Miranda Marquit recently posted a Guest Blog Entry at the Investor Junkie blog called How to Invest Using Valuation-Informed Indexing: Interview with Rob Bennett.
Juicy Excerpt: Rob Bennett has been advocating valuation informed indexing for years, and his insistence on it has even had him kicked off investing forums, including the Bogleheads forum. “Buy and hold is intellectually dead,” he says. “It’s not practically dead, since plenty of investors still use the theory, but intellectually it’s been dead for more than 30 years.”
The Goons that meet at Goon Central shared their thoughts re the article here.
The Goons that meet at the Early Retirement Forum shared their thoughts re the article here.
Miasma says
Miranda sells her writing services. Three questions: 1) did you hire Miranda to write this, 2) if so, what was her fee, and 3) was it a good investment?
Anonymous says
Calling someone a goon speaks more about you instead of the person you have targeted. I am sure you will respond by trying to justify it, but then ate you not hypocritical? Secondly, the “goons” responses are based on a track record and persona that you have established yourself. You have given them the material and they are reporting on it. You call it attacks, yet you can refute it with facts of your own.
Let’s take the death threats issue. You were the one to bring up the subject. You are rediculed over and over again on this topic. You look at it as an attack on you. In absence of proof to the contrary, any reasonable person is going to doubt your allegations because you have nothing to back it up. If you actually posted a direct link to the death threat, you would have instant credibility and support. Instead, people are left to believe that you are either a liar or mentally ill. You have full control on this issue.
Rob says
Miranda sells her writing services. Three questions: 1) did you hire Miranda to write this, 2) if so, what was her fee, and 3) was it a good investment?
This is the state of the “defense” of Buy-and-Hold in the yea4 2014.
What once was Science is now Intimidation.
Rob
Rob says
Calling someone a goon speaks more about you instead of the person you have targeted.
It says that I do my job, Anonymous. I am a journalist. Journalists tell people what is going on in the world. The 12-year cover-up of the errors in the Old School safe-withdrawal-rate studies is the biggest economic and political story of our time. Pointing to the behavior of you Goons is part of the job of telling this story. Things could not have played out as they have played out without a heavy helping of Goonishness. The story doesn’t make even a tiny bit of sense if the Goonishness is ignored.
One big reason why the Behavioral Finance School of personal finance has not achieved more in the practical realm despite the many powerful insights it has advanced is that too many people in this school are afraid to describe and document the Goonishness we all see taking place all around us every day from those who believe and follow the conventional (Buy-and-Hold) investing advice. Goonihsness is the story. Goonishness is the thing we need to combat if we are to become effective investors. We will not as a society become able to combat Goonishness until we first work up the courage to at least talk about it.
I am the fellow who doesn’t hold back from noticing and talking about and exploring and commenting on and trying to rein in Goonishness. That’s why I am today 12 years ahead in my understanding of how stock investing works of people like my good friend Jack Bogle. Jack shies away from this topic. It has its ugly side. I certainly don’t say different. But you know what? A doctor who wants to cut out cancerous tissue has to draw blood to do so. There are times when a person seeking to do something good has to engage in some awful task to get the job done.
Jack Bogle has more I.Q. points than I possess and he has more training in this field and he has more experience. But he has held himself back because of his fear of talking about the ugly Goonishness that has come to dominant this field in the Buy-and-Hold Era. I care about what happens to the people who read my words. And so I cannot go there. I talk about non-Goon stuff all the time and I enjoy being able to do that when it is an option. But when the Goon stuff stares me in the face and demands to be reported, I make an effort to work up the courage to do that. I work it hard and I think it would be fair to say that I have gone to places that no one else in this field has ever gone to before. I pray that I will continue to push when called on by realities taking place before me to do so.
Had Shiller published his “revolutionary” research in 1961 instead of 1981, there never would have been any Buy-and-Hold. The Buy-and-Holders don’t want to destroy our economic system. They don’t want to invest ineffectively themselves. Valuation-Informed Indexing has been shown to be so far superior to Buy-and-Hold in every test that has been done that it is silly to suggest that there is any intellectual debate here. There’s a mountain of evidence on the Valuation-Informed Indexing side and zero evidence on the Buy-and-Hold side. Zero evidence combined with a huge amount of Goonishness. Which has been enough to block the intellectual debate for 12 years now (it’s 33 years if you date things back to when Shiller published his revolutionary research). It will soon become 34 years if we don’t as a society work up the courage to face the Goonishness this year. It will soon become 35 years of we don’t as a society work up the courage to face the Goonishness either this year or next year. And so on.
The reason why we are in an economic crisis today instead of enjoying the greatest period of economic growth in our history is that we are not all Vulcans who pursue our self-interest in a purely rational manner. Eugene Fama is responsible for some major advances. We all owe him a debt of gratitude for the good he has done. But he also made one huge mistake that has caused a huge amount of human misery. And he doesn’t want to acknowledge it. He feels ashamed. He wants that mistake covered up. The mistake has destroyed millions of middle-class lives. So as a society we cannot permit the error to be covered up any longer.
And of course it is not just Fama. LOTS of people want the realities of what we know about how stock investing works in the year 2014 covered up. And that cannot be. These realities cannot be covered up any longer. We all want to be enjoying life on the other side of the river. But the only way to the other side is struggling through the hard stuff. The only way to the other side is exposing the Goonishness and talking about it and punishing it (both through civil and criminal actions) and then forgiving it and then putting it all behind us and moving on to all the good stuff.
It’s not an accident that we have gone 33 years since Robert Shiller proved that there is precisely zero chance that a Buy-and-Hold strategy could ever work for even a single long-term investor without every expert in this field declaring that to be the case. There’s money in Get Rich Quick investing strategies. A LOT of money. And so a lot of smart and otherwise good people have been attracted to the wrong side of the ethical lines out of a desire to be popular and make lots of bucks while the Get Rich Quick garbage is still paying out its huge payouts to those who put obtaining huge personal payouts above helping their clients and readers learn how to invest effectively for the log run.
Those people very, very, very, very, very much don’t want the truth getting out. And the only hope they have with 33 years of peer-reviewed research behind them showing that they are talking garbage when they say that there is no need for investors to practice price discipline when buying stocks is engaging in and tolerating and encouraging Goonishness. That’s where things stand. I didn’t create the reality. I report on it. I care deeply about my many Buy-and-Hold friends and I want to help them. But I know that I am not helping them by causing them to travel even farther down the dark path that they have elected to travel.
I will continue to report on the behavior of you Goons and on the behavior of the Wall Street Con Men that makes possible the existence of you Goons in a society that has adopted laws protecting us from this sort of behavior. I can do no more and I can do no less.
I wish you all good things, Anonymous.
Rob
Anonymous says
You are not a journalist when you don’t post on comments that can be supported by facts. You are not a journalist when all you are doing is pushing an agenda.
You say that you uncovered errors in the SWRs, yet you do not show any math for what you call errors and you do not provide what you say is a fix.
You say buy and hold doesn’t wor, yet you have been given data on buy and hold strategies that have worked. You either ignore it or delete it. That is not being a journalist. That is being a partisan.
The death threat issue I posted before was ignored by you in your response. How is that being a journalist when you won’t address things in a fact based way?
You speak of millions of people that are destroyed by buy and hold, yet you have no direct proof of that accusation. You twist it around to fit your story.
Rob says
That is not being a journalist. That is being a partisan.
Say that you were a journalist writing about the Lance Armstrong matter, Anonymous. Many people have known for many years that Lance Armstrong was using performance-enhancing drugs. People who worked with him said so and provided enough details that their stories could be checked against Armstrong’s to determine who was telling the truth.
Why is it that his cover-up was successful for so many years? He had money. And he put that money to use intimidating people. If a journalist wrote an honest report, he would sue the person. That person would lose his money and his job. And all the others who had been giving thought to reporting the truth would see this and would hold back from doing so.
Intimidation tactics drive out truth. When you are trying to work a scam, truth is your enemy. So you MUST employ intimidation tactics. There is no other option. And the longer you push the scam, the more intimidation tactics you must employ. And the longer the cover-up continues, the more risk you take on that you will be held financially liable and/or go to prison. So the intimidation tactics escalate. Once crimes are committed in defense of a scam, things go down, down , down, down, down.
The Investing Advice Field is 1,000 times more corrupt today than the bicycle racing field. Buy-and-Hold was a bonanza. It is the purest and most dangerous Get Rich Quick scheme ever concocted by the mind of mortal man. Which means it helped take more dollar bills out of the pockets of middle-class investors and put them into the pocket of super-rich “experts” than any other Ponzi scheme that has come along in the history of the United States. That’s the reality here. I have documented that reality at this site. There is now a mountain of evidence supporting this claim.
I didn’t know this on the morning of my famous May 13, 2002. I thought Buy-and-Hold was a legitimate strategy in those days. I called myself a Buy-and-Holder in those days. So it’s obviously the case that millions of other middle-class people don’t know that Buy-and-Hold is a scam. And also that the vast majority of the people who promote Buy-and-Hold (my personal belief is that it may be every last one of them — that’s certainly the charitable take here) don’t know that Buy-and-Hold is a scam.
So we have this huge scam, this huge Ponzi scheme that has brought on the biggest economic crisis in U.S. history. And we have millions of people who believe that it is NOT a scam. And we have lots of experts who believe that it is NOT a scam and who continue to promote it. And we have more and more financial wreckage being caused on a daily basis.
How do you propose to fix that problem?
We don’t fix it by keeping quiet about the many, many acts of financial fraud that have been deployed to “protect” Buy-and-Hold any more than we reined in Lance Armtstrong’s deceptions and acts of intimidation by being quiet about them. We fix the problem by facing it and by talking about it and by taking action regarding it. There is no other way.
I will continue to call you out on your b.s. I will continue to call Jack Bogle out on his b.s. I will continue to let people know about the many acts of financial fraud that you and Bogle (at least objectively) and many others have committed over the past 12 years. If those others work up the courage to act, you and all the others pushing the scam go down. If those others fail to work up the courage to act, I go down and our economic system goes down.
That’s where things stand today. I cannot change it and you cannot change it. We just need to wait and see how things play out following the next price crash.
The bottom line here is that the errors in the Old School safe-withdrawal-rate studies became public knowledge on the morning of May 13, 2002, and have not been corrected to this day. A field in which millions of people’s lives could be ruined without action being taken is a field that is more corrupt than any field has ever before in U.S. history been corrupt.
We can as a society take action or we can as a society fail to take action. I vote for taking action. But I am not Superman. I do not get to decide these matters by myself. Nor would I ever want to possess such powers. I will continue to report honestly on events as they play out and I will continue to do what I can to exhort every person who has been affected by The Buy-and-Hold Crisis (and that’s every last one of us) to take action. While accepting that I do not possess the power to dictate the outcome. As noted in my earlier comment, I can do no more and I can do no less.
I naturally wish you all the best that this life has to offer a person regardless of what investing strategies you elect to follow.
Rob