Alex Frakt, site administrator for the Bogleheads.org forum, acknowledged in a recent post to that forum that I was banned from posting there even though I never violated any of the site’s posting rules. He said that I was banned because I represent a “threat to the community.”
Frakt offered his comments on this thread. The post referring to me (I posted as “hocus” in that community) is the one put forward on January 13, 2011, at 4:14 pm. After saying that the norm in the community is to ban only those who violate posting rules, Frakt writes: “Hocus is the great counterexample, of course. Which is part of the reason why we have an Advisory Panel: to give us the flexibility to deal with threats to the community that do not clearly fall under one of our posted guidelines.”
The history that explains the banning dates back to the morning of May 13, 2002. On that morning, I put a post to the Motley Fool’s Retire Early board asking whether the valuation level that applies on the day a retirement begins needs to be taken into consideration in calculations of the safe withdrawal rate (the inflation-adjusted percentage of his portfolio value that a retiree may use each year to cover living expenses with virtual certainty that his retirement plan will survive 30 years, presuming that stocks perform in the future at least somewhat as they always have in the past). Extensive research was done on this question in the following years in both the Retire Early and Indexing communities and every analysis showed that a valuation adjustment is indeed required. Background on the safe withdrawal rate matter is available at the Google Knol that I wrote on this topic.
I have seen two reactions to my advocacy of New School (valuation-adjusted) safe withdrawal rate research at every community in which I have posted on this topic. Many community members respond with excitement to learning for the first time how retirement planning (and, by extension, stock investing in general) really works. Thousands of community members have expressed a desire that honest posting on safe withdrawal rates and other important investing topics be permitted at our boards (an article setting forth of the comments of 101 community members expressing this desire is here).
However, there has also always been intense opposition to the idea put forward by individuals who have written books or prepared studies or calculators rooted in the Buy-and-Hold Model of understanding how stock investing works (Buy-and-Hold is rooted in the research of University of Chicago Economist Eugene Fama and posits that investors do not need to change their stock allocations in response to valuation swings). Discussion of the implications of the research of Yale Economics Professor Robert Shiller, who found that valuations affect long-term returns and thereby discredited Fama’s Efficient Market Hypothesis, has been banned not only at the Bogleheads forum but at every large investing board on the internet as well as at numerous influential personal finance blogs. The result of the Social Taboo that has developed since The Stock-Selling Industry elected to spend hundreds of millions of dollars promoting the now (but not then) discredited approach is the investing crisis we are living through today (for more on how the promotion of Buy-and-Hold caused the economic crisis, please check out this article).
I had a long reputation for posting honestly in support of the Shiller model (Valuation-Informed Indexing) even in the face of brutally abusive posting by those seeking to “defend” the Buy-and-Hold Model at the time I put my first post to the Vanguard Diehards forum (the community that meets now at the Bogleheads forum met at the Vanguard Diehards forum before moving to the new site to avoid my postings). My first post generated a hostile response and the site administrators failed to take action to rein in the hate and anger and contempt that came from Buy-and-Holders as discussions over whether valuations matter in stock investing came to dominate the forum over the next several years (I am not able to recall a single time in which a Valuation-Informed Indexer posted abusively).
Matters came to a head in February 2007. Vanguard Founder John Bogle planned to speak at the indexing community’s annual conference. I announced plans to attend. Many expressed excitement that I would be able to put to Bogle the questions that had caused such controversy among indexers for so many years. At this point, the Lindauerheads (Mel Lindauer, the co-author of the book “The Bogleheads Guide to Investing” was the leader of the Goon posters seeking to intimidate those who dared to post their honest view that valuations matter in stock investing) formed a new site where they could be free of the relatively even-handed site administration policies of Morningstar.com. Thus was the Bogleheads forum born. Posters who oppose honest posting have remarked on numerous occasions in the time since how lucky the board community was that their desire to escape my posting freed them from the reach of responsible site administrators. Those advocating Buy-and-Hold at the Bogleheads forum no longer have to deal with those annoying questions about the 140 years of historical stock-return data showing that Shiller is right and Fama is wrong!
Is what Frakt says so? Am I a threat to the Bogleheads community?
By no means. A community that closes itself to questioning is a community in the process of experiencing a slow and painful death. There has never in the history of the indexing community been an issue that has generated even a small fraction of the genuine interest that we saw generated by our explorations of the effect of valuations on long-term returns during the years when such explorations were tolerated. Community members have now suffered huge losses because of the ban and many feel even stronger doubts about Buy-and-Hold today than they felt in the days when questioning of the strategy was permitted. Even Taylor Larimore, another co-author of “The Bogleheads Guide to Investing,” at one point shortly after the crash acknowledged that he had abandoned Buy-and-Hold in favor of a mysterious “Plan B” because of concerns that his retirement would be in jeopardy if he stuck with the strategy he had advocated for many years at the board (Larimore today has at least for a time returned to generally favoring Buy-and-Hold strategies). Allowing honest posting by all community members would save the community, not do harm to it. It is the ban that is killing the indexing community.
That said, I do represent a threat of a different kind. I represent a threat to Buy-and-Hold. Another way of saying it is that I represent a threat to Get Rich Quick. A strategy that tells investors that they do not need to change their stock allocations even at times of insane overvaluation is a Get Rich Quick scheme no matter how it is promoted in the marketing materials. Where do the Buy-and-Holders think that the money used to send stock prices so high in the late 1990s came from? Was it printed up by Milton Bradley? The money was being borrowed from future investors (Today’s investors! Us!). The unwillingness of the Buy-and-Holders to acknowledge the need to pay back the $12 trillion debt incurred during the Buy-and-Hold years is typical of Get Rick Quick thinking.
I am no threat to indexing or to any indexing community. I aim to become the greatest threat to Buy-and-Hold and to all other Get Rich Quick investing schemes that I can possibly be. Why? Because I don’t believe in Get Rich Quick. Because I believe in long-term investing, data-based investing, intelligent and honest and realistic investing, investing rooted in the academic research. Why do I believe in these things? Because of the persuasive arguments advanced in support of these preferences put forward by people like John Bogle, Eugene Fama, Burton Malkiel, William Bernstein, and many, many other Buy-and-Holders.
John Bogle does not object to discussions of Valuation-Informed Indexing. He has said publicly that he believes that the concept can work. To be sure, Bogle has shamed himself by failing to stand up to the Lindaurheads in defense of the community that meets at a board bearing his name (and, yes, I have made a personal plea to him to do so). But Bogle himself is not a Lindauerhead, at least not according to his public statements. It is of course absurd that discussion of an investing strategy that Bogle himself says can work is prohibited in a community bearing his name. I think it is fair to say that Bogle’s name is being dragged through the mud each day that the ban remains in place. It casts doubt on all his good work for those who claim to post in his name to make a daily implicit statement that Bogle is not up to the task if defending his investing advice in civil and reasoned discussion.
He’s not up to it, of course! The Lindauerheads are right to be alarmed at the prospect of Rob Bennett asking John Bogle questions re his longstanding investment advice in a public forum. But that should not be such a big deal. The mistake that Bogle and Malkiel and Fama and all the others made is not the first mistake that has ever been made in the history of humankind. There are procedures that we all learn about in kindergarden that we know to follow when we make mistakes that harm so many of our friends in such serious ways. We acknowledge the mistakes! We apologize for the human misery caused by the mistakes! We vow to do better! We move on with our lives!
And do you know what happens when we follow those procedures? The people harmed by the mistakes forgive us. And in time they come to recall that it is not only our mistakes that define us. The humans who make the biggest mistakes are often the same humans who bring about the greatest advances in human knowledge. Why? Because they stick their necks out. Because they take chances in going where none have gone before them. Because they are pioneers.
Bogle is a pioneer. Fama is a pioneer. Malkiel is a pioneer. The thousands of others who have advocated Buy-and-Hold are pioneers. How does the indexing community insure that these pioneers ultimately obtain the respect and gratitude and affection they merited through their hard and well-intentioned work despite the huge losses they have caused through their inadvertent advocacy of the purest and most dangerous Get Rich Quick scheme in history? We insure it by turning the focus away from the ugliness and deception and intimidation and word games we have seen during the Campaign of Terror against our board communities and by placing it instead on a constructive and healing and life-affirming transition from the failed Buy-and-Hold Model to the investing model of our future, Valuation-Informed Indexing.
Valuation-Informed Indexing could not exist but for the contributions of Bogle and many other Buy-and-Holders. But the longer the ban on honest posting on safe withdrawal rates and other critically important investment-related topics remains in place at our boards, the more difficult it becomes to make the case for Bogle and the other Buy-and-Holders to the millions of middle-class investors who have been done such harm by the failure of The Stock-Selling Industry to back down on its dogmatism for three decades after the academic research showed that there is precisely zero chance that Buy-and-Hold could ever work for the long-term investor.
No one posting honestly on what the academic research of the past 30 years says about the dangers of Buy-and-Hold represents any sort of threat to the indexing community. It is the ban on honest posting that represents a threat to us. The ban on honest posting makes us look absolutely awful in the eyes of the millions whose financial futures have been destroyed by our too easy acceptance of Get Rich Quick thinking during a time when it seemed to be paying off (Get Rick Quick of course always performs like gangbusters during out-of-control bulls).
I pray that I will over time come to represent a huge threat to the continued promotion of Buy-and-Hold. I represent zero threat to the promotion of indexing or to the advocacy of any of the many powerful insights through which Bogle and the other Buy-and-Holders have been enriching all of our lives for many, many years. I am the true Boglehead. Lindauer represents only the man’s dark side (at least this is so at the times when Lindauer is playing the role of Enforcer of the Buy-and-Hold dogmas). The future of indexing lies in the promotion of Valuation-Informed Indexing, not Buy-and-Hold.
This is my sincere take re these important matters, in any event.
Hang in, there True Bogleheads! We see signs of a growing interest among middle-class investors in learning the realities of stock investing as revealed in the academic research of the past 30 years on an almost daily basis. As famed portfolio strategist Sam Cooke once put it: “It’s been a long time coming, but Lord I know that someday soon now A Change Is Gonna Come.”