Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
Who is a goon and who is not a goon? Will you be finally revealing the names of all the goons in your book?
We all have goonishness within us. We all want something for nothing. We all are drawn to Get Rich Quick/Buy-and-Hold strategies to get it. A society does not get to a CAPE value of 36 because of a few individuals on the internet with outlier personalities. We all to some degree want to abandon our irrationality so we can “enjoy” irrational exuberance” as if it were something real. It is human nature that is responsible for most stock investing risk. We all do our part to push stock prices up to unsustainable levels and we all suffer the consequences of doing so.
But there are degrees. Most of us have that goonishness within us and thus feel some sympathy for the Buy-and-Hold case. But 90 percent of us would never in a million years advance a death threat or engage in an act of extortion. It is the true Goons who do that sort of thing, the people who feel that life would not be worth living if honest posting re the last 40 years of peer-reviewed research were permitted and if people were thus able to hear about the downside of going with a pure Get Rich Quick/Buy-and-Hold strategy.
Since the vast majority of us are not pure Goons, the normal state of affairs would be that the Normals would rein in the Goons when they got totally out of hand. We have seen hundreds of efforts to do that. But those efforts tend not to be sustained because the 90 percent who are not true Goons themselves do have sympathies for the Get Rich Quick/Buy-and-Hold position. The 90 percent rationalizes. They say: “Oh, it’s not so bad.” They tell themselves: “It is not my job to put my neck on the line to fix this, let someone else do it.”
The question is — Will that change after the next price crash, when millions of Normals see most of their life savings disappear into thin air? If the Normals elect to speak up, you Goons are finished and we will all live far richer and better lives from that point forward. From that point forward, everyone in this field will be doing all that he or she can to SUPPRESS the Get Rich Quick/Buy-and-Hold urge, not to do everything imaginable to take the Get Rich Quick “idea” to places to which it has never been taken before.
Goonishness is irrationality. The purpose of research is to put reason to use to help us all live better lives. Thus, you Goons HATE the last 40 years of peer-reviewed research with a burning hate. The Normals do not hate the research. They are not happy with the thought that their retirement portfolios are worth only 40 percent of what they have been led to believe that they are worth. But they support the laws against death threats and against extortion. In theory, they support the idea of permitting rational discussion. They are torn today between their respect for rationality and their love for temporary fruits of Get Rich Quick “strategies.”
I think rationality will prevail over goonishness in the end. I don’t believe that our economic and political systems can survive if they do not, But we are today at the second highest CAPE value ever seen in U.S. history. It would be fair to say that rationality is not even a tiny bit popular in Investoworld today, Goonishness is king at this moment in time.
I believe that the history of the human race is the story of an effort of the humans to overcome their gooonishness, to become more rational and to become able to live better lives. So I believe that Valuation-Informed Indexing is going to prevail. But I would, wouldn’t I?
Rob
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