“For 11 Years Now, We Have Been Seeing Emotions Evidence Themselves, Often in Very Juvenile and Destructive Ways. That’s an Investing Issue. Investor Emotions Are an Investing Issue.”

Set forth below is the text of a comment that I recently put to the Investor Junkie blog:

Rob,

I approve comments that make legit counterpoints. I do not know the full history with Early Retirement Forum, nor do I personally care.

His comment is a legit question (though the personal attack is not). If the commentator does not keep it on topic, he will be banned and comments removed (same applies to you also).

Otherwise I do not moderate and allow each to have their own opinion.

I agree with you that the Goons sometimes ask legitimate questions, Larry. If you look at my blog , you will see that I permit the Goons to post there. A LOT. One of the reasons is that they do sometimes present legitimate questions that we all can learn from (especially me — I obviously need to hear challenges to my thinking). I have two hour-long podcasts at my site that were inspired by questions posed by the Goons.

The Goons really do follow Buy-and-Hold strategies. They post lots of insincere stuff. But they do themselves follow the strategies they recommend to others. That’s one test of sincerity.

So it is not my position that the Goons should not be permitted to participate in discussions in any way, shape or form. They are part of what it going on and to fully understand all of what is going on, we need to understand what drives the Goons. That’s part of the story.

All that said, I think there is a problem if no one comments on their tactics. That fellow at Early Retirement Forum deserved to be able to engage in civil and reasoned discussion. We all miss out when the board is intimidated by a few insanely nasty personalities. I DO care greatly about the Early Retirement Forum. I spent years of my life building it up. There are hundreds of wonderful people there who would like to be having very different sorts of discussions. That board was once a great learning resource for everyone in the Retire Early Community and it is obviously not that today and that is a very, very unfortunate reality in my assessment.

My sense is that you are saying that you don’t want to be the one to comment on these sorts of things because you are the site owner and moderator here. That makes some sense. I hope others will feel encouraged to comment on these process issues. There have been thousands of people who have expressed a desire that honest posting be permitted. I have spoken to lots of professionals in this field who would like to talk openly about their real beliefs about how stock investing works but who do not feel safe doing so because of what they have seen from the Goons. The economic crisis hurts us all. So we are all being hurt by the reluctance of these many smart people to speak out.

The overlying reality here is is that we are in the transition years from Buy-and-Hold to Valuation-Informed Indexing. All of the evidence now goes in one direction. But it has been difficult to make this change because lots of smart people once really believed in Buy-and-Hold and those people built careers around their promotion of it. The tactics we see from the Goons reveal the desperate nature of the effort to “defend” Buy-and-Hold at this late date, over 30 years from the day the peer-reviewed research discrediting it was published. It may be that you should not comment on these issues in this thread but I very much think it would be a plus if you commented on them in a separate article at some later date. The process issue here is a big issue.

The difference between Buy-and-Hold and Valuation-Informed Indexing is that Buy-and-Hoid ignores investor emotion while Valuation-Informed Indexing takes investor emotion into account. Part of the transition we need to make as a society is in coming to understand that we must talk openly about not just the numbers of investing but also the emotions of investing. Pretty much all of us are uncomfortable about it today because with Buy-and-Hold emotions were just presumed not to matter. For 11 years now, we have been seeing emotions evidence themselves, often in very juvenile and destructive ways. That’s an investing issue. Investor emotions are an investing issue. It wouldn’t be too much of an exaggeration for me to say that that is the core point of the entire VII project.

Anyway, I am grateful to Miranda for conducting the interview and writing it up and to you for hosting her article. Anything that gets these ideas out before more people is a plus. If there are any others who would like to comment on the emotionalism we have been seeing from our Goon friends, I hope that they will feel encouraged to speak up. When they put it on display at a public forum, it becomes a legitimate issue for all of us to comment on.

Rob

Comments

  1. Anonymous says

    Rob,

    I don’t see anyone on that link that really supports you. I also dont see Larry or Joe the taxpayer inviting you back to write more content. Is there anyone of any major substance that is supporting you on a regular basis in a mainstream financial forum?

  2. Rob says

    Everybody is waiting for someone else to act, Anonymous.

    Shiller published his research showing that there is precisely zero chance that a Buy-and-Hold strategy could ever work for even a single long-term investor 33 years ago. The intellectual issue is settled. The entire 140-year history of market returns supports Valuation-Informed Indexing. Zero of those 140 years of history supports Buy-and-Hold.

    Jack Bogle wants the truth to get out so that he can begin doing honest and useful work once again.

    Wade Pfau wants the truth to get out so that he can begin doing honest and useful work once again.

    Robert Shiller wants the truth to get out so that he can begin doing honest and useful work once again.

    Mike Piper wants the truth to get out so that he can begin doing honest and useful work once again.

    And the same is of course true of all the others.

    Jack Bogle does NOT want to see the hate of all the Buy-and-Hold investors whose lives he has destroyed with his relentless promotion of Get Rich Quick garbage turned on him.

    Neither does Wade Pfau. Neither does Robert Shiller. Neither does Mike Piper. Neither do all the others.

    The realities are easy to decipher. Nothing could be easier. Price matter when buying stocks. That’s what all the research tells us, that’s what all the data tells us. What a shocker! Whodathunkit?

    But the money is in Get Rich Quick. That’s the other side of the story.

    The investing advice industry is not an industry built on research. It is an industry built on marketing. Research-based strategies work. But it is emotion-based strategies that SELL. The people who work in this field are about turning a buck, not about helping investors learn what they need to do to invest effectively. Those who put their customers first are discovered and expelled. We have seen that story play out over and over in the course of the past 12 years.

    Everyone in the field supports me, Anonymous. Everyone has a desire to be able to do honest work, to help people. All the humans have that inside them whether they elect to take work in the investing advice field or not.

    The question is — Who is going to pin the bell on the darned cat? Who is going to be the one to come clean about this massive act of financial fraud? Who is going to be the one to expose the 12-year cover-up so that we all can start doing good and clean and helpful work in this field?

    I’m doing my part. I have documented the 12-year cover-up at this site.

    I need help. It could be a venture capitalist that puts us over the line. It could be a journalist that puts us over the line. It could be a practitioner who puts us over the line. It could be a blogger who puts us over the line. It could be a policymaker who puts us over the line. It could be a researcher who puts us over the line. It could be an economist who puts us over the line.

    I cannot say who it will be. I can say that it has to happen. Because if it doesn’t happen, the Wall Street Con Men will just keep right on promoting Buy-and-Hold and thereby destroy even more middle-class wealth. Eventually, the economic crisis will grow so painful that we will end up in the Second Great Depression. You can’t just go on destroying wealth and destroying wealth and destroying wealth and not see consequences. We are in the early days of the consequences stage of this fourth try at seeing whether we can turn all the rules of logic and research on their heads and make a Buy-and-Hold strategy work for one or two long-term investors for the first time in history. The early signs on this grand experiment are not super encouraging.

    Everyone supports me.

    No one wants you Goons trashing his reputation all over the internet. Bogle doesn’t want that. Pfau doesn’t want that. Shiller doesn’t want that. Piper doesn’t want that.

    We were smart enough to enact laws against financial fraud before you Goons came on the scene. So we have what we need in place to put you Goons behind bars. Once we do that, it’s over. All the people who want to take things in a positive direction will be speaking out once they feel safe to do so.

    But the prison terms have to come first, Anonymous.

    People will not speak honestly about what the research says so long as you continue to respond with 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.

    I believe that the next price crash will help people to work up the courage we need to see to turn this around. Jack Bogle is a hero of mine. I believe that he is going to see how much human suffering he has caused with his cowardice and that he is going to speak out following the next crash.

    We’ll see.

    I naturally wish you all the best that this life has to offer regardless of what investing strategies you elect to pursue.

    Rob

  3. Rob says

    Here’s an article about the race-baiting of Jackie Robinson by the manager of the Philadelphia Phillies, Anonymous:

    http://articles.philly.com/2013-04-08/news/38348704_1_jackie-robinson-phillies-baseball-world

    Please note the part where the article reports how the commissioner of baseball eventually worked up the courage to warn the Phillies manager to knock off the funny business.

    That’s what will happen here.

    People may be slow to act at times. But most people have good in them. Most people are not 100 percent Goons. I mean, come on. We would not still be here if a large percentage of the population engaged in the sort of behavior that we see on a daily basis from the sorts of individuals who have put up posts in “defense” of Mel Linduaer and John Greaney.

    This is a process that we are working through as a society. We all (except you Goons, to be sure!) want to see things eventually move in a positive direction.

    My best wishes to you and yours.

    Rob

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