Set forth below is the text of a comment that I recently poster to another blog entry at this site:
Uh, oh Rob. Someone is on to you. Note the link someone gave to Shillers recent comments about how is still in the market and to not use CAPE for market timing. It seems there is a big whole in your boat and it is taking on water very quickly.
I haven’t read the Goon Central comments. But I’ve now read the article.
I disagree strongly with what Shiller is saying here.
I of course agree that the P/E10 value could go to 35. None of the research of the past 33 years tells us how high P/E10 can go. So he is 100 percent right re that one.
When he says “it’s not a clear signal yet,” he seems to be trying to use P/E1o to engage in short-term timing. ALL of the peer-reveiwed research (even pre-Shiller) tells us that that cannot possibly work. The idea that P/E10 can be used for short-term timing is just nuts. Shiller is of course right to reject the idea. But he should not need to say this. I know of not a single Valuation-Informed Indexer who has ever suggested in any way, shape or form that P/E10 can be used to engage in successful short-term timing.
He says “it’s not time to bail out.” It’s never time for the typical investor to bail out. Stock prices can always go higher, just as Shiller indicated in his other comments. So it makes sense for the typical investor to keep 25 to 30 percent of his portfolio in stocks even at times of insanely high valuations. Even if the P/E10 value went to 35, it would make sense for most investors to keep a small percentage of his portfolio in stocks. It could go up to 45. Or it could remain at 35 for a good amount of time.
There are VII strategies that call for some investors to go to zero stock allocations at specified P/E10 levels. I think those strategies make perfect sense. So I wouldn’t criticize anyone who elected to “bail out” at today’s prices. But I also would not criticize anyone who went with a 20 percent or 30 percent stock allocation at today’s prices. It’s a judgment call as to which way to play it. And of course all investors need to take their personal circumstances into account.
Shiller says that he is at 50 percent stocks and that younger people might want to go with even higher stock allocations. That is at complete variance with what he said shortly following the 2008 crash. He said then that it would not be safe to get back into stocks until the P/E10 had dropped below 10. Telling people that it is okay to go with a stock allocation of greater than 50 percent given where things stand today is exceedingly dangerous advice, in my assessment. I find this particular comment of Shiller’s shocking and even somewhat shameful.
The author of the article says that Shiller has said many times that P/E10 is not a good tool for timing the market. I follow these things closely and I am 99.999 percent sure that Shiller has never said that. He has certainly said that P/E10 cannot be used for short-term timing. There is zero evidence that it can be used for short-term timing. The peer-reviewed research that I co-authored with Wade Pfau shows that P/E10 has been an effective tool for long-term timing for 140 years now. If Shiller has ever said that P/E10 cannot be used for long-term timing, then he is wrong (according to the peer-reviewed research in this field). I don’t believe for two seconds that he has ever said this.
Shiller is saying dangerous stuff here. But nothing he says undermines the findings of the research that Wade and I produced together. The fact that the grandfather of VII would say such things publicly shows once again how imperative it is that the Ban on Honest Posting be lifted and that everyone affected by the economic crisis (and that’s all of us!) participate in a national debate on what the last 33 years of peer-reviewed research in this field tells us about how stock investing works.
Shiller doesn’t get it all. He’s in very good company re that one. He is a leader in this field. We all should be doing all that we can to see that he DOES get it all and that he helps us spread the word to the millions of middle-class investors who very much need to learn the realities.
Rob
It’s a judgment call as to which way to play it. And of course all investors need to take their personal circumstances into account.
Bingo. Your opinion is exactly the same as everyone else’s – be informed about valuations, but make personal decisions as to asset allocation. Now you can give up the conspiracy theories – there are no buy and hold or VII purists.
That is at complete variance with what he said shortly following the 2008 crash. He said then that it would not be safe to get back into stocks until the P/E10 had dropped below 10.
I’m a big fan of Shiller’s, but he never said this to my knowledge. Got a link?
Shiller doesn’t get it all.
Yes, Rob, you’re clearly far ahead of Shiller on matters of asset valuations 🙂 .
Bingo. Your opinion is exactly the same as everyone else’s – be informed about valuations, but make personal decisions as to asset allocation. Now you can give up the conspiracy theories – there are no buy and hold or VII purists.
Then why have the Old School SWR studies not been corrected as of this morning?
I pointed out the errors in them on the morning of May 13, 2002.
Rob
I’m a big fan of Shiller’s, but he never said this to my knowledge. Got a link?
I recorded a RobCast about it. If you make a sincere effort, you’ll be able to figure out which one it is by looking through the titles.
In the RobCast, I refer to the article in which he was quoted. My guess is that I provided enough information that you will be able to track it down if you put in the time it will take to do so.
Rob
Yes, Rob, you’re clearly far ahead of Shiller on matters of asset valuations
It’s possible that Shiller knows more than he is letting on in his public statements.
But, yes, I am far ahead of what he says in his public statements.
Shiller keeps a lot of what he knows to himself. As does Bogle. As does Bernstein. As does Swedroe. As does Scott Burns. As does Wade Pfau. As does Michael Kitces. As does Mike Piper. As does Todd Tresidder. As do thousands of others.
That nonsense needs to stop.
I am going to be the one to stop it.
When Rob Bennett can post honestly, so can all these others.
When honest posting is permitted on safe withdrawal rates, honest posting will be permitted on scores of critically important investment-related topics.
We are playing for all the marbles, Anonymous.
I am winning.
I have been for some time now.
I go farther and farther ahead with each passing day.
I wish you well.
Rob
How far ahead of him are you financially and professionally?
If you count the $500 million settlement, I am miles and miles and miles ahead financially. As I should be. It’s being the target of you Goons that has been the hardest part of this job. The substantive stuff is a walk in the park in comparison.
I would say that we are roughly equal in terms of professional accomplishment. Shiller started the ball rolling. There would be no Valuation-Informed Indexing today had he not published his revolutionary research 33 years ago. But his powerful theoretical research has not helped all that many investors as of today. You have to show people the practical how-to implications to really get the job done. That’s what I do with the articles and podcasts and calculators at this site.
Rob
Then why have the Old School SWR studies not been corrected as of this morning?
Civilized discourse 101: You don’t get to force people to change studies they may have done, even if you feel a variable could be included that wasn’t. The exception would be if you’re paying for the study.
And you’ve already agreed with my statement that most folks are just like you – informed about Valuations, and making personal decisions about whether or not to modify their allocations based on them.
Rob,
People often try to help you understand your obviously distressed but self-inflicted situation by telling you that it’s not your ideas but your method of presenting them that is the problem.
You don’t get to force people to change studies they may have done, even if you feel a variable could be included that wasn’t.
That’s not how it works in any field of endeavor other than stock investing, Anonymous.
If the tobacco companies tried putting out a study showing that smoking four packs of cigarettes a day adds ten years to life expectancy, you would see an uproar that would force them to acknowledge that the study is pure b.s.
In future days, that’s how it will work in the investing advice field too. Humans possess a deep need to evidence ethical behavior. That’s true of people working in this field as much as it is of people working in other fields.
In fact, I believe that one of the reasons why the reactions we have seen from you Goons are so intense is that it causes you pain NOT to act ethically. You don’t want to abandon Buy-and-Hold. And you have no effective response to the 33 years of peer-reviewed research showing that there is zero chance that it could ever work for even a single investor. So you feel that you have no choice but to behave unethically. But you don’t like the idea of people seeing that. So you demand that honest posting on the last three decades of research be banned. I obviously don’t approve of this “solution” to your problem. But I think in fairness it should be said that it shows that there is a desire somewhere deep within you to be seen as ethical. That reality will help us all bring this to a resolution somewhere down the road a bit.
I cannot force anybody to do anything, Anonymous. We certainly agree on that limited point. But I can expose the corruption in a field in which errors in retirement studies become public knowledge and those studies remain uncorrected for 12 years, no? That’s not me, Rob Bennett, forcing something by myself. It is an entire society taking action to demand that one field of human endeavor — the investing advice field — adhere to the same ethical standards as every other field in our society.
That’s a big deal. Once we have investing advisors adhering to the same ethical standards as people who work in every other field, Buy-and-Hold is finished. It’s been hanging on only because the Wall Street Con Men have had enough money and power and influence to make this field an exception to the usual rules for a time. I think it would be fair to say that those days are coming to an end. The house of cards is in the process of toppling to the ground. We are going to see reasonable ethical standards apply in this field.
And you know what? It’s going to be people WITHIN the field who are going to end up leading the effort. I have seen LOTS of evidence of that during the first 12 years. MOST people in this field want to feel free to honor minimal ethical standards. And so that’s how it is going to be.
I hope that, when as a society we bring about that change, you won’t feel that you are being “forced” to correct those darn Old School SWR studies.
And you’ve already agreed with my statement that most folks are just like you – informed about Valuations, and making personal decisions about whether or not to modify their allocations based on them.
I don’t AT ALL agree that people are adequately informed. For people to become informed, we need to permit honest posting on every board and blog on the internet.
I agree that people accept that valuations matter.
The problem today is that the Buy-and-Holders will not permit the effect of valuations to be quantified. Most people have NO IDEA how big the valuations effect is.
The perfect illustration of this is Bogle’s claim that there is no need for investors to lower their stock allocations by more than 15 percentage points even when valuations are insanely high. That’s not even close to being right. There’s never been a more dangerous statement put forward in the history of personal finance. That statement is in the process of causing MILLIONS of people to suffer failed retirements. It has caused a mountain of human misery.
Why don’t journalists call out Old Saint Jack on that statement on a daily basis?
Why don’t policymakers give speeches demanding that he either offer research-based support for a statement that is destroying our economic system or stop making the foolish and irresponsible statement?
Why don’t academic researchers declare their freedom from the dictates of the Buy-and-Hold Mafia by publishing peer-reviewed study after peer-reviewed study showing the reality that a percentage change of 60 percent is needed when prices reach insanely dangerous levels?
They are all afraid.
That’s all.
And they are ashamed of being afraid.
So they tell themselves that this is not such a big deal, that we will somehow struggle along with Big Shots like Bogle offering loony tune numbers that he pulled out of his backside.
But we won’t. Bogle HURTS people by offering loony tune numbers that he pulled out of his backside.
And he hurts HIMSELF too.
We will work up the courage to react appropriately to such dangerous claims. Because as a society we have no other realistic options.
And then you will see Rob Bennett doing everything in his power to help people understand WHY my good friend Jack behaved so poorly for so long a time. Because we must have healing to get to all the exciting stuff on the other side of The Big Black Mountain.
Before the healing comes the truth telling. That’s the priority today. But healing will be a priority in Stage Two of this process.
At any rate, people are NOT informed. People are afraid. People are ashamed. And they are afraid and ashamed because they are NOT informed. Their common sense tells them that valuations MUST matter. But they have for 33 years not been able to bring their intellects into alignment with their common sense because the Buy-and-Holders have been so brutal in their use of intimidation tactics to keep the findings of the last 33 years of peer-reviewed research covered up.
People WILL become informed. That’s my “agenda,” as you call it.
It’s going to happen. It is well on its way to happening. We have done amazing things over the first 12 years of our discussions. But it is not time to declare victory just yet. Not every battle has been won as of this morning.
Give it time.
My best wishes to you, old friend.
Rob
People often try to help you understand your obviously distressed but self-inflicted situation by telling you that it’s not your ideas but your method of presenting them that is the problem.
Yes, I seem to recall hearing that line once or perhaps even twice before.
Hang in there, old buddy.
Rob
Rob,
Rephrased another way, many of us do not agree with your statements and have given you the reason why. However, you are not banned because of this disagreements. Instead, you are banned because of your behavior. Many have told you time after time as to your behavior issues and you just ignore it. You feel as if you should be able to act any way you want on a board, despite the negative impact to the community. A board is a place to have a discussion and not to be there for the sole purpose of carrying out the Rob Bennett agenda.
The Rob Bennett Agenda is the future of investing analysis, Anonymous.
Valuation-Informed Indexing reduces the risk of stock investing by 70 percent while letting the investors who employ the strategy retire five to ten years sooner than they ever imagined possible back in the days in which they believed in Buy-and-Hold. VII is the first true research-based investing strategy. It puts an end to economic crises (every economic crises we have suffered in 140 years followed a time of insane overvaluation, which is not possible in a world in which most investors follow VII strategies). VII is smart, safe, simple investing. We know from the positive reactions we have seen from thousands of posters during the first 12 years of our discussions that there are millions of middle-class people who want to learn more about the concept. I am going to see to it that they are able to do so.
I am not asking your permission. I am telling you how it is going to be.
We have seen amazing advances in computer technology over the past 33 years. If the computer technology field were as resistant to change as the investing advice field, we would all still be using typewriters and buying white-out. The Wall Street Con Men don’t want us to move forward. They want to protect their turf. They have power and money and connections. So they have grown accustomed to bullying people into letting them have their way. When the internet came on the scene, they saw that their ability to block investors from learning what they need to learn was threatened and so they turned to Internet Goon Squads to do their dirty work.
Sorry, you lose.
No sale.
Find some other country in which to peddle your Get Rich Quick garbage.
In this country, my country, we are moving on.
Every investor in this country is going to learn what the last 33 years of peer-reviewed research says about what works in stock investing. Count it. I am going to see to it. The decision has been made and it is not going to be reversed. No apologies whatsoever.
You can stand in the way. You can try to stop me. I cannot force you to go along.
But please understand that those who stand in the path of the History Train will be run over.
It’s nothing personal.
But we are not a Goon nation. And we are not going to permit you Goons to determine what we can talk about on the internet.
Put forward b.s. and you will be called out on your b.s.
Cause people to lose money and you will be sued for financial damages.
Engage in financial fraud and you will go to prison.
Like that.
We adopted the civil and criminal laws of this nation to protect ourselves from people like you and those laws will be enforced. The way it is.
We have an educational task that needs to be completed before we can persuade prosecutors to file the papers that they need to file. That will be addressed. Things will speed up considerably following the next price crash. I am sure.
That’s where things stand.
You are right that I have behavior issues. I am honest. And Buy-and-Hold is the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind. So honestly is a not a behavioral trait that can be tolerated by either the Wall Street Con Men or by the Internet Goons Squads who do their dirty work.
So be it.
The difference is that my behavior is supported by the laws of the United States of America and yours is not.
So we will see as time passes who has fell and who’s been left behind.
I naturally wish you the best of luck in all your future endeavors in any event, my old friend.
Rob
If the tobacco companies tried putting out a study showing that smoking four packs of cigarettes a day adds ten years to life expectancy, you would see an uproar that would force them to acknowledge that the study is pure b.s.
One, John Greaney is not an industry. He’s a guy with a website. Guys with websites can post whatever they want, including the fact that cigarettes are good for you, or that there’s a massive conspiracy where everyone who disagrees with you about stock valuations is going to jail. It’s the internet!
Two, including or leaving out a variable in a study nothing like posting something factually incorrect, such as that smoking is good for you. Only a bully would even make such an analogy, instead of arguing his point respectfully.
The problem today is that the Buy-and-Holders will not permit the effect of valuations to be quantified. Most people have NO IDEA how big the valuations effect is.
No Rob, most people agree that valuations have affected around 40% of future variability in stocks prices historically. But they know the future is a very uncertain place, so they approach it with humility (Vanguard’s word).
It’s that humility that caused you to maintain a 100% bond allocation even when valuations were at historic lows a few years ago.
The perfect illustration of this is Bogle’s claim that there is no need for investors to lower their stock allocations by more than 15 percentage points even when valuations are insanely high.
You’d have to define “insanely high” and provide a link to back up that statement. In fact, Bogle recommends rebalancing from stocks to bonds as prices rise, which naturally leads to holding more bonds.
In any case, if you disagree with Bogle or anyone esle on this point, state your case respectfully and move on, as everyone else does.
I think it would be fair to say that those days are coming to an end. The house of cards is in the process of toppling to the ground.
Great, so very soon, within the next couple of years surely, we’ll know if your theories are true.
I am not asking your permission. I am telling you how it is going to be….Sorry, you lose….those who stand in the path of the History Train will be run over….you will go to prison….
Funny how folks can express their views about our very uncertain future over at Bogleheads without resorting to such statements. How do they do it Rob?
They do it by accepting the terms that the Buy-and-Holders dictate.
The Old School safe-withdrawal-rate studies get the numbers wildly wrong. The errors in those studies are in the process of causing millions of failed retirements. Instead of saying “these studies fail to consider the most important factor bearing on the question being examined,” they say “oh, it’s looking like that magical 4 percent rule isn’t going to work out so hot” but leave out the part about the 12-year cover-up of the errors in those studies being the biggest case of financial fraud in the history of the United State.
Not interested. Not this boy.
Bogle’s absurd claim that there is never a need to reduce your stock allocation by more than 15 percentage points no matter how insanely high prices go has caused more human misery than any earlier claim ever made in the history of personal finance. Instead of pointing out the gross irresponsibility of Bogle making this claim, which has been refuted by 33 years of peer-reviewed research based on 140 years of historical return data, they say “he’s a nice man, we should give him a bogey,” thereby evidencing a lack of respect for his genuine accomplishments by suggesting that they do not think he is capable of understanding what the research says or ethical enough to correct statements he had made that are found to be in error.
Not interested. Not this boy.
The Bennett/Pfau research is the most important research published in this field in three decades. It shows millions of middle-class investors how to reduce the risk of stock investing by 70 percent. Instead of saying “the individuals who silenced Wade Pfau by threatening to destroy his career should be in prison today,” they say “oh, just because Buy-and-Hold has eventually caused a wipeout of every investor who has ever fell for the claims made for it with collective losses large enough to bring on an economic crisis on each of the four occasions on which it has become popular doesn’t mean that this most pure and most dangerous of all Get Rich Quick investing strategies will continue to destroy human lives. Nobody knows the future. Perhaps it will all turn out different this time.”
Not interested. Not this boy.
Yes, the future is uncertain.
But there are reasons why as a society we have adopted laws to protect us from the sorts of individuals who continue to promote Buy-and-Hold strategies in the year 2014, 33 years after the peer-reviewed research in this field showed that there is precisely zero chance that they could ever work for a single long-term investor.
I will continue my efforts to get the word out about what the last 33 years of research says to the millions of middle-class investors who need to know about it. Why? Because there is a better chance that stocks will continue to perform somewhat as they always have in the past than there is that everything will be turned upside-down and for the first time in history the pure Get Rich Quick approach will produce good results for one or two investors.
Stop me if you can, Anonymous.
I will certainly be doing everything in my power to stop you and the other Goons.
But don’t ever for two seconds fool yourself into thinking that I might someday agree to post dishonestly re the numbers that my friends use to plan their retirements.
Not in 12 years. Not in 12 billion years.
My best and warmest wishes to you, my long-time abusive-posting friend.
Rob
One, John Greaney is not an industry. He’s a guy with a website.
He’s a guy with a website who just happens to be the most abusive poster in the history of the internet.
My good friend Jack Bogle knows about the abusive posting of John Greaney and about the abusive posting of Mel Linduaer and about the abusive posting of the individuals who have put up posts in “defense” of Mel Linduaer and John Greaney. What does that say about the character of my good friend Jack Bogle?
And what does it say about the character of the many other Wall Street Con Men who have also failed to speak up about the Lindauer/Greaney matter?
An argument can be made that these people are suffering from cognitive dissonance. I personally find that argument persuasive.
But are we going to elect as a society to let cognitive dissonance to be used an an excuse for tolerating death threats and demands for unjustified board bannings and tens of thousands of acts of defamation and threats to get academic research fired from their jobs?
I have a funny feeling that that one is not going to fly following the next price crash, Anonymous.
We’ll see.
Rob
Guys with websites can post whatever they want
Not according to the laws of the United States.
Financial fraud is a crime whether committed in the pages of a book or in the words of a telephone conversation or through the manipulation of the code that comprises the page of a website.
We all have a responsibility to let people giving thought to permitting the sorts of individuals who have posted in “defense” of John Greaney and his 12-year cover-up of the errors in his retirement study to participate at their web sites that they are engaging in an act of financial fraud by doing so and thereby subjecting themselves to the possibility of being held legally liable for financial damages or in extreme cases for commission of a felony.
That is certainly what I tell people.
I will continue to do so. I believe that the wisdom of doing so will become clear to everyone following the next price crash. I don’t expect that there will at that time be anyone questioning why I was so careful to do so in numerous posts.
But I am not God. There is always the possibility that I am wrong. We are just going to have to wait to see how things play out to know for certain. I don’t personally see any other way that things can resolve themselves given the realities that apply here.
Rob
including the fact that cigarettes are good for you
I don’t see a problem with someone saying “I think cigarettes are good for you.”
But if someone publishes a study claiming to show that smoking four packs a day will extend your life by 10 years and it is discovered that the way he doctored the results to say that was by excluding all deaths caused by cancer from consideration and if his response when this deception was pointed out was to threaten to kill family members of the person who discovered the error and to follow that person everywhere he goes for 12 years and engage in insanely abusive behavior aimed at harming that person’s reputation and at intimidating the owners of web sites that publicize that person’s good work and to threaten to send defamatory e-mails to academic researchers who work with that person to get accurate information about the dangers of smoking out to the millions of people who very, very much need to hear it, then, yes, I see a problem.
A big problem.
A felony-size problem.
A prison-sentence problem.
Your mileage may vary, Anonymous.
But that is indeed what I see.
And I don’t intent to hold back any in my efforts to tell the entire world about it.
No apologies whatsoever.
Count it.
Rob
It’s the internet!
There is no Get Out of Jail Free card that applies for people who commit acts of financial fraud on the internet.
I am sure.
Rob
including or leaving out a variable in a study nothing like posting something factually incorrect, such as that smoking is good for you.
Huh?
Greaney says that a 4 percent withdrawal is “100 percent safe” regardless of the valuation level that applies at the beginning of the retirement. The legitimate studies show that, for retirements that began at the top of the bubble, a 4 percent withdrawal had only a 30 percent chance of lasting 30 years.
Being left penniless in your old age is not a life setback in the same general neighborhood as getting cancer?
Rob
if you disagree with Bogle or anyone esle on this point, state your case respectfully and move on, as everyone else does.
There is no bigger fan of Jack Bogle alive on Planet Earth today than Rob Bennett. I show that with every post I put forward. I am the lead advocate of Valuation-Informed Indexing. There would be no Valuation-Informed Indexing had Bogle not first advocated Buy-and-Hold. VII is Buy-and-Hold with the Get Rich Quick element removed, nothing more and nothing less.
It does not follow that I should not point out when my good friend Jack Bogle engages in acts of financial fraud. Bogle has failed to take action re the Lindauer matter despite three e-mails from me imploring him to do so.
It is the people who ignore Jack’s acts of financial fraud who are dissing him by suggesting that they expect no better from him. I expect better. A LOT better.
Rob
Great, so very soon, within the next couple of years surely, we’ll know if your theories are true.
I think so.
I certainly hope so.
Rob
if you disagree with Bogle or anyone esle on this point, state your case respectfully and move on, as everyone else does.
What do you mean by the phrase “move on”?
I have pointed out Jack’s mistake in saying that there is never a need for an investor to lower his stock allocation by more than 15 percentage points on numerous occasions. He has to this day not corrected the error. In fact, he continues to make this loony tunes claim to this day.
Are you saying that we should pretend that that is okay?
Do you appreciate that there are millions of middle-class lives at stake?
I like to think that we are in agreement that Jack is a basically good guy. If he were making that loony tunes claim with full knowledge of how wrong it is, it would be fair to refer to Jack as the Frank Underwood of Personal Finance, no? So I like to think that we are in agreement that Jack wants us to work together to make sure that he gets the error corrected and never again puts forward such a loony tunes claim.
Are you saying that we should not let our friendship with Old Saint Jack influence us re this matter?
Huh?
Could you please explain why?
I see it as being a whole big bunch more respectful of Jack to insist that he correct the error than to look the other way. Is that not how you see it, Anonymous?
Is Jack even being respected of himself when he continues to make such a loony tunes claim 33 years after the peer-reviewed research in this field showed it to be loony tunes?
Rob
I have pointed out Jack’s mistake in saying that there is never a need for an investor to lower his stock allocation by more than 15 percentage points on numerous occasions. He has to this day not corrected the error.
Another lesson in basic, civilized behavior: Others’ opinions about asset allocation or the future are not errors.
Another lesson in basic, civilized behavior: Others’ opinions about asset allocation or the future are not errors.
There are responsibilities that come with being a person of Bogle’s stature, Anonymous. I have had people tell me that they find everything that I say about stock investing to be 100 percent sensible and compelling. Yet they say that there is one reason why they are not going to become Valuation-Informed Indexers. It is their retirement money at stake; they need to be careful. And they do not hear the people widely recognized as experts in this field saying the same things that I am saying. Investing experts have influence on people’s behavior!
Bogle says that there is never a need for an investor to lower his stock allocation by more than 15 percent no matter how high valuations go. The data says that a change of 60 percentage points is required to keep one’s risk profile roughly constant. The two numbers are nowhere even remotely in the same neighborhood. They cannot possibly both be right. One is right and one is wrong. We need to know which number is right and which number is wrong.
I looked at research and data to get my number.
Did Bogle?
All signs are that he did not.
Yes, you are right that an opinion is not an error. We agree. But Bogle is playing an irresponsible and dangerous game here. Bogle fills his books and speeches and articles with references to data. He promotes Buy-and-Hold as a research-based strategy. People have come to believe that, when Bogle speaks, they are being exposed to a viewpoint formed by making reference to research and data. If Bogle is not basing his statement re the 15 percent number on research and data, he is misleading millions of people about a very important matter in a very big way.
This must stop.
These sorts of misleading statements are what caused the economic crisis. People have common sense. Our common sense tells us that the sorts of gains we saw during the out-of-control bull market are not real. So people intuitively know to lower their stock allocations as valuations rise. People intuitively know to follow Valuation-Informed Indexing strategies and not Buy-and-Hold strategies.
But there are two problems.
One, while we do all have common sense, we ALSO all possess a Get Rich Quick urge. We WANT to believe that those bull-market gains are real. So we are vulnerable to any con man who comes along and tries to plant the idea in our heads that this might be the first time in history when lowering our stock allocation by only 15 percentage points during a wild bull might work out in the long run.
And, two, the Buy-and-Holders don’t distinguish when they are using data and when they are just pulling numbers out of their backsides. Bogle plants the idea in people’s heads that he is a research-based guy by citing data and research over and over and over again. But when it comes time to give advice on the most important and most practical investing question of them all — What should my stock allocation be? — all the research and the data goes out the window and he pulls a number nowhere even remotely in the same neighborhood as the research-based number out of his backside.
Is that financial fraud? Is that 500 times worse than anything Bernie Madoff ever did?
I’ll say this much for sure. Millions of middle-class investors are going to have a very different reaction to that question following the next price crash than they have today. Today, they see themselves as winners for using the number pulled out of Bogle’s backside. Following the crash, they are going to see that they destroyed their lives by thinking that loony tunes number was reasonable and they are going to be looking for someone to hang from a tree for having encouraged them to use it.
Who is Jack’s true friend? The fellow imploring him to come clean today? Or the people telling him to continue marching down the dark path he got on the first time he failed to take action re the Lindauer matter?
That 15 percent number had to come from somewhere, Anonymous. Bogle didn’t have a dream in which some Martian held up a sign with the number “15” written on it. Where the heck did that crazy number come from?
I’ll tell you what I think.
I think that Bogle once really believed in Buy-and-Hold. Before Shiller published his “revolutionary” (his word) research in 1981, there was good reason to do so. So be believed.
Then Shiller published the revolutionary research. If people were angels, Bogle would have dropped the Buy-and-Hold nonsense then. But people are not angels. People have a hard time accepting big changes. So Bogle dismissed Shiller’s breakthrough findings. He told himself that those findings didn’t really matter that much, that Buy-and-Hold worked just fine So he continued advocating it.
The long bull market encouraged him to continue living in that world of illusion. There weren’t too many people demanding changes in Buy-and-Hold. It wasn’t just in Bogle’s dream world that Buy-and-Hold was working just fine. For all appearances, Buy-and-Hold was working just fine in the real world too.
But Bogle’s conscience nagged him. It didn’t add up. We all consider price with every purchase of every other good and service we buy. It seemed so odd that with stocks it worked in just the opposite way! Bogle’s doubts caused a deep defensiveness to kick in. He didn’t like the feelings he experienced when he entertained doubts. So he made sure to associate only with True Believers. He stopped reading articles and books that cast doubt on all his wonderful insights. He grew to enjoy the abusive tactics employed by the sorts of individuals who have put up posts in “defense” of Mel Lindauer and John Greaney. Hate was good! It was through hate that you persuaded people to ignore the awful findings of the last 33 years of peer-reviewed research and persuaded them to continue following that great, proven Buy-and-Hold strategy, the one used by the truly successful people!
That’s where we are today, Anonymous.
Bogle made a mistake. There was no dishonor in that. LOTS of good and smart people made that mistake.
But now he has gone way past making a mistake. Now he is COVERING UP the mistake.
That is a dangerous business. When the tactics that have been used by the Buy-and-Holder for the past 12 years are employed, we are talking about financial fraud. Perhaps Jack will not be charged with this crime. We don’t know all the circumstances involved in his decision to work with you Goons. He will be asked questions under oath and perhaps there will be charges and perhaps there will not be charges. I think it is fair to say that as an objective matter the elements of the felony are all at least arguably present. That alone is pretty darn sick stuff. Bogle is a hero to a lot of people (Rob Bennett first among them!). To learn that there is even a hint of criminal activity associated with his name is to learn a profoundly sad reality. Yet here we are.
Why does he do this? Why does our mutual friend Jack Bogle continue to use that loony tunes 15 percent number when he knows that the research-based number is a number nowhere even remotely in the same neighborhood?
Because he is a human.
Because he hurts. Because his ego is invested in Buy-and-Hold. Because he cannot bear to think that his mistakes have caused millions of failed retirements. Because he cannot bear to accept that it was his continued promotion of the purest Get Rich Quick strategy ever concocted by the human mind that was the primary cause of our economic crisis. Because he hurt so many of his friends in so serious way.
He hurts, Anonymous. And the only way he can stop the hurting is by coming clean. And you encourage him NOT to come clean with your behavior. So you EXTEND Jack’s pain. Some friend, huh?
Everybody is entitled to an opinion. If Jack were to say “I don’t know why, I just have this funny feeling that no one should ever change his stock allocation by more than 15 percent,” that would of course be fine. But he doesn’t present the case in that way. He talks data, data, data, research, research, research and then he puts forward this loony tunes 15 percent number. And the million of people hearing it and putting their trust in him and forming their retirement plans in accord with what Jack says are thinking that there is some sort of data or research that supports this 15 percent number. And that’s a lie. A lie that is in the process of destroying millions of middle-class lives.
This is not a joke, Anonymous. The destruction of millions of middle-class lives is a serious business.
You say that no one is a pure believer in Buy-and-Hold and that everyone accepts the reality that valuations matter. That’s to a large extent true. If Bogle had a pure belief in Buy-and-Hold, his number would be 0 percent, not 15 percent. Fama would say 0 percent. The 0 percent number at least makes sense. If the market were efficient, there would never be any need to change one’s stock allocation AT ALL. So you are right that Bogle is not a pure believer and that his advice reflects a belief that valuations matter at least a little.
But where the heck does that 15 percent number come from? Why didn’t he look at the data? Why didn’t he look at the research? Why does he just make things up?
He is trying to combine two beliefs that it are impossible to reconcile. Yes, he accepts that valuations matter. He feels that he would sound like a crazy person to say otherwise. So he acknowledges that much . But he doesn’t want to give up on Buy-and-Hold. He is fighting hard to hold on to most of something he has long loved. So he gives up a little bit of his Buy-and-Hold beliefs while retaining a belief for the most part. The 15 percent number is the number used by a person who has acknowledged internally that a pure Buy-and-Hold belief cannot be justified but who is not yet willing to travel the distance one needs to travel to believe in Valuation-Informed Indexing, the model rooted in a belief in Shiller’s revolutionary findings of 1981.
It’s obviously not just Bogle that I am talking about here. I am talking about you. And I am talking about Mike Piper. And I am talking about Scott Burns. And I am talking about Wade Pfau. And on and on and on and on.
That’s where we are today as a society. Valuations matter. Pretty much all of us sign on to that one. But they don’t matter nearly as much as Rob Bennett says they do. That’s ALSO part of the currently prevailing belief. The prevailing belief is not dogmatic in saying that valuations have no effect. But it is dogmatic in saying that the effect is not as great as the data and research indicates. So we must stop people from exploring the data and the research.
That’s where things stand, Anonymous. My aim is to change things. I think change is needed. For reasons that should be obvious to any halfway reasonable person.
It hurts the feelings of Buy-and-Holders for them to hear the arguments for why they have made a terrible mistake. I get that loud and clear.
That is not an argument for not permitting discussion of the research findings of the past 33 years. It is an argument that goes in the other direction. We should all want to relieve the pain of the Buy-and-Holders. We do that not by ignoring the research but by exploring its implications in great depth.
Bogle has a right to his opinion.
He also has a RESPONSIBILITY to tell us all what that opinion is based on.
And all of his friends have a responsibility as friends of his to INSIST that he recognize that responsibility before he gets himself in even deeper trouble.
That’s my sincere take re these terribly important matters, Anonymous.
I wish you all good things.
Rob
There are responsibilities that come with being a person of Bogle’s stature, Anonymous.
There are certain responsibilities anyone engaging in social discourse on a topic has. Primarily to post their views respectfully, and respect others. Special respect is due leaders in the field by nobody’s like me and you.
But they do not have the responsibility to agree with Rob 100% or be in error. That’s just boorish and bullying. Especially about a topic like the future, where anything can happen, and there are no hard facts that can be proven right or wrong beforehand.
That’s where we are today as a society. Valuations matter. Pretty much all of us sign on to that one. But they don’t matter nearly as much as Rob Bennett says they do.
Correct. And maybe more than Joe Blow says they do. Everyone’s got an opinion. When stating yours, do so politely.
Thanks for sharing your sincere view re this matter, Anonymous.
Rob