I’ve posted Entry #164 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called If Widely Held Views About Smoking Can Change, Widely Held Views About Investing Can Change Too.
Juicy Excerpt: I don’t think anyone truly believed that smoking is good for your health. So, in a literal sense, no, no one believed the stupid advertisements.
But it is important to remember that it is not the purpose of an advertisement to persuade through logic. One of the characters on Mad Men did a good job of explaining the purpose of advertising when she said that the idea is to persuade people to do what they want rather than what is expected of them. Advertising attacks the Super-Ego with the aim of making the consumerist Id more powerful.
The advertisements promoting the health benefits were aimed at people who already smoked. Research showed that these people were starting to develop concerns that smoking could kill them. So they were thinking of quitting or cutting back. The aim of these advertisements was to offer reassurance to people who wanted to smoke that it would be okay to continue doing so. The aim was achieved by putting forward absurdly deceptive claims that possessed emotional resonance because they gave people a reason to do something they very much wanted to do but which was beginning to cause pangs of conscience.
It’s the same story with the absurdly deceptive claim of the Buy-and-Holders that there is no need for investors to lower their stock allocations when prices rise to insanely dangerous levels.
More lazy re-runs. Y-A-W-N.
Okay, Anonymous. GET cancer. See if I care.
Just kidding around, old friend.
Rob
Here’s another one of those terrible re-runs for your listening pleasure:
http://www.youtube.com/watch?v=3MHkgwA8t-g
Oh, my!
Rob
Scott Burns discusses SWR including the affect of valuations
http://assetbuilder.com/scott_burns/understanding_and_setting_a_safe_withdrawal_rate?utm_source=hootsuite&utm_campaign=hootsuite
Whadda ya think?
I think Scott believes what he says in that article, Trebor.
I also think that Scott is wrong.
Scott accepts that valuations affect long-term returns. But he is not able to let in HOW BIG a factor the valuations factor is. So he RATIONALIZES until he has come up with some positions that do not undermine his belief in the core Buy-and-Hold realities that he does not want to give up.
He points out that many do not believe that 4 percent will work today. He also points out that SWRs well below 4 percent are “too low.” He says that withdrawal rates above 6 percent are dangerous. Where does he come up with this stuff? Where is the research/data behind this jumble of sincere (but seriously jumbled) beliefs.
There is no research supporting the jumble of confusion put forward in this column.
There once really WAS research-based support for the Old School SWR findings. Those findings were wrong. But at least they were LOGICAL. That gives them an edge over what Scott Burns is putting forward in this article. If the market is efficient (there were once a large number of smart people who believed this), 4 percent really is the SWR. If the market is efficient, risk is stable and the SWR is always 4 percent. The Old School studies advanced our understanding of how stock investing works in a way that the jumble of confusion posted by Scott Burns does not.
If valuations affect long-term returns, then risk VARIES with changes in valuations, and the SWR sometimes drops as low as 1.6 percent (in the year 200) and sometimes rises as high as 9 percent (in 1982).
What people have a hard time accepting is how big a gulf there is between the strategic recommendations of Buy-and-Hold (rooted in a belief in the efficient market) and Valuation-Informed Indexing (rooted in a belief in Shiller’s research showing that valuations affect long-term returns). I understand why big change makes people skeptical. But the big gulf is not my doing. It is a result of the fact that the effect of valuations is huge and that this is the factor that the Buy-and-Holders happened to miss when they were putting together their models (in the days before Shiller published his research).
The bottom line here is that I think that Scott is sincere but that his thinking is hopelessly muddled and dangerous.
I am grateful to you for asking an intelligent question, Trebor.
Rob
“The aim was achieved by putting forward absurdly deceptive claims that possessed emotional resonance because they gave people a reason to do something they very much wanted to do but which was beginning to cause pangs of conscience.”
Rob, this sounds like something you know a lot about from personal experience making absurdly deceptive claims of your own!
I think it would be fair to say that I made one claim that was not absurdly deceptive on the morning of May 13, 2002, Sensible.
If that one wasn’t right on the money, why would the Buy-and-Hold Mafia have advanced tens of thousands of posts in the 11 years since saying that my claims are “absurdly deceptive”?
It’s almost as if the Buy-and-Hold Mafia doesn’t want us all to advance in our understanding of how stock investing works.
It’s almost as if the members of the Buy-and-Hold Mafia is adverse to saying the words “I” and “Was” and “Wrong.”
It’s almost as if the Buy-and-Hold Mafia is fine with pushing Get Rich Quick garbage so long as there is money and fame to be had by doing so.
I wish you the best of luck regardless of what investing strategies you elect to follow in any event, Sensible.
Rob
Why do you focus so much on the “Buy and Hold Mafia” here at your own blog? It seems you choose to post about the “goons” pretty much every day rather than using your own blog to post about your own theories.
BTW I look forward to that board you say that you will start soon, and look forward to participating in it. I would relish the opportunity to join you in moderating this said forum.
I hope your Christmas was a good one, and wish you a happy New Year.
Rob,
As mentioned many times, the bottom line is results. The buy and holders that you like to bash have had better return rates and have built up more net worth than you, based on what you have posted about yourself. You can make up any number of silly fantasies, but the facts will always get in your way.
The buy and holders that you like to bash have had better return rates and have built up more net worth than you,
Only if you fail to adjust for valuations. Which is of course the pure Get Rich Quick way of doing things.
The people invested in the Bernie Madoff fund bragged about their great returns before the Ponzi scheme that excited them so collapsed. Madoff is in prison today. I think it is fair to say that those who have engaged in financial fraud to block millions of middle-class investors from learning about the dangers of Buy-and-Hold (as revealed in 32 years of peer-reviewed academic research) will be joining him in days to come. Pink. I think it would be fair to say that you are in that group.
I wish you all good things.
Rob
Why do you focus so much on the “Buy and Hold Mafia” here at your own blog? It seems you choose to post about the “goons” pretty much every day rather than using your own blog to post about your own theories.
I focus on the Buy-and-Hold Mafia and our failure as a society to shut it down because that story is the biggest political and economic story of any of our lifetimes, Sensible.
We are the luckiest generation of investors that ever lived. We are the first generation of investors that has available to it the opportunity to reduce the risk of stock investing by 70 percent while increasing returns enough to be able to retire five to ten years earlier than we ever imagined possible in the Buy-and-Hold years.
Have you ever heard more wonderful news?
That news is wonderful for Democrats as well as Republicans. It is wonderful for women as well as men. It is wonderful for Christians as well as atheists. It is wonderful for blacks as well as whites. It is wonderful for lovers or jazz as well as for lover of rock. It is wonderful for the young as well as for the old. It is wonderful for Buy-and-Holders as well as for Valuation-Informed Indexers. It is wonderful for Goons as well as for humans. It is wonderful for haters as well as for lovers.
So the job is to get this wonderful news out before people.
One thing stands in our way.
The Buy-and-Hold Mafia. There are a number of people who made names for themselves promoting the pure Get Rich Quick approach and now that they have ruined millions of middle-class lives by doing so they want us all to agree to go along with their 11-year cover-up. It’s a terrible mistake to do so. Those who commit acts of financial fraud in support of the cover-up will be going to prison following the next price crash. Huh? When you find yourself promoting a strategy with so little support in the academic research that the only way it’s defenders can think of to “defend” it is to engage in criminal acts, I think it is fair to say that it is time to question the merit of that particular strategy.
And so thousands and thousands of people have done. We had hundreds expressing a desire for honest posting at Motley Fool. We had hundreds more expressing a desire for honest posting at Early Retirement Forum. We had hundreds more expressing a desire for honest posting at Morningstar. We have had academic researchers express a desire to be permitted to publish honest research. Even big-name Buy-and-Holders have mixed in honest words along with the smelly Get Rich Quick garbage that has made them so rich at the expense of the millions of middle-class investors who have assumed that these “experts” might be sharing their honest beliefs about how stock investing works with us all.
Bogle was honest enough in his book for me to learn that the Old School safe withdrawal rate studies got the numbers wildly wrong. Bernstein was honest when he said that anyone using one of the Old School studies to plan a real-world retirement would have to be out of his or her mind. Swedroe was honest when he put forward words that caused Lindauer to expel him from the Bogleheads Forum. Burns was honest when he said that I was right about safe withdrawal rates. Pfau was honest when he wrote to the authors of the Trinity study saying that they should correct the errors in their study before it caused even more failed retirements.
But all of these people want to continue making a buck by pretending to be investing “experts.” And all of these people know what the Buy-and-Hold Mafia will do to them if they dare to offer honest investing advice, advice consistent with the 32 years of peer-reviewed academic research showing that there is precisely zero chance that a Buy-and-Hold “strategy” could ever work for a single long-term investor.
What to do, what to do?
I could focus on the intellectual case, which every person even slightly knowledgeable in this field already understands on at least one level of consciousness.
Or I could focus on the Buy-and-Hold Mafia, which is the force that stops Wade Pfau and Larry Swedroe and Bull Bernstein and Jack Bogle and Scott Burns and all the others from sharing with us what they truly believe and thereby helping us all to become more effective investors rather than encouraging our most sick and twisted Get Rich Quick/Buy-and-Hold fantasies.
I think I’ll continue to focus on the role played by the Buy-and-Hold Mafia, Sensible.
I think that might be where the leverage is.
I think we might be able to bring this economic crisis to an end within six months of the day that Jack Bogle gives his “I Was Wrong” speech, thereby opening the way for thousands of “experts” to start posting their honest views rather than the smelly Get Rich Quick garbage that has come to pass for “expert investing advice” during the Buy-and-Hold Era.
Just another one of those crazy hunches that I have been known to experience from time to time.
Please take good care.
Rob
1. “Swedroe… caused Lindauer to expel him from the Bogleheads Forum.”
Uh, he posts there regularly, Rob. I think he might even have done so just yesterday or perhaps today.
2. “the Buy-and-Hold Mafia and our failure as a society to shut it down… is the biggest political and economic story of any of our lifetimes…”
Rob, does the L’il Missus even agree with you on this claim? Your Pastor? Your next door neighbor? You banker? Your investment advisor? The fellow at 7-11? The kids teachers? *Any* of the people you claim to talk to via email?
No?
No.
Instead, I imagine all of them think pretty much as I do — that’s a totally whackadoodle idea, and one that no one endorses, except a single insane man, self-isolated into a stumpy moldy basement out in the barrens of lower-middle-class exurban Virginia.
Get help. Soon.
I look forward to that board you say that you will start soon, and look forward to participating in it. I would relish the opportunity to join you in moderating this said forum.
You won’t be contributing to the new forum except perhaps to a trivial extent, Sensible.
This blog is a general-interest investing blog. I both permit and encourage honest posting on the last 32 years of peer-reviewed academic research. That makes this one special in a day when as a society we have not yet worked up the courage to stand up to the intimidation tactics of The Buy-and-Hold Mafia. But the general purpose is the same as that claimed by most investing blogs — to teach people reading it the realities of stock investing.
The new discussion board will be different. The starting premise of the new board will be that The Buy-and-Hold Mafia should be brought down and that all U.S. citizens should be permitted to give voice to their sincere beliefs about the past 32 years of peer-reviewed academic research. There’s not going to be any debate at the new board as to whether honest posting should be permitted. The debate will be re how we move forward, how do we achieve our goals of bringing down the Buy-and-Hold Mafia and opening the entire internet to honest posting on safe withdrawal rates and scores of other critically important questions.
80 percent of the posts from you Goons that I leave up at this board will be taken down at the new one, Sensible.
You could compare the two boards to a board that might have existed in the 1950s on the question of whether basic civil rights should have been extended to people without white skin to one that might exist today in which discussion of that question would be viewed as insulting to every participant in the board project. On the morning of May 13, 2002, I was not aware of the role played by The Buy-and-Hold Mafia in the destruction of the financial futures of millions of middle-class investors. So I needed a board of this type to learn about the matter. I don’t need that today. I now have access to all the materials at this site, showing beyond doubt how the Buy-and-Holders have employed death threats and unjustified board bannings and tens of thousands of acts of defamation and threats to get academic researchers fired from their jobs to block millions of middle-class investors from learning about the findings of the past 32 years of peer-reviewed academic research. Today I need the new sort of board, one in which posts arguing in “defense” of the purest and most dangerous Get Rich Quick scheme in history will not be welcomed any more than a post suggesting there there is some sort of merit in the idea of denying people with black skin their most basic civil rights would be welcomed in the current-day United States.
The core idea of the new project will be that we as a nation need to move BEYOND Get Rich Quick, that we have already paid too big a price for our unwillingness to stand up to the tactics that have been employed for 11 years now by the sorts of individuals who have put up posts in “defense” of Mel Lindauer and John Greaney (and Jack Bogle?).
Rob
Rob, does the L’il Missus even agree with you on this claim? Your Pastor? Your next door neighbor? You banker? Your investment advisor? The fellow at 7-11? The kids teachers? *Any* of the people you claim to talk to via email?
Yes, all of these people agree, Anonymous.
You know who else agrees?
John Greaney agrees. Mel Linduaer agrees. Jack Bogle agrees.
If any of these people thought that there was a single sliver of support for the “idea” that it is not necessary to consider price when buying stocks, we never would have seen a single death threat or a single unjustified board banning or a single act of defamation or a single threat to get a single academic researcher fired from a single job.
These people have not ACTED on these beliefs. They are AFRAID to act. That’s why we are today enduring an economic crisis rather than enjoying the greatest period of economic growth in our history.
But, yes, we all agree that price matters when buying stocks just as it does when buying anything else. Those who want to make a buck in this field keep it zipped so as not to bring on the wrath of the Buy-and-Hold Mafia. But they know it is b.s. That’s why they try to post honestly when they see little windows of opportunity open up. Jack Bogle has posted honestly on occasion. So has Bill Bernstein. So has Larry Swedroe. So has Scott Burns. And on and on and on and on.
We need to make honest posting on the last 32 years of peer-reviewed academic research in this field not the exception but the rule. That’s the job. To do that, we need to bury the Buy-and-Hold Mafia 30 feet in the ground, where it can do no further harm to humans and other living things.
Make sense?
Rob
I imagine all of them think pretty much as I do — that’s a totally whackadoodle idea
I recall a day when you were saying similar things about my claim that John Greaney got the numbers wildly wrong in his safe withdrawal rate study, Anonymous.
Rob
“Only if you fail to adjust for valuations. Which is of course the pure Get Rich Quick way of doing things.”
Wrong, Rob. I and the others could liquidate our accounts today and that is the value. I and others could take a sizable hit to any one of our components and still have significantly more than you. I and others have a significantly higher income stream coming from our investments. No matter which way you look at it, you can’t even come close.
Your problem is two-fold. You did not save enough before you retired. Secondly, you were not invested in the market and missed out on one of the largest increases we have ever seen. You are one of the biggest preachers of the Get Rich Quick scheme known as marketing timing and you didn’t even invest in the market. How ironic is that?
Your example of Bernie is laughable. Comparing a ponzi scheme to investing in something tangible is silly. If I buy stock in McDonalds, I own a piece of the McDonalds company. If I gave it to Bernie, he didn’t buy anything. Stop acting like a moron when using examples.
Rob, honesting post can only take place if you are not participating as you find it hard not to post without filling up the board with lies.
Rob,
Will 2013 be yet another year Buy and Hold crushes VII? S&P up over 25% on the year. What did VII yield for 2013 out of curiosity? I have no way of actually tracking it based on the vague information provided on this website.
I and the others could liquidate our accounts today and that is the value.
Not according to the last 32 years of peer-reviewed academic research, Pink.
If non-adjusted portfolio values were real, P/E10 could not be used to predict future returns.
P/E10 gains its power from the fact that overvaluation is a real thing.
Rob
Comparing a ponzi scheme to investing in something tangible is silly.
Shiller points out in his book that an overvalued stock market is a Ponzi scheme.
If honest posting were permitted at all of the boards, you would know this.
If honest posting were permitted, you would be hearing this on a daily basis not just from me but from hundreds of people.
When you ban honest posting, you don’t only hurt the ability of millions of others to know how stock investing works. You do harm to your own ability to understand how stock investing works.
Rob
Comparing a ponzi scheme to investing in something tangible is silly. If I buy stock in McDonalds, I own a piece of the McDonalds company. If I gave it to Bernie, he didn’t buy anything.
If you buy stocks that are overpriced by a factor of three, one third of your money is purchasing something real and the rest is purchasing cotton candy nothingness.
Mispricing is a lie. There is nothing real about it.
Hence, the use of death threats and unjustified board bannings and tens of thousands of acts of defamation and threats to get academic researchers fired from their jobs.
If Buy-and-Hold were something legitimate, you could point to peer-reviewed academic research showing that it is not necessary to practice price discipline. You can’t. You can’t because there has never been any such study. The idea that there could ever be a study showing that failing to take price into consideration when buying stocks could ever work for even a single long-term investor is a logical impossibility.
Rob
Rob, honesting post can only take place if you are not participating as you find it hard not to post without filling up the board with lies.
I filled up a lot of boards with posts pointing out the errors in the Old School safe withdrawal rate studies. I think that much is more than fair to say.
Rob
What did VII yield for 2013 out of curiosity?
Valuation-Informed Indexing is a long-term strategy.
No intelligent answer to your question is possible.
There is now 32 years of peer-reviewed academic research showing that investing for the long-term always works.
The very fact that that reality fills you with a burning rage tells me that there is something very wrong with the investing strategy that you follow.
I am not responsible for you having been taken. That was the other fellow.
Rob
The intelligent answer is it returned -10%+ given Rob’s investments in TIPs. But who even knows if that is true or not.
The problem with P/E-based (or P/E10 or whatever) investing is that increases in E make it so you may be so far behind when you get back in the market that you may never catch up.
Also picking the time in entering/exiting stocks is difficult but probably easier than choosing what to invest in (and when) during the time the investor is out of stocks. Gold? TIPs? Oil/CCFs? Cash?
Good luck having the stomach to be in cash when the market doubles or triples over a 5-10 year period.
I am not even sure if Rob’s backtesting (which were back tested by JWR, not Rob, who was fairly unstable. Rob probably does not even have access to the raw data/results.) really pits VII against any kind of real portfolio.
The problem with P/E-based (or P/E10 or whatever) investing is that increases in E make it so you may be so far behind when you get back in the market that you may never catch up.
You’re wrong, Laugh.
Opting out of insanely overpriced markets is not “falling behind.”
The fellow trying to get you to pay $10,000 more than a car is worth has all kinds of jibber-jabber about how you are missing out on the opportunity of a lifetime too. That’s sales talk. Sales talk benefits the con man, not the person making the purchase.
The person making the purchase has to look at value propositions. When stocks offer the best long-term value proposition, go with stocks. When stocks offer a horrible long-term value proposition, look elsewhere.
This stuff is SO complicated!
Rob
Good luck having the stomach to be in cash when the market doubles or triples over a 5-10 year period.
I’ve got 140 years of historical return data backing me up, Laugh. You have zero years. That makes a difference.
That’s why you are the one engaging in death threats and unjustified board bannings and tens of thousands of acts of defamation and threats to get academic researchers fired from their jobs. It’s not me who for 11 years now has been showing signs of serious stomach problerms.
Rob
I am not even sure if Rob’s backtesting (which were back tested by JWR, not Rob, who was fairly unstable. Rob probably does not even have access to the raw data/results.) really pits VII against any kind of real portfolio.
Wade Pfau doesn’t know how to count.
That’s why he was awarded a Ph.D. in Economics from Princeton.
I forgot.
Rob
“Not according to the last 32 years of peer-reviewed academic research, Pink.”
Show me the research Rob, where it says that the liquidation value is not the real value. I can sell my stocks tomorrow and my account will show it as cash. Simple as that.
Last year, I decided that I no longer wanted a mortgage. I decided to liquidate some of my holdings and then subsequently paid off my home. So, according to your definition, my house must not be paid off”.
“Mispricing is a lie. There is nothing real about it.”
I guess we need to have a price listed next to it telling us what the “Rob Bennett” approved price level is, right?
Look, Rob, we all know you are suffering. You should have saved more for your retirement. If you had, then you probably wouldn’t have been too scared to invest in the market. Unfortunately, you missed one of the largest bull markets we have seen and you are stuck with a paltry net worth, while others have done well. All this has added to your emotional hurt and the best you can do it tell people these silly stories.
“Wade Pfau doesn’t know how to count.
That’s why he was awarded a Ph.D. in Economics from Princeton.
I forgot.
Rob”
That is the same Wade Pfau that said you were wrong on SWRs and that you should also leave him along.
That is the same Wade Pfau that said you were wrong on SWRs and that you should also leave him along.
Only after you Goons threatened to get him fired from his job and Jack Bogle backed you up.
Wade would LOVE to be able to do honest work. There’s nothing he would love more.
So would Jack. So would Larry. So would Scott. So would Bill.
So would thousands of others working in this field.
So you Goons lose in the end.
The question that remains today is how long your prison sentences will be.
Is long better or is short better?
What do you think, Pink?
The math on this one is a little too tough for me.
Rob
I can sell my stocks tomorrow and my account will show it as cash.
And the people invested in the Bernie Madoff fund could have done well had they cashed in in time too.
That’s how Ponzi schemes work, Pink. It’s the promise of the magical payoff that pulls in the suckers.
What do you think the chances are that you are going to be one of the ones who benefits from falling for a Ponzi scheme?
How often do you think that really happens?
Rob
I guess we need to have a price listed next to it telling us what the “Rob Bennett” approved price level is, right?
The accurate price should be reported every day along with the GRQ price.
Do you see any possible downside?
Rob
“Yes, all of these people agree, Anonymous.”
Bullshit.
From the mouth of a liar.
From the mouth of a liar.
I’m the one who got the safe withdrawal rate wrong and then refused to acknowledge the error for 11 years.
Good point.
Rob
Occasionally, Rob let’s a little truth sneak out:
Q: “What did VII yield for 2013?”
Rob’s reply: “No intelligent answer to your question is possible.”
Correct — At least, not from the guy standing on the sidelines for eleven years, Innumerate Rob, the Father and Sole Promoter of Lucky Seven, it’s sure not!
LOL
“And the people invested in the Bernie Madoff fund could have done well had they cashed in in time too.”
No they couldn’t,Rob. Your Bernie Madoff analogy is still wrong.
Also, still waiting to see your 3rd party proof on the threats. Until you provide the specific proof (and not links to your own posts), they remain as lies.
“The fellow trying to get you to pay $10,000 more than a car is worth has all kinds of jibber-jabber about how you are missing out on the opportunity of a lifetime”
Rob, it’s much more like we are back in 1970 and you need a car to start college and get you to and from a career, to follow. A Nova or similar small car might cost 2500, and if you got totally burned by a horrible dealer, then maybe you overpaid: sticker, then rustproofing, etc and someone who got the worst deal paid him $3000, but got a solid, reliable, well-comprehended vehicle to drive them into the future, as required.
Fast forward to the idiot who never bought a car, never went to college, never got that job, all because he was waiting for that brand new Nova to somehow miraculously drop to $2000 dollars, only because that was the price he mentally had stubbornly fixated on, as the ‘right’ price, rgardless of both need, and evidence to the contrary.
There is a name for someone with such catastrophically horrible judgement.
We call them “Bums”.
Uneducated, out of work, innumerate, angry, jealous, loser, scumbag bums.
Okay, Anonymous.
Okay, Pink.
Rob
Fast forward to the idiot who never bought a car
Your mistake is in thinking that stocks are the only car available to you.
When TIPS or IBonds or CDs are offering higher long-term returns at less risk, it makes sense to go with them.
No, the Wall Street Con Men won’t tell you that. For the same reason why the used-car dealer won’t tell you everything you need to know about buying cars either.
Sometimes people who are trying to sell you something tell little fibs to persuade you to send your money in their direction.
Shocking, I know.
Rob
Moving the goalposts in an obvious way sure doesn’t help your cause one bit, Rob.
1) Rob flatly stated: ““the Buy-and-Hold Mafia and our failure as a society to shut it down… is the biggest political and economic story of any of our lifetimes…”
2) He was immediately asked (and the question included the exact quote from Rob):
Q: “Rob, does the L’il Missus even agree with you on this claim?”
3) Rob’s Bogus Answer to the question that no one asked: “we all agree that price matters when buying stocks”
That’s some lame and clumsy stuff there, Rob. Very lame.
I’ll testify honestly at the congressional hearings and at the civil and criminal trials, Anonymous.
Testifying honestly means telling both the stuff that reflects well on you and the stuff that reflects poorly on you.
You’re a friend. It makes me happy when you give me something good to report.
But I’ll testify honestly in any event. If there are 19 bad things to report for every good thing that I can report on honestly, then that’s just the way it is.
I naturally wish you all the best things that this life has to offer a person.
Rob
“Sometimes people who are trying to sell you something tell little fibs to persuade you to send your money in their direction.”
True.
And if a would-be con man is as inept as you are at fabrication and salesmanship, then he of course gets nothing and goes hungry, despite his panic-level of desperation and his best efforts to fill his coffers.
How is that book selling, Rob?
How is book number two coming along?
I am looking forward to a $500 million payday, Anonymous.
I intend to use 5% of that money to promote this site.
I think it would be fair to say that I will have the #1 most popular personal finance site in the world in days to come.
I can live with that.
I wish you well, my future prison-dwelling friend.
Rob
“I think it would be fair to say that I will have the #1 most popular personal finance site in the world in days to come.”
Based on all your “fans” that come to your site now, I think we would be waiting a llllllllllloooooooonnnnnnnggggggggg time for that to happen.
I have a serious question for you, Rob, and I hope you take some time out of your evening to give me an answer. Do you talk to your wife about the future Congressional hearings, civil and criminal trials, and jail sentences for the Goons? If so, what does she say about all of this?
I see it just the other way, Pink.
People want to see you Goons in prison. They don’t want to see death threats or unjustified board bannings or tens of thouands of acts of defamation or threats to get academic researchers fired from their jobs.
But, outside of your smelly Goon garbage, people have responded well to my reports of what the last 32 years of peer-reviewed academic research says at every board and blog at which I have presented them. You obviously would not have risked going to prison if you didn’t see huge interest in my message. So your own actions confirm my observations re this one.
There is a HUGE pent-up demand for honest investing advice. I believe that the only thing we need to bring this economic crisis to an end and to enter the greatest period of economic growth in our history is for Old Saint Jack to work up the courage to walk up on a stage and say The Three Magic Words.
We’ll see.
Take good care, man.
Rob
Do you talk to your wife about the future Congressional hearings, civil and criminal trials, and jail sentences for the Goons? If so, what does she say about all of this?
She certainly knows about the Goon phenomenon in a general sense. Rarely do we discuss specifics. She knows that the police came to our house when I called them about the death threats. That gives her the general idea that there are going to be trials at which I will need to testify when this is over, right? But we don’t sit around discussing how much time I will need to spend testifying or whether it was a good idea for me to come forward with a suggestion that I would be willing to settle for $500 million or that sort of thing.
I always tell her about what went on at the Financial Bloggers Conferences when I come back. So she of course knows about my talk this year on “How to Become the Most Hated Blogger on the Internet” and how that was received. I told her about the woman who told me that people sitting near her said that I was “bitter.” When something like that happens, we talk about the human psychology elements of this. On the way back from Midnight Mass, we were talking in the car about my feeling that the best one-word summary of the emotional problem here is “shame,”that people have a hard time standing up to the Goons because on some deep level of consciousness they feel complicit in what has happened, they realize that they have a Goon side to their own personalities and understand that they played a role in causing all of the human misery that has come with the economic crisis and that that makes them not want to think about the implications of Shiller’s research.
The other day at lunch we were talking about something entirely different and my boy Timothy said: “Maybe you really ARE the product of an artificial intelligence project, Dad!” Then he followed that up by observing: “Or maybe you really are on the way to becoming a Saint!” He had read some of the quotes at the “People Are Talking” section of the site and someone at the Early Retirement Forum once said that about my ability never to give in to feelings of anger no matter what tricks you Goons pull. Timothy is interested in programming, so I think that quote tickled him a bit. I thought that incident was very funny.
Does that answer your question, Pink? We certainly talk about the Goon phenomenon. But we certainly do not talk about it to the level of detail at which you and I talk about it here or at Goon Central.
I think it would be fair to say that there is a suggestion in your question that this is all just a little bit too crazy to be true. I certainly agree. But history plays out the way history plays out, you know? Was it not a little too crazy to be true that Nixon kept tapes of his conversations in the Oval Office? Recall that nobody knew that at one time. People were trying to figure out how they would prove the case and they couldn’t come up with anything and then one day out of the blue they learned that he kept tapes of all his conversations, tapes that would obviously offer evidence of conspiracy and obstruction of justice. Do you not think that both sides saw that element of the story as just too crazy to be true?
It was the same with the Clinton/Lewinsky matter. There was a semen stain (which could be tested for DNA) and she saved the dress without having it dry-cleaned. How crazy was that?
History is filled with crazy stuff. That’s just the way it is.
I didn’t come into this thinking that I would be testifying in civil and criminal trials and congressional hearings and receiving settlements of $500 million and seeing my old friends from the Motley Fool board taken off to serve prison sentences and all this sort of thing. It all seems crazy to me too. But there’s nothing more crazy than thinking that I am someday going to agree to post dishonestly re the numbers that my friends use to plan their retirements. Of all the craziness that we have witnessed or will witness in days to come, it is that Goon hope that is the craziest element of the entire saga. So, if you are amazed at the craziness, please take a good long look in the mirror, Sensible. You brought a lot of the craziness on us with your belief that someday you might come up with some act of intimidation that would be scary enough to persuade me to agree to post dishonestly. There was never more than a zero chance of that happening and every post I ever put forward evidenced that reality. But that crazy thought has remained stuck in your head for 11 years now. Now THAT’S crazy.
The obvious reality here is that this thing was waiting to explode before I ever came on the scene. The Buy-and-Hold Mafia was intimidating people who showed an interest in reporting honestly on what the academic research says for 21 years before I put forward the fateful May 13, 2002, post. I didn’t know that. I cannot testify to details of what happened in those earlier years because I was not around. But it is what happened in those earlier years that made all that has happened for the past 11 years so crazy. The Big Shots in this field had been covering up the realities before the internet had been invented. People in the field could be kept in line because this is a high-paying field and the threat of losing their jobs caused a lot of people to engage in a lot of rationalizing of their decisions to keep it zipped about the obvious dangers of Buy-and-Hold strategies.
I wasn’t part of any of that. I wasn’t employed in The Stock-Selling Industry. I was a poster on an internet discussion board, nothing more and nothing less. So I saw nothing even a tiny bit “wrong” about posting honestly. THe hundreds of my fellow community members who told me that I started the most exciting discussion in the history of the Retire Early board saw nothing wrong with it either. But it freaked you Goons out entirely. You knew. Perhaps only on some buried level of consciousness. But you clearly recognized a big-time threat when it appeared before you. So we were off to the races.
Blame it on the internet, you know? The internet discussion board is a powerful new communications medium. The Wall Street Con Men didn’t factor in the power of the internet when they elected to cover up the findings of the last 32 years of peer-reviewed academic research. There was a major hole in their strategy that they didn’t see at the time because it didn’t exist at the time. The internet changed everything.
Anyway, we are where we are.
You can call it crazy that you will be going to prison because you didn’t want people to be able to learn about the implications of Shiller’s ideas when they arrived at internet discussion boards and blogs. It IS crazy. I certainly don’t say different. But you knew that there were laws against financial fraud. You knew that the crime you were committing was a felony. You knew that you were leaving permanent evidence of it in the Post Archives. You contributed to the crazy when you did that. I presume that you persuaded yourself that you would get away with it.
That’s crazy. But that’s an element of crazy that appears in MOST cases of financial fraud. When Madoff created those false documents, he must have believed on some level of consciousness that he would get away with it. No? It was a crazy thing to do. He could have made a lot of money setting up legitimate funds. There was no need for him to do things that stood a good chance of landing him in prison. And he was a smart enough man to know that. But he did the crazy thing anyway. Whachagondo?
I ain’t posting dishionestly on the nunbers my friends use to plan their retirements. Zero chance. Not in 11 years, not in 11 billion years.
That’s not crazy. That’s 100 percent sensible. I signed up at the Retire Early board to HELP people seeking early retirements, not to ruin their lives.
So I didn’t bring the crazy to the table here. I see it play out before me every day and I just do normal, healthy things in response. If people choose to engage in financial fraud on a massive scale, the normal thing to do is to testify honestly in the congressional hearings and civil trials and criminal trials that follow. Don’t put any of that on me, Sensible. I’m not the one who threatened to kill family members of any poster who posted honestly on the SWR topic. That was the other guy. His name is: John Greaney. He’s going to prison too. Perhaps you will be in a cell not too far away from his and you will be able to talk about funny stuff that happened in the old days from behind the bars.
I acknowledge the craziness of the situation. ButI think it would be fair to say that the thing that distinguishes me is that I am the person who has been working his backside off for 11 years now to see that the prison sentences are as limited as possible. My wife knows that. That’s the part that she needs to know and she certainly knows that much.
Guess what?
My good friend Jack Bogle knows too.
And my good friend Bill Bernstein.
And my good friend Larry Swedroe.
And my good friend Scott Burns.
And all my friends at Motley Fool and Early Retirement Forum and Morningstar and Bogleheads Forum and at the Financial Blogger Conferences and on and on and on.
They all want our economic system to survive. They all want our political system to survive.
Yes, they are scared of you and your brutality and your lack of conscience. And, yes, they are even more scared when they see people of great money and power and influence like Old Saint Jack saying things that shouldn’t be said or failing to say things that should be said and thereby empowering you Goons to deceive even more middle-class investors and cause even more financial devastation.
Will they work up the courage to do what their consciences have been telling them for 11 years now they must do following the next price crash, which will likely put us in the Second Great Depression?
You know what I think.
That obviously means a long prison term for you.
Given that reality, what would you say would be the more strange thing for me to do? Would it be more strange for me to keep it zipped and see my friend put in prison without me ever having made an effort to see his prison sentence reduced a bit? Or would it be more strange for me to do the best I could day after day after day even though my efforts to help my old friend out were rejected over and over and over again?
There’s lots of strange stuff going on here, Sensible. But it ain’t me bringing the strange stuff to the table. It is strange of you to feel so burning a hate for the findings of the past 32 years of peer-reviewed academic research that you are willing to go to prison to serve the “cause” of keeping discussion of the implications of that research off the internet. You Goons own the strangeness here.
I naturally wish you the best of luck in all your future endeavors, my strange Goon friend.
I am confident that my wife would wish you the same if I were to ask her. And most of the millions of middle-class investors whose lives have been destroyed by this massive act of financial fraud would probably do the same. We are the Normals. We don’t think like you Goons. We aim to build up rather than to tear down. That’s why you are the ones who are headed to prison and we are the ones who will be reaping the benefits of the 32 years of peer-reviewed academic research for many, many, many, many years to come following the resolution of the crazy, unfortunate, Goon-inspired segment of the otherwise wonderful and positive and healing and life-affirming saga.
Hang in there, man. There are people who care about what happens to you even when your head is so filled with confusion and anger and envy and shame and regret that you are no longer capable of doing so.
Rob
“Does that answer your question, Pink? We certainly talk about the Goon phenomenon. But we certainly do not talk about it to the level of detail at which you and I talk about it here or at Goon Central.”
You are mixing up your posters, Rob. That was a post from sensible. However, it was a good question to ask and your response was as delusional as usual. I think you have posted the same nonsense for so long, you actually believe much of what you say. I am just wondering when another 11 years have passed and nothing has changed, will you finally come up with the realization that you were wrong all along and you wasted a good portion of your life?
I suppose that time will tell the tale, Pink.
Please take good care.
Rob
She certainly knows about the Goon phenomenon in a general sense. Rarely do we discuss specifics.
So setting your usual verbose evasion aside, the answer to the question is No. You don’t talk to her about trials and prison sentences. Which is good! That means that at some level, you understand those are just fantasies. Perhaps that provides a tiny glimmer of hope.
“Or maybe you really are on the way to becoming a Saint!”
I have absolutely no doubt you believe that. But if anyone qualifies for sainthood, it’s your wife. Lord knows how she’s suffered.
We agree that my long-suffering wife qualifies for sainthood, X.
Take good care, man.
Rob
Rob: “…a felony. You knew that you were leaving permanent evidence of it in the Post Archives….”
Link? Just one single, solitary DIRECT link to support your claim? (and not just links to you blathering about your own blather, relative to your previous blather)
Rob: “I didn’t bring the crazy to the table here. ”
Oh, I very much beg to differ! LOL
The evidence will be presented to a jury and the jury will determine the length of your prison sentence, Anonymous.
That’s the way the system works.
My best and warmest wishes to you.
Rob
Q: “Do you talk to your wife about the future Congressional hearings, civil and criminal trials, and jail sentences”
A: [snip a two thousand, one hundred, and forty-five word long reply from Rob]
Observation: The truth don’t take long to tell.
Oh, I very much beg to differ! LOL
It’s my name on the May 13, 2002, post pointing out the errors in the Old School SWR studies. In that sense, yes.
But Greaney knew that when he pushed his study at a board on early retirement that he was taking a risk that someone there would look at the methodology and then let other community members know that there was no valuation adjustment.
It was my post that precipitated the events that followed. But had Bogle pointed out in 1981 that research has been published by a very big name in the field showing that Buy-and-Hold was a big pile of smelly garbage, there would not have been a nuclear explosion when I pointed out the errors in the Old School SWR studies. It was the 21-year cover-up that was the true cause of the problem.
And now things are worse with the cover-up having stretched to 32 years. And you Goons still blame me for daring to “cross” you and the Wall Street Con Men by posting honestly. I don’t buy it. Honest posting does not “cross” you. Honest posting helps you realize that the cover-up is killing us all and must be brought to a full and complete stop by the close of business today.
I do not apologize for being the person who discovered the errors in the Old School studies. I am proud of it. We would not have discovered together the hundreds of powerful insights that we have developed over the past 11 years had I not worked up the courage to “cross” Greaney by pointing out the errors in his study. My regret is that I did not work up the courage to “cross” him sooner.
Don’t let the bad guys get you down, Anonymous.
Rob
Observation: The truth don’t take long to tell.
You’re wrong, Anonymous. Tell the truth of why people with black skin were once not permitted to drink from the same water fountains as people with white skin in 10 words. It cannot be done.
You can tell oversimplified versions of the story that are more lies than anything else in 10 words. But you cannot tell the truth in 10 words.
It would be a lie to say that white people wanted it that way. Because many white people did NOT want it that way.
It would be a lie to say that black people were okay with the situation. Because many black people were NOT okay with the situation.
To tell the truth, you have to say something about the history that both white and black people of the time were born into. People are born into a gravely flawed world and then they work up ways to cope with it.
Jack Bogle is a hero of mine. He has accomplished great things. He is the second most important investing analyst alive today (second only to Robert Shiller).
Jack Bogle is a con man. He may well find himself on trial for financial fraud following the next price crash. He has posted in support of Mel Linduaer on numerous occasions and has failed to address the Lindauer matter after being notified of the problem in numerous e-mails.
The statements in both of the above paragraphs are true.
The complete set of realities cannot be reduced to 10 words. People need to hear both sides of the story to understand enough about the situation we are in today to know what needs to be done to help us out of it.
You are a Goon. Your heart is filled with hate for the past 32 years of peer-reviewed academic research.
You once had a sincere desire to know the realities of stock investing. It is the failure of your dream that has crushed your spirit enough to turn you into a Goon. If Shiller had published his research in 1971 instead of 1981 so that you wouldn’t have gotten your pride tied up in “defense” of the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind, you would be the biggest advocate of Valuation-Informed Indexing alive on the planet today.
The claims made in both of the above two paragraphs are true. It is not possible to tell the true story about what makes you a Goon in 10 words.
My job is to lead us out of the dark place in which we find ourselves. I cannot do it by answering goonishness from one side with goonishness from the other side. I cannot do it with 10-word descriptions of complex human realities.
If I were to try to reduce it all to something in the neighborhood of 10 words, I would say —
All human battles are battles of love versus hate and love must prevail in the end if the humans are to continue to exist together on this planet.
That’s the best I can do for you, Anonymous.
My warmest wishes go out to you and your Goon friends that you will find the spark of humanity that I believe resides somewhere in your heart to this day. Juries want to see a spark of humanity when they are debating within their minds whether to show some mercy or not.
Rob
Q: “Link? Just one single, solitary DIRECT link to support your claim?”
A: “The evidence will be presented to a jury ”
Translation: No. I have zero evidence to support my eleven year jihad against truth, reason, and sanity. So I could not possibly provide a link, even though I have been asked to do so repeatedly, and always failed to come up with anything except a wall of words and a transparent pathetic attempt at changing the subject.
That makes a lot of sense, Anonymous.
Rob
Rob: “Tell the truth of why people with black skin were once not permitted to drink from the same water fountains as people with white skin in 10 words. It cannot be done.”
A: Racism.
(Only needed one word to get the job done, so you can have the other nine budgeted words back, since you love to use words so promiscuously)
Then how did the situation change?
If racism was the only reality, we would still have those laws on the books today.
There was more going on that just racism.
So it is in InvestoWorld today.
Get Rich Quick was always a money-maker for the Wall Street Con Men.
So I could just say “the Wall Street Con Men saw an opportunity to make a buck and that’s why we are in an economic crisis today.”
But that’s not the full truth. It was the Wall Street Con Men who served as the Buy-and-Hold pioneers. It was the Buy-and-Holders who came up with the idea of rooting one’s investing strategies in the peer-reviewed academic research. There wouldn’t be any Valuation-Informed Indexing today if it weren’t for the good work done by the Buy-and-Hold pioneers yesterday. VII is Jack Bogle’s dream-come-true every bit as much as it is Rob Bennett’s dream-come-true.
So, no, ten words is not enough.
If I lie about safe withdrawal rates, we all go down. If I make the Buy-and-Hold pioneers out to be all bad, we will see such social unrest following the next price crash that we will all go down.
My job is to pull us together so that we do NOT all down. I will post honestly on safe withdrawal rates. But I will also point out that it was by reading Jack Bogle’s book that I learned about the errors in the Old School studies. So there must be SOME good buried at the bottom of all this smelly Buy-and-Hold garbage. No?
I will take more than 10 words to tell the story because it takes more than 10 words to tell the story honestly.
My best wishes.
Rob
Rob’s best effort to keep himself to 10 words? 28 words.
” If I were to try to reduce it all to something in the neighborhood of 10 words, I would say – All human battles are battles of love versus hate and love must prevail in the end if the humans are to continue to exist together on this planet.”
Rob, not everything is a war or a battle. Sometimes differences are just preferences, or proclivities, or desires expressed through action. The fact your father believed in buying an index, some bonds, then pretty much leaving it alone to grow over time, does not mean you have to fight his legacy, in a childish attempt to prove you are his equal or his better. IF you have a method you think is better, then espouse it. If you then also want other people to use it, then it better be specific, actionable, and it better work! You of course have done no such thing, and are clearly incapable of doing so, even after eleven years of struggling, blind, innumerate, angry, emotional, fruitless, illogical effort. You’ve had eleven years to explain, to use, and to prove your ideas. You have failed to do any of the three things: explain, use, or prove it superior to ANY other method, including just loading the dough into a mattress and hoping the bugs don’t eat it. Sometimes you gather truisms, like a cargo-cultist might gather remnants of a crashed airplane. You say “Valuations Matter.” As if anyone is actually challenging that old truism. They aren’t. But you expect people to somehow anoint you as a sage when all you’ve done is repeat something that far more capable and far more schooled and far more successful people have said for decades if not centuries. And if THEY could not develop a magic timing scheme that works in today’s (and tomorrow’s) world, what gives you the hubris to think you, and you alone, could do so? Even if you didn’t know better, and tried, the proof is in the pudding, Rob. You have not created, documented, nor used any such approach to investing. Your own cited economic realities have left you spending more than you earn, and your scheme lost ground to buy and hold that included equities. That is the truth, and the facts, and you well know it, try as you might to dissemble and ignore and deflect. Outside of income from the wife, kids, lottery, charity, or bequest, you would be totally broke today. The fact you have clothes on your back and a rabbit in the pot is absolutely traceable to someone OTHER than Rob Bennett earning the requisite money to obtain those things, and that also is a hard but a true fact. That’s no way to go through life, Bennett. Especially where a wife and young children are involved. Grow up.
But you expect people to somehow anoint you as a sage when all you’ve done is repeat something that far more capable and far more schooled and far more successful people have said for decades if not centuries.And if THEY could not develop a magic timing scheme that works in today’s (and tomorrow’s) world, what gives you the hubris to think you, and you alone, could do so?
I don’t care if people anoint me as a sage or not. What I care about is that the words that appear next to my name express my sincere beliefs, that they not be lies. If I say that the Old School safe withdrawal rate studies report the SWR accurately, I am telling a lie. So I am not going to say it, no matter how much in the way of intimidation tactics you apply to me.
How is it that I have done something that smarter people who have worked in this field before me have not been able to do?
Many of those people did their work prior to 1981. Shiller’s “revolutionary” findings changed everything.
Many of the people who did work in this field after 1981 had already done work in this field prior to 1981 and had associated themselves with Buy-and-Hold beliefs. Those people were compromised by their pride in discredited belief and by the friendships they formed at times when the research they needed to put the puzzle together had not been available to them.
Many of the people who did work in this field after 1981 and who were not compromised by taking a false pride in earlier, discredited work were intimidated by the brutal intimidation tactics of those who had.
That leaves me, Anonymous.
I never did any work in this field prior to 1981. So I was not compromised by earlier, now-discredited work. I have done my work post-1981, so I have had access to Shiller’s research. And I have refused to be intimidated by the Buy-and-Hold Mafia. I think a big factor there is that I formed personal friendships with many of the people whose lives were destroyed by Greaney’s refusal to correct the errors in his study. None of this is purely theoretical to me. It is a story of human lives being destroyed by the lowest of the low on the internet.
You make it sound as if no one else has been smart enough to see that Buy-and-Hold is a big pile of smelly garbage. There is of course nothing that could be farther from the truth. The very reason why we have seen such abusive behavior from you Goons is that JUST ABOUT EVERYONE sees. Freakin’ Jack Bogle sees it! Bogle is the king of Buy-and-Hold. If the King of Buy-and-Hold sees that Buy-and-Hold is a big pile of smelly garbage, who the heck DOESN’T see it? You Goons obviously see it or you wouldn’t behave the way you do.
The others can be bought off or intimidated into silence. I cannot. Why not? One very obvious factor here is that I am not employed in this field. With Wade Pfau, you can threaten to get him fired from his job and he has to think about what will happen to his two small children if he insists on his right to post honestly. I have never received a penny of income in this field. So there is nothing you can take away from me. So I continue to post honestly despite the threats.
You can threaten bloggers that link to me and try to destroy my efforts to earn a living on the internet. That COULD work. But I’ve got 11 years worth of Post Archives that would ruin me if I were to agree to post dishonestly and 11 years worth of Post Archives that stand to make me a huge sum of money following the next price crash if I resist your demands that I agree to post dishonestly. I don’t think you need an I.Q. of 140 to figure out what is the better play for me in these circumstances.
If Buy-and-Hold hadn’t already been ready to collapse when I came on the scene, I couldn’t have done this. I wouldn’t have been able to find honest comments from people like Bogle and Bernstein and Swedroe and Burns and Kitces and Pfau and on and on and on if people had not already begun positioning themselves for the post-crash years at the time I put forward that famous post of the morning of May 13, 2002. I was born at the right time, you know? I didn’t plan this, I fell into it.
What matters is where we stand. Behind Door Number One is Valuation-Informed Indexing and the greatest period of economic growth ever known in our history. Behind Door Number Two is a continuation of the Campaign of Terror and the onset of the Second Great Depression.
I choose Door Number One. Call me madcap. I have a funny feeling that many millions will be joining me following the next price crash, regardless of your intimidation tactics.
The deal here is that you can join in on all the fun or you can stretch your prison sentence out to the longest possible period of time. Those are the two live options available to you today. I beat you a long, long, long, long time ago. The proper way to put it is that the peer-reviewed academic research beat you, I just reported on it accurately and thereby got picked up by the biggest wave ever seen in the personal finance world. Bogle and the others have given you what you need to stretch out the pain. But no one can stop the first true research-based strategy from burying the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind 30 feet in the ground, where it can do no further harm to humans and other living things.
You want my help, you’ve got it.
You demand as a condition that I post dishonestly on safe withdrawal rates, please look up someone else, I am not the right fellow for the job.
I wish you all good things.
Rob
Why would Wall St make much less money on folks buying bonds then they do stocks?
Rob,
We keep seeing you repeat your claims of felonies. Can you explain why no prosecutor has filed charges for the things you allege?
When another 11 years have passed and nothing has changed, what will you do then?
Why would Wall St make much less money on folks buying bonds then they do stocks?
I don’t think that Wall Street has anything against bonds, Laugh.
It’s the super-safe asset classes that Wall Street doesn’t like. They undersell TIPS, they undersell IBonds, they undersell CDs.
Even there, I don’t think the underselling is motivated primarily by financial considerations. I think there may be some financial considerations. But I don’t see them as the driver.
To make sense of this, you have to understand the history.
The Buy-and-Hold Pioneers are heroes of mine. I’ve said that so many times now that I am getting sick of hearing myself say it. They came up with the idea of rooting one’s investing strategy in the findings of the peer-reviewed academic research. That was a profound advance, a magical advance. It is that advance that makes me love the Buy-and-Holders, that makes me feel that I am one of them.
They made a mistake. It was a perfectly understandable mistake but it was a mistake all the same. They came to believe that “Staying the Course” means staying at the same stock allocation rather than staying at the same risk level. For various reasons, the mistake remained uncorrected for a long period of time. Now people feel that it can never be changed! The feeling is — this mistake we made was so terrible that no one may ever talk about it, all discussion of it must be silenced, we won’t look like Big Shot experts if people learn that we once made a mistake. It’s the failure to correct the mistake that I criticize, not the mistake itself.
Now move forward to today.
Stocks are priced for a 65 percent price crash. The typical middle-class person should have something in the neighborhood of 30 percent of his or her money in stocks. The Buy-and-Holders say that something in the neighborhood of 75 percent stocks is “optimal.” So their numbers are wildly off.
You are asking what the financial incentive is for favoring stocks.
One, there is a financial incentive for selling stocks over things like TIPS or IBonds or CDs. The commissions are generally bigger in stocks. Again, I don’t see this as the driver. But it is a reality that applies.
Two, the experts would need to acknowledge their mistake to advocate bigger non-stock allocations. Their pride is at stake. They don’t want to go there. They are afraid of lawsuits if they acknowledge that they have been giving bad advice for many years now. They worry that they will be drummed out of the field if they offer straight talk when so many others are trying to keep the cover-up going. There is all sorts of nasty stuff going on.
Three, Get Rich Quick sells! This is probably the biggest factor. The way to get your clients to do business with you is to get them to like you. Tell them that their phony bull market gains are real and they fall in love with you. Nothing gains you as many brownie points as telling your clients that Buy-and-Hold really can work. It never does. But it sure sounds good to a lot of people to say that it might this time. Telling people that there is one asset class that is always a good choice for the long term is like telling people that there is some system that will always let you win the lottery. It’s pure b.s. There is zero support in the research for such a claim. But it sells like hotcakes.
Four, please don’t forget the obvious — MOST OF THE EXPERTS PROMOTING BUY-AND-HOLD STRATEGIES ARE DOING SO BECAUSE THEY BELIEVE IN THEM. A lot of people would continue to push stocks even if the commissions were LOWER. Stock salesmen are not pure revenue-focused creatures any more than any of the rest of us are pure revenue-focused creatures. Most of us are creatures of habit highly influenced by inertia. Buy-and-Hold has been the dominant strategy in the academic world for a long time. That alone is enough to give it lots of points over strategies that have only been shown to work better by the research of the past three decades.
Wall Street could do JUST FINE promoting Valuation-Informed Indexing. I think in the long run it would do better because we would not see any more financial crises. Financial crises HURT this industry big time.
The move to Valuation-Informed Indexing is in everyone’s interest. It creates all winners and no losers. It shouldn’t be even a tiny bit hard to sell. Logically, promoting a strategy that greatly increases returns while also greatly diminishing risk should be the easiest sell in the world. The problem is that today people who have a long history of promoting Buy-and-Hold are on the defensive. I want to change that. I try to praise the Buy-and-Holders every chance I get to make them less defensive. But the defensiveness is hair-trigger stuff. It is VERY hard to come up with ways to say things that point us to a better future that don’t make the Buy-and-Holders go stark raving nutso.
To a large extent, the industry is doing what it thinks its customers want it to do. If you took a survey, I am sure that most investors would describe Buy-and-Hold as the most responsible strategy. The industry doesn’t want to step in and say: “No, you’re wrong, it’s actually Get Rich Quick garbage, it’s very dangerous stuff we have been pushing so hard all these years.”
I tell that in a funny way to make a point. I don’t dislike the people who work in this industry. I like them. My take is that they are destroying themselves. Yes, their customers like Buy-and-Hold today. But what are they going to think following a 65 percent price crash? The time to deal with that problem is NOW, not after the crash has taken place. People who call themselves “experts” have responsibilities. People who give investing advice should be aware of the last 32 years of peer-reviewed research in their field and should be at least a bit curious about the implications of that research. They make themselves look very bad to the millions of investors who will be looking for someone to hang from a tree by pretending that they are not aware that valuations affect returns and that therefore there is zero chance that a retirement study that does not contain a valuations adjustment could ever get the numbers right. That’s basic stuff, Laugh, and the industry “leaders” in this field have placed themselves very much on the wrong side of the line re that one.
Lots of people in this field understand where things are heading and are making efforts to position themselves for the post-crash period. Kitces is doing that. Bernstein is doing that. Swedroe is doing that. Pfau is doing that. Even Bogle has come out with a good number of statements showing that he understands the dangers of Buy-and-Hold. The trouble is that he doesn’t want to give up all the applause he wins by telling people that their Get Rich Quick fantasies might really some true, So he includes one GRQ statement for every research-based statement and the Get Rich Quickers eat up the GRQ garbage with a fork and spoon while pretending that he never said the research-based stuff. Responsible behavior? Not nearly. But good salesmanship in the short term? The very best!
I hope that helps a bit. The question is a good one.
Rob
When another 11 years have passed and nothing has changed, what will you do then?
That’s like asking me “When you wake up tomorrow morning and find that you can flap your arms and fly over traffic jams, won’t you want to sell your car?”
I suppose that, if things that are impossibilities according to the last 32 years of peer-reviewed academic research start taking place in this crazy, mixed-up world of ours, I will have to come up with a plan for dealing with those new realities.
I am not going to plan today for something that has never happened and shows no signs of ever happening. It’s too far-fetched a scenario.
Rob
We keep seeing you repeat your claims of felonies. Can you explain why no prosecutor has filed charges for the things you allege?
There was an accountant who wrote a long letter to the SEC long before Bernie Madoff was brought down showing with numbers that the returns he was claiming his fund was providing were an impossibility. Why didn’t they file charges at that time?
Prosecutors are influenced by political realities. The political reality today is that millions of middle-class people have their lives riding on Buy-and-Hold. They have doubts as to whether it can work. But they cannot bear the thought that they have been played for fools and that their financial futures have been ruined. Until that changes, prosecutors will not win popularity points with the general public by bringing these cases.
This political reality will be stood on its head following a 65 percent price crash. At that time, the public will be screaming for action from prosecutors. Then the prosecutors will act.
One of my biggest fears is that the public will scream too loudly and the prosecutors will OVER-act. If that happens, we may seen the social fabric of the country torn apart.
One of my jobs is to see that that doesn’t happen. Emotional extremes beget emotional extremes. We all should be doing everything we can to make this a POSITIVE story. We are the luckiest generation of investors that ever walked Planet Earth. That should be the core message we convey to the millions of screwed-over middle-class investors.
We need to make people feel better about the future. But not by telling them more lies. We need an honest, optimistic message. The message should be — We now have research telling you how to reduce the risk of stock investing by 70 percent while also greatly increasing returns. Getting that message out helps all of us.
Rob