Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
This morning, we see that the price wars with oil is also now taking blame, along with the coronavirus as to the drop in stocks. There are also comments about the drop in treasuries are also signaling a recession. Not a single comment about buy and hold causing anything. I am guessing that you haven’t received a call yet from The New York Times. Don’t hold your breath waiting.
I can’t control what other people say, Anonymous. Please mark ME down as saying that it was the relentless promotion of the Buy-and-Hold “strategy” that served as the primary cause of the price drop that we experienced over the past few weeks just as it served as the primary cause of the huge price drop that brought on the 2008 economic crisis.
The other factors that are mentioned obviously play a role, just as the other factors that were mentioned in regard to the 2008 economic crisis played a role then. But these factors are things beyond our control. There are going to be positive economic events and there are going to be negative economic events. The question is what we do as a people to be prepared for those developments when they take place. There is now 39 years of peer-reviewed research showing that the best way to prepare for them is to always, always, always encourage all investors to practice market timing so that the irrational exuberance which we are all naturally formed to fall victim to does not get so out of control as to bring on an economic crisis.
The factor that is in our control is the CAPE value that applies when negative economic events show up on the scene. If the CAPE value had been 16 when the Coronavirus hit, we probably would have seen a drop to 13, a loss of about 20 percent, significant but not too terribly frightening. Given that we were at a CAPE value of near 30 when the virus hit, a drop to 13 would be loss of nearly 17 CAPE points. Losses that big could cause the raging irrational exuberance to be transformed into a raging irrational depression, a transition that would cause the CAPE level to drop all the way down to 8. That would mean that millions of investors would see losses of nearly 70 percent. The resulting loss of consumer buying power would cause hundreds of thousands of businesses to go under and millions of workers to be thrown out of their jobs. It would cause political frictions to worsen. There’s already one case in history in which the high prices brought on by the promotion of Buy-and-Hold strategies caused a Great Depression.
Please mark me down as urging that every investing discussion board and blog on the internet be opened to honest posting re the last 39 years of peer-reviewed research in this field, without a single exception. We know from the thousands of community members who have expressed a distaste for the criminal tactics that you Goons have employed to block millions from learning what the peer-reviewed research teaches us all that most investors would be perfectly willing to practice market timing if only they had access to honest and accurate reports of what the peer-reviewed research says and to places to talk about what it means.
I believe that we will get there. 18 years later than I would have preferred, to be sure. But I believe that once we get to a better place and are all living better lives as a result that it is unlikely that there will be even one person wishing that we could return to the Buy-and-Hold days and the insane bull markets and insane bear markets and insane economic crises that went with them. Holy moly!
I haven’t received a call from the New York Times as of this morning. But I believe that that day will come. I believe that this is a good country. I believe that the people of the United States are going to find a way to overcome you Goons. It will be interesting to see how it all plays out.
My best and warmest wishes you and yours, in any event, dear Goon friend.
Buy-and-Hold Critic Rob
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