“Holy Toledo! This is great stuff!”
So said Bill Schultheis, author of The New Coffeehouse Investor and a popular Passive Investing advocate, in an e-mail to me dated May 14, 2009. Bill was writing to me as the result of our joint participation in a discussion thread at the Get Rich Slowly blog.
Bill wrote a guest blog for the Get Rich Slowly blog entitled How to Build Wealth, Ignore Wall Street and Get On With Your Life.
Juicy Excerpt: The problem is that we have been so inundated by the financial industry’s marketing machine over the past quarter century, that we have been brainwashed into thinking that the secret to our long-term financial well being lies in Wall Street’s hands, instead of our own hands. Nothing could be further from the truth.
I made clear in Comment #9 that I wasn’t buying.
Juicy Excerpt: The problem did not come about because most of us were trying to pick “hot stocks.” The “experts” have been pushing Passive Investing down our throats for three decades now and most of us bought in. That’s the problem.
Bill responded graciously in Comment #14, saying “you bring up some very interesting points” and then offered detailed observations in Comment #20.
Juicy Excerpt: I agree with you that prices matter in regards to future returns on equities. How do you suggest one integrates that into a portfolio? I am very familiar with the studies that recognize that valuations matter. Using that information to build portfolios and allocate assets is a challenge, and a slippery one at that.
I responded to that one in Comment #21.
Juicy Excerpt: The way to integrate this critically important reality into a portfolio construction strategy is to accept that to “Stay the Course” meaningfully one must keep one’s risk level roughly constant. An investor who stays at the same stock allocation when the risk of owning stocks has increased dramatically is NOT staying the course in a meaningful sense. He is staying the allocation. That’s not at all the same thing.
I followed up with an e-mail to Bill which I will post as Thursday’s blog entry. He responded with an e-mail to me offering his kind assessment of the investing materials at the site and expressing interest in entering into a more extended back-and-forth exploration of these matters. I of course expressed my gratitude and indicated that I too am looking forward to further conversations.
J.D. Roth (the owner of the A Rich Life blog) then threw us a curve ball. Without explanation, J.D. blocked me from posting further comments (I do not know whether the block applies site-wide or only to the one blog entry as I have not since had occasion to try to post a comment there). I let Bill know by e-mail and he expressed a desire to be able to read my comments. Two community members other than Bill expressly directed comments or questions to me. But J.D. did not respond to my two e-mail requests for help with what I presumed (until he failed to address the problem for several days) was a technical problem. [Note (added May 22): Subsequent events have shown that J.D. did NOT block my comments — the posting problem turned out to have been caused by a technical problem afterall]
To have yet another Passive Investing advocate act so defensively (J.D. joins the Bogleheads.org site, the Morningtar.com site, the Motley Fool site, the Early Retirement Forum and IndexUniverse.com in banning effective criticism of the Passive Investing model) is of course disappointing. But I view this chapter in the saga as being more encouraging than discouraging.
I believe that Bill is sincere in wanting to learn more about the flaws in the Passive Investing model (while also perhaps being reluctant to let in just yet just how extensive the problems with this model really are). I also believe that J.D.’s mind is not entirely closed. He permitted three comments by me before lowering the boom, and there were several comments by other community members expressing either skepticism re Bill’s message or support for mine. Most significantly, I am hearing more questioning of the Passive Investing marketing slogans from a larger number of middle-class investors all the time. In the old days, the Passive Investing dogmatists positively celebrated their bans on honest debate. I am sensing a feeling of defeatism re these “strategies” today. Even the dogmatists appear to be growing weary of the tactics needed to keep the dogmas in place after they have failed so many real-world tests and caused so much financial misery.
We’re not yet where we want to be. Not by a long shot. But I believe we are seeing some forward movement. Let’s just hope that it doesn’t take another 50 percent price drop to obtain the cooperation of the number of “experts” needed to move the ball into field goal territory!
I’ll send Bill another e-mail today and ask him whether he is okay with me posting his side of our correspondence here (if he is not, I will post only my own e-mails). I’ll let both Bill and J.D. know about this blog post. In the event that either feels that there is anything that I have said that is inaccurate or unfair, I will let him know that I would be happy to reserve next Tuesday’s blog for the presentation of his words. Finally, I’ll write a blog entry on the question raised by Bill in his Comment #20– how best to implement long-term timing — and ask J.D. whether he has an interest in posting it as a guest blog entry at his site.
I heard from two fellow blog owners yesterday focusing on the same question as Bill — the practical implementation question. One was Shadox, owner of the Money and Such blog (Please do not click on this link as I believe that the blog is going to be featuring a Guest Blog Entry of mine today that I intend to feature here in a future blog entry of my own — it’s cheating to sneak a peak today!). The other was Frank Curmudgeon, at the Bad Money Advice blog (please feel free to click this one and to travel down to the comment that Frank put forward at 8:45 am on May 18).
Frank Curmudgeon: When I say that I am not saying you are right, I mean only that I am not yet convinced you have a powerful enough equity market prediction model.
Shadox (in an e-mail): The question is whether there is a problem with translating what may be a sound concept to a “real world” environment. I think this is where the real challenges are from your perspective.
If we are witnessing a shift in the focus of the “opposition” to the Valuation-Informed Indexing concept to a questioning of whether it can be implemented effectively, that is very good news indeed. Skepticism re the implementation question is entirely healthy and appropriate. It’s the threats to kill anyone who fails to genuflect upon hearing the pronouncement of one of the Passive Investing marketing slogans that have done so much damage to the various Retire Early and Indexing boards. If the focus turns to the feasibility of the ideas explored at this site, it will be almost like we are having a regular old investing discussion re these matters. We will have achieved Normalization of The Great Safe Withdrawal Rate Debate at last!
Mel hates it when I cite Beatles lyrics for the insights they offer us into the great stock investing questions of the day. Still, I really do think there’s something to be said for the observation that “there’s nothing you can do that can’t be done.”
And that “all you need is the historical data.”
Update: There have been two developments in this story as of the morning of May 20 (when I am posting this update).
I sent the e-mails to Bill Schultheis (author of The New Coffeehouse Investor) and J.D. Roth (publisher of the Get Rich Slowly blog) described in the blog entry. Both Bill and J.D. responded.
J.D. said that he has not banned me from posting at his blog. He said that he has never banned anyone. I am still not able to get my comments to appear on the thread relating to Bill’s guest blog entry. J.D. is out of town and away from his computer (he read my e-mails through use of his phone), so he has not yet been able to address the technical problem (J.D. had a site upgrade last week — my guess is that the problem relates to that). But he has indicated that he will get things fixed up in a few days.
Bill sent me an e-mail objecting to me quoting him as saying extremely positive things about my site without his permission. He did not claim that the quote I used was inaccurate. I responded with a long e-mail that aims to bring to the surface the underlying issues that gave rise to what I believe can fairly be characterized as an exceedingly odd complaint. I will post the text of that e-mail in a later blog entry. I told Bill that I am happy to give him space at the blog to comment on anything that I have said that he views as being either inaccurate or unfair or unkind. I also said that I am happy to quote the precise words that he used to express his objection to my use of the quote from him but only if he gives me permission to do so. I said in the earlier blog entry that I will provide the texts of Bill’s e-mails in our ongoing (I hope!) correspondence only if he gives me permission to do so.
As I’ve said before, getting people to understand that there is an active/passive question worth discussing with regard to asset allocation is the hard part. Personally, as somebody who made a nice living for many years as an active investor, I never needed convincing.
As for J.D. Roth, without knowing any details of this particular incident, let me say that in my experience he’s been a stand-up guy. Some months ago I wrote one of my sharper, and frankly not that fair, posts about something on his blog. His response was to write a post recommending my blog to others. I think about 80% of my current traffic ultimately stems from that post of his.
Thanks so much for stopping by, Frank. It makes me happy to be able to hear your voice at this place (Frank runs the “Bad Money Advice” blog, one of the few that I follow daily).
getting people to understand that there is an active/passive question worth discussing with regard to asset allocation is the hard part.
We’re in complete agreement re this one, Frank. It’s like getting over a mountain. My experience is that, once you (I don’t mean you in particular but anyone) see what is on the other side of the mountain, you will never want to go back. It’s all good stuff on the other side. Once I came to understand why Passive can never work in the real world, my understanding of every aspect of the investing project just got better and better and better. Getting over that mountain is a win/win/win/win/win.
I need to point out here that, while getting people to understand that there is an issue here (the question being raised is so fundamental that most people just take it for granted that what the “experts” say regarding it simply MUST be right) is indeed the hard part, I have had success in convincing hundreds of people that there is an issue. There’s an article at the “Banned at Motley Fool!” section of the site entitled “Community Comments on The Great Safe Withdrawal Rate Debate” in which scores of people said back in 2002 that these discussions are among the most exciting investing discussions they have ever heard. So it is not as if there is not great interest here. There is great confusion to go with the great interest. But there is certainly great interest.
That’s a wonderful thing for all blog owners, is it not? We’ve got this issue in which there is huge interest and yet limited understanding. Isn’t that a combination that makes for great blog entries? Wouldn’t you be thinking in ordinary circumstances that this would be an issue that we would soon see written up at hundreds of blogs with lots of people offering differing takes and with lots of discussion and back and forth and lots of learning experiences and with big-name experts getting involved and with write-ups in the general media and all that sort of thing? Has there ever in the history of the internet been an opportunity for personal finance bloggers as big as this one?
We are not yet seeing that sort of reaction today. I certainly have hopes that we will see it in days to come. But I think it would be fair to say that we are not seeing it today. Why the heck not? That’s the $64,000 question.
Blog owners do not need to understand every aspect of a question just to put forward blog entries commenting on it, do they? Why are people not doing that? Why have we not yet seen this issue explode across the blogosphere (the implications here actually go beyond just personal finance, there are economic and political implications too because of the role that Passive Investing has had in causing the economic crisis).
Say that there are some who disagree with much of what I say. Why do they not put forward blog entries saying that? Why do people not invite discussion of the issues regardless of which side they are on just so that people can hear both sides and decide for themselves? This is the usual practice, no?
It’s because they are afraid, Frank.
Most of the blog owners who have looked at this believe in Passive Investing (there have been hundreds of millions of dollars directed to marketing the concept in recent decades). None of the blog owners who have looked at this have been able to come up with an effective rational argument to defend Passive Investing from the challenges to it that have been advanced. Most are at least dimly aware that a good number of Passive Investing advocates are capable of a good bit of nastiness when their investing strategies are questioned effectively. So most personal finance bloggers are afraid to step forward. They duck the question. They shiver and shake in the corner while this LONG DISCREDITED investing strategy continues to cause financial ruin for their readers and for the entire U.S. economy.
Can this state of affairs continue indefinitely?
I say “no.”
People are going to need to work up the courage to address the challenges that have been raised. I don’t see any other way it can go. When that happens, we all learn as a result. If weaknesses are discovered in things I have said, that’s a wonderful thing. If not, that’s also a wonderful thing. Either development advances the ball. Something has to be done with this ball, whether it makes a good number of us feel uncomfortable to take action or not. The issues raised are just too important to ignore. We have no choice re this one.
Putting it off makes the entire experience 20 times more painful than it needs to be. Putting it off has been a disaster for seven years now and it proves itself a greater disaster with every passing day. We need to identify a few real men (whether of the male or female gender) who are able to work up the courage to do their jobs and inform their readers of the questions that have been raised and of their significance.
The rest will take care of itself. Once people feel free to discuss these matters, people will figure out ways to make good of it all. That’s what people do. But people cannot work this magic until the issues are put on the table and they are made aware of them and they come to understand them. We need to see the personal finance blog owners do their part.
It’s a win/win/win/win/win with no possible downside for anyone concerned. But it takes a little bit of guts to get the ball rolling.
That’s my take, in any event.
Rob
His response was to write a post recommending my blog to others.
That’s a great story that reflects very well on J.D.. I am very happy that you put it forward. We need to have that side of the story presented here.
I have heard similar things from other people. And I have had personal experiences with J.D. that reflect well on him. So I am certainly happy to say that he does indeed appear to me to generally be a stand-up guy. I think it would be fair to say that that one has been proven beyond any reasonable doubt at this point.
But —
He did not behave as a stand-up guy re this particular matter. That is also beyond reasonable dispute at this point, is it not?
It is a verifiable fact that my comments on the Bill Shultheis guest blog entry were of great significance. Bill himself says this! Bill came to this site to check me out and after looking at the investing materials here concluded that “Holy Toledo — This is great stuff!” That’s not a put-down, right? Bill is a well-regarded expert in this field and he learned something new by checking out Rob Bennett’s site. J.D. Roth had an opportunity to share those insights with the readers of his blog by permitting Rob’s comments to appear at his site along with all the others. And J.D. Roth pushed a button to see that this learning experience would not take place. Huh? That makes precisely zero sense. I think it would be fair to say that the behavior here is behavior that is all but impossible to understand.
I understand it. Only because I have spent seven years involved in this thing and I have seen the same otherwise inexplicable behavior from lots of other stand-up guys. John Bogle is a stand-up guy. He did similar things. William Bernstein is a stand-up guy. He did similar things. Scott Burns is a stand-up guy. He did similar things. The site administrators at Motley Fool and Morningstar and Early Retirement Forum and Bogleheads.org and IndexUniverse,.com are stand-up guys. They did similar things.
What the heck is going on?
That’s the question you should be asking yourself. That’s the question we all should be asking ourselves.
What is going on is that an investing model that at one time pretty much took over the world has been totally and completely discredited by the academic research of the past 30 years. And the people who believe in it (there are millions of smart and good people who believe very intensely) are in GREAT PAIN re the need to come to terms with what we have learned. They don’t want to acknowledge it. They want to put off recognition of the realities, which become more and more obvious with each passing day.
The pressure has caused lots of good and smart people to break. J.D. Roth is just the most recent. He is in very, very good company.
But he very much needs to flip it. He is hurting himself. And he is hurting all these others by putting off the day at which they will feel forced to flip it too. I have zero desire to cause any pain to J.D. Roth or to John Bogle or to any of the others. I want to be able to post my honest and sincere thoughts on investing at internet discussion boards and blogs — that’s it! How did such a simple and plainly good and healthy desire ever become “controversial”? How did such a simple and plainly good and healthy desire ever come to provoke such anger and outrage and hate (there are people who have threatened to kill my wife and children if I continue to report the safe withdrawal rate accurately — this is documented).
Say that the tables were turned and that it was advocates of the Rational Investing model who were doing and saying these things. I would be embarrassed beyond belief. I would be disassociating myself from this sort of behavior in every possible way available to me. Bogle hasn’t done that. J.D. Roth hasn’t done that. The others haven’t done that. Huh?
They are in great pain, Frank.
Great, great, great, great pain. This stuff is inhuman. One of the reasons we have a hard time getting people to talk this stuff over is that a good bit of the “defense” of Passive that we have seen in recent years is truly unspeakable. Civil people don’t generally make it a practice to talk about death threats. To have death threats being used to “defend” investing strategies is so over the top that people have a hard time even processing the fact that these sorts of things have become a daily occurrence among those seeking to “defend” Passive Investing from the challenges that have been raised to it over the past seven years.
Does this not show that Passive cannot work? Forget the historical data. Look at the behavior that questioning of Passive brings out in a good number of people. Does this behavior not tell the tale that needs to be told? Is there any possibility that an investing strategy that made sense could provoke such reactions? Is there any other field of human endeavor in which we would not all go running in flight from a set of ideas that caused so many people to experience such horrible pain? I mean, come on.
If J.D. or any of the others wants space at this blog to explain the behavior or to argue that I have in some way been unfair or unkind in my reporting of the story, I hereby warmly invite him or them to take some space at this blog to present their case. I want people to do this! I want to help all the people who have behaved poorly! I am J.D.’s friend. I am Bill Schultheis’ friend. I am John Bogle’s friend. I am Mel Lindauer’s friend. I am John Greaney’s friend.
I also believe that I am obligated to act in a friendly way to the millions of middle-class investors who have lost large portions of their retirement savings because of their misplaced confidence in this reckless investing strategy. So I am being torn right down the middle. I have friends on both sides and I need to show respect and affection to ALL of my friends.
There shouldn’t be two sides. That’s the thing. We ALL should want to learn how to invest more effectively. J.D. needs to be made to see that Rob Bennett and J.D. Roth are on THE SAME SIDE.
He needs to be a stand-up guy in discussions of the flaws of the Passive Investing model TOO, not just in discussions of all other topics that come to his attention. His true friends need to tell him that. His true friends (I certainly consider myself one and I am trying to honor my obligations to him with these words) need to try to help make him see that the path he is on today is not a good long-term path.
The issue is not going away. It’s not an issue that someone who writes about personal finance can duck forever. Either Passive Investing has been discredited or it has not. J.D. Roth and all other personal finance bloggers have an obligation to themselves and to their readers to explore the questions that have been put on the table to the best of their abilities.
Again, that is my sincere take re this matter. I hope that my words reflect my belief that these matters must be addressed in a spirit of both honesty and charity in the proper proportions (emphasis on the charity combined with an iron unwillingness to abandon the demands of simple honesty that simply cannot be denied in conversations that may affect what people do with their retirement money).
Rob
Today’s Passion – “The Problem Isn’t Monte Carlo Itself, But the Assumptions That Go Into It”
http://www.passionsaving.com/investment-strategy.html
You are right to make the point you are making, Evidence.
I am not God. I am as capable as any of the other humans of getting caught up in my excitement and making some bad assumptions and then heading down a bad path as a result. It’s helpful for you to point that out.
Where you go wrong is when you lend your energies to support of a ban on honest posting on the internet on the flaws of the Passive Investing model. We need to know about both the strengths and the weaknesses of both the Passive model and the Rational model.
If there are flaws in the Strategy Tester, those will be brought out in honest and open debate of all the questions that have been raised during the first seven years of our discussions.
If there are no significant flaws (it is hard for me to imagine that there are not at least a few small flaws), that will come out. And learning that would be a boon for all of us (just as learning of any flaws would be a boon for all of us). You very much included.
You benefit from a lifting of the ban on honest posting, Evidence. All Passive Investing advocates do. The sooner that all Passive Investing advocates come to appreciate their own best interests in this matter, the better off we all will be.
That’s my sincere take.
Rob
Rob, I’ve just taken the time to read the COMMENTS on this post, and I see that your accusations here are even more defamatory than in the post itself. I’m serious: You need to take this down, and now. It’s not a trivial matter to make false accusations. My reputation is all I have on the internet, and I will NOT have it tarnished by your misperceptions and allegations. I’m now asking you to not only remove the two paragraphs in question, but also your comments. In fact, I’d recommend removing this entire post.
THIS IS NOT AN ATTEMPT TO SILENCE YOU. This is an attempt to remove defamatory statements that have no basis in fact, an attempt to protect my own reputation from future harm.
Thanks for stopping by,. J.D. I wish that your first post here could have been under friendlier circumstances.
J.D. and I have been exchanging a number of e-mails today about the issues he addresses in his comment immediately above.
In my first response to his first e-mail, I offered to give him space at the blog to put forward any comments that he wants to make re my handling of the developments discussed in this blog entry. He said that he did not want to write a guest blog entry here. However, he agreed to the idea of me running the text of his first e-mail (which sets forth his version of things) as a guest blog. I told him that I would do that next Thursday). I have other things in place for the days before that. I said that if the delay was a problem, I could move things around a bit.
We talked about some other matters, including his attempts to work out the technical problems that are causing my comments not to appear at his web site. We have not yet worked that one out, but we have developed some clues.
J.D. is obviously still not satisfied.
I obviously have no intent to post anything “defamatory” re him.
He has not been able to give me the information I would need to feel comfortable deleting the original words from the blog entry. I see that as an extraordinary step to take. I am okay with saying that J.D. did not intend to impose a ban because he has told me that that is the case and I find his story believable. But I do not see the need to remove the original words. I prefer to have people see the original words (which reflect my entirely reasonable belief at the time they were written, given that there have been numerous bans on honest posting adopted as a result of our findings re safe withdrawal rates from seven years back and that J.D. himself played a minor role in one of those bans (the one that took place at the Money Bloggers Network) and that J.D. has made some statements that are so totally off the wall that they raise concerns as to whether he is shooting 100 percent straight re these matters. For example, he has expressed “concern” re my mental health in his comments. That’s a standard Goon tactic, one that was employed on the Money Bloggers Network thread and one which J.D. did not object to when it was employed there.
Claims of mental illness are often used to intimidate. I cannot see into J.D.’s mind and say with certainty that he raised these claims with the purpose of engaging in intimidation. However, I can say that I am not 100 percent certain that that is not the case.
If there is even a small chance that that is what is going on here, I do not want to do anything to encourage the intimidation. Intimidation tactics have obviously caused huge financial damage to middle-class investors over the past seven years as a result of the way in which they have been used to block honest posting on SWRs and related matters at the Retire Early and Indexing discussion-board communities (and recently at a number of blogs).
I believe that the best thing to do in these confused circumstances is to let people review the full record (as much of it as I am free to provide — I do not have the right to post the full texts of J.D.’s posts other than the one re which he gave permission to do so) and let them just decide for themselves what to believe.
I do NOT say that J.D. banned me from his site because I put up a post questioning the merits of Passive Investing.
It is a fact that I have not been able to post my comments for nearly a week now. It is a fact that I asked J.D. to look into the matter in two separate e-mails and did not receive any responses. It is a fact that I notified Bill Schultheis of the problem and suggested that he might want to contact J.D. too and that Bill responded by saying that he would like to see my comments but did not indicate that he had contacted J.D. It is a fact that J.D. was contacted at the time that the thread on the problem of Goon posting was being removed from the Money Bloggers Network forum (the owner of the Lazy Man and Money blog suggested that J.D. might post about the errors in the Old School retirement studies and thereby solve the Goon problem by addressing the underlying substantive issue and I saw that as a great potential solution to the seven-year saga). It is a fact that J.D. declined to get involved in response to that request. It is a fact that J.D. declined to run a guest blog entry that I sent him for his review that I view as the best that I have yet written (it uses the historical data to show investors that the stock crash has been a good thing for many of us because the lower valuations that now apply will likely increase future returns by enough to make up for the money we lost in the crash).
Is your head spinning at this point? Mine sure is.
All that I have heard or seen of J.D. outside of my dealings with him on this one particular matter has impressed me. I have fond feelings for him. I certainly have the greatest respect and admiration for what he has done with his blog. I would be pleased to develop an ongoing working relationship with him.
I think that people should give him the benefit of the doubt on the banning issue. There certainly were facts that indicated that I had been banned from posting comments on the Bill Schultheis thread. But it is also true that J.D. has a reputation for permitting viewpoints other than his own to be expressed at his blog. And it is also true that his site has been going through a rebuild and that might have caused some sort of problem. And it is also true that he has worked to fix the technical problem.
So I personally do not believe that a ban was imposed. I would feel even stronger about that if the technical fix is eventually fixed (I believe it will be).
But I also believe that there is a lot of weird stuff going on here. There has been a lot of weird stuff going on at a lot of places since May 13, 2002, when I first posted about the analytical errors in the Old School retirement studies at Motley Fool. Thousands of people have already been victimized by that weirdness. It seems entirely possible to me that J.D. in just the latest in a long list. The whole world is turned upside down when posting on studies that have been demonstrated to give false retirement numbers are encouraged and the discussion of studies that give accurate numbers is banned. Holy moly!
I continue to believe that the best thing to do is to leave up the words that originally appeared and supplement them with my Addendum (which says that J.D. did not impose a ban) and with any words that J.D. wants to put forward as a further explanation. I am continuing to discuss the matter with J.D. I don’t want to be stubborn. I want to do the right thing both for J.D. and for all the millions of middle-class investors who have been done so much harm by all the craziness that has attached itself to all internet discussions of investing since the discovery of the errors in the Old School retirement studies.
Please say a prayer that there will come a day soon when responsible people will step forward (including J.D. and Bill but certainly not only including them) and bring all the craziness to an end by taking the steps that need to be take to reopen the entire internet to honest posting on ALL investing topics.
And please say a prayer than J.D. and I are able to listen to the other’s point of view to the extent necessary to bring these matters to a good resolution.
Yowsa!
Rob
I have a question for J.D.
You express a concern that “my reputation is all that I have on the internet.”
During the Campaign of Terror against the Retire Early and Indexing discussion-board communities, there have been scores of posters who have been forced to behave in incredibly degrading ways to win the favor of the Goon posters who threatened physical violence against any posters who dared to “cross” them by posting honestly on the safe withdrawal rate matter. Some of the best posters in the history of those communities were forced to put up words directly the opposite of what they had long indicated they believed for fear of what the Goons would do to them if they did not obey their sick demands.
Does it bother you that these people had to destroy their reputations to escape the threats of the Goons?
There were big-name experts who either encouraged the Goons or at least tolerated their behavior. John Bogle is associated closely with the Vanguard Diehards board, which was virtually burned to the ground because Morningstar permitted honest posting on SWRs and related issues there for nearly two years. William Bernstein posted at that board at the time the Campaign of Terror was raging. Scott Burns once banned honest posting on SWRs at his web site when the Goons attacked. There are others.
Do these people’s reputations matter too?
You are not responsible for these people. There is a sense in which their problems are not your problems. I get that.
But you could get involved if you cared to get involved. i think that it is fair to say that if you reported about the problem at your blog, it would be solved within 24 hours. Bogle would be able to engage in reasoned and civil back-and-forth at the Bogleheads and Vanguard Diehards communities. We might be able to persuade Bogle to say some things about Passive Investing that would help millions of middle-class investors and perhaps help bring this economic crisis to an end.
You write a blog about personal finance. It would seem to me that in ordinary circumstances you would jump at a story like this. Is there a reason why you have not pursued it (you were made aware of it during the discussions of the ban imposed at the Money Bloggers Network forum).
Are you afraid of the Goons, J.D.?
If you are afraid, how do you think that others who have far less influence than you do feel about them?
How likely do you think it is that all posters are posting honestly at Bogleheads and Vanguard Diehards, given the Goons’ track record and given that most people who post at those boards do not possess the ability to protect themselves from their attacks?
I have learned some amazing things from the community members who congregate at those boards, J.D. I think of those people as my friends. I would like to see them gain the freedom to post their honest views at those boards. I think those boards could change the history of investing if they were opened to honest posting on all investing topics.
Can you find it in your heart to help out?
I think it would be fair to say that your reputation would be secure in the hearts and minds of millions of middle-class investors if you could.
If there is ever anything that I can do to answer any questions that you need answered for you to find it in your heart to help out, please ask. I care about your reputation. I think those people’s reputations matter too. Big time.
Rob
This is an attempt to remove defamatory statements that have no basis in fact, an attempt to protect my own reputation from future harm.
Are you able to identify any specific words that concern you, J.D.?
Rob
You told me in an earlier e-mail that you read the thread about the problem of Goon posters that was removed from the Money Bloggers Network forum.
Did you come across any defamatory words about me in that thread?
I have a copy of the words of the thread in my file.
Do those defamatory statements concern you?
Would you feel comfortable posting the words that you employed in some of your e-mails to me today saying that you believe that I suffer from mental health problems? Do you view those words as being defamatory?
Rob
Is it defamatory if I tell people that you elected not to tell people about the analytical errors in the Old School retirement studies after you learned about them, J.D.?
Is it defamatory if I tell people that you failed to do anything at the Money Bloggers Network when you saw the thread on the problem of Goon posters taken down?
Is it defamatory if I tell people that you failed to run a guest blog entry that would have helped a lot of people feel better about the stock crash and thereby might have done a good bit to ease the feeling of panic that is undermining a market recovery today?
Each of these three things is far worse than anything I say about you in this blog entry, in my assessment. I am saying in this blog entry that I believe that you did NOT impose a ban on me when I posted comments critical of Passive Investing at your site. That’s defamatory and these other things are not?
I hate saying negative things about anyone. I positively hate it.
I have been forced to do it on numerous occasions over the past seven years because the Campaign of Terror against my board communities has been so brutal and the issues that those board communities have been trying to discuss are so important. I’ve done what I’ve felt I absolutely had to do to provide even minimal protection for my fellow community members, but I have never experienced a moment of enjoyment doing so.
It astounds me that you are so worked up over something that I would describe as about a 2 on a scale of 10 on the negativity scale. As I note above, I am saying that I believe that you did NOT impose a ban on me. I would not feel free to say that if I did not believe it. I’ve been forced in other circumstances to say worse on numerous occasions.
The fact that you are worked up argues for your credibility in my eyes. Someone lacking integrity wouldn’t care.
But then I see this indifference to what has been done for seven years now to the integrity of thousands of others, including some of the biggest names in the field (people who I am sure you revere as I do). What am I to make of that?
It is my job to try to figure it out. I am trying.
I am not going to say that I have a firm fix on this one at this time.
Are you able to share with us (or with me alone if you prefer to communicate by e-mail) where you are really coming from re this matter. I mean the entire matter. What the heck is driving you to engage in such contradictory behavior? Is there something that I can help you to understand better?
Rob
Rob, I’ve never blocked anything from my site other than spam posters and I don’t consider you a spammer. As I’ve told you, I don’t know why your original comments didn’t appear but as you yourself have since verified your comments are appearing now. Feel free to comment at length if you wish.
I would, however, appreciate it if you would stop attributing specific motivations to what you perceive as actions that I’ve supposedly taken. And please correct the record rather than leaving innuendo and speculation as the mainstay of the discussion. I assure you I have not taken the actions you claim and I certainly don’t hold those motives.
If you want to critique “passive investment strategy” then by all means do so. But please don’t involve me and my reputation in that discussion because that’s not what I’m about.
This conversation has consumed two hours of my day, but I need to return to the business of running my blog. I have writing to do and people to help. Best wishes, Rob. I’ll see you around.
I would, however, appreciate it if you would stop attributing specific motivations to what you perceive as actions that I’ve supposedly taken. And please correct the record
I am doing the best that I can to tell the entire story in as complete and balanced and charitable way as I possibly can, J.D. That’s my job.
When I ask you what it is in the record that you want corrected, you point to the matter of whether there was a ban imposed at your blog. The record has been corrected on that point. The record says that there was not.
I am not able to figure what it is that you are upset about.
Rob
If you want to critique “passive investment strategy” then by all means do so.
I am grateful to you for saying that, J.D.
It is my belief that all the craziness stems from a feeling that some had developed for a time that Passive Investing was beyond criticism, that it was some sort of “science.”
If that feeling is passing from the scene (and I see more evidence than just your words here that that is indeed slowly happening), I believe that in time these other matters will sort themselves out.
I would like to see us (I don’t mean just you and me, but all in the personal finance field) take the quicker road rather than the slower road. The other side of the story is that I believe that what we are going to find at the end of the road is going to be so great that it is going to make all the craziness we had to work through to get there worth it 20 times over.
I’m a big admirer of your blog. I look forward to posting a comment there from time to time.
Perhaps I’ll even find a few positive words to say about Passive Investing. It’s been known to happen!
Take care, my new friend. Again, I hope that we will see you posting here again in friendlier circumstances in the not too terribly distant future. I believe that you could add a lot to the discussions.
Rob
I would, however, appreciate it if you would stop attributing specific motivations to what you perceive as actions that I’ve supposedly taken.
I reread the comments on this blog entry this morning in an attempt to get a better fix on this particular chapter of the saga and the thought came to me that J.D.’s use of the phrase “if you would stop attributing specific motivations to what you perceive…” might provide a clue.
We live in a society in which free speech is a well-respected principle. It’s actually in the First Amendment to our Constitution.
We do not permit free speech on the flaws in the Passive Investing model at many places on the internet.
I believe that that one particular fact is so terribly strange that it causes all other kinds of strangeness to follow from it. That’s the elephant in the living room.
To say that an influential Passive Investing advocate has either endorsed or tolerated a ban on honest posting on the flaws of the Passive Investing model does not by itself say what the motive for this behavior is. But the fact is so strange that it is hard for people hearing the fact not to pick up a negative vibe. In a society in which free speech is generally respected, how can we not wonder a bit about the motives of those who either endorse or tolerate bans on free speech re an issue which affects the viability of our retirement accounts?
I make an effort NOT to do what J.D. is suggesting I do. I am an effort to report the facts and hold back from assigning specific motives or, in cases in which I believe that motive must be discussed, to make clear that I am engaging in speculation and also to make an effort to be as charitable as humanly possible. Still, I think that those who have either endorsed or tolerated bans cannot help but feel somewhat defensive about it. To endorse or tolerate bans on free speech is so outside the realm of the socially acceptable that those engaging in this behavior cannot help but feel bad about it even if no specific negative motive has been assigned to them. They feel as if a motive had been assigned even if it has not.
That’s what I think is going on.
My personal belief re the motive question is discussed in some depth in a podcast called “It’s Not a Conspiracy, It’s Cognitive Dissonance.” I believe that the people endorsing or tolerating the bans simply cannot bear to hear what the historical data says — they are not yet emotionally prepared to acknowledge to themselves the flaws in the Passive Investing model. So they feel either that they must seek bans or that they should not speak out against them, despite the strong societal norm that opposes bans on free speech.
What we really have here is too strong social norms coming into conflict with each other. We have a strong social norm against bans on free speech. We also have a strong social norm against criticism of the Passive Investing concept (I explore this one in the podcast entitled “Taboo”). When faced with historical data showing that Passive Investing cannot work in the real world, the Passive Investing advocate is faced with a choice of violating one strong social norm or violating another strong social norm. What a mess!
I of course want to do whatever I can to bring the insanity to an end as quickly as possible. The other side of the story is that I don’t believe that persuading people to come to a recognition that a social norm that has been proven destructive (the social norm against questioning of the Passive Investing dogmas has been proven destructive in many different ways) should be abandoned is something that can be forced. We need for the Passive Investing enthusiasts to develop a desire to change before we can engage in the sorts of discussions and negotiations that can bring about constructive and positive change.
Are we getting closer to that place that we all deep in our hearts very much want to be? I believe that we are.
The other side of the story is that I’ve been saying that for a long time now.
Love! Courage!
Rob
After spending some additional time trying to come up with an approach that would satisfy J.D. without requiring a deletion of the original material (I believe in maintaining the record so that those trying to make sense of things have it all available to them — for example, some might conclude from the mistake that I made re J.D. that I have made other mistakes in other areas), I elected to add the language in bold that now appears in the blog entry at the end of the paragraph that begins “J.D. then threw us a curve ball.”
J.D. has told me that this change addresses his concerns.
Rob
Starting with post 70, I see a JWR1945.
I have not posted on that thread. It is a case of misrepresentation.
Have fun.
John Walter Russell
I pointed that out in a comment that i put to the thread, John.
But thanks for confirming it here for the benefit of anyone who had any doubts about what was going on in that thread.
Rob
Wow,
I’m new to this blog and had no idea there was so much energy and anger around the passive/index valuation debate. I’m going to do my best to create a study to help resolve all of the in fighting on these boards.
I think traditional indexing works most of the time based on the numerous academic studies that I’ve read and my 25 years of practical investing experience. However, like any policy in the world it does not work all of the time. There are exceptions to virtually every rule.
I think Rob is right in that there are times when the market is way overvalued and not a good place to park your money. I’m not going to go into another long explanation of why I think he is right about his point here. I debated Rob in previous blog entries and we found some common ground. You can read our debate for yourself.
However, the goal of this blog is to find the truth about the passive/valuation argument not to see “who” is right. The goal is to identify “what” is right. I hope all people in this blog will keep an open mind and find ways to improve the financial lives of those they serve.
I’m new to this blog and had no idea there was so much energy and anger around the passive/index valuation debate.
I am grateful to you for joining in on the discussions, Larry. It would be fair to say that we have generated a wee bit of controversy from time to time.
I think it would be fair to say that many Passive Investing enthusiasts see the idea that valuations affect long-term returns as a threat. It is a simple idea and it is a common-sense idea. But the implications of the idea are very far-reaching.
I didn’t begin exploring this stuff with the idea of overturning all that we think we know about how stock investing works. It just worked out that way!
I’m joking a little bit, but not entirely. The reality is that the question of whether valuations affect long-term returns is so fundamental that, if you change your take on this one, you end up changing your take on just about everything. It was never my intent to stir people up. But it is in my nature to follow the evidence where it leads (I am a journalist by trade). Follow the evidence where it leads in the investing field in 2009 and you end up stirring a lot of people up!
I’m going to do my best to create a study to help resolve all of the in fighting on these boards.
That would be wonderful. If you are going to go down that road, you should check out John Walter Russell’s Early Retirement Planning Insights site before doing so. John has been researching these questions on a full-time basis for over seven years now. There’s room for plenty more to get involved — I look forward to the day when there are thousands of blogs and sites exploring these questions. But you might want to check out what John has already done to gain a better sense of precisely where you can best direct your energies.
Here is a link to John’s site:
http://www.early-retirement-planning-insights.com/index.html
I think traditional indexing works most of the time based on the numerous academic studies that I’ve read and my 25 years of practical investing experience.
Something that you need to keep in mind is that stocks were priced to provide decades of fantastic returns in 1975. Many investors believe that Passive Investing “worked” from 1975 through 1995. It’s not so. Passive provided good results during those years. But so did Rational!
Any strategy that had you heavily invested in stock during those years provided good results. Stocks were so low-priced in the wake of the last inane bull market that they were able to provide amazing returns for many years into the future. It’s not Passive Investing that provided those returns. It’s stock investing (the two are not the same thing).
From 2000 forward, Rational has been superior. The differential that Rationals now enjoy over Passives, plus the compounding returns they will earn on that differential for many years to come, will permit Rationals to retire years sooner. How can it be said that Passive worked during this time when those following it delayed their retirements by a good number of years by doing so? The goal of an investing strategy should be to help you to obtain financial independence sooner, not to delay your financial independence by many years. I do not buy the idea that Passive Investing worked during this time-period (or any other extended time-period, for that matter).
Passive was superior from 1996 through 1999. That’s an objective fact. The reason is that the valuations achieved in those years are the most irrational ever seen in U.S. history. Passive is an irrational strategy and it always does well at times of highly irrational markets. The question the investor needs to ask himself is — Do I want to be heavily invested in highly irrational markets? My answer to that question is “no.” To invest heavily in irrational markets is gambling, not investing.
My view is that few middle-class investors should have been going with a stock allocation of more than 30 percent during those years. I do not believe that middle-class investors should invest heavily in highly irrational markets any more than I believe that they should “invest” heavily in lottery tickets. Just because a strategy pays off from time to time does not make it a good strategy. A good strategy is one that puts the long-term odds on your side. This Passive Investing does not do. Investing passively always turns the odds against you sooner or later. This has been so throughout the entire historical record.
I hope all people in this blog will keep an open mind and find ways to improve the financial lives of those they serve.
We very much agree that this should be the goal, Larry. Those who identify weaknesses in my ideas (and there of course are weaknesses — I am one of the humans, after all) are my best friends. They spare me the embarrassment that I would suffer if I went on saying dumb things long after reasonable people had discovered the mistakes. Pointing out a fellow community member’s errors (regardless of which “side” he is on) is an act of charity, in my view. We all should be working together to encourage each other’s efforts and to help each other discover the weak points in our thinking (because discovering our mistakes helps us focus on achieving our real goal — developing better investment strategies).
Rob
Rob,
I’m going to spend two or three weeks analyzing your thoughts and strategies in great detail. I’ll take an objective look as well at the data on the web sites you suggested.
I will report back to the blog with my opinion of rational verus passive in the form of a position paper.
I don’t have a detailed understanding of the “rational approach” as you define it so I need to do my homework for a few weeks.
Signing off for now………….
Either way this comes out it will help me and the entire community, Larry. As you say above, what we need is to discover the realities. I am grateful to you for being willing to take the time to do this.
I will of course feature what you have to say in any way that I can. If you have another place at which to publish your findings, that’s of course fine. If you would like to publish the position paper as an article or blog entry at the site, that’s also fine.
Good luck with it.
Rob