“The Depression Caused an Ocean of Human Misery, Even to a Lot of the Wall Street Con Men. I Think It Would Have Been Better Had Shiller’s Research Been Available and If People Had Felt Free to Discuss It and If We Could Have Avoided the Great Depression.”

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

Can you show me just one failed buy, hold and rebalance portfolio and then just one single person that has been successful with VII?

Every single Buy-and-Hold portfolio that was ever assembled has been a failure if you go by the last 39 years of peer-reviewed research. And every single Valuation-Informed Indexing portfolio has been a success if you go by the peer-reviewed research. If valuations affect long-term returns, it is a logical impossibility for an investment strategy that does not call for long-term market timing to ever produce good results.

Look at what happened in 1929, Millions of people were hurt in the Great Depression. That was caused by Buy-and-Hold. Had Shiller’s research been available at the time and if people had felt free to discuss it, the CAPE value would never have reached 33 and caused an economic collapse. Was it worth it? I am sure that the Wall Street Con Men of that time turned a few extra bucks because Shiller’s research was not available to the people of that time. But was it worth it? The Depression caused an ocean of human misery, even to a lot of the Wall Street Con Men. I think it would have been better had Shiller’s research been available and if people had felt free to discuss it and if we could have avoided the Great Depression.

The key to every market that has ever existed is price discipline. Take that away by telling people that it is not necessary to engage in market timing and sooner or later you are going to cause an ocean of human misery. It is not even possible for the rational human mind to imagine a scenario in which it would not turn out that way. Given that there is precisely zero indication in the peer-reviewed research that market timing is not required (Wade Pfau researched this question very carefully), I think we should tell people that it is always required and that it always works. What possible downside could there be other than our Buy-and-Hold friends needing to learn how to pronounce the words “I” and “Was” and “Wrong?”

My sincere take.

Great Depression Foe Rob