I’ve posted the third entry to my monthly column at the Balance Junkie site. It’s called Liberals Came Closer Than Conservatives With Their Explanation of the Economic Crisis.
Juicy Excerpt: The comedian John Stewart had a funny line re this aspect of the story. There was a debate in the early days that executives of firms in the financial sector should be denied bonuses because they would be out of work but for the bailouts they received from the U.S. taxpayers. One executive complained that, without bonuses, “we won’t be able to hold onto out best people!” Stewart observed (I’m paraphrasing) that: “You don’t seem to get it. That’s just the problem. You don’t have any best people! That’s why we’re in this mess!”
That hits close to the truth but not precisely in the way that Stewart meant the words. It’s true that Wall Street doesn’t have any “best people” today. It has plenty of smart and hardworking people, however. The problem is that smart, hardworking people learn what is in the textbooks very, very well, and we happen to be living in a time when most of what is written in the financial textbooks is outdated gibberish (Modern Portfolio Theory was discredited years ago but is still used in the analysis of financial transactions because there are so many powerful people who have made careers promoting it and who don’t want to acknowledge having made such fundamental and widely destructive mistakes).
what says
So..mortgage fraud, writing clearly bogus CDO/CMOs, and lying about credit quality is all in textbooks? Yes, clearly the problem is what is in the text books.
Have you ever even met anyone who works on Wall Street?
Brilliant Rob!
Rob says
I’ll need to get to this tonight or tomorrow, What. I have some religious services to attend.
Stay cool, Goon!
Rob
kimber says
Do you ever worry about being sued for lying about people (such as the “death threats” by Jon Greaney that you don’t seem able to document)?
critter says
That’s: Jon Stewart
Rob says
Do you ever worry about being sued for lying about people (such as the “death threats” by Jon Greaney that you don’t seem able to document)?
Everybody worries about what the Goons will do to them if they post honestly, Kimber.
Consider Scott Burns’ statement. He said that the reason he never posted honestly about safe withdrawal rates was not that he did not understand that valuations affect long-term returns. It was that the accurate SWR numbers are “information that most people don’t want to hear.” He’w worried that he will lose readers (and his paper will lose advertisers) if he tells us what the research says.
We didn’t know how stock investing works at the time Buy-and-Hold was developed. So I don’t find fault with the people who put the idea forward. I think they were doing a good thing.
But they created a monster. Lots of investors now believe in this stuff..
We need to deal with this problem as a society. The first step is having honest conversations. That means standing up to the Goons.
There is no other way.
Rob
Rob says
[i]That’s: Jon Stewart[/i]
Thanks, Critter.
Rob
Rob says
[i]So..mortgage fraud, writing clearly bogus CDO/CMOs, and lying about credit quality is all in textbooks? Yes, clearly the problem is what is in the text books.[/i]
Stocks were overpriced by a factor of three in January 2000, What. So a person who had a portfolio with a real value of $100,000 was for a time able to obtain $300,000 for it.
Is that not a form of fraud? If you don’t call it fraud to sell something worth $100,000 for $300,000, what would you call it?
Bull markets are fraud, What. They don’t call it a bull market unless there is fraud in it. If stocks go up by 6.5 percent real in a year (the long-term average return), do they call it a bull market?
The fraud that we saw as a result of the bull market entirely overwhelmed these other types of “fraud.” My guess is that you see those other things all the time. Human nature is what it is. When we have a bull market and we all end up busted, people go looking for things other than foolish stock-buying practices to blame and they start pointing to these other things.
The dollar amount of the overvaluation in 2000 was $12 trillion. What are the numbers for these other factors you mention? Nothing close, right? Which is the real fraud?
Rob
Drip Guy says
Rob continued to claim: “Scott Burns… said that the reason he never posted honestly about safe withdrawal rates was not that he did not understand that valuations affect long-term returns. It was that the accurate SWR numbers are “information that most people don’t want to hear.” ”
Scott Burns never said he did not post honestly. If one Googles the phrase “information that most people don’t want to hear,” and “Scott Burns”, one is inundated with…. well, with Rob Bennett repeating that snippet over and over. Bennett does it so often that Scott Burn’s original article and CONTEXT are almost impossible to find. But find them I did. So, the following is direct from the horse’s mouth (Burns), and not from the other end (Bennett). And of course, my post includes a link back to the original Scott Burns writing, so that you can easily check it out for yourself, unlike with 99% of Rob’s lamentations and claims.
“…research, cited in this column and posted on my website, indicates that a withdrawal rate of 5 percent a year is pretty safe. Start exceeding 5 percent a year and your chances of going broke start to increase, rising dramatically when you go over 7 percent. Worse, “pretty safe” isn’t what most people want to hear.”
Link #1:
http://old.dallasnews.com/s/dws/bus/scottburns/columns/archives/2000/000404TU.htm
Link #2:
http://www.uexpress.com/printable/print.html?uc_full_date=20000404&uc_comic=sb
Rob says
my post includes a link back to the original Scott Burns writing, so that you can easily check it out for yourself, unlike with 99% of Rob’s lamentations and claims.
I am grateful to you for providing the link, Drip Guy. That’s constructive.
I agree with you 100 percent that the best thing for people to do is to check out the original materials. That’s the great thing about the internet.
You demean yourself when you suggest that I have not gone crazy providing that link to people. I have linked it at this site in about five different places. I have linked to it in comments at blogs perhaps a dozen times. I have a permanent link to it on the home page of my blog.
It’s important stuff. I encourage all reading these words to follow the link and read the man’s actual words.
Rob
Drip Guy says
Why did you delete my post, merely truthfully asking why you continue to misquote Mr. Burns, now that the article’s actual words have been brought to your attention?
Rob says
The link shows that I quoted Burns accurately, Drip Guy.
You did a constructive thing by providing the link. Now people can check for themselves.
Once people check for themselves, it’s over.
Some may say they agree with you. Some may be so emotionally addicted to Buy-and-Hold that they cannot bear to acknowledge what he said. There’s nothing I can do about that. It doesn’t change what he said.
He said that the reason why he and others have not reported the realities of SWRs is that “it is information people don’t want to hear.” Implicit in that statement is an acknowledgment that it is TRUE information. Scott knows that the Old School studies get the numbers wrong. He doesn’t point out the error because it is not a popular thing to do.
I cannot take that path. It is dishonest. It would cause my readers great pain in the long run to think that those studies get the numbers right. Our collective decision as a society to tell these lies over and over again caused an economic crisis and is likely in days ahead to bring on the Second Great Depression.
This needs to stop.
I do thank you for pulling up the link. The best thing is for people to read his words for themselves. His words speak louder than yours or mine. So providing the link should put an end to it.
Rob
Rob says
Now I see the problem.
You did not put up the correct link.
Scott’s statement that “it is information that most people don’t want to hear” was in a column posted in June of 2005. I have linked to it at a number of places at my site.
Rob
Here Ya Go says
http://www.uexpress.com/scottburns/?uc_full_date=20050602
Rob says
That’s the one!
Thanks very much for helping out, Here Ya Go.
Rob
Drip Guy says
What an utter failure you are, Rob. The second article (provided by someone else!) no more supports your claim of what Burns says, than does the article I provided!
Your failure to recognize that, both originally and now, is a symptom of your mental illness, IMHO.
Burns never says he is afraid to tell the truth about ANYTHING, much less about his own constantly evolving views on what the best approach for retirement withdrawals were (and estimating the percentage to withdraw when doing so.)
What a sad liar you are.
Drip Guy says
And in case you missed this point, you definitively prove that you don’t read (or proofread or fact check check) anything, by saying the following of the first link:
“The link shows that I quoted Burns accurately, Drip Guy.”
Now, how could it do that if it was entirely the wrong link, Rob?
LOL
what says
Ya, obviously Scott Burns is not afraid to say that 4 or 5% withdrawal might not be safe…because he said it in the article!
Rob says
What a sad liar you are.
I’ve heard it all before, Drip Guy.
You wouldn’t feel a need to use such language if you had confidence in your investing strategy.
Buy-and-Hold has hurt you in very serious ways.
Rob
Rob says
Now, how could it do that if it was entirely the wrong link, Rob?
We’ve talked about that link o hundreds of occasions, Drip Guy. I made the mistake of assuming you to be honest enough to post the correct link.
Mea culpa!
Rob
Rob says
obviously Scott Burns is not afraid to say that 4 or 5% withdrawal might not be safe…because he said it in the article!
That was huge, I give him all the credit in the world for that.
But why doesn’t he demand that the authors of the studies correct them?
Why is he afraid to do that?
What is the problem here?
Rob
Drip Guy says
Rob: “What is the problem here?”
I think everyone else, except for one person, has that fully sussed out at this point, Mr. Bennett.
Rob says
That one person intends to continue posting honestly re safe withdrawal rates and other critically important investment-related topics, Drip Guy.
I wish you the best.
Rob