Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
“There’s not one thing in this world that can be bought with money that I want and do not have.”
Then why is your wife scared about money? Maybe she wants to buy things that you don’t care about. College tuition for the boys, perhaps.
The question that you are asking goes to the heart of all this, Anonymous.
Why do fat people eat too many cookies? Why do smokers smoke? Why do drinkers drink? We do we watch too much television and engage in too little exercise? Why do young people engage in unprotected sex with partners whom they don’t even like very much?
Life is better when you take a long-term perspective. But we are vulnerable creatures always on the look-out for some short-term relief. Buy-and-Hold offers huge amounts of short-term relief. Stocks are today priced at two times fair value. It makes people feel good to believe that they are twice as far along in the job of achieving financial independence as they really are. It hurts them in the long run to fall for the Buy-and-Hold lies. You cannot plan effectively for your future when you have no idea how much in the way of assets you possess today. Buy-and-Hold is a disaster, like eating too many cookies is a disaster or like drinking too much wine is a disaster or like picking up too many strangers in bars is a disaster.
But we humans like our little disasters, don’t we? If you are looking for a quick way to turn a buck, you are better getting into the cookie-selling business than getting into the giving-sound-nutritional-advice business. So it is in the investing realm as well. Buy-and-Hold beats Valuation-Informed Indexing as a marketing proposition. By a country mile.
I got into this because I was studying what it takes to achieve financial freedom early in life. Up until age 35, I did not save money. I had a few thousand in a checking account and spent the rest of whatever came in. I became excited when I learned the power of saving effectively. It wasn’t about doing what the experts said and being a goody goody and all this garbage. It was about opening up possibilities for my life that would not exist if I did not learn to save effectively. Once that click experience went off for me in the saving realm, I became open to having similar click experiences in other areas. The day came when I had a click experience in the investing area. Failing to consider price when buying stocks does just as much to set back your hopes of achieving what you want to achieve with your life as failing to pay close attention to long-term value propositions on the spending/saving side. So here I am.
There are always going to be people who are going to be drawn to Get Rich Quick investing experiences. My guess is that Buy-and-Hold will always be with us. I accept that, just like I accept that lots of the humans (including this one!) eat too many darn cookies. That one doesn’t bother me.
What bothers me is the big distinction between how we handle Get Rich Quick thinking in the investing realm versus how we handle it in all the other realms. There are people in this world who will try to get my boys interested in taking drugs. But there are also people who do the opposite. My boys may end up taking drugs. I cannot control what happens. But I can point them to articles and stories and all sorts of things that make the case that taking drugs is a bad idea. I feel that I have a fighting chance re the drug-taking thing. They can hear both sides of the story and they can make their own decisions. It’s not a perfect situation but it is probably the best that we can do down here in the Valley of Tears.
It’s not like that in the investing realm. I posted honestly on safe withdrawal rates on the morning of May 13, 2002. Hundreds of friends of mine responded with great enthusiasm to the prospect of being able for the first time to learn the realities of how stock investing works according to the peer-reviewed research. I care about those people and I want to help them out. I want to present the anti-drug case to them. I want to show them how much better their lives can go if they resist the Get Rich Quick urge that we all possess. And they want to hear the message? Why should I not be permitted to make that case? Why should they not be permitted to hear it?
The answer is — money. There’s money to be made selling drugs and so the people who sell drugs would no doubt prefer to set up a system in which no one can ever make the anti-drug case. Fortunately, we do not live in such a world. People make the anti-drug case all the time. Those debating whether to take drugs or not get to hear both sides of the story before making their decision. It’s not that way in the investing realm. When Greaney put forward his first death threat, I went looking for sites where people discussed Shiller’s ideas on stock investing so that I could bring in some well-informed, friendly voices to our discussions. There are no such sites. The man has been awarded a Nobel prize because smart people recognize his great achievement. But Goons like you patrol the entire internet and make sure that no one anywhere feels safe telling people what the last 36 years of peer-reviewed research is teaching us.
I don’t buy it, Anonymous. This massive act of financial fraud is killing us. It’s probably more important that we get the non-Get-Rich-Quick word out re stock investing than it is that we get that word out re drug-taking. Even if there were no places on the internet that made the anti-drug case, is is probably only a limited portion of the population that would take drugs. People get caught up in other things as they age and leave their drug-taking days behind. It’s not like that in the investing realm. Every person who wants to retire someday has to invest in stocks. It is all but 100 percent mandatory. Deny people the ability to hear about research-based investing strategy and you are hurting 100 percent of the population. Even poor people who cannot afford to buy stocks are hurt when there is an economic depression because they lose their jobs and because depressions cause wars and wars kill rich people and poor people alike.
We have to find a way as a society to open up access to honest and accurate reports re how stock investing works according to the last 36 years of peer-reviewed research in this field. This is not just a good idea. It is a 100 percent required thing if we are to have any realistic hope of continuing to live in the way that we have always in the past lived in this country. We didn’t know how stock investing worked prior to 1981. So our ignorance was just one of those things. But we learned how stock investing works just in the nick of time. Just about every middle-class person invests in stocks today and these people cannot take the sorts of hits that are delivered to those who follow Buy-and-Hold “strategies.” We have to get the word out. Our economic system cannot survive if we do not. And, ultimately, our political system cannot survive if we do not. If we go into a Second Great Depression as a result of this massive act of financial fraud, there is a good chance that our political system will ultimately fall when millions of people who did all the right things according to the experts learn that they have lost most of their life savings because of a scam pushed relentlessly by our Wall Street Con Men friends and by our internet Goon friends.
If people want to follow Buy-and-Hold strategies, people can follow Buy-and-Hold strategies. If people want to promote Buy-and-Hold strategies, people can promote Buy-and-Hold strategies.n That’s all part of the wonderful game in these here United States of America. But no death threats. No demands for unjustified board bannings. No thousands of acts of defamation. No threats to get academic researchers fired from their jobs. That stuff comes to a full and complete stop. But the close of business today. Farmer Hocus has spoken and so it shall be.
My wife is like everyone else. She would like our country to avoid going through a Second Great Depression. She obviously opposes the Goon behavior that for 15 years now has been threatening to bring one on. But she also possesses that natural human inclination to perceive the short term realities as more urgent than the long-term realities. She sees that others in the neighborhood can repair their porches when they fall into disrepair and she wants that for us. She wants to “buy things that I don’t care about,” in your words.
I care about fixing the porch. I want to pay for that. I have earned more than enough money to pay for that and I want to incur the expense today. But I am not willing to sell out my country to appease you Goons and thereby get my hands on the money today. The very fact that you have concluded that there is no way to defend the Buy-and-Hold strategy without engaging in criminal behavior tells me that this is an investing strategy that is not fit for humans. Someone has to lead the effort to open the entire internet to honest posting re the last 36 years of peer-reviewed research in this field. I wish that someone else had stepped up to do the job. I was elected. Given that reality, I intend to do the job to the best of my ability. I have never once for two seconds considered the possibility of selling my country to appease you Goons so that I can pay for those porch repairs today.
I’m not wired that way, Anonymous. Lots of people say they love their country. But you know what? You never really know how deep a love goes until it is tested. My love for my country has been tested. It remains strong. So we will see how things play out, you know? I am personally 100 percent certain that my country is going to come through for me and for all of us. But the proof is in the pudding. The pudding will be presented to us for our edification in the days following the next price crash. I wish you the best of luck with it. But that’s as far as it goes.
I hope that all that helps a small bit, dear Goon friend.
Rob
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