Buy-and-Hold Goon to Rob: “If You Needed Heart Surgery and a Doctor Said That He Could Do a Procedure That Has a Demonstrated Track Record of Success or, Alternatively, He Said That You Could Try This Other Surgery That Might Work, But Has No Track Record, Which Would You Choose?”

Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

If you needed heart surgery and a doctor said that he could do a procedure that has a demonstrated track record of success or, alternatively, he said that you could try this other surgery that might work, but has no track record, which would you choose?

I don’t agree with you that Buy-and-Hold has a demonstrated track record of success, Anonymous.

The U.S. stock market has generated an annual average return of 6.5 percent real for 147 years running. U.S. stocks should represent an AMAZING long-term value proposition.

But look at what happened in the four occasions in U.S. history when the Buy-and-Hold “strategy” became popular. On the first occasion, this “strategy” caused losses big enough to cause the first of the four economic crises suffered in U.S. history. On the second occasion, this “strategy” caused losses big enough to cause the second of the four economic crises suffered in U.S. history. On the third occasion, this “strategy” caused losses big enough to cause the third of four economic crises in U.S. history. On the fourth occasion, this “strategy” caused losses big enough to cause the fourth of four economic crises in U.S. history.

Huh? What the f?

I’m beginning to develop a funny feeling that perhaps going pure Get Rich Quick is NOT the answer, that perhaps going pure Get Rich Quick is actually the freakin’ problem, just as the last 36 years of peer-reviewed research in this field indicates.

When the first heart surgery was performed, there was no “track record of success.” There was a mountain of scientific evidence showing that heart surgery would enhance millions of lives and the decision was made that as a society we would have to go with what the science said and let the track record of success develop naturally over time. Had advocates of the morticians lobby threatened to kill any doctors who employed the new scientific knowledge to help millions of people lead better lives, we would all be worse off today.

Fortunately, we have laws protecting us against that kind of behavior. Unfortunately, the Wall Street Con Men have for 36 years now been able to use their considerable wealth and power and connections to evade those laws. I think it would be fair to say that following the next price crash we will be working together as a society to insure that our laws are enforced, that those who have posted in “defense” of Mel Lindauer, John Greaney and Jack Bogle will be put in prison cells where they belong so that the rest of us will be able to enjoy the benefits of Shiller’s “revolutionary” (his word), Nobel-prize-winning research for many decades to come.

It will be interesting to see how it all plays out, Anonymous.

I naturally wish you the best that this life has to offer a person, my hostile-to-scientific-breakthroughs friend.

Rob