My E-Mail to Yale Professor Robert Shiller, Author of Irrational Exuberance

Set forth below is the text of an e-mail that I sent on January 14, 2010, to Yale Professor Robert Shiller, author of Irrational Exuberance.

Mr. Shiller:

My name is Rob Bennett. I write the “A Rich Life” blog ( I am a big fan of your work in the investing field and have done a good bit of work of my own expanding the reach of your insights. I have considered writing to you on several earlier occasions, but concluded that the time was not ripe to ask you to take time from your schedule to read my words. I now believe that the time is ripe. I hope you will be able to give a little bit of your time to review the words below.

The development that has pushed me over the line is my writing of a Google Knol entitled “Why Buy-and-Hold Investing Can Never Work.” I believe that the Knol does a good job of summing up eight years of work that hundreds of us in the Retire Early and Indexing discussion-board communities have engaged in as a consequence of what we have learned from your research and your books. I would be thrilled if you could offer any comments (either positive or negative, of course) on the Knol.

I also would benefit from any comments that you could offer on the calculator (“The Stock-Return Predictor”) linked to at the Knol. My focus has been on developing  practical asset-allocation strategies rooted in your theoretical insights. The calculator performs a regression analysis of the historical stock-return data to reveal to investors the most likely 10-year return for U.S. stocks starting from any of the various possible valuation levels. If you see problems with the calculator, I would of course like to alert my readers to them. If you are able to endorse it, that would of course help me promote the calculator as a valuable investor tool.

If it would help you to look at comments from 50 people (a mix of experts in the field and ordinary middle-class savers and investors) on my work, please take a look at the “People Are Talking” section on the left-hand-side of the home page of my blog:

There’s one other matter that I would like to run past you. You will note when reading the Knol that I refer to a “ban on honest posting” that applies to internet discussions of the flaws of the Buy-and-Hold Investing Model. My view is that your research showing that valuations affect long-term returns ruled out the possibility that Buy-and-Hold could work in the real world (stocks obviously do not offer the same value proposition at different valuation levels if valuations affect long-term returns and thus failing to adjust one’s stock allocation in response to big changes in valuations makes precisely zero sense). I of course understand that there are millions of good and smart people who believe otherwise. The problem that we all face today, according to my experience on the internet, is that many of those who believe in Buy-and-Hold are hotly opposed even to the idea of permitting honest and civil and reasoned discussion of these issues.

Humans do not change their views on reading a single article or book putting forward new ideas. We need to hear about new points of view numerous times to gradually let in the new approach and to consider its implications. Once this process gets started, I am confident that the Rational Investing Model (I refer to the model saying that allocation changes are required for those hoping to have a realistic chance of long-term success as “Rational Investing”) will win the confidence of most investors. However, we have now spent eight years trying to get these discussions started without success! Thousands of ordinary investors have expressed a desire to be able to hear both sides of the story. But big-name institutions (Motley Fool, Morningstar, Index, etc.) have blocked honest posting by those who have doubts about the Buy-and-Hold Model. And big-name experts in the field (John Bogle, William Bernstein, Jonathan Clements, etc.) have gone along.

I am planning this year to devote a good bit of effort to getting political blogs involved in my effort to open the internet to honest posting on the flaws in the Buy-and-Hold Model. Given the economic crisis that was caused by the massive promotion of Buy-and-Hold, this has obviously become a political issue. It is my belief that responsible people should be working hard to insure as smooth a transition from the Buy-and-Hold Model to the Rational Model as possible. While I very much want to “win” this battle, I also very much do not want to cause a negative sort of populist reaction that could lead us all to bad places. In my mind (I have made my living as a journalist for many years), discussion is healing. I am not able to see how anyone could be harmed by opening the internet to honest discussion. But I worry that the reaction is going to be bad when middle-class workers find out how long the big names in this field have known about the effect of valuations and yet have failed to let them know of the risks of following a Buy-and-Hold strategy.

This is a delicate matter. I don’t know that it is fair to expect you or anyone else to know precisely how to proceed. However, to the extent that you have any thoughts, I certainly would like to hear them and I certainly can promise to give them serious consideration.

Thanks for listening. And thanks for the wonderful and life-affirming work that you have been doing for many years. I often point out that I do not believe that most people appreciate the depth of some of John Bogle’s most important insights (I am a big believer in indexing although I like to think of myself as the most severe critic of Buy-and-Hold alive on Planet Earth today). I think this is ever more so in regard to the work that you have done. You have of course enjoyed a good bit of fame in recent years. As people begin to explore the practical implications of your insights in a more in-depth way, I believe that they are going to see more and more and more gold buried in those hills. We are living in dark economic days today but my belief (hope?) is that they are going to take us to The Golden Age of Middle-Class Investing. It may be that the primary reason why we will be able to turn this darkness into something very good will be the fine work that you did for decades before most investors appreciated the need for it. I am not a flatterer. But I feel no hesitation in describing your work in this field as “heroic.” On behalf of all middle-class investors looking for a better and more realistic way to plan for their retirements, I salute you, sir!



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