“The Problem Stems From the Fact That We Didn’t Always Know Everything There Is to Know About How Stock Investing Works, and When Shiller Published His Nobel-Prize-Winning Research, the Buy-and-Holders Elected to Ignore It Rather Than to Work Up the Courage to Say the Words ‘I’ and ‘Was’ and ‘Wrong.’ Now We Are in a Trap. It Is Now 500 Times Harder for Bogle and the Other Buy-and-Holders to Say Those Words Than It Would Have Been to Say Them 37 Years Ago.”

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

“I hope that helps a bit. I have heard of the Coffeehouse Portfolio. I don’t know what the Cowards Portfolio is. I obviously get it that a three-fund portfolio would include three funds but I couldn’t tell you what those three funds would be. These questions don’t interest me too much.”

So you don’t really know what is in all those portfolios as well as their strategy, yet you say that they will all lose 50% of their value and that VII is superior.

I don’t say that. It’s the last 37 years of peer-reviewed research in this field that says that. I REPORT it. I am a reporter. That’s the kind of thing we do. We don’t just push smiley-face marketing slogans. We REPORT realities.

What if these funds went by the name of “The Irrational Exuberance Portfolio”? Do you think that would sell? Why do you think they don’t do it that way? It’s because they want to turn a quick buck. Valuation-Informed Indexing is what works. Buy-and-Hold is what sells.

It can’t all be about marketing. When millions of middle-class people see their lifetime savings wiped out, they are going to get angry. When they learn that there were people trying to tell them what the last 37 years of peer-reviewed research teaches us about how stock investing works in the real world, their anger is going to intensify. The Buy-and-Hold marketing slogans will be spoken as obscenities in those days. Not a good thing.

There’s plenty of money to be made in this field telling the truth. You could have all these funds and still tell people the truth about the need to practice price discipline (long-term timing) when buying stocks and the funds would actually work and people would like them. The problem stems from the fact that we didn’t always know everything there is to know about how stock investing works, and when Shiller published his Nobel-prize-winning research, the Buy-and-Holders elected to ignore it rather than to work up the courage to say the words “I’ and “Was” and “Wrong.” Now we are in a trap. It is now 500 times harder for Bogle and the other Buy-and-Holders to say those words than it would have been to say them 37 years ago.

Am I responsible for any of that? I was a Buy-and-Holder myself on the morning of May 13, 2002. I was just trying to point out an error in a retirement study because I had come to care about my fellow community members at a discussion board at which I posted and I didn’t want to see them get hurt. I gave up on Buy-and-Hold on the evening of August 27, 2002, when Greaney advanced his first death threat and 200 Buy-and-Holders endorsed it. Huh? What the f? Does that sound like science to you? I became a Buy-and-Holder because it was promoted as being rooted in peer-reviewed research and I believe in science. Death threats ain’t science. Endorsements of death threats ain’t science. No way, no how. It’s not a close call.

Part of the scientific process is learning new things and acknowledging your mistakes when you do. That’s how human knowledge advances over time. Shiller didn’t hurt the Buy-and-Holders when he published his “revolutionary” (his word) research findings. He helped them. He gave them a chance to avoid all of the embarrassment that they are feeling today. That’s what I did for Greaney when I pointed out the error in his retirement study. He should have thanked me. He didn’t. But he should have. If your aim is to help people with a retirement study, you want to know if you have made a mistake. Greaney has made it look like he INTENDED to cause millions of failed retirements, that he was working a con from the first day. It is Greaney who is making Greaney look bad, not Bennett. I have described his study as a big advance over what came before that happened to include an error because lots of people in the field had not come to terms with Shiller’s findings at the time that Greaney prepared his study. I was Greaney’s best friend. And I still am. I am still trying to help him out 16 years later, whether he is able to see that or not.

If you invest in any of those funds without exercising price discipline, you are going to hurt yourself. I am 100 percent sure. Of course that’s true of any good or service that you could possibly buy. If you buy cars or sweaters or bananas without exercising price discipline, you are going to hurt yourself. The idea that stocks are the one exception to the otherwise universal rule was a MISTAKE that in an ideal world would have been corrected when it was uncovered by the peer-reviewed research in 1981. Shiller has described the intellectual leap from the finding that short-term price changes are unpredictable to the Buy-and-Hold belief that the market sets prices properly as “one of the most remarkable errors in the history of economics.” That’s the story here. When you make a mistake re an important matter, you need to correct it. The Buy-and-Hold claim that there is no need to exercise price discipline (engage in long-term timing) is the biggest mistake ever made in the history of personal finance. It is hurting us all. It is in the process of potentially bringing our economic system to its knees.

That’s my sincere take re these terribly important matters, in any event, Anonymous.

I naturally wish you all the best that this life has to offer a person.

Mistake Correcting (and Proud of It!) Rob