Set forth below is the text of a comment that I recently put to a discussion at this site’s blog:
I respond to what is in front of me, Pink.
The Great Debate has been going on for 11 years. There’s a sense in which the debate has been over the same question since the first day — Do valuations affect long-term returns or do they not? That’s the only substantive question that has ever been at issue.
While that element has always remained the same, the emotional element — which is the element that matters because the answer to the substantive question has been 100 percent obvious going back to the first day — is ever changing. So for a time the “defense” of the Old School studies was that the idea that valuations matter wasn’t supported by the data. Then John Walter Russell provided the data and the “defense” became the claim that Russell’s work was not peer-reviewed and only peer-reviewed research counts. Then Wade Pfau published peer-reviewed research showing the same thing that Russell showed and the “defense” was transformed into “well, Pfau no longer talks about his findings because we threatened to get him fired from his job if he did so and Bogle’s unwillingness to stand up for him convinced him that he would be all alone if he insisted on posting honestly.”
The emotional impulse behind the “defense” of Buy-and-Hold remains strong. But the intellectual defense started out plenty weak and has grown weaker and weaker and weaker over the past 11 years. In recent years, those trying to “defend” Buy-and-Hold have had no choice but to engage in criminal acts. They enjoy no other options other than to acknowledge the obvious reality, that Buy-and-Hold was a mistake and there is no study showing that a strategy in which the investor fails to exercise price discipline can ever work for even a single long-term investor.
I prefer to write about matters of substance over the matters of process that I have focused on in a number of recent blog entries. For three reasons. One, the process stuff is a nasty business and so it is not a fun thing to write about. Two, readers hate discussions of the process stuff. And, three, once we all make the transition to Valuation-Informed Indexing, the substance stuff will have great value while no one is going to care about the process side of a debate that has come to an end. So I generally focus my efforts on the substance side while writing about process to the extent necessary to bring the stupid Debate About Having a Debate to an end and thereby get us to the debate that we all very much need to have, the debate about what the last 32 years of peer-reviewed academic research really says about what works in stock investing.
It’s becoming increasingly obvious over time that, no matter how much I would like to avoid exploration of the process questions, we are not going to get to the substantive debate we all very much need to engage in without full exploration of them. To put it bluntly, we are going to need to see some of you Goons be sent to prison before as a society we are going to give up our vain hope that we can somehow avoid working through these issues. I don’t want it to be this way and I have dragged my feet re going down this road for 11 years now. But this is not my call. We need politicians and economists and academics and bloggers and journalists helping us bring all this ugliness to an end. To persuade them to work up the courage to get involved, we are going to need to put these matters on the table.
I don’t want you to go to prison, Pink. I have never wanted that. I worked very, very hard for many years to set things up so that you would not go to prison. I wan’t able to pull that off. I believe that today it is too late for you to avoid a prison term. It would be irresponsible for me to ignore that reality. So I now am more inclined to talk about it than I was in earlier days. My goal today is to shorten your prison term. I am not going to achieve that goal without cooperation on your part. Part of what I need to do to obtain your cooperation is to be up front with you about the prison term and about what you can do to shorten it. So I work hard not to let my natural resistance to talking about such a sad matter hold me back as much as I have let it hold me back in the past.
Once we get to substance, we obviously will not be talking about prison terms. We will be talking about all the wonderful stuff on the other side of The Big Black Mountain. I believe that there still will BE prison terms. But I don’t believe that anyone is going to want to spend much time talking about them, not when we could instead be talking about how lucky we are to be the first generation of investors who ever walked Planet Earth with the ability to invest in stocks on a virtually risk-free basis.
My job is to help us all achieve as much of the good stuff as we can possibly obtain as quickly as we can possibly obtain it while keeping any negatives to the absolute minimum. If I could wave a magic wand in the air and take us back to May 13, 2002, for a do-over, I would obviously do that. I have a funny feeling that you would be happy to go along now that you see how things turn out if you elect not to do so. But I don’t have a magic wand. I have to respond to what is in front of me.
What is in front of me is a situation where a failed investing strategy has put us in an economic crisis on its way to becoming the Second Great Depression. We know that a large segment of the population feels a deep interest in exploring the academic research that gets us out of that economic crisis and on the way to the biggest economic boom in our history. We also know that there is a group of internet Goons willing to engage in any behavior imaginable, including criminal behavior, to stop the millions of middle-class people who very much need to learn what the academic research says from doing so. In such circumstances, what is the responsible thing to do?
The responsible thing to do is to PUBLICIZE the criminal acts in hopes that it will cause some influential people to work up the courage to do what it takes to bring the madness to and end and thereby to keep the prison sentences as limited as they can possibly be given the amount of water that has already passed under the bridge.
My focus is going to continue to be on the substantive side. I still write the VII column and so on. But I am working hard to gain the courage to be more open in my discussion of the criminal side of this story. Not because I enjoy talking about those things or seeing you serve prison time. Because I want to leave the ugly side of this behind and move on to enjoyment of the vast wonderful side. I want to see the economic crisis brought to an end and I want to see the huge economic boom begin. And I want Pink’s prison sentence reduced to the absolute shortest time-period to which it can be reduced given the realities that prevail today. Any lack of courage evidenced by me at this stage PROLONGS your prison sentence, Pink. Not good. Not good for you. Not good for me. Not good for anyone.
That’s the thinking behind the small change in focus that you are picking up on, Pink. I naturally wish you all the best things that this life has to offer.