Yesterday’s blog entry reported on an e-mail that I sent to Academic Researcher Wade Pfau on February 25, 2011. He sent his response later the same day.
Wade thanked me for my messages, saying that our correspondence “gives me a lot to think about.”
He offered an observation regarding one potential pitfall for those following a Valuation-Informed Indexing strategy. He said: “The worse thing would be if he abandoned the valuations strategy in 1999 to join his friends with 100% stocks. I
think this is a real and unavoidable concern. Someone really has to be strongly committed to the strategy to not deviate at the worst possible time. But I think people can do it if they get a firm understanding about the historical data.”
I sent an e-mail to Wade on that day offering further comments on his exchanges with Drip Guy and other Goon posters. The text is set forth below.
You’ll never find consistency in the statements of Drip Guy and the other Goons. Their primary aim is to block fruitful discussions and they will say whatever needs to be said to achieve that aim.
I was FORCED to put up the post of May 13, 2002, that kicked off The Great Safe Withdrawal Rate Debate. Greaney founded the Motley Fool’s Retire Early board. I built the board into the most successful board at the site (posting only about saving). I had to take time off to write my book and a fellow named “Wanderer” became the best poster. Wanderer committed the “crime” of saying that he thought investing in real estate (instead of stocks) could make sense at times. Greaney signaled to his Goons that he wanted Wanderer gone and the deed was done. Greaney’s SWR study was the tool used (if the SWR can never drop below 4 percent, the long-term return for stocks is implicitly always 6.5 percent real and stocks thus can never be beat on a risk-adjusted basis (no need to study anything to invest in a stock index) by other asset classes. If I did not do something at that point, the board could never again serve as a useful place to learn about planning for an early retirement.
By pure coincidence, John Walter Russell had retired the week I put up the first post and was looking for something constructive to do. He did the first New School research on the sixth day of the discussions (May 18, 2002) and found that the sensitivity numbers for the Old School SWR studies were poor. Lots of community members got very excited about learning more.
From that point forward the battle has been over whether honest discussion should be permitted or not. Mel Lindauer (co-author of “The Bogleheads Guide to Investing”) and others knew who I was when I put my first post to the Vanguard Diehards board in July 2005. So my first post was met with abusive posting. Lindauer and others demanded that Morningstar ban me because I was not willing to post dishonestly but Morningstar was not willing to go along given that I had never violated any posting rules. When I announced an intention to appear at one of the annual meetings (where I would be able to direct questions to Bogle), the Lindauer group formed the new Bogleheads board off the premises of Morningstar.com and encouraged people to switch boards. Now the Lindauer/Drip Guy group does not need to get an independent site administrator to impose board bannings and they can maintain the ban without anyone being able to ask embarrassing questions.
You’ll never get anywhere with Drip Guy. I don’t mean to say that he does not follow Buy-and-Hold principles in his own investing. I believe he does. I asked Greaney how much he lost in the crash and he said “well in excess of $1 million.” That persuades me that they personally follow what they preach. But they have zero willingness to entertain the possibility that they have made mistakes. That by itself is not a problem (except for them). The problem is that they also have zero willingness to permit the hundreds of community members there who would like to be able to discuss both sides in civil and reasoned discussions to do so. I see that as a BIG problem in scores of different ways.
There are smart people in the community who say helpful things. But once honest posting is banned the thing becomes a corrupt enterprise.
It might be that Drip Guy and the others would play it a different way if they had a chance to do it over. But they now have to deal not only with having been wrong on SWRs but also with having destroyed numerous boards and blogs in their efforts to block community desires that honest posting be permitted. Drip Guy doesn’t feel even a tiny bit inclined to own up to that, according to every sign I have seen from him. So he often talks incoherent babble. He doesn’t see himself
as having any other choice at this point.
Sorry for the long answer. But I see no other way to help you make sense of the Drip Guy matter and of the fact that a good number of smart community members fail to speak up about it when it becomes an obvious issue.
They know that Drip Guy is in the Lindauer camp. That’s what matters as a practical reality, not whether what he says makes sense or not. And Bogle appears with Lindauer at the annual meetings. Community members there have noted that Bogle allows photos to be taken of him and Lindauer standing next to each other. That sends a signal to people as to what can and cannot be said at the forum.
That’s what needs to change. The entire Campaign of Terror against our board and blog communities comes crumbling down on the day that Bogle appears in a public forum and says the magic words “I” and “Was” and “Wrong” or the somewhat- less-helpful-but-still-magic words “I’m” and “Not” and “Sure.” When those words are said, all of the negative energy converts to positive energy and from that point forward everyone is working together to learn how stock investing works in the real world instead of pursuing counter-productive political agendas. No one gets left behind then. Learning how stock investing works (for the first time — the study of stock investing was
never a systematic academic enterprise before the research was done on the efficient market theory) is a win/win/win/win/win with no possible downside for anyone.