Set forth below is the text of an e-mail that I sent to Jay Cost, author of the Horse Race Blog, on December 21, 2009.
My name is Rob Bennett. I am the author of the “A Rich Life” blog (http://arichlife.passionsaving.com).
I am a fan of your column and particularly enjoyed “Democrats Risk Another Jacksonian Moment.” I want to make you aware of a matter that I have been working on for seven years now that I believe has the potential to stir up populist anger (on both the left and the right) in a serious way.
The Buy-and-Hold investing strategy was discredited by the academic research nearly 30 years ago. This critically important development has been kept from middle-class investors while continued promotion of Buy-and-Hold brought in millions to The Stock-Selling Industry.
Here is a link to an article at my site quoting 20 leading authorities addressing the problems with the Buy–and-Hold Model:
The quotes set forth in that article are amazing. Rob Arnott is the former editor of the Financial Analysts Journal, the most prestigious journal in the field. He says that the conventional investing wisdom of today is the product of “myth and urban legend.”
Jeremy Grantham says that the reason why we still tell people to practice Buy-and-Hold is that the academics who came up with the idea “have decades of their research and academic standing to defend” and are “unwilling to change their views in the face of evidence.”
A report published by Wharton says that the cause of the financial crisis is that the models we use to understand stock investing “by design disregard the key elements driving outcomes in real world markets.”
And on and on.
I have tried to help middle-class investors become aware of these realities in posts to discussion boards and blogs. Many have expressed great interest in learning more. Yet honest posting on these matters has been banned at numerous large boards, including ones hosted by Morningstar.com, by Bogleheads.org, by IndexUniverse.com and by Motley Fool. Big-name experts who participated at these boards (and who advocate Buy-and-Hold) failed to speak up when ruthlessly abusive posting practices (including threats of physical violence) were employed to force the bans.
As a journalist (I covered tax legislation for newsletters for many years before starting my internet business), I find this shocking. Do you?
Here’s a link to an article by Dallas Morning News Columnist Scott Burns that reveals well what is going on:
Scott wrote this column at my urging. I am the person who discovered the analytical errors in the Old School Safe Withdrawal Rate studies (these studies are used by financial planners to help people plan their retirements). Several big-name experts have confirmed that these studies are in error and the errors are likely going to cause millions of middle-class people to suffer failed retirements in days to come. I urged Scott to write the column because I have been trying for seven years to get publicity for this matter and to thereby get the Old School studies corrected (not one of the Old School studies has yet been corrected).
Please take a look at the first sentence of the fourth paragraph from the bottom of Scott’s column. He explains why so few know about all this today, even though their retirements are at stake. He says: “You don’t hear much about this because it is information most people don’t want to hear.”
Most of today’s financial planners tell us what we want to hear about stocks (that there is no need to lower our stock allocations when stock prices rise to insanely dangerous levels) rather than what we need to hear about stocks (that the academic research of the past 30 years tells precisely the opposite message. And the owners of many financial sites think this is fine!
The financial industry and the financial press is playing an extremely dangerou game, in my assessment. Investors are in the process of suffering the greatest loss of middle-class wealth in the history of the United States. All of this could have been avoided had we been straight with people re what the research has been showing for three decades. And it is inevitably all going to come out after it is too late to do anything to help people avoid the losses.
If you have an interest in writing about this or have suggestions re reporters who might be interested in the story, I would be grateful if you would contact me with questions or with suggestions of people that I might contact.
Thanks for listening. I wish you the best of luck with your column!