Set forth below is the text of a comment that I recently put to another blog entry at this site:
If the US economy grows at 3% and the stock market returns 6.5% real (which is even higher in nominal terms), how do you explain this 3.5%+ gap?
Most people understand that this gap is the equity risk premium and is compensation for the increased risk of owning equities. If that risk goes away because everything is ‘perfectly valued’ as in your utopia, why would stocks maintain any kind of premium?
Shiller’s “revolutionary” findings do not change just our understanding of stock investing, Laugh. They change our understanding of Economics as well. That’s why the guy won the Nobel prize.
You are citing ideas that are part of the Efficient Market/Rational Man/Buy-and-Hold Model. Those ideas have been discredited. I pointed out above how the idea of a risk premium has been proven absurd. Stocks were the most risky they have ever been in U.S. history in 2000 and the risk premium at the time was a negative number. You have’t even TRIED to explain that one. That’s because it is 100 percent impossible to explain. Our old ideas re how economics (and stock investing) work are WRONG.
Many people in the economics profession see that as a bad thing. They have made a good living for themselves pushing all this discredited nonsense. So they fight people who present legitimate research or who explore the implications of legitimate research. I take it just the other way. I LOVE it that we have learned amazing things about economics and about stock investing in the past 30 years. These advances will make us all rich beyond our wildest dreams once we give ourselves permission to talk about them openly on the internet. I am the leading figure arguing for honest posting on safe withdrawal rates and LOTS OF OTHER CRITICALLY IMPORTANT INVESTMENT-RELATED TOPICS.
If you really want to know where the 6.5 percent real return comes from, do a Google search for Bogle speeches on that topic. He does a fine job of breaking it down. Bogle is honest in a good part of his writings. It was by reading one of Bogle’s books that I learned about the errors in the Old School safe withdrawal rate studies.
Where Bogle turns dishonest (whether intentionally or not) is when he says that a Buy-and-Hold strategy can work. The thing that distinguishes a research-based strategy from a Get Rich Quick strategy is the extent to which the investor is willing to change his stock allocation in response to price changes. Buy-and-Holders say that it is okay to not make any changes at all. That’s the farthest you can go in the direction of Get Rich Quick. Valuation-Informed Indexing is the farthest you can go in the direction of research-based. VII says that you should make whatever changes are required to keep your risk profile constant and not any more and not any less.
Buy-and-Holders and Valuation-Informed Indexers have no difference of opinion on where the 6.5 percent comes from. You can read Bogle’s speeches on that question and know that I am happy to sign on to what he says 100 percent.
We have a big difference of opinion of what the Buy-and-Holders call the risk premium. There is 140 years of historical return data showing that the risk premium (as the Buy-and-Holders imagine it) DOES NOT EXIST. Risk was the highest it has ever been in 2000 and return was the lowest it has ever been in 2000. Risk was virtually non-existent in 1982 and returns were off-the-charts high.
There IS a connection between risk and return. So the Buy-and-Holders were sort-of on the right track. The mistake they made was ignoring investor perceptions. Risk was sky high in 2000. But the PERCEPTION of risk was very, very low. Risk was virtually non-existent in 1982. But the PERCEPTION of risk was sky-high.
There is a perception-of-risk premium. But there is no true risk premium.
Why did the Buy-and-Holders get it so wildly wrong? As always, they ignored INVESTOR EMOTION. It is investor emotion that causes the perception of risk to be so wildly off from the actuality of risk.
What is the answer here?
PERMITTING HONEST POSTING.
The interests of the Wall Street Con Men are directly opposed to the interests of millions of middle-class investors. The Con Men LOVE, LOVE, LOVE Buy-and-Hold. Why wouldn’t they? It has made them millionaires.
But in the long run their relentless promotion of the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind hurts them as much as it hurts all of the unfortunate people who listen to their advice thinking that perhaps they are telling the truth. When you rape the middle class, you cause an economic crisis. People cannot buy things when they have no money! When you have an economic crisis, you have a political crisis. When you have a political crisis, all the money you obtained by pushing Get Rich Quick strategies is not of much value because you have no stable political system in which to spend it. Get Rich Quick is bad news!
That’s my sincere take in any event, Laugh. I believe that we should be permitting honest posting on safe withdrawal rates and on many other critically important investment-related topics at every board and blog on the internet.
My best and warmest wishes to you and yours.
Rob
“PERMITTING HONEST POSTING.”
Can you please define what you mean by that. I am unaware of any topic that has not been discussed.
That’s a good question, Anonymous.
What’s honest for you is not the same as what is honest for me.
You believe in Buy-and-Hold. So you can put up a post saying “a high stock allocation makes sense today” or “there’s no reason to believe that we are going to see another price crash over the next year or two or three” or “the Old School safe-withdrawal-rate studies provide a reasonable guide for what withdrawal rate to use in your retirement plan.” All signs are that you believe these things. So for you it is honest to say these things.
I do not believe these things, as you know. So for me it is obviously not honest to say these things.
You represent something close to the farthest extreme on the pro-Buy-and-Hold side and I represent something close to the farther extreme on the anti-Buy-and-Hold side. The vast majority of posters at every investing board and blog hold views somewhere in the middle of those held by you and me. There are many more who hold views closer to what you believe than there are who hold views closer to what I believe.
We all should be saying precisely what we believe. A board in which every poster says precisely what he or she believes is a board at which honest posting is permitted. A board in which some hold back because they worry about what will be said about them or done to them if they express their sincere views is not an honest board. Such a board offers those listening in to the conversations held at it a false impression of what the community believes. Any board at which people on one side of a spectrum of beliefs feels disinclined to state its sincere views is a dishonest and corrupt enterprise.
You post honestly already (except when you are trying to get someone kicked off a board and you use deception as one of your tactics). When I post honestly, I am banned. Others who share my views see that and refrain from posting honestly so as not to be banned. You see that few are posting in support of me and you conclude that few support me. But this is a false conclusion. At times when there were not Goons like you engaging in wildly abusive posting practices or when those abusive practices had not been going on long enough for people to realize how great the penalty would be for posting honestly, there were many community members saying that I had started the most exciting series of discussions ever held at any of our board or blog communities. When threats were made to kill family members of any posters who showed interest in discussing the last 33 years of peer-reviewed academic research, those posters either left the board altogether or stopped posting on the subjects re which they had learned that honest posting would not be tolerated by the Goons and by the site administrators.
Here are some topics that are not discussed regularly at the boards and blogs that have banned honest posting:
1) The question of whether it was the promotion of Buy-and-Hold strategies that was the primary cause of the economic crisis;
2) The fact that the Wall Street Journal and the Economist and Smart Money and numerous other big-name journals have published articles in recent years saying that Rob Bennett was right all along in what he said about safe withdrawal rates way back in May 2002;
3) The question of why it took so long for these journals to acknowledge that the numbers in the Old School safe-withdrawal-rate studies are wildly off the mark;
4) The question of what is the ACCURATE (that is, valuation-adjusted) safe withdrawal rate;
5) Why the research that I co-authored with Wade Pfau that shows millions of middle-class investors how to reduce the risk of stock investing by 70 percent has not yet been written up on the front page of the Wall Street Journal;
6) Why Jack Bogle has not taken action against Mel Lindauer and those who have posted in “defense” of him even though he has been made aware of the tactics employed by Lindauer at a discussion-board community that bears Jack’s name;
7) Why Jack says that investors only need to change their stock allocations by 15 percent at times of insane overvaluation even though the last 33 years of peer-reviewed academic research in this field shows that the difference in return that results when we go from the sorts of valuations that applied in 1982 to the sorts of valuations that applied in 2000 is 16 percentage points of return per year for ten years running;
8) Why Wade Pfau felt that his career would be destroyed if he continued doing honest research, research that believed to be the most important work he had ever done in his life, research that he thought was worthy of publication in the Journal of Finance;
9) Why following Buy-and-Hold strategies makes investors so darn emotional; and
10) Why Buy-and-Holders say that they agree that valuations matter but are unable to point to a single change they have made in their investing strategies as a result of the “revolutionary” (Shiller’s word) findings of the past 33 years of peer-reviewed academic research published in this field.
And the list goes on and on and on and on.
Shiller changed out understanding of how stock investing works in a fundamental way in 1981. We can never put the genie back in the bottle. Buy-and-Hold was once thought to be the first research-based strategy. We now know that the research never supported Buy-and-Hold, that the belief that it did was mistaken. I didn’t create that reality. That reality was in place long before I came on the scene. What I did was post in accord with that reality. I believe that Shiller’s research is legitimate and so I naturally only believe things about stock investing that are logically consistent with Shiller’s findings. Buy-and-Hold is not logically consistent with Shiller’s findings. Shiller showed that all investors MUST change their stock allocations in response to big shifts in valuations to have any hope whatsoever of keeping their risk profiles roughly constant.
Millions of good and smart people believe in Buy-and-Hold today. That’s so beyond any reasonable dispute whatsoever. That’s why we see friction on the boards and blogs when someone like me advocates Valuation-Informed Indexing strategies. If Shiller is right, Buy-and-Hold is the most dangerous strategy ever concocted by the human mind. It hurts Buy-and-Holders to hear that. It scares Buy-and-Holders to hear that. it enrages Buy-and-Holders to hear that. Many site owners don’t want the majority of their community members to be hurt and scared and enraged. So they go along with demands made by the Buy-and-Holders to ban further discussion of the findings of the past 33 years of peer-reviewed academic research.
That is not the answer!
It’s a temporary answer. It brings an appearance of peace to the board community filled with upset Buy-and-Holders. But banning discussion of the research ultimately only prolongs the agony. Buy-and-Hold doesn’t work! It has never worked for a single long-term investor! Not once in 140 years! The research that I co-authored with Wade Pfau shows that as clearly as it can possibly be shown. There are no two “sides” to this debate. We are all on the same side. We all want to see an end to this economic crisis. We all want to see our retirement plans survive. We all want our nation to enter the greatest period of economic growth ever seen in our history. We all want our board and blog communities to be non-corrupt and honest and helpful.
The question here is not whether honest posting should be permitted or not. Our social norms DEMAND that honest posting be permitted (just as our social norms demanded in the early 1960s that the laws that forbid people with black skin from drinking at the same water fountain as people with white skin be repealed). We are not a people that feels comfortable banning honest posting on important public policy questions. And how we invest is a critically important public policy question given that the false understanding of the question that applied prior to 1981 has now caused four economic crises, including the Great Depression.
We need to all reach 100 percent, total agreement that honest posting is going to be permitted at every investing board and blog from this day forward. Then we need to agree to processes that will help us all live with that decision.
There are sensitivities here. The Buy-and-Holders do not want to go to prison for having committed financial fraud. The Buy-and-Holders do not want to be held liable for financial damages for the millions of failed retirements they have caused. The Buy-and-Holders get upset when confronted with numbers showing that they have made a horrible mistake with their investing strategies. The concerns that Buy-and-Holders feel re these sorts of questions need to be addressed if we are to move forward.
I cannot address those questions on my own. These are public policy questions and they can only be addressed by the nation as a whole. Perhaps we will have Congress adopt some sort of amnesty for things that were done at earlier times. I simply cannot say. There has to be a national debate on these questions for us to figure out as a nation how to proceed. People like Jack Bogle and Robert Shiller obviously need to be involved in that debate. I can offer my thoughts. But this is not a matter that is going to be decided by any one person or any small group of persons. Every one of us has been affected by what has happened and every one of us has to have a say in the resolution.
We need to see responsible people taking responsible steps. That’s the bottom line here. When Bogle gives his “I Was Wrong” speech, that is going to change things in a big way. Once Jack gives that speech, people are no longer going to be afraid that they are going to be sued by the Wall Street Big Shots. That will cause a lot more people to speak out. Once Bogle gives that speech, people like Lindauer and Greaney won’t be able to get away with their b.s. intimidation tactics any more. That will also cause a lot more people to speak out. Once Bogle gives that speech and more people begin speaking out, bloggers and others who try to make money off this stuff are going to see that there is a huge opportunity to make lots of money creating tools that help people following Valuation-Informed Indexing strategies. That will cause even more people to speak out. One good thing will beget another good thing, which will beget another good thing, and on and on.
The tough part is getting Bogle to make that speech. We all should be working together to try to help Old Saint Jack understand how critical it is that he give that speech by the close of business today.
There are two things holding my good friend Jack back.
One, he is suffering from cognitive dissonance, as are so many other Buy-and-Holders. He really believed that this strategy worked. He is proud of the word he has done. He is capable of seeing that there might be small flaws in it. But he has a very hard time believing that his wonderful idea was the cause of the economic crisis and the cause of millions of failed retirements and all this sort of thing. It’s all just too much for him to take in at this moment in time.
We need to help Jack (and all the other Buy-and-Holders) understand what happened here. There are no magic words that can be said to make this happen. Jack will come around in time. He is obviously not dumb. But it is rare to see anyone get this on their first exposure to the ideas. People come around gradually. They need to be able to ask lots of questions. They need to hear lots of people offering their thoughts. They need to be exposed to the ideas multiple times for them to kick in. All this sort of thing.
The bottom line is that Jack must hear honest discussions. And of course the same is true of the many other Buy-and-Holders who today are having a hard time with this.
Two, Jack wants to be loyal to his tribe, the Buy-and-Holders. He doesn’t want all of his friends to become angry with him. He doesn’t want to see people held financially liable for giving bad advice for so long after the Buy-and-Hold Model was discredited by the academic research. He doesn’t want to see people go to prison. We need as a nation to address those concerns of his. We need to hear him give that speech and so we need to do what we can do to make him feel comfortable giving it.
The core issue here is that Buy-and-Hold and Valuation-Informed Indexing are OPPOSITE strategies. They are the same on every point except one — how the investor sets his stock allocation. But getting your stock allocation right is 80 percent of what it takes to be a successful long-term investor. So the real-world differences between these two strategies are great. And the Buy-and-Holders really believed that they were promoting something good, the world’s first research-backed strategy.
Under the ordinary way of doing business, people would have gradually been exposed to the new ideas starting in 1981 and, by now, we all would have made the transition to Valuation-Informed Indexing. It was the huge bull market that caused things not to turn out that way. People gave Buy-and-Hold the credit for the huge gains they thought they were earning in the late 1990s. They fell in love with Buy-and-Hold. So there is now a huge psychological resistance to making the switch to Valuation-Informed Indexing.
We have to start somewhere. We have to get the ideas out there. We need to hear lots of people commenting on them. If there are holes, we obviously need to hear that. If there are not holes, we need to hear that. We need to hear as much as we can hear from as many people as we can persuade to participate constructively.
We need to work together to bring the abusive tactics to a full and complete stop. We have seen from the first day that the majority of our community members LOVE exploring the Valuation-Informed Indexing idea so long as they do not see any death threats or demands for unjustified board bannings or tens of thousands of acts of defamation or threats to get academic researchers fired from their jobs. We need to be 100 percent adamant that that stuff comes to a full and complete stop. We are the luckiest generation of investors who ever lived. So we can figure out the rest together so long as we deal with the Goon problem in a clear and firm and absolute and final way.
I think that covers it, Anonymous.
If I was asked to give a short version, I would say that we will have honest, non-corrupt boards and blogs when every last one of us feels free to say that Buy-and-Hold is a dangerous Get Rich Quick scheme if that is what we believe. I remember saying that at a blog and one fellow telling me that he had never heard that idea expressed before. That fellow’s reaction tells the story of why we are in an economic crisis today. There is now 33 years of peer-reviewed academic research showing that Buy-and-Hold is the purest and most dangerous Get Rich Scheme ever concocted by the human mind (not intentionally, to be sure — but still). People need to hear that, over and over and over again. They need to hear the other side of the story too, of course. But they already DO hear the other side of the story. People need to hear the anti-Buy-and-Hold story as firmly and clearly and regularly as they today hear the pro-Buy-and-Hold story.
All of this will happen naturally once the intimidation comes to a stop. But the intimidation MUST come to a stop. It is killing us. We all know on some level of consciousness how dangerous the intimidation tactics are to our way of life. That’s why they are prohibited by the published rules of every board and blog. That’s why we adopted laws making financial fraud and the cover-up of financial fraud a felony under the laws of the United States.
I hope that helps a bit. Please take good care.
Rob
“What’s honest for you is not the same as what is honest for me.”
What you REALLY want is for people to think you are right. People have tried to tell where they disagree, but that hasn’t been good enough for you. Each of the points you brought up above, people have addressed (and explained how you are wrong). After awhile, they see that you are not really there to answer any questions, consider other points, etc. Instead, you ultimately want them to agree with you. You also want to be acknowledged as some kind of financial expert of similar stature to Jack, Larry, Bill, etc. That hasn’t happened and won’t happen. The majority of people do not agree with you and see you as more of a pest versus someone that has much to contribute. I know you like to make yourself feel better and convince people that you have this mass following by points out what you call recommendations, but that is just not the truth.
In short, Rob, you ultimately want people to say “Your are right, Rob” and then to be vaulted to some high level of stature. It just isn’t going to happen. After wasting your time for well over a decade, you would think you would have come to that realization. However, you are clearly so emotionally invested, you just can’t let yourself see reality.
What you REALLY want is for people to think you are right.
I want people to say that I am right if they think I am right.
I want people to say that I am wrong if they think I am wrong.
I don’t want to see either those who think I am right or those who think I am wrong to advance death threats or demands for unjustified board bannings or tens of thousands of acts of defamation or threats to get academic researchers fired from their jobs.
When people engage in that sort of thing to cover up errors made in retirement studies, they are committing the crime of financial fraud, which is a felony under the laws of the United States. That means prison time.
Not good.
My sincere take.
Rob
The majority of people do not agree with you
Most do not agree with me on the substantive points. Most have never heard Valuation-Informed Indexing explored in depth. That’s because the Buy-and-Hold Mafia has been engaging in abusive and in some cases even criminal acts to block people from learning about it. There has never been a case in which people did not respond in an extremely positive way to hearing about the ideas until abusive tactics were employed to poison the discussions.
The vast majority obviously agree with me on the process questions. If people liked the tactics employed by you Goons, there wouldn’t be rules prohibiting them at every board and blog, nor would there be laws on the statute books making those tactics a felony when they are used to cover up errors made in retirement studies.
My best wishes to you, Anonymous.
Rob
You also want to be acknowledged as some kind of financial expert of similar stature to Jack, Larry, Bill, etc.
Who put forward the May 13, 2002, posting pointing out the errors in the Old School safe withdrawal rate studies nearly 10 years before the Wall Street Journal published an article pointing out those errors?
Was that Jack Bogle?
If not, why not?
I think it would be fair to say that the most charitable explanation that can be put forward for why Jack did not point out the errors in the Old School retirement studies is that he did not at the time grasp that the studies were in error. Jack is one of the flawed humans. Jack does not know all there is to know about stock investing.
I have learned a lot from Jack and Jack in coming days will be learning a lot from me and from all the other Valuation-Informed Indexers. His true friends are today doing all they can to persuade Jack to drop the phony pride b.s. and get about the business of learning some things about how stock investing works that he very, very much needs to know.
I am the true Boglehead here, not you, Anonymous. And certainly not Mel Linduaer.
Take it easy.
Rob
” There has never been a case in which people did not respond in an extremely positive way to hearing about the ideas until abusive tactics were employed to poison the discussions.”
That is wrong. People ask you to back up your comments and you don’t. You then attack buy and hold (which has been proven over and over again to be successful for millions of people. In fact, you have been given data on many buy and hold strategies and their success, yet you can’t point to one fund that has followed your strategy and has developed a track record.
I am a person that makes decisions based on facts and results. The numbers tell the story. I look at the outcomes from implementation. It goes beyond just research. It is taking a strategy and implementing it to see how it works in the real world and then comparing the outcome of one strategy to another.
I know you like to make yourself feel better and convince people that you have this mass following by points out what you call recommendations, but that is just not the truth.
There are millions of middle-class Americans who very much want to learn how to reduce the risk of stock investing by 70 percent while increasing their returns enough to be able to retire five to ten years sooner than they ever before thought possible. The market for Valuation-Informed Indexing is the biggest market imaginable.
The number who follow Valuation-Informed Indexing strategies today is small. The way to increase the number who follow VII strategies is by telling people about it. We do that by opening every investing board and blog on the internet to honest posting re what the last 33 years of peer-reviewed academic research tells us about how stock investing works in the real world.
The Buy-and-Hold Mafia is trying to protect its turf. That’s the bottom line here. When prison sentences are announced for you Goons, the appeal of pushing the smelly Buy-and-Hold garbage is going to dim greatly for just about everyone in this field.
Then the dark days will be over.
Then we will all join in together to work rebuilding our nation from the wreckage caused by those who have posted in “defense” of you Goons, Anonymous.
I naturally wish you the best of luck with whatever investing strategies you elect to pursue.
Rob
“When prison sentences are announced for you Goons, the appeal of pushing the smelly Buy-and-Hold garbage is going to dim greatly for just about everyone in this field.”
When people like this, they see two things. First, they know you are not credible because what you call “buy and hold” has been very successful and is not how your portray it. Secondly, they see you as a crackpot when you throw around threats of prison. It makes you come off like a little child having silly revenge fantasies.
It goes beyond just research. It is taking a strategy and implementing it to see how it works in the real world and then comparing the outcome of one strategy to another.
I agree that it goes beyond research, Anonymous.
I was a Buy-and-Holder myself until the evening of August 27, 2002. That was the day that John Greaney threatened to kill my wife and children if I continued to “cross” him by posting honestly re the safe-withdrawal-rate. 200 of my fellow community members endorsed John’s action. 50 endorsed a post by one of my fellow community members saying that death threats were beyond the pale in investing discussions.
What does that tell you?
It told me that Buy-and-Hold causes investors to become more emotional than any other strategy that has ever been concocted by the human mind. You don’t see day traders engaging in the sorts of emotionalism that we see Buy-and-Holders engaging in on a daily basis. Why do you think that is?
It is because Buy-and-Hold defies common sense. It is impossible for any rational human to believe that price does not matter when buying stocks when we all know that it matters when buying any of the other hundreds of goods and services that we all buy regularly. It’s not just that there is zero peer-reviewed academic research supporting the key Buy-and-Hold principle (that it is not necessary for investors to exercise price discipline for the stock market to work properly). Buy-and-Hold doesn’t even pass the smell test.
Yes, there is something in us that loves to hear that this might be the first time in history when a Buy-and-Hold “strategy” might work for one or two long-term investors. We all have that Get Rich Quick urge going on inside.
I believe that we should be helping people overcome their Get Rich Quick urge, not making a smelly buck exploiting the human weaknesses of our friends and neighbors and co-workers and fellow community members.
I wish you all good things.
Rob
The numbers tell the story.
Does this rule apply with safe withdrawal rates?
Rob
Hypothetically (and this is the wildest hypothetical ever) let’s say that everything you say is true. The bottom line is that no one respects you as a financial adviser. Whatever excuses and conspiracies you can conjure up to explain that, objectively, your 12 years of effort has gotten you nowhere in the investment community. Most of the real players haven’t heard of you, and those who have, let’s just say, you’re not in their circle.
So my question is, other than patiently maintaining your vigil for the mega-crash so you can crow “I told you so”, do you have any plan at all for improving your image? Or is that unimportant because is this all just a strange hobby to pass the time?
When people like this, they see two things. First, they know you are not credible because what you call “buy and hold” has been very successful and is not how your portray it. Secondly, they see you as a crackpot when you throw around threats of prison. It makes you come off like a little child having silly revenge fantasies.
People do not respond well to those sorts of statements, Anonymous. You don’t have to convince me of this. I have seen the reality play out before my eyes on thousands of occasions.
Did you see the demonstrations that were held by hundreds of students at Penn State when the truth about Joe Paterno came out? Those students LOVE Joe Paterno. And not without reason. He is one of the greatest coaches who ever lived. The bad things he did do not cancel out his many genuine accomplishments.
Do you think that people helped Paterno by covering up what was going on around him for so many years? There was a woman who worked at Penn State who asked that action be taken and she was fired for her trouble. That solved the problem TEMPORARILY. But of course in the long term it made it worse.
That woman was the true Joe Paterno fan, in my assessment. She tried to bring a quick end to something that was in the process of destroying his reputation. I am to Jack Bogle what that woman was to Joe Paterno. I love the guy. That’s why I speak up when I see financial fraud being practiced at a board with his name on it.
It takes more guts to speak up than it takes to be a yes man. Another way of saying it is to say that it takes more love to speak up than it does to be a yes man. I love Jack Bogle more than you do. You talk the talk. I walk the walk.
That woman was fired. People didn’t like what she said. But she has a clear conscience today. She is able to look at the woman in the mirror and feel good about what she sees.
I get it that telling the truth about how stock investing works is not the popular thing to do today, when we are priced for a 65 percent price crash sometime over the next year or two or three. The reality is that we are going to need someone to put the pieces together after that crash and to get the job done that person is going to need a reputation for integrity. I think it would be feel to say that the “experts” who failed to speak out about you Goons when they learned what you are up to will not be viewed as possessing the personal integrity needed to help us dig out of the hole that the Buy-and-Holders put us in. I will.
Personal integrity matters, Anonymous. It matters a lot. I never went to Investing School. I never managed a big mutual fund. But I was the first person to work up the courage to “cross” John Greaney by posting honestly on safe withdrawal rates. And I was the first person to call out Mel Lindauer on his b.s. abusive posting tactics at the Bogleheads Forum. And that makes me ten times the investing expert that Jack Bogle or Bill Bernstein or Larry Swedroe or Scott Burns can ever again claim to be now that they have failed to take prompt action re these matters.
We all are presented opportunities to act or not act. I acted. They did not. That one is now written in the books and it obviously can never be unwritten.
A new page of the book is being written today. Jack or Bill or Larry or Scott can elect to act today. If one of them does, I will be writing it up at my blog tomorrow. I will be praising that person to the skies. It will make me happy to do so once it becomes possible to do so HONESTLY.
I cannot do that today, can I? Whose fault is that? I have figured out how to get my words posted to the internet. Does Jack lack that ability? Jack Bogle hasn’t called Mel Linduaer out on his b.s. abusive posting tactics because he fears what Linduaer will do to him if he does so. That’s the most charitable explanation of Jack’s behavior that any of his friends can possibly put forward on his behalf. That reality will change when my good friend Jack works up the courage to take the steps needed to make it change. I can try to steer him in the right direction. I cannot force him to take the steps recommended.
An investing expert who is afraid to post honestly re the numbers that millions of people have used to plan their retirements is a piss-poor investing expert. People need to know that Jack Bogle is today a piss-poor investing expert. It’s a reality that affects every one of us suffering the effects of today’s economic crisis and worrying over the worsening of that economic crisis that we will experience when the next price crash sends us all down deeper into the Buy-and-Hold darkness.
My best and warmest wishes to you (and to my good friend Jack).
Rob
do you have any plan at all for improving your image?
I have attended three Financial Blogger Conferences and have interacted with hundreds of my fellow bloggers when attending them. I have never experienced even a tiny whiff of the sort of feeling that you are here saying is felt by everyone who knows me. What I have heard over and over and over again is that just about everyone knows about me and just about everyone agrees with me that honest posting should be permitted on every board and blog on the internet but just about everyone is afraid of what will happen to their businesses if they speak up in opposition to the tactics employed by you Goons and by your Wall Street Con Men pals to keep millions of middle-class Americans from learning what they need to know about how stock investing works.
If people remain too afraid to take action following the next crash, we go into the Second Great Depression, Bizarro. I hate the idea. But I don’t say that there is zero chance that this is how it will play out. If that is what happens, I will just have to live with it. I don’t exactly have any other options available to me.
I believe that people will work up the courage to stand up to you Goons after we experience the next crash. Call me a cockeyed optimist if you feel you must. That’s what I believe. We survived the Civil War. We survived the Great Depression. We survived Disco. I believe that we are going to survive The Buy-and-Hold Mafia. Sue me, you know?
My plan for improving my image is to testify honestly at your trial for financial fraud and to be certain to avoid committing financial fraud myself. My plan is to make sure that there are thousands of posts in the Post Archives in which I object in the strongest possible terms to the tactics that you Goons have employed to keep the Ban on Honest Posting in effect at all of our boards and blogs for 12 years now.
I think they I have stated things strongly. No, I’m sure that I have!
I have stated things more strongly than any other person alive on this planet today. I have stated things more strongly than Robert Shiller or Rob Arnott, you know? I have stated things as strongly as my mild-mannered personality will permit. If that’s not good enough to get the job done, then that’s not good enough to get the job done. I have stated things as strongly as I am capable of stating them and, once I have done that, I just have to accept that however things work out will be how things will work out.
Don’t let the bad guys get you down, man.
Rob
By the way, when you have to delete posts, you know that you are wrong and are hiding from the truth.
Not true, Anonymous.
When I delete sub-human posts, I am showing respect for the humanity of the people who visit the site.
Why do you think every board and blog on the internet has published rules prohibiting the tactics that you Goons have employed?
Why do we have laws prohibiting death threats and financial fraud?
Those laws and rules say what we are as a people. We are not Goons.
Yes, we have a Goon side to us. We are all drawn to Get Rich Quick strategies. That’s goonish behavior. But we are not Goons through and through. If we were, we would have destroyed ourselves a long time ago.
I only wish that others would have stood up to you Goons a long, long time ago. I sent an e-mail to the site administrator at Motley Fool asking that Greaney be banned back in June 2002. Had that site administrator done his job, my friend John would not be going to prison. And neither would you.
We are humans, Anonymous. There is a spark of humanity still alive even within you. If there weren’t, you wouldn’t be able to get up in the morning.
I am doing my job when I delete your sub-human posts. I will continue to do that job. I would be showing a lack of respect to the human within you if I failed to do that.
You have my wishes for a healthy and prosperous and fun-filled new year.
Rob
Didn’t a coach in the Financial Blogger audience tell you that you came across as bitter?
You are thinking of Jaime Tardy, owner of the Eventual Millionaire site.
I talked to Jaime at FinCon13 and told her I would like to hire her for help with spreading the word about Valuation-Informed Indexing. She asked me a number of questions about the VII concept and about my experiences spreading the word on it and all this sort of thing. She was in the audience when I gave my Ignite presentation (“How to Become the Most Hated Blogger on the Internet”). She said that she was sitting with a number of millionaires when I gave the talk (there is a video of the 5-minute talk at the home page of this site) and that a number of them offered the view that I was “bitter.” She didn’t say that she agreed with them (she said that she found my ability to stick to my guns in the face of such brutal opposition “inspiring). But she said that she did not want to work with me unless I agreed to no longer engage with “the haters” (she was referring to you Goons).
I am certain that Jaime was shooting straight re what the millionaire bloggers said. I detected a coldness in the vibe in the room when I was giving my talk. My impressions are vague ones. But I think I am good at picking this sort of thing up and I obviously have a lot of experience watching reactions re this particular issue. I got a VERY positive reaction when they announced the title of the talk. People laughed and applauded, more than they had for any of the other speakers. I found that very encouraging. I felt at the beginning of the talk that I had the crowd in the palm of my hand. There was a second round of laughter and applause after I said the first few lines. And then I never heard any further reactions until the applause at the end of the talk (which sounded to me to be equal to that given all the other talks). There was never any booing. People were not hostile. But the reaction to the material following the title and the first few lines (my recollection is that the line that got people laughing a second time was a line about how I had been banned at 15 different places) was subdued. I no longer felt that I had the crowd in the palm of my hand as the talk progressed.
There was lots of powerful stuff in the talk, stuff that in ordinary circumstances would get people excited in a positive way. For example, I noted that I had produced with Wade Pfau research that shows millions of middle-class people how to reduce risk by 70 percent. The ordinary reaction to this would be for the bloggers to come up to me to ask how they could get involved in the effort to spread the word about Valuation-Informed Indexing all over the internet. Not one person has asked me that as a result of the talk (my e-mail address is available in the conference materials). That tells me something.
There were several people who came up to talk to me when the presentations ended. One was Joe Taxpayer. Joe ended up including me in his write-up re the conference and saying that you Goons should permit honest posting on Shiller’s findings. One of the other people who came up said that I should play up the “Most Hated Blogger” thing in all my marketing. I think that makes sense but I already do that to at least a limited extent. Another blogger congratulated me and then followed up with an e-mail following the conference (to which I responded) but has not yet done anything more than that. Another blogger said that I should send out lots of promotional materials noting that Shiller recently won the Nobel prize. I agree that that makes perfect sense. But I have zero confidence that that would help in the particular circumstances that apply in this case. People were not banning the discussion of Valuation-Informed Indexing because Shiller had not won a Nobel prize and the award is not going to change things in any significant way. The awarding of the Nobel prize is a small plus but not a game-changer.
There are no intellectual issues here. The intellectual case for Valuation-Informed Indexing is overwhelming. ALL of the evidence supports it and there is no evidence supporting Buy-and-Hold. The issues holding us back are all PSYCHOLOGICAL in nature.
The people who get it best are the academics who I wrote about the Wade Pfau matter and who came back to me saying that this is a case of the sort of paradigm change described in the book The Structure of Scientific Revolutions, by Thomas Kuhn. A society accepts small advances without too much trouble. It has a much harder time with big advances. This is a HUGE advance. It changes life in the United States forever for us to be able to reduce the risk of stock investing by 70 percent. It is of course a hugely POSITIVE change. But it is a huge change all the same. And as a society we are having a hard time accepting that this huge positive change is a real thing.
One of the academics told me that we either need to wait for the people whose careers were built promoting Buy-and-Hold to die or for a crisis. If Shiller is right (I obviously believe that he is), the crisis is coming within the next year or two or three. That should do it. The next price crash should shake people up enough that they will hear out people who go forward with the Valuation-Informed Indexing concept. Once we reach a certain acceptance level, support for Buy-and-Hold will collapse and VII will spread like wildfire.
The question is — Should we just wait around for that to happen?
My sense is that that is how Shiller and a lot of others have elected to play it. There are a good number of people who hint at a belief in VII but who hold back from a full endorsement of all of the amazing implications of Shiller’s research because they know that Buy-and-Holders will go nuts if they go public with them. I obviously don’t play it that way. I believe that responsible people should be doing everything they can do to help us AVOID another price crash. I also believe that, once people are ready to hear about VII, we need to have a record that people can turn to for answers to all of their questions about why it took so long for us to get to a good place. So I believe in continuing to knock on doors and on detailing the results of those efforts here at the blog.
People have a wall of resistance to hearing about this stuff. A good part of it is shame.
I call out the Wall Street Con Men all the time. But the full reality is that all that the Wall Street Con Men are doing is trying to make a sale. You complete a sale by forming an emotional connection with your reader. People love Get Rich Quick. Buy-and-Hold is pure Get Rich Quick. It sells like hotcakes. So the Wall Street Con Men love to use it. They go with what works.
The point here is that it takes two to tango. The Wall Street Con Men are conning us. They obviously know that there is this fellow Shiller who showed 33 years ago that valuations affect long-term return and that there is zero chance that Buy-and-Hold can work if valuations affect long-term returns. But they keep it zipped because their readers and their clients DO NOT WANT TO HEAR ABOUT IT. Mike Piper did not want to ban honest posting at his blog. He HATED the idea. But he sincerely believed that his readers would abandon him if he permitted me to continue posting there about the implications of Shiller’s research. I don’t know that things are quite as bad as he believes. But I do agree with Mike that he would have taken a big hit. For Mike Piper permitting honest posting would have meant earning less money from his blog, at least in the short run.
That’s not true just of Mike. It’s true of Motley Fool. It’s true of Morningstar. It’s true of Index Universe. It’s true of just about everyone. Buy-and-Hold is a marketer’s dream. It’s a Get Rich Quick approach that sounds responsible if you don’t study it too closely. Valuation-Informed Indexers tell people that much of the money in their retirement portfolios is not real, that it is cotton candy fated soon to be blown away in the wind. Buy-and-Hold is a Snickers bar and VII is spinach. VII is a hard sell compared to Buy-and-Hold until the next crash shows people where Get Rich Quick always takes everyone who follows it in the end.
This is a one-time thing. VII was impossible before 1981 because we didn’t have the research to support it. It didn’t catch on through 2008 because people were too happy with their phony bull market gains to be open to considering a new strategy. Since 2008, the door has been opened a bit. But it appears that it is going to take another crash to kick the door open all the way. Those are the realities that apply.
The next part is a little hard for most people to understand. But it is rooted in a psychological reality. People often know things that they are not willing to acknowledge they know. If you talk to an alcoholic about cutting back on drinking, he will deny having a problem. That’s not because he believes deep in his heart that he does not have a problem. It’s because he knows ten times better than you do how big the problem is and cannot bear to have you say the words out loud. The alcoholic is in deep denial. But he of course knows. That’s the story of the Buy-and-Holder. Every Buy-and-Holder has doubts about his strategy. Buy-and-Holders hate Rob Bennett because Rob Bennett spells out all the reasons why those doubts are legitimate. My stuff causes people to feel emotional pain.
The millionaire bloggers in the audience for my Ignite talk have probably followed Buy-and-Hold themselves and have probably recommended it to others. So my stuff made them feel shame. They are not ready to acknowledge what the research says. So they need some psychological defense. They felt that my presentation was too compelling to argue against it on substantive grounds. So they attacked it on process-oriented grounds. I wasn’t wrong. I just was too “bitter” about the fact that the ideas haven’t caught on yet. I deliberately chose images for the slides that focused on the soft, funny side of things. There was nothing even a tiny bit bitter about my presentation. That assessment was employed as part of a psychological defense.
We are making progress. I wouldn’t have been permitted to give the Ignite talk a few years ago. Now I am able to do that. Now I can get guest blog entries posted at lots of places. There are more and more people expressing doubts about Buy-and-Hold every day. But, yes, as of today there are smart and good people in this world who are going to respond by saying that I am “bitter” when they hear my presentation. Jaime was shooting straight with me and reporting on the reality that applies today. I liked the idea of working with her. I think that she could provide something that I am not able to provide. But I at least learned something as a result of my association with her and I am of course grateful for that.
I hope that helps a bit, Trebor.
Rob
“The millionaire bloggers in the audience for my Ignite talk have probably followed Buy-and-Hold themselves and have probably recommended it to others.”
Yes, people will do what has been successful. Not a big surprise.
Do you really think people should follow your example?
The investors in the Bernie Madoff fund thought they were “successful” for a time, Anonymous. That’s how Get Rich Quick schemes work. There’s now 33 years of peer-reviewed academic research showing that there is precisely zero chance that a Buy-and-Hold strategy could ever work for even a single long-term investor.
I want nothing to do with it. I hope to become known as the most severe critic of Buy-and-Hold strategies alive today. I believe in research-based strategies.
I acknowledge the pain of the people who have followed or promoted Buy-and-Hold strategies. I don’t think we show kindness to those people by failing to call them out on their nonsense. It is cowardice that holds many of us back, not kindness. Deep in their hearts, these people are good and smart people. We should want them to do well and we should want them to overcome their embarrassment to the extent needed for them to make positive and constructive and life-affirming contributions once again.
I wish you well.
Rob
“The investors in the Bernie Madoff fund thought they were “successful” for a time, Anonymous.”
They weren’t really buying anything. It was a Ponzi scheme. When you buy stock, you own a piece of a company.
As for get rich quick schemes, that is typical with market timing.
Rob,
Can you give me a specific definition of what makes someone a goon. How many goons are there? Where do they formally meet and interact? What does a typical investment strategy look like for the typical goon?
When you buy stock, you own a piece of a company.
Not when you pay more than the fair price.
To the extent you “buy” overvaluation, you buy nothingness.
The nothingness always disappears in the long run.
A massively overvalued stock market is a Ponzi scheme.
Rob
Can you give me a specific definition of what makes someone a goon. How many goons are there? Where do they formally meet and interact? What does a typical investment strategy look like for the typical goon?
Goonishness is ignorance or sin or excessive emotionalism. It is the dark force within you that causes you to act against your own self-interests.
We all have goonishness within us. Each and every one of us feels an attraction to Get Rich Quick schemes. Most of us try to suppress our goonishness. I refer to you as a “Goon” because you make so little effort to suppress your dark side, you show it for all the world to see.
I don’t believe that there is a typical Goon investing strategy. The Madoff investors were hurt by their goonishness. They could have seen through him if they were thinking clearly. You could see through Buy-and-Hold if you were thinking clearly.
Goon investing strategies are strategies that do not add up in the rational mind but that possess surface appeal because they give us the feeling that we are getting away with something. Every rational human being knew that the insane gains of the late 1990s were not real. No economy can grow by 20 percent or 30 percent for several years in succession. Rational investors (non-Goons) would have looked for the holes in the story. The goonishness within us makes us want to accept those gains unquestionably.
That Goon impulse has been there since the first stock market opened for business. Buy-and-Hold made it worse because Buy-and-Hold supplied the strongest rationalization for ignoring the obvious problem with a stock market going up by 20 percent and 30 percent per year. Buy-and-Hold posits that there is “research” showing that it is okay to count those phony baloney gains as real. There of course is no such research. But this is the claim that is made. And millions of good and smart people fell for it because of their human weakness.
I say that it should not be the aim of investing experts to trick people. Experts should be giving us tools to help us resist the Get Rich Quick urge. The Return Predictor lets people see the losses that follow from permitting out-of-c0ntrol bull markets to develop. It helps people to resist the GRQ urge rather than encouraging them to give in to it.
We all have a bit of goonishness within us. But we all ALSO have common sense within us. I want to help people strengthen the voice of common sense and resist the goonishness that seeks to crush it.
Rob
“Not when you pay more than the fair price.”
No, you do own a piece of the company. Your shares give you a percentage ownership of a company. In a Ponzi scheme, you don’t own any shares.
Stocks were overpriced by a factor of three in 2000. So, if you had $600,000 in the market, $200,000 of it was invested in something real and $400,000 was invested in nothingness.
Compare that to someone who has $50,000 invested in a Ponzi scehme.
Yes, the full $50,000 is invested in nothingness. That’s a distinction. But it is worse to have $400,000 invested in nothingness than to have $50,000 invested in nothingness.
Buy-and-Hold has destroyed more lives than all of the pure Ponzi schemes that have been promoted in recent years all added together.
A legitimate research-based investing strategy has no Ponzi scheme element to it. A legitimate research-based investing strategy steers people away from Ponzi schemes. That’s the job.
Rob