Larimore Acknowledges Errors in Bogleheads Guide, Then Retreats into Further Defensiveness

Taylor Larimore, co-author of The Bogleheads Guide to Retirement Planning, on Wednesday acknowledged that his book contains errors in its discussions of stock investing risk.

He didn’t say the Three Magic Words. But he inched up closer to doing so than any long-time advocate of the Buy-and-Hold Model has done before (to my knowledge).

Taylor’s words came in a thread at the Bogleheads.org board entitled “The 50 Percent Fallacy.” A community member named “Tadamsmar” launched the thread, saying: “I wonder if there are any Bogleheads here who have made an attempt to square their philosophy of investment risk on the facts rather than on a fallacy?  If so, please speak up.”

Tadamsmar  noted that Page 142 of the Bogleheads Guide asserts that a 50 percent loss is the maximum loss that can be suffered by stock investors. This is of course a wildly false claim. The average loss on the three earlier occasions when stock prices went to double fair value is 68 percent real. On the one occasion when the P/E10 level went above 30, we saw a drop in stock prices of 80 percent real. In the late 1990s, the P/E10 level went to 44, far above what we have ever before seen in U.S. history.

Larimore responded defensively. He claimed that: ” Nowhere does the book say stocks (or any investment) can’t fall more than 50%.”

Numerous other defensive comments were posted. But some reasoned points were offered as well. “DBR” said: “Whether the Bogleheads book literally presents false information at that point is arguable. On re-reading, I can certainly see how a reader relying on no other sources of information could be mislead by the discussion presented there.”

After extensive discussion and obfuscation, Larmore acknowledged: “You are right. Figure 9.1 in the book should not use the words ‘Maximum Loss.’ Thank you for the correction.”

It’s a start. Eight years after we discovered the analytical errors in the Old School Safe Withdrawal Rate Studies, we have not heard any of the authors of the Old School studies or calculators make that clear an acknowledgement of their mistakes.

A few posts later, Taylor returned to Defensive Mode. He said: “Over two dozen Boglehead retirement and financial experts contributed their time and knowledge to our second Bogleheads’ Guide without renumeration. Like any book, it contains mistakes and some things may not be perfectly clear to every reader. Despite its shortcomings, customer reviews at Amazon give our book a 5-STAR rating and it is recommended by many reviewers, including Vanguard. Please tell us what you like about the book.”

Tadamsmar observed in response to one of the many defensive comments put forward by Boglehead.org community members that: “If I make a correct statement and people keep coming back and telling me I am wrong, then I guess this might continue forever.”

Taylor has claimed on earlier occasions that the reason why he favors a ban on posts pointing out the flaws in the Buy-and-Hold Model is that Buy-and-Hold is the only investing approach rooted in “science” and “academic research.”

Comments

  1. Von Bosco says

    Rob

    I think you do yourself and your cause a great disservice by your continued mischaracterizations of Taylor’s responses. He never stated that he supported a ban on honest posting and has said on numerous occasions that there are “many roads to Dublin”

    I believe your deep envy of him and your need for attention drives your comments about Taylor.

    Best of luck tilting at windmills

    -VB

  2. Rob says

    You are right that there are numerous times when Taylor has said the words “There are many roads to Dublin.”

    That’s not enough, VB. Pointing out that there have been numerous occasions when Taylor has said that “there are many roads to Dublin” is like pointing out that there have been numerous times when John Bogle has said that Reversion to the Mean is an “Iron Law” of stock investing.

    Those are both true statements and those are both helpful statements. But Taylor’s belief that there are many roads to Dublin did not prompt him to stand up for the Vanguard Diehards community when Mel Lindauer (Taylor’s co-author) was assaulting it with relentless abusive posting. And Bogle’s belief that Reversion to the Mean is an “Iron Law” of stock investing has not prompted him to publicize the obvious implication of this reality, that the Old School retirement studies get all the numbers wrong and are likely going to be the cause of millions of busted retirements.

    Taylor and Bogle (and lots and lots of others, to be sure) need to do better, VB. A lot better.

    It’s up to us to insist that they begin doing better. I think it would be fair to conclude eight years into our discussions that there is no other way that it is going to happen. We need to care enough to speak out. We need to care about our fellow community members, we need to care about our own retirements, we need to care about the future of our economic system, and we need to care about the future of our political system.

    It should not be a “controversial” position to say that the numbers that people use to plan their retirements should be reported accurately, VB. The fact that is has become so controversial tells us that there is something terribly, terribly wrong with the entire Buy-and-Hold model.

    We all need to get about the business of fixing it. Taylor should be part of that effort. Bogle should be part of that effort. VB should be part of that effort. It shouldn’t be Rob Bennett always being left with most of the work pulling this particular wagon.

    My sincere take.

    Rob

  3. Jack says

    I’ve always found the Bogleheads site to be helpful, and Taylor and the other posters to be very willing to offer free advice.

    You appear to have a major chip on your shoulder, a victim complex, extreme insecurity (I have 120 endorsements on my homepage!), and a desire to sell something.

    First and LAST visit to your sorry excuse for a website, Rob.

  4. Rob says

    There are a lot of great people who post at the Bogleheads site, Jack. I believe that those people all have a right to post their sincere views even when that means that people like Jack Bogle and Mel Linduaer will need to acknowledge mistakes. It’s when we acknowledge our mistakes that we learn. And Jack and Mel have as much right (and need!) to learn as all the rest of us.

    I intend to add the Bogleheads Forum to the http://www.PassionSaving.com site as a subdomain following the next price crash. I think it would be fair to say that that will solve the problems that we have experienced with abusive posters there. There is no one who did a better job of standing up to Linduaer than I did at my time there. There is no one in a close second place.

    I am proud of those 120 endorsements, Jack. I think it would be fair to say that there is no other blogger on the internet who can claim such impressive endorsements. Wouldn’t you be proud of those endorsements if people were saying those sorts of things about your work?

    I don’t think I have a chip on my shoulder. I am trying to help my fellow community members learn how to invest more effectively.

    And I don’t think that I have a victim complex. All of us humans are victims of our lack of perfection. All that I am doing is trying to help my many Buy-and-Hold friends get back on the right track. Would you say that they have victim complexes because they have been reluctant to acknowledge their mistakes? I would say that they are just humans. All of us humans are hurt by feelings of false pride from time to time. No?

    I want to sell Valuation-Informed Indexing to every investor alive, Jack. I want to make hundreds of millions of dollars doing so. I expect to be one of the richest men in the United States following the next crash. Is that not how our system works when it is working well? I was writing about the errors in the Old School SWR studies ten years before the Wall Street Journal reported on those errors and we have developed hundreds of amazing insights as a result of that discovery over the past 12 years. I have helped millions of middle-class people by doing that. That’s worth something in the compensation department, is it not?

    I am grateful that you took time to visit the site. I wish that I could have won you over to make repeat visits. But I understand that this place is not for everyone. I certainly wish you the best of luck with whatever investing strategies you elect to follow in any event.

    Take good care, man.

    Rob

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