in the ordinary practice before things get too out of hand.
At one point I had fallen to about three months behind. As a result of the new posting schedule, I am now about five weeks behind. My intent is to return to the five-posts-per-week schedule when I get caught up.
Please take good care.
Rob