Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
If there is any crash, it will be blamed on something like debt levels, Mideast tensions, etc. The market will recover and the buy and holders will do even better than before. No one will even think about you or your market timing schemes. I just hope you can take advantage of the current job market and scrape up a few dollars to pay the bills because your investing career has been a bust.
Okay, Anonymous.
I don’t doubt that there will be people who will blame the next price crash on debt levels on or Mideast tensions or whatever. That’s the old way of thinking about these things.
I believe that the last 39 years of peer-reviewed research offers us a better way of thinking about these things. The beauty of understanding that it is bull markets that cause bear markets and bear markets that cause economic crises is that that understanding liberates us. We cannot do anything about debt levels or Mideast tensions because something of that sort is always going to be with us. For so long as we deny ourselves access to the hundreds of powerful insights that follow from an appreciation of Shiller’s Nobel-prize-winning research, we remain subject to the craziness of a stock market that can take away half of our accumulated savings of a lifetime overnight and without warning. If Shiller is right (I believe that he is), then none of that even needs to happen again. Learning that valuations affect long-term returns is like discovering antibiotics. It is an advance that helps every person living on Planet Earth to live a better life. Once we all get to a place where we feel free to consider what really works with stock investing, I don’t believe that there will ever be one person who will wish that we could go back to the days when we didn’t realize how essential it is that all stock investors practice market timing (price discipline!). The widespread practice of market timing is the only way to restore sanity to stock investing by keeping prices at reasonable levels at all times.
It may be that I am more optimistic than you or more idealistic. Perhaps that’s the core difference. You would say more foolish. Whatever it is, I am what I am and I offer no apologies for it I can acknowledge that it is possible that I am wrong. I don’t believe that I am or else I wouldn’t say the things that I do. But I do acknowledge that I am one of those flawed humans and that it is at least possible that I am wrong. But, given how important this stuff is, I don’t feel that I have any option but to post honestly about these matters.
I wish that that were okay with you. But I naturally wish you all the best that this life has to offer a person in any event, dear friend.
Idealistic (Foolish?) Rob
Anonymous was right. All of the pressures on the market over the next decade will be blamed (rightly so) on Covid-19. There won’t be any New York Times article on you and there won’t be any $500 million windfall.
You may be right. I don’t think so. But it is possible.
What you are saying is that progress is impossible. Once humans come to believe in something, that’s the end of the story. There is never any consideration of new ideas. If we happen to make a mistake in our initial efforts to understand something, then that mistake will continue to do us harm until the end of time.
I find that idea depressing. If it is not possible for us ever to learn anything about how stock investing works that we did not know in 1980, why do we still have people going to school to earn Ph.D.’s in Economics? Why not just close the schools on the grounds that we knew everything that we would ever need to know in 1980?
I think that we have learned important things over the course of the past 39 years. So I think that we can do better. And I know that I am not the only person who believes that. If everyone agreed that we can never learn anything that we did not know in 1980, Shiller would not have been awarded a Nobel prize. The fact that we awarded him a Nobel prize shows that we see value in his work.
It’s only 10 percent of us today. We are not getting much benefit from Shiller’s amazing research because only 10 percent of us buy in to it today. That part is unfortunate. But I sure don’t see how I am going to make that situation better by agreeing to say that Greaney’s study contains a valuation adjustment. It seems to me to be a much more positive approach for me to continue to post honestly. I think that we will be able to get some more people to join the effort after a massive price crash because people will be less complacent then and more open to hearing about new ideas.
I sure hope that that is what happens. We’ll see.
Hopeful Rob