“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.”

Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

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