Site Visitor: “Not to Even Have an Intelligent Conversation on This Is Crazy. Wall Street Is Powerful But Not More Powerful Than the People. There Are a Lot of Us Who Appreciate What You Have Done. I Guess We Are Silent.”

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

Hey Rob

After reading most of your posts and Pods , and using the calculators, I have this comment I am just a middle class person, but the evidence is undeniable Value based investing is so much more superior to buy and hold that I challenge these people out there to do this When they buy a house I guess price doesn’t matter ? Or lets do this lets buy a house that is 100% overvalued? Do we just buy when the housing market is at the top and hold forever to see maybe it keeps going up?
Or do we look for good deals prices on houses at fair market value?
Not to even have a intelligent conversation on this is crazy But to say “Here is a better explanation:
Narcissistic personality disorder” I guess this looks like to me people who are employed by the Financial Markets so they have a vested interest to keep the scam going. Wall Street is powerful but not more powerful than the people
There are a lot of us who appreciate what you have done, I guess we are silent

Max

I almost agree with everything that you are saying, Max. There’s one caveat that I would add to the message.

I think it is fair to say that Buy-and-Hold is a scam. That’s so today. I do NOT think that it is fair to say that Buy-and-Hold was INTENDED to be a scam. My sense is that it was intended to be something real and that the people pushing it got caught up in their pride and over time it was transformed into a scam. Also, I think it is important to note that the people advocating Buy-and-Hold really do follow it themselves. They deceive others about a matter that is very important and that’s a horrifying reality. But the fuller reality is that they deceive themselves first. The damage done to others is just as real. But the distinction is one that should be noted in fairness. This is not a case where people woke up in the morning and said “oh, let’s see how we can screw people over today.”

The big picture here is that as a society we are in the process of learning how markets work. We just did not know that much about the subject a number of decades back. The Buy-and-Holders taught us tons of amazing stuff. We should be grateful to them for that. And, while there certainly is money being made from the promotion of Buy-and-Hold, there is no reason why the people advocating it couldn’t make just as much money or even more promoting Valuation-Informed Indexing. The unfortunate reality is that Shiller did not publish his “revolutionary” research findings until 1981. So, until recently, Buy-and-Hold was just a mistake, it was just one of those things. Had Shiller showed that valuations affect long-term returns in 1961 rather than in 1981, I am 100 percent certain that we would all be Valuation-Informed Indexers today and that the Buy-and-Holders would all be our good friends.

The Buy-and-Holders want to invest effectively. They want to be able to retire early. They don’t want to see their country suffer from an economic crisis. They don’t want to see the political frictions that we have seen develop in recent years as the result of the continued promotion of Buy-and-Hold for 36 years after we learned that there is precisely zero chance that it could ever produce good long-term results for even a single investor. But they are human. It hurts them to say the words “I” and “Was” and “Wrong.” And they suffer from cognitive dissonance. They so much want to believe in Buy-and-Hold that their minds cannot take in the message that the last 36 years of peer-reviewed research is trying to tell them.

We need to change things. You know that I believe that. I believe that more than anyone else alive on Planet Earth.

And we need to talk straight to bring about change. Pussy-footing around has not gotten the job done. We need to make use of words like “error” and “fraud” and “prison” when those are the only words that can convey the realities facing us. But we also need to be as charitable as we can possibly be without crossing the line and becoming dishonest. The Buy-and-Holders are good and smart people. They have offered many wonderful contributions to our understanding of how stock investing works. Deep down inside, they love their country and, if they could see clearly all the human misery they have caused, they would be horrified to realize what they have done.

We all want the same things. We are all in this together. The Buy-and-Holders are our friends, not our enemies. Our goal is not to defeat them but to reach common ground with them. So long as they follow the laws of the country they live in, their opposition to our ideas helps us sharpen our own thinking and we should be grateful for their respectful and yet spirited challenges to our ideas. This is a Learning Together project. We know some important things that the Buy-and-Holders do not and we need to insist on our right to speak honestly. The Buy-and-Holders also know some important things that we do not and we need to be grateful for their willingness to point it out to us when we wander to the wrong side of the tracks.

I hope that all makes at least a little bit of sense to you (and, in time, to a good number of others as well).

Thanks for dropping by. I am always glad to hear your thoughts.

Rob