“What Happened in 2008 Was a Test of Buy-and-Hold But Not a Big Test. All Buy-and-Holders Say That They Will Hold Through Anything and We Saw That That Is Not the Case. Some — Including the Author of a Book on Buy-and-Hold! — Failed When They Were Put to the Test.”

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

It’s interesting that you say there are no buy and holders even though there are plenty and the bogleheads has evidence. I increased my stock allocation moderately and bought plenty of stocks during the crisis.

The ironic thing is that the one ‘VII’ guy failed to make adjustments. I don’t understand how you can be so dense.

What happened in 2008 was a test of Buy-and-Hold but not a big test. All Buy-and-Holders say that they will hold through anything and we saw that that is not the case. Some — including the author of a book on Buy-and-Hold! — failed when they were put to the test.

Most did not fail. That’s fair to say. But how big was the test? It lasted a few months. You say that you would have held no matter how low prices fell and no matter how long low prices remained in effect. But you just don’t know what you would have done in such circumstances until you have lived through them, Taylor was 100 percent certain that he would never falter too. It’s all just words until you are actually living through the pressures that come with a loss of most of your life savings. So nothing you say about this is really persuasive.

I find the historical return data persuasive. Most Buy-and-Holders sell when prices drop. Prices couldn’t drop as low as they do in bear markets if that were not so. All Buy-and-Holders swear that they will never sell no matter what but most Buy-and-Holders sell at the lows because that’s human nature and human nature counts for more than the Buy-and-Holders’ swearing at a time when prices are high that they will never sell. Anyone can justify violating an oath he took at an earlier time by pointing out that circumstances have changed. They ALWAYS change when prices reach levels as high as they are today. It’s important to take note of that at a time when something constructive can be done about it rather than waiting until all that is left to you are the sorts of rationalizations that we saw Taylor Larimore engage in back in 2009.

We can prove that one too. The proof is that the Buy-and-Holders who swear that they will never sell demand that those pointing to the last 36 years of peer-reviewed research be banned from “their” discussion boards. They cannot bear to hear the history of stock investing discussed in their presence. Why the heck not? If they are no darn confident that their strategy is going to work out, why does it bother them to hear another point of view discussed? That’s not a sign of confidence, Laugh. That’s not a sign of a good strategy.

I didn’t increase my stock allocation when prices were at fair-value levels. But there’s a way to check whether I lost confidence in my beliefs at that time or not. Go to the RobCasts that I recorded when prices were at moderate levels. I started every one off saying that stocks offered a strong long-term value proposition at those prices. Why did I say that if I didn’t possess confidence in the research? I possessed confidence and I demonstrated it with behavior that can be examined in a record that was created in real time.

And of course I did not just tell others that the value proposition for stocks was strong at the time, I took action to take advantage of that opportunity myself. I didn’t run around like a crazy person making sure to buy within 48 hours. I went about a process of making a reasoned buy that everyone in the family agreed to so that everyone in the family would be comfortable sticking with it for the long term. I played it just the way a Valuation-Informed Indexer should play it. We don’t believe in making emotion-based decisions. If I has been running around like a crazy person seeking to make the buy before time ran out on the amazing offer, that would have been emotional. I handled things in an emotionally healthy way. That is 100 percent in tune with the strategy and 100 percent in tune with what the last 36 years of peer-reviewed research in this field shows is what always works in the long term.

And why are you engaging in deception re this point today? You know what I did. Why don’t you come here and say: “Rob, I don’t agree with some of your other posts but I am impressed that, when the time came when prices were where you said they need to be for you to buy, you really did tell others to buy and begin taking steps to buy yourself. The real test of a strategy is not words but actions and you showed during that brief time-period when prices were at fair-value levels that you don’t just talk the Valuation-Informed Indexing talk, you actually walk the Valuation-Informed Indexing walk. As someone who is personally persuaded by advocates of a different strategy, I find that very cool and I am going to continue to ponder it as time goes on to see if there is something for me to learn in the contrast between your behavior and the behavior of Taylor Latrimore, one of my Buy-and-Hold friends who did not show the same courage of his convictions that you showed when the pressure was on.”

You cannot say those words, Laugh. It’s not in you. I mean no personal offence but it’s not in you because you are too scared to let in what happened in those months. You saw your Buy-and-Hold friends lose their confidence in their strategy at the very worst time to lose confidence in it. There is a part of your brain that you have silenced but that is still functioning in the background that tells you that that is something you should examine in some depth before Buy-and-Hold is put to its next test. The part of you that you silence wants to participate in civil and reasoned discussions at every discussion board and blog on the internet so that he learns as much as he possibly can by listening to as many different perspectives as possible. But the soul-crushing side of you, the Get Rich Quick side of you, the financially incompetent side of you, the Goon side of you, says: “No, keep on pumping out more dishonest and abusive garbage, it’s been working so great so far.”

I don’t think it has been working so great so far, Laugh. If it had been working, you wouldn’t be today walking a path that leads to a prison sentence in the days following the next price crash. You don’t possess confidence in your strategy and every post that you advance here shows it. You cannot discuss the last 36 years of peer-reviewed research in a civil and reasoned manner. You can’t even tolerate others discussing it while you sit off to the side a bit in silence. You feel compelled to crush such discussions when you hear them spring up. Not because you truly believe that the peer-reviewed research in this field is on your side. Because you WANT to believe that the peer-reviewed research is on your side and you cannot think of any other means to keep that fading belief alive other than to engage in insanely abusive and, yes, even criminal behavior to keep it from flickering out.

Not this boy, Laugh. I am your friend. You cannot bear to acknowledge it, but that small, remaining, rational voice in your head sees it. That’s why you get so ugly. That voice is telling you what is real and the stronger, irrational voice that controls you cannot bear to hear what the small voice says. I speak up in tune with the small voice and you feel hate for me because you feel threatened by the small voice. The small voice comes from a good place within you. Taylor Larimore wished in the early months of 2009 that he had listened to his small voice on all those occasions when some kind person had suggested to him that he might want to give it a try. You have that chance today. You have that chance every day until the day comes when the money is gone and cannot be called back. It’s your friends who are telling you to at least give that small voice a listen before shutting the door on your future.

These are my sincere thoughts re these matters, Laugh. Hate me as much as you want. I cannot control that. But I really do believe deep in my heart that the very fact that you hate so much is evidence that the last 36 years of peer-reviewed research in this field is telling us all something very, very, very important.

It will be interesting to see how things play out. I naturally wish you all the best that this life has to offer a person regardless of what investing strategy you elect to follow today or at any time in the future.

Rob