Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
“ No. What I am saying is that, if Wendy’s says in a commercial that their Junior Bacon Cheeseburger costs $3 but then charges you $6 for it, all of the people who are hurt by this dishonest practice should be permitted to call them out on their dishonesty”
What? We all know the stock price when we are buying it. It is not like I put in an order to buy a stock at $3/share and find out that they took out $6/share from my account. We all know what the stock price is and make our choice to buy it or not buy it. If you don’t like the price, it is simple. Just don’t buy it.
Your comment highlights the “irrational” part of irrational exuberance, Anonymous. Yes, people “know” on some level of consciousness that the numbers on their portfolio statement are wrong at times of massive overvaluation of stocks..The tricky part is — they don’t want to know it! They want to believe in the Buy-and-Hold fantasy. Letting them look at what the peer-reviewed research says undermines their ability to place their confidence in the Buy-and-Hold fantasy. So the Buy-and-Holders want to suppress discussion of the last 43 years of peer-reviewed research. The question on the table is — Should people be permitted to hear the case against Buy-and-Hold even though we know from experience that that would cause fewer people to follow Buy-and-Hold strategies? Buy-and-Hold is a money-maker for the people who push it.
There was a day when discussion of the research showing that smoking causes cancer was suppressed. Do you think that people in this days thought that smoking was perfectly healthy? I don’t think that. I think that there were lots of people who suspected that smoking was not so hot an idea long before they started putting a skull and crossbones on the package. People knew. And they also didn’t know. Because they very, very much didn’t want to know. Today information about the dangers of smoking are everywhere. Everyone knows the truth in a good bit of detail. And fewer people smoke. I think it’s a better world. I think it would be fair to say that there are people who make their living selling cigarettes who don’t agree, who were just fine with the idea of people knowing and not knowing at the same time.
We all know that overpriced stocks are dangerous. We all get it. But at times when there are overpriced stocks in our portfolio that we are counting on to finance our retirement, we don’t want to get it. There are always going to be people who enjoy hearing the Buy-and-Hold lies. It’s human nature. It makes a difference if we give ourselves permission to talk about those lies, to examine up close how much horror they have brought on over the years, to let people see what the research shows. That’s the entire benefit of research, that it permits us to see lies like that for what they are. Please remember that in an official sense the Buy-and-Holders are in favor of looking at the peer-reviewed research. I got the idea from reading one of John Bogle’s books.
Humans are rational creatures. That’s a true statement. Humans are also self-destructive creatures who harm themselves when they ignore what their reasoning ability tells them. That’s also a true statement. I title my book “Investing for Humans” because Valuation-Informed Indexing takes into consideration both sides of the human personality. Yes, we want to invest more effectively. We all do. But we also very, very,very much do not want that. We want to believe that the numbers on our stock poprtfolio are real,n even at times when the CAPE value is in the 30s. There’s something inside us that makes us want to believe in Buy-and-Hold. That’s the thing that has been making stock investing risky for as long as there has been a stock market.
I vote for permitting honest discussion of the peer-reviewed research at every site.
Rob
How do you think all this silly hocomania help you. You haven’t earned a dime, you went broke and you lost your marriage. I understand working a job for many of us is something that is hard and we often dread. However, screwing up your life and the lives of others is not worth the cost. Why continue to peddle this nonsense?
I can sleep at night, Anonymous. That counts for something.
I first posted at the old Motley Fool board in May of 1999. Greaney had a reputation of being a highly abusive poster. The first thing that I noticed about his retirement study was that it lacked a valuation adjustment. I didn’t;t possess the courage to point out the error at the time. Three years later, in May 2002, I did. I’ve learned a lot about the realities of stock investing in the 22 years since and I am proud that I finally worked up the courage to do the right thing.
I’ve run into thousands of people who want to open every site to discussion of the realities. I think we should do it. Buy-and-Hold is yesterday. Valuation-Informed Indexing is tomorrow.
Where I’m coming from.
Rob
You sleep well by convincing yourself of these made up stories? I have heard people say that if you repeat a lie long enough, you will eventually believe it. Sorry, Rob, but the rest of us are not going to play along with your fantasies.
Okay, Anonymous.
I do wish you all good things, in any event.
Rob