“I Am Not Going to Be the Only Person Getting Lots of Credit. This Is So Huge That There Is Plenty of Credit to Go Around. Here’s a Tip: The Early Adapters Are Going to Get the MOST Credit. Do You See What I Am Hinting At Here?”

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

Which then means that not a single expert has the full combination of being honest, avoiding conspiracies and is knowledgeable……..and that you alone, Rob, is the only one that has all three of those attributes.

I don’t think that what you say here is too terribly far off the mark, Anonymous.

We all have different strong points and different weak points.

There are areas where Bogle’s knowledge base is so far greater than mine that it would be silly to compare the two.

That’s true with Shiller too. And of course with lots of others.

But if you limit the discussion to valuations, I far surpass Bogle. He is not in my league. Not because he is dumb. He is very smart. But he has elected not to learn about valuations. He has deliberately stunted his own growth in this area. So I have been able to race ahead of him. It may be that someday he will start devoting his energies to coming to a better understanding of the effect of valuations and then he will surpass me in that area too. He has chosen until today not to do that.

Valuations happens to be the most important subject matter for the majority of middle-class investors. This is the are where we had a huge advance a number of years back that most experts in the field have elected (not with full intent, but still…) not to pursue. So I have been able to go to the head of the class on an overall basis without going to investing school or managing a huge fund.

It’s been easy for me to avoid conspiracies. I never advocated Buy-and-Hold. So I never had any vested interest in it. I never experienced any psychic pain reading Shiller’s work or exploring the implications of it.

And, yes, I try to be honest. I think these other people do too. I believe that one of the big problems we have is that they feel that I am calling them dishonest when I say that they got the SWR wrong and they become defensive about it because they view it as important to be honest. So I do believe that they try to be honest. I often say that they are “smart and good people.” But their cognitive dissonance does not permit them to be fully honest.

Please remember that I was not fully honest in the days prior to May 13, 2002. I rationalized not speaking up about the errors in the Old School SWR studies for a time. I do not say that I am better than other people. Part of the reason why I have had to play it so honest is that I have had you Goons on my back for 12 years and, if I engage in one tiny bit of dishonesty, I am sure to be burned at the stake for it. My personal circumstances are more than a bit unusual.

The bottom line is pretty much as you say. The work that I present here is the product of a combination of a reasonable amount of intelligence and a reasonable amount of integrity. That happen to be a rarely found combination in InvestoWorld in the year 2014. So, yes, I believe that the investing advice offered here is superior to what is available just about anywhere else.

I wish it weren’t so. Anonymous. I would like to see all my blogger friends offering top-notch investing advice. I would like to see Jack Bogle offering top-notch investing advice. I would like to see Index Universe and Bogleheads Forum and Motley Fool and Early Retirement Forum offering top-notch investing advice.

You know what it takes, right?

We need to hear Bogle give his “I Was Wrong” speech.

That will clear the air for everything. That will launch the national debate we all need to hear.

Then EVERYONE will be offering advice that shows millions of middle-class investors how to reduce the risk of stock investing by 70 percent while increasing returns enough to permit them to retire five to ten years sooner than they ever imagined possible.

You know what, Anonymous? You should stop worrying about me getting the credit for all the wonderful material at this site. If you spent one-tenth of the energy learning from that material and spreading the word, you wouldn’t have to sweat it so much that I will be getting the credit for all this amazing stuff.

I am going to get plenty of credit. I deserve it. I sweated blood getting all this stuff right. I had to fight you Goons with two arms tied behind my back every step of the way. And I never flinched. I never quit. I never even slowed down. I am about as proud of my performance here as you would be proud of yours if the tables were turned.

But I am not going to be the only person getting lots of credit. This is so huge that there is plenty of credit to go around. LOTS of people will be getting lots of credit.

Here’s a tip: The early adapters are going to get the MOST credit.

Do you see what I am hinting at here?

My best wishes to you, old friend.


“There’s Something Between Telling Truths and Telling Lies. There’s Being Too Afraid to Look at New Truths to Learn What One Needs to Understand to Give Up Old Ones. Things Are Not as Black and White As You Suggest.”

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

Rob, for your opinions need to be valid, all of these financial experts either need to be lying, part of a mass conspiracy or not smart enough to have figured things out……………or………….you are wrong.

It’s a combination of those, Anonymous.

We didn’t make a serious effort to figure things out until the mid-1960s. In earlier days, different people had different opinions on how the stock market worked. But it was generally not the subject of sustained and systematic academic study. The Buy-and-Hold Pioneers had the most important breakthroughs in the mid-1960s. It’s only from that point forward that it became reasonable to refer to the study of stock investing as any sort of science.

The Buy-and-Hold Pioneers got one important piece of the puzzle wrong. They showed that short-term timing never works and then jumped to the hasty, false conclusion that long-term timing also does not work. It wasn’t until 1981 that that question was tested by research. Shiller then showed that long-term timing always works and is always required.

From 1981 forward, the experts have been suffering from cognitive dissonance. The idea that timing doesn’t work is a fundamental belief. They are having a very hard time giving that one up. It’s not quite right to say that they are “lying.” They are saying wrong things. They should know that these things are wrong from following the research. But they simply are not able to process what they read in the research. If valuations affect long-term returns, long-term timing is required for any investor hoping to keep his risk profile stable over time. You don’t need to be a genius to see that. But the people who are “experts” in this field are blind to the implications of Shiller’s research because they cannot bear to question the core belief of the investing paradigm around which they have built their careers.

Cognitive dissonance is a real thing, Anonymous. Please check the literature in the field of psychology if you don’t believe me. This is a compelling illustration of the phenomenon. But it is certainly not the first time that we have seen something of this nature take place. It also would help to read the book “The Structure of Scientific Revolutions.” Several of the academics to whom I wrote referred to this book in trying to explain why the implications of Shiller’s revolutionary finding have been ignored for 33 years.

People have a hard time processing really big changes. The shift from Buy-and-Hold to Valuation-Informed Indexing is a HUGE change. There’s never been a change this big before in this field. So it is taking some time for people to process it. It’s actually HARDER for people who possess a high level of expertise in the field to process the changes. They have more of an emotional stake in the old paradigm.

I don’t feel comfortable saying that there is a “mass conspiracy.” There was never a day when a group of people got together in a smoke-filled room and decided on a plan to keep knowledge of the implications of Shiller’s findings from millions of middle-class investors. But the Buy-and-Hold Mafia is a real thing. Bloggers who push Buy-and-Hold know that they will not be able to persuade their readers to follow their advice if they permit honest commenting at their blogs. Mutual fund companies know that they will not be able to persuade their clients to remain fully invested in stocks if they learn the realities. Stock brokers know that they will make more money in the short term if people don’t learn about what the last 33 years of peer-reviewed research says. Lots of people benefit in the short-term from keeping millions of middle-class investors in ignorance.

And those people have been acting in the self-interest. They are telling untruths. For example, the claim that “long-term timing is not absolutely necessary” is an untruth. Long-term timing is price discipline. It is absolutely required. But the people who tell this untruth believe the untruth themselves, at least to some extent. They know that Shiller published research casting doubt on the fundamental principles of Buy-and-Hold. But they tell themselves that Buy-and-Hold probably kinda, sorta works. These are generally honest people telling untruths in this one particular area because the knowledge that was brought to light by Shiller is knowledge that millions of people wanted very much to ignore for so long as stocks were insanely overpriced.

Not all untruths are spoken by people with an intent to lie. When people said in pre-Civil Rights days that “blacks are better off with the world being the way it is than they would be if they were given equal rights,” many of them believed it on a least one level of consciousness. It wasn’t only whites that said that sort of thing. Many blacks said that sort of thing. There was a level of consciousness on which they wanted to see change (and there is a level of consciousness on which John Bogle wants to understand the implications of Shiller’s findings). But they were afraid to step into a new world; they were more comfortable staying in the old world despite its imperfections.

There’s something between telling truths and telling lies. There’s being too emotionally afraid to bear looking at new truths to be able to bear giving up old ones.

You Goons tell lies. You Goons have told many, many lies. But even you Goons rationalize your lies. You tell yourself that it is okay to tell them because you have to “protect” investors from hearing views that you believe are dangerous.

The Wall Street Con Men tell partial lies. Bogle says that it is not necessary for investors to change their stock allocations by more than 15 percent even when stock valuations reach insanely high levels. The historical return data shows that investors need to change their stock allocations by 60 percent when stock valuations reach insanely high levels. So what Bogle says is certainly not true. But I don’t think it is quite right to call it a “lie” in the way that the word is usually used. Bogle tells himself that 15 percent is enough. He tells himself that we are not going to see another crash anytime soon. He tells himself that the promotion of Buy-and-Hold was not the primary cause of the economic crisis. People tell themselves all kinds of things when they are working hard to ignore discoveries that they find it painful to confront, Anonymous. Humans do this sort of thing ALL THE TIME.

Bogle behaves with a greater level of dishonesty when he fails to respond to my e-mails seeking help with the Lindauer matter. He has a responsibility to take action when he learns that a discussion board with his name on it is being misused in that manner. I am not sure that this act of dishonesty can be excused with references to the cognitive dissonance phenomenon. That’s something that we are going to have to decide as a society. My job is to report the realities with honesty and charity. The decision as to what sorts of consequences will fall on Bogle as a result of that particular act of dishonesty is not mine to make.

That’s my sincere belief as to what is going on. I won’t say that it is not a strange story. I acknowledge that it is mighty strange. But things are not as black and white as you suggest. There is corruption present in our story. But the amount of corruption is not as great as one would intuitively think to be the case on first hearing that “experts” continue to advocate Buy-and-Hold strategies 33 years after peer-reviewed research was published showing that there is zero chance that they could ever work for even a single long-term investor.

These are big changes. And humans have a hard time processing big changes. And there are particular factors present here that makes these particular big changes particularly hard to process. One special factor is that the new understanding evidences itself only in the long term and for a good number of years Buy-and-Holders experienced a powerful amount of positive short-term feedback re the merit of their investing strategy. Another special factor is that the experts do not feel that they have available to them the option of saying that there are two schools of thought that lead to opposite strategic implications. That’s the truth here. But the experts in this field feel that to speak that truth plainly would cause people to question their expertise. A third special factor is that experts who give bad advice can be held financially liable for losses suffered as a result. That makes people in this field reluctant to acknowledge mistakes.

We are in a transition period. Buy-and-Hold is the past. Valuation-Informed Indexing (which is Buy-and-Hold with the Get Rich Quick element removed) is the future. Those are the realities.

Humans are imperfect creatures. It can take time for them them to acknowledge and correct mistakes. That’s another important reality.

We all should be working together to make the transition to the new model as painless as possible for as many people as possible. We should be trying to help heal wounded egos rather than trying to polarize debates and stir up trouble. That’s my sincere recommendation.

The world is not as simple as you once imagined it to be, Anonymous. You cause a lot of pain by ignoring the complexities, both to millions of others and to yourself.


“The Vanguard Study Shows That the Valuations Factor Is Huge. It Is the ONLY Significant Factor to Which the Investor Can Respond in an Effective Manner. It Is Financial Malpractice for Any Advisor to Ignore the Valuations Factor (Responsible for 40% of the Market Price, According to Vanguard!) in the Year 2014.”

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

Here’s what a team of Vanguard PhDs and CFAs say:

Figure 2 reveals that the predictability of valuation
metrics has only been meaningful at the 10-year
horizon. Even then, P/E ratios have explained only
approximately 40% of the time variation in real
stock returns.


Uh oh.

I view the Vanguard paper as being highly supportive of Valuation-Informed Indexing principles. At one point it states that “returns are better stated in a probabilities forecast” and that in the short term returns are not predictable at all. That’s Valuation-Informed Indexing! That’s what I have been saying over and over again since the first day. That’s what the Return Predictor shows. So I have not until now been able to figure out why you keep bringing up this paper.

I re-read your comment above and it hit me. I say over and over again that valuations are 80 percent of the game and the paper says that P/E ratios explain only 40 percent of the time variation in real returns. You are viewing the difference between the 80 percent number and the 40 percent number as a discrepancy.

I am NOT saying that valuations are responsible for 80 percent of the return in any given year. I stand by my statement that understanding and acting on valuations is 80 percent of the strategic stock-investing game.

There are two broad types of factors that affect returns: (1) rational factors; and (2) irrational factors.

The rational factors are all the things that should and do affect stock prices, all of the things that affect the profitability of the underlying businesses. Fama showed that all of these factors are quickly incorporated into the price of stocks. The Valuation-Informed Indexer does not dispute this finding. We endorse it. The Vanguard study is saying that all of these factors added together comprise 60 percent of the price.

The irrational factors are the emotional factors that cause mispricing (overvaluation or undervaluation). These factors are non-business, non-economic factors. They are emotional factors. The significance of these factors at any given point in time is signaled by the P/E10 value.

As an investor there is nothing you can do about the 60 percent of rational factors. So no strategic considerations come into play. If rational factors determined 100 percent of the market price, the market would be efficient (because there would be no emotional factors throwing things off) and Buy-and-Hold would be the ideal strategy. If there were no emotional/non-rational factors to take into consideration, risk would be constant. The investor would always be justified in having an expectation of a long-term return of something near 6.5 percent real.

There IS something you can do about the 40 percent emotional factors.

This study (and every other study that has looked at the question in an even remotely reasonable manner) shows that the market is NOT efficient and that RISK is variable, not constant. Buy-and-Hold does NOT make sense. Investors MUST change their stock allocations in response to big valuation shifts to have any hope whatsoever of keeping their risk profiles roughly constant over time.

The 40 percent of the total return that depends on the P/E10 level is the only portion of the total return to which the investor can respond in a strategic way. The logical response is to increase one’s stock allocation when prices are low and risk is low and to lower one’s stock allocation when prices are high and risk is high. That’s Valuation-Informed Indexing. That’s the entire concept. That’s the approach that lowers stock investing risk by nearly 70 percent, according to the famous Bennett/Pfau research paper (the only research paper so compelling that it caused the Buy-and-Holders to threaten to destroy the careers of the two authors of the paper so desperate was their desire to keep millions of middle-class investors from learning about its findings).

Valuations are not 100 percent of what determines the market price. Rational, economic factors obviously play a huge role. But there is nothing that the investor can do about those factors. They are a given.

The investor MUST change his stock allocation in response to the 40 percent of emotional factors. So far as allocation changes go, valuations are 100 percent of the game. There is no other factor that permits a high degree of predictability, according to the research. So I believe that valuations are the ONLY factor that an investor should be looking at when making the necessary allocation changes.

I reason why I don’t say that valuations is 100 percent of the game is because there are considerations other than getting one’s stock allocation right that come into play. For example, it makes sense to limit one’s fees. If one company has lower fees than another, that will affect the investor’s long-term level of success. That is a non-valuation factor. Another example of a non-valuation factor that matters is that most investors should be going with index funds rather than picking individual stocks. Failing to go with indexes is not a fatal mistake. But I do believe it is a mistake for all investors except those who possess the skill and willingness to do research needed to win at the stock-picking game.

My claim is that getting your stock allocation right is the most important thing (80 percent of the game). And that the investor MUST take valuations into consideration to get his stock allocation even roughly right. If you ignored valuations, you might have gone with a 74 percent stock allocation in 2000 (the Greaney study identified this allocation as “optimal” at all times). If you considered valuations, you probably went with an allocation of about 20 percent. That’s a big difference and getting that one right is going to pay off big time in the long run if valuations are indeed responsible for 40 percent of the market price (that is, if stocks continue performing in the future anything at all as they always have in the past).

The Vanguard study shows that the valuations factor is huge. It is the ONLY significant factor to which the investor can respond in an effective manner. All he needs to do is to look at the P/E10 value and make the required allocation changes. If he fails to do that, he hurts himself big time.

There is no excuse for any investment advisor to fail to stress the importance of valuations in the year 2014. A factor that determines 40 percent of the market price is far too important a factor to be ignored. I would go so far as to say that it is financial malpractice for any advisor to ignore the valuations factor (responsible for 40 percent of the market price according to Vanguard!) in the year 2014. Shiller did not publish his revolutionary research last week or last month or last year. He published it in 1981. That’s 33 years ago!

There are legitimate differences of opinion as to HOW MUCH one should change one’s allocation in response to valuation shifts. That’s why we need a national debate on these questions. We need to get all viewpoints re these matters aired! But the issue of whether valuation-informed allocation changes are required for those seeking to have some realistic hope of long-term investing success has been settled beyond any reasonable dispute. Even Vanguard (the lead promoters of Buy-and-Hold investing strategies) is on board! Bogle hasn’t given his “I Was Wrong” speech yet but the company he founded has published research showing why he needs to make it to come clean about false and deceptive claims he has made in earlier days which have done great financial harm to millions of middle-class investors.

Come clean, Old Saint Jack!

Do it before the close of business tomorrow!

Don’t worry about Mel Lindauer! I will take over the Bogleheads Forum and I will protect you from him!


“Perhaps Jack Bogle Believes That There Is an 80% Change That Buy-and-Hold Can Work. Or Perhaps It’s 50%. Or 20%. I Don’t Know. But I WANT to Know. And I Know That Jack Is Not Going to Tell Us Until He Comes to the Conclusion That This Massive Act of Financial Fraud Is a Bad Idea.”

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

The silencing of Academic Researcher Wade Pfau caused me to give up hope that we can overcome our economic problems without bringing the corruption that has come to dominate The Stock-Selling Industry out into the open.

I know that the Buy-and-Hold advocates are smart and good people. There are people who will question this following the next crash. But I have been watching things closely for a long time and I have seen a lot of evidence supporting my belief re this matter. So I am confident that we are dealing with smart and good people. That’s Step One in the logic chain.

The Bennett/Pfau research showed that the advance that we are on our way to achieving is absolutely huge. A 10 percent reduction in risk would be a big deal. 70 percent? That is just flat off the charts. There’s never before been an advance that big.

And it’s not just Rob Bennett who sees that. Wade expressed that thought over and over in his e-mails to me. Wade is a neutral party. He started out with no bias. He liked my stuff. But he also believed in what he learned from the Ph.D. program at Princeton. His e-mails show that, after studying these issues in depth, be became 100 percent convinced that the shift from Buy-and-Hold to Valuation-Informed Indexing is the biggest advance in the history of personal finance. So we are dealing with something that is positively huge. That’s Step Two in the logic chain.

Opening the internet up to honest posting would bring on the biggest advance in our understanding of how stock investing works ever achieved in our history. And the people who determine whether the internet will be opened up or not (The Wall Street Con Men) are good and smart people. On the surface, those two realities seem to add up to only one possible conclusion — We are going to see a quick opening up of the internet to honest posting.

Yet we have not seen this happen for 12 years now.

So we are missing some piece of the puzzle. There is something going on here that is not obvious, What is it?

It is that the delay in the opening of the internet to honest posting has already gone on too long. Bogle and all the others would LOVE to make the shift to Valuation-Informed Indexing if it could be achieved without anyone incurring huge financial liabilities or going to prison. But things are already too far gone for that.

The Wall Street Con Men and their Internet Goon Squads WANT to help investors. But they can’t. Not without seeing either themselves or their friends incur huge financial liabilities or go to prison. And they just cannot accept taking the path that leads to those events. So they rationalize continuation of the cover-up.

This has obviously been going on since before I came on the scene. I certainly didn’t know it on the morning of May 13, 2002. But the reaction to my famous post revealed the reality. We saw a huge positive reaction from those who hadn’t thought things through and thus liked the idea of enjoying a learning experience. And we saw a huge negative reaction from those who sensed where permitting honest posting on a single topic would lead and who wanted no part of it.

Nothing on the substantive side can change this.

We cannot do any better than showing how to reduce investing risk by 70 percent. That’s the biggest advance in the history of personal finance. No one is ever going to top that.

So worrying about what happens on the substantive side is a little silly at this point. Anyone in this field who achieves a major advance is going to be threatened with career loss by The Buy-and-Hold Mafia. The members of The Buy-and-Hold Mafia are in so deep than they just cannot permit fully honest posting on any important topic.

They are not just engaging in a cover-up at this point. They are engaging in a cover-up of a cover-up of a cover-up of a cover-up. So they are not going to pay attention to reasoned arguments. Things have gone way past the point at which that is possible.

What’s left?

What’s left is to prosecute the financial fraud.

We can elect as a society to do that, permitting us all to move forward together to a world in which we know much more about how stock investing works than we ever have before.

Or we can go over the cliff together following the next price crash.

Those are the only options at this point.

There is no longer any need to prove anything on the substantive side of things because everything that we need to prove has been proven 10 times over.

We won’t be heard because the interests of the millions of middle-class investors and the interests of the Wall Street Con Men and their Internet Goon Squads are now viewed by the Wall Street Con Men and their Internet Goon Squads as being diametrically opposed. The Wall Street Con Men don’t want the millions of middle-class investors learning what the last 33 years of peer-reviewed research says and they are not going to tolerate efforts to get the truth out in an effective way. And that’s that.

But we have laws that we adopted to protect us in these sorts of circumstances.

When we enforce those laws, we all move forward together.

So that’s what matters at this point. We need to enforce the laws of financial fraud against those who use abusive tactics to keep the millions of middle-class investors from learning what they need to learn.

I cannot see into the future. But I remain optimistic. If Shiller is right, we will be seeing another price crash within the next year or two or three. The 2008 crash opened the door A LOT. So there is every reason to believe that the next crash will open the door a lot MORE. That will get us to where we need to go. Once we have enough people concerned enough about where our economy is headed to stand up to you Goons, we are home free. The work on the substantive side is top-notch. Once we have the courage we need to possess to move forward on the process side, it’s all downhill sledding.

I am still going to do what I can to help people understand what the research says. The substantive side is the side that really matters in an ultimate sense.

But I don’t pretend anymore that we can achieve what we need to achieve on the substantive side without first bringing the corruption that has come to dominate this field during the Buy-and-Hold Era out into the open. Things have to be done in a certain order.

We need lots of people reporting honestly what the research says for the millions of middle-class investors to gain confidence in what works. And we are not going to see lots of people speak in honest and clear and informed ways until we do something to rein in the intimidation and deception tactics of the Buy-and-Holders. These issues are confusing enough to a lot of people that they just are never going to be able to make sense of things until we decide as a society to hold the Buy-and-Holders to the same ethical standards that we hold all other people doing work in all other fields of human endeavor.

Exposing the corruption is Job #1. Lots of good stuff will follow from that. But the good stuff cannot come first. Exposing the corruption must come first. The good substantive stuff will come second, after we have reassured people like Wade Pfau that they can do honest work in this field without seeing their careers destroyed by the sorts of individuals who have put up posts in “defense” of Mel Lindauer and John Greaney (and my good friend Jack Bogle?).

That’s why I write about the themes that I write about today, Anonymous. The 12-year saga has taught me that those are the themes that matter most. The substantive stuff matters most in an ultimate sense. But the process-oriented stuff needs to be worked out for constructive discussions on the substantive stuff to begin.

We are working at cross purposes, Anonymous.

The thing that you most do NOT want to see is a discussion of the corruption issues.

That’s the stuff that I MOST want to see at this point in the proceedings. I no longer believe that we can move forward together until the corruption stuff has been publicly examined to the point necessary for us to be able to put it behind us.

I want to see everyone posting honestly. I don’t mean just Valuation-Informed Indexers. I want to see Buy-and-Holders post honestly too.

Jack Bogle doesn’t possess full confidence in Buy-and-Hold. If he did, he would have disassociated himself from the sorts of individuals who have put up posts in “defense” of Mel Linduaer a long, long time ago.

I don’t know what level of confidence in Buy-and-Hold Jack possesses. Perhaps he believes that there is an 80 percent chance that it can work. Perhaps he thinks that the odds are 50-50. Perhaps he believes that there is only a 20 percent chance that Buy-and-Hold can work. I don’t know. But I WANT to know. And I know now that Jack is not going to tell us until he comes to the conclusion that continuation of this massive act of financial fraud is a bad idea. So the focus of all of us who want to bring this to a successful conclusion has to be to bring the Ban on Honest Posting to a full and complete stop by the close of business Monday afternoon.

That’s the difference you are seeing in my posting habits. That’s why I have “gone off the deep end,” in your terminology.

I want everyone on the planet to learn how to reduce the risk of stock investing by 70 percent. The finding of the Bennett/Pfau research is the most important finding in the history of personal finance and I want to spread the word far and wide.

My many Buy-and-Hold friends don’t want that. They feel that they will be held accountable for the 12-year cover-up if the truth comes out now.

I love my Buy-and-Hold friends. I want to see them in a better place.

But I believe that continuation of the cover-up will only put them in a worse place than where they are today.

So I want to bring the cover-up to a close.

That means talking about the corruption, not avoiding the subject.

Even many people who believe in the principle of Valuation-Informed Indexing are avoiding the subject today. They care about the Buy-and-Holders as I do and they don’t want to see them hurt. I think that they are choosing a bad path. I believe that continuation of the cover-up just makes things worse and worse and worse as times goes on.

I hope that helps a bit, Anonymous.

Please take good care.


“We Should Be Using the Research to Determine HOW MUCH to Change Our Stock Allocations in Response to Valuation Shifts. That’s Where the ‘Conspiracy’ Stuff Comes In. The Buy-and-Holders Do Not Want Millions of Investors to Find Out What the Research Says on This Point. BECAUSE IT MAKES THEM LOOM REALLY, REALLY BAD.”

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

These cover up folks are doing a pretty lousy job, given that you’ve recently admitted that most people do consider valuations when making asset allocation decisions, and there really are no Buy and Hold purists. And the fact that Shiller recently won a Nobel prize.

I agree with you that the cover-up folks are doing a lousy job, Anonymous. That’s why I don’t like to use the word “conspiracy.” The cover-up does possess many of the elements of a conspiracy. I am virtually certain that people are going to use that word to describe it following the next price crash. And I can to some extent see where they would be coming from in using that word. But I have never felt entirely comfortable using the word “conspiracy” to describe what is going on here. I prefer the phrase “cognitive dissonance.” I often say that I am okay with describing it as a “conspiracy of ignorance.”

Your point about Shiller winning the Nobel Prize is right on. That’s not evidence of a conspiracy. It’s strong evidence that this is NOT a conspiracy as that word is generally understood. And there is a lot more evidence pointing in the same direction. I learned about the errors in the Old School SWR studies by reading Bogle’s book. If there were a conspiracy, Bogle would be the leader of it. Why the heck would he be saying things in his book that help to expose the conspiracy? That makes no sense.

Similarly, Bernstein said a long time ago that anyone giving thought to using the Old School SWR studies to plan a retirement would have to be out of his or her mind. That’s not something that someone trying to cover up the errors in the Old School SWR studies would say. Again, it just makes no sense.

The other side of the story is that Bogle has for 12 years now not lifted a finger to help us get the Old School SWR studies corrected, despite what he wrote in his book. Nor has Bernstein, despite what he told us in his e-mailed response to Ataloss’s question as to whether Bernstein thought that the Old School studies were analytically invalid.

This isn’t precisely a conspiracy. But it is something.  There is a LOT of funny business going on. What is this cover-up about?

You are looking in the right direction when you note that few investors follow Buy-and-Hold strategies in a dogmatic fashion. Just about everybody (the exception is Eugene Fama!) acknowledges that valuations matter. Judging by that, you would think that we could all get along just fine, right?

But we are obviously NOT all getting along just fine. I hope you will give me that much.

Why? What the heck is the problem?

The problem is that the middle ground on which most investors live today does not make theoretical sense. Buy-and-Hold makes perfect theoretical sense if the market is efficient. Valuation-Informed Indexing makes perfect theoretical sense if valuations affect long-term returns. Splitting the difference (what you call “Strategy B”) makes no theoretical sense.

Splitting the difference possesses great appeal to most investors. Most investors don’t care about theory. They like Buy-and-Hold. The Buy-and-Hold principles sound entirely sensible to most investors. And most experts endorse Buy-and-Hold. So most investors believe that they should generally follow those principles. But they do not feel comfortable following them in a dogmatic way. They feel that valuations must matter. So they choose to tailor Buy-and-Hold to better fit what their common sense tells them is probably the full truth — They follow Buy-and-Hold principles generally but also occasionally ignore the theory to make small adjustments in their stock allocations as a result of concerns they hold about valuations getting out of control.

That’s the reality today. We do not disagree re the reality.

We disagree about what works.

I believe in the original Buy-and-Hold idea that investors should be rooting their investing strategies in the peer-reviewed research. There is no research showing that valuations kinda, sorta matter and kinda sorta don’t matter. The research shows that, if valuations matter, they matter a whole big bunch. If we really believed that valuations matter and weren’t just paying lip service to the idea while generally holding tight to out belief in Buy-and-Hold principles, we would be looking to the research to determine HOW MUCH to change our allocations in response to changes in valuations.

That’s Valuation-Informed Indexing. That’s what I am arguing for.

I don’t say that you are lying when you say that you consider valuations to a small extent. I think you do that. I think that millions of people do that. I agree with you that MOST investors do that.

I don’t think that’s what works.

I certainly agree that we should be investing with valuations in mind. But I also think that we should be using the historical return data and the peer-reviewed research based on that data to determine HOW MUCH to change our stock allocations in response to valuation shifts.

That’s where the “conspiracy” stuff comes in.

The Buy-and-Holders do not want millions of investors to find out what the research says on this point.


Because it makes them look really, really bad.

People should have been using the research to determine their stock allocations all along and millions of people have lost huge amounts of money because the “experts” in this field told them that that was not absolutely required or, heaven help us all, perhaps not even a good idea. Those experts understand that they are liable for the losses they caused. They pretend to be “experts.” But they are today 33 years behind in their reading of the peer-reviewed research. Huh?

And, in extreme cases like with you Goons, they are guilty of financial fraud and are likely on their way to prison following the next price crash. That group really, really, really does not want the word getting out about the 12-year (or 33-year if you count back to when Shiller published his breakthrough research) cover-up.

I cannot change these realities, Anonymous. And I sure don’t intend to lie about them. I like to think of myself as an honest person. And, even if I didn’t, there are Post Archives! Old Farmer Hocus being persuaded to tell lies about what has been going on for 12 years now is not in the cards. It would help if you would get that foolish dream out of your head.

I have extended the hand of kindness to all my Buy-and-Hold friends. But I am not in a position to lie about what has been going on for 12 years now and I like to think that I would not be inclined to lie even if I were in a position in which doing so would benefit me.

You need to come clean.

Bogle needs to come clean.

J.D. Roth needs to come clean.

Mike Piper needs to come clean.

And on and on and on.

There is no other way.

I am telling you not just what is best for me and for the millions of middle-class investors. I am telling you what is best for you and for the Wall Street Con Men.

Everything needs to come out in the open. All the lies have to be acknowledged. All the Bans on Honest Posting need to be lifted. All the civil and criminal trials need to be held and brought to completion.

We need to put all this ugly stuff behind us so that we can move on to the wonderful learning experiences that we have been enjoying for 12 years now but that we have not thus far felt that we could share with the millions of middle-class investors because it would upset the Wall Street Con Men and their Internet Goon Squads too much for them to learn the realities. This field does not exist solely for the benefit of the Wall Street Con Men and their Internet Good Squads. It exists in part for the benefit of the millions of middle-class investors who need access to accurate and honest reports on what the peer-reviewed research says to be able to finance their retirements effectively.

Do you see?

What I am describing is what is best for ALL of us. We are all in the same boat. We need to knock off the funny business and begin moving forward TOGETHER.

There are things that can be done to make the transition less painful for the Wall Street Con Men and for you Goons. It makes sense for us to do those things. I am 100 percent happy to help out in any way possible.


We MUST do this. This is NOT optional. This is 100 percent imperative.

Call the support of or indifference to dishonesty a “conspiracy” if that works for you. Call it “cognitive dissonance” if, like me, you are not quite able to accept that so many good and smart people could get themselves involved in so awful and damaging a conspiracy. The terminology you use is not what matters most here. What matters most here is that we bring the funny business to an end.

The funny business must come to an end. That’s the bottom line here. That must happen by the close of business today.

Can I count on your support, my old friend?


“No One Else Publicly Says That the 12-Year Cover-Up of the Errors in the Old School Safe-Withdrawal-Rate Studies Is the Greatest Act of Financial Fraud in the History of the United States. But We Do Not Know What People Believe In Their Hearts. There Is Too Much Intimidation Going On for People to Feel Safe Saying Openly What They Truly Believe. My Guess Is That There Are Others Who Feel Concerns Along These Lines.”

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

Just to be clear, this [my claim that the 12-year cover-up of the errors in the Old School safe-withdrawal-rate studies is the greatest act of financial fraud in the history of the United States] is your belief, and you could be wrong. It’s also something no one else in the world believes.

Every word that I put forward is my belief and could be wrong.

But given that this belief of mine is a sincerely held belief, do you think that it would be right for me to keep it to myself? Do you not think that I should try to help out my friends before events take place that make it too late to help them?

And I don’t think that it is so clear that no one else in the world believes what I say re this point.

No one else publicly says what I say re this point. I give you that one.

But we do not know what people believe in their hearts. There is too much intimidation going on for people to feel safe saying openly what they truly believe.

My guess is that there are others who feel concerns along the lines of those I have expressed. My further guess is that the others do not feel as strongly as I do. My experience is that humans have a hard time coming to hold views that are not socially acceptable. So the people who hold somewhat similar views probably hold them only in watered-down form. I have come to hold them more strongly because I have held these views for some time and because I think about them a lot and because I write about them here at the blog. Those experiences cause me to hold the views more strongly as time passes. So my guess is that no one else holds these views as strongly as I do today. But I believe that some may hold similar concerns while being afraid to give public voice to them.

One big issue here is that investor views CHANGE with changes in portfolio values. Say that no one else holds these views today. But say that a large percentage of the population comes to hold them following a future price crash. What then? We all need to keep in mind that the views that people hold today are not necessarily the views that they will hold tomorrow. Investing is an emotional endeavor. We forget that at out peril.

How did we let things reach this point, Anonymous?

That’s the question that we all should be reflecting on.

Why place ourselves in circumstances in which such things even need to be discussed?

We don’t want to be where we are today.

If you are expressing in your posts today a hint of a desire to take things to a better place, I am 100 percent on board.

I don’t want to see anyone hurt in any way, shape or form. That’s not what I am about.


“Would I Not Be an Awful Person If I Believed These Things and Just Kept Them to Myself? I Would Be Letting You Ruin Yourself and Not Even Trying to Warn You Beforehand. Wouldn’t That Be Pretty Darn Low Behavior? I Care.”

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

That sounds reasonable. Did the same person also write:

Yes, the same person wrote both things.

I have spent a lot of time thinking about these things and I have strongly held views. But I am a flawed human. I get things wrong from time to time. There are millions of good and smart people who do not agree with me. Everyone who hears my words needs to know that. I DO believe what I say. I AM sincere. But I am also FLAWED. I could be wrong.

I’ll give a silly example of me being wrong and realizing it at a later time of life.

When the Beatles single “Hey, Jude” b/w “Revolution” came out, I thought that “Revolution” was amazing. I did not care for “Hey, Jude.” It made me crazy that “Hey, Jude” was picked for the A side. I kept saying: “Why is Hey, Jude” the A side? What were they thinking?”

Today I rank “Hey, Jude” as my favorite Beatles song. I either was wrong in my first reaction or I am wrong today. There was something in “Hey, Jude” that I just didn’t see when it first came out. So I obviously am capable of developing a wrong take on things.

I am NOT perfect. I do not say that I am.

But say that I am right in what I think about investing?

If I am right, I have an obligation to share what I believe with my friends, do I not?

Would I not be an awful person if I believed these things and just kept them to myself? I would be letting you ruin yourself and not even trying to warn you beforehand. Wouldn’t that be pretty darn low behavior?

I care, Anonymous.

I care about you and I care about the experts and I care about the boards and blogs and I care about my country. That is the driver here. I care. If you care, you cannot say something other than what you believe about so important a matter.

I don’t ever say anything to hurt people’s feelings. Not once have I done that. I know that things I say DO hurt people’s feelings. I have seen that happen many times. But I can take an oath that that has never once been the intention.


“If the Author of the Old School SWR Study Included Language Explaining That There Is a New School of Thought That Maintains That a Valuations Adjustment Is Required, That Would Show Good Faith and Shift the Burden to the Reader to Determine If an Adjustment Is Required.”

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

Ok, that’s reasonable. But that’s very different from:

I don’t see the big difference between Form A and Form B.

I do not feel bound in conscience to use Form B.

If the Buy-and-Holders were to tell me that they prefer that I use Form A to make this point, I would be happy to give up Form B.

I have suggested elsewhere that someone offer particulars of things that I say that Buy-and-Holders find objectionable. I would happy to let them know whether I can go along with the suggested phrasing or not.

In the case at issue here, I would have no problem going along with the suggested phrasing.

If it were suggested that I say “the Old School SWR studies are analytically valid,” I could not go along.

But even in that case, there are lots of things that I would be okay with saying. I am happy to say that the Old School SWR studies constituted a big advance from what we had before they came along. I am happy to say that the people who prepared the Old School studies possessed a sincere desire to help people. I am happy to say that the Old School SWR studies accurately report the Historical Surviving Withdrawal Rate (HSWR). I am happy to say that there is always a chance that a 4 percent withdrawal will work and that, except when valuations are very high, the odds that 4 percent will work are very high. I am happy to say that none of this is pure science and that we are still at a stage where we are learning lots of new things and that thus all of us should try to avoid dogmatism. I am happy to say that the authors of the Old School SWR studies are good and smart people.

There’s one scenario in which I could even see myself saying that it is okay for an Old School SWR study to remain up at a site in Old School form. If the author of the study included language in the study explaining that there is a New School of thought that maintains that an adjustment for the valuation level that applies on the day the retirement begins must be included in the calculations and linked to places where more background on that school of thought could be obtained, that would show good faith and put the readers of the Old School study on notice that there are good and smart people who have issues with the way the retirement study they are reading was set up.

In that case, I think it could be argued that the burden has been moved to the reader to decide whether a valuation adjustment is required or not. In those circumstances, I think it could be argued that the author of the Old School SWR study has placed himself on the right side of the ethical divide.

I acknowledge the sensitivity of these discussions. If there are things that can be done to reduce the friction, I am all for us working together to see that those things are done. The words above suggest that in this particular case, an acceptable change in wording would help. In those sorts of circumstances, I am of course happy to agree to state things in the acceptable way.


“I Will Acknowledge That These Views Are Extreme If You Go By the Continuum of Viewpoints Held Today. But It Is Not Right for Me Not to Express My Sincere Views. If Everyone Who Holds This View Says to Himself ‘I’ll Keep It Zipped Until Lots of Others Are Saying This.’ The View Will Never Be Publicly Expressed. Someone Has to Be the First to Say These Things.”

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

From today’s post by you on this exact topic, which you agree can’t be proven one way or the other:

I am telling you what I believe, Anonymous. I stand by those words. If I said anything different, I would be telling you a lie.

I am not able to imagine any circumstance in which the promotion of Buy-and-Hold strategies would not cause an economic crisis. Once you tell people that there is no need to exercise price discipline, you have taken the brakes off the car and you are going to end up with a crash. Are you able to imagine a scenario in which you can drive a car without brakes to a happy conclusion?

I will acknowledge that these views are extreme if you go by the continuum of viewpoints held today. I have not heard anyone else saying what I say here. It’s fair to point that out.

But it is not right for me not to express my sincere views. It may be that there are many people out there today who share this view and are afraid to express it because they feel that they will be attacked for being too extreme. If the idea is going to be explored, we need to have people giving voice to it.

If everyone who holds this view says to himself “I’ll keep it zipped until lots of others are saying this,” the view will never be publicly expressed. I have a duty to say what I truly believe at every board and blog at which I post. Someone has to be the first to say these sorts of things. I wish it could be someone other than me. But. if no one else steps up to the plate, it becomes my job to do so. Someone has to get the ball rolling here. Shiller didn’t publish his research last week. It has been 33 years.

But I do NOT express this view or any other view in a dogmatic way.

I hold my views strongly but I do not hold them arrogantly. I often acknowledge that there are million of smart and good people who hold very different views. I often acknowledge that the Buy-and-Holders should be heroes to all of us and that we should feel respect and affection for them and be grateful for the important insights they have generated for our benefit. I often acknowledge that I have been wrong many times in my life and that it may be that I am wrong again. Those are not arrogant words, Anonymous.

I believe what I said. I believe it strongly. I have a right and duty to say precisely what I believe. A board community cannot achieve its potential unless every community member shares his sincere views. It is the interaction among a wide range of differing views (some on the extremes of the continuum and some in the middle of it) that creates a solid learning experience for all.

So there is nothing even a tiny bit wrong with me stating that opinion. If the opinion is foolish, it will be exposed as such. If the opinion has merit, that will become evident through the ongoing discussions. But the opinion that is sincerely held must be expressed accurately and in full strength for all the magic to happen. It would be wrong of me to state a view other than the one that I actually hold.

Dogmatism hurts us. I would be wrong to say “no one else may express a different opinion because it is so clear that I am right.” That crosses the line. I should respond to those who express other points of view with respect and warmth.

But I should of course NOT respond to those who engage in deception or intimidation tactics with respect and warmth. Those who post abusively hurt all of us. We all should be united in speaking out strongly against that sort of stuff.

I respect you for holding a different viewpoint. I do NOT respect you for posting abusively. When you post abusively, you degrade yourself. As your friend, I am compelled to urge you to stop doing that.


“The Amazing Thing Is That No One Had Done This Work Before I Came on the Scene. I Am Trying to Get More People Involved. It Is Important Work. And, Once Buy-and-Hold Falls, It Is Going to Be Very Financially Rewarding Work. My Thought Is That Anyone Who Holds Off on Taking Advantage of the Opportunity Is a Fool.”

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

if you make a wild causal claim like this, you must back it up with evidence. Can you point to any academic studies showing, or even trying to show this is true?

There is no direct evidence one way or the other. We cannot ask the market to sit down on the coach and respond to our questions.

The Buy-and-Holders BELIEVE that bad economic news caused low stock prices. They do not KNOW this. There is no study that SHOWS this. They arrive at this conclusion by following the logic of their theory, which is exactly what I do. Different theories lead to different beliefs about all sorts of questions.

If the Buy-and-Hold theory were correct, price changes would be random. They are not. So I throw the ideas that follow from Buy-and-Hold out and go looking for ideas that make sense given what the last 33 years of research tells us.

The research shows that the primary cause of price changes is changes in investor emotion. If that’s so, the best time to buy stocks is when investor emotion can only move in an upward direction. That’s when prices are low. When prices are low, there is zero risk because there is only one direction in which emotion (and prices) can move.

Do you not agree that, when prices fall hard, trillions of dollars of spending power leave the economy? Is there some doubt about this point?

If trillions of dollars of spending power leave the economy, would you not expect the economy to collapse? What else could it possibly do?

The point that I am making here is self-evident, Anonymous.

It is not self-evident to someone who believes in Buy-and-Hold. Buy-and-Hold posits that it is economic developments that cause price changes. But to someone who has given up on that idea because the last 33 years of research discredits it, what I am saying here is self-evident.

It’s as clear as clear can be. We once thought that things worked one way. Now we know that we were wrong. We are in the process of determining how things REALLY work. All of the work that I do at this site is part of an effort to explore the IMPLICATIONS of Shiller’s revolutionary finding of 1981.

The amazing thing is that no one had done this work before I came on the scene. Is that my fault? I am trying to get more people involved. I think it would be fair to say that, if you Goons stopped the attack stuff, I would be more successful doing that. It is very, very important work. And once Buy-and-Hold falls, it is going to be very, very financially rewarding work. My personal thought is that anyone who possesses the qualifications to do the job and who holds off on taking advantage of the opportunity is a fool.

Anyway — I certainly have as much proof to offer in support of what I say as the Buy-and-Holders have to offer in support of what they say. Please show me the study showing that it is economic developments that cause stock prices to drop. You believe it. I can give you that one. But you cannot provide a URL for a study because no such study exists.

I face this problem in lots of different areas. Buy-and-Holders act as if they are 100 percent sure of everything they say. But rarely do they have any evidence to point to in support of what they say. They just argue that “Everyone agrees about this” or some such thing. If what everyone thought was right, you wouldn’t see “revolutionary” findings like what we saw in 1981 from Shiller and in 2012 from Bennett/Pfau.

Mark Twain said that it is not the things you don’t know that hurt you the most but the things that you know for certain that just ain’t so!