I am a polite person. No, really! Even on an investing discussion board.
I am not bragging, I have had lots of interactions with my fellow humans over the years and one of the few compliments that I hear over and over again is that I am exceedingly polite. I may not be smart, I may not be good-looking, and I may not have an impressive sense of humor. But something in my make-up makes me not want to hurt people’s feelings. I am polite because being polite comes easy to me.
I have been banned from every large investing discussion board on the internet. That doesn’t sound like something that would happen to such a polite person, does it? This reality amazes me. It surprises me and it shocks me and it stuns me. Strange things happen all the time in this crazy mixed-up world of ours. But I really have a hard time coming to terms with that one. How could it be? How could an exceedingly polite person manage to get himself banned from every large investing discussion board on the internet? I ponder that one a lot.
It’s because there is no polite way to challenge Buy-and-Hold. I would never tell someone that they are dumb even if I suspected that this was the truth. That’s just not a polite thing to say. And of course I never say that Buy-and-Holders are dumb either. First of all, I don’t believe it. And, second of all, I wouldn’t say it is I did believe it. But I say things that Buy-and-Holders hear as ways of me saying that they are dumb. And they react to what they hear me saying.
Investing Discussion Board Conversations On Buy And Hold
Buy-and-Holders say that market timing never works. I say that it always works. I distinguish between short-term timing and long-term timing and I acknowledge that short-term timing never works. But I say that long-term timing always works. I say that Shiller showed that to be so when he published research showing that valuations affect long-term returns. If valuations affect long-term returns, then stock investing risk is not fixed but variable and investors who want to maintain a constant risk profile over time must engage in long-term timing. On a risk-adjusted basis, that must work. It’s a logical impossibility that it wouldn’t, presuming that Shiller’s research is legitimate. So I say that.
And it gets my Buy-and-Hold friends mad to hear me say it. The point that I am making is such a simple one that my statement comes off as insulting. I could just not say it on grounds that the point is so obvious that it needn’t be made. But of course there are millions and millions of investors investing as if long-term timing either doesn’t work or isn’t required. So the insulting point really must be expressed.
When I see people getting angry on an investing discussion board, my usual response is to explain that humans are emotional creatures and that logic is thus not necessarily our strong point. When we want to believe that the numbers on our portfolio statement are a good indicator of the true value of our stock portfolio, we rationalize our way into believing that regardless of any peer-reviewed research published by any Nobel-prize-winning economist. I have never seen people calm down when I say that. Me saying that makes my Buy-and-Hold friends even more angry. At that point I am seen as not only saying that Buy-and-Holders are dumb in their choice of investment strategies but that they are too dumb to even want to be educated about these matters.
I do not believe that Buy-and-Holders are dumb, I think that they are smart. I can honestly say that I have never encountered a dumb Buy-and-Holder. They think and think and think. Their strategy is the product of a lot of hard thinking. It is because they value logic and rational thought that they take exception to what they hear as suggestions that they don’t have enough on the ball to see the far-reaching implications of Shiller’s research.
Someday I am going to connect with my Buy-and-Hold friends. I believe that that day may come following the next price crash. I believe that a big price drop may deliver the shock that it would take for them to become able to look at the subject of stock investing with a fresh perspective. The core mistake made by the Buy-and-Holders (in my view!) is the assumption that they make that investors are rational. That’s a mistake that is core to the entire economics profession. Shiller’s breakthrough was to ask how stock investing would work if in fact investors were not entirely rational beings but highly emotional beings. Like, um, you know -- the humans!
Investors are human. That’s what Shiller showed and that’s why we overprice stocks. That’s why we push stock prices up so high as to cause devastating price crashes. And that’s why we are so resistant to learning about this flaw in our make-up and about how to overcome it to become more effective investors in the future.
We are not dumb. But we are not perfect either. We are as a people in the process of learning on a investing discussion board what it takes to invest effectively for the long run. The cool thing is that we are making progress. But of course to say that is to acknowledge that we don’t have it all figured out as of today. Which is a scary thing to realize. Being a human is a scary thing and we are all mere humans.
Rob’s bio is here.