Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
The premise is wrong and represents deeply flawed thinking. There will always be some kind of back-tested approach that ‘worked in the past’. it is logically impossible to show that long (or short) timing ‘doesn’t work’. There was always something that worked.
Either the premise of Buy-and-Hold is wrong or the premise of Valuation-Informed Indexing is wrong. It is a logical impossibility that both are right since the two premises contradict each other (it’s not possible that price changes are always caused solely by economic developments and also sometimes caused at least in part by non-economic psychological factors, it’s not possible that investors as a whole are always 100 percent rational and that investors as a whole are also sometimes highly emotional).
It’s natural that you would think that my premise is wrong and that it represents deeply flawed thinking. You believe in the opposite premise. You couldn’t believe in the opposite premise without thinking that my premise is wrong and represents flawed thinking. But of course the same is true coming from the other direction. I couldn’t believe in my premise without thinking that your premise is wrong and represents flawed thinking. The premise that one holds to determines one’s take on every stock investing question. We are essentially living in different worlds, speaking different languages.
The question is — What to do in such circumstances?
We could refuse to speak to each other. We could say “that guy says weird stuff, even his language is messed up, I am not going to have anything to do with him.” From the perspective of the person holding the premise, doing that makes a lot of sense. There are people talking about this sort of question in the political realm. They are saying that Trump supporters and Trump detractors disagree on fundamental questions and cannot get along and that they thus should not even try, they should just limit their communication to others in the same tribe and ridicule and dismiss anything they hear from people in the other camp. It is unsettling to hear ideas expressed that one does not believe in.
I do not at all think that this is the right way to go. I have sympathies for some things that Trump supporters say and I have sympathies for some things that Trump detractors say. I think there are good people on both “sides.” I put the word “sides” in quotes because I believe that all of us who live in America are on the same side, we all need to try to learn from people with different views and work with them to build the best country we can build. It’s hard sometimes. It’s confusing sometimes. It’s unsettling sometimes. But it works. I think that making an effort to understand where the other fellow is coming from pays huge dividends down the line. Personally, I believe that it is probably the only thing that works in the long run. None of us know it all, Just when we think we have it figured out, something unexpected comes along to throw us. Often it is the disparaged “Other” who possesses the background needed to come to terms with this unexpected development and it is only by listening to what the disparaged “Other” says that we shape ourselves into our best possible selves.
I agree that it is not possible to show with absolute certitude either that long-term timing works or that long-term timing doesn’t work. We are not Gods. We really don’t know anything with absolute certitude. And in this case our knowledge is particularly limited. We don’t have the amount of data that we would need to feel 100 percent confident of either position. We don’t disagree re that one (although I think it would be fair to say here that you ACT as if you believe you possess perfect knowledge when you demand that those who express views rooted in a different premise than the one you subscribe to to be banned from our boards and blogs — please note that I do not demand that Buy-and-Holders be banned).
We cannot wait until we have perfect knowledge. We need to make some decision as to how to invest our money TODAY. We would like to have perfect knowledge but we do not possess it. What to do?
I say that we should let both sides speak. That’s what the published rules of every site say. That’s what the laws of the United States say. That’s what our social norms say. I believe that that is the way to go.
That’s not the way we have gone as a people over the past 16 years. You have prevailed in your efforts to get the views of those holding the minority point of view suppressed. In some cases you have out-and-out banned them. In other cases they took note of what happens to people who express the minority view in clear and firm terms and adopted a policy of self-censorship so that they could continue to speak in a halting and vague and limited and apologetic way. That’s not the path that I have chosen. I have insisted on my right to speak honestly and I have gotten banned at the demand of those holding the majority point of view.
That’s where things stand, Laugh. You think my premise is flawed. I think your premise is flawed. You are in the majority, I am in the minority. Our social norms, reflected in our laws and in the published rules of all of our boards, say that the minority has a right to express its sincere views without hesitation or vagueness. Those social norms have not been reflected in the decisions of site administrators. I think those site administrators made bad calls. I think they hurt their sites by shutting down the clear expression of the minority point of view. I think that, once a board shuts down the expression of a minority point of view supported by 37 years of peer-reviewed research and a Nobel prize in economics, that that board becomes a corrupt entity. I don’t want to play a role in corrupting our boards. I want them to achieve their fullest potential. I don’t think they can achieve their fullest potential until then come to reflect our social norms and our laws. I think that it is only when every community member feels free to express his or her sincere views that our boards can do the good that they were set up to do.
You are the “Other” to me every bit as much as I am the “Other” to you, Laugh. I disagree with your views on how stock investing works. But I do not want to limit your ability to express your views (I of course DO want to limit your ability to violate the laws of the United States, which is not at all the same thing — the laws of the United States limit what you can do to block others from speaking, they do nothing to limit your ability to express your own views honestly). I do not dislike you. I view you as a friend. I view you as someone who happened to live through different experiences than me and who as a result came over time to believe that Fama’s research is legitimate and Shiller’s research is not while my life experiences caused me to believe that Shiller’s research is legitimate while Fama’s research is not.
Is it unsettling for someone who believes that Fama’s research is legitimate and who has his retirement money riding on that belief to hear that there are people who do not believe that? Sure. The reason why our laws say that the minority may speak even in cases where the voicing of their views is unsettling to the majority is that there are circumstances in which permitting the voicing of minority views leads over time to amazing growth experiences for everyone and our social norms favor the creating of amazing growth experiences. I love my country and its social norms. That’s why I love the idea of permitting honest posting on the last 37 years of peer-reviewed research at every discussion board and blog on the internet.
I hope that helps a small bit, my dear “Other” friend.
Deeply-Flawed-Premise Advocating Rob
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