The primary purpose of this site is to provide people with the information needed to help us recover from the Buy-and-Hold Crisis.
Most people don’t call it that. People call it “the economic crisis” or “the financial crisis.” Those are misnomers. There is nothing wrong with our economy or with our financial system. We are living through a Buy-and-Hold Crisis, a crisis brought on through the relentless promotion of Get Rich Quick investing strategies for 30 years after the academic research showed that there is precisely zero chance that these strategies could ever work for any long-term investors.
I give the details on why this is so in the articles linked to below. For purposes of this overview, I will offer only the very brief version of the story. Stock prices always return to fair value over time. When the market becomes insanely overpriced, the amount of each investor’s portfolio that reflects the overvaluation over the course of the next ten years of so disappears into cotton-candy nothingness. In January 2000, stocks were priced at three times fair value. So each portfolio was fated over coming years to lose two-thirds of its nominal value. The total dollar value of the market overvaluation was $12 trillion. As that amount of spending power disappeared from our consumer economy, tens of thousands of businesses failed and let go millions of employees. We are today left with no constructive option but to rebuild what we collectively destroyed in the runaway bull market of the 1990s.
The good news is that we now have available to us the academic research that was not available in the days when Buy-and-Hold was being developed. This new research shows us for the first time how stock investing really works. The “experts” who have promoted Buy-and-Hold do not want to acknowledge their mistakes. But they must. And we must insist that they do so. It’s our economy as much as theirs and a deepening of the economic crisis hurts them as much as us. The new research, advanced by Robert Shiller and John Walter Russell and Wade Pfau and others, shows us how to obtain far higher returns while taking on far less risk. The gains to the middle-class investor would be great enough to make up for the losses suffered during the Buy-and-Hold years and then some. So we need to get to work!
Links to articles addressing the following topics are set forth below: