Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
“ Why do I have a funny feeling that there will indeed be a long line of attorneys standing outside my door in the days following the next Buy-and-Hold Crisis? It will be interesting to see how it all plays out.”
You have had hundreds of “funny feelings” over the last 20 years. We saw those play out. You ended up broke and divorced. Those funny feelings don’t seem to be a good thing for you.
We disagree, Anonymous.
Yes, it is very, very, very painful that I am broke and divorced. That part is so.
But the good news here has been 20 tumes as good as the bad news here has been bad.
I’ve got a tiger by the tail. Say that opening every site to honest posting leads to every stock investor accumulating an extra $300,000 in the course of his or her investing lifetime. That’s money that could be put to use toward financing an early retirement or a college education or a vacation home or toward supporting a favorite charity. That’s life-changing money. And we are not talking about a small number of people getting to see that sort of life enhancement. We are talking about millions and millions.
Yes, my decision to post honestly re the last 41 years of peer-reviewed research has hurt me in the short term. But the only reason why there are any Buy-and-Holders who have an objection to the wideapread discussion of Shiller’s Nobel-prize-winning research is that they see how huge an advance this is and cannot bear to acknowledge that there was a time when they did not know everything there is to know about this subject. That’s not a good reason. The shift from Buy-and-Hold to Valuation-Informed Indexing will be the biggest advance we have ever seen in the history of personal finance. That enough to give meanng to 50 lifetimes. And I am well on my way to achieving iit n only the one that I was given.
I naturally wish that I could have achieved all the good without having had to experience any of the negativity. Obviously. I have requested that you Goons knock off the funny business on thousands of occasions. But I do want to see us all move to a place where we can live better and fuller and richer lives than we ever imagined possible in the Buy-and-Hold days, So I am going to stick it out. I can do no more and I can do no less.
My best and warmest wishes to you and yours.
Rob
Hey Rob. Let’s have you tell us all how my retirement is all going to play out. Just as an update, at the end of Q1, my portfolio is now just over $6.4 million. I will be 60 years old this year. I like working and have no intention of quitting, but let’s just say something happens (health, or otherwise) and I end up retiring at 62 years old. I am a classic buy and hold guy. Tell us all how my retirement (from a financial point of view will go).
Say that you were buying a car rather than stocks. Say that you had plenty of money to buy any car you liked. You identify one that is perfect for you that costs $30,000. But there is an industry marketing campaaign telling people that they should never consider price when buying a car, they should just pay whatever the dealer asks. You fall for it. The dealer asks $60,000 and you pay the $60,000.
You have the money. You don’t die from being taken. But, no matter how much money you have, you always could have directed that money to other purposes. You could have given it to your kids to give them a start in life. You could have donated it to your favorite charity. You could have begun a new hobby of collecting art. Not paying attention to the price you pay for a car is never a good thing, it is always a negative. Surprise! Surprise! There is now 42 years of peer-reviewed research showing that it works the same way with stocks.
Price indifference (Buy-and-Hold) always subtracts, it is a logical impossibility that it could ever add. It’s a marketing gimmick, nothing more and nothing less. It hurts people in very serious ways. We should permit honest posting.
My sincere take.
Rob
Back when I had 2 million, you told me it would be cut to 1 million, but look at what happened. It grew. To use your analogy, my Honda Civic turned into a Tesla.
It didn’t grow to the extent you are saying it did. You are not adjusting for irrational exuberance when you perform your calculations. So your numbers are wrong. If you did the calculations properly, you would come to different conclusions. You certainly experienced some real growth. There is a penalty for moving a portion of your assets out of stocks during a time when risk is super high. I’m not saying that there is no price to be paid. But, if you look at how much risk is diminished and how much return is enhanced when you are able to invest more money in stocks at a time when the expected long-term return is much higher, you will see that it is always a good idea to engage in market timing.
It always works. Or at least it always has in the history of the stock market that we have available to us today. It’s impossible for the rational human mind to imagine circumstances in which it wouldn’t work. Market timing is price discipline. Price discipline is essential in all markets. It is always a plus, never a negative. The only thing on the other side is that there is a limited amount of historical return data available to us. So it is possible that you could see some weird return pattern that we have never seen before. We are living through one of those today. Prices have remained at crazy high levels for a longer time than has ever before been the case. In circumsrances like that, it is possible that an investor who engages in market timing could suffer some dollar losses as a result. But of course his risk was lower. He was going by what has always happened in the past. So he was taking a much safer bet.
If there are investors who conclude that they think prices will remain higher for a longer time than they ever have before and that therefore they are going to go with a higher stock allocation than what history indicates would be best, more power to them, you know? I have zero problem with that. But it is up to each individual investor to determine for himself or herself hoe to play it, not for a gang of internet goons to intimidate people who want to explore what the last 42 years of peer-reviewed research teaches us into silence. That’s garbage. We should permit honest posting re the peer-reviewed research at every site.
My sincere take.
Rob
I have $6.4 million that I can spend. Thus, I have $6.4 million. How much do you have that you can spend right now?
Irrational exuberance is not the same as real money, Anonymous.
If we permitted honest posting re the peer-reviewed research at every site, as I have been saying we should for 21 years now, you wouldn’t have 6.4 million. If we permitted honest posting, people would engage in market timing/price discipline to the point needed to bring stock prices back down to reasonable levels. So you wouldn’t have anything close to 6.4 million.
When your retirement plan depends on keeping millions of people ine dark about what the last 42 years of peer-reviewed research teaches us all about how stock investing works in the real world, I would say that you have a very shakey retirement plan.
You should count only the real money, not the phony baloney irrational exuberance stuff.
My sincere take.
Rob
Real money is what translates into currency, which in turn, allows you to buy things. I can buy $6.4 million in goods. If I had listened to you, I would have significantly less. If you followed buy and hold, you would not be broke right now. Those are just simple facts.
It’s a simple fact that, if people felt safe posting honestly re the last 42 years of peer-reviewed research, you wouldn’t have $6.4 million. If people could act in their self-interest, they would lower their stock allocation when prices reached crazy levels and the sales would bring prices down to reasonable levels. It’s a simple fact that you have had to engage in abusive and in some cases even criminal behavor to block people from learning what they need to know to invest effectively. If the only way that you can keep the Buy-and-Hold/Get Rich Quick train running is to go outside the bounds of U.S. law, that doesn’t say anything good about Buy-and-Hold/Get Rich Quick.
Not this boy, you know?
Rob
So what you are saying is that you need everyone else to change the way the invest for your plan to work vs how the market REALLY works. Got it.
For prices to be set properly, investors need to act rationally. That’s certainly so.
If honest posting were permitted at every site, prices would be set properly every day because most investors would know what was in their best interest and would act in accord with that understanding.
With Get Rich Quick/Buy-and-Hold being promoted so heavily, we are not in the place today. But we always get there eventually. If we didn’t, the market would just collapse.
We all would be better off if prices were set properly. That’s why I am always advocating that we open every site to honest posting. We are going to get there sooner or later regardless. There’s never been one exception in the historical record. I obviously favor the idea of permitting honest posting. It may be that we will need to experience a Buy-and-Hold Crisis to get prices right. That’s probably so. It makes me sad. It scares me to death. But it’s not like there’s anything that I can do about it.
After we all experience the next Buy-and-Hold Crisis as a nation of people, we will need to determine how we feel about the idea of experiencing even more of them in days to come. If we want to bring them to an end, we can elect as a nation of people to open every site to honest posting re the peer-reviewed research. That’s the course of action that gets my vote. I think it would be fair to say that, if we choose that course of action, we will experience the great surge of economic growth in our nation’s history. Works for me.
Rob
Rob
The entire world needs to change for you and you are not responsible one bit for your own outcome. Got it.
The entire world adopted laws against death threats and extortion and financial fraud. The entire world made Shiller’s book a best-seller and awarded him a Nobel prize for his amazing research. The entire world supplied thousands of comments expressing the view that honest posting re the last 42 years of peer-reviewed research be permitted at every site.
The entire world will be suffering the effects of the next Buy-and-Hold Crisis presuming that the market continues to perform in the future at least somewhat as it always has in the past.
The entire world is okay. The problem is you Goons. The entire world needs to work up the courage to stand up to you. I think it is going to happen. But we will have to wait a bit to find out for sure.
I wish you the best of luck with it in any event.
Rob
Anonymous is worth $6.4 million. That’s pretty good but he’s not controlling institutions and he’s not capable of being extremely influential. Who are these goons that are pulling the strings?
We all have a Get Rich Quick/Buy-and-Hold urge residing within us. We all want to believe in the fantasy of getting something for nothing. It’s just human nature. We are to a large extent pulling our own strings.
Did anyone have to pull any strings to get people to like smoking cigarettes? Injesting tobacco made people feel good. People do less of it now that they know about the research showing that smoking causes cancer. The heads of the tobacco companies didn’t want that getting out. They fought it. To that extent, they pulled strings. we have that kind of string-pulling in the investment advice field. That was a time when we didn’t know how stock investing worked, when Shiller’s Nobel-prize-winning research had not yet been published. So just about everyone in the field jumped on the Buy-and-Hold bandwagon. Now they feel that they will look bad if people learn about the realities because they have been covered up for 42 years. So there’s a lot of instituional pressure not to talk about the realities, not to acknowledge the cover-up.
But people who work in this field are like people who work in every other field — they want to help people, they want to feel good about themselves when they go to bed at night. So there are conflicting pressures. There’s a pressure to continue the cover-up and there’s a pressure to tell people about the realities. Most of the experts try to do a little of both. They tell enough of the truth to help out their clients a little bit but not so much as to get into real trouble.
That doesn’t get the job done, If it did, the CAPE value would not be where it is today. Given that we all have a natural Get Rich Quick/Buy-and-Hold urge, halfway measures don’t get the job done, People need to be reminded daily of the dangers of failing to engage in market timing or they just are not going to engage in it. People want to believe that the numbers on their portfolio statement are real. If you want to persuade them that it is not so, you need to make the case repeatedly for it to stick. People can be reached, It can be done. But it’s not any easier to quit Buy-and-Hold than it is to quit smoking, It’s a highly addictive strategy.
Rob