“What I Am Saying Is That What We All Believed About How Stock Investing Works in 1980 Has Been Proven Wrong. Shiller Published Research in 1981 Showing That the Market Is Not Efficient. The Idea That the Market Is efficient Is the Foundation Stone for the Entire Buy-and-Hold Model. If Shiller Turns Out To Be Right, Then Everything That the Buy-and-Holders Have Ever Said About How Stock Investing Works Is Wrong.”

Set forth below is the text of a comment that I recently posted to the discussion thread for one of my columns at the Value Walk site:

It seems you are still trying to come up with reasons as to why everything else is wrong in the investment world, versus you just accepting the fact that your investment strategy and retirement plan failed.

What I am saying is that what we all believed about how stock investing works in 1980 has been proven wrong. Shiller published research in 1981 showing that the market is not efficient. The idea that the market is efficient is the foundation stone for the entire Buy-and-Hold Model. If Shiller turns out to be right, then everything that the Buy-and-Holders have ever said about how stock investing works is wrong. That’s simple logic, Sammy. If the market is efficient, risk is constant and market timing is a bad idea. If valuations affect long-term returns (this is impossible if the market is efficient and yet this is what Shiller showed is so), then risk is variable and investors seeking to maintain the same risk profile over time MUST practice market timing.

For 39 years now we have been living in a twilight zone where we know intellectually (because we have access to Shiller’s research) that market timing is required but in which we cling to Buy-and-Hold emotionally because we prefer thinking that the numbers on our portfolio statement are real and that we do not need to divide by two to identify the true and lasting value of our portfolio. We are going through a process taking us from a discredited model to a true research-based model. Progress has been slow. But we are seeing progress. We awarded Shiller a Nobel prize. That shows clearly that we care deeply about getting these matters right, even though we really, really, really want it to be the Buy-and-Holders who are proven right (because our portfolios are assigned a higher value by the Buy-and-Holders at times of insanely high prices).

My primary argument is that we need to launch a national debate on the question of whether is is the Buy-and-Holders or Shiller who is right. We need to hear from people from all points on the spectrum of opinion re these matters. The Buy-and-Holders need to feel 100 percent safe to express their sincere beliefs. And the Valuation-Informed Indexers need to feel 100 percent safe to express their sincere beliefs. And the people in the middle (that’s the majority) need to feel safe to express their sincere beliefs.

That’s where I am coming from, in any event, Sammy. I naturally wish you all the best that this life has to offer a person.

Rob