Valuation-Informed Indexing #170 — How to Become the Most Hated Blogger on the Internet — Point Out the Dangers of Buy-and-Hold!

I’ve posted Entry #170 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called How to Become the Most Hated Blogger on the Internet — Point Out the Dangers of Buy-and-Hold!

Juicy Excerpt: The YouTube video of my Ignite presentation to the Financial Bloggers Conference for 2013 (FinCon13) is now available. It’s titled How to Become the Most Hated Blogger on the Internet. The fellow who writes the award-winning Joe Taxpayer blog wrote about the presentation at his blog and that post generated a long discussion (125 comments!) between me and my critics (or perhaps it was between me and one of my critics pretending to be several different people — you’ll get the joke if you read to the end of the discussion thread).

Joe and three other bloggers came up to me at the end of the other presentations to offer their thoughts on what I said. I was told that it was really smart marketing to focus on the “most hated” aspect of the story. People know that when one side in a debate evidences hate, they are revealing a lack of confidence, I was informed. So I was told to never miss an opportunity to play up this angle.

That makes sense. Unfortunately, I believe that the debate between Buy-and-Holders and Valuation-Informed Indexers may be the exception that proves the rule. The Haters have been directing their rage at me since the morning of May 13, 2002, when I put forward my famous post pointing out the errors in the Old School safe withdrawal rate studies. It hasn’t been my experience that their rage causes too many others to take my side.

Comments

  1. Curious says

    Rob,

    Buffett recently wrote that individual investors should “ignore the chatter, keep your costs low” and buy an s&p 500 index fund. In doing so, he added, they would earn returns superior to most investors.

    Is it your belief that the world’s fourth richest man (who is in his 80s) does not really believe that, but writes it because he’s scared of what people will write about him on investment forums on the internet?

  2. Rob says

    You’re asking an intelligent question, Curious.

    I’ll start by saying what I said in response to a similar question that was asked here re Shiller a day or two ago. You should ask Buffett this question. He is likely to be able to shed more light on it than me. Or, if you are not able to reach Buffett, you should talk it over among your friends. We all would benefit from knowing the answer to your question. I’ll give a shot at providing a reasonable answer. But I am not Superman. I am not the only one capable of thinking over this matter. You should be seeking possible answers from lots of people coming at the matter from lots of different perspectives.

    Buffett does not believe in the Efficient Market Theory, which is the intellectual construct on which the Buy-and-Hold strategy was built. He has ridiculed it on numerous occasions. That’s important background in trying to think this through.

    I of course agree 100 percent with Buffett re the three points re which you quote Buffett. Yes, investors should ignore the chatter. Yes, investors should keep costs low. Yes, investors should buy a S&P 500 index fund. On all those points there is total and complete agreement.

    You don’t quote any words in which Buffett says that investors should ignore valuations in setting their stock allocations. The value proposition offered by stocks changes dramatically with changes in valuation levels. There is 33 years of peer-reviewed academic research showing this beyond any doubt whatsoever.

    Buffett himself practices Value Investing. Valuation-Informed Indexing is the indexing strategy that focuses on obtaining strong value propositions (as with Value Investing, but obviously far more simple). So there is zero reason to believe that Buffett does not believe that ordinary investors should not be following Valuation-Informed Indexing strategies and avoiding Buy-and-Hold strategies (in which the value proposition being offered by stocks is ignored when stock purchases are made).

    VII is the combination of Buffett’s key insight (an investor must pay attention to the value proposition being obtained) and Bogle’s key insight (investing must be kept simple for the vast majority of investors). I have often observed that Buffett and Bogle go together like chocolate and peanut butter.

    All that said, I have not heard Buffett openly criticize Buy-and-Hold, which is an exceedingly dangerous strategy according to the last 33 years of peer-reviewed academic research. Is it possible that he doesn’t see how great the danger of Buy-and-Hold is?

    I think it is possible.

    I didn’t see the dangers of Buy-and-Hold on the morning of May 13, 2002. John Walter Russell didn’t either. Wade Pfau didn’t see the dangers of Buy-and-Hold when he first began working with me. There are obviously millions of smart and good people who today follow Buy-and-Hold strategies. Those people obviously do not appreciate the dangers of the strategy they follow.

    Buffett is obviously smart enough to see these dangers. The problem is that he does not hear other people talking about them and he has no particular reason to explore them himself. Buffett is not a Buy-and-Holder. Buffett is not an indexer. So this is not an area on which he spends a lot of time or mental energy.

    The answer, as always, is to launch a national debate on these questions. When there is a national debate, Buffett is one of the people who will be adding his thoughts. A national debate will make him sufficiently informed about the various points that he will be able to offer helpful guidance.

    I am certain that Jack Bogle can reach Warren Buffett and that Warren Buffett would be happy to spend some time responding to his inquiries. The sensible thing to do here is to provide a copy of the peer-reviewed research paper that I co-authored with Wade Pfau to Bogle and to ask Bogle to pass it along to Buffett along with a request for his feedback. We all will benefit from hearing what Buffett says about Buy-and-Hold after reading the peer-reviewed research showing that Valuation-Informed Indexing has for 140 years offered far higher returns at dramatically reduced risk.

    VII is superior to BH in ever possible way, Curious. Getting Buffett’s feedback on the paper helps us all. If he agrees that VII is far superior, having him say so obviously helps us all by getting the word out to millions of investors who need to know this. If Buffett sees some problem with how the research was done that was not noted by the peer-review committee that approved it, that is obviously something that Wade and I and the peer-review committee need to know.

    Are you willing to help bring the matter to Bogle’s attention so that we can get the feedback from Buffett that we all need to hear? I think it would be a truly positive and constructive and life-affirming step for you to agree to help us all (including yourself) out with this important matter.

    Rob

  3. Curious says

    Hi Rob,

    Thanks for the response. I for one don’t think it’s necessary to ask Buffett that question for the simple reason that I don’t have any reason to believe that he doesn’t believe what he says. To the contrary, both he and Bogle strike me as the most candid commentators one could hope to find.

    No, Buffett didn’t say anything in his letter about valuations, but he did say that he’s instructed his wife’s trust to be allocated 90% to a s&p index and 10% to treasurys. So it’s probably fair to read that as an ambivalence to overall valuations. And given that Buffett learned directly from Graham, I’m confident that he’s exceedingly familiar with the whole margin of safety concept. Indeed, he even went out of the way to discuss how distracting it can be to focus too much on the market’s price. But I’m sure you read that.

    Your comment that Buffett isn’t a buy and holder strikes me as odd, for that’s precisely how most would define his approach. He’s famously never sold a share of Berkshire. And I can’t recall the last sale he’s made as a portfolio manager. If that’s not buy and hold, what is?

  4. Rob says

    That was a good response, Curious. You obviously don’t agree with me. But you stated your point of view fairly. I don’t see any goonishness in that response. I am grateful for that.

    Buffett certainly holds the things he buys for a long time. So, yes, there are similarities to Buy-and-Hold. But there is also one huge difference. He only buys when the value proposition is strong. That makes all the difference in the world.

    The thing that makes holding such a great idea is that the market is unpredictable in the short term. No matter how much intelligence you apply to the project, there is just no way of being sure you will do well in the short term. In contrast, the market is highly predictable in the long term. Those who buy into strong value propositions always do well in the long term, those who buy into poor value propositions always do poorly in the long term. Buffett makes sure that he will do well by picking good stocks. Indexers don’t have that option available to them. The only way they can be sure of doing well in the long term is by paying attention to valuations when they buy.

    Buffett and Bogle may both be candid. They are also both flawed human beings. I can point you to contradictions in the public statements of both of these men. I presume that they both want to do better. They need our help to pull it off.

    I saw the part about the 90 percent stock allocation. That particular statement does suggest an ambivalence to valuations. Unless I am missing something in my quick read of it, you are quoting him fairly. I rank Buffett up with Shiller and Bogle, at the very top. That said, it is my strongly held view that going with a 90 percent stock allocation to an index fund at all times is nothing short of moronic.

    I can see how Buffett himself might get away with always going with a 90 percent stock allocation. Even at times of insanely high valuations overall, there are some stocks that are well priced. Perhaps someone as smart as Buffett can find them. But I am not able to come up with any way of seeing how a constant 90 percent allocation to a broad index find could lead to anything short of disaster. The peer-reviewed research that I co-authored with Wade Pfau shows this as clear as clear can be. All that that does is add tons of risk with no payoff in form of a higher return.

    Perhaps there is something re the context of what Buffett said that I am not seeing. If he said what it appears to me he said, my take is that that particular statement (about the constant 90 percent allocation) is moronic and irresponsible and uninformed and dangerous. There is ZERO support in the academic research for this statement. Perhaps this is Buffett’s blind spot. It’s an odd one for him to have given that he doesn’t believe in the Efficient Market Theory. But he is certainly not alone. There are millions of smart and good people who don’t place nearly as much importance on valuations as I do.

    Graham supported Valuation-Informed Indexing. He said that investors should go with a 75 percent stock allocation at times of low valuations, a 50 percent stock allocation at times of moderate valuations, and a 25 percent stock allocation at times of high valuations. The entire 140 years of stock-market history available to us supports Graham.

    I can see how it would be distracting to focus on the market price of a particular company.It is ESSENTIAL to look at the market price when investing in indexes. There’s nothing even a tiny bit distracting about it. You only need to do it once per year. It takes about five minutes to go on the internet and look up the P/E10 value. The distracting thing is to lose most of the accumulated savings of a lifetime in a price crash, which is what ALWAYS happens to Buy-and-Holders sooner or later.

    Anyway, I do like the way you stated your position in this comment. If we were on a discussion board and you put forward that comment, I would not feel a need to respond to it unless you directly asked me a question. You argued your position forcefully (which is good) but also fairly (which is also good). I wish that all on “your side” would do that in every post. It’s possible that I am wrong. If I am, we need people supporting the other point of view in a forceful but fair way. And you did that here.

    I don’t think that all the evidence supports your view that Buffett is okay with Buy-and-Hold. But it does seem to me that there is SOME evidence pointing in that direction. People need to know that. You have made the case for it here. You have helped my readers by doing so. So thanks for that, my old (in this case non-Goon) friend.

    Rob

  5. Rob says

    The reason I used the word “moronic” is that I want to provide clarity. I feel that you are trying to challenge me by saying that the world’s greatest investor does not agree with me. I have the greatest respect possible for Buffett (as I do for Bogle) and I agree with him on 90 percent of what he says. But I think the fair thing to do when we really do disagree (as it appears to me we do here) is to make it very clear that there is a strong disagreement. I don’t want to pussyfoot around and say “oh, Buffett and I don’t disagree that much” if we really do have a stark disagreement.

    If Buffett believes that it is a good idea to go with a permanent 90 percent stock allocation (as the link you provided does indeed seem to suggest), then I disagree with him very strongly. I want people to know that because people need to know the genuine areas of disagreement to figure things out.

    I view a constant 90 percent stock allocation as an invitation to disaster. I cannot even begin to make sense out of such a recommendation. Perhaps Buffett just doesn’t worry about wipeouts because it’s been a long time since we saw one. There’s the story of that fellow who pronounced a few days before the 1929 crash that it appeared that stock prices had reached a permanent plateau.

    Rob

  6. Anonymous says

    Based on Buffet’s remarks, it seems very clear that he is a strong supporter of buy and hold for most investors.

  7. Rob says

    The one link you pointed to supports that view, Anonymous. There are other links that tell a different story. Buffett has ridiculed the Efficient Market Theory on numerous occasions. The crazy idea that the Buy-and-Holders put forward that it is not necessary for investors to consider price when setting their stock allocations is rooted in a belief in the Efficient Market Theory. So Buffett has pulled the chair out from under the Buy-and-Holders on numerous occasions.

    Also Buffett’s personal investing strategy is in direct conflict with Buy-and-Hold. Buffett ALWAYS considers the value proposition he is buying when he purchases stocks. Buy-and-Holders NEVER do. The peer-reviewed academic research in this field shows that the thing that the Buy-and-Holders need to do to take value propositions into account is to look at the P/E10 level that applies when they set their stock allocations. Do we have any reason to believe that Buffett would oppose the idea of Buy-and-Holders doing the very thing (looking at value propositions) that is the basis for all of his many years of success if he knew that there were an easy way (take five minutes once per year to check the P/E10 level) to do it? We do not.

    The most reasonable explanation for Buffett’s contradictory remarks and behavior is that he has not seen the peer-reviewed academic research that I co-authored with Wade Pfau. I think it would be fair to say that, once exposed to the Valuation-Informed Indexing concept, Buffett would experience the same epiphany that Wade Pfau experienced when we began working together and that John Walter Russell experienced when we began working together and that hundreds of others of our fellow community members experienced when they learned about the concept. We need Bogle to bring the study to him by the close of business today.

    This is imperative business, Anonymous. The Buy-and-Hold Crisis has put millions of people out of work and winning the endorsement of Warren Buffett for the first true research-based approach would help bring that crisis to an end. And of course there is the matter of the upcoming prison sentences for you Goons. It obviously will not be a good thing for you if your jury hears that you rejected this sensible and positive and constructive and life-affiming suggestion. On the other hand, if Buffett agrees to work with us to get the word out about our “revolutionary” (Shiller’s word) findings, there obviously are going to be some jury members who will view your behavior in a somewhat more forgiving light.

    Please keep us up to date on Jack Bogle’s response to your request and on Buffett’s response to Bogle’s entreaties to him.

    Rob

  8. Anonymous says

    What link? I look at all of his comments. He is clearly a buy and hold supporter.

  9. Rob says

    He is clearly a buy and hold supporter.

    Does Buffett support the 12-year cover-up of the errors in the Old School safe-withdrawal-rate studies, Anonymous?

    Does Buffett support the death threats you Goons have used to intimidate people who have reported on the 33 years of peer-reviewed academic research showing that long-term timing has worked for 140 years of stock market history and is 100 percent required for any investor who hopes to have a realistic hope of long-term success?

    Does Buffett support demands for unjustified board bannings? Does he support tens of thousands of acts of defamation? Does he support demands to get academic researchers fired from their jobs?

    These questions are silly. Buffett obviously does not support any of these things.

    Neither would Bogle if he were not caught in a trap. Neither would Bernstein if he were not caught in a trap. Neither would Burns if he were not caught in a trap. Neither would Pfau if he were not caught in a trap.

    The Buy-and-Hold Pioneers put together their strategy at a time when the research had not yet been published on whether long-term timing works or not. All they had was research showing that short-term timing doesn’t work and they jumped to a hasty conclusion that no form of timing is necessary. Shiller proved that hasty conclusion false in 1981. A huge bull market arrived and no one cared for a time that the Buy-and-Holders had gotten it terribly wrong. The economic crisis that follows every time Buy-and-Hold becomes popular arrived in 2008. People have begun to open their minds to new ideas. But one thing holds them back.

    The thing that holds them back is The Buy-and-Hold Mafia. Lots and lots of people have begun to have grave doubts re Buy-and-Hold. But they have witnessed the ruthlessness of the Buy-and-Hold Mafia and they want no part of what happens to those who post honestly on what the last 33 years of peer-reviewed research says re what works in the real world.

    If Buy-and-Hold were a legitimate strategy, the errors in the Old School retirement studies would have been corrected within 24 hours. Everyone who works in this field lives in fear of “crossing” the Buy-and-Hold Mafia. So those errors have remained uncorrected to this day. But everyone who has taken five minutes to check the studies has found that they contain no valuation adjustments.

    Buffett will speak in an informed and honest way when everyone else does. He will do so when he feels that it is safe to do so.

    The Buy-and-Hold Mafia is a criminal enterprise. The Wall Street Con Men have lots of money and lots of power and lots of influence and they have silenced many people. Following the next price crash, they won’t be able to silence us anymore. A big blogger will speak out. Or a major newspaper will detail the 12-year cover-up. Or a venture capitalist will get behind Valuation-Informed Indexing, seeing the fortune there is to be made in providing millions of middle-class investors with true research-based investing advice.

    That’s the story. The only thing that can ever change the way things are is for people to speak out against The Buy-and-Hold Mafia. People don’t want to get involved. People are afraid. People find the entire business an ugly business. But there is no other way.

    I don’t think that the members of the Buy-ad-Hold Mafia had bad intent. They just didn’t know it all. None of us did. Shiller didn’t publish his research until 1981. That’s just the way it goes sometimes.

    The problem is that people who give bad investing advice are subject to legal liabilities if they are found to have claimed that their advice is rooted in peer-reviewed academic research when in reality it is the opposite of what the peer-reviewed academic research shows. The Buy-and-Holders started down a dark path by accident and in time they found themselves so far down that dark road that they elected to cover-up their mistake rather than acknowledge it. Now they are subject to legal liabilities and, in the case of you Goons, prison sentences.

    I care. I want to help. But I have zero willingness to commit a felony myself. If I were to say that the Old School retirement studies are legitimate, I would be aiding the 12-year cover-up. That’s financial fraud. That’s a felony. That’s prison time. No can do.

    Buffett will tell us his sincere views about Buy-and-Hold when he and all others feel safe to do so. That will be after the 12-year cover-up of the errors in the Old School retirement studies has been exposed and your prison sentence has been decided. At that point, there will be no reason for all of us not to move forward together and we will obviously do just that.

    I will continue doing all that I can to bring that day on as soon as possible. That obviously is best for the millions of middle-class people whose lives are in the process of being destroyed by The Buy-and-Hold Mafia. It is also what is best for you Goons. Your prison sentences obviously will be a bit shorter if you come clean prior to the next price crash.

    I will obviously be reporting to your jury what you did when the suggestion was made that you ask Bogle to have Buffett review the peer-reviewed research that I co-authored with Wade Pfau. It is obviously an urgent public-policy matter that Buffett share with us all his thoughts on that research. The members of your jury will obviously take into consideration your reaction to the idea when they are deciding your case and the length of your prison term.

    The hand of kindness remains extended. The odds that I will agree to take part in the 12-year cover-up of the errors in the Old School retirement studies remain precisely zero.

    I wish you well.

    Rob

  10. Rob says

    It is interesting to see that Larry doesn’t seem to be afraid, as you often characterize.

    There is a mountain of evidence that Larry Swedroe is afraid to state his honest views on how stock investing works at places like the Bogleheads Forum, Anonymous.

    Larry was banned from that forum for posting honestly. He was able to return to it only when he promised Mel Linduaer that it would never happen again.

    I have seen articles off the forum in which Larry has acknowledged that the Old School safe-withdrawal-rate studies are in error. When that question was being discussed at the forum, he was afraid to speak up.

    Larry will be posting his honest investing views when everyone else does. That will be when the 12-year cover-up of the errors in the Old School studies has been exposed and publicized and when you Goons have been put away in prison cells. That’s how our system works. When people see that the laws that govern behavior in every area of human endeavor other than the investing advice field also apply in the investing advice field, we will all be posting honestly on a daily basis and thinking nothing of it.

    Larry is not a “success.” A man who betrays his friends and his profession and his country and himself is not a success no matter how much money and fame he enjoys as a result of those betrayals.

    I look forward to the day when Larry is able to feel good about the work he does once again. I look forward to the day when all in this field are able to feel good about the work they do once again.

    I look forward to the day when we recover from this economic crisis and I look forward to the day when we enter the greatest period of economic growth in U.S. history.

    I naturally wish you the best of luck with whatever investing strategies you elect to pursue.

    Rob

  11. Trebor Martin says

    “Does Buffett support the 12-year cover-up of the errors in the Old School safe-withdrawal-rate studies, Anonymous?

    Does Buffett support the death threats you Goons have used to intimidate people who have reported on the 33 years of peer-reviewed academic research showing that long-term timing has worked for 140 years of stock market history and is 100 percent required for any investor who hopes to have a realistic hope of long-term success?”

    And if Warren Buffett actually believed any of those things were actually happening then I am sure he would speak out against them.

  12. Anonymous says

    “And if Warren Buffett actually believed any of those things were actually happening then I am sure he would speak out against them.”

    Agree, Trebor. I would also say that Jack, Larry, Bill and Rick would speak out as well.

  13. Rob says

    That’s why the announcement of your prison sentence is so important for all of us, Trebor.

    When your prison sentence is announced, the announcement will go viral. It will all be out in the open, everyone working in this field will come clean and we will all from that day forward be working together to help people invest effectively rather than to cover up mistakes made years ago.

    We are the luckiest generation of investors that ever walked Planet Earth. We need to begin tapping into the benefits of the 33 years of peer-reviewed academic research that is the foundation of our good fortune.

    Buffett will be part of the rebuilding. Bogle will be part of the rebuilding. Shiller will be part of the rebuilding. Pfau will be part of the rebuilding. And thousands and thousands of good and smart people (some who today advocate Buy-and-Hold strategies, some who do not) will be part of it. There is huge leverage in this.

    We are today on the one-yard line. Our collective fear about speaking out on the need for you to go to prison for your massive act of financial fraud is the one thing holding us back. It is no act of kindness to remain silent when one sees a massive act of financial fraud. It is cruelty to fail to speak out in such circumstances. When we let an act of financial fraud go on, the people committing the act of financial fraud end up going to prison for a longer time than they would have had we done the right thing and had spoken out about it immediately.

    I very much want to see your prison sentence begin. Seeing your prison sentence begin will be like seeing the first bluebird of Spring.

    I care about you. I want to do what I can to get the prison sentence shortened. But I want the prison sentence to begin because I want to see us all put the ugliness behind us and move on to spreading the word about the scores of powerful investing insights that we have developed together over the past 12 years,.

    My best wishes to you and yours.

    Rob

  14. Rob says

    I would also say that Jack, Larry, Bill and Rick would speak out as well.

    Jack Bogle and Larry Swedroe and Bill Bernstein and Rick Ferri certainly all have goodness in them and all four of these individuals certainly have shown on numerous occasions that they would like to come clean.

    Jack Bogle said in his book that Reversion to the Mean is an “Iron Law” of stock investing. That’s how I knew that there was zero chance that the Old School retirement studies got the numbers right. Jack sprinkles honest observations about how stock investing works in with the smelly Buy-and-Hold garbage ALL THE TIME. If there were no good in him and no desire in him to come clean, why would he do this?

    Bill Bernstein was honest when Ataloss asked him whether the Old School retirement studies were analytically invalid, as I have claimed since the morning of May 13, 2002. He said that any aspiring retiree who gave a second’s thought to using on of this studies to plan a retirement had to be out of his or her mind. That’s pretty darn honest! He also included a dishonest statement in his response, saying that even though there was zero chance that the studies could get the numbers right, they were analytically valid all the same. So he covered his tracks with the Get Rich Quickers and they permitted him to continue making a living in this field. It remains the case that he included some honest stuff in that e-mail and that that took courage on Bill’s part.

    Larry Swedroe was so honest at one time that he got himself banned from the Bogleheads Forum! Again, that shows that there is some goodness in him and that he would like to come clean about what the last 33 years of peer-reviewed academic research says. Does that overcome the harm he did with his dishonest support for the 12-year cover-up of the errors in the Old School retirement studies? Hardly. But it does show a desire on Larry’s part to do good work, a desire that we will see him acting on on a daily basis once your prison sentence is announced and this all comes out, Anonymous.

    We are all on the same side, Anonymous.

    Rob

  15. Anonymous says

    It is so common to see as these leading financial experts threatening people with prison and lawsuits.

  16. Rob says

    It is not common at all to see leading financial experts refer to the need for prison sentences for you Goons, Anonymous. That’s why we are in an economic crisis.

    I was a Buy-and-Holder on the morning of May 13, 2002. I gave it up on the evening of August 27, 2002. That’s the night that John Greaney threatened to kill my wife and two sons if I continued to “cross” him by posting honestly on the safe-withdrawal-rate matter. Motley Fool did nothing even though this was an obvious violation of their posting rules. 200 of my fellow community members (people who praised me to the skies in the days before I worked up the courage to post honestly on the SWR matter) endorsed Greaney’s threat.

    That is emotion, Anonymous. That is a level of investor emotion so great that it is scary.

    The peer-reviewed research that I co-authored with Wade Pfau shows us how to reduce the risk of stock investing by 70 percent. The biggest problem I have promoting that study is that the findings are unbelievable to most people. If I showed how we can now reduce the risk of stock investing by 10 percent, I would be the most popular person in the investing world today. But 70 percent? It just doesn’t seem possible.

    Why is it that it is possible? It’s because investor emotion has been The Great Forbidden Subject for many years now. People see it all the time. They see the death threats and the demands for unjustified board bannings and the tens of thousands of acts of defamation and the threats to get academic researchers fired from their jobs. And they keep it zipped. They view it as unprofessional to talk about this stuff. They haven’t seen other investing experts talk about it and so they feel that it will hurt their credibility to talk about it themselves.

    We have decided as a society to adopt a Social Taboo against talking about the subject that covers 80 percent of what we all need to know about to become effective investors. We need to know about and avoid investor emotion. We have a tool — P/E10 — that tells us what we need to know. We all need to make use of that tool. But to do so we all need to acknowledge that we messed up big time during those years when we were telling people (and ourselves) that looking at P/E10 was not 100 percent necessary.

    We are ashamed that we messed up. We are ashamed that others messed up. We are ashamed that we failed to call others out when they messed up. We are ashamed that we let things get so out of control that there are people who will be going to prison over the cover-up. And on and on and on and on.

    If I had a magic wand, I would take us back to the morning of May 13, 2002, and we would all play it over, behaving much differently this time. I appreciate that you Goons would like that. I can’t do it. I don’t have a magic wand. I can say some words as to why I think you felt pressures to play it the way you did play it and I can say some words about how I think you would do it differently if you had another chance. But that’s as far as I can go. If I say that you demanded correction of the Greaney study within 24 hours of learning of the errors in it, I am aiding the cover-up and then I am committing financial fraud myself. Which is a felony. Which means prison time for me too. Huh? No thanks!

    We’re all in the same boat. We’re all in a big mess.

    We have one huge thing going for us. We are the luckiest generation of investors who ever lived.

    We take advantage of that card and we all end up in a far better place than would otherwise be possible.

    But taking advantage of that card means working up the courage to talk about investor emotion. Which evidences itself in death threats and demands for unjustified board bannings and tens of thousands of acts of defamation and threats to get academic researchers fired from their jobs. We all need to work up the courage to talk about all the stuff that we have never talked about before. Because it is the failure to talk about that stuff that caused our investing advice to go so wide of the mark and to cause so many trillions of dollars of losses as to bring on an economic crisis.

    If the market were automatically efficient, none of this would matter. If the market were automatically efficient, investor emotion simply would not be an issue.

    It turns out that Fama was close to being right but not precisely on the mark. The market LONGS to be efficient. But it cannot pull the trick off without being supplied with information helping it to access the level of investor emotion present at any given time. Once the market has that information, it can act to BRING the market to efficiency. We cannot do it without the information.

    When we open the internet up to honest posting on every possible issue, we will all enjoy seeing an efficient market for the first time in history. So long as the Ban on Honest Posting remains in place, that dream remains unrealized.

    My job is to steer us to the place where we work up the courage to make all that good stuff happen. Part of it is pointing out the prison sentences. Part of it is softening the blow by pointing out that the people who engaged in the cover-up were under a lot of unusual pressures.

    That’s it. That’s where we stand today.

    When I get the help I need, we all will begin living far richer lives than we ever imagined possible in the Buy-and-Hold days.

    The hand of kindness is outstretched. I obviously don’t control when you Goons will extend your own hands in warm acceptance of the offer of help.

    I continue to wish you all good things while you ponder the matter some more.

    Rob

  17. Anonymous says

    It gives comfort to see Captain Rob manning the ship 7 days a week at his Goon Watch Central headquarters. Just think of the millions he has saved already.

  18. Rob says

    In the days following the next crash, we want to put all the ugliness behind us as soon as possible and move on to enjoying our good fortune in being the luckiest generation of investors ever to walk Planet Earth.

    We all want to come clean. We all want to spread the word about the first true research-based strategy. We all want to enjoy investing in stocks as a virtually risk-free asset class. We all want to see the economic crisis come to an end and to see the greatest period of economic growth in U.S. history.

    Everything is documented. Everything will quickly be out in the open. The best way to have things done is to get the bad stuff out in the open and then be free to move on to all the wonderful stuff without worry that new reports of bad behavior will be forthcoming.

    We all will always continue to care about you. Even at times when your pain is so great that you are not capable of caring about yourself. You are the creature of a God that loves you and you deserve that much from the rest of his creatures.

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

    Rob

  19. Anonymous says

    “It is not common at all to see leading financial experts refer to the need for prison sentences for you Goons, Anonymous.”

    Common? There are ZERO financial experts talking about prison sentences and/or lawsuits.

    “Everything is documented. ”

    Yes, Rob. Everything is out there. There is so much wacky stuff (as well as truckloads of lies) that you have posted out there. You are your own worst enemy. People will ask simple questions and off you go pumping out some of the most outrageous garbage anyone has seen.

    If you were ever stupid enough to try and go to court with someone, you would quickly hear phrase “summary judgement”, followed by an outburst of laughter.

    Forget your lame phrase “tell it to the jury”. We all know it is silly and has no factual basis.

    Grow up, little man and start talking like an adult.

  20. Rob says

    Common? There are ZERO financial experts talking about prison sentences and/or lawsuits.

    How many do you think we need to turn this all around, Anonymous?

    We need one big name or one front-page article in a major newspaper.

    That will set off a chain reaction that won’t stop until Buy-and-Hold is buried 30 feet in the ground, where it can do no further harm to humans and other living things.

    You need to win every day just to stay alive. I need to win one time to change forever the investing advice field in a fundamental way. That’s how things turn out when you find yourself on the wrong side of the history train and fail to take prompt action to remedy the problem.

    Forget your lame phrase “tell it to the jury”. We all know it is silly and has no factual basis.

    That’s why you post here on a daily basis. Makes sense.

    Grow up, little man and start talking like an adult.

    I will continue posting honestly on the numbers my friends use to plan their retirements, Anonymous. I have never given the thought of doing otherwise two seconds consideration in 12 years. I will never give the thought of doing otherwise two seconds consideration in 12 billion years.

    My best and warmest wishes to you and yours.

    Rob

  21. laugh says

    Rob is definitely going into some kind of demented death spiral. He can’t write more than 2-3 sentences without talking about all his enemies going to prison.

  22. Rob says

    That’s the only issue that remains, Laugh.

    We know that there are many academic researchers who long to be doing honest work in this field.

    We know that there are many bloggers and journalists who long to be doing honest work in this field.

    We know that there are many investment advisors who long to be doing honest work in this field.

    Even Jack Bogle, the King of Buy-and-Hold himself, has advanced MANY signs that he longs to be doing honest work.

    And I think it would be fair to say that you Goons are none too happy with the status quo at this point in the proceedings.

    So we’re got everybody on board.

    Now we need to figure out how to make the transition.

    We saw way back in the Motley Fool days that there is a HUGE interest among ordinary investors in learning about how stock investing really works. Going by what we saw at that community of a few thousand people, the number in the general population that has an interest in learning the realities has to be in the many millions.

    And we have seen that it is rare for someone to make the switch to Valuation-Informed Indexing as the result of a single exposure to the concept. People need to gradually come to an ever-more-enhanced understanding of the new paradigm. They need to be able to have their questions answered. They need to see how everything connects. They need to see how their friends react to the new ideas. One day they experience an epiphany. It is rarely the first day on which that happens.

    What does all that add up to, do you think?

    It adds up to a conclusion that it is absolutely imperative that we open up every investing board and blog on the internet to honest posting on the last 33 years of peer-reviewed academic research. There is no reasonable argument going the other way. That one is settled and has been settled going back to the morning of May 13, 2002. I even asked on a thread at the Motley Fool board whether the community there felt that honest posting should be permitted and the respone was virtually unanimous.

    We ALL want every board and blog opened up to honest posting. We don’t all say so out loud. But we all want the same thing. It is silly to argue otherwise. People like Jack Bogle and Bill Bernstein and Wade Pfau would not be mixing in honest stuff along with the Buy-and-Hold garbage they also often promote if they didn’t have a desire deep inside to see the Ban on Honest Posting lifted.

    So far so good. We are the luckiest generation of investors ever to walk Planet Earth. We know what it takes to reduce the risk of stock investing by 70 percent while also dramatically increasing returns AND bringing the boom/bust cycle that causes economic crises to an end. Pretty darn exciting. But we have experienced a certain amount of friction re these matters over the first 12 years of our discussions. Something is holding us back from realizing our dream. Whatever could it be?

    The problem is that these matters are too darn important. That’s an irony. You would think that we would move quicker on matters that are particularly important. But it has worked out just the other way. Because these matters are of high importance and affect so many people, those who advocated Buy-and-Hold in good faith in earlier times don’t want to acknowledge having made a mistake. They feel embarrassment. They feel shame. They worry that they will be held financially liable for poor investing advice they offered at earlier times. In the case of you Goons, they worry about going to prison for having committed the greatest act of financial fraud in the history of the United States.

    That’s the problem, Anonymous.

    There’s nothing else to talk about. The intellectual case is settled. It’s not just the Valuation-Informed Indexers who believe that. The Buy-and-Holders believe it. They don’t believe it on every level of their consciousness. They really do follow Buy-and-Hold strategies. That’s evidence of a sincere belief. But they don’t feel confident enough of the strategy to believe that it can be defended in civil and reasoned discussion. So there clearly is another level of consciousness on which they do not believe at all. It’s a mix. You could say that they believe but that they almost entirely lack confidence. If the Buy-and-Holders themselves don’t feel that the intellectual case for Buy-and-Hold is strong enough to support a confidence that it can survive challenges raised in civil and reasoned discussions, there really is no one who truly believes in this stuff in the sense that that word signifies in most cases in which it is employed.

    We all want to know how to invest. We are entirely united re that one. Some of us are scared to death that the strategies we continue to follow are not going to work and so it pains us to hear academic research showing otherwise even discussed. So progress has been blocked for a long, long, long time.

    What do you propose we do?

    It is an imperative public policy initiative that we spread the word re Valuation-Informed Indexing. But spreading the word causes intense emotional pain for the Buy-and-Holders. No one wants the Buy-and-Holders to experience pain. But no one wants to see the Second Great Depression either. We ALL share an interest in working this one out.

    What do you propose we do?

    I propose the announcement of prison sentences. Or an “I Was Wrong” speech by my hero Jack Bogle. Either one of those would break the logjam. Either one of those would cause enough people to learn about the issues that we would see a national debate launched that ultimately would take us to one of two places. Either Valuation-Informed Indexing would not stand up to scrutiny and we would be back where we were on the evening of May 12, 2002. Or Buy-and-Hold would not stand up to scrutiny and we would move on to a brave new world that I of course expect to turn out to be pretty darn wonderful for all concerned.

    But even if you don’t believe that today, you should want to go to that brave new world if you truly believe in following research-based strategies, as all the evidence available to us indicates you do. The Buy-and-Holders will obviously have a chance to make their case in the national debate. If they cannot make it, it is to your benefit to make the shift. You don’t see it today. But of course we have not had the debate yet. So you simply do not know whether you will end up seeing it or not after the debate has taken place. If you become convinced as a result of the debate, you won’t be complaining that we had the debate. You will be thrilled that you were carried to it kicking and screaming.

    We need to have that national debate, Laugh. There is no other way out of this mess. Many commenters noted how odd it was that the Nobel Prize in Economics was awarded to two men with opposite views on how stock investing works. That happened because we haven’t yet had this national debate. The purpose of a debate is to resolve the matter. Who is right, Fama or Shiller? That is the most important economic and political question before the people of the United States today. We obviously cannot answer the question without first giving ourselves permission to talk about it.

    So the debate happens. The question that remains is — How do we get there?

    I say that we get there through the announcement of prison sentences for you Goons. The announcement of the prison sentences goes viral and then lots of people turn to examination of the substantive issues to figure out what the heck is going on. There’s your kick-off to a national debate!

    My sense is that that is how this is going to play out. So, yes, I am focused today on your prison sentence. I obviously will return to a focus on the substantive issues after the debate gets underway. But the goal today is not to win the substantive debate, the goal today is to get the darn substantive debate off the ground. The aim is to bring The Debate About Having a Debate to an end and to commence with the debate proper, the real thing, the question of whether Fama or Shiller (or some combination of the two — which is what I believe is the reality) is right about how stock investing works.

    Do you have any ideas other than the announcement of prison sentences for how we can as a society move on to the national debate we all very much need to see begin by the close of business today? If you have ideas, please advance them. That would be a constructive and positive and life-affirming thing to do.

    If you don’t have any ideas for how to solve the obvious problem that confronts us, then I will keep pressing on the prison sentence idea. Not because I enjoy the idea of seeing you go to prison. Because that’s the way our system is set up. We adopted the laws against financial fraud for a reason. We knew as a people that we didn’t want situations like this to develop. I love my country and I support our system for addressing matters of this sort. So my inclination is to go with the procedures that are already part of the system. The laws against financial fraud are part of our system and they serve an important purpose and that purpose needs to be served in this case.

    Do you have some other idea that solves the problem that needs to be solved?

    I don’t think you do.

    If you do, I am of course happy to hear about it.

    But if you do not, yes, I am going to return again and again to the solution that already exists on the statute books, imprisonment of those who have participated in the 12-year cover-up of the errors in the Old School safe-withdrawal-rate studies, the greatest act of financial fraud in the history of the United States by a long shot.

    I will win. Maybe not by the close of business today, as I would like to be the case. But following the next price crash. The emotion that counts in your favor today turns against you when millions of people lose most of the money they were counting on to finance their retirements. That shift in the emotions of millions of ordinary investors changes everything.

    You will come back with something stupid. I know that. But I also know you are worried about that prison sentence. Otherwise, you wouldn’t be posting here on a daily basis.

    If you have an idea for solving the problem better than mine, put it forward.

    If you don’t, I’ll stick with the idea that the people of the United States enacted as part of their system of laws to protect us from this kind of situation.

    In any event, I naturally wish you good luck with whatever investing strategy you elect to pursue.

    Rob

  23. Anonymous says

    “Do you have some other idea that solves the problem that needs to be solved?”

    Yes, I do have a solution for you, Rob. Everything can be fixed by having you get the mental health assistance that you so desperately need.

  24. Rob says

    That’s the state of the “defense” of Buy-and-Hold in the Year 2014.

    Millions of middle-class investors need to know that Jack Bogle knows about you Goons and has elected to do nothing about the problem.

    And that Bill Bernstein knows about you Goons and has elected to do nothing about the problem.

    And that Wade Pfau knows about you Goons and has elected to do nothing about the problem.

    And that Morningstar knows about you Goons and has elected to do nothing about the problem.

    And that Motley Fool knows about you Goons and has elected to do nothing about the problem.

    And that Mike Piper know about you Goons and has elected to do nothing about the problem.

    We recover from the economic crisis soon after we all pull together to deal with the problem that caused it.

    If it takes prison sentences to get there, that’s what it takes.

    Given that it is going to take prison sentences, the kind thing is to see that those prison sentences begin soon. The sooner we solve the problem, the shorter the prison sentences will be.

    There is no kindness in acting to make the prison sentences longer than they need to be.

    My sincere take.

    Rob

  25. Anonymous says

    Rob,

    Specifically, who are the goons? What makes them goons? Who are the leaders of the goons? Who are the goons that are most responsible for what you see as the problems? Are we talking about a handful of goons or just a small select group? How do I spot a goon?

  26. Rob says

    A Goon is someone who is too filled with hate and fear to have a constructive discussion.

    We ALL have goonishness within us. That includes me. That includes Shiller.

    You could just use the word “emotionalism” if you wanted. “Goon” is a smidgen more colorful.

    We are living through a time of fundamental change in the investing advice field.

    In the old days, the idea was to be intelligent. The more so, the better.

    Indexing pretty much takers intelligence off the table as a factor. All the things that people used to study are priced in. You don’t need to be intelligent to obtain great investing results today.

    But you need to rein in your emotions. You can ruin the indexing thing by getting too emotional.

    So the future is about reining in your emotions. That’s 80 percent of the investing job from this point forward.

    You guys make the point all the time that most of the Big Shots in this field don’t talk about Goons and about death threats and about prison sentences and about board bannings. They should be talking about all that stuff. That is the stuff that matters in the Age of Indexing.

    Why? Because that is the stuff that tells you that emotion is the driver. Emotion is risk in index investing. Rein in your negative emotions and you can’t lose no matter what else you do. Fail to rein in your emotions and you can’t win no matter what else you do.

    We all suffer from goonishness. The people I refer to as “Goons” (that’s you, Anonymous!) make it their whole life. They give in 100 percent to the negative emotions. They don’t make even a feeble effort to rein anything in.

    By learning what drives the Goons, we can learn how to reduce risk. The Goons would like to obtain good results . Why don’t they? What causes them to make such bad choices?

    Coming up with the answers to those questions is the future of investing analysis.

    My take.

    Rob

  27. Rob says

    The Buy-and-Hold Crisis has hurt each and every one of us.

    But we have learned important things over the past 33 years.

    So it don’t be having to hurt us no mo!

    Rob

  28. laugh says

    So if the only thing left to do is to send the Goons to prison, are you actually doing anything to cause that to happen or are you just waiting for yet another price crash?

    Seems like a very dubious strategy. You have been fiddling around on the Internet for well over a decade during 2 price crashes with very sad results. You may want to rethink your approach.

  29. Anonymous says

    Buy and Hold takes out emotion. You set an allocation and you stick with it. Sounds like buy and hold is the most “goon-less” way of investing, whereas marketing timing get rich quick schemes, like VII and filled with emotion and are very goonish.

  30. Rob says

    So if the only thing left to do is to send the Goons to prison, are you actually doing anything to cause that to happen or are you just waiting for yet another price crash?

    I’ve done everything a human being could possibly do, Laugh.

    I send 50 e-mails each day on the Wade Pfau matter. I have sent 30,000 e-mails just to academic researchers. I respond to any questions they have. I’ve notified all the big names. I’ve contacted Bogle three times. And lots and lots of others. I respond to questions from you Goons. I attend the Financial Bloggers Conferences and give presentations at them. I have produced five unique calculations and recorded over 200 RobCasts and have over 100 investing articles at the site and scores and scores of Guest Blog Entries and on and on. There’s nothing that can be dome that I have not done.

    Would I like a different result? Yes! But I cannot control that. All that is in my power is to work it as hard as I can work it. I do that.

    You have been fiddling around on the Internet for well over a decade during 2 price crashes with very sad results.

    We don’t agree re this part at all. There are two sides to this, the substantive side and the process side. I have won every battle that has been fought on the substantive side and I have lost every battle that has been fought on the process side That’s been so going back to the first day.

    If you had told me years ago that one day I would be the co-author of the most important piece of peer-reviewed research published in the investing field in three decades, I would have told you that you were off your rocker. But that’s the reality today. My wins on the substantive side go beyond anything I could have imagined possible. On the process side, it’s just the opposite, I would have put the odds of me being banned at even a single board at one million to one. I have been banned at at least fifteen. On the process side, I have suffered massive defeat after massive defeat after massive defeat.

    Whachagondo?

    The two things are connected, Laugh. I suffer defeats on the process side BECAUSE I achieve such amazing results on the substantive side. The more effective I am in the case I make, the more of a threat I represent to the Buy-and-Holders. They cannot stand me! I am poison to them! Why? Because all of my stuff is 100 percent supported by the academic research. Their primary marketing pitch is that THEIR stuff is rooted in academic research. So I am a mortal threat. If they didn’t ban me, the entire Buy-and-Hold house of cards would have tumbled to the ground by now. I know that, you Goons know that, the Wall Street Con Men know that.

    So, yes, we probably will have to wait for the next price crash to break through. I wish it were not so. But that indeed is my assessment of where things stand today. The Buy-and-Hold Mafia has hundreds of millions of dollars to spend promoting its Get Rich Quick garbage. I cannot spend hundreds of millions on marketing. Maybe after I receive my settlement I can. But not today. So they have the edge on me today. I could beat them if site owners would honor their promises to protect me from you Goons. But the site owners are scared. So things are what things are.

    I believe that the dynamic will change after the next crash. A lot of the middle-class people whose lives are in the process of being destroyed have a desperate need to believe in Buy-and-Hold. They have their entire lives invested in it. Those people don’t feel that they can afford to let in the possibility that they have been taken. I believe that that will change following the next crash. Once the Pretend Money is gone, I believe that they will turn on those who promote Buy-and-Hold in general and on you Goons in particular. I am not God. Perhaps I am wrong. But that’s what I believe.

    You may want to rethink your approach.

    I don’t see a need for a new approach. I need help. I need the Wall Street Con Men working with me (especially my good friend Jack Bogle!). I need you Goons working with me. I need the major newspapers working with me. I need the big blogs working with me. I need all the academic researchers working with me. I don’t need to change what I am doing. I need others to change what they are doing so that I am the leader of a huge movement rather than one guy posting stuff on the internet and nothing of practical consequence happening when he does so.

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

    Rob

  31. Anonymous says

    Rob,

    Why is it that only you see buy and hold as part of an overall campaign of fraud? The press loves all the dooms day scenarios and investment professionals will always warn about things they see as disasters in the wings. Yet the only one out there talking about prison time and lawsuits is you.

  32. Rob says

    Buy and Hold takes out emotion. You set an allocation and you stick with it.

    We obviously disagree, Anonymous. We couldn’t possibly disagree more. We are at opposite ends of the spectrum of possible belief re this one.

    I say that you should set a risk profile and stick with it.

    If valuations affect long-term returns, then each increase in valuations makes stocks more risky. To stay at the same risk profile, you MUST change your stock allocation in response to big valuation shifts. The more you are willing to do this, the less risky stock investing becomes. Buy-and-Holders are the ones least willing to do this. So they are the ones who follow the riskiest investing approach of all.

    Fama’s research and Shiller’s research lead to opposite strategies. That’s why I say that it is so important that as a society we figure out which one of the two Nobel Prize winners is right and which one of the two Nobel Prize winners is wrong. They can’t possibly both be right. It cannot be that it is essential not to change your stock allocation and also that it is essential that you do change your stock allocation.

    whereas marketing timing get rich quick schemes, like VII and filled with emotion and are very goonish.

    If we were talking about short-term timing, I would agree with you.

    That’s the mistake that was made by the Buy-and-Hold Pioneers. It is the biggest mistake ever made in the history of personal finance.

    Fama equated short-term timing and long-term timing. He showed that short-term timing doesn’t work and he then jumped to the hasty conclusion that long-term timing doesn’t work and is not required. He never even tested long-term timing.

    Shiller was the first to test long-term timing. He found that it always works and that it is always required. The test has been repeated in many different ways in the 33 years since. Every test has shown that long-term timing always work and is always 100 percent required. There has never been a single exception.

    That’s why I believe this to be the case.

    Rob

  33. Robisadouchebag says

    I guess you goons better shape up. You better contact all the board owners and demand that Rob be allowed to post on all boards and say whatever he wants, but that goons (per Rob’s direction) should be immediately cut off. You all then need to get Jack, Bill, Larry, Rick, JD, Mike and everyone else we can think of to join Rob on the state in Madison Square Garden so that they can all give their “I was wrong speech” and to proclaim Rob the leader of a new financial movement. We then need to get someone to rewrite all the financial text books and studies to say what Rob wants.

    Did I leave anything out?

  34. Rob says

    Why is it that only you see buy and hold as part of an overall campaign of fraud? The press loves all the dooms day scenarios and investment professionals will always warn about things they see as disasters in the wings. Yet the only one out there talking about prison time and lawsuits is you.

    If someone uses astrology as their guide to investing, that’s not fraud. It’s stupid, in my assessment. But it’s not fraud.

    There are millions of people who believe in Buy-and-Hold and who promote it and who are not engaged in fraud. They are sincere in their beliefs.

    It becomes fraud when you cover up an error in a retirement study for 12 years. Greaney knows that he cannot defend his study in civil and reasoned debate. Otherwise, he would not have advanced death threats. It wouldn’t be fraud if he didn’t put forward the death threats and the demands for unjustified board bannings and the tens of thousands of acts of defamation and the threats to get academic researchers fired from their jobs. I think a case can be made that he is suffering from cognitive dissonance. Someone who gets something wrong because he is suffering from cognitive dissonance is not committing fraud. But you cannot use cognitive dissonance to justify things like death threats and threats to get academic researchers fired from their jobs. The laws against fraud would become meaningless if you permitted such loopholes.

    I don’t understand what you are trying to suggest about doomsday scenarios. I just don’t get the connection.

    Do you acknowledge that the media described what Bernie Madoff did as fraud? That’s the case that is similar to what is being done with Buy-and-Hold. The Madoff investors LOVED him before the Ponzi scheme collapsed. They HATED him when all their money disappeared. That’s what I believe will happen in the Buy-and-Hold case.

    There were people who endorsed the Madoff fund who were not engaged in fraud. They heard that it produced good results and they passed along this information to others. They were misinformed, as are most of those who promote Buy-and-Hold strategies today. It’s just one of those things that happen.

    Madoff was sent to prison because he produced fake transaction reports. That’s when it becomes fraud. You can’t say “oh, Madoff thought he was helping people (this is what he claims) when he produced fake transaction reports. That’s fraud.

    Well, to respond to learning that you got an important number wrong in a retirement study by threatening to kill family members of the person who discovered the error is fraud. To spend 12 years engaged in a smear campaign against the guy who discovered the errors in the study is fraud. To fail to tell the people who planned their retirements around your study that the Wall Street Journal has reported that it is in error is fraud. To threaten to get an academic researcher fired from his job because he tried to get a similar study by a different author corrected is fraud.

    I say that this is financial fraud because this IS financial fraud. The 12-year cover-up of the errors in the Old School safe-withdrawal-rate studies is the biggest case of financial fraud in U.S. history. There is nothing else even close.

    Buy-and-Hold was a mistake. It wasn’t fraud. The Buy-and-Hold Pioneers came up with lots of wonderful stuff and happened to get one important point wrong. That’s not fraud. That’s how we learn.

    The 12-year cover-up is fraud. It’s because you have aided the 12-year cover-up that you will be spending most of the remaining years of your life in a prison cell, Anonymous.

    Rob

  35. Robisadouchebag says

    Forgot to add Wade to my last post. He really needs to say he is sorry. He really crossed Rob. When Rob asked his infamous question, Wade said he had his answer within 82 minutes. That made Rob look foolish and he shouldn’t have done that. He also continues to say that Rob is wrong on SWRs and hasn’t withdrawn that statement. He needs to say he is really really really sorry and then tell everyone that Rob is really the author of his paper even is Rob didn’t write anything.

  36. Rob says

    Did I leave anything out?

    You stated things with lots of unnecessary and negative attitude, Douche.

    I would say that everybody should remember that the goal is to give good investing advice that helps our readers and clients. We all should follow the academic research where it leads us. If we find that there’s even the possibility that we got something wrong, we should note that possibility and then investigate further.

    Say that Greaney has put up a post on the morning of May 13, 2002, saying: “You are making an interesting point, Rob. I am a bit taken aback because the methodology that I used is similar to what was used in the Trinity study, which is peer-reviewd. So I had confidence in it. You are bringing up something that I hadn’t thought about before and I am not sure what to make of it right off the bat. I would like to explore this a bit. We should have some discussions here. If we agree that there’s a genuine issue, we should contact the authors of the Trinity study and see what they think. Then perhaps we can go to Bogle and Bernstein and Burns and get their feedback. For now, I have added a paragraph to the study noting that this issue has been raised on the board and that we are looking into it.”

    Do you see how that would have taken things in a different direction?

    Yes, I do believe we are going to end up rewriting all the textbooks. That is where things are headed.

    But you of course know that that is not solely because of the work that I have done. My work is rooted in Shiller’s work. Shiller is an economics professor at Yale and has been awarded a Nobel prize in economics. Is it so surprising that someone who won a Nobel prize would come up with findings sufficiently “revolutionary” to cause a rewriting of the textbooks in his field of expertise? That is what is in the process of happening here.

    I didn’t start out expecting to change textbooks. I was a leader at the Retire Early community at Motley Fool. I believed that Greaney made an error in his study. I rationalized keeping my mouth shut for some time but that eventually became impossible. So I spoke up. I was 100 percent gentle and kind about it. I didn’t say that I knew there was a mistake. I said that I thought there might be and I asked for feedback. Hundreds of my fellow community members became very excited in a positive way, saying that this was the best discussion we had ever had at that board.

    Who responded inappropriately?

    It was Greaney and his Goon Squad who did that.

    The thing became bigger because the Goons tried to shut down debate and I naturally felt a responsibility to do something. The obvious thing to do was to go to boards where Shiller’s model was regularly being discussed and ask those people to help us out. I learned that there are no such boards! Shiller was the author of a best-selling book that “revolutionizes” the field and there were no boards focusing on his work. This suggested a HUGE opportunity. I had the chance to build the first such board, the only board on the internet that would explore in depth the new model. Why the heck would any sane person not want to take advantage of that opportunity?

    I do not say that I know everything. I say that I am honest and that I give my best shot to every topic I explore and that I have won huge applause at every board and blog at which I have participated at which you Goons were not permitted to poison the discussions. So, yes, I think I have something very important to offer.

    I don’t want this to be just me. I asked Greaney to help me develop the first New School SWR calculator. It was his decision not to do so. I asked Bogle to work with me. I asked Burns to work with me. I worked with Pfau. I worked with Russell. And on and on and on.

    There is room for anyone who wants to be involved in the building of the VII concept to be involved in it. There is no need for envy here. You Goons keep yourselves on the outside looking in by your negative attitudes. You are not required to sign up. But you are invited warmly.

    Yes, this is big.

    It is the biggest advance in the history of personal finance.

    You put forward sarcasm suggesting that that is not so or that that is not a good thing. But you cannot make reasoned and civil arguments that it is not so. Why do you think that is? It is because this really is a big thing.

    We all should be celebrating. We are the luckiest generation of investors ever to walk Planet Earth.

    I offer no apologies whatsoever. I am very proud of the work I have done and of the amazing insights I have produced (working with thousands of other good and smart and generous people).

    All of the nasty stuff comes from your end, Douche. You should knock if off before the destructive behavior puts you in an even worse place than the place you find yourself in today.

    Huge advances do take place in this wonderful nation of ours from time to time. Smart people try not to go down in history as the people who cried out that progress must come to a complete stop because it suggests that they weren’t born knowing everything that can possibly ever be known.

    My sincere take.

    Rob

  37. Rob says

    Forgot to add Wade to my last post. He really needs to say he is sorry. He really crossed Rob.

    Wade really crossed himself and Wade really crossed all the readers of his research and Wade really crossed all the community members at the boards at which he posts and Wade really crossed the professors who taught him and Wade really crossed his profession and Wade really crossed his country.

    And Wade showed a lot of heart writing the authors of the Trinity study and seeking a correction.

    And Wade earned a Nobel prize with the work he did on the amazing peer-reviewed research we co-authored.

    I look forward to the day when Wade flips back to the side where the good guys reside. We will be welcoming him with open arms, prison sentence or no prison sentence.

    Rob

  38. Rob says

    Do the people who were our friends and who believed in the study and who ruined their lives as a result matter to any of you Goons?

    They matter to me.

    Big time.

    Rob

  39. Anonymous says

    “We will be welcoming him with open arms”

    Who, specifically is “We”? Can you give us actual names?

  40. Rob says

    Jack Bogle and Bill Bernstein and Larry Swedroe and Scott Burns and thousands and thousands of others, Anonymous.

    We are all on the same side. We all want the same things.

    Every last one of us wants to live in a world in which there are no more economic crises and in which we have access to accurate retirement planning numbers and in which stocks have become a virtually risk-free investment class.

    Lots of us are afraid to do what it takes to get us there. But there won’t be one of us who won’t be celebrating and welcoming Wade back with open arms when we make it to the other side of the river.

    I’m scared too. I am not different in that respect.

    The difference with me is that I am more afraid of what happens to us a society if we do not open the internet up to honest posting on investing topics than I am afraid of what happens to me personally if I work up the courage to “cross” the Buy-and-Holders by posting honestly myself.

    There is a part of you that wants to experience the benefits that follow from the learning experience you will enjoy if we lift the Ban on Honest Posting, Anonymous. You won’t admit it. But there’s a part of you that feels that way all the same.

    You make a big deal that I am alone.

    We wouldn’t be having this conversation if I were not alone.

    It doesn’t take many to prevail when the issue we are talking about is the calculation of a number.

    I am alone with a need to win over one big-impact supporter to succeed in changing the future of investing analysis in a fundamental way. That’s a different and far more encouraging way to look at it.

    I am one supporter away from total victory. That one supporter will translate in little time into millions of supporters.

    So who has really been winning more and more and more victories over the first 12 years of our discussions?

    Did you ever hear the one about the fellow who went on to win the war after losing every battle?

    Rob

  41. Anonymous says

    “We are all on the same side. We all want the same things.”

    I doubt they really want what you want. In fact, they probably prefer a more civil board in which people act like adults versus putting up with the childish behavior you have brought to the boards. Where else have you ever seen financial communities are set up with a particular focus to avoid the behavior of one individual (you). You would think you would have learned something from that and figured out a way to communicate like a NORMAL person so that you could avoid looking like a troll. Even people you think are on your side (which we can debate that point) have told you that you need to reconsider they way you interact with people, yet you just can’t help yourself and you just repeat the same lines and continue with the same behavior that you have exhibited over the past 12 years. You want everyone else to change in one way or the other. Ever think it just might be you?

  42. Anonymous says

    Here is reality, Rob:

    There are many people out there that know much more than you. There are people out there that have experienced much more success than you. Your approach is to tell these people that despite the fact that they know more and have done better, you think they are wrong. Do you really think they will be convinced? Of course not, they will ask for your track record. They will look to compare results/outcomes.

    Now, if you just happened to go on a board and say, here is what I do and this is why. That is one thing. In your case, you want everyone else to say “Hey Rob, I am just going to ignore what has been successful for me and many other people, I am going to ignore the data that shows the success of various strategies. Despite the fact that you don’t have any track record to point to with your trading strategy, I will go ahead and follow you. And when it comes to SWRs, despite the fact that you haven’t corrected what you say is errors in SWRs, I will go ahead and just believe you. Despite the fact that people have already responded to you about how you misunderstand SWRs, I will just go ahead and ignore it. Hey, and while we are at it, it is okay for you to continue to destroy the reputation of Wade Pfau, despite the fact that he told you to stop talking about him, but that is okay because it suits you Rob. In fact, anytime Wade or any other expert says something that you don’t agree with Rob, they must be lying.

    So every single person out there is wrong and only Rob is right….yep, that REALLY makes sense.

  43. Rob says

    Where else have you ever seen financial communities are set up with a particular focus to avoid the behavior of one individual (you).

    I have never seen that anywhere else, Anonymous. It is an extraordinary phenomenon.

    Where else have you seen numerous site administrators write to a person they banned from a site apologizing to them and telling them that they have read every article the person has written and think that the work the person is doing has huge value?

    I am being banned because what I say causes Buy-and-Holders to feel intense emotional pain.

    Is that my fault?

    Or should the Buy-and-Hold advocates have started telling people what the peer-reviewed academic research in this field says 33 years ago?

    If the Buy-and-Holders had been behaving irresponsibly all along, there never would have been a problem.

    I am doing the right thing by getting this stuff out in the open.

    Rob

  44. Rob says

    You would think you would have learned something from that and figured out a way to communicate like a NORMAL person so that you could avoid looking like a troll.

    Is it a good thing to point out errors in a study that people are using to plan their retirements or is it a bad thing?

    Is someone who saves million of people from suffering failed retirements (millions would have been saved if my work had been publicized as it should have been) a troll or a hero?

    Is the person who directs death threats at the person who does the heroic work of saving millions from suffering failed retirements not the real troll? Isn’t it the business of an investing board to HELP people, not to destroy their lives?

    You say you want me to behave in a “normal” manner. “Normal” in this context has for 33 years meant going along with a cover-up of what the peer-reviewed academic research says about how stock investing works in the real world. How does it help to have one more person doing what thousands before him have done. I WANT TO END THE COVER-UP!

    No, that’s not “normal.” It’s wonderful.

    I offer no apologies for not having behaved in the manner that has come to be seen as “normal.” I strive for better than normal and I have achieved that in this case. I offer no apologies for being the person to have discovered the errors in the Old School studies. I am proud to have done that important work.

    The trolls are the people who have responded by disrupting the boards rather than getting to work spreading the word about the New School SWR studies far and wide. We should be giving people accurate information. When it becomes normal to give wrong numbers, we need to do better than normal.

    Rob

  45. Rob says

    Even people you think are on your side (which we can debate that point) have told you that you need to reconsider they way you interact with people

    People for whom I have great respect have said this sort of thing. Carol Osler is one. Her e-mail to me was full of intelligence and kindness. And she advised me not to use the word “Goon.”

    Here is my problem with the approach that Carol and others have suggested — It hasn’t freakin’ worked for 33 years now!

    The errors in the SWR studies were made public on May 13, 2002. They have not been corrected to this day. EVEN AFTER THE FREAKIN’ WALL STREET JOURNAL WROTE ABOUT THE ERRORS, THEY WERE NOT CORRECTED!

    And I am to conclude that the problem is that I am pushing too hard?

    The problem is that others are not pushing hard enough.

    We need to get the darn studies corrected! Should that be hard? People get the numbers in retirement studies wildly wrong and they don’t correct them. Huh?

    That’s the problem, Anonymous. We need to see some steps taken. We need to see the Buy-and-Holders behave in a responsible manner.

    I am all for gentle interactions. But the purpose of this enterprise is to help people invest effectively. We need to start worrying less about the feelings of the experts who made the mistakes and more about the retirement plans of the millions of people who have suffered huge financial damages as a result of those mistakes.

    The mistakes themselves are not a problem. The problem is in the 12-year cover-up. The cover-up helps no one. We need to end the cover-up. Then there won’t be any more Goons and I won’t ever again have to use the word “Goon” when talking with my friends.

    Rob

  46. Rob says

    You want everyone else to change in one way or the other. Ever think it just might be you?

    I’m not the one who got the number wrong in a retirement study published at my web site.

    I am pretty darn sure of that much.

    Rob

  47. Rob says

    There are many people out there that know much more than you.

    Did any of these people who know more than me point out the errors in the Old School retirement studies prior to May 13, 2002, and demand that they be corrected?

    If not, why not?

    Bernie Madoff knows more than me on a lot of different subjects. He is in prison today.

    Intelligence is not the only thing needed in an investment advisor. Personal integrity is also needed. A good argument can be made that personal integrity is MORE important. Intelligence in a con man is a bad thing. It makes it more likely than his con will be successful.

    Rob

  48. Rob says

    Now, if you just happened to go on a board and say, here is what I do and this is why. That is one thing.

    I don’t do that.

    I don’t see why anyone should be interested in what I do personally.

    What matters is what the peer-reviewed academic research in the field says. Every word I have put forward in the past 12 years is supported by 33 years of peer-reviewed academic research.

    Rob

  49. Rob says

    In your case, you want everyone else to say “Hey Rob, I am just going to ignore what has been successful for me and many other people

    I do not.

    I want everyone to post honestly or not at all.

    I have had thousands of people tell me that they see me as the first person who has ever discussed investing in a sensible way. Those people have a right to ask as many questions as they wish. I have a right to respond to every question directed at me.

    Those who do not find merit in the ideas have the right to say so while honoring the published rules of the site or to ignore the matter and stick to threads in which things they agree with are being said.

    I don’t want anyone who doesn’t agree to say that he or she agrees. The thought horrifies me. But I want those who do agree to say so as loud and as often as they please.

    The Valuation-Informed Indexers have every right to participate at the boards in the same manner as the Buy-and-Holders. We should show the Buy-and-Holders respect. And the Buy-and-Holders should show us respect. We should not worry about “going too far” or upsetting the Buy-and-Holders or anything along those lines. We should say precisely what we believe. We should be kind and gracious, yes, but also HONEST.

    Rob

  50. Rob says

    Hey, and while we are at it, it is okay for you to continue to destroy the reputation of Wade Pfau, despite the fact that he told you to stop talking about him,

    Wade made clear to me in 16 months of conversations that he LOVED doing honest research. There is nothing he would like more than to get back to it.

    You Goons should take the gun away from his head. He has a right to do the work he trained for years to do.

    Rob

  51. Rob says

    In fact, anytime Wade or any other expert says something that you don’t agree with Rob, they must be lying.

    If someone who claims to be an expert says something that is not in accord with the last 33 years of peer-reviewed academic research, there is some sort of funny business going on, Anonymous.

    Shiller won the Nobel prize for his research. How has Bogle changed his investing advice as a result of what he learned from Shiller’s research?

    He hasn’t changed it AT ALL!

    What does that tell you?

    It doesn’t tell you anything good.

    If Bogle sees zero value in Shiller’s work, he should say that. But it is deception to pretend that you are recommending what the research says and then to ignore 33 years of research and give no reason why.

    Rob

  52. Rob says

    So every single person out there is wrong and only Rob is right….yep, that REALLY makes sense.

    I am a mild-mannered reporter who reports honestly on what the last 33 years of peer-reviewed academic research in this field says. Nothing more, nothing less.

    It doesn’t matter what I say. What matters is what the research says.

    Anyone who fails to address himself to the last 33 years of peer-reviewed academic research is not to be trusted. Either he is woefully uninformed or corrupt or suffering from cognitive dissonance. There are no other possibilities. And all three of those possibilities are bad news.

    I am ahead of all those people. I never went to investing school. And I never managed a big fund. And I could be wrong in everything I say. But I am not ducking 33 years of research. I am trying to make sense of things. That puts me ahead of anyone who doesn’t even address the most important questions.

    If Shiller is right, Buy-and-Hold is the most dangerous strategy ever concocted by the hunan mind.

    We ignore that?

    We ignore the reality that failing to speak out on this stuff could put us in the Second Great Depression?

    Not this boy.

    Find someone else.

    Rob

  53. Anonymous says

    Rob,

    Perhaps you should reflect again on this post made some time ago on freemoneyfinance:

    @Rob,

    I did not think I could change my opinion of someone so quickly.

    You have stated so many unsubstantiated things that are far beyond your basic premise that I am really no longer interested in your answers.

    1. It was Buy-and-Hold that caused that false valuation. — There is no proof of that. Margin percentages got to all time highs in the late 90′s, I am sure that had nothing to do with it. Day trading got to levels not seen in my life time, I am sure that had nothing to do with it. etc etc. Buy and Hold may or may not be wrong but it is certainly not the boogie man and the root of all evils. You hold Buy-and-Hold responsible for all that is wrong with investing and the elimination of it as a strict regiment as some kind of financial utopia. I find that extremely naive.

    2. Of FMF you said: “I can respond to any substantive question. But I cannot overcome the hostility you feel to having your ideas questioned.” and “You need to be asking yourself why FMF is hostile to the idea of learning about this stuff.” — That’s just ignorant and pathetic.

    3. “I’d prefer the discussion to be about the substantive points, Apex. If everyone would insist that we stick to the substantive points, everyone would get what they say they want. I do not control Eugene or FMF. They say what they say and I respond to what they say.” — Screw what they say (and I don’t even know what you are talking about with FMF, he didn’t say anything), why are you so defensive and spend all your time defending yourself rather than defending your theory. If you just stick to the substantive points those who are making distractions will get drowned out but all you do is debate the distractions rather than the substance.

    I can see now that the problem is that you are far beyond the basics of your theory as I understand it. You are into a war on buy and hold and some kind of Al Gore save the planet type of crusade that you believe will forever usher in an investing utopia if we can just eliminate pure buy and hold investing.

    I don’t believe a thing you have stated here beyond the basics that markets get over-valued and being fully invested in them at all times is not always the best course of action.

    Beyond that basic assertion I retract any endorsement I stated here or implied by defending what you do as it appears you have other agendas that I do not support.

    You are going to find you are regularly a lone voice if you continue to approach things in such a personal and accusatory manner. You took your one defender here and turned him into a detractor in less than 24 hours. If that was me I would reconsider my approach.

    To FMF, I am sorry that my comment seems to have started this mess.

    Posted by: Apex | September 15, 2010 at 04:38 PM

  54. Rob says

    There is nothing in those words that justifies covering up errors in retirement studies for 12 years, Anonymous.

    There is nothing that comes close.

    I won’t reconsider my approach.

    I will continue to be as friendly as I possibly can be to all my Buy-and-Hold friends while ALSO remaining true to the millions of middle-class investors who need access to honest and informed investing advice.

    Apex is worried that it makes FMF look bad to acknowledge that he has gotten some things wrong. You know what really makes FMF look bad? To not come clean as soon as possible.

    It is not the mistakes that are killing people. It is the cover-ups of the mistakes. Every day the cover-ups continue more people are hurt.

    We all need to come clean and we all need to move forward. There is no other way. We all need to do this by the close of business today.

    Rob

  55. Anonymous says

    “There is nothing in those words that justifies covering up errors in retirement studies for 12 years, Anonymous.”

    Why are you covering up your error. Afterall, Wade said you are wrong, so you must be covering it up.

    “Apex is worried that it makes FMF look bad to acknowledge that he has gotten some things wrong. You know what really makes FMF look bad? To not come clean as soon as possible.”

    You are just angry because FMF would not give you a guest post. Anyone can go read the thread and see how you were crying like a baby about getting a guest post.

    You should be ashamed for the way to treated FMF as he is a person with credibility, honor and truth (which you lack).

  56. Anonymous says

    “I won’t reconsider my approach.”

    And you will continue making no progress.

    “We all need to come clean and we all need to move forward. There is no other way. We all need to do this by the close of business today.”

    There is no “we”. It is just you, Rob.

    Some people never learn.

  57. Rob says

    You should be ashamed for the way to treated FMF as he is a person with credibility, honor and truth (which you lack).

    We disagree.

    FMF could have played a huge positive role. His blog reaches enough people that he could have made a difference.

    Like many others, he didn’t want to get involved. He wanted to rationalize. He wanted to tell himself that it is someone else’s problem.

    I won’t say that I lack sympathy for his situation. I kept it zipped for a long time. I know how it feels to worry about what will be directed at you if you speak up and I know the reality of what will be directed at you if you speak up.

    All that said, FMF needs to speak up. And everyone else needs to speak up.

    This doesn’t end until people speak up.

    So I continue to urge him (and all others in a position to do good) to speak up.

    Rob

  58. Rob says

    And you will continue making no progress.

    Then I live with that, Anonymous.

    You cannot teach a cat to bark and you cannot teach a dog to meow and you cannot teach Rob Bennett to lie about the numbers that his friends use to plan their retirements.

    It’s not in me.

    Yell at me, smear me, ban me, hit me, imprison me, execute me. Whatever you do, it will not change. Not because I am made of such strong stuff. Because it is not in me. It cannot change.

    There are soldiers who die for their country, right? There are people who are sent to the lines and who have to give up their life for a greater good. I of course like to think that I could pull that off if placed in the circumstances. But I don’t think that I would be especially good at it. That’s a physical fight. I am not good at that sort of thing. I would do the best I could to be brave, that’s all I can say.

    God didn’t place me in those circumstances. He placed me in these other circumstances instead. He wants me to have my bravery tested in this other way instead. I am 50 times more confident about how I will behave in these circumstances because the fight here is over an idea and ideas are what drive me and what matter to me on a deep-down level. So re this one I know how I will behave. I will die before I agree to post dishonestly re SWRs if it comes to that. I say that not to be melodramatic but to pass along a piece of information that is relevant and that should be taken into consideration by whoever is calling the shots here.

    And I sincerely wish you well, man. I don’t agree at all with what you have done re this matter. But I am capable of putting that to one side and accepting that I have done bad things in my life as well and that it is God who will judge both you and me and that I don’t know how either of those calls are going to go. I will fight with all the energy that I possess to fight. But I won’t reach the end of this with hard feelings towards you or anyone else as a result of how things go down.

    I will always call Jack Bogle a “hero.” That’s written in the book because of accomplishments already attained and can never change. I will always feel great affection for all of my Buy-and-Hold friends because I love what Valuation-Informed Indexing can do to enrich the lives of millions of middle-class investors and there would be no Valuation-Informed Indexing today had Buy-and-Hold not come first. You Goons are nuts and corrupt and all the other stuff but you are creatures of a loving God who wants me to love you and so that is what I must do. I believe that you follow Buy-and-Hold. That’s one point re which you are sincere. You are fighters, you possess ten times the fight of any of the wussies on my side, I give you that one. And you have helped me learn some new things with your – er- challenges to my way of thinking.

    If it can never change, it can never change. I love the idea that the Buy-and-Hold Pioneers taught me — that investors should root their strategies in the findings of the peer-reviewed academic research. I will remain true to that beautiful idea, smear me as you will.

    Rob

  59. Rob says

    There is no “we”. It is just you, Rob.

    You see something very different from what I see when I read the 12 years of the Post Archives, Anonymous.

    I wish you well, old friend.

    Rob

  60. Rob says

    Some people never learn.

    The good heart loves, Anonymous.

    It cannot be taught to do otherwise.

    It can die. To die is in its nature. But it cannot act contrary to its nature.

    We live in a wonderful country. We have faced trials before and we have overcome them. I believe we will overcome this trial. If not, not. But I will believe that until there is no one left to write the story of how the wonderful country went down.

    I naturally wish you the best of luck with whatever investing strategy you elect to pursue, old friend.

    Rob

  61. Rob says

    Afterall, Wade said you are wrong, so you must be covering it up.

    Good point.

    I forgot.

    Rob

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