“People Have a Hard Time Understanding How This State of Affairs Could Continue for 32 Years. It Is Because of the Phenomenon Described in This Article. The Idea that Buy-and-Hold Is DANGEROUS (Not Just Imperfect) Has Been Considered Beyond the Pale for Those 32 Years.”

Set forth below is the text of a comment that I recently put to the Goon Central board:

Simply put, this objection to the president’s healthcare law is based on a falsehood, and letters that have an untrue basis (for example, ones that say there’s no sign humans have caused climate change) do not get printed.

This is the answer to the question put to me so often over the past 11 years — Are you saying that there is a Grand Conspiracy to keep people from learning what the last 32 years of peer-reviewed academic says?

There is a Conspiracy of Ignorance. And there is a Conspiracy of Silence re evidence that Buy-and-Hold is dangerous.

There once was a sincere belief that Buy-and-Hold was the answer. People were very excited about that finding. They lost interest in pursuing alternatives to Buy-and-Hold. The only interest was in REFINING Buy-and-Hold, which is of course something very different.

So long as the bull market continued, this was not going to change. There was no DEMAND for an alternative.

Since 2008, there is SOME demand. It is not yet strong enough to get every board and blog on the internet opened to honest posting on the research. But there is some demand today and it is growing. It will grow much more quickly following the next price crash.

People have a hard time understanding how this state of affairs could continue for 32 years.

It is because of the phenomenon described in this article. The idea that Buy-and-Hold is DANGEROUS (not just imperfect) has been considered beyond the pale for those 32 years. Many, many people have grave doubts. But they are aware of the Social Stigma attached to saying that Buy-and-Hold is DANGEROUS, not just slightly wrong but WILDLY wrong.

The longer the Social Stigma remains in place, the harder it becomes to violate.

Once the Social Stigma is removed, we will all work together to make progress at an amazing speed.

There is ZERO evidence showing that Buy-and-Hold works. ZERO. It was all a mistake. What happened is that people discovered that short-term timing doesn’t work and jumped to the hasty conclusion that long-term timing is not required either. There has never been even a tiny sliver of evidence that the latter claim is so.

This is not science. This is superstition. Scientific claim can be questioned and can survive the challenges put to them. Superstitions must be accepted on faith or they collapse. Buy-and-Hold is today a superstition, something many people believe in but something for which there is zero evidential support. It is BECAUSE there is zero support for Buy-and-Hold that Buy-and-Hiolders are so unwilling to acknowledge the mistake. Acknowledging  a mistake that has been doing damage for 32 years is VERY embarrassing.

The embarrassment gets worse and worse with each day that the Ban on Honest Posting remains in place.

The only way out is tearing down the stigma that blocks us all from engaging in honest and respectful and free discussion of the possible DANGERS of Buy-and-Hold.

The only way out is forsaking superstition and returning to the original idea behind the Buy-and-Hold project — learning what the RESEARCH says about what works in stock investing.

Rob

Comments

  1. Anonymous says

    Sadly for you; you hoist yourself on your own petard, sir.

    Reading your linked post over on what you call the “Goon Central” board, then considering the comments to that post, it is plain that the comments are far more lucid, fact-based, and unemotional than your original post starter!

    Rob, have you *ever* considered the possibility that the world is right and that it is you who are wrong?

  2. Rob says

    I was a Buy-and-Holder myself until the evening of August 27, 2002, Anonymous. So obviously I had to be wrong either prior to August 27, 2002, or after August 27, 2002. So there is no question whatsoever that I have been wrong about important matters relating to investing at some time in my life.

    The thing that persuaded me beyond any reasonable doubt that Buy-and-Hold is a big pile of smelly garbage is when John Greaney, who was a good friend of mine in the days before I “crossed” him by posting honestly on safe withdrawal rates, threatened to kill my wife and children if I continued to post honestly on that topic.

    It wasn’t just John. If it had been only John, I could have told myself that he was some crazy person and that Buy-and-Hold was still a legitimate thing. There were 200 of my fellow community members who endorsed John’s post. That’s insanely emotional behavior. If Buy-and-Hold was a legitimate strategy, the people who followed it would have confidence in their retirement plans. They wouldn’t behave in insanely emotional ways.

    The thing that made me fall in love with Buy-and-Hold in the first place is that it was the only investing strategy rooted in the peer-reviewed academic research. I feel that I am going to need to stick with my investing strategy for years. So I want something real. Strategies rooted in research make the grade. Strategies not rooted in research do not. The behavior I saw on the part of the Buy-and-Holders told me that the claim that Buy-and-Hold is rooted in research is a lie. No strategy rooted in research could induce such behavior on the part of the people who followed it.

    Sure enough, Academic Researcher Wade Pfau confirmed this finding years later. He looked through the entire research trying to find one study supporting the key Buy-and-Hold claim. He found nothing. He checked with Bogle and Bernstein and Swedroe and Ferrir. None of them had ever heard of a single study supporting the key Buy-and-Hold claim. I think it would be fair to say that that is because there has never been one.

    Buy-and-Hold is not a research-based strategy. It is a con. It is pure Get Rich Quick garbage dressed up like a research-based strategy. I want nothing to do with it. I hope to gain a reputation on the internet as the most severe critic of Buy-and-Hold alive on Planet Earth today.

    Could I be wrong about what I believe today?

    Obviously. I have clearly been wrong before. If it were happening again, I would probably be the last to know.

    But I am not going to put my name to an endorsement of the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind just because I know that there is a possibility that I could be wrong. If anyone ever presents me with the first study showing that there is some slim possibility that this “strategy” might work for one or two long-term investors, I will certainly take a look at it. Short of the Buy-and-Holders producing a URL to peer-reviewed research lending some credibility to this big pile of smelly marketing b.s. garbage, I cannot imagine circumstances in which I would ever grant it my endorsement

    For me, research-based strategies walk and smelly GRQ garbage strategies talk.

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

    Rob

  3. Anonymous says

    “John Greaney…threatened to kill my wife and children…It wasn’t just John…”

    Out of curiosity — I know you say that those who support Greaney or Lindaur, or Pfau, or Bogle, or Burns, etc are all felons, who will be going to prison. Super.

    But, putting aside those that are just supporters of the GRQ terrorists, how many people have actually made death threats related to their defense of the corrupt evil of buy and hold investing?

    I think I’ve seen you name at least four or five, is that right? But, is it more like a dozen? Even more? Could you please list them? And provide links to the actual threats? Do you think these horrible criminals will get more prison time than those whose crime is just read Bogleheads casually, or to have bought a book on Passive Investing, or merely quietly practice the dark art of non-Lucky Seven investing in secret on their own? Or is everyone who ever even toyed with buying and holding indexes without using PE10 going down, Rob?

    Curious to hear your take on these specific matters.

  4. Rob says

    There are millions of good and smart people who follow and believe in Buy-and-Hold strategies. I was of course one of them and I don’t see that these people have anything whatsoever to worry about. I think they are mistaken. But their mistake is understandable. There really is academic research showing that short-term timing doesn’t work. We really did not have available to us the research needed to come to an understanding of how things really work until 1981. Shiller’s research findings were truly “revolutionary.” So it is not hard to see why it would take some time for people to come to see the implications that follow from his work.

    I believe that it is the people who have in some way participated in the 11-year cover-up of the errors in the Old School safe withdrawal rate studies who are in danger of going to prison.

    There are four categories of people that I believe are in danger: (1) those who advanced death threats of other threats of physical violence; (2) those who demanded unjustified board bannings or who agreed to such bannings; (3) those who engaged in tens of thousands of acts of defamation; and (4) those who threatened academic researchers or who were aware of threats made to academic researchers and who failed to do anything about it.

    The number of people at risk is in the hundreds or perhaps in the thousands. I do not feel able to give a list of who will be sent to prison and who will not be sent to prison. That’s something we have to decide as a society. I am confident that my role will be to argue for fewer prison sentences and for shorter prison sentences that what most others are calling for. The issue is just too big and too novel for me to feel up to giving any kind of a precise count.

    The best way to understand it is to look at a particular case. I think Mike Piper is a good case to look at. Mike is a fine blogger. He is smart. He is hard-working. He is helpful. He HATED the idea of banning honest posting at his blog. He directed a lot of energy to finding some other means of dealing with the situation. All that obviously counts AGAINST a prison sentence.

    The other side of the story is that we will be seeing millions of people’s financial futures ruined because of the 11-year cover-up and Mike played an important role in keeping that cover-up going. He obviously knows that the Old School SWR studies don’t contain a valuations adjustment. He knows that Mel Linduaer is one of the leaders of the cover-up. He has acknowledged thinking that Mel is a jerk and has said that he doesn’t speak up against Mel only because he is afraid of him. All indications are that that is indeed so.

    If you post claims about retirement planning at your blog that you know to be false and millions of people experience failed retirements as a result, that’s obviously financial fraud. In ordinary circumstances, you obviously risk going to jail by doing that.

    Are you excused if the most abusive poster in the history of the internet threatens to destroy your business and if you know from personal experience that this individual is capable of going through with his threat and if big names in the field indicate that they are going to side with the abusive poster? WHO THE HECK KNOWS?

    No one has ever seen a case of financial fraud as big as this one, Anonymous Perhaps Mike is going to prison, perhaps he is not. Perhaps it will be a short prison term, perhaps it will be a long one. No one knows.

    I’ll tell you what I think.

    We are the luckiest generation of investors who ever walked Planet Earth. The peer-reviewed research that I co-authored with Wade Pfau shows us how to reduce the risk of stock investing by 70 percent. We shouldn’t be talking about how long Mike Piper’s prison sentence is going to be. We all should be working together to tap into the benefits of the amazing research findings of the past 32 years. We should all be working to bring the economic crisis to an immediate stop and to bring on the greatest period of economic growth in U.S. history. What’s the downside?

    If Mike is not sent to prison, I expect to be working with him for many years to come. That one is easy.

    If Mike IS sent to prison, I obviously won’t be able to work with him. But I am going to feel bad about him being sent to prison despite being such a nice guy and such a smart guy. So I want there to be lots of posts in the record when Mike’s prison sentence is announced showing that I did everything in my power to bring his potential prison sentence to the attention of Mike and his friends and to implore them to do everything they could to see either that there is no prison sentence for Mike or that his prison sentence is as short as it can possibly be given today’s circumstances.

    We all are going to have to live with ourselves following the next crash, Anonymous. I don’t think it is even a tiny bit responsible to hold off on talking about the prison sentences until the events that lock them into place have already taken place. I think the responsible thing to do is to talk about those prison sentences NOW and to do what can be done to get them reduced a bit NOW.

    So that’s what I do.

    The only way to answer the questions you are posing is to look at history and see how things have gone down in the past. We know that Bernie Madoff is in prison. We know that with the 11-year cover-up of the errors in the Old School safe withdrawal rate studies we are looking at an act of financial fraud that makes what Madoff did look like a drop of water in the Atlantic ocean. So there is clearly a problem here.

    The other side of the story is that we have never seen a case of financial fraud as big as this. So we just cannot give details of what is going to happen with a high degree of confidence. We are in 100 percent uncharted waters.

    I hope that helps a bit.

    My best wishes.

    Rob

  5. Anonymous says

    “If you post claims about retirement planning at your blog that you know to be false and millions of people experience failed retirements as a result, that’s obviously financial fraud. In ordinary circumstances, you obviously risk going to jail by doing that.”

    That must mean you are going to prison. You have been given proof that many buy and hold portfolios have returned superior returns, yet you preach against them. Instead, you promote a get rich quick scheme of market timing (that you won’t even follow). Market timing can lose people great sums of money if they do not trade at correct times. So, by YOUR definition, you are going to prison.

  6. Rob says

    I’m going to prison, Anonymous.

    The charge will be: “Reported on the errors in the Old School safe withdrawal rate studies 10 years before they were reported on in the Wall Street Journal.

    Maybe you and I will be lucky enough to get cells next to each other and we’ll be able to pass the time looking back at the old days.

    Take care, my old friend.

    Rob

  7. Anonymous says

    “I’m going to prison, Anonymous.

    The charge will be: “Reported on the errors in the Old School safe withdrawal rate studies 10 years before they were reported on in the Wall Street Journal.”

    Well, actually, Rob, according to Wade Pfau, he said you are wrong on the SWRs and also said that it goes beyond that. I guess that adds another fraud charge to your other wrongdoings.

    On the other hand, people like me have been pointing out your errors. I guess we will all be in line for a $500 million reward when you stand on that stage giving your “I was wrong speech” and all of your smelly garbage selling your get rich quick scheme comes to an end.

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