Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
There are no victims. We each have a personal responsibility in saving and investing for our retirement. We have all the information that we need at our finger tips. If your retirement fails, then it is your own fault. End of story.
We do not have all the information at our fingertips.
When I put forward my famous post from the morning of May 13, 2002, there were numerous people who thanked me for starting the most exciting discussion in the history of the Retire Early board. If people had all of the information contained in that post at their fingertips all along, what were they thanking me for? They hadn’t had the information contained in that post at their fingertips all along. I pointed out that the Greaney retirement study lacked a valuation adjustment. That was something new to think about that many people at that board had not considered.
When people considered that point, they lost confidence in the study. That was why Greaney got so upset. He wanted to maintain confidence in the study. And the point that I was making was undermining confidence in the study. Each time that someone points out the error at the root of the Buy-and-Hold project, it helps people to think more clearly about how stock investing works in the real world. It’s new information, valuable information.
There was a day when people did not know that smoking causes cancer. Research was published showing that it does, just like the research that Shiller published showing that valuations affect long-term returns. The tobacco companies went nuts. They threatened people who told people about the harm done by smoking, just as you Goons have threatened me for telling people about the error in the Greaney retirement study in particular and about the error in the Buy-and-Hold strategy in general. The con doesn’t work if people become aware of it. So the Buy-and-Holders have to keep the error hushed up. But I want to talk about it. I want to help people. A lot of the people who were being misled by Greaney had become friends of mine over the years.
If everyone has all the information at their fingertips, why do we even have academic researchers? Why not do away with them if we already know everything there is to know? We have researchers because we want to continue learning new stuff. Shiller’s research has taught us the most important thing that we have ever learned about stock investing — that market timing is always 100 percent required, that it is the secret to successful long-term stock investing. I want to spread the word all across the internet.
If all retirement failure are solely the fault of the person whose retirement failed. why do we have laws against fraud and against extortion? Those laws suggest that there are lines that those working investment cons should not be permitted to cross, that there is a point at which the retirement failure becomes the responsibility of the person working the con. I believe that those laws are good and necessary laws.
My best and warmest wishes to you and yours.
Rob
https://www.cnbc.com/2021/06/23/how-much-wealth-top-1percent-of-americans-have.html
The top 10% own 89% of all stocks. These means that the main reason for retirement failure is lack of savings, not a market crash.
No it doesn’t.
The top 10 percent own 90 percent of everything. Anything that causes a massive loss of wealth affects everyone, the top 10 percent and the bottom 90 percent alike. The top 10 percent lose more in dollar terms, the bottom 90 percent feel more pain because they have less ability to endure the losses.
We should all want to avoid massive losses of wealth. The relentless promotion of Buy-and-Hold investment strategies makes them inevitable. It pushes irrational exuberance up to the highest levels it can be pushed to because it advises investors not to practice price discipline (market timing!). It is price discipline that permits markets to function, Remove price discipline from a market and it becomes dysfunctional. Eventually you see the massive losses of wealth (and the economic crises that inevitably follow from them) that always appear in times when Buy-and-Hold strategies are heavily promoted.
Who would have thought that going with a pure Get Rich Quick investment strategy could have such a serious downside?
Rob
Wrong again. When you have nothing to begin with, there is nothing there to lose. If the market dropped 50% today, how much would you have lost? Answer: Nothing, because you don’t own any stock.
We’ll see how the millions of middle-class people who see the size of their stock portfolio diminish by 50 percent feel about it in the days following the next crash, Anonymous. Perhaps they will say, as you suggest: “Oh, I never had anything to begin with, so it doesn’t matter.” My sense is that those millions of people are proud of how they have managed to save the amounts they have managed to save. They don’t think of their life savings as “nothing,” they think of it as the means by which they hope to secure their financial future. I think that we should have been shooting straight with those people all along.
But we’ll see, you know?
I wish you all good things.
Rob
“ We’ll see how the millions of middle-class people who see the size of their stock portfolio diminish by 50 percent feel about it in the days following the next crash, Anonymous.”
We already know the answer to that as we see what happened in 2008/2009. They will keep buying more stock because they are happy they can get it so cheap.
I saw people begin to question Buy-and-Hold in a serious way in the days when the CAPE had dropped to 13. There were people at the Bogleheads Forum flat-out calling Taylor Larimore a liar. That was unimaginable in the days before the crash.
That development never gained much momentum because prices recovered quickly. We will see whether having prices remain low for a long time makes a difference with the next Buy-and-Hold crisis.
There is no such thing as “cheap” if the market is efficient. If there is such a thing as cheap, there is such a thing as expensive. If there is such a thing as expensive, we all should be timing the market. We should be buying more stocks when they are cheap than we do when they are expensive.
Rob
“ I saw people begin to question Buy-and-Hold in a serious way in the days when the CAPE had dropped to 13. There were people at the Bogleheads Forum flat-out calling Taylor Larimore a liar. That was unimaginable in the days before the crash.”
Those are market timers. We can just look at history and see that Buy and Holders have done extremely well as the held their stock and continues to buy.
These were ardent Buy-and-Holders before prices fell.
Are you saying that Taylor Larimore is a market timer? Before prices fell, he said that he would never sell. Then after prices fell he said that he needed to reconsider. Get Rich Quick strategies are not nearly as appealing after the pretend money disappear.
Check with the people who bought into the Bernie Madoff fund. They said that their strategy performed “extremely well” too before his fraud was exposed.
This is the benefit of looking at peer-reviewed research. Research takes you out of the emotion of the moment and helps you to focus on what works best in the long term.
Rob
Anyone selling as you described is market timing. Show me the link to posts by Taylor indicating he sold off in the crash.
As for Bernie, he was not buying stocks, just like you.
The thing that is consistent about Buy-and-Holders is that they always do the emotional thing, When prices are insanely high, they insist that they will never sell. When prices fall, they say that anyone who continues to hold stocks is nuts. We know that they sell because the CAPE always drops to 8 at the end of a bull/bear cycle. That couldn’t happen unless the people who were bragging about their great results following Buy-and-Hold didn’t sell after they saw that it had failed.
It’s a question of reason vs. emotion. Buy-and-Holders hate the peer-reviewed research because the research supports the reason-based approach (practicing price discipline!) and letting reason become a factor makes it very hard to continue following a purely emotional approach (no market timing!).
It’s reason and research for me. Call me madcap.
Rob
“ The thing that is consistent about Buy-and-Holders is that they always do the emotional thing, When prices are insanely high, they insist that they will never sell. ”
It is exactly the opposite. With buy and hold, you are not letting the emotions of panic or euphoria to drive your decisions, unlike market timing. The peer reviewed research by countless experts confirm this.
Okay, Anonymous.
I do wish you all the best that this life has to offer a person, in any event.
Rob