First, I will set forth seven factual statements that support the remarkable assertion advanced in the headline.
Then, I will set forth seven caveats that provide the context needed to come to a full appreciation of the unfortunate reality.
1) I put a post to a Motley Fool discussion board on May 13, 2002, pointing out the errors in the Old School safe-withdrawal-rate studies. These are studies that people use to plan their retirements. That the studies were in error was confirmed five days later, when John Walter Russell posted a sensitivity analysis on the studies. The studies have not been corrected to this day.
2) For nine years, both experts and ordinary investors denied that the Old School safe-withdrawal rate studies are in error.
3) In the past year, numerous big-name publications have acknowledged that the studies are in error. Yet they STILL have not been corrected.
4) Academic Researcher Wade Pfau wrote to the authors of the Trinity Study asking that they correct the errors in their study. They did not respond to the e-mail.
5) A group of internet Goons led by the author of one of the discredited studies threatened to send defamatory e-mails to Wade’s employer to get him fired from his job.
6) Wade relented. He now says that, while the studies are in error, there is no need for them to be corrected.
7) I have reported these facts on numerous occasions and tried to get others to do so. No one other than me has reported on the intimidation tactics.
Each of those seven factual statements on its own supports a conclusion that the investing advice field today is 100 percent corrupt. The combined effect of all seven is to leave no reasonable person in any doubt (so says I!).
It’s not just that I say that the Old School retirement studies are in error. That is acknowledged! There is today a widespread consensus on this point.
Yet the studies remain uncorrected! How could that not be financial fraud?
But even that reality does not convey the full extent of the corruption. No one has reported on the intimidation tactics that were employed to get Wade to flip to the Goon side.
Are these intimidation tactics not news? Do we not want academic researchers to give voice to their sincere beliefs?
Before I depress you too much, I rush to add the caveats, which also need to be considered by those wishing to understand the full reality.
1) There is no reason to believe that Buy-and-Hold was intended to be a Get Rich Quick scheme. It IS that. But the reason it is that is that the concept was developed at a time when all of the research needed to construct the model properly was not available.
2) Millions of smart and good people possess a sincere belief in Buy-and-Hold.
3) The experts in this field acknowledge that valuations affect long-term returns.
4) A minority of experts have in recent years given voice to doubts about Buy-and-Hold.
5) Making the transition from Buy-and-Hold to Valuation-Informed Indexing will require a rewriting of all the textbooks in the field. Yale Economics Professor Robert Shiller was not kidding when he described his findings as “revolutionary.”
6) “Cognitive dissonance” is a real phenomenon. It is written up in the psychological literature.
7) There is much evidence that experts in this field and publications in this field would do more to tell their clients and readers about the implications of Shiller’s findings if they would not lose business and/or readers as a result. Many influential people are waiting for their clients or readers to show an openness to hearing the message before presenting it to them.
In an objective sense, the investing advice field is 100 percent corrupt.
But one element of the crime of financial fraud is a negative subjective intent. It is clear that that negative subjective intent is not present in most cases. The confusion that millions of people are experiencing over the implications of Shiller’s findings is so great that my personal belief is that the crime of financial fraud should be found to exist only in those cases in which some element of negative subjective intent is demonstrated, such as cases where there are death threats or acts of defamation of improper board bannings or threats to do harm to the employment prospects of honest researchers.
Still, to have the investing advice field found to be 100 percent corrupt even in just an objective sense is unsettling stuff.
The good news is that the future is bright. Shiller’s insights are the most important insights in the history of this field. We fight discussion of them and we fight discussion of them and we fight discussion of them and we fight discussion of them. One fine day we will stop fighting discussion of them and begin enjoying the benefits that come from having the discussions we need to have to come to an acceptance of these powerful and enriching insights.
We humans are corrupt. Bad humans! Very, very, very bad!
But we’re redeemable.