Academic Researcher Silenced by Threats to Get Him Fired From His Job After Showing Dangers of Buy-and-Hold Investing Strategies

Brett Arends wrote in the Wall Street Journal: “For years, the investment industry has tried to scare clients into staying fully invested in the stock market at all times, no matter how high stocks go…. It’s hooey.… They’re leaving out more than half the story…. Anyone who followed the numbers would have avoided the disaster of the 1929 crash, the 1970s or the past lost decade on Wall Street…. I wonder how many stayed fulled invested because their brokers wanred them ‘you can’t time the market’.”

The public policy implications are huge. If investors knew how dangerous it is to follow Buy-and-Hold strategies, they would buy stocks in the same way they buy everything else — buying more (that is, going with high stock allocations) when prices/valuations are low and buying less (going with low stock allocations) when prices/valuations are high. If most investors followed this smart, simple, and safe approach (it’s called “Valuation-Informed Indexing”), market prices would be self-correcting. Excessive valuations would cause investors to sell their stocks, which would bring prices back to reasonable levels.

We would never again see bull markets or bear markets or the economic crises that inevitably follow the loss of consumer buying power associated with bear markets. Each of the four economic crises that we have seen since 1870 (that’s as far back as we have good records of stock prices) followed an out-of-control bull market caused by the popularity of the Buy-and-Hold “idea” that price doesn’t matter when buying stocks. The bull market of the late 1990s insured that our economy would suffer a loss of roughly $12 trillion of buying power in the first decade of the 21st Century as stock prices worked their way back to fair-value levels, making today’s economic crisis inevitable. That’s why Yale Economics Professor Robert Shiller was able to predict the economic crisis in his book Irrational Exuberance, published in March 2000.

The question this article addresses itself to is — How do they pull it off?

It’s not hard to understand why financial planners would want to encourage their clients to invest heavily in stocks — most of the money made in this field is made through the selling of stocks and all industries want their customers to believe that the product they are selling is a good buy at any possible price. But how has Wall Street managed to convince millions of middle-class people to throw away large portions of their retirement money through a misguided belief in this obvious fiction?

Buy-and-Hold advocates argue that the academic research on stock investing supports their claims that market timing doesn’t work or isn’t required for long-term success. Academic researchers are independent actors. How have the researchers been persuaded to keep quiet about what the entire historical record so clearly shows to be the case, that long-term market timing (changing your stock allocation in response to big swings in valuations with the understanding that you may not see benefits for doing so for as long as 10 years) always provides investors with much higher long-term returns at greatly reduced risk?

It’s done through the application of brutal intimidation tactics aimed at those who stray from support for the company line. Other researchers with thoughts of telling the truth about stock investing see what has happened to their peers, learn the lesson that the industry needs them to learn for their Buy-and-Hold marketing slogans to remain effective, and self-censor their research.

Wade Pfau holds a Ph.D. from Princeton. He is an Associate Professor of Economics at the National Graduate Institute for Policy Studies in Tokyo, Japan.

I am the creator and lead promoter of the Valuation-Informed Indexing strategy. Mine is the only web site that offers investors in-depth guidance on the practical implications of Shiller’s research. I am also the person who discovered the errors in the safe withdrawal rate studies that have put millions of middle-class investors at grave risk of suffering failed retirements.

My discovery of these errors made me for a time the most hated poster on the internet. I have been subjected to hundreds of death threats, some placed in internet forums and heartily cheered on by the Buy-and-Hold investors who frequent them, and others sent by e-mail. I have been banned from at least 15 forums and blogs. I have even been banned from forums I have created! I have in several cases received apologies from the site administrators who banned me. I have in several cases been banned by people who told me they see great value in my work. All the same, I have been banned at every major board and blog at which I have tried to help middle-class investors learn about the 30 years of research showing that Buy-and-Hold strategies are dangerous for long-term investors.

Many people like me. Many people admire my work. Many people wish it could be different. But it is a rare individual who is willing to go up against the intense hostility that Buy-and-Holders show to those who report honestly and accurately what the academic research of the past 30 years tells us about how stock investing works in the real world. And it is a rare investing expert who is willing to take on the industry machine used today to enforce Buy-and-Hold dogmatism and punish steadfast dissenters with career death.

Wade learned of my work through my posts at the Bogleheads Forum before I was banned for the “crime” for pointing out the errors in the retirement planning studies (there is a widespread consensus today that the studies are in error but there is also a widespread consensus that the studies should not be corrected and that there should be no discussion of the cause of the errors – the use of methodologies rooted in the Buy-and-Hold model for understanding how stock investing works). He was intrigued by my ideas about safe withdrawal rates and about stock investing in general and sought an ongoing relationship in which he could pick my brain for the purpose of developing research on a multitude of important investing topics. I enthusiastically agreed to the idea.

The research product that followed is worthy of a Nobel prize. Wade’s work shows that: “Valuation-Informed Indexing provides more wealth for 102 of the 110 rolling 30-year periods, while Buy-and-Hold did better in 8 of the periods.” In short: ““Yes, Virginia, Valuation-Informed Indexing Works!

The data-based case for long-term market timing [Valuation-Informed Indexers agree with Buy-and-Holders that short-term market timing is a mistake] is so strong that Wade expressed amazement that no earlier researcher had published the same findings. He told me: “Valuation-Informed Indexing is much less risky by pretty much any standard I consider.  I must wonder… did I make a mistake somewhere?  Why haven’t academics already published research about this?” 

This article documents why no academic researcher prior to Wade Pfau reported such findings in the three decades since publication of Shiller’s revolutionary work compelled of any honest researcher examination of the questions explored in Wade’s research and why Wade abandoned his research on Valuation-Informed Indexing and changed his position on safe withdrawal rates (Wade at one time requested the authors of one of the discredited retirement studies to correct their study before it caused more failed retirements but now says that I am wrong to insist on such corrections because “this isn’t how research works.”) The Stock-Selling Industry exerts enormous pressures on researchers who report honestly what the data clearly reveals. None other than Shiller has been able to maintain his or her independence in the face of these pressures and even Shiller has refrained from providing investors the asset allocation guidance they need to invest successfully for the long term.

In short, the investing advice field is today 100 percent corrupt. No one is telling the full truth because, once someone tells the full truth, the 30-year cover-up of Shiller’s findings will be exposed and the industry will be hit with lawsuits calling for the recovery of trillions of dollars in losses.

Wade resisted the intimidation tactics (to some extent, never fully) for a time before giving up the fight. Today, he toes the company line. He knows that Valuation-Informed Indexing is far superior to Buy-and-Hold and that the discredited retirement studies should be corrected. His research shows these things. He told me that be believes these things in our e-mail correspondence. But he has elected to keep his mouth shut about such things when speaking in public, presumably waiting for the next price crash (stock prices are likely within the next few years to fall 65 percent from where they stand today, according to Shiller’s research) to increase public support for consideration of the powerful investing ideas we explored together and thereby to make it safe for him to talk openly about how stock investing really works.

Wade Pfau is not the only academic researcher in this field afraid to explore the realities of stock investing in his research. Rob Arnott once asked for a show of hands on two questions at a convention of academic researchers. He first asked how many of the researchers still believed in the Efficient Market Hypothesis (the academic construct that supports the Buy-and-Hold idea that it is not necessary for investors to consider price when buying stocks because the market always sets the price properly). Only a tiny number of hands went up. He then asked how many of the researchers would be basing the research they would perform when they got back to their offices on an assumption that the Efficient Market Hypothesis is valid. Nearly every hand in the room shot up.

Rajiv Sethie, Professor of Economics at Columbia University, said of my work: “Rob Bennett makes the claim that market timing based on aggregate P/E ratios can be a far more effective strategy than passive investing over long horizons (ten years or more). I am not in a position to evaluate this claim empirically but it is consistent with Shiller’s analysis and I can see how it could be true.” It would not take long to verify my claims empirically. Wade did so in a matter of weeks. The entire 140 years of academic research supports those claims and there has never been any data that supported the Buy-and-Hold claim that long-term timing is not necessary (Buy-and-Hold is rooted in a mistaken interpretation of data, not in any data itself). Yet in the two years since Sethie wrote those words, neither Sethie nor any of the many academic researchers who read his blog have found themselves in a position in which they felt comfortable evaluating my claims empirically.

Even Shiller has been intimidated. Shiller has said in interviews that he has never told us all he knows about stock investing because he would be branded “unprofessional” if he were to do so. Shiller’s book was a widely reviewed bestseller. But the careful reader noted an amazing deficiency of the book — never does Shiller offer any practical advice as to what investors should do with their money given his “revolutionary” (Shiller’s word) findings.

Nor does Shiller feel comfortable making the case that it was the promotion of Buy-and-Hold strategies that served as the primary cause of the economic crisis. He predicted the crises in his book, saying: “If over some interval in the first decade or so of the 21st Century the U.S. stock market is going to follow an uneven course down, as well it might — back, let us say, to its levels in the mid-1990s or even lower — then individuals, foundations, college endowments and other beneficiaries of the market are going to find themselves poorer, in the aggregate by trillions of dollars. The real losses could be comparable to the total destruction of all the schools in the country, or all the farms in the country, or possibly even all the homes in the country.” But Shiller has refrained from putting forward clear and firm and strong denunciations of Buy-and-Hold as the primary cause of the economic crisis causing so much human suffering today.

The  acts of intimidation that caused Wade to betray his research findings were advanced in public discussion boards and blogs by a group of internet Goons led by John Greaney (the author of one of the discredited retirement studies) and Mel Lindauer (co-author of the book The Bogleheads Guide to Investing). The issue of the use of intimidation tactics being employed by Buy-and-Holders to silence those seeking to post honestly on the implications of Shiller’s research has been widely discussed over the past 10 years at scores of boards and blogs. Thousands of community members have over the course of the ten years of discussions expressed a desire that honest posting be permitted on safe withdrawal rates and on many other critically important investment-related topics, to no avail.

Big name experts who participate at these boards and blogs but who have failed to speak up in opposition to the tactics of the internet Goons who threatened to get Wade fired from his job include: (1) John Bogle (I have sent Bogle two e-mails seeking his help with the abusive posting at the Bogleheads Forum): (2) William Bernstein; (3) Larry Swedroe; (4) Rick Ferri; and (5) Scott Burns. Large sites that have failed to take effective action against the abusive posting tactics of Buy-and-Holders include: (1) The Bogleheads Forum; (2); (3) Motley Fool; (4) The Early Retirement Forum; (5) the Oblivious Investor blog; (6) The Get Rich Slowly blog; and (7) the Monevator blog.

I have alterted the police department in Purcellville, VA, to the problem of the death threats and to the possibility that the Goon Squads led by Lindauer and Greaney may next resort to SWAT-ting, an intimidation tactic that has been used against a number of bloggers in recent days. I have also contacted a special internet crimes department of the Virginia state government. Finally, I described the matter in some depth in an e-mail to my congressman, Rep. Frank Wolf (R-VA).

Numerous big-name experts have spoken of my work in the most laudatory terms imaginable (please see the “People Are Talking” section of the home page of my blog; it runs down the left side of the page). None of the people who have made laudatory comments have dared to “cross” the Lindauer and Greaney Goon Squads, presumably our of fear of the threats of violence or career damage that would be visited on them if they were to do so.

Another big factor is the sustained popularity of Buy-and-Hold strategies. I write three weekly columns on Valuation-Informed Indexing at three different web sites and it is a rare event for these columns to generate comments from the readers of these sites. In contrast, my work in the saving area was so popular that it made my early retirement board at the Motley Fool site the most successful board in that’s site’s history — my board was so successful that Motley Fool designed an online retirement course around it and hired me as a paid instructor. Tom Gardner, co-founder of the Motley Fool site, wrote one of the blurbs that appears on the back cover of my book Passion Saving: The Path to Plentiful Free Time and Soul-Satisfying Work. He wrote: “The elegant simplicity of his ideas warms the heart and startles the brain.” I am today banned from the Motley Fool site.

Wade described to me his concern re the “hostile environment” that Buy-and-Holders create for those seeking to post honestly on the implications of Shiller’s research in his first e-mail to me. He proceeded to do his breakthrough research despite these fears, but never did he post at a board or blog re his findings without worries re what the Buy-and-Holders might do to him if he were to be blunt in his statements about the dangers of the strategy they favor.

Many community members showed great interest in his findings that Valuation-Informed Indexing is superior to Buy-and-Hold. One poster at the Bogleheads Forum said that Wade’s research showing the superiority of Valuation-Informed Indexing over Buy-and-Hold “refutes a central tenet of the Boglehead investing philosophy. It’s a big deal.” But Lindauer accused Wade of “data-mining.” Wade responded: “I take the issue of data-mining very seriously, and, with all due respect, any data-mining that I am doing is in favor of Buy-and-Hold, not in favor of market timing.” Lindauer did not apologize and made clear that his harassment would continue for so long as Wade continued to report on research findings showing the superiority of Valuation-Informed Indexing. Other community members kept quiet (Lindauer had a long history of posting abusively when the board community met at and was never disciplined).

Wade thought enough of his research showing the superiorty of Valuation-Informed Indexing to entertain hopes of having it published in the Journal of Finance, the most prestiguous journal in the field. He was greatly discouraged when it was given a “desk reject” by a less influential journal. The rejection letter stated: “We did not find the paper’s incremental contribution to the academic finance literature, assuming the analysis proved to be correct, rose to the level that we are seeking.” Another peer review report stated of Wade’s work: “The elephant-in-the-room question is — What is the ultimate criterion for one to conclude with confidence that one strategy is better than the other?”

Eventually, his paper was published by a journal that Wade characterized as “decent.” These defeats prompted his announcement in October 2011 that he would no longer do research on the “controversial” Valuation-Informed Indexing topic but would limit himself to examination of restirement planning topics.

Wade never expressed any doubt about the dangers of the conventional retirement studies. He said: “This is not the information that current and prospective retirees need for making their withdrawal rate decisions.” Even today, he acknowledges that the old retirement studies are obviously in error. The source of his friction with the Buy-and-Hold goons was on another point — Given that the studies get the retirement numbers wildly wrong, should they be corrected? The Goons feel that, once the Buy-and-Holders correct one error, their claims re scores of different investing topics will be widely challenged (Shiller’s research discredited the foundational assumption of the entire strategy).

There are so many retirements now in the process of failing that even the Buy-and-Holders have after ten years given up their effort to maintain that studies that do not contain valuation adjustments can accurately identify the safe withdrawal rate. But Buy-and-Hold advocates very much do not want to see corrections in the studies or any discussions of WHY the studies got the numbers wrong. Such discussions would bring to the forefront the question that strikes terror in the hearts of Buy-and-Hold advocates: Why do Buy-and-Holders continue to maintain that investors do not need to change their stock allocations in response to big price swings despite 140 years of return data showing otherwise?

Wade announced on April 27, 2011 that he had sent an e-mail to the authors of the Trinity retirement study urging that a correction be made (he did not reveal the precise text he used in his e-mail). One of the Goons wrote the following in a comment to the blog entry in which I announced Wade’s decision: “Rob –You likely think yourself quite clever for actually enlisting an apparently naive but scholarly dupe as your proxy to contact the Trinity authors about these supposed ‘errors’ (yet to be elucidated) that only you seem capable of seeing…. I think you will be surprised at how this apparently initially successful attempt will backfire on you.”

On April 29, 2011, Greaney and his Goons advanced threats to send defamatory e-mails to Wade’s employer and thereby “deny him tenure.” The discussion-board thread in which the threats were advanced is housed at the Goon Central board, owned by Greaney. I started the thread in which the threats appeared. My thread-starter was titled “Wade Pfau Contacts Trinity Authors.” It contained a link to the blog post at my site at which Wade agreed to contact the Trinity authors.

Rob Bennett: “There are many millions of people who have been hurt in very serious ways by the same analytical error that caused the Trinity authors to get the numbers so wildly wrong in their retirement study…. We should of course be grateful for the work they did. But we cannot ignore the harm that was done to millions of aspiring retirees by the mistakes they made. Ignoring that is going to down the road cause a political explosion that may well tear our society apart.”

Wade Pfau: “Okay, I took care of it. I was a little timid about contacting them, as I was publicly critical of their study in the past. But first I apologized to them for that. Then I explained my concerns about 4% for retirees since the mid-1990s. Valuations was a part of my list. I’ve even invited Prof. Walz to give a seminar at my university, as he is in Hong Kong during the spring term. This matter is settled.”

John Greaney (Greaney posts under the screen-name “Intercst”): “I hope Wade Pfau’s association with notorious Internet troll Rob Bennett doesn’t cost him tenure. ”

GW (one of the Greaney Goons): “The damage that it will do to Pfau is simply the amount of time and energy he diverts to dealing with Rob – unless he develops an extensive relationship with our wacko and someone alerts his fellow professionals to this. Then, his career could suffer because of a demonstrated lack of good judgment.”

Wade took the threats seriously. He told me in an e-mail dated May 1, 2011: “”I think I should stay publicly quiet for a while, as I really don’t want anyone sending messages about any topics to officials at my university.  They will not care about who is right or wrong, especially as they will not care about U.S. retirement planning issues anyway, but they just don’t like any topic of controversy or problems. Hopefully this stuff will blow over soon and those guys will forget about it and move on to the next thing before any further escalation occurs. But would you mind, at least for the next week or so, to not mention my name anymore on your blog, and to also completely ignore the “Wade Pfau Contacts Trinity Authors” thread at the Hocomania site.  I hope that thread can quickly move down the list into the archives.  At the same time, please do not delete it either, as that would surely be noticed by someone. By the way, please do not mention this publicly, but just to let you know, I haven’t heard back from any of the Trinity authors yet.”

Wade reported in an e-mail dated May 2, 2011, that his safe savings rate article had been published in the Journal of Financial Planning. He told me that he included a link to my Retirement Risk Evaluator calculator (which reports the safe withdrawal rate accurately) in a footnote. Wade observed: “It is a pity that you probably shouldn’t mention this for a while, or else those guys [the Greaney Goons] will send a bunch of nasty emails to the Journal of Financial Planning editors.” Wade said of the article: “Perhaps this approach can replace safe withdrawal rates, and since safe savings rates do incorporate valuations, as the revised published article makes clear, all is well.”

On May 16, 2011, Wade put a post to his blog endorsing the idea of permitting honest posting on safe withdrawal rates. He stated: ““Retirees now frequently base their retirement decisions on the portfolio success rates found in research such as the Trinity study. Studies such as those are fine for what they accomplish: they show how successful different withdrawal rate strategies were in the historical data. But it must be clear that this is not the information that current and prospective retirees need for making their withdrawal rate decisions.” I posted a comment to Wade’s blog expressing the view that: “This is the most important paragraph ever written about retirement planning, Wade.” I sent an e-mail to Wade that day applauding him for the post. He thanked me but said: “I don’t think I really said anything particularly new though.  It is the kind of thing you’ve been saying for years.”

Re the issue of whether the time was ripe for me to write about his study, he said: “Sure, it is okay to discuss the blog, paper, etc., in your blog now. But, perhaps, you do not need to emphasize my name so much, or even at all.  It is okay to just refer to it as “a new academic study” etc. I do not wish to antagonize the “Goons” too much, as I would like to reach a wider audience than them anyway, and I don’t want them working behind the scenes to derail me.” He added that: “I did warn the editor of the Journal of Financial Planning that they may receive some “hate mail” after I mentioned your name in the safe savings rate paper. Maybe it didn’t happen after all, but it won’t be a big problem even if it does happen now.”

Wade’s public position today is that there is no need for corrections of the discredited retirement studies. “That isn’t how research works,” according to the new Wade Pfau. He removed an article at his site at which he identifed me as the person who developed the Valuation-Informed Indexing strategy and reported that his research shows that Valuation-Informed Indexing beat Buy-and-Hold in 102 of 110 30-year rolling time-periods in the historical record. He also removed all comments that I had made to his blog. He put a post to his blog characterizing Greaney as the hero of the 10 years of discussions of the discredited retirement studies (Greaney has employed death threats and thousands of acts of defamation to intimidate board communities into not discussing the need for corrections).
Wade has objected strongly to my reporting on our e-mail correspondence. This is so unethical,” he said. He says today that: “I do not have any fears about the Goons. The reality is that you are causing me 1000x more career damage than the Goons ever could have by filling Google with so much nonsense about me.” He explains his earlier expressions of concern re the Goons by saying: “I was just trying to explain politely to you that I’d rather have you quit writing about me, or at least stop using my name. I suppose that I figured the only way you might understand why is if I explained it in terms of your favorite conspiracy theories.”

I have set forth below statements by Wade Pfau made during my 16 months of e-mail correspondence with him, arranged into five types of comments. Each comment has a link to the blog entry at my site reporting on the e-mail that contained that comment. I have posted a separate article containing links to all of my reports on my correspondence with Wade.

A) Academic Researcher Wade Pfau’s Statements Showing Interest In and Confidence in Rob Bennett’s Work

1) “I do cite you and John Walter Russell in my paper as the earliest and strongest advocates of this approach [New School safe-withdrawal-rate research].

2) “Are you aware of Shiller offering asset allocation advice based on PE10? …. If you read Rob Bennett’s stuff carefully, I think he did provide an important contribution in terms of describing a way for PE10 to guide asset allocation for long-term conservative investors. I also think he was right on the issue of safe withdrawal rates.” – Posted at the Bogleheads Forum discussion board.

3) “I am also extremely grateful to Rob Bennett for motivating this topic and contributing his experience and encouragement.” — Written in Acknowledgments section of Wade’s breakthrough research paper.

4)”You deserve much of the credit as the whole idea of Valuation-Informed Indexing belongs to you.”

5) “I definitely need to cite some of your work as the founder of Valuation-Informed Indexing, as I have not found anyone else who can lay claim to that.  Shiller pointed out the predictive power of PE10 but never discussed how to incorporate it into asset allocation, as far as I know.”

B) Academic Researcher Wade Pfau’s Statements on the Superiority of Valuation-Informed Indexing Over Buy-and-Hold

1) “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 Valuation-Informed Indexing….Valuation-Informed Indexing provides more wealth for 102 of the 110 rolling 30-year periods, while Buy-and-Hold did better in 8 of the periods.”

2) “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.”

3)  “Any data mining that I am doing is in favor of buy-and-hold, not in favor of market timing.”

4) “The findings for “market timing” are so robust anyway, that it hardly matters how we do it.”

5) “The maximum drawdown from market timing is much less. That is how far the portfolio drops from past highs to current lows. The Buy-and-Holder once experienced a 60.96% drop, whereas the worst drop for market timing was 24.16%.

6) “Market timing provides signficantly higher returns at a comparable level of risk.” 

7)  “The market timer enjoys a far less risky strategy.”

8) “On a risk-adjusted basis, market-timing strategies provide comparable returns as a 100 percent stocks Buy-and-Hold strategy but with substantially less risk. Meanwhile, market timing provides comparable risks and the same average asset allocation as a 50/50 fixed allocation strategy, but with much higher returns.”

9) “If everyone increased exposure after a market fall and vice versa, then this would dampen out the big swings in the market aggregates, and we might get shallower boom/bust cycles.

10) ““‘I’m excited about this, as depending on what you have already done, I think I can design a study using the Shiller data to provide historical simulations of Valuation-Informed Indexing strategies against fixed Buy-and-Hold strategies and also lifecycle strategies (declining allocation to stocks as one ages).  If  Valuation-Informed Indexing consistently outperforms fixed and lifecycle strategies, then the proof is in the pudding so to speak.  Given how well valuations help to explain withdrawal rates, I think there is a lot of potential for this topic.”

11) “Yes, Virginia, Valuation-Informed Indexing Works!

12) “It makes complete sense to have an equity allocation that is in some way flexible. Having a completely inelastic demand for equities is a bit bonkers; no-one acts that way with life’s other important commodities.

13)  “I wrote up the programs to test your Valuation-Informed Indexing strategies against Buy-and-Hold, and I must say that the results look very promising…. I am quite excited about the findings so far.  As you say in the podcast, Valuation-Informed Indexing should beat Buy-and-Hold about 90 percent of the time, and I am getting results that support this for various strategies.”

14) “I have been toying with the idea of sending the paper to the Journal of Finance, which is the most prestigious journal in academic finance.

15) “Now that I am accounting for risk, I am even more amazed by how well Valuation-Informed Indexing works.”

16) You shouldn’t be too excited with great wealth accumulations if they happened due to unusually high valuations, and low wealth accumulations shouldn’t be as scary if valuations are also quite low.”

17)  “My idea is to show many different tables with results over the whole period for returns and risks.  Valuation-Informed Indexing always provides more returns for often less risk.”

18) “No matter what I try, Valuation-Informed Indexing will still perform better in 85-95% of cases for 30 years.”

19) “I have a new figure for showing this as well. And a nice figure showing the outperformance percentages across rolling periods of lengths between 1 and 40 years.  I think it is all quite persuasive.

20) “You haven’t seen anything yet! This was just the secondary study.  I’m still working on the main one!”

C) Academic Researcher Wade Pfau’s Statements of Incredulity That He Was the First Academic Researcher to Examine the Valuation-Informed Indexing Strategy

1) ” I know that there is an extensive literature about the predictability of long-term stock returns dating back to Campbell and Shiller’s work in the mid-1990s.  I also know that there is an extensive literature about short-term market timing strategies….  But my question is about LONG-TERM market timing strategies. In other words, using market timing over periods of at least 10 years to obtain better returns than a Buy-and-Hold strategy. The literature seems slim.”

2) “Let me just explain a bit more why I posted about this here. Valuation-Informed Indexing has had critics for years, but until Norbert did it in 2008, nobody seemed to have provided a serious investigation of it. I just couldn’t understand why. And that bothered me.

3) “Two papers by Fisher and Statman are still all I can find that provide evidence against long-term market timing.

4)  “I’m so confused by why Fisher and Statman didn’t consider risk in their idiot switching tests.  Valuation-Informed Indexing is much less risky by pretty much any standard I consider.  I must wonder… did I make a mistake somewhere?  Why haven’t academics already published research about this?” 

D) Academic Researcher Wade Pfau’s Statements on the Dangers of the Conventional Retirement Planning Advice

1) “The traditional approach to retirement planning (as described on pages 10 and 11 of The Bogleheads’ Guide to Retirement Planning, for example) is counterproductive and possibly damaging.

2) “Retirees now frequently base their retirement decisions on the portfolio success rates found in research such as the Trinity study…. This is not the information that current and prospective retirees need for making their withdrawal rate decisions.”

3) “This article provides favorable evidence based on the historical record for long-term conservative investors to obtain improved retirement planning outcomes (lower savings rates, higher withdrawal rates) using valuation-based asset allocation strategies.”

4) Wade sent me a link to an article in Business Week that was published more than eight years after my post pointing out the errors in the Old School retirement studies and which he characterized as “quite sympathetic to the point you were trying to make all along”.

5)  “Though I was only trying to do an Old School safe-withdrawal-rate study, all that I ended up doing was showing in a different way what you had been saying all along: the safe withdrawal rate changes with valuations.”

6) “Valuations are the driving factor. ”

7) “This is similar to your drunk driving analogy, which I agree with.” The discredited but uncorrected retirement studies find that in most circumstances a 4 percent withdrawal rate provides a huge cushion for the retiree using it. However, in each of the three cases in history when stocks reached insanely high price levels, retirements using a 4 percent withdrawal came within a whisker of failing. To say that this shows that a 4 percent withdrawal is “100 percent safe” (these words are used in the Greaney study) for a retirement beginning at a time of insanely high price levels is like saying that driving drunk is “100 percent safe” because 97 sober drivers drove their cars 20 miles without incident while 3 drunk drivers were paralyzed for life in car accidents but did not die. The fact that 4 percent only worked by a whisker in the cases in which valuations were high at the beginning of the retirement shows that a 4 percent withdrawal is high-risk at times of high valuations, not that it is “100 percent safe.”

8) ” Actually, this issue shouldn’t really even be all that controversial. It’s just common sense that the probabilities from the Trinity study shouldn’t be interpreted as forward-looking probabilities for new retirees.”

9) Naturally, I am finding that Valuation-Informed Indexing can allow you to reach a wealth target with a lower savings rate, use a higher withdrawal rate, and also have a lower “safe” savings rate, than a fixed allocation.

E) Academic Researcher Wade Pfau’s Statements Showing His Concerns that Continuing to Report Honestly on the Investing Realities in the Face of the  “Hostile Environment” for Doing So Created by Buy-and-Holders Would Harm His Career

1) “I was trying to pay tribute to your accomplishments in what I knew would be a hostile environment.”

2) “Valuations and long-term investors is a somewhat controversial topic.” Wade posted these words to his blog in October 2011 as his explanation of why he was abandoning his plan of doing further research on the superiority of Valuation-Informed Indexing strategies over Buy-and-Hold strategies. He had told me in earlier days that “You ain’t see nothing yet!” when I praised his breakthrough research in this area. After his flip to the dark side, Wade removed the page containing this blog entry from his site.

3) “We have both read and met to discuss your paper. Unfortunately, we did not find the paper’s incremental contribution to the academic finance literature, assuming the analysis proved to be correct, rose to the level that we are seeking for papers in the JFR. Thus sending the paper to a reviewer would be inefficient.” These words are from an academic journal’s “desk reject” of Wade’s breakthrough research.

4) ) ““ I was discouraged when I first received the “desk reject” by the editors of the same journal that published the Fisher and Statman paper. I realized that I didn’t have a chance with one of the top journals.”

5)  “I think I should stay publicly quiet for a while, as I really don’t want anyone sending messages about any topics to officials at my university.”

6)  I don’t want them [the Goons] working behind the scenes to derail me.”

7) “I did warn the editor of the Journal of Financial Planning that they may receive some ‘hate mail‘ after I mentioned your name in the safe savings rate paper.”

For background on the ten years of internet discussions that aided my development of the Valuation-Informed Indexing concept, please take a look at this article. For an in-depth examination of the argument that the promotion of Buy-and-Hold strategies caused the economic crisis, please take a look at this article. The Stock-Return Predictor, a calculator that performs a regression analysis of the historical return data to reveal to investors the most likely 10-year annualized return for stocks starting from any possible P/E10 level, is here. Wade Pfau’s research showing the superiorty of Valuation-Informed Indexing srtategies over Buy-and-Hold strategies is here. Links to all articles at this site relating to The Wade Pfau Story are collected here.


  1. [...] Danielle Park wrote: “For all the many people who are still holding equities at present levels because their financial adviser insists that timing market cycles is impossible to do. Please awaken from your marketing-induced slumber and read this: Academic Researcher silenced by threats to get him fired from his job after showing dangers of buy-a… [...]

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