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:
So, were you lying when you posted your original details on your financials or are you lying now?
I’ll make an effort here to explain what this behavior signifies for people with an interest in learning how stock investing works in the real world.
Fama never showed that investors act in their self-interest when making decisions re stock investing. He ASSUMED it. Shiller checked out that assumption. He found that 145 years of historical return data discredits the idea that investors set stock prices through a rational decision-making process. Investors are humans and humans are emotional. So the market is emotional. The P/E10 value is telling us how emotional (and thus how risky) the market is at any given point in time.
Can investors act on this powerful insight to invest more effectively? They can. The peer-reviewed research that I co-authored with Wade Pfau shows them how. But there is one big obstacle holding us all back today. Deep in our hearts we all want to be rational investors. But our ability to act rationally obviously varies. The Goons are the least rational investors among us. They cannot stand to acknowledge even the possibility that they ever got anything even a tiny bit wrong.
In ordinary circumstances, the experts would not associate with the Goons in any way, shape or form. The published rules of every site at which I have posted prohibits the abusive tactics they employ. But the experts in this field hold back from taking effective action re the Goons. Why? The experts themselves have made mistakes. We did not always know what Shiller has showed to be true in recent years. Lots of experts have built careers promoting Buy-and-Hold strategies. These experts would never in a million years personally engage in the behavior we have seen from the Goons. But they tolerate it. They are not entirely unsympathetic to the Goons even though they of course disdain their tactics.
The P/E10 value tells us how irrational we all are re stock investing at any given point in time. Today’s P/E10 value is very high, telling us that we being very irrational. What you see on this thread is what you see when the market as a whole has become highly irrational.
We can do better. We do better by speaking up re this sort of thing. Lots of people want to explore these issues. I have spoken to thousands of them. Some are Buy-and-Holders, some are not. It doesn’t matter. We need to hear from all sorts of people to enjoy a rich learning experience. But we do need to leave the Goon stuff behind us. People feel uncomfortable participating in discussions when they see this kind of behavior. We need to reassure them that there are limits to what we will tolerate. The limits should of course be the limits that apply in all fields of human endeavor other than stock investing.
The problem is circular. We cannot get more rational until we speak up about the Goon problem. And we will not feel comfortable speaking up re the Goon problem until we are assured that most of our friends are too rational to tolerate this sort of thing. The way that a society overcomes this sort of thing is that a few brave souls work up the courage to speak up and then the idea spreads and spreads over time.
The Goons do not feel that they can prevail in a reasoned discussion. If they did, they obviously would not behave this way. And they also feel that there will be no consequences that will follow from sinking into the gutter. That has been their experience for 15 years now. Lots of good and smart people would participate if they did not feel a need to worry about what the Goons would say about them if they did. But it takes a lot of courage to be one of the first to take on the Goons.
We will get there. It is a process. We have made lots of progress. And deep down inside we all want the same thing. We certainly are not being kind to our Goon friends by tolerating their bad behavior. They feel worse and worse about themselves with each passing day. They want to be human too. We should encourage them in that regard. They are capable of acting in a human manner. I know them from earlier times and I can testify to this.
I hope that helps a small bit. Please be assured that the good news here is 50 times more good than the bad news here is bad.