“All That You Are Showing Is That the Decline in Liquidity Was the Precipitating Event. It Is the $8 Trillion Loss of Consumer Buying Power (Caused By Promotion of the Buy-and-Hold Strategy) That Did the Most Damage. That’s Like Saying That, When Someone Is Driving a Car Without Brakes and Gets to a Toll Booth and Crashes, It Is the Toll Booth That Caused the Crash. The Presence of the Toll Booth Was the Precipitating Event. But, Whenever Someone Drives a Car Without Brakes, There Is Going To Be a Car Crash Sooner or Later.”

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, in turn, led to a severe decline in liquidity, a stock market collapse, and a collapsing economy worldwide.”

Thanks for proving my point. The cause was decline in liquidity, not buy and hold. Shiller agrees with me.

I disagree strongly.

All that you are showing is that the decline in liquidity was the precipitating event. It is the $8 trillion loss of consumer buying power (caused by promotion of the Buy-and-Hold strategy) that did the most damage. That’s like saying that, when someone is driving a car without brakes and gets to a toll booth and crashes, it is the toll booth that caused the crash. The presence of the toll booth was the precipitating event. But, whenever someone drives a car without brakes, there is going to be a car crash sooner or later. Just as, whenever a large number of investors comes to believe that Buy-and-Hold (No market timing required!) is an acceptable investment strategy, we are going to experience an economic crisis sooner or later. There is no other way that the massive promotion of a pure Get Rich Quick approach could ever turn out.

Shiller predicted the crash and it happened. How did he do it? He has studied the history of the market and has seen that it happens every time. The way to get it to stop happening is to stop promoting Buy-and-Hold and to stop telling investors that market timing/price discipline is not always 100 percent requireed.

That’s Rob Bennett’s sincere take re these terribly important matters, in any event.

My best and warmest wishes to you and yours.

Rob