Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
I bet I sound at least somewhat like some people in your real life. Is there anyone online or, most especially, in your real life who still supports what you have been doing for the past 22+ years?
There are a number of people who are supportive. There is no one who is intensely supportive. I get asked about the investing stuff on a regular basis. Probably once a month someone will ask about it. The reactions are very similar. People are definitely interested. Nearly everyone seems to have some concerns re investing, they feel that they don’t know enough about it and are worried about what may happen to their money. So people want to know more. But people have a hard time grasping the story.
The issue is that it is just so darn big. It doesn’t sound plausible. You Goons have on occasion used the term “conspiracy theory.” I don’t claim a conspiracy. But I believe that people have a hard time accepting how 43 years of peer-reviewed research could be covered up without a conspiracy. It doesn’t sound possible. So people do not feel 100 percent comfortable with what they are hearing.
That’s my job with the book. I have to explain it in a way that makes sense to people. The core problem is that it’s just so big. Shiller took us to the undiscovered continent of stock investing — the psychological side of the story. People completely accept that there’s a psychological side to the story. But they have no idea how big it is. And they don’t understand how ignored it is in the advice that they hear. Shiller looked at the 70 percent of the story that has been hidden from all of us for a long time. It’s a very big advance and big advances are hard to grasp.
Big advances upset the apple card. This is a lucrative area for those who have acquired expertise. So there are lots of powerful people who would prefer that the apple cart not be upset.
People are definitely interested. And they don’t doubt that there are things being kept from them that it would be good for them to know. But they are generally not intense about this issue. They are 1/50th as intense as you Goons. They don’t feel confident re their ability to understand the issues. Most people are intimidated by the subject of stock investing. And it makes them uncomfortable to imagine that our system of government is not handling things. They feel that there should be people taking care of things.
And of course they don’t really want to think too much about their portfolios not being worth what they have been led to believe they are worth. That part of the story is of course highly distressing. They hear the words and they tune them out at the same time. Cognitive dissonance is very much a factor.
People have a complacency over it, a lack of urgency. Prices are of course high today. That makes people feel satisfied with their circumstances. People rarely get super worked up over something at a time when a situation seems positive. But there is definitely an undercurrent of concern.
Rarely do I have someone dismiss what I say out of hand. I have had that happen. When it happens, it’s because the person has a strong loyalty to the Buy-and-Hold Model. Then I get a “who do you think you are?” reaction. That’s not at all a common reaction.
That was a good question.
Rob
I could sell my house and move to the country my wife was born in and actually see a rise in my standard of living. I can live in a first world district that’s cleaner and “nicer” than the best cities here. I consider this the first major milestone of my Financial Independence journey. My goal is to stay as healthy as I can and retire young enough, with millions more than I actually need, so that I can live a Millionaire Next Door lifestyle here and an obscenely wealthy lifestyle when it’s winter here. Sometimes I might go on a cruise, other times I’ll be living in my wife’s original country. If my kids choose to become MDs I’ll buy them a decent condo there and pay tuition, to schools that produce so many of our doctors that their courses are designed to prepare students for western board exams. Our kids have the advantage of dual nationality.
What would be the better way to achieve my financial goals? Valuation Informed Indexing or Buy and Hold? The answer is obvious.
Valuation-Informed Indexing would be better. Practicing price discipline when buying something always adds, it can never subtract. Anyone Who tells you different is working a con. The odds are good that he is working a con on himself as well. So it’s a funny sort of con. But it’s a con all the same. Price discipline is always a plus. It’s impossible to imagine any exceptions to that rule.
You describe a pretty darn appealing future for yourself. What if the next Buy-and-Hold Crisis puts us in the Second Great Depression and the Second Great Depression leads to World War III and your kids are drafted and killed in that war? Will you still say that it was a good thing that as a nation of people we adopted a ban on honest posting re Shiller’s Nobel-prize-winning research showing us all for the first time how stock investing works in the real world. I obviously pray that that doesn’t happen. But it is not an entirely far-fetched scenario. The Buy-and-Hold Crisis of 1929 played a role in bringing on World War II and lots of scary and tragic things happened in that war. Causing a collapse of our economic system because you want to experience the thrill ride of bull markets followed by bear markets followed by economic crises Is not such a hot idea, in my assessment.
There’s a level of your own consciousness in which you don’t think it’s such a hot idea either. If you feel deep down that it was a hot idea, you would be happy to permit honest posting about the research and you would enjoy making the best case possible for your favored “strategy.” I put the word between quote marks because Get Rich Quick thinkng is not a strategy, it is an emotional impulse. The battle here is a battle between reason and emotion. You want the investment advice field to be dominated by emotion because you like the thrill ride that Buy-and-Hold makes possible. I don’t like the thrill ride because of the great harm it does to human beings. I think that a return of 6.5 percent real is just fine, you can keep all the irrational exuberance garbage so far as I’,m concerned.
Where I’m coming from.
Rob