The Daily Caller site has posted my opinion piece entitled Conservatives Fall Into a Trap by Blaming Obama for the Bad Economy.
Juicy Excerpt: We haven’t been honest about the true cause of the economic crisis. We are all ashamed that we were taken in by what can fairly be called a Get Rich Quick approach to investing. Did anyone ever really believe that stock prices could go up as fast as they did in the late 1990s without there being a price to be paid somewhere down the road? It’s time to come clean. The alternative is to go along with the liberal mindset that says that only government matters.
Do you have any quantitative evidence showing that buy and hold is what caused the economic crisis?
http://knol.google.com/k/rob-bennett/the-bull-market-caused-the-economic/1y5zzbysw7pgd/3#
Rob
This article is way too long and provides no evidence of causation, only correlation. These are two completely different concepts.
You also failed to show that buy and hold investors are to blame for the rising stock prices. Some evidence of this might include the % of their activity during the late 1990s.
In fact, the vast majority of market activity (and therefore price setting) is done by hyper-active investors – so your underlying premise is completely false.
provides no evidence of causation, only correlation. These are two completely different concepts.
You are highlighting an interesting aspect of this, Sadface.
The way I would say it is that we have strong evidence of causation but not of direct causation. That is indeed the thing that trips people up, in my assessment.
Losing $12 trillion of wealth is going to cause an economic crisis every time. I don’t see how anyone can even question this. So there is a claim of causation being made here.
But there is a tricky element to it. You are right that there is no way to directly tie the loss of the $12 trillion to the events that took place at the time of the crash. That’s why people look to things like the subprime mortgages and deregulation. Those things seem more hard and real and can be better tied to the crash by a chronology of events.
The claim that it was the bull market that caused the crash leaves many cold because it seems spacey — all this talk about Pretend Money and Pretend Money going “Poof!”. It all seems too weird.
My view is that the truly weird thing is the idea of not taking prices into consideration when buying stocks. We take prices into consideration when buying everything else we buy. When we fail to do so with stocks, we CAUSE stocks to enter this spacey realm where things do not make sense and where things are not what they seem.
I am trying to pull things back to the practical and the concrete and the real. I am saying that the valuation-adjusted price of the market is the more real number. The nominal, non-valuation-adjusted price is the spacey price. You have to ask yourself “What does the word ‘overvaluation’ mean?” It means “mispriced.” So why the heck are we using numbers that get the price wrong to do our financial planning?
The Buy-and-Hold vision and the Valuation-Informed Indexing vision are opposite visions. One says that stocks are priced right automatically because investors are rational. The other says that stocks will be priced right only when investors begin making it a practice to use valuation-adjusted numbers rather than phony nominal non-valuation-adjusted numbers. We can have an efficient market. But we need to be willing to work it a bit.
In any event, I thank you for asking a thought-provoking question, Sadface. My guess is that your question helped a lot of people or will help a lot of people as we continue to struggle with it over time.
Rob
This article is way too long
It’s a long article, Sadface. That one took a lot out of me. I spent about five weeks getting that one right.
I don’t think it is too long given the importance of the issue being examined. We are talking about an economic crisis that is now shaking confidence in our political system! That’s a pretty darn big deal.
And there are not too many others making this claim as to the cause of the crash. So I think I have a responsibility to make the case as effectively as possible.
Given the amount of confusion out there re the causes of the crash, I felt that this was a case where using a few extra words to make it clear to those trying to learn made sense.
Rob
the vast majority of market activity (and therefore price setting) is done by hyper-active investors – so your underlying premise is completely false.
I don’t agree, Sadface.
A car has an accelerator and a brake. Say that the brake is cut out and the driver accelerates while on the highway to a speed of 60 MPH. Then he sees a toll booth and hits the brake but nothing happens. The car crashes and he is killed.
You are saying that it was the accelerator that killed him. It was that darn accelerator that caused the car to go so fast.
True enough. But there is a reason why we put brakes in cars and the brake here failed to perform its function. I say that it was the cutting of the brakes that caused the crash. The driver had no brake when he needed one.
The reckless promotion of Buy-and-Hold for 30 years after the academic research showed that there is zero chance that it can ever work for the long-term investor cut the brakes from the stock market car. There were many middle-class people who began to have doubts about how much higher prices could go when prices reaches the insane levels we saw in the late 1990s. They went to sources like Money magazine and the Wall Street Journal and John Bogle’s books to find out what the story was. And what were they told? They were told “Oh, insane prices are no concern at all, just remember that lowering your stock allocation would be timing the market and timing the market is a no-no.”
The “experts” were giving the most dangerous advice imaginable. Yes, all humans have a Get Rich Quick impulse. If we all had been thinking clearly, we would have laughed at the people promoting Buy-and-Hold. But the fact that they put themselves forward as “experts” made what they said 10 times worse. Many people do not realize that marketing considerations are John Bogle’s first, second, third and fourth priorities when he gives investment “advice.” They hear him talk about research and they presume that he is a serious person talking in a serious way about serious things.
This is the root of the problem. Investors need a way to distinguish the people describing the research accurately from those who are just trying to sell them something. I have no objection to marketing. It is part of our system, and, in its place, it is a good thing. But when the stock selling experts are quoting the research inaccurately, I believe we all have an obligation to tell our friends and readers and listeners how they are being tricked.
We do this sort of thing in many other areas of life endeavor. It is common practice to point out con men in every area of life endeavor other than stock investing.I think that the problem is that the financial rewards of working a con in this field are so huge.
If we want to preserve our free market system, we are going to have to open up some means for middle-class people to learn the realities of investing. That’s the counter — honest reports on what the research says.I believe that opening up internet discussion boards and blogs to honest posting on the Big Fail of Buy-and-Hold is a natural. Once we do that, our entire system works again.
Rob
Rob, to use your analogy, I would compare the ‘accelerator’ of the buy-and-hold investors about as powerful as a 10 HP lawn mower. They just don’t have the market volume to make much of a difference in prices.
Secondly, the fact that there was a muted bull market in equities at the same time as a massive housing crash and credit bubble (both of which dwarf the equity markets) is like trying to say that a bucket of water thrown into the Pacific caused a tsunami.
It is just completely misplaced as if you want to believe that the equity market drives all economic activity – which is backwards itself.
To put things in perspective. The total size of world equity markets (not just the U.S., the entire world) is somewhere between 30 and 40 trillion dollars. The derivatives market which includes credit default swaps is estimated at $800 trillion face value. When mortgages started to go bad (which was not a function of the stock market AT ALL) it looked like every major financial firm could die because of their exposure to MBS/CDS. Obviously, since financial borrowing activities (lending/etc) is the core of the economy if the large banks died, the economy would die. This is when equity markets reacted.
Your reasoning that: “Well, people were buying and holding equities and this somehow made them default on their mortgages” or “Well, people were buying and holding which caused equity markets to crash and so without high equity values people defaulted on their mortgages” does not make any sense.
People do not pay mortgages with equity sales. Equity valuations do not affect borrower’s ability to pay.
More evidence that the idea that equity markets caused the economic collapse is wrong:
The total size of the MBS market was more than $150 trillion. This collapse was caused by the bond market and the derivatives market – markets much deeper and much much larger than the relatively small equity market. Saying the equity market caused this collapse is like saying you can roll a boulder uphill with a toothpick.
I think maybe you are over-fixated on the equity market as a result of the bubble of the late 90s which was mostly equity/technology focused and now you are trying to apply the same ideas to a totally different phenomena. It just doesn’t work and it looks a little silly.
I would compare the ‘accelerator’ of the buy-and-hold investors about as powerful as a 10 HP lawn mower. They just don’t have the market volume to make much of a difference in prices.
90 percent of today’s investor’s believe in the core Buy-and-Hold idea that there is no need to time the market, Sadface. That’s the problem.
The intuitive thing would be to ALWAYS time the market, to ALWAYS take price into account when deciding on a stock allocation. That’s what all of us do with every purchase we make of everything we buy other than stocks. Yet it is a small number of investors (perhaps 10 percent) that practices long-term timing. Why? That’s an incredibly strange reality.
The obvious (at least to me!) explanation is that that is because, when Buy-and-Hold was developed, there was a widespread belief in the Efficient Market Theory. If the EMT were valid, there would be no need to engage in long-term timing.
The cause of all the trouble is that the EMT was discredited in 1981 by Shiller’s research and the Buy-and-Hold advocates just never updated their approach to keep it in line with the academic research. I think it is fair to say that the primary reason is that the uncorrected approach appeals to the Get Rich Quick impulse within all of us (we all like to think that the phony gains experienced in bull markets are somehow real and can be counted as a help in financing our retirements).
The accelerator is the idea that it is not necessary to take price into consideration when buying stocks. There were hundreds of millions of dollars directed to promoting this “idea” (it really is just a marketing slogan now that the Efficient Market Theory has been discredited).
This idea is part of the Buy-and-Hold package that the Buy-and-Holders have never disowned. So they have to take the blame for the vast financial damage that was caused by promotion of it. 90 percent of today’s investors are unaware of the need to engage in long-term timing to have any chance at all of achieving long-term investing success.
All of this didn’t just happen by itself, Sadface.
Rob
“It is just completely misplaced as if you want to believe that the equity market drives all economic activity – ”
It’s not that the equity market drives all economic activity. It is that the Biggest Mistake in the History of Personal Finance is a mistake that affects the equity market directly. You need to try to appreciate how big a mistake Fame made when he surmised that the equity market is AUTOMATICALLY efficient.
The idea that the market SHOULD be efficient is a good one. Most other markets are reasonably efficient. So Fama was on the right track.
But you have to consider the MEANS by which efficiency is achieved in all other markets. It is achieved by market participants paying attention to price. The car market would go insane if no one paid attention to price. So would the banana market. No market can function without price discipline. It is absolutely essential.
Fama (and Malkiel and Bogle) removed all price discipline from the stock market. They rendered it dysfunctional. And the problem was not corrected for DECADES. Eventually,it got so bad that it took down the global economy. We just need to go in and fix that problem, stop telling people that it is not necessary to engage in long-term timing.
Your heart is a more important part of your body than your finger, right? Say that your heart is fine but that your cut off your finger and do nothing to stop the bleeding. That could kill you, right? The fact that the equity market is not the driving force for the economy does not mean that a huge mistake being made in the equity market cannot bring everything down. The problem is that the mistake was so big and that it remained uncorrected for so long.
We all need to acknowledge the mistake and get about the business of fixing it. We need to stop making excuses and stop trying to shift the blame elsewhere. The market is not automatically efficient. It can become efficient only if investors are permitted to learn that they need to practice long-term timing to achieve long-term investing success. Getting the basics right is important.
Rob
“When mortgages started to go bad (which was not a function of the stock market AT ALL) ”
No. All of the problems with mortgages were caused by the reckless promotion of Buy-and-Hold.
It was Buy-and-Hold that caused the insane bull market. The insane bull market caused people to believe that they were far richer than they were. Stocks were priced at three times fair value at the top of the bull. The guy who had $100,000 of real value in his portfolio was thinking that he had $300,000. You don’t think that affected his spending?
Millions of people were spending far more than they could afford to spend on all sorts of things, including houses. People would not have overextended themselves so much if we had given them accurate numbers for the amounts of wealth they held in their stock portfolios. It is the trillions in Funny Money created by the promotion of Buy-and-Hold that is at the root of all our economic problems, in my assessment.
Rob
“it looks a little silly.”
But claims that creating $12 trillion in Funny Money might not cause an economic collapse don’t look silly to you, SadFace.? Be honest now!
These were good comments and observations, Sadface. I hope that some people will gain a better understanding of things by thinking them over.
Rob
The point is that 12$ trillion is the small tail of the problem.
The real problem was the 150$+ trillion MBS market and the 800$ trillion derivative/CDS markets.
12$ trillion dollars in this context is next to nothing and if only 12$ trillion had vanished this ‘crisis’ would have been of minor consequence. Its immaterial and was certainly not the cause of the latest crash. In some contexts, like the late 90’s bubble it was the equity markets but not this time – not this time at all.
“90 percent of today’s investor’s believe in the core Buy-and-Hold idea that there is no need to time the market, Sadface.”
Um, where did you get this data? This seems contrary to just about _every_ source. The market is _extremely_ active and the average holding time for an equity is less than 6 months or something. That IS NOT buy and hold…again, you might be mistaking what some ‘middle class’ investors do (who don’t have enough money to move markets) with what the market actually does.
Your logical progression makes no sense as well. To boil down your 800 paragraphs:
***************
Somehow, because it is inherently wrong, buy and hold caused people to not be able to pay their mortgages.
***************
Seems dubious. The more likely and far more simple explanation is that people bought more house than their incomes could afford financed by risky lending and when the credit bubble popped they could not refinance their way out of it.
I think you see the world through an extraordinarly narrow overly equity-focused viewpoint. Maybe because you like equities and feel comfortable with them (even though from what I have read you dont really understand them).
BTW, how come mortgages did not go bad when there was a much bigger equity bubble in the late 1990’s?
The current crisis is far worse and the stock market losses are far less…so your explanation just does not add up at all.
[i]12$ trillion dollars in this context is next to nothing and if only 12$ trillion had vanished this ‘crisis’ would have been of minor consequence.[/i]
You’re wrong. Sadface.
Compare the $12 trillion number to the numbers for the budget deficit or the national debt and you will see that you are wrong.
The other numbers you are citing at not loss numbers. The $12 trillion is a loss number.
A $12 trillion loss means a wipeout of the entire economy every time. There is zero possibility that a $12 trillion loss would not sink the entire economy.
Check what a $12 trillion loss translates into in terms of the loss for each adult and you will get a sense of what we are up against as a result of the widespread promotion of Buy-and-Hold for so many years.
Rob
The market is _extremely_ active and the average holding time for an equity is less than 6 months or something. That IS NOT buy and hold…
The issue is not whether investors are active or inactive. It is whether they are lowering prices or increasing prices. When prices go to insane levels, we need to have rational investors step in and sell to bring prices back to reasonable levels. The Stock-Selling Industry was spending hundreds of millions of dollars promoting the idea that it is okay to stick with the same stock allocation even when stock prices go to insanely dangerous levels. Millions of people bought into the Get Rich Quick scheme.
The market has never survived the widespread promotion of Buy-and-Hold. We are now four-for-four re Buy-and-Hold causing stock crashes. We are also four-for-four re Buy-and-Hold causing economic crises (and we have never had an economic crises dating back to 1870 except in the aftermath of times when Buy-and-Hold became popular). I am beginning to detect a pattern.
The claim that it is not necessary to time the market most certainly IS Buy-and-Hold. John Bogle has said this thousands of time. All Buy-and-Hold advocates say it. In fact, honest posting on the need to time the market has been banned at numerous sites where Buy-and-Hold advocates promote their Get Rich Quick scheme. Even the Wall Street Journal acknowledged in a recent article that the purpose of the absurd claim that it is not necessary to engage in long-term timing is “to keep the clients fully invested.”
Get Rich Quick schemes have a horrible track record, Sadface. Do you remember what a lot of people said about the Madoff fund? If it sounds too good to be true, there’s a good chance it isn’t true.
Rob
people bought more house than their incomes could afford
People had no idea what their real net worth was. Stocks were overvalued by a factor of three in 2000. Those who had portfolios worth $100,000 were being told that they had portfolios worth $300.000.
That ain’t no way to run a railroad, Sadface. Especially not in an era when we have told middle-class workers that they are responsible for financing their own retirements. If we are going to make people responsible for financing their retirements, we need to provide them the means to obtain accurate and realistic and honest information about how stock investing works.
My sincere take.
Rob
Maybe because you like equities and feel comfortable with them (even though from what I have read you dont really understand them).
But the stock selling experts know them well — is that it?
Are these the same stock selling experts who have failed to let middle-class investors know of the errors made in the Old School SWR studies for eight years after we discovered these errors at the Motley Fool board? Are these the same experts who now rationalize the millions of failed retirements they caused by claiming that those wildly wrong numbers were just a “rule of thumb”?
It’s those experts who have the jump on me? They have the jump on me when it comes to marketing, I think that much is fair to say.
Rob
how come mortgages did not go bad when there was a much bigger equity bubble in the late 1990?s?
It’s the equity bubble of the late 1990s that created the $12 trillion in Funny Money, Sadface. Without the widespread promotion of Buy-and-Hold, that would not have been possible.
I oppose Get Rich Quick. Please feel free to quote me re this one everywhere on the internet. I would feel that you were doing me a favor.
Rob
Rob,
So far I haven’t seen anything logical in your defense of your theory. In fact, you continue to redefine terms like ‘buy and hold’ and how it is now actually unrelated to the actual hold time of the asset. Or how buy and hold is somehow related to ‘get rich quick’ even though it bares no resemblance to typical ‘get rich quick’ schemes. Or how the bubble of the late 1990s (which popped 10 years ago) somehow directly created the bubble that caused the housing boom (as if loose lending standards, FED fueled credit bubbles, over-securitization of mortgages, etc – all of which have little to do with the stock market – had nothing to do with it). This is all fantasy and word games.
Rob, it really seems as though you are a broken record and your entire existence is defined by the events of the late 1990s, which I remind you happened more than 10 years ago….time to get over it and move on to the present. Its sad 🙁
Two fundamental flaws in your entire position:
1) Middle class investors hold a tiny percentage of the equity markets and do not influence prices. It does not matter what a 12$ trillion loss amounts to on a per person basis because the wealthy hold almost the entire equity market. So, you would be dividing two unrelated things.
2) Not everything is because of the stock market. The equity markets are small compared to many other financial markets and typically is not the driver of its big brothers.
Or how buy and hold is somehow related to ‘get rich quick’ even though it bares no resemblance to typical ‘get rich quick’ schemes.
There’s one important sense in which I see Buy-and-Hold being different from other Get Rich Quick schemes. Madoff created fake documents. That’s deliberate fraud. Buy-and-Hold is not promoted with fake documents. Most, perhaps all, of those promoting Buy-and-Hold themselves believe in it and follow it. That’s an important distinction.
To some extent, though, that is typical of all Get Rich Quick schemes. It’s not true of Madoff himself. But most of the people who were brought into the Madoff scheme were not brought in by the marketing of Madoff himself but by the promotion of his fund by other investors who had already been taken in. Those people believed! Those people had their own money at risk! How is that different from Buy-and-Hold?
Humans have a huge capacity for self-deception, Sadface. Buy-and-Hold is all about self-deception. The key characteristic of a Get Rich Quick scheme is that it sounds too good to be true. That’s Buy-and-Hold. Where did the money come from to finance those 20 percent and 30 percent gains we were seeing in the late 1990s? No Buy-and-Holder can answer that question. That’s because the answer is that the money was being borrowed from the investors who would come along 10 years later (us!). It’s Get Rich Quick to pretend that borrowed money that needs to be repaid is real and can be counted for purposes of planning a retirement.
Buy-and-Hold is the most dangerous Get Rich Quick scheme ever concocted by the human mind precisely because it is widely viewed as respectable. People don’t expect to have the Wall Street Journal and Money magazine and Vanguard and all these other respectable entities promoting a Get Rich Quick scheme. That’s why the people promoting it found Buy-and-Hold to be such a pot of gold. No Get Rich Quick scheme of the past ever had going for it what Buy-and-Hold had going for it.
But it’s not something you can do more than once. The bigger the Get Rich Quick scheme, the greater the losses suffered when it collapses. We are going to have to move on to discussion of legitimate investing strategies.
Rob
Or how the bubble of the late 1990s (which popped 10 years ago)
Are you joking, Sadface?
Have you looked at the valuation levels that applied until September 2008?
It’s true that we are only at dangerous valuations today, not at the insane valuations we were at prior to September 2008. But September 2008 is not 10 years ago.
We are today in the early stages of paying back the many trillion dollars of debt we took on with the massive promotion of Get Rich Quick in the late 1990s.
It may take decades to recover. I hope not. But if the charade continues too much longer, we are likely to go into the Second Great Depression and that will delay our recovery by many years. It is possible that it will render recovery impossible. It is not out of the realm of possibility that once we enter the Second Great Depression, we will be nearing a Game Over situation. You need to sober up a bit.
We have so far only seen a small taste of what it is going to take to recover from what we did to ourselves when we banned honest posting on investing in deference to the desire of The Stock-Selling Industry to promote the greatest Get Rich Quick scheme ever concocted by the mind of mortal man.
If you are somehow under the impression that we paid back the $12 trillion in the tech crash, I am afraid that you are mistaken. You need to recheck your numbers and your thinking, Sadface. The tech crash hurt a lot of people. But comparing that to what was done to the middle-class through the promotion of Buy-and-Hold is like comparing a wading pool to the Atlantic ocean. It’s two very different orders of things. There is no legitimate comparison that can be drawn.
Rob
as if loose lending standards, FED fueled credit bubbles, over-securitization of mortgages, etc – all of which have little to do with the stock market – had nothing to do with it)
These things had everything to do with the stock market, Sadface.
There’s nothing more “loose” than creating $12 trillion out of thin air and telling middle-class investors that they can use it to finance their retirements. There’s nothing more “loose” than publishing studies that people use to plan their retirements, getting all the numbers wildly wrong, and then refusing to correct them for many years after the errors are brought to your attention.
Once you have bought into a Get Rich Quick scheme, you are in no position to demand that others report numbers accurately. How many people do you know who followed Buy-and-Hold? Lots of people, right? Well, guess what? Some of those people were bank regulators. Some of those people were lawmakers. Some of those people were voters. Some of those people packaged mortgages.
You cannot be loose as all get-out in one area of your life and then be tight in other areas. A bull market is a Liar’s Market. By definition. They don’t call it a bull when stocks go up by the 6.5 percent real justified by the economic realities. When we lie in one area of our lives, it makes it harder for us to resist lies in all other areas of our lives.
The success of the free market depends on honesty, If people do not have trust that numbers are being reported accurately, they are unwilling to engage in the trading that makes the free market work. We have all been using phony numbers in our stock transactions for years now. If we want our free market economy to work, we are going to have to stop doing that. We are going to have to open up the internet to honest posting on SWRs and other investing topics and bury Buy-and-Hold 30 feet in the ground, where it can do no further harm to humans and other living things.
It’s an either/or, Sadface. We can have the free market economy or we can have the massive Get Rich Quick scheme. A rational person is not able to imagine any scenario in which we can indefinitely have both. One or the other is on its way out.
Rob
your entire existence is defined by the events of the late 1990s, which I remind you happened more than 10 years ago….time to get over it and move on to the present.
A long-term investor does not concern himself only with what numbers appear on his portfolio on one single day of time, Sadface. The idea of investing for the long term is to care about how what you do today is going to affect you for five and ten and fifteen and twenty years into the future.
We are today in the early days of paying back the massive debt we took on with the promotion of Buy-and-Hold in the late 1990s. I’ll stop worrying about what it is going to take to pay back that debt when the debt has been fully paid and when we are no longer working for The Stock Selling Industry and are back to working for ourselves, as befits the dignity of a people that at least at one time cherished its freedom (and that I believe will do so again in coming days).
My hope is that we will NEVER entirely forget what we did to ourselves during the Buy-and-Hold Era. I believe we will get past it. I believe we will rebuild. But I hope that we will create web sites that will record all that went on, all the human pain suffered and all the slippery sales talk used to market Buy-and-Hold and all the ugliness employed to block those trying to post honestly on investing topics and all the rest. We need to take a vow that nothing like this will ever, ever, ever happen again.
When we do that, our suffering becomes meaningful. When we do that, it becomes possible to construct a narrative in which the pain we are suffering today ends up being in the service of a noble goal — the creation of a world in which middle-class people can participate in the rewards of a capitalist society and plan their retirements in honest, realistic, prudent, effective, life-affirming ways.
We need an investing strategy that reflects the sort of people we are. We are not trash. So we should not be satisfied with trash investing strategies. And I think it is fair to say that investing strategies that can only be “defended” with trash talk are themselves big pieces of ugly, smelly trash.
No?
Rob
It does not matter what a 12$ trillion loss amounts to on a per person basis because the wealthy hold almost the entire equity market.
It’s true that the wealthy own a high percentage of equities.
But those same wealthy people are also responsible for a lot of the spending that takes place in our economy. The wealthy buy lots of cars and houses and vacations and electronics. They have pulled back because of their stock market losses. And that has hurt our economy.
The bottom line is that there is no way that you can create $12 trillion in Funny Money and not collapse the entire economy when it disappears, Sadface, It was a foolish thing to do. It was a dishonest thing to do. It was a heartless thing to do.
There is no excuse for it given that the academic research showing that valuations affect long-term returns has been available to us for 30 years now.
Rob
It does not matter what a 12$ trillion loss amounts to on a per person basis because the wealthy hold almost the entire equity market. So, you would be dividing two unrelated things.
Allocate the losses according to the percentage of equities owned and you come to the same place, Sadface.
It’s a bad place.
Rob
Not everything is because of the stock market. The equity markets are small compared to many other financial markets and typically is not the driver of its big brothers.
If people had access to accurate information on how to invest, the stock market would not be a driver.
You are forgetting that we do not ban honest discussion on any other topic.
When you ban honest discussion re one area, the behavior going on in that area gets more and more and more removed from reality over time. That’s what has happened in the stock market during the Buy-and-Hold Era. They elected in 1981 not to correct the error on which this strategy was built and the consequences of that decision just keep getting bigger and bigger and bigger. The only thing that I can think of that could change it is to open the internet to honest posting on investment topics.
It’s not that the stock market is so big (although it IS big). It is that it is so crazy today. That craziness becomes more and more and more of a factor the longer it is permitted to continue.
If we had fixed the problem back in 1981, no one would have even noticed. The effect of the error would have been zero. But this has been going on for 30 years now! The costs just keep getting larger and larger and larger and larger.
It’s insane. I’ll give you that one. It makes no rational sense that a mistake that a few people in The Stock-Selling Industry made and that was discovered three decades ago should not be bringing down the entire U.S. economy today. The tricky part is that they got millions of us to buy into the Get Rich Quick scheme and there is today a huge shame about what we have all done. We all know on some level of consciousness that we messed up but we hate the idea of talking about it and coming clean about it.
So it will get even worse.
THEN we will talk about it and come clean.
Once we do that, it’s clear sailing. Once we do that, we can take what we learned about investing 30 years ago, add it to what the Buy-and-Holders taught us (which is also of huge value) and have the greatest investing strategy ever developed by the mind of mortal man instead of the worst. We will be experiencing the strongest economic growth we have ever seen.
But it doesn’t happen by you and me talking about it, Sadface. We need people like Bogle to get up on a stage and say the Three Magic Words clear enough so that everyone can hear and understand.
That’s been the holdup for over eight years now, or arguably for 30 years if you go back to when the 1981 research was published.
Rob
I don’t see any logic in your multitude of paragraphs, just suppositions. So I must cease to discuss this with you.
Good luck, you need it.
Good luck, you need it.
We all do, Sadface. I mean, come on.
Anyway, I believe that our combined effect was to give people on both sides some things to think about. That’s not a bad thing! Take a bow, my old friend.
Rob