“All of the Elements of Buy-and-Hold Other Than the Crazy Idea That It Is Not Necessary to Practice Price Discipline (Long-Term Timing) When Buying Stocks Have Been Proven Successful.”

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

There has never been 1 documented case of anyone that has successfully implemented VII, yet we have endless data on successful buy, hold and rebalance portfolios. You are just too scared to show this actual data on your website. That won’t look good to your jury.

It’s obviously not possible to have documented cases on successful implementation of a strategy in the days before the research showing the merit of that strategy is published. That covers up to 1981. In the days since 1981, there has been a brutal cover-up. Those who have argued in support of Valuation-Informed Indexing have seen their loved ones threatened with physical harm and have seen their careers threatened by powerful and wealthy and well-connected people. And yet we still have 10 percent of the population that today believes that Shiller’s research was legitimate.

Once we open every discussion board and blog on the internet to honest posting, the percentage of the population following a Valuation-Informed Indexing strategy will increase dramatically. You will have as many successful implementation cases as you desire. The Bennett/Pfau research shows that 100 percent of the people who follow VII will do better on a risk-adjusted basis than those who follow Buy-and-Hold. It’s not possible to do better than 100 percent.

Has Buy-and-Hold had any success? All of the elements of Buy-and-Hold other than the crazy idea that it is not necessary to practice price discipline (long-term timing) when buying stocks have been proven successful. Naturally I incorporated all of those elements into the VII model. So all of the successful elements of Buy-and-Hold will be generating success for Valuation-Informed Indexers.

The only element of Buy-and-Hold that I did not incorporate into the VII element is the one that has been discredited by 37 years of peer-reviewed research. I say that valuations matters. Always. I say that investors need to consider valuations when making investment decisions because the valuation level that applies when making the decision is the most important factor bearing on the question being considered.

Price matters when buying stocks just as it does when buying anything else. ALL of the research shows this. Wade Pfau spent months trying to locate one sliver of research supporting the core Buy-and-Hold claim that it is not necessary to consider price when buying stocks. He came up empty-handed. I wonder why. That one false claim of the Buy-and-Holders has caused more human misery than any other false claim ever made in the history of personal finance.

John Bogle has caused more human misery with that one false claim than Bernie Madoff did with his false claims. 500 times more. I don’t say that he did so intentionally. Bogle developed the Buy-and-Hold strategy before Shiller published his “revolutionary” (Shiller’s word) research. So his mistake was at one time just one of those things. But we can no longer say that 37 years down the road. Bogle should never have tolerated death threats and demands for unjustified board bannings and thousands of acts of defamation and threats to get academic researchers fired from their jobs at a discussion board with his name on it. Bogle was asked to take action re the behavior of the Lindauerheads and he failed to do so. As someone who admires this giant greatly, I urged him to take prompt action I still do.

It will be interesting to see how it all plays out in the days following the next price crash, Anonymous.

I naturally wish you the best of luck in all your future endeavors, dear Goon friend.

Unapologetic VII Advocate (and True Bogle Friend) Rob