Valuation-Informed Indexing #177 — Buy-and-Hold Will Fall All At Once Rather Than Gradually

I’ve posted Entry #177 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Buy-and-Hold Will Fall All At Once Rather Than Gradually.

Juicy Excerpt: There are a number of things that should have happened following the publication of Shiller’s research. The Buy-and-Holders should have expressed great concern that their model might have been built on a shaky foundation and that they might be giving bad investing advice as a result. There should have been a call for lots of follow-up research aimed at determining whether the market is efficient or whether valuations affect long-term returns (it can’t be that both things are so!). There should have been lots of books written and lots of magazine articles published exploring the strategic implications of Shiller’s finding (which are breathtakingly far-reaching). There should have been a national debate on the question of how the Buy-and-Holders got it all so wrong and about what we need to do to insure that we are protected from mistakes with such frightening public policy implications in the future.

We played it precisely the opposite way.

We covered up The Mistake. Buy-and-Hold remained the dominant model for 32 years after it was discredited by the peer-reviewed academic research even though the findings of the peer-reviewed academic research are supposed to count for something in this field.


  1. Rob says

    Please explain why Shiller has 50% of his investments in stock.

    We’ve talked about this several times before, Anonymous.

    I am not the person to whom you should be addressing this question. I am happy to tell you what I think. But I am not the person best positioned to give the right answer. That person is — Shiller!

    Why the heck don’t you ask him?

    It may be that he will not respond to your e-mail. But it is hard for me to imagine that he would not respond to an e-mail from Jack Bogle. And there are numerous people at the Bogleheads Forum who have regular contact with Jack. So why not put up a thread over there asking for a group of people to approach Jack asking for his help getting Shiller to answer this question?

    Does that not make sense?

    I would benefit from knowing the answer to this question. So would you. So would Jack. So would millions of others. Knowing the answer to this question would help us all to better understand what this Valuation-Informed Indexing stuff is all about. SO WHY NOT JUST TRY TO GET AN ANSWER TO THE QUESTION FROM THE PERSON WHO ACTUALLY KNOWS THE ANSWER?

    Why is it that I am excited about the possibility of doing things to learn the true answer to the question and you are not?

    It’s because I want to move forward and you want to live in the past. Learning the true answers to questions like these helps us all enjoy a learning experience and thereby to move forward. THAT’S WHAT I WANT TO SEE. You just want to bicker and waste time. Please don’t ask me this question again. Please do something constructive and positive and life-affirming. ASK THE DARN FELLOW WHO IS POSITIONED TO KNOW THE ANSWER TO THE QUESTION.

    I’ll let you know my guess.

    In the same interview in which Shiller said that he is going with a 50 percent stock allocation he also said that he watches “indicators” that he believes tell him where stock prices are headed in the short term. Shiller has predicted a stock crash in 2014. I don’t think he intends to be at a 50 percent stock allocation when prices crash. I think he plans to watch his indicators and he believes that they will warn him when the crash is imminent and he will get out of stocks then.

    That’s short-term timing. I agree with the Buy-and-Holders that short-term timing does not work. So I don’t agree with Shiller re this one.

    But you know what? Shiller is one of the humans. He is allowed to make mistakes. I am one of the humans too. I am allowed to make mistakes too. Perhaps Shiller is right. Perhaps short-term timing really works for those who have access to the right indicators. Perhaps the Buy-and-Holders and I are wrong re that one. I obviously don’t think so. But, if I were wrong about this one, I would probably be the last one to know, right?

    I am not Robert Shiller. I learned a lot from him. I respect him. I like him. Just as I learned a lot from Jack Bogle and respect Jack Bogle and like Jack Bogle.

    But both Bogle and Shiller are different people from me. And both Shiller and Bogle agree with me on some points and disagree with me on some other points.

    I am at a zero stock allocation today. I recommend that most middle-class investors be at 20 percent stocks today 30 percent at the most. Shiller is today at 50 percent. He has said that there are cases in which he could even imagine some young investors going with a stock allocation of MORE than 50 percent.


    Different people come to different conclusions re different questions. This sort of thing happens ALL THE TIME in all fields of human endeavor other than stock investing. How did you ever come to believe that it would be different in the field of stock investing?

    I am not Robert Shiller’s keeper. I do not have to answer for his asset allocation choices. I wish him well with the 50 percent thing. I think he has made a poor choice. But it’s his money, not mine, so he is the one who should choose his stock allocation, not me. I wish him well with it. And that’s the end of it. He doesn’t have to answer to me and I don’t have to answer to him.

    Your question is a perfectly reasonable one. There is a conflict here. Shiller said in early 2009 that he did not think it would be safe to own ANY stocks until the P/E10 value dropped below 10 and it has not done that yet. So we all really should want to know the answer to this question. It is not my aim here to knock you for asking the question.

    It is my aim to point out the silliness of hammering me with it over and over and over again.

    I am not Robert Shiller’s keeper. I don’t know what is going on in his mind.

    You should ask Shiller. You should put him on the hot seat.

    You should count this inconsistency as a point against him. That’s a perfectly reasonable thing to do.

    You should point out that it appears that Shiller believes in short-term timing. He didn’t say that directly. But that seems to be what he is saying in an indirect way. And I believe that you and the other Buy-and-Holders are right about short-term timing. So this appears to me to be a legitimate point to be making against Shiller’s credibility on stock investing questions.

    But please don’t ask me again to go into Robert Shiller’s head and answer a question that only he could possibly know the answer to.

    Shiller has said something inconsistent with earlier statements he has made. That’s a stone cold fact. He’s in good company re that one. Bogle does this ALL THE TIME. Bernstein does this ALL THE TIME. Swedroe does this ALL THE TIME.

    But please don’t try to suggest that you have caught ME in an inconsistency. My recommendation of a 20 percent stock allocation is entirely consistent with Shiller’s revolutionary findings of 1981 and with the 33 years of peer-reviewed research that followed it. I am being consistent here. I cannot answer for the guy who isn’t, no matter how much I respect and admire and like him. Anymore than you could answer for all of Jack Bogle’s many inconsistencies.

    Discovering inconsistencies is a great way to bring on a learning experience. So you could turn this into something good if you really wanted to learn the answer to your question.

    But to do that, you need to stop directing the question to me and instead begin directing it to the only fellow in the world who knows the true answer to the question. That’s Robert Shiller.

    Fair enough?


  2. Anonymous says

    People like Shiller and Pfau are only correct on what you want to use to support your position, but they are wrong on everything else. Is that right, Rob?

  3. Rob says

    Obviously I cannot say that I think they are right when they are saying something other than what I believe, Anonymous. If I believed they were right, I would believe what they believe!

    I can say that they are smart and good people who hold a different belief.

    I can say that it is possible that I am wrong.

    I can say that I would advise everyone to listen to what they say to see if they find that it makes more sense than what I say.

    But that’s as far as I can take it. I cannot say that things I believe to be wrong are right.

    And that shouldn’t bother them. It certainly doesn’t bother me when people say that they do not agree with me.

    Why does it bother you so much?


  4. says

    I would advise everyone to listen to what they say to see if they find that it makes more sense than what I say.

    Trust me, people have. The results speak for themselves :Either we live in a world where every single investor out there, and at the same time, everyone writing working, teaching, or reporting about markets somehow all have a simultaneous and undiagnosed raging terminal case of what you call “Cognitive Dissonance,” or else Rob Bennett is simply loudly and stubbornly wrong.

  5. Rob says

    Either we live in a world where every single investor out there, and at the same time, everyone writing working, teaching, or reporting about markets somehow all have a simultaneous and undiagnosed raging terminal case of what you call “Cognitive Dissonance,” or else Rob Bennett is simply loudly and stubbornly wrong.

    This statement is pure Goon Talk, X.

    Some of the biggest names in the field have endorsed my work with the warmest and most enthusiastic words imaginable.

    And thousands of my fellow community members have expressed a strong desire to learn more. That translates into millions of people in the general population who long to learn about the first true data-based strategy, a smart and safe and simple way to invest effectively.

    I will soldier on, X.

    My best wishes to you.


  6. Anonymous says


    If you look at the comments, most are not really endorsing you. It is how you spin the enterpretation. Notice the lack of comments here on your board. Notice the lack of progress you have made in getting any serious attention on any site that is considered mainstream. Your only explanations are attributed to goons and mass conspiracy, which lack any real credibility.

  7. Rob says

    I included a few comments that do not endorse me. The majority endorse me with wild enthusiasm. And I have spoken to many people who have told me that they love my work and would love to feel free to endorse me if they did not think that you Goons would destroy their web sites if they did so.

    The problem is the death threats, the demands for unjustified board bannings, the tens of thousands of acts of defamation and the threats to get academic researchers fired from their jobs.

    I am confident that people will work up the courage to stand up to you Goons following the next price crash, Anonymous.

    Then prosecutors wil file cases and you will be sent to prison.

    No more Ban on Honest Posting! No more economic crisis! No more dishonest retirement studies! No more Buy-and-Hold! No more excessively risky stock investing!

    My best wishes to you and yours, Anonymous.


  8. Rob says

    Notice the lack of progress you have made in getting any serious attention on any site that is considered mainstream.

    Those are the ones that you Goons patrol. Those are the ones where we need to see honest posting to bring down Buy-and-Hold.

    Todd Tresidder’s Financial Mentor site is not a mainstream site. He tells the truth there. He warned people of the dangers of the Old School SWR studies. He points out all the time that valuations affect long-term returns.

    Todd is not banned anywhere. Todd is liked by everyone. Todd gets speaking engagements at the Financial Bloggers Conferences all the time.

    What’s the difference between Todd and me?

    When Todd wrote his post on the errors of the Old School SWR studies, I put up some long comments pointing out how the Buy-and-Holders had been engaging in abusive tactics to cover up the errors in those studies for years. Todd called me on the phone and asked that I not put up such posts. He doesn’t want people to hear about this history from reading his site.


    Because it will enrage the Wall Street Con Men and their Internet Goon Squads if he allows honest posting at his site on these issues. The 12-year cover-up is the biggest act of financial fraud in the history of the United States. Many Buy-and-Holders will be held financially liable for millions and millions in damages. Others will go to prison. Lots of people want this covered up. Todd wants to have a successful site. So he keeps it zipped.

    I do not keep it zipped. That’s why I am banned at 15 different sites.


    Do you see?

    We are working at cross purposes, Anonymous.

    You want the cover-up to continue and I want to bring it to a full and complete stop.

    I am not Todd Tresidder. I am Rob Bennett. My site is not successful today while his is. But I expect my site to be 50 times more successful down the road a piece. I expect to receive a $500 million settlement from the Wall Street Con Men to compensate me for the damages I have suffered during the 12-year cover-up. I expect to become famous all over the internet for being the person who brought this huge act of financial fraud to light and for bringing the economic crisis to an end by doing so.

    I like Todd. I think he’s a smart guy and a good guy.

    But I am not interested in playing it the way that Todd has played it.

    I want to open the entire internet to honest posting on the dangers of Buy-and-Hold strategies. That’s the high-leverage move here. I think we all will learn more when we ALL are posting our sincere beliefs.

    I want to know what my good friend Jack Bogle really believes about stock investing. I want to know what Bill Bernstein really believes. I want to know what Robert Shiller really believes. I want to know what Larry Swedroe really believes. I want to know what Scott Burns really believes. I want to know what Todd Tresidder really believes. And on and on and on.

    There’s only one way to find out. That’s to apply the same ethical standards to discussions of stock investing as are applied to discussions in every other field of human endeavor.

    I want it all, Anonymous. And I think I am going to get it.

    I hope that all makes good sense to you, my old friend.


  9. laugh says

    I thought you said that anyone who posts honestly is banned, you also said that Todd posts honestly about valuations, AND you said that he isn’t banned. how is this possible?

    Perhaps the difference is that you are a nut and he isn’t?

  10. Rob says

    I thought you said that anyone who posts honestly is banned, you also said that Todd posts honestly about valuations, AND you said that he isn’t banned. how is this possible?

    There are two differences:

    1) Todd has a niche site. He doesn’t post at the mainstream sites like Motley Fool or Bogleheads Forum. So he is not viewed as a major threat by the Buy-and-Holders; and

    2) Todd does not talk about the cover-up. He does not refer to massive acts of financial fraud or prison sentences. He even holds back from saying that the Old School SWR studies “get the numbers wrong” or are “in error.” He implies this. But he does not state it in language that is clear and firm and easily understandable to millions of middle-class investors.

    I don’t want to limit myself to posting at niche sites. I want every investor on the planet to know about Valuation-Informed Indexing. Why wouldn’t I? It’s the biggest advance in the history of personal finance. I don’t want anyone to miss out and I shouldn’t want anyone to miss out.

    I’d be happy to never have to talk about financial fraud and cover-ups again. But because I have refused to limit myself to niche sites, the Buy-and-Hold Mafia has COMMITTED numerous acts of financial fraud and ENGAGED in a cover-up. Todd should be writing about that stuff. He has a responsibility to his readers to do so. The cover-up caused the economic crisis and the economic crisis affects each and every one of us.

    This idea that we will only talk about the realities of stock investing at niche sites is a marketing concept. The idea is to let the Buy-and-Holders continue to make a buck saying that their strategy is rooted in academic research even though that has not been so for 33 years now. This was a stupid, stupid idea. We MUST get the word out about what the research says to every middle-class investor. We must use every board and blog on the internet. Todd has signed on to a very stupid and dangerous idea and I am not about to join him.

    When the internet is opened up to honest posting, Todd will be more successful than he is today He will be able to spread his message far and wide without worrying that some Buy-and-Holder will become enraged with him for being a little too honest in the posts he writes. I want to see Todd telling us everything he knows about stock investing. I don’t want to see him holding back. And I want to see all the others who today are holding back tell us everything they know. That’s how we all enjoy a great learning experience together.

    If the Buy-and-Holders can continue to market their approach in an environment in which honest posting is permitted, that’s fine with me. If they cannot, that’s just too darn bad. They never would have turned to death threats and all the other garbage if they believed that they could still promote Buy-and-Hold 33 years after the peer-reviewed research showed that there is zero chance that it can ever work for even a single long-term investor. So I think it is fair to say that it is time for us all to work together to bury Buy-and-Hold 30 feet in the ground, where it can do no further harm to humans and other living things. It’s not me saying that Buy-and-Hold can no longer be promoted honestly. It’s the Buy-and-Hold Mafia saying that (through its actions).

    Valuation-Informed Indexing is the NEW Buy-and-Hold. It is Buy-and-Hold with the Get Rich Quick element removed. It is a form of Buy-and-Hold that WORKS in the real world. I am HELPING the Buy-and-Holders by insisting that they drop the financial fraud garbage. They are going to have to drop it sooner or later in any event. Why not do it now? The sooner it is done, the less the civil damages will be and the shorter the prison sentences will be. A nice plus is that, when you promote research-based strategies, you help people rather than destroy their lives.

    Most Buy-and-Holders LONG to make this change. They just cannot figure out how to make the transition. The best way to do it is to make a clean break. That hurts for a short time and then all the pain is over and things just get better and better and better with each passing day. We all want to be in that place. So we all should be working together to get us to that place.

    If wanting to help the millions of middle-class investors who need to know how to invest their retirement money AND all of my many Buy-and-Hold friends at the same time makes me a nut, then I’m a nut. No apologies.


  11. Laugh says

    So basically the difference is that he doesn’t believe in a global conspiracy that somehow subconsciously acts in a coordinated way to keep Rob from his 500 million imaginary dollars. Aka he isn’t a nut.

  12. Rob says

    So basically the difference is that he doesn’t believe in a global conspiracy that somehow subconsciously acts in a coordinated way

    If you can put forward a better explanation of the realities that have appeared before us, I would sure like to hear it, Laugh.

    Greaney’s retirement study does not contain a valuations adjustment. That’s a stone cold fact. So the study obviously gets the SWR number wildly wrong.

    Why did no one point this out until the morning of May 13, 2002? And why do so few object that the study has not been corrected to this day?

    We should all want to know the answers to these questions.

    There are millions of people affected by this. So we ought to be able to agree that it would in ordinary circumstances be impossible to keep the errors in the Old School SWR studies covered up this long. Yet the reality remains that they have not been corrected to this day.

    How do you explain this?

    Yes, there is a sort of conspiracy. All people who have either advocated Buy-and-Hold strategies or followed Buy-and-Hold strategies feel emotional pain in coming to terms with the mistake they made. They have delayed their retirements by many years. They have hurt their friends. They have been taken for fools. It hurts to accept these realities. So they rationalize away what the research says and try desperately to hang on to their long-discredited beliefs about how stock investing works.

    That’s a conspiracy in the sense that lots of people with similar interests are acting in the same way. But it is not a conspiracy in the way that the word is usually used. No one met in a smoke-fiilled room and arranged for people to act in concert.

    And the people who are engaging in deceptions and making use of intimidation tactics follow Buy-and-Hold strategies themselves. They are hurting others. BUT THEY ARE ALSO HURTING THEMSELVES. That’s not the way that we generally think of conspiracies playing out. We usually think of conspirators as people acting in their self-interest. This is a case where the conspirators are hurting themselves financially because they cannot bear the emotional pain that follows from learning what the last 33 years of peer-reviewed research tells us about how stock investing works.

    That’s “a global conspiracy that somehow acts in a coordinated way.”

    You try to make it sound as if this is an incredible event. It IS strange stuff. But it is by no means unprecedented stuff.

    I have heard that Galileo was put under house arrest for saying that the earth revolves around the sun rather than the other way around. Would it be fair to say that he lived at a time when there was a global conspiracy to tell people that the sun revolves around the earth that somehow acted in a coordinated way?

    It’s easy to get lots of people to act in a coordinated way when lots of people believe the same thing.

    And, whenever there is a huge advance in human knowledge, we have lots of people believing in the same WRONG thing.

    That’s what we have here. People really believed in Buy-and-Hold for a long time. Many staked their retirements on it. Many staked their careers on it. Many devoted years of their lives writing books about it or developing calculators rooted in a belief in it.

    Then this Shiller fellow came along and published peer-reviewed research showing them that they were wrong. Not by a little bit. Shiller showed that the Buy-and-Hold concept is the OPPOSITE of what works. His research implies that exercising price discipline is the key to long-term investing success. Practicing long-term timing is 80 percent of the game. Shiller showed something very, very important. The implications of his insight are so far-reaching that he caused a lot of good and smart people to feel an intense emotional pain.

    So, yes, they looked the other way. They patted him on the head and said “Shiller is great” and then returned to what they were doing before he came along as if his research didn’t exist. There is not one way in which Buy-and-Hold changed as a result of Shiller’s “revolutionary” (his word) findings.

    The huge bull market aided those who looked the other way. No one was mad at them for doing so because everyone was enjoying the Pretend Gains of the runaway bull. To recognize the import of Shiller’s findings would be to acknowledge that those gains were Pretend. Who needed that? Everyone was “successful.” Everyone was rich. Everyone was having a ball. The Buy-and-Holders had figured it all out and were not to be questioned.

    Now we are in the early years of paying the price for looking the other way.

    We have intellectually achieved the greatest advance in the history of personal finance over the past 30 years. But anyone who either advocated Buy-and-Hold or followed a Buy-and-Hold strategy does not want the word getting out. They feel shame because of how they have hurt themselves and millions of others. Looking the other way caused an economic crisis. Buy-and-Hold is the lie so huge that it cannot be acknowledged.

    Humans don’t like to think that they have been responsible for so much human misery. So they tell themselves stories. They rationalize. They say “Sure, valuations matter, but it is impossible to take advantage of this reality.” It’s a claim that makes zero sense in the logical sphere and that enjoys zero support in the historical data but one that offers some temporary emotional relief to those who have been looking the other way for so long now that they cannot bear the thought of ever acknowledging the obvious (and highly encouraging once you accept them!) truths.

    Most of us are engaged in a “global conspiracy that somehow unconsciously acts in a coordinated way.” That’s because most of us are ignorant of the realities. That’s because most of us continue to look the other way. That’s because most of us DON’T WANT TO KNOW how stock investing works in the real world.

    None of that is criminal behavior. It’s sad. But human beings have been ignorant of lots of important truths at earlier times in history. It happens. It’s one of those things.

    Fortunately, we have means to overcome our ignorance over time. We have discussion boards. We have blogs. We have newspapers. We have magazines. We have studies. We have calculators.

    This is where the criminal stuff — my focus nowadays because it must be addressed before we can all enjoy the wonderful blessings that have bestowed on us as a result of the last 33 years of peer-reviewed research in this field — comes in.

    Those who want to continue looking the other way have seen what happens when the truths are spoken in clear and firm and direct and understandable ways. PEOPLE OVERCOME THEIR IGNORANCE. The horror! Something must be done.

    That’s where you Goons come in.

    Punish people who dare to “cross” the Buy-and-Holders by reporting honestly and accurately what the last 33 years of peer-reviewed research says severely enough and you can stop them from continuing to do so. You can stop others who have similar ideas as well. As the holes in the Buy-and-Hold concept get more and more noticeable, it takes harsher and harsher pubishments to keep the house of cards from collapsing to the ground. But the Wall Street Con Men have lots of money and power and influence and the majority of middle-class investors remain largely ignorant of the realities today. So this remains a viable strategy for keeping people in the dark. Less and less so all the time. But still at least barely viable as of this morning.

    I am not playing this stupid game, Laugh.

    I am telling.

    That’s my job.

    That’s what I am going to do.

    I naturally wish you the best of luck in all your future endeavors regardless of what investing strategies you elect to pursue.



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