Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
99.999999% of people didn’t respond to your tweets because they never saw them. The rest didn’t respond because you’re a nut.
You’re wrong. There are many cases in which people who did not respond have told me that they think my work has great value. There are cases that I have written about on the blog in which people who BANNED me told me that they thought my work has great value. That’s not the normal situation, Anonymous. It is because those people are afraid to speak up that we have this problem.
You are of course right that the vast majority of people don’t see a tweet. And it is also true that, when someone makes a claim that seems out there, most people are going to be highly skeptical even though they do not know the facts. That’s normal too. But it was not normal for Motley Fool to ban me when I was the most popular poster there in the days before I pointed out the error in Greaney’s study and when it was Greaney putting forward death threats and not me. And it was not normal for Wade Pfau to thank me profusely for teaching him more about how stock investing works than anyone he had run into before and to tell me how much he couldn’t stand you Goons and then to flip to the other side when you threatened (with Bogle’s implicit approval) to destroy his career. It’s not normal for someone like Bogle not to speak up when he sees threats of violence and career destruction at a discussion board with his name on it and not to do anything about it. None of this is normal.
People are skeptical of all new ideas. That’s normal and healthy. But the discussion of new ideas is permitted in this country. So while we should expect support for new ideas to grow only slowly in the early days, we should expect support for new ideas with merit to grow gradually over time. Shiller’s idea has so much merit that he was awarded a Nobel prize for it. And that idea has been public knowledge for 37 years now. And honest posting re the many far-reaching implications of that idea is not today permitted at a single large web site. That ain’t normal. It’s not a close call.
That’s where the financial fraud comes in. That’s where the criminal stuff comes in. The criminal stuff has blocked Shiller’s idea from gaining the level of support that it needs to attain for more and more people to get involved helping us to learn more about it. That has to change. Valuation-Informed Indexing will probably remain at a disadvantage to Buy-and-Hold for as long as prices remain high. We all have a Get Rich Quick urge within us and so Buy-and-Hold comes to the table when prices are where they are today with a big marketing advantage.
But the criminal stuff has to go. Get Rich Quick urge or no Get Rich Quick urge, there are lots of people who want to know what the peer-reviewed research says about how stock investing works. Those people have a right to be able to talk with others on the internet about what they want to learn. And, when we get to a point where they feel free to do that, support for Shiller’s work and interest in exploring Shiller’s work will grow dramatically. The hard part is getting the level of support up to a place where at least the criminal stuff is no longer a viable option for the Buy-and-Holders. We will all be living better lives once we get to that place. And a lot of people who today consider themselves confirmed Buy-and-Holders will begin rethinking their ideas about how stock investing works in those days. Hearing the ideas discussed by more people makes a difference. We may well be working on the same side in those days, Anonymous. I look forward to that.
We are in an ugly place today, Anonymous. I wish we weren’t. But we are on our way to a very magical place. We are close to making the transition. And all we need to do is to insist on compliance with the laws of the country we live in. People like me who believe that Valuation-Informed Indexing is the future need to work up the courage to stand up to you Goons no matter how brutal you are with your intimidation garbage. That’s what it takes to get us all to this much better place where we all would want to be were we only thinking clearly and sufficiently informed to know what is in our best interest. So I try to remain steadfast.
Why did the opposition to this one particular new idea become so intense? Because the change is so darn important. We all need to know how to invest our retirement money effectively and Buy-and-Hold and Valuation-Informed Indexing are about as different as it is possible for any two ideas to be different. So the people who advocate Buy-and-Hold feel a lot of shame and embarrassment over the idea of having their mistake exposed to the world. Their shame gets worse the longer the cover-up goes on. So none of us are doing them a favor by keeping our mouths shut. Things just get worse the longer the cover-up continues. The life-affirming thing to do here is to EXPOSE the cover-up and thereby to bring it to an end and thereby to help out our Buy-and-Hold friends as well as our Valuation-Informed Indexing friends.
The criminal stuff is over the top. It never should have been tolerated by even a single person for even a single day. That is not how we do things in this country. It is a shame that our Buy-and-Hold friends turned to criminal stuff in desperation and it is a shame that a good number of us Valuation-Informed Indexers failed to quickly work up the courage to call out those who had wandered onto that dark path in clear and firm language. This sort of thing is a lose/lose/lose/lose/lose/
When did 22 years become “short-term”? And what risk adjustment formula makes a 113% gain preferable to a 282% gain?
Everything is relative. Most of us invest over roughly a 60-year time period, from age 20 to age 80. 22 years is not a super long time-period considered in the context of a 60-year investing lifetime. It is how you do over the 60-year investing lifetime that matters, not how you do over any 22-year time period. It is the losses suffered over a 22-year time-period in which you go with a Get Rich Quick approach that can cause you to miss out on the progress that you could have made on obtaining strong lifetime numbers by following a more sensible (and research-based!) approach.
If you thought that the lifetime numbers didn’t matter, you wouldn’t be so angry, Anonymous. If you truly believed that all that mattered was putting up good-enough numbers for 22 years, you would be okay with letting others do as they pleased while you did what you thought was best for you. The rage comes from the part inside you that entertains doubts whether that really is the answer. You hate me because I stir up those doubts.
If I don’t do it, who is going to do it, you know? Someone has to stir up the doubts while you still have time to do something about them. Would you rather that I wait until after the crash and start telling you then how you could have protected yourself from it? My bet is that we will see a lot of people doing that and a lot of others complaining that waiting until after the crash hits to talk about this stuff was a pretty darn lame way of proceeding. I am proud that I had the courage to say some things when people still had time to put the knowledge to good use if they cared to (and of course to ignore it if they preferred to play it that way instead).
My best wishes to you and yours.
Recognized Tweeting Nut Rob
Mike Piper just wrote an article that helps break things down in very simple terms so that maybe you can finally understand how the market works.
https://obliviousinvestor.com/stock-prices-still-volatile-efficient-market/
Thanks for the link, Anonymous. As you know, I love Mike’s stuff (while not agreeing with every last word of it).
I agree with the words in this particular article. I think he is describing properly the sense in which the market is indeed efficient.
The dispute that I have with Mike and with you and with Bogle and with lots of other good and smart people is that I do not believe that the market is efficient in all respects. The market is efficient when it is rational. The market is generally rational. So the market is generally efficient. But in areas in which the market has lost its capacity for rationality, it loses its capacity for efficiency. This is what has happened in cases in which the market is either overpriced or underpriced. The rational/efficient thing to do would be to price stocks properly. When the market goes nuts and prices stocks too high or too low, it is behaving irrationally. That’s where inefficiency comes in. You can’t have efficiency without rationality.
Say that you have an engineer friend who is an alcoholic. If you followed him around all day, you would see him perform hundreds of rational acts during the course of the day. He is CAPABLE of great levels of rationality. He calculates. He reasons. He judges. He disciplines himself. All of these things are undeniably true of many alcoholics. But when he reaches for that glass at the end of the day, he is not acting rationally. He is destroying his life. He has lost the capacity to act rationally in that one area of life and that weakness has the potential to destroy all the good done by the many acts of rationality he engages in on a regular basis.
I believe that Shiller’s work permits us to become more rational/efficient investors than we have ever been in the past. If we all explored the implications of Shiller’s findings in depth and took the message they are delivering to us to heart, we would never again see the level of overvaluation that we have experienced in recent years. Each time the overall market price became irrational/inefficient, investors acting in their own self-interest would sell some stocks and those sales would act to pull prices back to more rational/efficient levels. Market prices are self-regulating so long as investors have access to the information they need to make rational choices.
The trouble today is that we do not have access to the information we need to act rationally in response to overvaluation or undervaluation. Prior to 1981, Shiller had not yet published his research. So it was just one of those things. The information needed was not there and so investors continued acting irrationally and stocks remained a high-risk asset class. From 1981 forward the information was available to us but we collectively forbid ourselves from learning about it because learning about it would have required that we acknowledge having made a mistake in earlier days and it would caused us pain to acknowledge having once made a mistake re so important a matter.
The rational thing is to acknowledge the mistake or, at the very least acknowledge the possibility of a mistake, so that we can all move forward. I believe that we are in the process of getting to a higher level of rationality/efficiency re our stock investing behavior. It has been hard to achieve the advance because the advance is such a big one; the bigger an advance, the more scary it is to acknowledge that there was once a time when we did not know everything and therefore made bad decisions re important matters. But we are getting there, you know? It has been a painful process but we are in the process of getting there and there won’t be one of us who will not celebrate the advance once we all make it safely to the other side.
The mistake that the Buy-and-Holders made was in thinking that efficiency is automatic. Efficiency has to be ACHIEVED. The market is us. The market is comprised of human actors. Human actors become capable of making rational choices by learning what the peer-reviewed research says about the subject. We need to permit ourselves to discuss ALL of the peer-reviewed research, including the 37 years of peer-reviewed research that the Buy-and-Holders were not expecting to see in the days when they were putting together their model for understanding how stock investing works.
I hope that helps a small bit. I naturally wish you all the best that this life has to offer a person.
Rational (I Hope! — But Who Can Ever Be 100 Percent Sure?) Rob