“Shiller Does Not Know It All. Shiller Is One of the Humans and We Humans Learn by Talking Things Over. We Learn Through Give and Take. We Unearth Puzzles and Then We Offer Our Thoughts As to the Resolution of the Puzzles and Then We Get Some Feedback That Helps Us Figure Out If We Are on the Right Track or Not and So On. That’s How It Is Done. That Process Is Not Taking Place Today. EVEN FOR SHILLER.”

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

Question for you Rob. If Shiller’s actions indicate that his interpretation of his revolutionary research differ from your interpretation, is more likely that difference is attributable to Shiller being disingenuous for fear of being spoken ill of on finance blogs, or that you’ve mis-interpreted the implications of his work?

Thanks for asking an intelligent question, Curious.

You are referring to Shiller’s recent statement that he is today 50 percent in stocks. I am personally at zero stocks and I have said that the typical middle-class investor should today be going with a stock allocation between 20 percent and 30 percent, based on Shiller’s findings and the 33 years of peer-reviewed academic research that have followed.

It’s certainly possible that I have misinterpreted the implications of Shiller’s work. I did not go to investing school. I have never managed a big fund. I am one of the flawed humans. So people certainly need to understand that one possible explanation here is that I have messed up. I don’t think that’s the case. But then I wouldn’t, would I?

I will make the argument for the case that I have NOT messed up. I am not the person to talk to for hearing the case that I HAVE messed up. Those who believe that I have messed up should make that case.

Shiller has a long record of giving odd responses when asked about the practical implications of his “revolutionary” (his word) findings. In early 2009, he said that investors should stay out of stocks until the P/E10 value dropped below 10. We have not dropped below 10 since then. So Shiller is not following his own advice in going with a 50 percent stock allocation. Do you not find that odd? I sure do.

There’s another contradiction revealed by Shiller’s statement that he is at 50 percent stocks today. A few months ago, Shiller predicted that there will be a crash in 2014. That means sometime in the next nine months. He foresees a price crash and he is at 50 percent stocks? Does that make even a tiny bit of sense? It does not.

Shiller clearly does not know everything, Curious. I obviously love the guy. “Irrational Exuberance” is my Bible. But the guy obviously has not put all the pieces together.

You suggest that the only alternative to me being wrong is that Shiller is being “disingenious.” I don’t agree with that. I don’t think he knows all the answers and is just not revealing them to us. I do indeed think there may be some of that going on. There is a high price to be paid for speaking frankly about these matters. I believe that the Social Taboo holds Shiller back, that he does not say everything he believes because he fears the smears that would be directed at him if he did. He’s like all the rest of us in that regard.

But I also believe that Shiller does not know it all. Shiller is one of the humans and we humans learn by talking things over. We learn through give and take. We unearth puzzles and then we offer our thoughts as to the resolution of the puzzles and then we get some feedback that helps us figure out if we are on the right track or not and so on. That’s how it is done. That process is not taking place today. EVEN FOR SHILLER.

He no doubt has theories on certain questions. But until there is widespread and open and frank discussion of all these matters, he is not going to be able to do his best work. We have as a society crippled him. And that hurts us in a big way. We have also crippled Bogle, to be sure. And of course it is true that I am crippled as well. I would do better work if Shiller were being challenged on his contradictions on a daily basis and if Bogle were being challenged on his contradictions on a daily basis. I would learn from the discussions that would follow and I would be better able to do good work myself as a result. So would Bogle. So would Shiller. So would everyone else.

You challenge me daily to explain everything that goes on in the world of stock investing that seems a bit odd but you never challenge anyone else. Why don’t you start a thread at the Bogleheads Forum about Shiller’s contradictions and see if anyone there can figure things out better than I can? Then please start a similar thread re Bogle’s contradictions. Stop trying to put all the weight on me. I am just some fellow who figured out how to get his words posted to the internet. I don’t claim to be an expert. Bogle does, Shiller does. Those guys should be held to a higher standard than me and you are not today holding them to any standard whatsoever.

Yes, Shiller is afraid to speak out in perfect frankness. If he were not afraid, why would he have published a book that contains only two paragraphs on the how-to questions? Those are the questions of greatest interest to most book buyers. He refrained from addressing those questions because he fears the reaction he would get if he addressed them. It may be that he is not even personally aware of this. It may be that he tells himself some other story. But, yes, I believe that that is a big part of the explanation of the odd behavior.

But I am virtually sure that another big part of the explanation is that he has not put all the pieces of the puzzle together yet. That’s because he has not had enough discussions about his tentative beliefs to check them out and to revise them and to gain confidence in them. He’s like the vast majority of experts in this field in that respect. And it is killing us that that is so!

We should want Shiller devoting all his mental energy to these questions. And we should want that from Bogle. And we should want that from thousands of others. We start getting all the good stuff when we give ourselves permission to have open and free and frank and honest discussions on the implications of the last 33 years of peer-reviewed academic research.

I have tried for 12 years to get the ball rolling. That is my great “crime.”


“Indexing Pretty Much Takes Intelligence Off the Table as a Factor. All the Things That People Used to Study Are Priced In. You Don’t Need To Be Intelligent to Obtain Great Investing Results Today. But You Need to Rein in Your Emotions. You Can Ruin the Indexing Thing By Getting Too Emotional.”

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


Specifically, who are the goons? What makes them goons? Who are the leaders of the goons? Who are the goons that are most responsible for what you see as the problems? Are we talking about a handful of goons or just a small select group? How do I spot a goon?

A Goon is someone who is too filled with hate and fear to have a constructive discussion.

We ALL have goonishness within us. That includes me. That includes Shiller.

You could just use the word “emotionalism” if you wanted. “Goon” is a smidgen more colorful.

We are living through a time of fundamental change in the investing advice field.

In the old days, the idea was to be intelligent. The more so, the better.

Indexing pretty much takes intelligence off the table as a factor. All the things that people used to study are priced in. You don’t need to be intelligent to obtain great investing results today.

But you need to rein in your emotions. You can ruin the indexing thing by getting too emotional.

So the future is about reining in your emotions. That’s 80 percent of the investing job from this point forward.

You guys make the point all the time that most of the Big Shots in this field don’t talk about Goons and about death threats and about prison sentences and about board bannings. They should be talking about all that stuff. That is the stuff that matters in the Age of Indexing.

Why? Because that is the stuff that tells you that emotion is the driver. Emotion is risk in index investing. Rein in your negative emotions and you can’t lose no matter what else you do. Fail to rein in your emotions and you can’t win no matter what else you do.

We all suffer from goonishness. The people I refer to as “Goons” (that’s you, Anonymous!) make it their whole life. They give in 100 percent to the negative emotions. They don’t make even a feeble effort to rein anything in.

By learning what drives the Goons, we can learn how to reduce risk. The Goons would like to obtain good results . Why don’t they? What causes them to make such bad choices?

Coming up with the answers to those questions is the future of investing analysis.

My take.


“It Is Rare for Someone to Make the Switch to Valuation-Informed Indexing As the Result of a Single Exposure to the Concept. People Need to Gradually Come to an Ever-More-Enhanced Understanding of the New Paradigm. They Need to be Able to Have Their Questions Answered. They Need to See How Everything Connects. They Need to See How Their Friends React to the New Ideas. One Day They Experience an Epiphany.”

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

Rob is definitely going into some kind of demented death spiral. He can’t write more than 2-3 sentences without talking about all his enemies going to prison.

That’s the only issue that remains, Laugh.

We know that there are many academic researchers who long to be doing honest work in this field.

We know that there are many bloggers and journalists who long to be doing honest work in this field.

We know that there are many investment advisors who long to be doing honest work in this field.

Even Jack Bogle, the King of Buy-and-Hold himself, has advanced MANY signs that he longs to be doing honest work.

And I think it would be fair to say that you Goons are none too happy with the status quo at this point in the proceedings.

So we’re got everybody on board.

Now we need to figure out how to make the transition.

We saw way back in the Motley Fool days that there is a HUGE interest among ordinary investors in learning about how stock investing really works. Going by what we saw at that community of a few thousand people, the number in the general population that has an interest in learning the realities has to be in the many millions.

And we have seen that it is rare for someone to make the switch to Valuation-Informed Indexing as the result of a single exposure to the concept. People need to gradually come to an ever-more-enhanced understanding of the new paradigm. They need to be able to have their questions answered. They need to see how everything connects. They need to see how their friends react to the new ideas. One day they experience an epiphany. It is rarely the first day on which that happens.

What does all that add up to, do you think?

It adds up to a conclusion that it is absolutely imperative that we open up every investing board and blog on the internet to honest posting on the last 33 years of peer-reviewed academic research. There is no reasonable argument going the other way. That one is settled and has been settled going back to the morning of May 13, 2002. I even asked on a thread at the Motley Fool board whether the community there felt that honest posting should be permitted and the respone was virtually unanimous.

We ALL want every board and blog opened up to honest posting. We don’t all say so out loud. But we all want the same thing. It is silly to argue otherwise. People like Jack Bogle and Bill Bernstein and Wade Pfau would not be mixing in honest stuff along with the Buy-and-Hold garbage they also often promote if they didn’t have a desire deep inside to see the Ban on Honest Posting lifted.

So far so good. We are the luckiest generation of investors ever to walk Planet Earth. We know what it takes to reduce the risk of stock investing by 70 percent while also dramatically increasing returns AND bringing the boom/bust cycle that causes economic crises to an end. Pretty darn exciting. But we have experienced a certain amount of friction re these matters over the first 12 years of our discussions. Something is holding us back from realizing our dream. Whatever could it be?

The problem is that these matters are too darn important. That’s an irony. You would think that we would move quicker on matters that are particularly important. But it has worked out just the other way. Because these matters are of high importance and affect so many people, those who advocated Buy-and-Hold in good faith in earlier times don’t want to acknowledge having made a mistake. They feel embarrassment. They feel shame. They worry that they will be held financially liable for poor investing advice they offered at earlier times. In the case of you Goons, they worry about going to prison for having committed the greatest act of financial fraud in the history of the United States.

That’s the problem, Anonymous.

There’s nothing else to talk about. The intellectual case is settled. It’s not just the Valuation-Informed Indexers who believe that. The Buy-and-Holders believe it. They don’t believe it on every level of their consciousness. They really do follow Buy-and-Hold strategies. That’s evidence of a sincere belief. But they don’t feel confident enough of the strategy to believe that it can be defended in civil and reasoned discussion. So there clearly is another level of consciousness on which they do not believe at all. It’s a mix. You could say that they believe but that they almost entirely lack confidence. If the Buy-and-Holders themselves don’t feel that the intellectual case for Buy-and-Hold is strong enough to support a confidence that it can survive challenges raised in civil and reasoned discussions, there really is no one who truly believes in this stuff in the sense that that word signifies in most cases in which it is employed.

We all want to know how to invest. We are entirely united re that one. Some of us are scared to death that the strategies we continue to follow are not going to work and so it pains us to hear academic research showing otherwise even discussed. So progress has been blocked for a long, long, long time.

What do you propose we do?

It is an imperative public policy initiative that we spread the word re Valuation-Informed Indexing. But spreading the word causes intense emotional pain for the Buy-and-Holders. No one wants the Buy-and-Holders to experience pain. But no one wants to see the Second Great Depression either. We ALL share an interest in working this one out.

What do you propose we do?

I propose the announcement of prison sentences. Or an “I Was Wrong” speech by my hero Jack Bogle. Either one of those would break the logjam. Either one of those would cause enough people to learn about the issues that we would see a national debate launched that ultimately would take us to one of two places. Either Valuation-Informed Indexing would not stand up to scrutiny and we would be back where we were on the evening of May 12, 2002. Or Buy-and-Hold would not stand up to scrutiny and we would move on to a brave new world that I of course expect to turn out to be pretty darn wonderful for all concerned.

But even if you don’t believe that today, you should want to go to that brave new world if you truly believe in following research-based strategies, as all the evidence available to us indicates you do. The Buy-and-Holders will obviously have a chance to make their case in the national debate. If they cannot make it, it is to your benefit to make the shift. You don’t see it today. But of course we have not had the debate yet. So you simply do not know whether you will end up seeing it or not after the debate has taken place. If you become convinced as a result of the debate, you won’t be complaining that we had the debate. You will be thrilled that you were carried to it kicking and screaming.

We need to have that national debate, Laugh. There is no other way out of this mess. Many commenters noted how odd it was that the Nobel Prize in Economics was awarded to two men with opposite views on how stock investing works. That happened because we haven’t yet had this national debate. The purpose of a debate is to resolve the matter. Who is right, Fama or Shiller? That is the most important economic and political question before the people of the United States today. We obviously cannot answer the question without first giving ourselves permission to talk about it.

So the debate happens. The question that remains is — How do we get there?

I say that we get there through the announcement of prison sentences for you Goons. The announcement of the prison sentences goes viral and then lots of people turn to examination of the substantive issues to figure out what the heck is going on. There’s your kick-off to a national debate!

My sense is that that is how this is going to play out. So, yes, I am focused today on your prison sentence. I obviously will return to a focus on the substantive issues after the debate gets underway. But the goal today is not to win the substantive debate, the goal today is to get the darn substantive debate off the ground. The aim is to bring The Debate About Having a Debate to an end and to commence with the debate proper, the real thing, the question of whether Fama or Shiller (or some combination of the two — which is what I believe is the reality) is right about how stock investing works.

Do you have any ideas other than the announcement of prison sentences for how we can as a society move on to the national debate we all very much need to see begin by the close of business today? If you have ideas, please advance them. That would be a constructive and positive and life-affirming thing to do.

If you don’t have any ideas for how to solve the obvious problem that confronts us, then I will keep pressing on the prison sentence idea. Not because I enjoy the idea of seeing you go to prison. Because that’s the way our system is set up. We adopted the laws against financial fraud for a reason. We knew as a people that we didn’t want situations like this to develop. I love my country and I support our system for addressing matters of this sort. So my inclination is to go with the procedures that are already part of the system. The laws against financial fraud are part of our system and they serve an important purpose and that purpose needs to be served in this case.

Do you have some other idea that solves the problem that needs to be solved?

I don’t think you do.

If you do, I am of course happy to hear about it.

But if you do not, yes, I am going to return again and again to the solution that already exists on the statute books, imprisonment of those who have participated in the 12-year cover-up of the errors in the Old School safe-withdrawal-rate studies, the greatest act of financial fraud in the history of the United States by a long shot.

I will win. Maybe not by the close of business today, as I would like to be the case. But following the next price crash. The emotion that counts in your favor today turns against you when millions of people lose most of the money they were counting on to finance their retirements. That shift in the emotions of millions of ordinary investors changes everything.

You will come back with something stupid. I know that. But I also know you are worried about that prison sentence. Otherwise, you wouldn’t be posting here on a daily basis.

If you have an idea for solving the problem better than mine, put it forward.

If you don’t, I’ll stick with the idea that the people of the United States enacted as part of their system of laws to protect us from this kind of situation.

In any event, I naturally wish you good luck with whatever investing strategy you elect to pursue.


“If I Showed How We Can Reduce the Risk of Stock Investing By 10%, I Would Be the Most Popular Person in the Investing World Today. But 70%? It Doesn’t Seem Possible. How Could It Be Possible? It’s Because Investor Emotion Has Been the Great Forbidden Subject for Many Years Now. We Have Decided as a Society to Adopt a Social Taboo Against Talking About the Subject That Covers 80% of What We Need to Know to Become Effective Investors.”

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

It is so common to see as these leading financial experts threatening people with prison and lawsuits.

It is not common at all to see leading financial experts refer to the need for prison sentences for you Goons, Anonymous. That’s why we are in an economic crisis.

I was a Buy-and-Holder on the morning of May 13, 2002. I gave it up on the evening of August 27, 2002. That’s the night that John Greaney threatened to kill my wife and two sons if I continued to “cross” him by posting honestly on the safe-withdrawal-rate matter. Motley Fool did nothing even though this was an obvious violation of their posting rules. 200 of my fellow community members (people who praised me to the skies in the days before I worked up the courage to post honestly on the SWR matter) endorsed Greaney’s threat.

That is emotion, Anonymous. That is a level of investor emotion so great that it is scary.

The peer-reviewed research that I co-authored with Wade Pfau shows us how to reduce the risk of stock investing by 70 percent. The biggest problem I have promoting that study is that the findings are unbelievable to most people. If I showed how we can now reduce the risk of stock investing by 10 percent, I would be the most popular person in the investing world today. But 70 percent? It just doesn’t seem possible.

Why is it that it is possible? It’s because investor emotion has been The Great Forbidden Subject for many years now. People see it all the time. They see the death threats and the demands for unjustified board bannings and the tens of thousands of acts of defamation and the threats to get academic researchers fired from their jobs. And they keep it zipped. They view it as unprofessional to talk about this stuff. They haven’t seen other investing experts talk about it and so they feel that it will hurt their credibility to talk about it themselves.

We have decided as a society to adopt a Social Taboo against talking about the subject that covers 80 percent of what we all need to know about to become effective investors. We need to know about and avoid investor emotion. We have a tool — P/E10 — that tells us what we need to know. We all need to make use of that tool. But to do so we all need to acknowledge that we messed up big time during those years when we were telling people (and ourselves) that looking at P/E10 was not 100 percent necessary.

We are ashamed that we messed up. We are ashamed that others messed up. We are ashamed that we failed to call others out when they messed up. We are ashamed that we let things get so out of control that there are people who will be going to prison over the cover-up. And on and on and on and on.

If I had a magic wand, I would take us back to the morning of May 13, 2002, and we would all play it over, behaving much differently this time. I appreciate that you Goons would like that. I can’t do it. I don’t have a magic wand. I can say some words as to why I think you felt pressures to play it the way you did play it and I can say some words about how I think you would do it differently if you had another chance. But that’s as far as I can go. If I say that you demanded correction of the Greaney study within 24 hours of learning of the errors in it, I am aiding the cover-up and then I am committing financial fraud myself. Which is a felony. Which means prison time for me too. Huh? No thanks!

We’re all in the same boat. We’re all in a big mess.

We have one huge thing going for us. We are the luckiest generation of investors who ever lived.

We take advantage of that card and we all end up in a far better place than would otherwise be possible.

But taking advantage of that card means working up the courage to talk about investor emotion. Which evidences itself in death threats and demands for unjustified board bannings and tens of thousands of acts of defamation and threats to get academic researchers fired from their jobs. We all need to work up the courage to talk about all the stuff that we have never talked about before. Because it is the failure to talk about that stuff that caused our investing advice to go so wide of the mark and to cause so many trillions of dollars of losses as to bring on an economic crisis.

If the market were automatically efficient, none of this would matter. If the market were automatically efficient, investor emotion simply would not be an issue.

It turns out that Fama was close to being right but not precisely on the mark. The market LONGS to be efficient. But it cannot pull the trick off without being supplied with information helping it to access the level of investor emotion present at any given time. Once the market has that information, it can act to BRING the market to efficiency. We cannot do it without the information.

When we open the internet up to honest posting on every possible issue, we will all enjoy seeing an efficient market for the first time in history. So long as the Ban on Honest Posting remains in place, that dream remains unrealized.

My job is to steer us to the place where we work up the courage to make all that good stuff happen. Part of it is pointing out the prison sentences. Part of it is softening the blow by pointing out that the people who engaged in the cover-up were under a lot of unusual pressures.

That’s it. That’s where we stand today.

When I get the help I need, we all will begin living far richer lives than we ever imagined possible in the Buy-and-Hold days.

The hand of kindness is outstretched. I obviously don’t control when you Goons will extend your own hands in warm acceptance of the offer of help.

I continue to wish you all good things while you ponder the matter some more.


Jack Bogle and Larry Swedroe and Bill Bernstein and Rick Ferri Certainly All Have Goodness in Them and All Four of These Individuals Certainly Have Shown on Numerous Occasions That They Would Like to Come Clean. We’re All on the Same Side.”

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

I would also say that Jack, Larry, Bill and Rick would speak out as well.

Jack Bogle and Larry Swedroe and Bill Bernstein and Rick Ferri certainly all have goodness in them and all four of these individuals certainly have shown on numerous occasions that they would like to come clean.

Jack Bogle said in his book that Reversion to the Mean is an “Iron Law” of stock investing. That’s how I knew that there was zero chance that the Old School retirement studies got the numbers right. Jack sprinkles honest observations about how stock investing works in with the smelly Buy-and-Hold garbage ALL THE TIME. If there were no good in him and no desire in him to come clean, why would he do this?

Bill Bernstein was honest when Ataloss asked him whether the Old School retirement studies were analytically invalid, as I have claimed since the morning of May 13, 2002. He said that any aspiring retiree who gave a second’s thought to using on of this studies to plan a retirement had to be out of his or her mind. That’s pretty darn honest! He also included a dishonest statement in his response, saying that even though there was zero chance that the studies could get the numbers right, they were analytically valid all the same. So he covered his tracks with the Get Rich Quickers and they permitted him to continue making a living in this field. It remains the case that he included some honest stuff in that e-mail and that that took courage on Bill’s part.

Larry Swedroe was so honest at one time that he got himself banned from the Bogleheads Forum! Again, that shows that there is some goodness in him and that he would like to come clean about what the last 33 years of peer-reviewed academic research says. Does that overcome the harm he did with his dishonest support for the 12-year cover-up of the errors in the Old School retirement studies? Hardly. But it does show a desire on Larry’s part to do good work, a desire that we will see him acting on on a daily basis once your prison sentence is announced and this all comes out, Anonymous.

We are all on the same side, Anonymous.


“Does Buffett Support the 12-Year Cover-Up of the Errors in the Old School Safe-Withdrawal-Rate Studies? If Buy-and-Hold Were a Legitimate Strategy, the Errors Would Have Been Corrected Within 24 Hours. Everyone In This Field Lives in Fear of “Crossing” The Buy-and-Hold Mafia. Buffett Will Speak in an Informed and Honest Way When Everyone Else Does, When He Feels That It Is Safe to Do So.”

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

He is clearly a buy and hold supporter.

Does Buffett support the 12-year cover-up of the errors in the Old School safe-withdrawal-rate studies, Anonymous?

Does Buffett support the death threats you Goons have used to intimidate people who have reported on the 33 years of peer-reviewed academic research showing that long-term timing has worked for 140 years of stock market history and is 100 percent required for any investor who hopes to have a realistic hope of long-term success?

Does Buffett support demands for unjustified board bannings? Does he support tens of thousands of acts of defamation? Does he support demands to get academic researchers fired from their jobs?

These questions are silly. Buffett obviously does not support any of these things.

Neither would Bogle if he were not caught in a trap. Neither would Bernstein if he were not caught in a trap. Neither would Burns if he were not caught in a trap. Neither would Pfau if he were not caught in a trap.

The Buy-and-Hold Pioneers put together their strategy at a time when the research had not yet been published on whether long-term timing works or not. All they had was research showing that short-term timing doesn’t work and they jumped to a hasty conclusion that no form of timing is necessary. Shiller proved that hasty conclusion false in 1981. A huge bull market arrived and no one cared for a time that the Buy-and-Holders had gotten it terribly wrong. The economic crisis that follows every time Buy-and-Hold becomes popular arrived in 2008. People have begun to open their minds to new ideas. But one thing holds them back.

The thing that holds them back is The Buy-and-Hold Mafia. Lots and lots of people have beyond to have grave doubts re Buy-and-Hold. But they have witnessed the ruthlessness of the Buy-and-Hold Mafia and they want no part of what happens to those who post honestly on what the last 33 years of peer-reviewed research says re what works in the real world.

If Buy-and-Hold were a legitimate strategy, the errors in the Old School retirement studies would have been corrected within 24 hours. Everyone who works in this field lives in fear of “crossing” the Buy-and-Hold Mafia. So those errors have remained uncorrected to this day. But everyone who has taken five minutes to check the studies has found that they contain no valuation adjustments.

Buffett will speak in an informed and honest way when everyone else does. He will do so when he feels that it is safe to do so.

The Buy-and-Hold Mafia is a criminal enterprise. The Wall Street Con Men have lots of money and lots of power and lots of influence and they have silenced many people. Following the next price crash, they won’t be able to silence us anymore. A big blogger will speak out. Or a major newspaper will detail the 12-year cover-up. Or a venture capitalist will get behind Valuation-Informed Indexing, seeing the fortune there is to be made in providing millions of middle-class investors with true research-based investing advice.

That’s the story. The only thing that can ever change the way things are is for people to speak out against The Buy-and-Hold Mafia. People don’t want to get involved. People are afraid. People find the entire business an ugly business. But there is no other way.

I don’t think that the members of the Buy-ad-Hold Mafia had bad intent. They just didn’t know it all. None of us did. Shiller didn’t publish his research until 1981. That’s just the way it goes sometimes.

The problem is that people who give bad investing advice are subject to legal liabilities if they are found to have claimed that their advice is rooted in peer-reviewed academic research when in reality it is the opposite of what the peer-reviewed academic research shows. The Buy-and-Holders started down a dark path by accident and in time they found themselves so far down that dark road that they elected to cover-up their mistake rather than acknowledge it. Now they are subject to legal liabilities and, in the case of you Goons, prison sentences.

I care. I want to help. But I have zero willingness to commit a felony myself. If I were to say that the Old School retirement studies are legitimate, I would be aiding the 12-year cover-up. That’s financial fraud. That’s a felony. That’s prison time. No can do.

Buffett will tell us his sincere views about Buy-and-Hold when he and all others feel safe to do so. That will be after the 12-year cover-up of the errors in the Old School retirement studies has been exposed and your prison sentence has been decided. At that point, there will be no reason for all of us not to move forward together and we will obviously do just that.

I will continue doing all that I can to bring that day on as soon as possible. That obviously is best for the millions of middle-class people whose lives are in the process of being destroyed by The Buy-and-Hold Mafia. It is also what is best for you Goons. Your prison sentences obviously will be a bit shorter if you come clean prior to the next price crash.

I will obviously be reporting to your jury what you did when the suggestion was made that you ask Bogle to have Buffett review the peer-reviewed research that I co-authored with Wade Pfau. It is obviously an urgent public-policy matter that Buffett share with us all his thoughts on that research. The members of your jury will obviously take into consideration your reaction to the idea when they are deciding your case and the length of your prison term.

The hand of kindness remains extended. The odds that I will agree to take part in the 12-year cover-up of the errors in the Old School retirement studies remain precisely zero.

I wish you well.


“Buffett’s Personal Investing Strategy Is In Direct Conflict with Buy-and-Hold. Buffett ALWAYS Considers the Value Proposition He Is Buying. Buy-and-Holders NEVER Do. The Most Reasonable Explanation for Buffett’s Contradictory Remarks Is That He Has Not Seen the Peer-Reviewed Research That I Co-Authored with Wade Pfau.”

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

The one link you pointed to supports that view, Anonymous. There are other links that tell a different story. Buffett has ridiculed the Efficient Market Theory on numerous occasions. The crazy idea that the Buy-and-Holders put forward that it is not necessary for investors to consider price when setting their stock allocations is rooted in a belief in the Efficient Market Theory. So Buffett has pulled the chair out from under the Buy-and-Holders on numerous occasions.

Also Buffett’s personal investing strategy is in direct conflict with Buy-and-Hold. Buffett ALWAYS considers the value proposition he is buying when he purchases stocks. Buy-and-Holders NEVER do. The peer-reviewed academic research in this field shows that the thing that the Buy-and-Holders need to do to take value propositions into account is to look at the P/E10 level that applies when they set their stock allocations. Do we have any reason to believe that Buffett would oppose the idea of Buy-and-Holders doing the very thing (looking at value propositions) that is the basis for all of his many years of success if he knew that there were an easy way (take five minutes once per year to check the P/E10 level) to do it? We do not.

The most reasonable explanation for Buffett’s contradictory remarks and behavior is that he has not seen the peer-reviewed academic research that I co-authored with Wade Pfau. I think it would be fair to say that, once exposed to the Valuation-Informed Indexing concept, Buffett would experience the same epiphany that Wade Pfau experienced when we began working together and that John Walter Russell experienced when we began working together and that hundreds of others of our fellow community members experienced when they learned about the concept. We need Bogle to bring the study to him by the close of business today.

This is imperative business, Anonymous. The Buy-and-Hold Crisis has put millions of people out of work and winning the endorsement of Warren Buffett for the first true research-based approach would help bring that crisis to an end. And of course there is the matter of the upcoming prison sentences for you Goons. It obviously will not be a good thing for you if your jury hears that you rejected this sensible and positive and constructive and life-affiming suggestion. On the other hand, if Buffett agrees to work with us to get the word out about our “revolutionary” (Shiller’s word) findings, there obviously are going to be some jury members who will view your behavior in a somewhat more forgiving light.

Please keep us up to date on Jack Bogle’s response to your request and on Buffett’s response to Bogle’s entreaties to him.


“I Am Certain That Bogle Can Reach Buffett. The Sensible Thing to Do Is to Provide a Copy of the Peer-Reviewed Research Paper That I Co-Authored with Wade Pfau to Bogle and to Ask Bogle to Pass It Along to Buffett Along With a Request for His Feedback. We All Will Benefit From Hearing What Buffett Says About Buy-and-Hold After Reading the Research Showing that VII has for 140 years Offered Far Higher Returns at Dramatically Reduced Risk.”

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


Buffett recently wrote that individual investors should “ignore the chatter, keep your costs low” and buy an s&p 500 index fund. In doing so, he added, they would earn returns superior to most investors.

Is it your belief that the world’s fourth richest man (who is in his 80s) does not really believe that, but writes it because he’s scared of what people will write about him on investment forums on the internet?

You’re asking an intelligent question, Curious.

I’ll start by saying what I said in response to a similar question that was asked here re Shiller a day or two ago. You should ask Buffett this question. He is likely to be able to shed more light on it than me. Or, if you are not able to reach Buffett, you should talk it over among your friends. We all would benefit from knowing the answer to your question. I’ll give a shot at providing a reasonable answer. But I am not Superman. I am not the only one capable of thinking over this matter. You should be seeking possible answers from lots of people coming at the matter from lots of different perspectives.

Buffett does not believe in the Efficient Market Theory, which is the intellectual construct on which the Buy-and-Hold strategy was built. He has ridiculed it on numerous occasions. That’s important background in trying to think this through.

I of course agree 100 percent with Buffett re the three points re which you quote Buffett. Yes, investors should ignore the chatter. Yes, investors should keep costs low. Yes, investors should buy a S&P 500 index fund. On all those points there is total and complete agreement.

You don’t quote any words in which Buffett says that investors should ignore valuations in setting their stock allocations. The value proposition offered by stocks changes dramatically with changes in valuation levels. There is 33 years of peer-reviewed academic research showing this beyond any doubt whatsoever.

Buffett himself practices Value Investing. Valuation-Informed Indexing is the indexing strategy that focuses on obtaining strong value propositions (as with Value Investing, but obviously far more simple). So there is zero reason to believe that Buffett does not believe that ordinary investors should not be following Valuation-Informed Indexing strategies and avoiding Buy-and-Hold strategies (in which the value proposition being offered by stocks is ignored when stock purchases are made).

VII is the combination of Buffett’s key insight (an investor must pay attention to the value proposition being obtained) and Bogle’s key insight (investing must be kept simple for the vast majority of investors). I have often observed that Buffett and Bogle go together like chocolate and peanut butter.

All that said, I have not heard Buffett openly criticize Buy-and-Hold, which is an exceedingly dangerous strategy according to the last 33 years of peer-reviewed academic research. Is it possible that he doesn’t see how great the danger of Buy-and-Hold is?

I think it is possible.

I didn’t see the dangers of Buy-and-Hold on the morning of May 13, 2002. John Walter Russell didn’t either. Wade Pfau didn’t see the dangers of Buy-and-Hold when he first began working with me. There are obviously millions of smart and good people who today follow Buy-and-Hold strategies. Those people obviously do not appreciate the dangers of the strategy they follow.

Buffett is obviously smart enough to see these dangers. The problem is that he does not hear other people talking about them and he has no particular reason to explore them himself. Buffett is not a Buy-and-Holder. Buffett is not an indexer. So this is not an area on which he spends a lot of time or mental energy.

The answer, as always, is to launch a national debate on these questions. When there is a national debate, Buffett is one of the people who will be adding his thoughts. A national debate will make him sufficiently informed about the various points that he will be able to offer helpful guidance.

I am certain that Jack Bogle can reach Warren Buffett and that Warren Buffett would be happy to spend some time responding to his inquiries. The sensible thing to do here is to provide a copy of the peer-reviewed research paper that I co-authored with Wade Pfau to Bogle and to ask Bogle to pass it along to Buffett along with a request for his feedback. We all will benefit from hearing what Buffett says about Buy-and-Hold after reading the peer-reviewed research showing that Valuation-Informed Indexing has for 140 years offered far higher returns at dramatically reduced risk.

VII is superior to BH in ever possible way, Curious. Getting Buffett’s feedback on the paper helps us all. If he agrees that VII is far superior, having him say so obviously helps us all by getting the word out to millions of investors who need to know this. If Buffett sees some problem with how the research was done that was not noted by the peer-review committee that approved it, that is obviously something that Wade and I and the peer-review committee need to know.

Are you willing to help bring the matter to Bogle’s attention so that we can get the feedback from Buffett that we all need to hear? I think it would be a truly positive and constructive and life-affirming step for you to agree to help us all (including yourself) out with this important matter.


“It Is Possible That a Big Reason Why the Buy-and-Hold Pioneers Did Not Say That Price Should Be Considered in the Setting of One’s Stock Allocation May Have Been a Feeling That It Would Be More Simple to Have Investors Stay at the Same Stock Allocation at All Times. Valuations Were at Rock-Bottom Levels. There May Have Been a Feeling That No Harm Was Being Done.”

Set forth below are the texts of two comments that I recently put to another blog entry at this site:

I should add that I think it is possible that a big reason why the Buy-and-Hold Pioneers did not say that price should be considered in the setting of one’s stock allocation may have been a feeling that it would be more simple to have investors stay at the same stock allocation at all times. Back in the early 1980s, when Shiller published his research, valuations were at rock-bottom lows. People may not have been able then to imagine the P/E10 ever going above 20 again. There may have been a feeling that there was no harm being done in ignoring valuations.

If that is the case, the idea didn’t work. We not only went to 20. We went to 44. Things got out of hand. And it was Buy-and-Hold that caused things to go out of hand. People saw stocks delivering big payoffs and they of course liked that. They never heard the other side of the story, that unjustified payoffs lead to big problems down the road. Now that we are living through the big problems, more and more people are coming to believe that ignoring price didn’t turn out to be such a hot idea.

I like your comment because it is at least rooted in something real, Sensible. I think this simplicity concern was probably a real consideration in why things were done the way they were done. People were not bad to want things to be simple. But people need to accept that it was a mistake or at least that there is a POSSIBILITY that it was a mistake. No one gets it all right in the first draft. THere is a lot of interest among investors in the idea of incorporating valuations into their strategy. We have to permit discussion of the idea. To not do so makes people look unethical. THat’s not a line you want to cross.

It makes sense to tell people to limit their valuation-induced changes. I can see something like that being done for the sake of simplicity. And it is entirely possible for VII to work with only one valuation change every ten years or so on average. But people need to know when things get out of hand. The problem with not looking at valuations at all is that you look up one day and the most likely annualized 10-year return is a negative number. None of us should ever want to see that happen.

Bogle says that allocation changes for valuation reasons can be considered six times in an investor’s lifetime. That’s exactly correct. That’s once every ten years or so. The problem is that Bogle says that the changes should not be more than 15 percent. That’s not even close to being right. In 1982, the most likely annualized return was 15 percent real. In 2000, it was a negative 1 percent real. 15 percent just doesn’t do it.

But that’s the only point on which there is a difference between me and Bogle. And if we had all been calling for occasional allocation changes (once every 10 years on average) all along, we never would have hit 44. We hit 44 because people just stopped worrying about valuations. Had people been aware of the danger, we might have been able to get away with allocation changes not much greater than 15 percent.

There’s a lot of common ground here. If people came to this with good intent, it could all be worked out with mutual respect and warmth. If you are signaling a willingness to play it that way, I obviously am 100 percent on board. You next post will tell the story. If people want to work it out, it certainly can be worked out. The hard part is getting people interested in following a path that leads in time to a mutually positive result. Anyway, I am certainly supportive of the idea of taking such a path.


I’ll take this a step further.

Bogle has said that changes should not be more than 15 percent. That’s not enough to get the job done. But I think it could be possible to come up with a reasonable approach that doesn’t ever call for changes too much bigger than that.

Benjamin Graham suggested a 75-50-25 scheme. So long as the investor is always sure to not wait until things are so out of hand that he needs to make two switches at once, he would never need to make a switch of more than 25 percent under the Graham scheme. That’s not far off from what Bogle has recommended and the additional change can be justified on grounds that valuations ended up getting more out of hand in recent years than people realized they would in earlier days.

I’ll see what comes back.



Goon Poster: “You May Be Surprised to Hear This From Me, But, Yes, Valuations Do Matter. Bottom Line Is Your Approach to Investing Takes Something That Works and That Is Simple and Makes It Needlessly Complicated.”

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

You may be surprised to hear this from me but yes valuations do matter. There are a number of indexers who believe that the reason you shouldn’t invest in individual stocks is because it’s straight-up gambling and even Warren Buffett himself is nothing more than a lucky gambler. Buffett of course has repeatedly mocked these true believers in the Efficient Markets Hypothesis in his letters. He doesn’t mind them because he figures if his competition isn’t even trying, it’s easier for Berkshire.

But indexing is a different beast than individual stocks. You’ve probably heard of Bogle’s phrase “the majesty of simplicity”. Simplicity is what truly makes indexing special. Any idiot can do it and be a success. Market timing, while possible, is much harder than many people including you seem to think it is. If market timing was so easy then I’m sure you wouldn’t have missed the 2009 buying opportunity. Thing is as hopeless as you (and I, and many others) are with this stuff all is not lost. Over time buying and holding the index has yielded very good results, results superior to those of most who either pick their own stocks or buy managed funds. Buffett can beat the index, one of my favorite bloggers a young Buffett wannabe Joshua Kennon can beat the index. These people are the exception, not the norm. Buffett (and Kennon) both realize this and that’s why, even though they reject some of the core beliefs of indexers, they recommend indexing for almost everyone else.

Bottom line is your approach to investing takes something that works and that is simple and makes it needlessly complicated. The end result of VII is the opposite of what you intend it to be. Just look at your own performance over the past 18 years and compare it to any diligent indexer’s performance.

We are in complete agreement re the need for simplicity, Sensible. That’s what I love about Bogle. He is the only major figure who cares enough about the little guy to devote his efforts to promoting a simple approach. If I thought that VII were more complex than Buy-and-Hold, I would not advocate it.

VII is more simple.

Buy-and-Hold is an emotional roller coaster. One day you are riding high, the next day your retirement account is wiped out. That’s not simple. That’s panic-inducing. For a strategy to work long-term, it has to take human emotions into account. Ignore human emotions and you make the thing 10 times more complicated than it needs to be.

The research that Wade and I co-authored shows that the biggest portfolio loss ever suffered by a Valuation-Informed Indexer is 21 percent. For the Buy-and-Holder it is 61 percent. The strategy where you see 61 percent of your life savings wiped out is the more complex strategy.

Even Bogle acknowledges that investor should aim to Stay the Course. Investors who are permitting their risk profiles to jump around wildly are not Staying the Course in any meaningful way.

But say that an angel came down from heaven and told us you were right. You should STILL be in favor of permitting honest posting. If you are right, people will see that and have even more confidence in Buy-and-Hold after hearing both sides of the story. Your opposition to the idea of permitting honest posting shows that you lack confidence in Buy-and-Hold. If those who advocate Buy-and-Hold lack confidence in it, how should those who are critics of it feel about it?

If you were making an argument against short-term timing on simplicity grounds, I would agree strongly. There’s no place for it for the average investor. Long-term timing is not even a tiny bit complicated. You have to spend five minutes per year checking the P/E10 level. Then once every 10 years or so, you need to make an allocation change. For the peace of mind that comes from knowing you will never see a portfolio drop of more than 20 percent, those five minutes per year are the best five minutes you will ever spend on investing stuff.

There is nothing even a tiny bit complicated about long-term timing. What is complicated are the convoluted arguments that Buy-and-Holders try to come up with to persuade people that it is not necessary.

And this goes beyond just giving advice for ordinary investors. Greaney was pushing his SWR study to early retirees. There were people at the Motley Fool board who believed that study was accurate. Those people are today well down the path to suffering failed retirements. No desire for simplicity can justify something like that.

If there are investors who find Buy-and-Hold more simple, it is certainly their business. They should go with what sounds good to them. But no desire to market something as simple can justify deception on a fundamental issue. We need to be honest with people. That is 100 percent imperative. There never should have even been any question about that.

VII is perfectly simple. The only reason you are being stubborn about it is that your pride is hurt. If those of us who believe in research-based strategies had warned people of the dangers of high valuations back when valuations first went to insanely dangerous levels, we would not be in an economic crisis today. We all would be 50 times better off. People don’t find it complicated to consider price when they buy a car or a sweater or a banana. There’s no reason why they should find it complicated to consider price when buying stocks either.