“An Important Communications Medium of the Future”

Katy Marquardt has written about the split-off of the Bogleheads community from the Vanguard Diehards community at her U.S. News and World Report blog.

Juicy Excerpt: Concludes Coleman: “The revamped Diehards.org is better organized, easier to navigate and much more intelligently moderated than the older version,” he says. “It’s becoming a true social networking site.”

I put forward a comment filling in some of the background that Murray Coleman “overlooked” in his write-up at IndexUniverse.com (referred to in Katy’s blog entry)

Juicy Excerpt: The internet discussion board is an important communications medium of the future. We learn things on discussion boards that we cannot learn through books or magazine articles or speeches. The magic is that we get to see how real live people apply the theories they learned about in books and magazine articles and speeches.

Threads are ongoing both at the Bogleheads community and at the Vanguard Diehards community. There’s a thread ongoing at Goon Central too but I recently added as a plug-in to this blog an Extreme Dumbnosity Filter and it will not permit me to post the link; you’ll have to dig that one up on your own.

Oh, shoot! — Here it is.

Today’s Passion: Jim Wiandt, publisher of IndexUniverse.com (referred to in Katy’s blog entry), said of the Valuation-Informed Indexing approach that “It’s not like you are proposing some wild new idea!” That’s me — Good Old Moderate-Sounding Non-Stop Troublemaker Rob.

Comments

  1. says

    I am NOT the “JWR of FL” in the comments to the first article.

    This misrepresentation is a typical tactic of those who suppress honest discussions.

    Have fun.

    John Walter Russell

  2. says

    I see a JWR1945. It is somebody else. Once again, the opposition demonstrates its character.

    They cannot stand the light of day. They cannot stand honest posting.

    Have fun.

    John Walter Russell

  3. Rob says

    I of course agree with the point you are making, John. I think that the bigger issue is — Why are there a good number willing to tolerate this sort of thing?

    I see three possible explanations:

    1) They like to see abusive posting because it protects them from having to examine questions about valuations that they do not want to have to examine;

    2) They are repulsed by the abusive posting, but sufficiently intimidated not to say anything about it; and/or

    3) They are sufficiently confused over the basics of how investing works as to feel that they should not say anything for fear of being exposed as being “dumb.”

    I believe that all three factors are at work. I believe that Factor Three is the primary problem.

    This says to me that the conventional investing advice has failed. If people understood the basics, they would speak up. An investing approach that leaves so many in confusion about such fundamental questions is an investing approach that does not cut the mustard.

    It is the Passive Investing concept (the idea that it is okay to stick with a stock allocation chosen at times of moderate valuations when valuations spin wildly out of control) that is the core problem. This belief is obviously irrational. How could it possibly be okay to go with the same stock allocation at both times of moderate valuations and at times of extremely high valuations (the risk levels are obviously wildly different, so both cannot be suitable for the same investor)? Accepting the core premise of Passive Investing means giving up your ability to reason because there is no possible rational explanation for how this “idea” could work out in the real world.

    The root problem is a widespread lack of understanding of the fundamentals of stock investing (“prices always matter” is a fundamental reality). The Goons exploit the lack of understanding for their self-serving purposes. If most investors understood the fundamentals, they would demand prompt action re the Goon tactics.

    The real problem is that the conventional model (Passive Investing, or Efficient Market Theory, or whatever you want to call it) has failed. It does not explain how stock investing works in the real world. It needs to be replaced by a Rational Investing model (a model rooted in the obvious truth that valuations affect long-term returns as a matter of “mathematical certainty” [Bernstein's phrase]).

    Rob

  4. says

    “The root problem is a widespread lack of understanding of the fundamentals of stock investing (”prices always matter” is a fundamental reality).”

    I suspect that many professionals lack this understanding. They have their training. Perhaps, they feel intimidated.

    Have fun.

    John Walter Russell

  5. Rob says

    I suspect that many professionals lack this understanding. They have their training. Perhaps, they feel intimidated.

    Precisely so.

    Experts are humans too. I am confident that the experts do indeed feel intimidated. What we see on our boards doesn’t happen only on our boards. It happens in the far bigger InvestoWorld too. Remember how Bernstein phrased his SWR findings in his book? Remember what Scott Burns said about our findings not having been reported in the major media because “it is information most people don’t want to hear”?

    The “experts” are every bit as much intimidated as the people who post to our boards, perhaps more so. Our community members worry that, if they post honestly, there are going to be vicious smear campaigns directed at them. The “experts” worry that, if they state what they know clearly, they will be hated by a good percentage of their customers and not be able to attract much business from that point forward. Which sort of pressure is the greater?

    The experts need our help, just as our fellow community members need our help. I sometimes feel that the answer is for everybody to hold hands and say together “We are all going to begin telling the truth about investing — starting now! It’s not an easy transition to make. If Greaney begins reporting the SWR accurately today, he has hundreds of thousands of busted retirements that he has to answer for. How do you think he feels about that? If Bernstein starts talking 100 percent straight today, he is going to hear questions about why he didn’t publicize his SWR findings when he first learned that the Old School studies got the number wildly wrong. We’re all in a big jam.

    It’s lies we told long before May 13, 2002, that put us here. The lies that caused all the trouble are the lies that brought the P/E10 level up to 44. You don’t get to 44 without a mountain of lies being told, do you? So how do we deal with that? How do people work up the courage to acknowledge that they have been telling tall tales for 20 years now, that it’s not so that stocks are always best for the long run, that it’s not so that the SWR is a constant number, that it’s not so that long-term timing isn’t necessary for an investor to have any hope of executing buy-and-hold successfully once the wild bull comes to an end?

    We all need to take a chill pill, you know? We all need to drop this pose that we already know it all. We don’t know one-tenth of what we think we know. If we did, we could answer reasonable questions put to us. If we did, we could correct errors brought to our attention. If we did, we could see that it’s wrong to play word games when people’s retirements are at stake.

    There’s a sense in which the experts have it worse than anyone else. The experts are talking like they know even more than those who are acting like they know 10 times more than that they really know. And they don’t. The experts know the stuff they read about in books when they were taking their courses and all that sort of thing. But the books don’t tell all there is to know about investing. When we learn things that aren’t in the books, that puts the “experts” at a disadvantage. They have this image they feel a need to project that suggests that they know it all and the obvious reality is that they don’t know a fraction of that.

    They need to start saying that, you know? They need to learn how to say “I don’t know” and “I was wrong” and “I guess we need to look at this a bit closer.” Those are the sorts of phrases we need to hear. We need less arrogance and a whole big bunch more humility.

    The longer that the “experts” continue to insist that the already know it all, the worse things get. They need to take it in just the opposite direction. We need to have Bogle come out with a statement that he is grateful for the wonderful work done at the Vanguard Diehards board back at the time when honest SWR and valuations posting was permitted there and that he is just so proud of all the community members who participated in that wonderful learning experience. And then we need to see him take the actions that show that he means it.

    I very much look forward to that day. It helps Bogle for him to take that step, it helps Lindauer, it helps Greaney, it helps both the Diehard and Boglehead communities, it helps all the other experts, and it helps all other investors. It’s a win/win/win/win/win. That’s when the real fireworks (the good kind!) begin!

    Rob

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