Set forth below is the text of a comment that I recently posted to another blog entry at this site:
Shoot someone like Rob Arnott an email with your theory about stocks providing a risk free return of 6% for all eternity.
You’re on the right track with this comment, Curious.
I am not going to shoot Rob that e-mail and I will say here that I do not know how he would respond if I were to shoot him that e-mail. He’s a smart guy and I have great respect for him. And I am saying here that I think it is possible that he would agree with you (at least at first) that the idea that stocks are a virtually risk-free asset class and the idea that it is possible just by opening the internet to honest posting on the research of the past 33 years to eliminate volatility in prices are crazy ideas.
I also think it is possible that it could go the other way. It is possible that Rob would agree with me.
A third possibility is that Rob would secretly agree with me but would keep quiet about it in public.
My personal guess is that Rob ‘s reaction would be some combination of all three of those possibilities. I think he would be highly skeptical of those particular claims of mine. And for perfectly good reasons. Those two are far-out claims. Any sensible person would be skeptical on first hearing them. I certainly would have been skeptical of such claims if I heard them on the morning of May 13, 2002.
Given Rob’s respect for me and for the materials that I have provided at this site, my further guess is that he would be willing to hear me out a bit re my rationale for believing in those two far-out ideas. I think that after hearing the rationale he would be partly, but only partly, convinced. So I think that, while his first reaction might be disbelief, his second reaction might be a healthy skepticism combined with a willingness to hear the ideas out and to listen in on discussions in which they were explored in more depth.
Finally, I think he would be hesitant to give voice to these reactions in public. So, while his genuine reaction might be along the lines of what I have described above, his public statements would be considerably more reserved. He might say in public “these ideas seem far-out but perhaps there is some tiny bit of truth to them” while believing in his heart “these ideas seem far-out but the argument that Rob makes for them makes enough sense that I would sure like to hear lots of other smart and good people bounce them around and see what they come up with as a result of their discussions.”
I do not believe that Rob would sign on to those ideas 100 percent today. Why? Because I didn’t sign on to those ideas 100 percent the first time I came up with them myself! That’s just not the way the human mind works.
I was a Buy-and-Holder on the morning of May 13, 2002. I experienced things that neither Rob Arnott nor any other expert in this field has ever experienced. The most amazing thing I experienced was the reaction in the Motley Fool community to Greaney’s death threats. Going by the endorsements that community members there advanced, there were roughly 50 community members who sided with me re the death threats and 200 community members who sided with Greaney re the death threats. That reality is more “out there” than the two claims of mine under discussion here, Curious. It is not a close call.
So please do not try to persuade me that those two claims are false solely because they sound too far out there. They DO sound far out there. I give you that one 100 percent. But there is other far-out-there stuff going on in these discussions. And my job (as someone who cares about investing and about his fellow community members and about his country) is to find out THE REALITIES.
I couldn’t believe in Buy-and-Hold after what I saw take place on the evening of August 27, 2002. If Buy-and-Hold were a legitimate strategy, there would not be one person who endorsed Greaney’s death threats. There wasn’t just one. There were about 200. That’s a reality that I need to come to terms with in trying to form a rational view re how stock investing works.
The fact that 200 people endorsed Greaney’s death threats does not show that stocks are a virtually risk-free asset class or that volatility is optional. What the endorsements of the death threats did was to cause me to doubt all conventional wisdom in this field. If the Buy-and-Holders were wrong about safe withdrawal rates and so unwilling to acknowledge the mistake that they were capable of endorsing death threats as a discussion tactic, what else could it be that the Buy-and-Holders got wrong? Everything! Given what I saw take place on the evening of August 27, 2002, I was forced to the conclusion that just about everything that most of us thinks he knows about how stock investing works could be wrong.
That conclusion led me over a stretch of time to the belief that stocks are a virtually risk-free asset class and that volatility is optional (these are both implications of Shiller’s “revolutionary” [his word] finding). It is right and proper that most people are highly skeptical of those two claims. I get that. But their skepticism does not prove that the claims are false. To find out whether the claims are true or false, we need to have a debate in which lots of good and smart people participate. That debate should certainly include Rob Arnott. It should also include Jack Bogle. And Wade Pfau. And Bill Bernstein. And Larry Swedroe. And Scott Burns. And on and on and on and on.
Could it be that I will be proven wrong in the public square once that debate is held? Of course. I have been wrong about important things in the past and it is entirely possible that it is happening again. If it were happening again, I would probably be the last to know. So it could be that your skepticism and the skepticism that I presume Rob Arnott would feel towards those claims were he to be exposed to them today will be proven justified. Or it could go the other way. No one can say until the debate is held.
You are not wrong to follow the Old School safe-withdrawal-rate studies in the event that you truly believe in them (it is my belief that you do), Curious. You are very, very, very, very, very wrong to engage in tactics aimed at blocking millions of others from learning what they need to learn to develop the same healthy skepticism toward the claims made in the Old School SWR studies that you (and perhaps Rob Arnott) feel toward my claims that stocks are a virtually risk-free asset class and that volatility is optional. That’s the bottom line re all of this.
We have enjoyed amazing progress in our development of computer technology over the past 33 years. If we could go back in time to a person who was alive in 1981 and ask that person his thoughts on whether the things we see around us every day today could possibly be developed in 33 years, that person would probably tell you that you are 100 percent off your rocker. The everyday computer realities of today would be viewed as insane possibilities to someone who had not lived through the 33 years of development of those advances. Tablet computers available for sale $100 that allow access to the biggest research library in the world (the internet) would be no more fantastic in the eyes of a person alive in 1981 than a world in which stocks were a risk-free asset class and volatility was optional.
I believe that we have experienced greater growth in our understanding of how stock investing works over the past 33 years than we have experienced in the area of computer technology. We have changed the world in amazing and very positive ways. There is only one problem. In the computer field, we were able to share these advances with millions because there was no Pre-Computer Technology Mafia holding us back. In the investing realm, we have thousands of people whose careers and reputations depend on us all pretending that we believe that the things that they sincerely thought were so in 1981 truly are so despite the 33 years of peer-reviewed academic research now showing that they are the OPPOSITE of what is truly so.
I am not the enemy of those people, Curious. I am the best friend that any of them has in this world. When we tap into all the advances, Jack Bogle will be ten times the hero he is today in the eyes of the millions of people who will benefit from living in a world in which stocks are a virtually risk-free asset class and volatility is optional. The other side of the story is that every day that Jack fails to speak up about The Lindauer Matter causes us all to experience even more financial destruction and Jack’s reputation to be dragged further and further through the muck that covers anyone who associates with Linduaer and Grenaey and those who have posted in “defense” of these two in any way, shape or form. It is going to be my job to rebuild Jack’s reputation after what is done to it when this massive act of financial fraud is uncovered following the next price crash. I sure don’t like seeing Jack made my job harder and harder and harder with each day that he fails to take the steps that any person possessing even a tiny concern for his ethical responsibilities knows that he needs to take.
If Rob Arnott writes me and asks about those two claims, I would certainly engage in a discussion with him about them. I did that sort of thing with Wade Pfau scores of times. He on many occasions experienced the sort of skepticism that Rob might feel if I contacted him today. Wade was converted so many times that he wrote me one time to tell me that he was not yet persuaded of a point I was making but that, given his experience of being converted to my other amazing claims over time, he accepted that there was a good chance that he would be coming around re that one too in future days. That’s the right attitude to take. No one should pretend to be converted until he or she really is converted. But no one should be so close-minded that he would support a Ban on Honest Posting. There’s a reason why as a society we have elected to adopt laws making the tactics that you have engaged in for 12 years now felonies, Curious.
I won’t write to Rob today because converting him on these two particular claims is not my priority. Persuading anyone of the merit of any of my ideas is not my priority. My priority is opening the entire interest to honest posting on every critically important investing issue. It’s not just Rob Bennett who will be posting honestly when that goal is achieved. Jack Bogle will be posting honestly. Rob Arnott will be posting honestly. Robert Shiller will be posting honestly. Wade Pfau will be posting honestly. And, yes, Rob Bennett will be posting honestly. We will see what we come up with together. I have a funny hunch that we are going to come up with some amazing stuff.
When that day comes, I will be saying that stocks are a virtually risk-free asset class for those open to taking valuations into consideration when setting their stock allocations and that volatility will disappear for so long as we are sure to provide a means for millions of investors to learn what they need to learn about the subject matter to make the rational choices we need to see for any market to function properly. I have zero doubt that there will be lots of good and smart people who will aim to shoot those ideas down. Good for them. Those people will be helping us all when they do so. It is by seeing how the ideas stand up to those challenges that we will all learn how much merit they possess.
There won’t be any death threats. There won’t be any demands for any unjustified board bannings. There won’t be tens of thousands of acts of defamation. There won’t be any threats to get any academic researchers fired from their jobs. Those who have posted in “defense” of Mel Lindauer and John Greaney will be serving long prison sentences. So none of that smelly garbage will exist in that wonderful new world.
We will figure things out together. That’s how we have been doing things as a nation for hundreds of years now. I am confident that we will realize in time that that’s the way we need to be doing things re The Buy-and-Hold Crisis as well. Our system works. Those who demand that we stop following the system that has been working for us all for a long, long time are not our friends. Those people are sick and twisted Goons. We should have all shown them the door a long, long time ago, in my assessment.
If we don’t figure it out, we will all go down together (I am presuming here that stocks may continue to perform in the future at least somewhat as they have always performed in the past). That would make me very sad. But at least I will have the small consolation of knowing that I gave this thing the best possible shot of which I was capable. That won’t count for much, given the tragic set of circumstances we are talking about here. But it will surely register as one big step above agreeing to participate in this massive act of financial fraud myself. No can do re that one, my old friend.
I hope that helps a bit Curious. My best and warmest wishes to you and yours.