Wade Pfau, Associate Professor of Economics at the National Graduate Institute for Policy Studies: Valuation-Informed Indexing Works

Wade Pfau, Associate Professor of Economics at the National Graduate Institute for Policy Studies in Tokyo, Japan, has posted at his blog preliminary research showing that Valuation-Informed Indexing works.

Juicy Excerpt #1: I will take steps in my final paper to test a wide variety of assumptions about asset allocation, valuation-based decision rules, whether the period is 10, 20, 30, or 40 years, lump-sum vs. dollar-cost averaging, and so on, and to show that the results are quite robust to changes in any of these assumptions.

Juicy Excerpt #2: I don’t like the term “long-term market timing.”  Market-timing is much too pejorative, and is also too easy to confuse with short-term market timing.  Also, market-timing seems to be associated with extreme strategies: either 100% stocks or 100% Treasury bills.  I don’t like that either.  I think the best term for this is “Valuation-Informed Indexing.”

Juicy Excerpt #3: Valuation-Informed Indexing [is] a term coined by Rob Bennett, who is banned from posting at the Bogleheads Forum.

Juicy Excerpt #4: Rob Bennett in his podcast “RobCast #137, Nine VII Portfolio Allocation Strategies,” indicates some preference for his high-medium-low strategy, which would be 60% stocks in the baseline, but would switch to 30% stocks when the PE10 ratio moves above 21, and would switch to 90% stocks when the PE10 ratio moves below 12.  My example will be a variation of this strategy that captures the spirit of what he suggested.

Juicy Excerpt #5: What you see in the top part of the graph for each year is the amount of wealth accumulated after 30 years for someone following buy-and-hold against someone following VII…. VII provides more wealth for 102 of the 110 rolling 30-year periods, while buy-and-hold did better in 8 of the periods.

Juicy Excerpt #6: The underperformance of VII [in the eight cases] is minimal…. In these final years, buy-and-hold was performing as well as it ever had at any point since 1880, and the slightly lower VII numbers also provided wealth that was on the high end of the spectrum compared to what buy-and-hold had provided in the past.  This seems like a small price for VII to pay for insurance against market crashes when valuations are out-of-control.

Juicy Excerpt #7: I welcome your comments and criticisms about this.

Comments

  1. DRIPGUY says

    (Rob – I apparently can’t leave comments at Wade’s column, the source of today’s Plop, so I hope you will not only host these comments here as a surrogate, but pass them along to your partner Wade as well. Thanks!)

    Wade,

    The idea of using PE10 or some other valuation measure as a timing signal for trades is nothing new.

    Using historical data to prove some particular scheme would have worked, if only someone had applied it in the past is also nothing new.

    And of course, the idea that you want to buy things when they are under-priced or out of favor versus overpriced or in a bubble is similarly, nothing new.

    Valuations matter.

    They always have, they always will. I have yet to see one economist, author, financial advisor or investor claim the contrary. What matters more, however, is not making stupid moves that behaviorist studies show that humans are usually apt to make when embarking on any sort of trading strategy, regardless of original intent.

    So, with those preliminaries out of the way, I will offer you some input, although I am frankly loathe to do so, since to do so means you will likely address these overt glaring issues, and therefore stand a greater chance of passing along a seemingly reputable paper, when in fact, the genesis and intent of it, in my opinion, pretty much damns it as critically flawed, no matter how many coats of paint get applied.

    1. You never state a goal, a thesis, a problem statement, or other clear basis for your paper. This is somewhat important, especially as an academic, hoping to present scholarly research, one would think with intent to be taken seriously. For instance, was your goal to optimize the returns of a thirty year retirement? With what constraints? At what acceptable risk of failure? In what country(s)? Were all funding sources and methods available for all periods (i.e.TIPS). Or was it merely to explore one person (Rob Bennett’s) audiocast #137? If so, what of Robcasts #1 through #136? Sir, the first role of a professor is to be understood. Please make it clear what you are doing, why, and under what conditions.

    2. There are so many assumptions implicit in your article, spoken and unspoken, that it is hard to innumerate them. Yet you hand wave away several of your own stated assumptions, claiming they are immaterial. Clearly, prior to being taken seriously, all of your own assumptions stated in the piece, and frankly many more, must be dispensed with and with much more than a professorial wave of the hand. Data, analysis, and results, sir, if you please, presented in a way that can be understood, replicated, and critiqued/improved upon.

    3. You overtly say that the “Lucky Seven” method (since you say you are using Bennett’s methods and labels, you might as well do it throughout) is going to use annual rebalancing. Well, why? Is that an intrinsic part of Bennett’s strategy? I do not think it is. In fact, I have ONLY heard him talk about adjustments based on market conditions, but he has to my knowledge, never dispensed advice to others on how to incorporate one’s own personal risk tolerance into the scheme, or even acknowledged that it is desirable to both evaluate that tolerance, to adjust allocation based on it, and finally, to periodically rebalance so that gains and losses are offset in order to keep the portfolio consistent with the current allocation appropriate for the existing tolerance. We can leave aside the fact that Bennett does not eat his own cooking with VII, either, having sat on the sidelines with 100% TIPs/fixed, through ALL periods, regardless of PE10, since leaving his corporate job and spending his time trolling internet message boards.

    4. So you will be adjusting Lucky Seven annually. Why did you choose annually and not monthly or weekly or even decannually?

    5. Will you be rebalancing the Buy-and-hold portfolio at the same interval? If so, why? If not, why not? Which begs the question: “How do you even define “buy and hold,” since I am not sure there is a broadly accepted definition, or even conventions, and certainly not practice!?” And on what authority do you make that determination? And why is it important to compare “Lucky Seven” to “Buy and hold” however you defined it – are EITHER of these actual approaches, used by a large majority of retirees today, therefore having broad applicability one would assume would underpin your research, given your mission statement on the site? Again, this goes right back to the vagueness in your purpose, which so far, can only be gleaned to be to rise and defend a tiny portion of the overall portfolio of a decade’s worth of internet ranting by a (IMHO) literally insane man. I am not saying madness does not sometimes bear forth seeds of genius; I’m merely asking that you yourself, as a currently presumed serious and not mad academic, please be precise, overt, and direct, in your own work.

    6. I’ll dispense with any line by line or more specific critiques, but suffice it to say I hope your study has progressed in a far more complete and scientific manner than your article might suggest. For instance, “I don’t think it’s proper,” “I guess,” “I will consider,” and “I don’t like,” “sound thrashing” etc. are hardly the terms indicating a mindset of the academic rigor required to actually produce a paper of unique and useful within the burgeoning field of Economics.

    7. I could go on, but suffice it to say that not only can I find much to be critical about in your article, your approach, your methods, and your apparently glomming on to the rantings of just one particularly unsavory character to form the basis of your proposed paper. And, I am just one unlettered layman, so good luck out there with your peers. If I may be so bold – you seem a likable, earnest young man, whose background would appear to give you sufficient resources to separate the wheat from the chaff. I would be scrupulous in doing so, if I were to elect to go garbage picking among around 200 hour long raving podcasts for the underpinnings of a viable retirement approach that could actually be presented in a serious manner.

  2. Rob says

    You need to get your anger under control, Drip Guy.

    When/If you do, I believe that you will be able to put forward helpful contributions.

    You are not the first person in the history of Planet Earth who ever made a mistake. It’s part of the human experience down here in the Valley of Tears.

    I am your friend, Drip Guy. You are not able to let that in. But it is so all the same.

    Please think it over, my goon (but clearly capable of better) friend.

    Rob

  3. DRIPGUY says

    (chuckle)

    Rob, Have you ever asked yourself why is it you PROJECT anger on to everyone who disagrees with you, or asks you to explain some part of your grandiose ramblings?

    I think investigating that could form an important part of your therapy plan.

    Get help. Soon. Staying up ’til 3 AM trolling the internet is no way for a grown man to live.

  4. Rob says

    My words above stand, Drip Guy.

    I am not your enemy. Wade is not your enemy. The Retire Early Community is not your enemy. The Indexing Community is not your enemy. The historical data is not your enemy. The scientific process is not your enemy. The free speech concept is not your enemy.

    Your enemy is Get Rich Quick thinking.

    You are not the first person who ever gave in to temptations to engage in Get Rich Quick thinking. Millions have obviously done so, both in the past and today. The reason why you don’t accept that you have given in to Get Rich Quick thinking is that NO ONE WHO GIVES IN TO GET RICH QUICK THINKING DOES SO AS A MATTER OF CONSCIOUS INTENT. It is always an act of self-deception. That means that you don’t see it! I cannot change that for you. That’s an inside job.

    Buy-and-Hold ENCOURAGES Get Rich Quick thinking. That’s why we are in an economic crisis today. Buy-and-Hold has been encouraging Get Rich Quick thinking for 30 years now and we are wrecking ourselves with it.

    I do not say that Buy-and-Hold was designed to do this horrible thing. I do not believe that. I do believe that the shame we all feel over having wrecked ourselves with three decades of encouraging Get Rich Quick thinking has made it difficult for us to come to terms with what we have done, to fix the mistakes we have made, and to move on to something far, far, far superior in hundreds of different ways.

    There is a part of you that would like to move to something better. All that I feel that I can do here is to appeal to that part of you. You need to have that part look at the other part and become sufficiently sickened by what it has done to you and to others to want to rein in it. Once that happens, we are off to the races. Once that happens, the real fireworks (the good kind!) begin.

    Please make an effort to think it over, Drip Guy. I wish you all the best in any event.

    It’s all about emotion. That’s the one element left out in the Buy-and-Hold Model. It’s the failure to include that essential element that ruined all the good in Buy-and-Hold. Valuation-Informed Indexing is just Buy-and-Hold with the Get Rich Quick junk removed. There was a time when that was just what you were looking for in an investment strategy. Get back to where you once belonged, Goon Man!

    Rob

  5. DRIPGUY says

    “Buy-and-Hold ENCOURAGES Get Rich Quick thinking. That’s why we are in an economic crisis today. ”

    Yes.

    Yes, I see.

    Thank you, Rob.

    I do hope Wade will integrate and even feature that apparently elemental point into his paper regarding your theories!

  6. Rob says

    I look forward to the day when there are thousands of smart and good people talking right out in the open about the dangers of Buy-and-Hold, Drip Guy. I’d like to see all of us doing it. Even the Buy-and-Holders! Is there some reason why someone who follows a particular investment strategy cannot be balanced enough to point out the dangers associated with it?

    I have an article at the site titled “The Case AGAINST Valuation-Informed Indexing.” How often do you see Buy-and-Holders do something like that? Why not? What holds them back?

    It is an emotionally unbalanced strategy, Drip Guy. You can believe that it works only for so long as you keep thee blinders on. It is your belief in this strategy that causes you such pain and causes you to behave so strangely. Give up Buy-and-Hold and you might be normal again! I know it’s hard to believe but I really think this might be so (I am teasing you here a bit, Drip Guy).

    To those of us who have seen through Buy-and-Hold, it’s plain as day that all of the rage and hate and contempt that we see coming from the Buy-and-Holders is evidence of how dangerous and emotionally unbalanced the strategy is. But you of course don’t see that because you remain under the spell. To you ANY behavior is acceptable so long as it is engaged in in support of Get Rich Quick. We must protect Get Rich Quick at all costs! That’s the mindset of the dogmatic Buy-and-Holder. Not good.

    In a perfect world, we would have begun talking about this stuff in 1981, when the academic research first showed that there is precisely zero chance that Buy-and-Hold could ever work in the real world for the long-term investor. We have held off because there was so much money to be made for a time following Get Rich Quick (or at least that’s how things appeared to those under the spell) that some of us just couldn’t bear to bring the gravy train to an end. But the economic crisis is changing things. There’s no profit anymore in Get Rich Quick. it just takes us down, down, down.

    We need to move on, Drip Guy. That’s the bottom line here. There’s no harm in you speaking up in support of Buy-and-Hold. That’s healthy. We need to hear two sides. But the death threats are strictly from Losersville. It’s the same with the defamation. It’s the same with the board bannings. It’s the same with the internet harassment. It’s the same with the smear campaigns.

    That stuff has to go. The humans cannot stand the smell anymore. And there are lots of humans participating at our boards. It’s not just you Goons, you know!

    I’m telling you the way it is, Drip Guy. You and the other Internet Sewer Rats are going to need to make some changes. The community is not asking you to do this. We are telling you how it is going to be. You dig, man?

    Rob

  7. DRIPGUY says

    I’m telling you the way it is, Drip Guy. You and the other Internet Sewer Rats are going to need to make some changes. The community is not asking you to do this. We are telling you how it is going to be. You dig, man?

    Rob

    So, there is a new “Board General” in town, eh, Rob?

    (wink)

    Robert Michael “Hocus” Bennett:

    “I want to be your Board General”:
    http://s162532268.onlinehome.us/Sewer/viewtopic.php?p=3

  8. Rob says

    Yes, there is a new Board General in town, Drip Guy.

    The new Board General feels a deep love and respect for all members of the Retire Early and Indexing discussion-board communities. He would never for two seconds entertain the idea of pressuring them to post dishonestly or of intimidating them or of harassing them or any of this other garbage.

    The new Board General rules through Love, not Fear.

    That’s a big change. It’s what our boards were intended to be about from the first day. Read the published posting rules and you will see clearly that that was the idea going back to the first day.

    If you are not able to rein in the hate, you need to find a new board community to which to direct your posting energies. We just don’t need the business that bad, my old friend. Please hit the road, Jack.

    The humans have won. The Goons have been defeated (as they always are on the last page). That is indeed one way of stating the bottom line re all this. It is the eternal story of love conquering hate and humankind advancing to a higher level of consciousness as a consequence of its victory over its dark side.

    We don’t win them all. But for a long time now we’ve been winning enough to keep the thing moving forward. Are you really so surprised as you make out to be? I cannot help but wonder if there is a part of you that knew going back to the first day how it was ultimately going to turn out.

    Peace, man. I wish you the best in all your future endeavors.

    Rob

  9. Wade says

    Drip Guy: As I live in Japan, the time zone differences means that when I wake up in the morning, the days events have already passed, and then I only get around to writing as everyone else is headed off to bed. I do want to respond to your post at Bogleheads as well, but I might not get a chance for another 10 hours or so. So I apologize for the delays.

    Your (1) (2) (6) and (7) are mostly about how my blog/message board post is not in the form of a proper academic paper. Well, no kidding. What academic paper begins with “These are some preliminary findings from the research I am working on now. I will present one example.” So thank you for these comments, and I will attempt to fully address them when I actually have a finish paper written. I read and re-read and reconsider literature and all kinds of stuff before I release my papers. This was one exception in which, in a spur of a moment decision, I feeled compelled to put together a quick overview of what I am working on, in order to give more context for everyone criticizing the idea. My hope is to have a finished paper by the end of February, so please stay tuned.

    Did you ever read my paper about predicting safe withdrawal rates? I would be more than happy to hear your criticisms along these lines about that one, since I do consider it to be in a more finished state.

    (3) (4) I’ve seen critics of Rob use the term “Lucky 7″. But I have’t seen Rob use it. Honestly, I don’t even know what this term means. You must understand, Rob is a rather prolific guy with 100s of articles and podcasts. I’ve only tended to focus on the parts relevant to my research. Even so, I do like the term VII a lot. It doesn’t mean I will adapt all of Rob’s terms.

    The issue of rebalancing is important though. I was debating what to do about it. I think that for this type of study, rebalancing is the only way to go. Otherwise, the portfolio will tend to creep away from its targeted asset allocation and then we are comparing apples and oranges. I am also troubled by the term “buy and hold” as, indeed, it sounds like there should be no rebalancing, because then you are not holding. In my past research, I always used the term “fixed allocation” instead of “buy and hold”. Probably, I will switch back to “fixed” for this paper as well. Thank you for helping me to clarify that.

    I can also investigate what happens if people don’t rebalance annually, but just when the allocation falls out of certain bands. There could be more frequent rebalancing as well. But given past experiences with research, I can safely guess that the rebalancing assumption (as long as people rebalance at least once every few years) will not have a material impact on the results. Surely, I will check this in more detail though.

    Rob does talk about risk tolerance in the same podcast as VII strategies. I think your criticism about that is not fair.

    (5) Yes, buy-and-hold is rebalanced annually as well. Though I have realized I missed stating some important assumptions in the BLOG POST version of my research, I thought this was was stated clearly.

    Best wishes, Wade

  10. Wade says

    DRiP Guy: I do think your comments, especially about rebalancing and buy-and-hold, deserve an acknowledgement in the final paper. But if you would find that to be personally offensive, I can leave your name out. Please let me know.

  11. Wade says

    Good morning over there in America! Regarding the rest of the comments on this thread, I do think I understand the logic behind why Rob refers to buy-and-hold as ‘get rich quick’. I wouldn’t want to use that term myself, as I think it would be better suited for things like Ponzi schemes. But taking that further, I can see how Rob might reply that buy-and-hold actually is a Ponzi scheme (with the eventual losses incurred by future generations, he might say). On this point, I think I would have to respectfully agree to disagree. I may still be too indoctrinated by old-time thinking (just joking). Best wishes guys! Wade

    By the way, is Lucky 7 a reference to VII? I haven’t looked this up yet, but maybe I should. Perhaps Rob has a 3rd earth-shattering idea that I don’t know about yet :)

  12. Wade says

    It seems like Lucky Seven is just the name JWR gave to VII. Is there anything more to it than that? Lucky Seven sounds like the name of a slot machine, which is kind of the opposite of what VII is intended to be.

  13. Rob says

    I’ve seen critics of Rob use the term “Lucky 7?. But I have’t seen Rob use it. Honestly, I don’t even know what this term means.

    Thanks much for stopping by, Wade.

    I have never used the term “Lucky 7.”

    John Walter Russell used it at his http://www.Early-Retirement-Planning-Insights.com site. There were two reasons: (1) He was setting up a section of his site for articles on Valuation-Informed Indexing and he needed something short to go on the button at the left side of every page; and (2) he was being a bit playful (the initials of Valuation-Informed Indexing come to 7 in Roman numerals and John of course understood that critics of the concept would love to place the idea in people’s heads that using the historical data for guidance is gambling — all Normals get so tired of the nastiness we see from Buy-and-Holders that at times we have to seek refuge in a bit of humor, and that is of course an entirely healthy response to such ugliness).

    When the Goons use the term, it is to mislead people into thinking that this is gambling. Valuation-Informed Indexing has far less of a gambling element to it than Buy-and-Hold. When you start with an assumption that stocks will perform as they never have before, you’re taking a big chance. When you start with an assumption that stocks will perform at least somewhat as they always have before, you’re still taking some chance (it might be that stocks will perform in ways that never could have been anticipated) but much less of one.

    I’m not crazy about the term “Lucky 7.” But I can say without reservation that John Walter Russell is one of the finest people I have ever known. I am proud to be able to say that he thought of me as a friend. I am also proud to be able to say that I stuck up for him on numerous occasions when Drip Guy and the other Goons put forward the most vile smears of him as a person and of his work that could be imagined by the human mind (this was done even on the day we learned of his death!).

    John viewed his work helping middle-class people learn the realities of stock investing as a form of Christian missionary work. I am not a good enough Christian to be able to proceed in quite that spirit (I’m in it for the fame and the bucks!) but I do see where John was coming from and I think that his take made a lot of sense (many middle-class people are today experiencing failed marriages and failed businesses and failed careers because of the mistakes made [but not yet acknowledged!!] by those who advocate Buy-and-Hold. If you read the Letters to the Editor section of John’s site, you will gain a sense of how much difference he made in the many lives he touched. I entertain hopes that my work will over time cause John’s contributions to touch the lives of millions more in days to come.

    And that it will bring me fame and the big bucks in the bargain!

    Rob

  14. Rob says

    It doesn’t mean I will adapt all of Rob’s terms.

    What???!!! You’re not going to refer to them in your paper as “Internet Sewer Rats”???!!! Everything turns on that! That’s key!

    I’m obviously just joking around, Wade. I think it would be fair to say that there are a few tiny differences in style to the two mediums in which we operate (you in academic papers, me in internet discussion boards). We are seeing a bit of interaction between the norms of the two mediums in this thread and, as someone who appreciates both the good and bad sides of BOTH of these important mediums, it tickles me to see it.

    Rob

  15. Rob says

    DRiP Guy: I do think your comments, especially about rebalancing and buy-and-hold, deserve an acknowledgement in the final paper.

    That’s cool. It makes me happy to see those words (I am being entirely sincere in these first two sentences but not in the next few). I permit a Internet Sewer Rat to post at my blog and it makes him famous. Can you beat that?

    And they try to make me out to be some sort of meanie!

    Rob

  16. Rob says

    It seems like Lucky Seven is just the name JWR gave to VII. Is there anything more to it than that?

    Even John only called it that as a joke. When he was being serious, he of course called it “Valuation-Informed Indexing.”

    Drip Guy’s standard MO is to throw tons of mud at the wall in the hopes that some of it might stick for people who have not been around long enough to have been brought up to speed re his trickery. Sometimes he does indeed manage to sow some confusion. But toward the achievement of what ultimate purpose? Nothing good every comes of this sort of trickery, in my assessment.

    Rob

  17. Rob says

    I can see how Rob might reply that buy-and-hold actually is a Ponzi scheme (with the eventual losses incurred by future generations, he might say)

    Yes, that’s the idea.

    And I am not in such bad company with my viewpoint on this one.

    Shiller on Page 67 of my paperback copy of the Bible says: “It would appear that…speculative feedback loops that are in effect naturally occurring Ponzi schemes do arise from time to time without the contrivance of a fraudulent manager. Even if there is no manipulator fabricating false stories and deliberately deceiving investors in the aggregate stock market, tales about the market are everywhere. When prices go up a number of times, investors are rewarded sequentially by price movements in these markets, just as they are in Ponzi schemes…. There is no reason for these stories to be fraudulent; they need only emphasize the positive and give less attention to the negative. The path of a naturally occurring Ponzi scheme — if we may call speculative bubbles that — will be more irregular and less dramatic, since there is no direct manipulation, but the path may sometimes resemble that of a Ponzi scheme when it is supported by naturally recurring stories. The extension from Ponzi schemes to naturally occurring speculative bubbles appears so natural that one must conclude, if there is to be debate about speculative bubbles, that the burden of proof is on skeptics to provide evidence as to why Ponzi-like speculative bubbles cannot occur.”

    Rob

  18. Rob says

    Perhaps Rob has a 3rd earth-shattering idea that I don’t know about yet

    You might someday want to ask me about my interpretation of the song “Workingman’s Blues” on Dylan’s “Modern Times” album, Wade.

    I dare you!

    Rob

  19. DRIPGUY says

    Wade,

    I think an attribution to an anon moniker on an internet chat board, within an academic work, would be foolish.

    I just as strongly also wish to guard my anonymity from potentially dangerous online kooks, such as Mr. Bennett, whom I personally consider likely to continue to devolve in his state of mental affairs until eventually the authorities will need to be involved.

    And finally, unlike the hugely narcissistic Mr. Bennett, I have no need to be personally acknowledged or thanked for merely participating in an informal dialog on the internet, and throwing out some off the cuff and rather obvious criticisms of yet another in a long parade of market timing schemes.

  20. Rob says

    In ordinary circumstances, I would not permit a post containing as much hate and venom as the one by Drip Guy just above to appear at this site. We have seen at numerous board and blog communities that, when we lower our standards to permit the lowest contributions from the lowest among us, it drive people of intelligence and integrity off of our boards and blogs. We don’t want to do that! We NEED people of intelligence and integrity for us to be able to move forward on the important and fun work we have been doing in the Retire Early and Indexing communities for the past nine years.

    In this particular case, I am making an exception. The primary purpose of Drip Guy’s comment was to respond to a kind comment put to him by another community member and Drip Guy has a right to have his ugly response appear in the same public record as the kind comment directed to him. It’s an exceedingly strange response and there’s a risk here that some fair-minded people will perceive me to be engaging in ridicule of him by permitting his words to appear here. That is not my intent.

    It’s hard for me to imagine what inner demons would cause someone to push the “Send” button on a comment containing such hate and venom. But ultimately it is Drip Guy who gets to say what words appear in Drip Guy posts, not Rob Bennett. My take is that he has a right to have a response appear and these are the words that he elected to have associated with his internet persona. So I think that in this particular case I just need to swallow my concerns, let the thing go up, and add a few words of explanation re the background and context so that people of intelligence and integrity are not unduly concerned that we have abandoned all standards at this place.

    Future posts of this type will not appear here, whether put forward by Drip Guy or others. We don’t do hate. I agree with Mike Piper at the Oblivious Investor blog that hate and death threats and all that sort of thing just do not belong at investing sites. Investing sites should be about –

    Let me think…

    Hey! I’ve got a wild and crazy idea!

    Investing sites should be about —

    Investing!!!!

    And Wade questioned for a moment whether I was capable of a third breakthrough!

    Investing sites should be about investing. Man! Is it any wonder that I am widely recognized as the most controversial poster on the internet today? Investing sites should be about investing. How does that madcap logic of mine come up with some of this stuff?

    Oh, What John Bogle Hath Wrought!

    Rob

  21. Wade says

    I’ll respect your position on this matter DRiP Guy.

    Rob, that’s funny about the Ponzi scheme issue. I was just imagining what you might say given the limited information I have about how your thinking process works. I only read Shiller’s chapter about PE10 so far. My reading list is growing longer and longer.

    Okay, I’ll bite about your interpretation of Dylan’s song.

  22. Wade says

    I kind of thought that DRiP Guy wouldn’t want to be acknowledged, though given his seeming complaint about me at Bogleheads (“especially as a contrasting canvas against which you can bounce your apparently developing theories, which you wish to work into academic papers under your own authorship”), I thought I should check to be sure.

  23. Rob says

    I’ll respect your position on this matter DRiP Guy.

    I of course have no problem with you going along with Drip Guy’s wishes, Wade. But I very much liked the idea of an internet poster being recognized in an academic paper. The arguments put forward in academic papers are of course more formal and more polished that those put forward on internet discussion boards. But as a journalist I have a natural attraction to the topical and for topicality boards cannot be beat!

    And re some issues discussion boards generate insights that could never be unearthed in other mediums. Take the question of the extent to which various strategies encourage or discourage emotional decisions on the part of investors. By listening in to internet conversations, you can learn what is going on in the minds of actual investors, not just what is SUPPOSED to be going on in their minds according to the theories put forward in formal papers.

    We need both. But it bugs me a bit that just about everyone acknowledges the value of academic papers while a good number seem reluctant to acknowledge the power of the new medium when it is on. When you (and others) credit internet discussions, that helps. That gets people thinking in new ways. So I think that’s great.

    I especially liked it that in this case the credit was to be going to this fellow who I generally refer to as an Internet Sewer Rat. I call Drip Guy that for obvious reasons. But I also maintain that he is CAPABLE of valuable insights. When he puts one forward, I make a special effort to give him credit for it. Because I think that’s the right thing to do when you learn something from someone whom you generally refer to as an Internet Sewer Rat.

    There are several cases in which I learned something significant from talking things over with Drip Guy. One that jumps to mind quickly is a podcast I did with a title something like “Why the Stock Market Is Not Like Other Markets.” That entire podcast was inspired by a comment that Drip Guy made at the Goon Central board (and I did of course give him credit in the podcast).

    We learn from all sorts of people. And we should make an effort to express our gratitude when we do. It would make me happy if lots of researchers followed your example and made an effort to give credit for what they have learned from participating on discussion boards, Wade (I noted your comment at Bogleheads giving credit to a bunch of people there as well).

    So — Thanks, Drip Guy!

    You ugly, smelly, no-good Internet Sewer Rat you!

    Rob

  24. Rob says

    I’ll bite about your interpretation of Dylan’s song.

    I think it’s about the conflict that many of us feel between our desire to be nice people and our desire to do something of some value in this world.

    My sense is that Dylan doesn’t give too much of a damn about the fame and the money. The things he has had to do to pursue and maintain the fame and the money have caused him intense pain (such as in the failure of his marriage). But he feels that for him it simply cannot be any other way. God gave him a gift and he must produce work that matters to feel respect for himself and he cannot do his job effectively without the fame and the money — So fame and money it must be!

    He has hurt a lot of people in his quest to do good. He’s not apologizing. He is saying that the idea that you can always be “nice” and still get the job done is b.s. It takes a tough man to make a tender chicken. So he makes as many tough calls as he needs to make to get the job done.

    He speaks with disdain of how “some people have never worked a day in their life, they don’t know what work really is.” Those are the critics who say that he should have did it this way or that way instead of the way he did it. They didn’t have to work up the courage to get up on the stage and sing those self-penned words about lived realities. When they work up the courage, they become entitled to a say. If they haven’t done the job, they don’t know what they are talking about (according to my interpretation of Dylan’s take).

    I relate to the song strongly. I was known in the days before I wrote about investing as a “puppy-dog poster.” That’s the real me. But I cannot do my job of creating and building all these wonderful board communities if I am not going to be honest with my friends. When thousands of people let me know that they would like to hear my sincere take re how investing works, I am bound to give that take regardless of how much hell the Big Shots elect to put me though as my punishment for “crossing” them. Whether I like the idea or not, that’s the JOB.

    Those who don’t see why I am required to post honestly on investing issues “have never worked a day in their lives” at the job of building an internet discussion board community into something special. You don’t lie. Not about the fundamental topics that the community was formed to address. Not re matters where bad information may well cause your friends to suffer some of the worst life setbacks imaginable.

    You might spin a bit. I’ve done that. You might bend over backwards to see things from the standpoint of the Big Shots in an effort to appease them. But you don’t outright lie. You don’t put your name to statements that numbers that are nowhere even close to the mark are A-OK in your assessment. You don’t go there. It’s not done by someone who loves his community. And those who don’t love their communities should find some other place to which to direct their posting energies than the communities to which they are contributing without feeling any love for the people congregating there.

    Those who don’t see that “don’t know what [this type of] work really is”, in my assessment. It’s all a big joke to them. It’s not a joke to the worker who directed years of his life energy to the project of getting the board off its feet and attracting smart and good people to it and making all sorts of diverse groups feel comfortable being in the same room and all the other things that are involved that the ones who feel only contempt for those who insist on their need to post honestly HAVE NO IDEA ABOUT. Those who have never done the job have zero idea what is involved in getting the job completed. They have never worked a day in their life, they don’t know what work really is.

    That’s my sincere take re this important matter, in any event.

    Rob

  25. Wade says

    Rob, I’ll have to read your song interpretation in a little bit. I just wanted to share my reply to DRiP Guy here, in case he stopped reading the thread at Bogleheads. I hope we can have some peace on this matter.
    —————

    Let me just explain a bit more why I posted about this here. VII has had critics for years, but until Norbert did it in 2008, nobody seemed to have provided a serious investigation of it. I did see a few other investigations, but they just focused on the most recent 20 years or so of data. I just couldn’t understand why. And that bothered me.

    Now I think I am understanding better about the position of critics, based both on the many comments here and on comments DRiP Guy made to me privately.

    If you really don’t like market timing in any and all forms, you may not see any point in an empirical investigation. You don’t trust the data to provide proper guidance about how the strategy might work in the future. In that regard, you view me as one of a long line of hucksters trying to sell you some snake oil. I don’t want to be such a person. I don’t like market timing either, but perhaps I am just not old and experienced enough to have completely internalized this lesson 100%. I’ve never tried market timing, and as I only started working and saving seriously in 2003, I missed out on the whole boom and bust euphoria that happened up to that point.

    So I’m beginning to understand better now why the critics feel the way they do. Looking forward at Bogleheads, I think my previous example makes my point well enough, and there will be no need to just keep spinning wheels about it. I hope I can make useful posts about other topics on occasion.

    To conclude, Cjking makes an important point. And if I may extend it… if after taking valuations into consideration, you decide that the proper 3 parameters for you are all the same number, then that is okay.

  26. Rob says

    Rob, I’ll have to read your song interpretation in a little bit.

    Please don’t feel that you need to do so, Wade. I am of course happy to hear anything you have to say about it. But I don’t see it as being at all a high-priority matter.

    I hope we can have some peace on this matter.

    My sense is that there many who feel this way re this matter, Wade. Peace has eluded us re this one for a long, long time.

    if after taking valuations into consideration, you decide that the proper 3 parameters for you are all the same number, then that is okay.

    My question here is — What does the word “okay” mean?

    Does everyone have the right to invest how they please? Obviously. How could there be any question about this?

    Should those who understand that long-term timing works keep quiet about it because it upsets some of those who don’t believe in it to hear the case for it? They should not, in my view.

    If those who understand that long-term timing works keep quiet about it, how are those who do not understand ever going to develop an understanding?

    All learning comes from talking things over. The reason why we are in an economic crisis today is because we have not been talking over the implications of Shiller’s finding that valuations affect long-term returns for 30 years after he published his first research on the subject. We are now 30 years behind where we would be if we had been permitting honest discussions of these matters going back to the first day. That’s not good.

    We need TOLERANCE of differing opinions. Valuation-Informed Indexers should show respect and affection for Buy-and-Holders and Buy-and-Holders should show respect and affection for Valuation-Informed Indexers. That’s how we all Learn Together, overcome the economic crisis brought on by the relentless promotion of Buy-and-Hold/Get Rich Quick, and learn how to invest in ways that permit us all to earn far higher returns while taking on far less risk.

    Ducking these issues for nine years has helped absolutely no one. We need to tackle them. We need to do so in a spirit of charity, to be sure. But there is no question in my mind that continuing to duck these questions is a terrible mistake.

    Remember, we have had thousands of community members express a desire that honest posting be permitted. Are those who favor a continuation of the ban going to cover the losses suffered by these people in coming days as a result of the intimidation tactics that were used to silence those who were perfectly happy to share what they knew but held back from doing so because they feared what would be done to them by those who felt that the only way to “defend” Buy-and-Hold was to block civil and reasoned challenges to it? If they are not willing to cover the losses they cause, they should not be continuing to cause them.

    In no other field of human endeavor would there be a “controversy” over whether honest posting on the subject matter of a board should be permitted at that board. “Peace” obtained at the the cost of the personal integrity of every community member who goes along with the corrupt charade is a false peace. I cannot go along with a “gentleman’s agreement” that we all pretend that Buy-and-Hold is not a discredited and dangerous strategy. Those of us who know the realities should be sharing what we know with those who have expressed a desire to learn.

    We should be trying to help people invest more effectively, not buying into acts of fraud that will only deepen the economic crisis today threatening the futures of each and every one of us.

    That is my sincere take re these important matters, in any event.

    Rob

  27. Wade says

    Rob, I can guess already how DRiP Guy will spin the last two posts [Headline: Rob panics as he lost his only supporter]. Don’t worry, I’m not abandoning the ship. I will still write my paper and try to provide a more complete and detailed investigation of the issue. A working paper will be online, and I, of course, will be happy to promote people reading it as much as possible. I also, of course, hope it will be publishable in a good journal and get even wider readership. Just with regard Bogleheads, I made the point that I wanted to make with that example. It’s now part of the record there and people can see it. For many criticisms of VII, it is merely a matter now of pointing them to the post with my example. That should be enough for people to decide for themselves, with regard to what I have to offer on the issue.

  28. Rob says

    Don’t worry, I’m not abandoning the ship.

    I didn’t really interpret what you said as indicating that you had abandoned ship but I am relieved to hear you say those words all the same, Wade.

    I couldn’t possibly agree more with what you say re the paper. It is a huge advance. Even if you did abandon ship, I would always be grateful for the work you did with the paper and I would always tell others how important a positive role you had played.

    It sounds to me that your basic message is that you just don’t feel that you can continue to push the Valuation-Informed Indexing concept at Bogleheads. Whether I agree or not with that decision I don’t think I can say. I see it as a judgment call. Different people have different ways of advancing the ball.

    There’s no one who helped all of us more than John Walter Russell. He took an EXTREMELY non-confrontational (but also entirely honest) approach. He did tremendous good. It sounds to me as though you may be trying to follow a path similar to the one that John followed.

    You can probably tell that that’s not been my path. I have too much journalism blood in me. Journalists don’t run from controversy — we are trained to run toward it!

    But as I mentioned above John is one of the finest humans I have ever come to know. I certainly would never say that his way of doing things was wrong. We all have to do what seems right in our hearts. I cannot entirely get out of my personality and understand all the other ways. But I respect the people who are following them for doing what in their hearts seems right. And it may be that there will be a day when I will conclude that the ways in which they proceeded were better than the way in which I proceeded.

    Leaving you out of this, it pains me to see yet another wonderful Learning Experience short-circuited by people whose 16 top priorities in life are to never have to acknowledge having been wrong about anything. It’s hard to let in how much human misery has been caused by this. To see it play out again and more crudely than ever before (as the mountain of evidence grows ever larger, it becomes even more silly than it has been ever since the first day to pretend that there is some sort of legitimate “controversy” over whether honest posting should be permitted or not) is hard.

    It’s difficult to accept that there are some humans who seemingly (I have my doubts as to whether this can be the full reality) care NOTHING about how much pain they cause their friends, neighbors, co-workers and even themselves. I’ve seen the same basic deal go down thousands of times. But I cannot say that I have ever entirely lost the capacity to be shocked by it.

    You have advanced the ball in a major way, I am extremely grateful, and I will of course be even more grateful if you are able to advance it farther in coming days. I will of course always do anything in my power to help you out in any way that I can.

    John was a Christian. He said that it was all in the hands of the Lord and that he was confident that it was all going to work out for the best in the end. John had greater faith than I happen to possess. But I don’t think his thought was crazy. I AIM to have faith. That’s not the ideal but it’s a big step up from not even trying! So perhaps this is God’s funny way of trying to send me a message that I need to strengthen my faith.

    If so, I get the message, Lord, I get the message! You can stop now! All is good!

    Or perhaps I am paying for sins I committed in earlier days. That’s a not too bad explanation for why things have gone the way they have for so long now. The more sins, the more punishment needed to set things right.

    Yikes! Now I am beginning to wonder if we might not all be here for ANOTHER nine years!

    Oh, my!

    Rob

  29. what says

    Wade,

    Did you actually read all of Rob’s posts? There is just no way! I typically can’t get past the first sentence.

    Btw, what do you think of his odd fascination with Internet message boards?

  30. what says

    Rob,

    I think your ideas (the ones that are at least coherent) can only gain acceptance once you have passed on. Your personal style and discourse is so toxic there is absolutely no chance of your ideas ever been accepted until you are removed from the equation and someone with a lot more focus and communication skills is able to distill the useful snippets of your ranting.

  31. Rob says

    Your personal style and discourse is so toxic there is absolutely no chance of your ideas ever been accepted until you are removed from the equation and someone with a lot more focus and communication skills is able to distill the useful snippets of your ranting.

    We have had thousands of community members express a desire that honest posting be permitted on the boards and blogs, What. I am the one who puts the findings we come up with together down in words in articles and podcasts and books and that sort of thing. But this has been a community effort from Day One. Only an Internet Sewer Rat would think (or should we say “lie”? — I am 100 percent confident that none of the Internet Sewer Rats believe any of this garbage they have been dumping on us on a daily basis for nine years now) to suggest otherwise.

    I will continue to post honestly on safe withdrawal rates and on many other important investment-related topics. I have met many smart, wonderful, generous people in all of the communities. They deserve no less, in my assessment.

    The hate stuff, the abusive stuff, the defamation, the deception, the intimidation — all of that garbage gets blown away in the wind in time, What. None of that matters in the long run. It’s not the Campaign of Terror that matters here. The Campaign of Terror is just the means by which those who made mistakes and are not men enough to acknowledge them use to block us from reaping the full fruit of The Great Safe Withdrawal Rate Debate. It’s the scores of wonderful investing insights that I write about in each of my three weekly columns that matter. The boards and blogs were formed to help people learn how to retire early and how to invest effectively, not for this Get Rich Quick garbage that the internet sewer rats have been insisting never ever, ever, ever be questioned by those who have taken a look at the historical data or the academic research.

    I take my lead from my fellow community members, What. The published rules of all the boards and blogs still rule out the tactics employed by those posting in “defense” of Lindauer and Greaney. I think it would be fair to say that that sends us all a pretty darn clear signal as to where the community’s heart has always been and where it today still remains. So long as there is universal support (every single community member gave his or her endorsement to the published rules before putting forward his or her first post) for the idea of permitting honest and civil and reasoned discussions of early retirement and indexing strategies at our boards and blogs, I will continue to respect the community’s wishes re this important matter.

    The hateful, dishonest, savagely abusive stuff is a big-time turn-off to me, if you want to know the full truth, What. Not this boy. No can do.I can’t go for that. It’s not my particular cup of tea. I’d be grateful if you would try to find somebody else to help out with all of that raw sewage. I’m just going to continue seeing where the insights provided by the thousands of my fellow community who have been willing to honor their pledges to post honestly and civilly lead, learning more and more and more good stuff over time and thereby becoming able to teach more and more and more good stuff over time.

    Call me madcap!

    Rob

  32. says

    what: I like Rob’s idea about using discussion boards as a type of ‘research seminar’ where people can get feedback on their research. I’ve actually been doing this at Bogleheads recently, but I didn’t articulate my justification for it as well as Rob did.

    Regarding your other comments, I address this type of issue in my most recent Bogleheads post on the same thread.

    Rob, I hope you do not feel offended by anything I wrote at Bogleheads. Of course we cannot be in agreement on everything, but I do try to support you there as best as I possibly can.

    Also, once you get down to the bottom of the post, I think I am asking a really important question to VII critics: what is really so different about my VII example and the beloved Trinity study?

    Writing that post took too long and now I need to really need to bunker down and write an exam.

    Best wishes, Wade

  33. Rob says

    Thanks for clearing that up Rob. I think that post sums it up perfectly.

    You see? I’ve been saying for a long time that all the hoohah was just the result of a little misunderstanding!

    You need to lighten up, What. It’s okay if you remain skeptical of the ideas. Actually, it’s not just okay, it’s a good thing. We need skeptics to force us to work through all kinds of questions and to sharpen the ideas to the greatest extent possible over time. Those who make the case for Buy-and-Hold and the case against Valuation-Informed Indexing are helping us all out, they are our friends.

    Those who put up abusive stuff are not our friends. They are causing us to waste vast amounts of time. They not only hurt all other community members, Buy-and-Holders and Valuation-Informed Indexers alike. They hurt themselves. Learning is always a plus. There is no possible downside. When you rule out the possibility of learning anything about this, you hurt yourself. And when you insist that entire board communities follow your lead, you hurt thousands of others (it’s millions of others when you consider that we could publicize these ideas to the far larger investing community after assuring ourselves that they really do check out).

    Is it possible that most would conclude that Valuation-Informed Indexing doesn’t cut it if we permitted full and fair discussion of the idea at Bogleheads? I obviously don’t believe that that is what would happen. But it obviously is a theoretical possibility. If that were to happen, that would be a good thing. If the idea fails in full and fair discussion, the idea needs to be exposed as a bad idea. I that event, I want the darn thing to fail.

    Do you feel the same way about Buy-and-Hold?

    That question highlights the entire dynamic that has applied for nine years.

    You do not want to learn that Buy-and-Hold was a huge mistake. That’s always been the driver. There are lots of people who are emotionally attached to Buy-and-Hold and they suspect that it cannot stand up to reasoned scrutiny. So they throw mud and hope that the distraction will keep Buy-and-Hold safe from questioning for a few more years or a few more months or a few more weeks.

    I do not fear questioning of Valuation-Informed Indexing, What. You fear questioning of Buy-and-Hold. That’s the difference between us. That’s why you are antagonistic to me and I am not antagonistic to you.

    I very much want to see Buy-and-Hold fall. But I have zero desire to see it fall as the result of some trickery on my part. I want to see it fall as the result of full and fair debate. So I am happy to abide by the norms of all the communities in my postings. You are not. That should tell all reasonable people something important about the merits of Buy-and-Hold.

    I have the greatest possible respect for Buy-and-Holders and the great advances they have brought us. I say this all the time because it is true and because it is right that I should say it given that I also say that Buy-and-Hold is purest and most dangerous Get Rick Quick scheme ever designed by the mind of mortal man (I do not say it was intentionally designed to be this and I do not believe that it was). The thing that I most respect about the Buy-and-Holders is that their original idea was to root their investing strategies in data and research, something real and objective.

    The Buy-and-Holders abandoned their first principle when they elected to employ the most vile tactics of deception and intimidation to protect Buy-and-Hold from effective questioning at our boards. It’s not so much that I have been harsh in my criticisms of the Buy-and-Holders as it is that the Buy-and-Holders have been brutally self-destructive in their own betrayal of their better selves.

    I love John Bogle and what he once stood for. I can say that about most Buy-and-Holders, probably to a large extent including you, What. When you become hateful in response to the presentation of historical data and academic research, you betray the very things that made me feel affection and respect for you in the first place. How would you have me respond to that? If I support the new hateful and abusive you, I am rejecting my wise old friend. If I support my wise old friend, I must speak out strongly about this strange and sick and twisted being who ridicules and defames and spouts hate at all the most cherished principles of my wise old friend.

    Bogle was right when he said that the focus should be on the long term and that investors should be trying to limit the role that emotion plays in their investing decisions and that we should all make an effort to remain humble re how much we really know about how the market works. That is the John Bogle I love and will remain true to. The new John Bogle who cannot bear to acknowledge a mistake or even to acknowledge the POSSIBILITY that he made a mistake is an enemy of that earlier John Bogle. That ain’t my guy. That’s an imposter. I want nothing to do with this new, sad, self-destructive, negative individual. I want the old John Bogle back!

    I think we are going to get him, What. You just wait and see. I’ve been proven right about about a whole big bunch of things that lots of people said I would never be proven right about. I think I am going to be proven right in the not too distant future re this one too. And, when we get the old John Bogle back, watch out, world! The New Buy-and-Hold will be taking the world by storm. All of the good ideas put forward by Bogle and the other Buy-and-Holders are in their new form going to bring on the greatest period of economic growth we have ever seen. That’s when the real fireworks (the good kind!) begin!

    I hope you will still be with us on that day, What. But please don’t ever let the idea enter your head that the rest of us aren’t going to get there one way or the other, with you or without you. The Bogleheads will in the end do what is right and best for the Bogleheads, whether that means that What and a few others ultimately will need to take their leave of us or not. The community is going to live on whether you like the idea or not. It’s of course your personal choice as to whether you remain part of it all or not and I have of course never for two seconds suggested that it should be any other way.

    Rob

  34. Rob says

    I like Rob’s idea about using discussion boards as a type of ‘research seminar’ where people can get feedback on their research.

    Few people seem to appreciate the power of this new communications medium. It’s cool that you get it, Wade.

    You may find this hard to believe but there was a time when I was annoyed that I was TOO popular on discussion boards. This really is so. In the days before I posted on investing (I used to post only on saving topics), I was the most popular poster at the Motley Fool site. We had a great community there and I loved the people and I feel great pride over the important work we did together. But one of the things that caused me to start thinking that perhaps I needed to post on the realities of stock investing was that things had reached a point where if I just said “Good morning!” there would be people recommending my post and saying how great I was and all this sort of thing.

    That ain’t the way!

    We all like to be flattered. So I can’t say that it didn’t please me in some way when people fawned over me. But the excessive praise was hindering my ability to learn about the issues. Praise has its place. But what people trying to learn most need to hear are legitimate and well-argued CHALLENGES to their thinking. All learning comes from recognition of weaknesses in one’s ideas. It is the people who criticize us (with charity, one hopes!) who inspire our greatest learning experiences.

    I post on boards to learn. If I don’t receive criticism of my ideas, I am not getting anything back for all the work that goes into the crafting of my posts. So I feel that I am being cheated when I am not being criticized. Hey! Thanks, Goons! You NEVER hold me back by fawning over me!

    I think it would be fair to say at this point that some others do not feel the same way. All that I can say about those others is that I sincerely believe that they are missing the point of the new communications medium. It is just an amazing medium. We can pull together all aspiring early retirees in one place and hash things out. Or we can pull together all indexers in one place and hash thing out. It’s amazing.

    The power comes from the fact that not all human beings have the same personality type or the same set of life experiences. Someone with an I.Q. of 140 is not capable of knowing all there is to know about investing. Why? He has only lived one life and there are limitations that follow from that reality. Put that fellow on a discussion board and the limitation is nixed. The COMMUNITY has the benefit of both the 140 I.Q. and the hundreds of different perspectives that can be put forward by other community members.

    It is only in the past 15 years or so that it has been possible to take advantage of this huge advance in our ability to develop an accurate understanding of how the world works. That’s why it has not yet clicked with many people how powerful this new communications medium really is (when the posting rules are enforced properly, of course). The reason why we have done such amazing things on our investing boards in so short an amount of time is that we have been making use of a communications medium of great power that has never been available to any earlier generation. Once we work out how how to deal with abusive posting — Look out, world! There ain’t gonna be no stopping us.

    Anyway, I recognized that I had a problem (excessive popularity on the internet) and I put my mind to figuring out a way to solve it and I did indeed come up with an effective means of overcoming the obstacle standing in my way. Even my most fierce critics cannot deny me that one!

    Rob

  35. Rob says

    I hope you do not feel offended by anything I wrote at Bogleheads.

    I have two emotional reactions in response to your research findings and your postings at the Bogleheads Forum, Wade.

    One is elation. Your research shows (yet one more time and from yet one more angle!) that Shiller’s 1981 finding that valuations affect long-term returns is the most important finding in the history of investing. We no longer need to take on the high levels of risk that historically have been associated with stock investing. If stock returns are predictable (and they obviously are in the long term if the first 140 years of historical data means anything at all), then they are not risky. Risk is uncertainty. A predictable asset class is a non-risky asset class. So stocks are not particularly risky anymore for all investors willing to abandon Buy-and-Hold. What news could be more wonderful? This aspect of the story is just great, great beyond words.

    Two is disappointment. The disappointment comes from the fact that the “leaders” at the Bogleheads board obviously have zero intention of permitting the many community members at that community who would like to learn more about these new ideas to do so. Look at the comments you see on that thread. How many times do you hear someone deliver some version of the message “maybe it would be better if we didn’t talk about this stuff too often here.”

    Huh?

    We know about an investing strategy that beats Buy-and-Hold in 102 out of 110 time-periods, an investing strategy that permits us to obtain far higher returns at dramatically less risk, an investing strategy that permits us all to retire years sooner and that would bring us out of this economic crisis if we could share it with millions of middle-class investors (if people could switch to an investment strategy that would put their retirement plans back on track, they would feel free to start spending again and businesses could start hiring again), and our first reaction is to come up with convoluted arguments as to why the best thing to do is to AVOID learning more about it and to AVOID getting the word out to the millions of middle-class people whose lives we have destroyed with our promotion of Buy-and-Hold.

    Again — Huh?

    This is not a NORMAL or HEALTHY or RATIONAL reaction, Wade.

    The research is wonderful. The reason why we are not ALL responding with elation to this exciting development is that some of us are experiencing a deep and severe emotional pain. Many of us BELIEVED in Buy-and-Hold. We fell for it. We followed it. We took pride in our ability to latch onto the best strategy. We told our friends about it. We wrote books about it. We developed calculators about it. And on and on.

    It HURTS for us to find out that we are wrong.

    That’s all that this has been about going back to the morning of May 13, 2002. There has never been a single rational argument put forward in support of Buy-and-Hold during those nine years. There has never been a tiny sliver of historical data put forward. There is not one sliver because there never can be one sliver. It is a logical impossibility that market timing might not work in a world in which valuations affect long-term returns (and in 1981 — BUT NOT BEFORE! — we learned that that’s the world we live in)

    The whole thing is a MISTAKE. That’s all there is to it. Suggesting that there is more just wastes people’s time. We made a mistake and we need to get about the business of FIXING the mistake.

    I am thrilled that you got us closer to the point of fixing the mistake, Wade. Absolutely thrilled. I am disappointed that there were not more willing to work up the courage to INSIST (Not ask! Asking doesn’t get the job done!) that the learning experience continue.

    If people at that board were not afraid of what would be done to them if they asked honest questions and put forward honest comments, there would be 10 different threads at Bogleheads this morning exploring different aspects of the new Valuation-Informed Indexing Model. There would be a thread on asset allocation strategies, and there would be a thread on retirement planning strategies, and there would be a thread on how to make best use of the Return Predictor, and there would be a thread on how to get to the word out as quickly as possible, and there would be a thread on how it was that so many of us were fooled for so long, and on and on.

    We are not seeing those threads, Wade. I don’t say that’s your fault. You did a very good thing. But I cannot say that I am not saddened that we are not this morning seeing those threads appear at that board community. I think it would be fair to say that the sooner we see those threads all appearing there, the better it will be for every single person in every single community, Buy-and-Holders and Valuation-Informed Indexers alike.

    That’s all. I take in the good and the bad as it appears before me on my computer screen. We are making great progress. But the other side of the story is that our big mistake has already brought on the second worst economic crisis in U.S. history and threatens to soon put us in the Second Great Depression. So we don’t know how much longer we have to get those threads up at Bogleheads and at lots of other places.

    We all need to give it our best shot. And then we just need to accept that whatever happens is what happens. We cannot do more than give it our best shot.

    That’s my sincere take re this extremely important topic, in any event.

    Rob

  36. Rob says

    Of course we cannot be in agreement on everything

    I’m not aware of any important issue re which we are in serious disagreement, Wade.

    I don’t believe that you have ever had a chance to look at what I am saying about the economic crisis and other IMPLICATIONS of your findings. You obviously have focused on the questions that you needed to understand to do your research, properly so. So it would not be right to say that we are in agreement re these other things. But it also would not be right to say that we are in disagreement.

    Re the things you have studied, we are in general agreement. I think that, as you go deeper, you are going to discover more and more and more amazing stuff.

    The reason why no one knows as much as I do about this stuff is not that I am smarter than others. It is just that I have been working it for 10 hours per day for seven days per week for nine years now. No one else has ever done that.

    It is a new model. I get the sense that many do not appreciate what that means. Finding a new model is like finding a new way of seeing or a new way of speaking.

    Finding the flaw in Buy-and-Hold and then creating a new model that does not contain that flaw is like inventing the computer. Did anyone imagine Twitter on the day the computer was invented? It was something beyond people’s thought processes. You had to start with the basic computer and then keep walking down the new path until some time later you came to the invention of Twitter.

    We started by showing that the Old School SWR studies get all the numbers wildly wrong. We did that on Day Six of the discussions. We didn’t stop there. We just kept moving forward, and we persuaded thousands of smart and good people to help us out. Now we have a low-risk, high-return way to invest in stocks. Now we know what we need to do to stop these periodic economic crises that we have been causing with our stock investing practices during the many years when we didn’t know what we were doing.

    Thanks to Bogle (who laid the groundwork) and thanks to Shiller (who revealed to us Bogle’s big mistake), we now know what we are doing.

    Or at least we kinda sorta think we do.

    We’re hot stuff now until the next fellow (or gal) comes along to knock those of us who become too full of ourselves because of what we learned during the Valuation-Informed Indexing Era off of our perches. I don’t say that this will be the last big advance in our understanding of the realities of stock investing. I say that it is the biggest that we have managed so far (and I certainly do not take sole credit for the huge advance — I share credit with Fama and Malkiel and Bogle and Shiller and Russell and Pfau and lots and lots of others, it was a community effort all the way).

    Community Rules!

    Rob

  37. Wade says

    I read your Dylan interpretation now. It sounds reasonable. Bob Dylan has made some of my favorite songs, but unfortunately I haven’t heard that one to compare. But I like how you tie it in to the issues you are passionate about.

    [i]Few people seem to appreciate the power of this new communications medium. It’s cool that you get it, Wade.[/i]

    I wrote my undergrad history thesis about comparing the development of radio circa 1924 and the Internet circa 1996. At both times people were so excited about all the possibilities of these new communications mediums. For radio, things like: people could hear the president’s voice for the first time, and universities of the air would bring knowledge to the masses. For the Internet, well, you know the story. It seems like a lot of that initial enthusiasm died out, but Bogleheads really does have a lot of potential as a ‘research seminar’. If you are not fully familiar with how academia works, when people finish writing papers, then tend to travel around to other universities to present their preliminary findings to the seminar and get feedback from the seminar participants. Well, Bogleheads could provide such an opportunity on a grand scale, and you’ve added other benefits, such as gauging the reactions of the investing public who may not be as familiar with all the ins and outs of the research.

  38. Wade says

    Hi Rob, your last post came out while I was writing mine. No, I haven’t looked much at your financial crisis articles. I will need to do that. What you are saying about VII not being the final step in the evolution will probably be right as well. Wearethefall started talking about this aspect. Human nature as it is, if everyone starts following VII, financial manias will probably just spread to other areas. But that is just brainstorming.

  39. what says

    Rob, I don’t have any problem per se with “VII” but I just cannot read more than 1 of your paragraphs per day and since you write approximately 10,000 paragraphs per day I can’t say that I am following what you are talking about.

  40. Rob says

    I do try to support you there as best as I possibly can.

    That’s a fair statement, Wade.

    It is also an incredibly revealing and an incredibly sad statement.

    Look at that phrase that ends your sentence — “as best as I possibly can.”

    You have to go to some sort of effort to say kind things about me? There’s some sort of price to be paid for doing so?

    I’m the fellow who discovered the errors in the Old School SWR studies and showed my fellow community members how to calculate the SWR properly. I’m the fellow who came up with the investing strategy that beat Buy-and-Hold in 102 of 110 30-year periods. And yet there is some sort of resistance to the idea of offering me the thanks and praise and credit that I merited as a result of having done these things? And there is some sort of resistance to the idea of offering the same to the thousands of community members who helped me in my efforts?

    Could anything be more sad and pathetic and ugly and sick?

    Now –

    Forget the historical data for a moment. Please focus for just a moment on the human side of all this.

    Could there be anything that ever made a more effective case that Buy-and-Hold is not an investing strategy fit for humans?

    We are not pure Get RIch Quick creatures. We just aren’t. We have intellects. We have hearts. We have personal integrity. You can’t have those things and have Buy-and-Hold too. Not for the long-term. Get Rich Quick always reveals itself for what it truly is in the long term.

    We need an investing strategy fit for humans. That’s Valuation-Informed Indexing. Valuation-Informed Indexing is Buy-and-Hold with the Get Rich Quick element (the idea that you don’t need to look at the price at which stocks are selling before putting money on the table) deleted.

    That’s the entire deal in a nutshell. Telling people what works hurts people’s feelings when for 30 years people have been taken in by the purest and most dangerous Get Rick Quick approach ever concocted by the human mind.

    But people need to know what works all the same. We cannot agree not to tell people what works just because we know it is going to hurt their feelings to hear the news. Not if we care for them.

    If your best friend was going to get behind the wheel of an automobile stone cold can’t-stand-up drunk, would you let him? I wouldn’t. My friend might get mad at me for taking the keys. But I would take them all the same.

    I won’t let my best friend drive drunk and I won’t let me good friends in all the Retire Early and Indexing discussion-board communities follow Buy-and-Hold strategies either. At least I won’t let them do it without me first telling them about the dangers. If they choose to invest drunk despite my warnings, that’s their call. Once I have had my little say, it’s no longer any of my business. But I cannot live with myself if I don’t at least make an honest effort to help out all of my many good friends at the various boards.

    Now, once I am banned at a board, I am off the hook in a sense. I no longer am required to offer any warnings because it is physically impossible for me to do so. But I then take on an obligation to try to persuade some people to go to the boards that have banned honest posting and insist (NOT ASK!) that the ban be reversed. Do I not owe that much to the thousands of my friends who have expressed a desire that honest posting be permitted?

    If there is someone who sees it some other way, please feel yourself warmly invited to come here and make the case. I’ll do my best to listen with an open mind. But as of today, based on everything I have seen go down during the first nine years of The Great Safe Withdrawal Rate Debate, I believe that I am under an obligation to my many good friends in all the communities to try to get the possibility of honest posting on SWRs and many other important topics opened to us again. For so long as I see it that way, I am obliged to play it that way.

    I am not capable of seeing it any other way as of today. So I just continue doing my thing to the best of my ability. I hope I am doing the right thing. It sure seems to me that I am. One of the difficulties of life in this Valley of Tears is that none of us ever knows this with 100 percent certainty. WhaChaGonDo?

    Rob

  41. Rob says

    what is really so different about my VII example and the beloved Trinity study?

    They are both data-based analyses.

    The one big difference is that your VII example is analytically valid because it contains a valuations adjustment and the Trinity study is analytically invalid because it does not.

    Shiller’s finding that valuations affect long-term returns discredited the Efficient Market Theory and the Buy-and-Hold strategy that was based on it.

    We need to move on.

    Rob

  42. Rob says

    I don’t have any problem per se with “VII” but I just cannot read more than 1 of your paragraphs per day and since you write approximately 10,000 paragraphs per day I can’t say that I am following what you are talking about.

    That’s cool, What. Thanks for letting us know.

    It makes me happy to hear that you have no problem with the Valuation-Informed Indexing concept. Maybe I’m beginning to make some progress in my effort to win people over to the new way.

    Today — What!
    Tomorrow — The Bogleheads Forum!

    You never know, right? It’s not as if any of us had a crystal ball.

    Rob

  43. Rob says

    I like how you tie it in to the issues you are passionate about.

    That’s the big benefit of being a critic. You get to take work produced by others and use it to further your personal agendas. Extremely cool concept.

    Rob

  44. Rob says

    I wrote my undergrad history thesis about comparing the development of radio circa 1924 and the Internet circa 1996.

    That’s great. I am so glad to learn that about you.

    Bogleheads really does have a lot of potential as a ‘research seminar’.

    I used to have a daily feature at the site called “Today’s Passion.” Each day I would link to a page at the internet that I thought provided some important insight (I dropped the feature when I went on Twitter because now I provide lots of links every day through that service). Despite all of my criticisms of how the Bogleheads Forum is run, there was no other internet site that I linked to as often. There was nothing else close.

    Huge potential.

    Rob

  45. Wade says

    Rob, starting from the last post, my question about Trinity and VII was not directed at you. It was directed at the people who like Trinity but don’t like VII. You, obviously, like VII but don’t like Trinity.

    Rob, I’m sorry that you feel offended by my comments. I do credit you and your ideas. I’m not sure what to say really. I don’t recognize Orion’s name, so I don’t know if he is someone you consider a Goon, but he was expressing what seems to be legitimate questions. I don’t know if he originally did it abusively, but I think a number of people have tried to engage you in discussions about SWRs and VII and felt they never could receive clear responses. If I am going to publicly declare my support for your ideas about SWRs and VII, then at some point I was going to have to discuss this issue. I thought I did so evenhandedly and fairly. You have a unique writing style and personality, it’s for sure. You don’t need to change that for anyone. But it is important to assess whether sometimes your writing style may turn away people who initially expressed interest in your ideas. Orion at least portrays himself as such a case.

    It obviously won’t make you feel better now, but I decided to edit out the first part of my post.

    DRiP Guy has been quiet lately, but he made a forecast of his own, and I wonder if he is just quietly waiting for his forecast to come true: “I will remain bemusedly observing to see in what manner Rob eventually slips Wade under the wheels of the Hoco-train, as he eventually does all who attempt to engage him in a serious manner.”

    At any rate, I’m sorry again if you feel offended, but I still plan to write a paper about VII and will certainly credit your contribution in my paper as I did in my paper about predicting withdrawal rates, and as I did repeatedly at Bogleheads at a time when most anyone there wouldn’t have done it. I hope you can forgive me at some point.

  46. Rob says

    I haven’t looked much at your financial crisis articles. I will need to do that.

    Here are two links, for when you have time (not now!):

    http://www.passionsaving.com/cause-current-financial-crisis.html

    This article is in Q&A form. It is the concise version of the story.

    http://knol.google.com/k/rob-bennett/the-bull-market-caused-the-economic/1y5zzbysw7pgd/3#

    This Google Knol offers the in-depth exploration. It works through all of the emotional aspects of the question, which are important but which some people don’t yet think of as being investment-related material. The Knol is the hardest piece of writing I ever undertook. I sweated blood over that one. I’m extremely proud of what I accomplished with that piece. It was a great feeling that I had on the day when I finally put that one to bed.

    Posting that Google Knol led to my first column. I sent it around to some political blogs and got into a conversation with the guy who runs one of them. Then, I got to like the idea of having a column, so I approached two other sites to set up two more. You never know where things are going to lead. The trick is just to keep DOING things. Sooner later, good stuff happens.

    Rob

  47. Rob says

    my question about Trinity and VII was not directed at you.

    I understand that, Wade. I didn’t take it the wrong way. I got what you were saying.

    Rob, I’m sorry that you feel offended by my comments.

    I don’t! Please get that idea out of your head.

    You’re a hero in my eyes. Why the heck would I not be thrilled with what you have done? You have advanced the ball in a MAJOR way.

    I obviously have serious concerns about things that have happened in the various communities and about the economic crisis and all this sort of thing. But you didn’t cause any of that. I certainly don’t think that you are Superman and can solve all our troubles in two days. You have helped us all big time. I am very grateful to you. There are zero bad feelings on my end. Please stop thinking otherwise.

    Rob

  48. DRIPGUY says

    Wade,

    You seem to be overtly and openly endorsing Rob’s habit of invading boards and trying to force them to provide a platform for his long, frequent and ridiculous strings of verbal diarrhea, no matter how noxious, ill-informed, and antithetical to the very principals of that board.

    In fact, you seem to want to use that model yourself.

    To both of you, I simply ask: If you have a better mousetrap, then why not build it, and they will come?

    Don’t get me wrong; I think good old Bogleheads
    and most internet forums, can easily handle a variety of opinions, and discussion about topics that are not supportive of their own central theme or ethos. But Bogleheads is just one small forum. There are dozens or hundreds of forums just as big, and just as influential, most of which do not endorse market timing as you two are espousing.

    If I was hellbent on pushing and getting acceptance and an audience for my own market timing scheme, because it was provably better, then I just can’t imagine trying to ‘invade’ boards that had already told me to scram, that my ‘better mousetrap’ held no interest for them, and I instead would simply start my own board, knowing that would give me the place to build a receptive audience to my obviously better approach.

    Instead, for a decade, Robert Michael “Hocus” Bennett has insisted on invading boards, trying the patience of administrators, until eventually, he has been banned, 15 times, and sometimes from boards that had a long standing policy of never banning anyone!

    Contrary to Rob’s assertion that ‘he’ is the founder of the Internet Finance Community (whatever that may be), the various forums are the private and individual property of those people who pay the hosting, pay for the software, develop the following, and otherwise manage the site as they see fit.

    Rob has proven he is unable to respect those board’s boundaries and has grudgingly been removed against his will over a dozen times.

    I am making an open and public statement that the world of the internet needs LESS Rob Bennetts, not more.

    He famously said “Let’s Disrupt!” and that might well be his motto — IMHO, he is not a ‘math guy’ or an ‘idea guy’ or a journalist, or an author or any of many things he claims he is. He is a bomb thrower. He does not build, he destroys. He is unable and or unwilling to use his own devices to develop the platform he desires; he insists on rushing the stage and stealing the microphone from the featured and invited speaker. Just read over on M* about the debacle where he was going to storm a Diehard convention. That’s not ‘free speech’; that’s ‘assault and battery.’

    IMHO, his noxious acts are not worthy of emulation by anyone wanting to develop or maintain a decent reputation.

  49. Wade says

    DRiP Guy: with regard to the research seminar, I’m not talking about VII. My previous finance-related research was about the glide paths of target date funds, which is well within the ethos of Bogleheads. And I think my paper about withdrawal rates from an international perspective is within the ethos of Bogleheads. I’m sure my future research will return to topics that are also more palatable to Boglehead tastes. I’m just exploring an issue that I previously felt people were all too quick to criticize without actually looking at the data, but now I am understanding better the reasons for your views.

  50. Rob says

    I don’t recognize Orion’s name, so I don’t know if he is someone you consider a Goon, but he was expressing what seems to be legitimate questions.

    Orion is a big-time Goon from way, way back. He was even around in the Motley Fool days, if I recall correctly.

    A standard Goon trick is to mix in legitimate points with defamation or intimidation or deception. There was certainly some ugly stuff in Orion’s post.

    Here’s how it should work (I shouldn’t have to say this, all should know this). When someone like Orion puts forward a post with defamation or intimidation or deception in it, community leaders should call him out on it. Then, if he ignores the call-out, he gets the boot. Could anything be more obvious and simple?

    It doesn’t happen re this matter because a good number of those who need to be doing the calling out don’t want people to hear about the dangers of Buy-and-Hold. So it’s no holds barred for those promoting Get Rich Quick and no honest posting permitted for those making the case for data-based strategies.

    I think it would be fair to say that this goes in one sense even for John Bogle himself. Bogle has of course never himself participated in Goon posting. But he has failed to call people out on it when he was in the room and others were participating in it. And the site administrators at Morningstar and Index Universe and Motley Fool and the Get Rich Slowly forum and lots of others have done the same.

    Now — what happens when someone engages in defamation or threats of physical violence or whatever and no one calls them on it?

    From that point forward, they have a vested, personal interest in insuring that people not find out what they did. So from that point forward, they are going to work overtime to block the discussions even if they come to see great substantive value in them.

    There are reasons why civil societies have always had rules about these things. People cannot live together in peace without such rules. On the internet, these rules do not today apply, at least not in discussions of the dangers of Buy-and-Hold. It’s mob rule when that subject comes up.

    I know that you do not believe some of the things Orion said, Wade. He said: “He said he made up the name of his investing system so that people will google it and end up at his site.” No reasonable person believes that that is so in the way he says it (another standard Goon trick is to twist things people really did say so that they can confuse and mislead people who do not take the time to study every last word put forward).

    He says: “he does not follow the system himself.” Could anything be more moronic and dishonest? I went to a zero stock allocation in 1996. If I wasn’t following the dictates of Valuation-Informed Indexing, why in the world did I do that?

    Now –

    I am not saying that it is YOUR job to challenge every questionable statement you see. If you did that, you would have time to do nothing else. And a lot of the dishonest statements that appear there you wouldn’t even know to be dishonest because you are a newcomer. So please get the over the idea that I am trying to put this on YOU.

    What I am saying is that the board is CORRUPT. Once you ban honest posting on the key subject matter of the board (investing), the board becomes a corrupt enterprise. We talked above about the wonderful potential of that forum and of internet discussion boards in general. Now we come to the downside of this new communication medium. Unless we have some means of reining in the lowest of the low among us, the lowest of the low among us have a veto power over what all the rest of us contribute.

    Those who employ threats of physical violence for the “crime” of posting honestly on an investing board need to be removed from it. This is Mel Lindauer, co-author of “The Bogleheads Guide to Investing.” This is John Greaney, author of the discredited SWR study at the http://www.RetireEarlyHomePage.com site. These people have threatened to kill people who offer opinions with which they do not agree on discussion boards. And John Bogle has not been able to work up the courage and decency to take action (I have sent him an e-mail imploring him to do this — the words of the e-mail appear in a blog entry at this site).

    Now –

    What happens as more and more middle-class people learn of the errors that were made by the people who came up with Buy-and-Hold and about the huge financial losses that they have suffered because of the unwillingness of these people to acknowledge these errors and because of the vicious smear campaigns that were employed to silence the thousands who have expressed a desire that honest posting be permitted?

    I love John Bogle. But I think it is fair to say that I am going to have a heck of a job trying to remind people of his good points if his continued failure to act leads us over time to the Second Great Depression. Investing is not a game. Advocacy of Get Rich Quick investing schemes can have very negative effects down the road whether the Get Rich Quick schemes are recognized by those advocating them as Get Rich Quick schemes or not.

    Again — none of this is aimed at you, Wade! You did great. You are a hero.

    I am saying that you should not be required to have your name associated with a corrupt enterprise to be able to share what you have learned from your research. My wife should not have to live in fear that our two boys are going to be killed because I happened to let my friends at the Motley Fool board know about the proper way to calculate SWRs. Bogle should not have to see his name dragged through the mud on a daily basis (It’s his name being used in the title of the “Bogleheads” board) because it upsets Mel Lindauer for people to learn that he got some important things wrong in his book.

    I have been working this for nine years now. I think it would be fair to say that I have developed some absolutely amazing breakthrough insights (with the help of hundreds of my fellow community members, including many Buy-and-Holders, to be sure). Do you know how much of my time was directed to development of the substantive insights? I would estimate roughly 20 percent. The other 80 percent was directed to trying to help out the thousands of people who have expressed a desire to be able to post honestly (the people who we need to have contributing if we are to continue to develop the substantive insights!) That’s how big a deal this Campaign of Terror against our board communities has become.

    We are all going to have to do what we can to overcome the problem. I don’t mean just all the people reading these words. I mean all the people living in the United States and in the other countries affected by the economic crisis. Our policymakers need to get involved. Our economists need to get involved. Our journalists need to get involved. Our financial planners need to get involved.

    Why?

    Because there is no country for which to make policy if the economic crisis leads to the Second Great Depression and that leads to a third world war and we all go “boom.” To have our economy go into a depression is a big deal. So we should all want to do what we can to stop that from happening. The big problem today is the ban on honest posting at the Retire Early and Indexing boards. There obviously is not one person alive who does not want to learn how to invest more effectively. So if we permit honest posting, these ideas are going to go viral on the internet. That solves the problem, does it not?

    You cannot solve this by yourself, Wade. I certainly do not say that you can. I think you need to disassociate yourself from the internet sewer rats from time to time. You obviously do not want your own personal integrity put into question. You have been doing that. So all’s good on that front.

    You shouldn’t even need to worry about it, in my view. I think it is 100 percent crazy that this is even an issue. There are rules that apply at every one of the boards that protect us all from this sort of thing. But it is just an unfortunate reality today that the rules are not doing the job at this particular moment in time. Let’s all hope that that changes by the close of business today, you know? What more can we do than that?

    There are thousands of people who would like to see the boards opened up to honest posting, Wade. The sewer rats would not stand a chance if those who want to post honestly stick together. They count on our fear to get their way. We all need to learn to stand up to them. Then its over. Once we insist (NOT ASK!) that our right to post honestly be respected at all the boards, the Campaign of Terror comes to an end. All that garbage gets blown away in the wind. It means nothing in the long term.

    What matters is the substantive stuff. What matters is Valuation-Informed Indexing. You have done heroic effort helping us all develop and publicize the concept further. That’s the bottom line here. The bottom line here is very, very, very, very, very good news and we should not let all the ugly stuff being thrown about by the internet sewer rats cause us to lose sight of this wonderful, encouraging, life-affirming reality.

    Whew!

    Rob

  51. Rob says

    I do credit you and your ideas.

    Yes, you have done that. And I am most grateful. It brought a great deal of cheer to my Friday morning to see your blog post. You were entirely straight-up in the way you handled it.

    Rob

  52. Rob says

    I think a number of people have tried to engage you in discussions about SWRs and VII and felt they never could receive clear responses.

    I’m not responsive to questions.

    Buy yet we have What just up above saying that he doesn’t read my words because there are too many of them.

    If cannot be both, Wade.

    If people don’t want to hear the answers to their questions, they shouldn’t ask them. If people don’t read the responses, they have no complaint with me for not responding to them. To know what the response is to your question, you have to read it!

    I can write the responses. I cannot download them directly into people’s brains. If people want to know what the responses are, they are going to need to develop a willingness to read them. I cannot perform this particular task for them.

    I think that these particular words of yours are silly, Wade. I cannot say that I am impressed with these particular words.

    Rob

  53. Rob says

    It is important to assess whether sometimes your writing style may turn away people who initially expressed interest in your ideas.

    If there is some particular aspect of my writing style that you would like me to consider changing, I am of course happy to do so, Wade. But I can tell you that I was the most loved poster at the entire Motley Fool site in the days before I started posting about the realities of stock investing. John Greaney is the co-leader (with Mel Lindauer) of the Campaign of Terror. Do you know what John said about me in the days before I pointed out the errors in his SWR study? He had a post that stayed on the front page of the board for newcomers where he instructed them to read all of my posts before they did anything else because my stuff was “seminal.”

    Given that reality, you are going to have a hard time persuading me that it is my writing style that is the problem here. I think I have a pretty darn good idea what it is that sparks all the hostility.

    Here’s a Rob Bennett sentence that sparks hostility:

    “The Old School SWR studies are analytically invalid.”

    Here’s another:

    “Buy-and-Hold Investing is Get Rich Quick Investing.”

    Here’s another:

    “The decision by The Stock-Selling Industry to continue promoting Buy-and-Hold for 30 years after the academic research showed that there is precisely zero chance of it working in the real world is the primary cause of today’s economic crisis.”

    It’s not style that is causing the trouble, it is substance.

    Do we hush these things up? Do we stop saying them?

    Do we have any hope whatsoever of solving our problems doing it that way?

    That’s the rub, Wade. I want people to learn how to invest effectively. That’s my gig. The people who are angry with me want Buy-and-Hold to stand. We are working at cross purposes.

    They’ve got the numbers ten to one, right? We all know that.

    So there shouldn’t be a problem.

    With a ten to one advantage, they should be able to hold up their end of the discussion at boards at which honest posting is permitted. If they lack confidence that they can pull if off, that tells me something about Buy-and-Hold. It doesn’t tell me something good.

    It’s all about substance. My investing posts bring emotional pain to people. I get that loud and clear. I obviously don’t like causing people to feel emotional pain. I had a reputation in earlier days as a “puppy dog poster.” That’s the real me.

    But here’s the thing. A doctor sometimes has to cut into a person’s body, right? That causes pain too, right? Does it follow that the doctor is a meanie? It does not. It is the guy’s JOB to do that. He cuts to help.

    So it is with my posts. I put forward investing realities that cause people to feel emotional pain not because I enjoy causing emotional pain but because we just happen to be living at a time when hearing the realities causes many people to feel great emotional pain. People NEED to hear the realities. They are going to end up feeling a whole big bunch more pain than what my posts cause them to feel when their retirement plans fail. I cause some pain on the front end to save people from feeling far greater pain on the back end.

    The very fact that people feel such pain upon hearing what the data says should tell us how dangerous Buy-and-Hold is. When people follow a Get Rich Quick approach for many years, they become EMOTIONALLY INVESTED in it. We need to get about the business of treating people’s addictions to Get Rich Quick. This is important business.

    We live today at the best time to be an investor in the history of Planet Earth. Valuation-Informed Indexing is the best model ever developed, it permits us to enjoy the high returns of stocks by taking on only a small fraction of the risk that was taken on by all investors coming before us. We should be dancing in the aisles.

    Instead we are talking about all sorts of ugly stuff — deception, intimidation, smear campaigns.

    Huh?

    By an unfortunate twist of fate we learned about one huge breakthrough (the discovery of the Buy-and-Holders that short-term timing doesn’t work) before we learned about the second huge breakthrough (that long-term timing always works and is required for long-term success). All that we need to do is to integrate the two huge insights and we have the best investing strategy ever developed by mortal man. If we fail to make the corrections to Buy-and-Hold needed, the economic crisis worsens and we end up in the Second Great Depression.

    I think it makes sense to let people know that we have an option other than letting our economy slip into the Second Great Depression. Call me madcap.

    Rob

  54. Rob says

    DRiP Guy has been quiet lately, but he made a forecast of his own, and I wonder if he is just quietly waiting for his forecast to come true: “I will remain bemusedly observing to see in what manner Rob eventually slips Wade under the wheels of the Hoco-train, as he eventually does all who attempt to engage him in a serious manner.”

    Those words are weird in the extreme, Wade.

    I’m happy to help you in your research in any way I can. If it bothers you that I have a long history of posting honestly on safe withdrawal rates, then it bothers you that I have a long history of posting honestly on safe withdrawal rates. It bothers Drip Guy a great deal. It bothers Orion a great deal. I’m going to keep on doing it. I have never for two seconds considered giving in to the pressure that those two and a good number of others have exerted on me to persuade me to stop.

    When you put forward an investing strategy that purports to be data-based, you take on a responsibility to make changes in that strategy when new things are learned from the data. We did not know that valuations affect long-term returns at the time when Buy-and-Hold was first put forward. The research showing that was put forward in 1981. It is in 1981 that the Stock-Selling Industry should have stopped promoting Buy-and-Hold to middle-class investors.

    We cannot wave a magic wand and go back to 1981. It is now 2011. The best thing that we can do is to tell people the realities of stock investing on January 24, 2011 forward. That’s what I intend to do. I wake up each day and I see what questions people have and I respond to them to the best of my ability, always striving to be honest in my responses, always keeping the academic research of the past 30 years in my mind when I craft my responses.

    If you think that there is some defamation post or intimidation post or harassment post or threat of physical violence post that a Drip Guy or an Orion or a Mel Lindauer or a John Greaney is going to put forward that is going to change that, all that I can say is that I have a record of continuing to post honestly on these matters despite having the biggest smear campaign in the history of the internet (by a factor of 50) aimed at me for nine years now. There are extensive Post Archives that prove it.

    I won’t ever post dishonestly on the numbers that my friends use to plan their retirements, Wade. I’m shooting straight with you re this one. Non-negotiable.

    Rob

  55. Rob says

    I still plan to write a paper about VII and will certainly credit your contribution in my paper

    Good deal. The right stuff.

    I hope you can forgive me at some point.

    Gibberish.

    as I did repeatedly at Bogleheads at a time when most anyone there wouldn’t have done it.

    Excuse me?

    There are thousands of my fellow community members who have expressed a desire that honest posting be permitted over the course of the past nine years, Wade. Here is an article at which I quote comments put forward by a small sample of 101 of them:

    http://www.passionsaving.com/The-Great-Safe-Withdrawal-Rate-Debate.html

    There are many fine, honest, generous-spirited people in all of our communities, Wade. You insult us without justification to suggest otherwise.

    You might want to spend a little time catching up on the history before you make any rash decisions. The Goons have not nearly the power today that they possessed before the stock crash. That caused a lot of middle-class people to start entertaining doubts about the merits of Get Rich Quick.

    I have a funny feeling that a lot more will begin forming doubts following the next crash. So the power of the Goons will be even weaker in coming days.

    There are a lot of political blogs that are not controlled or even heavily influenced by The Stock-Selling Industry.

    There are Post Archives with hundreds of thousands of posts. Everything that is being said here can be documented in thousands and thousands of cases.

    I wish that you didn’t need to get dragged into such ugliness for the “crime” of having put forward honest research on investing. But then I think it would be fair to say that just about everyone who has ever put a post to one of the Retire Early or Indexing boards (including a good number of the Goons at this point!) wish the same. It is what it is, Wade. I believe that there will be a day when things will be cleaned up. But you will have to decide for yourself how to manage your interactions with the Drip Guys and the Orions of the world until that day comes.

    Again, I will always remain happy to help out in any way possible. And I will never for two seconds suggest even a slight willingness to post dishonestly re the numbers that my many friends at all of the various boards use to plan their retirements.

    I have of course said the same words to the Goons on many occasions. I haves said thousands of times that I am happy to help in any way possible in the rebuilding of the boards. And I have always added that there is precisely zero chance that I will ever agree to post dishonestly on SWRs.

    I think it would be fair to say that you now possess a pretty darn good idea where things stand, Wade. I wish you the best of luck with however you elect to play it, my new and good friend.

    Rob

  56. Rob says

    If you have a better mousetrap, then why not build it, and they will come?

    That’s why I say that we should permit honest posting at Bogleheads, Drip Guy. What the heck do you think all this is about?

    I think it would be fair to say that, once we open up the board to honest posting, Buy-and-Hold falls. There’s not one person alive who doesn’t want to know how to invest effectively.

    So what are we waiting for?

    Rob

  57. Rob says

    I think good old Bogleheads
    and most internet forums, can easily handle a variety of opinions, and discussion about topics that are not supportive of their own central theme or ethos.

    What the heck are you talking about with this “not supportive of their own central theme or ethos” gibberish, Drip Guy?

    Bogle says that valuations affect long-term returns. I learned this from Bogle!

    Bernstein says that the Old School SWR studies get the numbers wildly wrong. And Bogle endorsed Bernstein’s book.

    We had thousands of people express a desire that honest posting be permitted at that board.

    Even Taylor Larimore has said that posts on the academic research and on the historical data should be permitted there!

    Valuation-Informed Indexing is a necessary improvement on Buy-and-Hold, Drip Guy. It is the kind of thing that that board is all about. It’s the future indexing and there are lots of indexers at that board! That’s why we have had so many there respond so positively.

    Now — let’s open things up to honest posting and bring in even more converts! Starting right –

    Now!

    Rob

  58. Rob says

    I just can’t imagine trying to ‘invade’ boards that had already told me to scram

    The board community did not tell me this, Drip Guy. Mel Lindauer and his Goon Squad told me this. There’s a big difference.

    Lots of people in the board community loved me to death. Those are the people who built the board. Who is Mel to tell those people whether they may learn what the historical data says or not? Who the heck does he think he is?

    I’m loyal to my friends, Drip Guy. My many friends over there want to see honest posting. I’ll post honestly or I’ll post not. That’s the bottom line re all this.

    Rob

  59. Rob says

    I instead would simply start my own board

    That is my board, Drip Guy.

    Whose board do you think it is? You think it’s Mel’s board? If it’s Mel’s board, why doesn’t he follow the posting rules that apply there?

    The board belongs to all the community members who post according to the rules of the board. That board belongs to lots of people. One of the few people who I would say it doesn’t belong to is Mel Lindauer. And that’s only because he found our norms unacceptable and disassociated himself from us. No one asked him to do that, Drip Guy. He chose to separate himself from that board community,

    Rob

  60. Rob says

    until eventually, he has been banned, 15 times, and sometimes from boards that had a long standing policy of never banning anyone!

    This part is accurate, in case anyone listening in is trying to separate the accurate stuff from the deceptive stuff.

    Do you find it odd that I am the only person in the history of the internet who has been banned from 15 boards and blogs without ever once having broken a posting rule, Drip Guy?

    Do you find it odd that I have had numerous site administrators write me nice notes apologizing for banning me?

    Do you find it odd that I have had people like Carl Richards (owner of the Behavior Gap blog) tell me that they have read everything they can find about Valuation-Informed Indexing and that they think that my stuff has “huge value” and then in the next sentence ban me from their blogs because it upsets their readers to learn that Buy-and-Hold doesn’t work?

    Is that my fault or is that Buy-and-Hold’s fault? Who is it that put these Get Rich Quick dreams in people’s heads, the people promoting Buy-and-Hold or Rob Bennett? Am I supposed to agree to never post honestly about investing for the rest of my life because many, many years ago Eugene Fama and Burton Malkiel and John Bogle developed some wrong-headed ideas about how stock investing works (while also being pioneers in leading us to some of the most powerful investing insights in history)?

    I don’t think that one person alive (especially Fama and Malkiel and Bogle) benefit from a decision by Rob Bennett to agree to post dishonestly. I think that our entire problem is the thousands of layers of deception that now are suffocating all of us. I think that honest and accurate and informed posting about what the historical data says is the solution to our troubles, not the cause of them.

    That’s my sincere take.

    Rob

  61. Rob says

    the various forums are the private and individual property of those people who pay the hosting, pay for the software, develop the following, and otherwise manage the site as they see fit.

    Then we should all be willing to adhere to the posting rules that the site owners put forward.

    No?

    Rob

  62. Rob says

    Rob has proven he is unable to respect those board’s boundaries

    Excuse me?

    I’m the one who put a thread to the Motley Fool board on November 23, 2002 urging community action to have Greaney removed from the community.

    There is no one who has spoken out as forcefully or as frequently in opposition to the internet sewer rats as I have.

    There are Post Archives.

    Rob

  63. Rob says

    There are dozens or hundreds of forums just as big, and just as influential, most of which do not endorse market timing as you two are espousing.

    I want to see honest posting on investing permitted at every board and blog on the internet, Drip Guy. I’m not playing favorites.

    I have a history at Bogleheads. I posted there for nearly two years and I have a lot of good friends there. And of course I am the biggest Boglehead in the world. There obviously would be no Valuation-Informed Indexing but for Bogle’s many key insights.

    So that board has a special place in my heart. But I want to see honest posting permitted everywhere. I am not able even to imagine any possible downside. Are you?

    Rob

  64. Evidence Based Investing says

    I just can’t imagine trying to ‘invade’ boards that had already told me to scram

    The board community did not tell me this, Drip Guy.
    ——-
    Actually the board community did tell you this hocus, you just chose not to listen.

    The Bogleheads board was set up to escape you.

    The introductory post is here http://www.bogleheads.org/forum/viewtopic.php?t=3 and includes the following quote “Recent experience has been that one particular troll has been so desperate for attention that he has ruined the user experience at the Morningstar Diehard forum. This forum has been set up as an alternative venue for Diehards who just can’t take it any more. Trolls will not be allowed to post on this forum. Ever. ”

    The person referred to as “one particular troll” is you.

    Within a week over 400 people had signed up, over 1200 in the first month and close to 6000 by the first anniversary. There are currently over 23,000 members signed up.

    Now it might be convenient for you to pretend that it was just “Mel Lindauer and his Goon Squad” but the facts indicate otherwise.

    Your ability to alienate almost everyone who interacts with you on a discussion board has been consistent for years, even those who start out sympathetic to you. Normally you can behave yourself for a while but your current interactions with Wade seem to have descended to insults in record time.

    You seem much more comfortable in discussing board politics, bannings and your personal grudges against Mel Lindauer and John Greaney than discussing investing.

    It is amazing that Wade produced in one article, more actual information on VII than you have produced in your whole time writing about the subject. Wade’s research on P/E10 based timing should have been an opportunity for you to discuss your investing philosophy in factual terms. That opportunity seems to have passed.

  65. Rob says

    I am making an open and public statement that the world of the internet needs LESS Rob Bennetts, not more.

    And what you say goes, eh, Drip Guy?

    I’m not buying.

    I’m calling you out on your b.s.

    People who point out the dangers of Buy-and-Hold have every bit as much right to post at all of our boards and blogs as those who believe in it. For so long as we fail to permit both sides of the story to be told, the boards are corrupt enterprises. How can any community member possibly come to an informed take when only one side of the story may be told?

    I oppose Buy-and-Hold. And I have as much right to post at Bogleheads as John Bogle himself.

    Who says so? I says so.

    I hope that’s good enough for you.

    If it’s not, I guess it will just have to make do all the same. That’s my sincere take re this one.

    Rob

  66. Rob says

    He famously said “Let’s Disrupt!”

    Doesn’t every new idea disrupt those who have grown fat, dumb and happy following the old ones, Drip Guys?

    New ideas are disruptive be definition. What is so awful about the idea of discussing new ideas at investing boards?

    Given how the old ones have been performing for the past 11 years, I would think some new ideas would be very much in order along about now.

    I offer no apologies for putting forward new ideas at the Bogleheads Forum.

    Let me go even more out on a limb here. I’m damn proud to have been the first one to work up the guts to do it.

    Rob

  67. Rob says

    That’s not ‘free speech’; that’s ‘assault and battery.’

    Reporting the safe withdrawal rate accurately is assault and battery, Drip Guy. That makes sense.

    It’s hard to understand why I didn’t see it that way going back to the first day.

    Rob

  68. Rob says

    his noxious acts are not worthy of emulation by anyone wanting to develop or maintain a decent reputation.

    Yeah, yeah.

    Get angry much, Drip Guy?

    Rob

  69. Rob says

    The Bogleheads board was set up to escape you.

    I think it would be fair to say that there is a universal acceptance that this is a fact. Finally something brings us all together!

    I think it would be fair to say that we have a different take re what this fact signifies.

    If I had ever broken a rule, Morningstar would have banned me in two seconds. So I obviously never broke a rule. In fact, Alex Frakt acknowledged in a recent post that I never broke a rule.

    Alex said that I was banned because I represented “a threat to the community.”

    I say that the only thing that I represent a threat to is Buy-and-Hold Investing.

    Effective posting on the dangers of Buy-and-Hold is today banned at that board. It is a corrupt enterprise.

    That’s my take, Evidence.

    I love the board and the people who comprise it but I think that a board becomes a corrupt enterprise the minute that honest posting on an important piece of board business is prohibited.

    Rob

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