“The Buy-and-Holders Didn’t Know About the Importance of the Distinction Between Short-Term Timing and Long-Term Timing at the Time They Were Developing Their Strategy. Shiller Showed That in 1981 and Buy-and-Hold Was Developed Before That. So the Buy-and-Holders Just Made a Mistake.”

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

You are just repeating the same delusions that have been addressed thousands of times.

I would say that it’s the other way around, Anonymous It’s the Buy-and-Holders who repeat and repeat and repeat a mistake that was uncovered by the peer-reviewed research 38 years ago.

There is zero evidence that price discipline (long-term timing) is not required when buying stocks. ALL of the evidence shows that long-term timing always works and is always required. But the Buy-and-Holders continue to make this crazy claim that there might be some mystical, magical world where long-term timing might not work every time, Huh? What the f?

It all goes back to a mistake made back in 1965. Eugene Fama published research showing that short-term timing doesn’t work. Good for him. That one has stood the test of time. That was an important finding. If the Buy-and-Holders told investors to avoid short-term timing, they would be heroes.

That’s not what they say. They say to avoid all forms of timing, both short-term and long-term. Why do they do this? They didn’t know about the importance of the distinction between short-term timing and long-term timing at the time they were developing their strategy. Shiller showed that in 1981 and Buy-and-Hold was developed before that. So the Buy-and-Holders just made a mistake. No biggie. It happens. The only humans who never make a mistake are the ones who never try to accomplish anything.

So the Buy-and-Holders make a mistake and Shiller uncovers it and all is well that ends well, right? Not quite.

The Buy-and-Holders become EMBARRASSED by their mistake. So, instead of owning up to it, they elect to cover it up. And then they are embarrassed not only by the mistake itself but also by the cover-up of the mistake and then also by the cover-up of the cover-up and so on and so on and so on. And now, 38 years down the line, they are also worried about the hundreds of thousands of civil claims for damages that will be brought against them by investors who will lose large portions of their life savings because the Buy-and-Holders have failed to own up to this mistake for 38 years now and about the criminal charges that will be brought against those who have posted in “defense” of you Goons and so on. It gets worse and worse and worse and worse and worse.

It can never get better, Anonymous. Actually, there’s one way that it can get better. But only one.

The only way that it can ever get better is if those who are aware of the mistake start making it a practice to call the Buy-and-Holders out on their b.s. when they advance the crazy idea that it is not necessary to engage in market timing or that there might be some mystical, magical, alternate universe in which market timing is not required. It’s about 10 percent of us who see these claims as b.s. If that 10 percent consistently calls the Buy-and-Holders out on their b.s., the mistake will get fixed. But that’s the only way that it is ever going to happen.

The penalty for the Buy-and-Holders owning up to their mistake is just too huge for them ever to do it on their own. No one wants to go to prison. No one wants to pay damages in a civil lawsuit. No one wants his clients or his readers to learn that he is the sort of “expert” who is 38 years behind in his reading of the peer-reviewed research in his field. So the Buy-and-Holders are not going to on their own walk up to the front of the stage and say “oopsie!” That is just not going to happen.

So how do we ever get this mistake fixed? The Buy-and-Holders ain’t going to fix it on their own. And they are going to make sure that the thousands of honest and good people who would like to see the mistake fixed so that our economic and political systems can survive are going to pay a huge price if they dare to “cross” the Buy-and-Holders by posting honestly re the last 38 years of peer-reviewed research. What happened to me is what happens to anyone who dares to note that the Buy-and-Hold retirement studies lack an adjustment for the valuation level that applies on the day the retirement begins. The Buy-and-Holders don’t attack me because they don’t like the way I look. They attack me because I post honestly about the far-reaching implications of Shiller’s Nobel-Prize-winning research and there is no way that Buy-and-Hold can survive someone being able to do that.

Millions of people want to know how stock investing works in the real world. Permit me to post honestly and I will soon be making millions and then tens of millions and then hundreds of millions. And, after I make hundreds of millions, there are going to be thousands of bloggers joining me and then thousands of investment advisors and then thousands of academic researchers and then thousands of authors and then thousands of policymakers and then thousands of economists on and on and on.

The mistake that the Buy-and-Holders made (failing to distinguish long-term timing from short-term timing when research was published showing that short-term timing doesn’t work) is the biggest mistake ever made in the history of personal finance. Long-term timing is price discipline. Persuade millions of investors that there is no need to practice market timing and you are going to bring on an economic crisis. We have seen an economic crisis on every occasion in U.S. history in which Buy-and-Hold has become a popular “strategy.” It is not even possible for the rational human mind to imagine a scenario in which we would not see an economic crisis once Buy-and-Hold became popular. Market timing is price discipline. Remove price discipline from the market and it collapses. Every market depends on price discipline to function. Crash the market and you remove trillions of dollars of spending power from the economy and the economy collapses too. It has happened every time because it MUST happen every time.

I’m not the one breaking the law, Anonymous. I am not the one in a panic. I don’t like how you Goons have destroyed our boards and the lives of the people who populate them. Obviously. But I believe that our country is a good country and I believe that we will see reasonable enforcement of our laws in the days following the next price crash, when people are able to see with their own eyes what Buy-and-Hold delivers to millions of investors every time that it is tried.

We’ll see, you know?

I am going to continue to say that I see no valuation adjustment in the retirement study posted at John Greaney’s web site. That much is under my control. That much I will do. The rest is out of my hands. I would like to see us all stay within the confines of U.S. law in our discussions. But I only get one vote. I don’t always get my way. Perhaps you’ve noticed.

I wish you all the best that this life has to offer a person. I like to think that that might help a tiny bit. That much I can do in good conscience and so that much I do do. I cannot in good conscience say that I believe that the retirement study posted at John Greaney’s web site contains an adjustment for the valuation level that applies on the day the retirement begins. So that I do not say. No freakin’ way, no freakin’ how.

My best wishes to you and yours.

Delusional (According to the Buy-and-Holders!) Rob