“The Buy-and-Holders Based Their Claim That Market Timing Does Not Work and Is Not Required on a Finding That Short-Term Timing Doesn’t Work. They Never Even Looked Into Long-Term Timing Before Advancing the Claim. It Was That Failure to Exercise Some Caution Before Making That Highly Counter-Intuitive Claim That Caused All the Trouble We Have Seen in the Years Since (Including the 2008 Economic Crisis).”

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 don’t think that I am wasting my time.”

If a buy and holder was wrong for 24 years, you would say that he/she wasted their time. Why do you hold yourself and VII to a different standard?

First of all, it’s not 24 years. Shiller said in 1996 that we should expect to see a price crash by 2006. We haven’t yet seen one that remained in place for a good length of time. So you could say that he was off by 14 years. But not 24 years. And there are explanations for why he was off by 14 years. I have written several articles on that topic. Others who believe that valuations matter have done the same. It is up to each investor to consider the points made in the articles and decide for himself or herself whether they are persuasive or not, But you can’t just say that the crash is now 14 years overdue, so forget about everything that Shiller showed in his research.

According to the research, the Buy-and-Holders have wasted their time for 150 years. Wade Pfau examined all the literature in this field and never was able to identify one iota of research indicating that long-term market timing might not work. Even there, I don’t conclude that we should ban discussion of Buy-and-Hold. The Buy-and-Holders may see something that Wade Pfau missed, so I want to hear what they have to say. But I do find it a very impressive reality that a man who makes his living doing research in this field could not find one iota of evidence supporting the core Buy-and-Hold claim that market timing is not required, That’s a highly counter-intuitive claim. In every other market, price discipline is absolutely critical and long-term market timing is the means through which price discipline is practiced in the stock market. And, if it turns out that the Buy-and-Holders are wrong and that Wade Pfau and Robert Shiller and Rob Bennett (and lots of others) are right, and the claim that market timing is not required (or that it might not work!) is going to go down in history as a very, very damaging claim, then the Buy-and-Holders should have been very careful about making that claim. I don’t think they were at all careful. They based the claim on a finding that short-term timing doesn’t work. They never even looked into long-term timing before advancing the claim. It was that failure to exercise some caution before making that highly counter-intuitive claim that caused all the trouble we have seen in the years since (including the 2008 economic crisis).

We will not know whether the Valuation-Informed Indexers were wrong about anything until we see the end of this bull/bear cycle. That will tell the tale. We have witnessed the Get Rich Quick part of the Buy-and-Hold experience. We have not yet seen the human devastation that in the past has always followed. I believe that it is going to follow again this time. But I don’t have a crystal ball, We are going to have to wait to see how things play out to find out for sure. But I sure am not going to say that I approve of the Ban on Honest Posting. If things turn out as they always have in the past, you Goons will be going to prison. Huh? What the f? How is that a good thing? Permit honest posting and you take that possibility off the table. The laws of our nation permit people to have different views on these sorts of questions. Permit people to express different views and permit other people to hear those different views and everything works. If Buy-and-Hold really is best, that will be revealed. If it is Valuation-Informed Indexing that is best, that will be revealed. But there will be no prison sentences or any of the other awful stuff if you just follow U.S. law (no death threats, no extortion, etc.).

That’s my sincere take, Anonymous. I think it is an important reality that the price crash has been deferred for 14 years now. That is a very strange reality and we all need to come to terms with it. I would never make any effort to hide that reality from anyone. If someone said that, because of that reality, he was going to go with Buy-and-Hold, I would say that I understood that choice. I have not taken that path myself. I see too much evidence going the other way to take that path. But I don’t know everything and neither does any of the other Valuation-Informed Indexers. Despite our best efforts to get it right, it is always possible that we got it wrong. So each and every investor needs to look at the evidence on both sides and make his or her choice as to which model to follow,

The thing that I feel strongly about is that the evidence for both sides should be presented at every site on the internet. There should not be a ban on honest posting at a single site. We cannot make sound and informed choices unless we hear both sides. And today we are not hearing both sides. The Buy-and-Holders have been suppressing discussion of the far-reaching implications of Shiller’s Nobel-prize-winning research for a long time and that needs to come to a full and complete stop by the close of business today.

My sincere take.

Rob