A Rich Life

The Old Ideas on Saving & Investing Don't Work -- Here's What Does

Archives for January 2009

“It Is the Result of a Mistake, Not a Lie”

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Tuesday’s blog entry set forth the text of an e-mail that I recently sent to the owner of the Frugal Dad blog proposing an arrangement in which we would work together to publicize the findings of the Retire Early and Indexing discussion-board communities from the first seven years of our investing discussions.

Set forth below is the text of a follow-up e-mail that I sent following the posting of a blog entry at the Frugal Dad site entitled Have We Been Sold a Bunch of Lies About Money? I’ll offer commentary in next Tuesday’s blog entry.

Frugal Dad:

This is Rob Bennett. I sent you an e-mail last week re the extensive investing research that I have done. I have not received a response, and so I assume that you do not have an interest in the idea that I advanced. That is of course fine. But your blog entry today is on precisely the topic that I have explored, and so I felt a need to try one more time to get you interested in exploring this question in some depth.

You are not too far off in suggesting that we have been sold a bunch of “lies” re investing. I think that use of the word “lie” is not appropriate. But it is certainly true that we have been misled in terrible ways. I can explain the entire story and provide links backing up my conclusions on just about all of the important points. I very much want to get this story out to a wider audience and I would be thrilled to work with you in doing so if you have any interest in the idea.

What happened is that there was exciting research done in the 1960s and 1970s showing that short-term timing (changing one’s stock allocation in response to price changes with the thought that this would bring good results within a year or two) does not work. Many “experts” interpreted this to mean that ALL forms of timing (both short-term and long-term) do not work. The result was the investing advice that became the conventional wisdom for the past 30 years — always invest heavily in stocks, even when prices go to insanely dangerous levels. This is the worst possible advice that could have been offered. But it is the result of a MISTAKE, not a lie.

We need to fix the mistake. I have found this to be a tough business. Many “experts” are highly reluctant even to consider the possibility that they made such an obvious mistake that caused such great human misery. Still, the evidence is very strong that this is what happened. It is important that the mistake be corrected before too many more investors become so disillusioned with stocks that they take all their money out. Many people are coming to conclusions along the lines of your own, and this could cause stock prices to drop another 50 percent over the next few years. This could lead us to an economic depression. The stakes here are as high as they could possibly be,.

I hope you will not consider me a pest for writing again. I hope that you will give some thought to my idea. Your readers need to learn the realities. The “experts” have indeed let us down. But it is not right to conclude that they are liars and it is not right to conclude that stocks are a bad investment even when purchased at reasonable prices. If you change your stock investing strategy to one in line with the research of the past 20 years, you can obtain the benefits that stocks really do offer while reducing your risk to a fraction of what applies for those following the strategies that became popular during the past 30 years.

If you have doubts about anything that I am saying, please ask questions. I really can tell the whole story, it really is an important story, and it really is a story that you can understand if you spend just a little bit of time getting up to speed on realities that it took me years to uncover.

I am sorry about your losses. If you check my well-documented record, you will see that I have been warning about this stock crash for a long time. I have worked this incredibly hard for a long time. There IS a good deal to be said for the Your Money or Your Life approach (reading that book’s treatment of investing led me to asking the questions that sparked all of my research into these questions) but the YMYL approach has flaws of its own. I have been working with hundreds of people to come up with something a lot better and we have enjoyed a great deal of success in the work we have done. Our one big problem has been on the publicity side. You obviously could be a huge help in that area.

Rob

“I Want to Launch an Effort to
Publicize the Ideas on the Internet”

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Set forth below is the text of a e-mail that I sent to the owner of the Frugal Dad blog on January 14. I did not receive a response.

On January 19, Frugal Dad posted a blog entry entitled Have We Been Sold a Bunch of Lies About Money?  He stated in this blog entry that “My 401(k) has been demolished” and “family members’ 401(k)s have been demolished, even those in target retirement funds that should have been comprised of more conservative options based on their upcoming target retirement date.” He concluded that: “After watching these wild market swings, I’m starting to wonder if I really have the stomach for it” and indicated that he may move to a less risky investing strategy, one not involving the purchase of stocks. I posted a comment to the blog entry and responded to questions put forward by several community members (a few at the end of the thread are abusive, but several earlier in the thread raise reasonable points or ask good questions). I also sent a follow-up e-mail.

I will post the follow-up e-mail as Thursday’s blog entry. I will offer commentary in next Tuesday’s blog entry.

Frugal Dad:

This is Rob Bennett, publisher of the “A Rich Life” blog at www.PassionSaving.com. We exchanged e-mails a ways back in connection with your article re paying off the mortgage (you linked to an article of mine). I hope things are going well with you.

I am looking for a partner to help spread the word re some exciting investing ideas that have been developed in the Retire Early and Indexing discussion-board communities in recent years. Based on what I have seen from following your blog, I think you would be a great person to work with (I am looking for someone with an audience that is large and active but that is not comprised of people primarily interested in investing issues).

The investing strategies that are today conventional wisdom (“timing doesn’t work, “stocks for the long run,” “buy-and-hold,” etc.) have been increasingly discredited by the academic research of the past two decades. There is truth in all these ideas, but not complete truth; there is good in them but there is also danger in them. I have been reporting on these realities for close to seven years now and have produced  a wealth of material related to them (including three unique calculators, over 50 podcasts, scores of articles, and tens of thousands of discussion-board posts). I have communicated with hundreds of middle-class investors who showed great excitement to have found for the first time a description of how investing works that truly makes sense. Unfortunately, these ideas have also met with intense opposition among people who view themselves as “expert” in their understanding of the discredited, conventional ideas. Abusive posting by the defensive group has blocked the efforts of many to learn about these ideas (I call the strategy that I recommend “Valuation-Informed Indexing”) for years now.

There has been a big change in discussions of investing since the big price crash. There is greater interest now than before in new ideas and those inclined to dismiss new  ideas are feeling increasingly defeated by real-world events. I want to launch an effort to publicize the ideas on the internet. If you have an interest, your blog would be a great place to do this. My guess is that your readership is concerned about the recent stock-market developments and would love to hear informed and straight-talk answers to their many questions. But your readership is not comprised of the sort of people who would become defensive on being exposed to some unconventional takes on how stock investing works.

If you think this idea holds any potential, I propose that you explore it a bit by directing a question or two of your own to me. I would respond, using the research that I have done with John Walter Russell (owner of the www.Early-Retirement-Planning-Insights.com site) over the past seven years as the basis for my answers. If you found the discussion helpful to your understanding, you could share what you learned from it with your readers in any of several ways: (1) you could write up articles summarizing the discussions; (2) you could post the actual words of the discussions if you thought that a better approach; (3) you could invite your readers to put forward their own questions and seek responses from me re those questions; or you could follow some other approach of your choosing.

The goal would be to inform your readers of what is happening in the stock market, why it is happening (none of what has happened is the least bit surprising to those familiar with the literature of the past 20 years, much of which unfortunately is rarely discussed in the conventional media), and what they need to be doing to invest more effectively. Ultimately, I hope to see this debate over the future of investing spread to other blogs and other sites. I believe that we need a national debate on the errors that caused the greatest loss of middle-class wealth in the history of the United States. Your “promotion” of my work would obviously bring attention to my site. My belief is that it would also enhance the value of your blog by offering great benefits to your readers and ultimately would gets lots of other people talking about some issues that very much need to be talked about more at this time.

If you have no interest, I of course understand that this is an unusual request and one that you might for perfectly good reasons not see much appeal in; I’d be grateful if you would just send an e- mail saying “no thanks” so that I would know. If you have a limited interest but also have questions, please ask. I have all sorts of resources that I can point to in response to just about any question you can ask. And this project is my baby — I have been preparing for the launching of this initiative by working 10 hour days six days a week re this matter for close to seven years now. I am more than happy and prepared to point you to materials showing the legitimacy of all of the claims that I put forward.

I of course would not expect you to be willing to endorse any of these ideas unless you were confident that there was merit to them. My thought is that you might serve as a go-between for your readers. Your questions are probably to a large extent their questions. If you found my answers convincing, you could forward them (perhaps with your own take attached). If you did not, you could of course elect not to report on them or to report negatively on them.

Please understand that none of the questions that I address are complicated ones. I address the BASICS of investing, the stuff that the typical middle-class worker needs to understand. Unfortunately, it is at the basics level that the conventional advice is most flawed.

I’ll leave you with a few links that will give you a general sense of the issues involved:

1) This is the Podcasts section of my site:

http://www.passionsaving.com/personal-finance-podcasts.html

2) The Stock-Return Predictor is key to making the Valuation-Informed Indexing approach work:

http://www.passionsaving.com/stock-valuation.html

3) Here is a nicely balanced write-up of the Predictor by Felix Salmon that appeared at the Market Movers blog:

http://www.portfolio.com/views/blogs/market-movers/2008/07/08/a-look-at-long-term-stock-valuations#blogComments

4) “Elizabeth’s Story,” which appears at this link, provides a good indication of how these ideas have affected some typical middle-class workers (I can provide many more such stories if they help you make sense of all this):

http://www.passionsaving.com/finding-life-purpose-page-three.html

Rob

Podcast #56 — “Time” Is Not a Four-Letter Word

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I’ve added Podcast #56 to the “RobCasts” section of the site. it’s called “Time” Is Not a Four-Letter Word.

It’s not that timing works. It’s that timing is required for those hoping to achieve long-term investing success.

Now can those of us who know this please stop apologizing for letting others know how critical it is that they begin learning how to time the market effectively?

My E-Mail to the Virginia Police re the Campaign
of Terror Against Our Board Communities

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Set forth below is the text of an e-mail that I sent on October 1, 2008 to Sergeant Kelly of the Purcellville, VA police force. I subsequently had several conversations with both Sergeant Kelly and with Special Agent Michael Jedfrey of the High Technology Crimes Unit of the Virginia Department of  State Police.

Sgt. Kelly:

Here are some printouts of internet postings that show the campaign of harrassment and intimidation aimed at me as a result of my posting accurate information on what the historical stock-return data says re safe withdrawal rates at the Motley Fool discussion board in May 2002:

1) Printout #1 (“A .22 caliber bullet fired from a handgun is not likely to cause death even when fired at very close range into the head”) is a post in which the poster discusses what gun model to use to kill me. It is clear from the context in which this post appeared that the intent was to threaten me, my family and any poster who agreed with me, supported me, or expressed a desire that the internet harassment directed at those who posted honestly on safe withdrawal rates be brought to an end. There were numerous highly abusive posts appearing at this board at this time. Several community members had made promises to begin reporting the abusive posts to the site owners. The response of the abusive posters was to become intensely angry at “censors.” Hence the title of this post — “Busy Censors.” There are earlier posts at this board at which posters threatened to come to my house with a baseball bat if I did not stop posting honestly on SWRs. Many of those have been removed but there are some posts remaining that contain quotes of the threatening posts (and I presume that Motley Fool has copies in its files of all of the threatening posts).

http://boards.fool.com/Message.asp?mid=18207722&sort=postdate

2) Printout #2 (“Can Retiring Early Make You Crazy?”) is the first page of the listing of threads in the “The Best of Hocomania” section of John Greaney’s discussion-board site. John is the author of an Old School SWR study (this is the type of study that I showed to be analytically invalid in my postings at the Motley Fool site) and has served as the leader of the effort to intimidate those posting honestly on the SWR topic at the Retire Early and Indexing board communities. The purpose of this printout is to show the effort that has been put into the internet harassment campaign. These two pages show that there are 20 separate threads (some with scores or even hundreds of posts) appearing on the first page of this discussion board index. The titles show that the majority of the threads are efforts at intimidation (a thread entitled “Pyschotic Man Kills Mother with Hatchet” obviously does not belong in a discussion of retirement planning). And Page Two shows that this is only one page of 84 pages listing additional such threads (at roughly 20 threads per page, that’s roughly 1,680 threads). And there are numerous other sections to this web site. Nor is this web site the only web site at which Greaney “defenders” have engaged in extensive abusive posting to intimidate those posting honestly on the SWR matter. There are hundreds of thousands of such posts appearing at more than half a dozen different boards in the Retire Early and Indexing communities.

http://www.s152957355.onlinehome.us/cgi-bin/yabb2/YaBB.pl?board=HOCO/20

3) Printout #3 (“Psychotic Man Kills Mother with Hatchet”) contains the first page of text from this thread. The intent of comments like “maybe he really is going to try to track down that girl he had a crush on and stalked back in law school” is obvious.

http://www.s152957355.onlinehome.us/cgi-bin/yabb2/YaBB.pl?num=1218883109

4) Printout #3 (Value-Informed Investing — Real Estate Style) contains numerous photos of rooms of my house obtained from a listing on the internet created when I put the house up for sale. The house photos are an obvious invasion of privacy when put forward in this context and are obviously intended for intimidation purposes when combined with the death threats made at earlier times.

http://www.s152957355.onlinehome.us/cgi-bin/yabb2/YaBB.pl?num=1217994638

5) Printout #5 (“Abandon This Stinkhole — Over 10,000 Already Have”) is a post in which one of the Goon posters brags of having over 10,000 registered users for a porn site that was created under my name. Hundreds of thousands of spam e-mails have been sent out under my name in promotion of this site, which was created to damage my internet writing business (the Yahoo search engine has identified my site as a spam site because of the hundreds of thousands of e-mails sent out under my name). The threat here is that my means of earning a livelihood will be destroyed unless I am willing to stop posting honestly on the SWR matter.

http://www.s152957355.onlinehome.us/cgi-bin/yabb2/YaBB.pl?num=1208271965

6) Printout #6 (“Wikipedia Solicits Authors for Hocomania Article”) is a post in which Greaney encourages his supporters to write disparaging comments about me (and thereby do harm to my means of earning a livelihood) at a Wikipedia encyclopedia entry. Numerous other tricks of this nature have been employed as part of the intimidation and harassment campaign, which has been ongoing for over six years now. New intimidation posts have been advanced on a daily basis for that entire time-period. There were many times in which hundreds of intimidation posts were put forward in a single day.

http://www.s152957355.onlinehome.us/cgi-bin/yabb2/YaBB.pl?num=1208235563

7) Printout #7 (“Bennett Divorce Details?”) is a post which makes false claims that my wife has left me. A person’s family life is obviously a personal matter and mentions of my wife and children by the Goon posters is obviously of particular concern given the history of threats of physical violence from this group. Again, such threats are obviously an inappropriate means of blocking people’s efforts to learn what they need to know to engage in effective retirement planning.

http://www.s152957355.onlinehome.us/cgi-bin/yabb2/YaBB.pl?num=1206392076

8 ) Printout #8 (“Google Search for “Rob Bennett”) shows the Goons bragging that they have damaged my reputation and my means of making a living by putting up enough abusive posts to cause the Google search engine to place their abusive posts high in the search rankings. The obvious threat is that these efforts will continue unless I am willing to stop posting honestly on the SWR matter.

http://www.s152957355.onlinehome.us/cgi-bin/yabb2/YaBB.pl?num=1191979128

9) Printout #9 (“Should We Start a Craigamania Board?” shows what the Goons do to posters other than myself who express a desire than honest posting on SWRs be permitted. They threaten to start boards directed at them similar to the ones directed at me. This tactic has been employed on numerous occasions. There is an entire section of the Greaney site aimed at ridiculing and threatening John Walter Russell, a retired government worker who has spent six years of his life preparing investment research for the benefit of the Retire Early and Indexing communities. There have been numerous occasions on which I have posted to blogs and members of the Goon Squad have appeared with links to the Greaney site and implicit suggestions that the blog owner had better not permit honest posting on this topic.

http://www.s152957355.onlinehome.us/cgi-bin/yabb2/YaBB.pl?num=1149702468

10) Printout #12 (“Rob Bennett Exposed as Fraud and Sexual Deviant”) is a post by Greaney at his discussion board announcing the publication of an article appearing at his web site. Posters who share information on investing at discussion boards obviously do not  by doing so agree to have smear articles appear about them. This article makes the obviously false claim that “Mr. Bennett has a long history of plagerism and copyright infringement.” There are several similar articles appearing at Greaney’s site. The obvious threat is that such malicious articles will continue to appear and to damage my means of earning a living for so long as I post honestly on the SWR matter.

http://www.s152957355.onlinehome.us/cgi-bin/yabb2/YaBB.pl?num=1149472246

http://www.retireearlyhomepage.com/rob_bennett_deviant.html

11) Printout #11 (“The Coin Toss”) falsely claims that I have engaged in plagerism. This is an obvious effort to do harm to my writing career.

http://www.s152957355.onlinehome.us/cgi-bin/yabb2/YaBB.pl?num=1133725238

12) Printout #12 (“Chicago Tribune”) documents how the Goon Squad makes malicious claims to reporters who write articles about me in an effort to do harm to my writing career. In this case, the reporter’s editor asked that she call me to verify that the claims made by the Goons are false. This is an intimidation tactic that has been employed on numerous occasions.

http://www.s152957355.onlinehome.us/cgi-bin/yabb2/YaBB.pl?num=1128554471

Rob Bennett

“Have We Been Sold a Bunch of Lies?”

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Frugal Dad asks that provocative question in his blog entry for yesterday.

There are lots of people asking that question today. More will be asking it in days to come unless some responsible people step forward to rebuild confidence in the markets by explaining why it is that we have in recent years suffered the greatest loss of middle-class wealth in U.S. history.

My comment is Comment #16.

Juicy Excerpt: We MUST get the word out re this. If people pull their money out of stocks (more are talking about it all the time), we are going to see another huge price drop. That is going to put our economy into a depression. All of this is 100 percent unnecessary. It is all the result of a MISTAKE. We really need to get about the work of getting some serious people involved taking some serious steps. There are many people who know about all of the things I am talking about but who are afraid to speak out because the human misery caused by the Passive Investing concept has been so horrible and it is considered “taboo” to note the errors in this failed approach. I have never seen anything like this!