Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
“Wade said the same thing over and over and over and over again. Then he was threatened and he took it all back. Gee, I wonder what was going on there.”
No need to wonder. It’s obvious. Just one small but typical example is in this same comment:
“the 1996 prediction did not pan out”
“long-term timing always works”
You fail to the contradiction there, which proves that you are irrational and impossible to reason with.
Wade disowned you in 2012, and your reaction was an epic psychotic break from which you have never recovered. I could post the link but it’s ancient history. It’s sad that you won’t ever get past it.
I agree that Shiller’s 1996 prediction did not pan out. I do not agree that that shows that long-term timing does not always work.
If prices fall over the next year or two or three by 75 percent (that would take us to a P/E10 of 8 — there has never once in U.S. history been a bull/bear cycle that did not get us to a P/E10 of 8 or lower before it fully resolved and a new cycle was able to begin), those who followed Shiller’s 1996 advice to lower their stock allocations will be FAR ahead of those who followed Buy-and-Hold strategies instead. Presuming that stocks continue to perform in the future at least somewhat as they always have in the past. this will be one more case in which exercising price discipline when buying stocks (by engaging in long-term timing) will have paid off big time, even though the precise prediction advanced by Shiller (that prices would drop hard within 10 years) did not in fact pan out.
Remember when Wade said re long-term market timing that “It hardly matters how we do it” because the evidence that it works in every possible circumstance is so strong? That’s what he was getting at. Long-term timing is price discipline. How could there ever be a circumstance in which exercising price discipline would not work? Shiller once said that the conclusion that the Buy-and-Holders jumped to, that because short-term timing does not work, the market price is the product of rational choices and reflects reality, is one of the most remarkable mistakes in the history of economics. I would add that it is in the process of causing more human misery than any earlier mistake ever made in the history of personal finance.
It doesn’t matter too much WHEN the pretend gains caused by irrational exuberance disappear into the wind. What matters is that they always do. If you know that those gains are going to be disappearing in coming days, you should not be counting them as part of your retirement portfolio. That’s what the Buy-and-Holders do. The Buy-and-Holders count those pretend gains as real (because they believe that those gains are the product of economic developments, not irrational exuberance).
That’s the core difference between Buy-and-Holders and Valuation-Informed Indexers. We have different views as to where excess price gains come from. If you believe that big price gains are the product of economic developments, then they signal something very positive — a growing economy. But if you believe that big price gains are the product of irrational exuberance, then they signal something very negative — a market that has become insanely emotional. How you feel about that core question is going to determine how you feel about every other question that comes up in stock investing. If you think that the market has gone insanely emotional, you are not going to feel comfortable putting too much of your money in it. If you think that high prices just signal a super strong economy, you are going to celebrate the big gains because you will want to participate in the benefits of the super strong economy to the greatest extent possible.
Wade didn’t disown me. The 16 months in which we were working together were the happiest and most exciting months of his life and he properly remains immensely proud of the research paper that we co-authored. He stopped promoting the paper and stopped working with me to get the word out about the realities of stock investing to millions of middle-class investors because he saw what you Goons do to people who post honestly re these matters and he saw how Bogle failed to act when he saw what was going on and he concluded that he needed to pull back to keep his career from being destroyed. Those who want to know Wade’s sincere views re what works in stock investing can read the items under the “Wade Pfau” category at this blog and learn some amazing stuff. Wade will be flipping back to work with the good guys in the days following the next price crash and I believe that he will be awarded a Nobel prize for his amazing work at that time. We’ll see.
Buy-and-Hold was a mistake. Now that the mistake has been covered up for 37 years through insanely abusive behavior, I think it would be fair to characterize it as a scam. It’s a scam that is killing us as a nation. I OPPOSE the scam. I am proud to be able to say that I have been publicly OPPOSING it for 16 years now. Who else can say that?
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, scam promotion or no scam promotion. My personal belief is that, in the days following the crash, when you have seen the effects of Buy-and-Hold on your own retirement hopes, you will flip too and we will be working together as friends to get the word out about the exciting last 37 years of peer-reviewed research in this field to every investor alive on the planet. I sure hope it turns out that way, in any event.
My best and warmest wishes to you, Goon pal.
Psychotically Broken Rob
Anonymous says
Oh uh, Rob. There is already an excuse lined up for the next big stock drop.
https://www.google.com/amp/s/www.cnbc.com/amp/2018/11/03/david-stockman-epic-downturn-is-here-brace-for-40percent-market-plunge.html
It looks like there won’t be anyone to blame buy and hold, which means you won’t be getting your $500 million.
Rob says
Different people are going to have different opinions. That’s normal and healthy. I am obviously not saying that everyone is going to wake up on the day following the next price crash and say “oh, Buy-and-Hold caused that.” What I believe is that we will see a change in investor psychology following a 50 percent price drop. People will be more open to hearing new ideas.
That means that people will be willing to listen to what the last 37 years of peer-reviewed research shows us. The last 37 years of peer-reviewed research shows that it is investor emotion, not economic realities, that cause stock price changes. That’s why, when prices rise to crazy high levels, they always crash. Investor gains that are rooted in emotion (irrational exuberance) are temporary, not lasting. So people need to be warned not to count those amounts as amounts that can be used to finance their retirements.
I listened to the video. I don’t see how Stockman is saying anything one way or the other about Buy-and-Hold. I don’t know what you are saying his non-Buy-and-Hold “excuse” is? Are you just saying that he is saying that there will be a recession? Recessions don’t just show up for no reason. If it is true that stock price changes are caused by investor emotion (irrational exuberance) and that those amounts always disappear into the mist in the long run, then big price gains always bring on recessions, no? A price drop of 50 percent would take trillions of dollars of spending power out of the economy. Are you able to imagine any way that we could experience a loss of trillions of dollars of spending power and NOT see a recession? I sure am not.
The smart way to go is to open every discussion board and blog on the internet to honest posting on the last 37 years of peer-reviewed research in this field. That way, we can educate investors to act in their self-interest and to lower their stock allocations when prices get so high that stocks offer a poor long-term value proposition. That would make stock prices self-regulating. Each price gain would bring on sales of shares, which would bring prices back to fair-value levels, where they belong. Once we are able to get that message out, our entire economy will operate much more smoothly, with few crazy booms and fewer crazy busts. That’s a win/win/win/win/win for every last one of us.
That $500 million is starting to look so close that I can almost smell it!
Rob, a Man Whose Stock Appears to Be RISING
Anonymous says
“That $500 million is starting to look so close that I can almost smell it!”
Your sense of smell is off.
Rob says
It could be. I’ve gotten them wrong before, heaven knows.
Imperfect Rob