Set forth below is the text of a comment that I recently posted to another blog entry at this site:
“PERMITTING HONEST POSTING.”
Can you please define what you mean by that. I am unaware of any topic that has not been discussed.
That’s a good question, Anonymous.
What’s honest for you is not the same as what is honest for me.
You believe in Buy-and-Hold. So you can put up a post saying “a high stock allocation makes sense today” or “there’s no reason to believe that we are going to see another price crash over the next year or two or three” or “the Old School safe-withdrawal-rate studies provide a reasonable guide for what withdrawal rate to use in your retirement plan.” All signs are that you believe these things. So for you it is honest to say these things.
I do not believe these things, as you know. So for me it is obviously not honest to say these things.
You represent something close to the farthest extreme on the pro-Buy-and-Hold side and I represent something close to the farther extreme on the anti-Buy-and-Hold side. The vast majority of posters at every investing board and blog hold views somewhere in the middle of those held by you and me. There are many more who hold views closer to what you believe than there are who hold views closer to what I believe.
We all should be saying precisely what we believe. A board in which every poster says precisely what he or she believes is a board at which honest posting is permitted. A board in which some hold back because they worry about what will be said about them or done to them if they express their sincere views is not an honest board. Such a board offers those listening in to the conversations held at it a false impression of what the community believes. Any board at which people on one side of a spectrum of beliefs feels disinclined to state its sincere views is a dishonest and corrupt enterprise.
You post honestly already (except when you are trying to get someone kicked off a board and you use deception as one of your tactics). When I post honestly, I am banned. Others who share my views see that and refrain from posting honestly so as not to be banned. You see that few are posting in support of me and you conclude that few support me. But this is a false conclusion. At times when there were not Goons like you engaging in wildly abusive posting practices or when those abusive practices had not been going on long enough for people to realize how great the penalty would be for posting honestly, there were many community members saying that I had started the most exciting series of discussions ever held at any of our board or blog communities. When threats were made to kill family members of any posters who showed interest in discussing the last 33 years of peer-reviewed academic research, those posters either left the board altogether or stopped posting on the subjects re which they had learned that honest posting would not be tolerated by the Goons and by the site administrators.
Here are some topics that are not discussed regularly at the boards and blogs that have banned honest posting:
1) The question of whether it was the promotion of Buy-and-Hold strategies that was the primary cause of the economic crisis;
2) The fact that the Wall Street Journal and the Economist and Smart Money and numerous other big-name journals have published articles in recent years saying that Rob Bennett was right all along in what he said about safe withdrawal rates way back in May 2002;
3) The question of why it took so long for these journals to acknowledge that the numbers in the Old School safe-withdrawal-rate studies are wildly off the mark;
4) The question of what is the ACCURATE (that is, valuation-adjusted) safe withdrawal rate;
5) Why the research that I co-authored with Wade Pfau that shows millions of middle-class investors how to reduce the risk of stock investing by 70 percent has not yet been written up on the front page of the Wall Street Journal;
6) Why Jack Bogle has not taken action against Mel Lindauer and those who have posted in “defense” of him even though he has been made aware of the tactics employed by Lindauer at a discussion-board community that bears Jack’s name;
7) Why Jack says that investors only need to change their stock allocations by 15 percent at times of insane overvaluation even though the last 33 years of peer-reviewed academic research in this field shows that the difference in return that results when we go from the sorts of valuations that applied in 1982 to the sorts of valuations that applied in 2000 is 16 percentage points of return per year for ten years running;
8) Why Wade Pfau felt that his career would be destroyed if he continued doing honest research, research that believed to be the most important work he had ever done in his life, research that he thought was worthy of publication in the Journal of Finance;
9) Why following Buy-and-Hold strategies makes investors so darn emotional; and
10) Why Buy-and-Holders say that they agree that valuations matter but are unable to point to a single change they have made in their investing strategies as a result of the “revolutionary” (Shiller’s word) findings of the past 33 years of peer-reviewed academic research published in this field.
And the list goes on and on and on and on.
Shiller changed out understanding of how stock investing works in a fundamental way in 1981. We can never put the genie back in the bottle. Buy-and-Hold was once thought to be the first research-based strategy. We now know that the research never supported Buy-and-Hold, that the belief that it did was mistaken. I didn’t create that reality. That reality was in place long before I came on the scene. What I did was post in accord with that reality. I believe that Shiller’s research is legitimate and so I naturally only believe things about stock investing that are logically consistent with Shiller’s findings. Buy-and-Hold is not logically consistent with Shiller’s findings. Shiller showed that all investors MUST change their stock allocations in response to big shifts in valuations to have any hope whatsoever of keeping their risk profiles roughly constant.
Millions of good and smart people believe in Buy-and-Hold today. That’s so beyond any reasonable dispute whatsoever. That’s why we see friction on the boards and blogs when someone like me advocates Valuation-Informed Indexing strategies. If Shiller is right, Buy-and-Hold is the most dangerous strategy ever concocted by the human mind. It hurts Buy-and-Holders to hear that. It scares Buy-and-Holders to hear that. it enrages Buy-and-Holders to hear that. Many site owners don’t want the majority of their community members to be hurt and scared and enraged. So they go along with demands made by the Buy-and-Holders to ban further discussion of the findings of the last 33 years of peer-reviewed academic research.
That is not the answer!
It’s a temporary answer. It brings an appearance of peace to the board community filled with upset Buy-and-Holders. But banning discussion of the research ultimately only prolongs the agony. Buy-and-Hold doesn’t work! It has never worked for a single long-term investor! Not once in 140 years! The research that I co-authored with Wade Pfau shows that as clearly as it can possibly be shown. There are no two “sides” to this debate. We are all on the same side. We all want to see an end to this economic crisis. We all want to see our retirement plans survive. We all want our nation to enter the greatest period of economic growth ever seen in our history. We all want our board and blog communities to be non-corrupt and honest and helpful.
The question here is not whether honest posting should be permitted or not. Our social norms DEMAND that honest posting be permitted (just as our social norms demanded in the early 1960s that the laws that forbid people with black skin from drinking at the same water fountain as people with white skin be repealed). We are not a people that feels comfortable banning honest posting on important public policy questions. And how we invest is a critically important public policy question given that the false understanding of the question that applied prior to 1981 has now caused four economic crises, including the Great Depression.
We need to all reach 100 percent, total agreement that honest posting is going to be permitted at every investing board and blog from this day forward. Then we need to agree to processes that will help us all live with that decision.
There are sensitivities here. The Buy-and-Holders do not want to go to prison for having committed financial fraud. The Buy-and-Holders do not want to be held liable for financial damages for the millions of failed retirements they have caused. The Buy-and-Holders get upset when confronted with numbers showing that they have made a horrible mistake with their investing strategies. The concerns that Buy-and-Holders feel re these sorts of questions need to be addressed if we are to move forward.
I cannot address those questions on my own. These are public policy questions and they can only be addressed by the nation as a whole. Perhaps we will have Congress adopt some sort of amnesty for things that were done at earlier times. I simply cannot say. There has to be a national debate on these questions for us to figure out as a nation how to proceed. People like Jack Bogle and Robert Shiller obviously need to be involved in that debate. I can offer my thoughts. But this is not a matter that is going to be decided by any one person or any small group of persons. Every one of us has been affected by what has happened and every one of us has to have a say in the resolution.
We need to see responsible people taking responsible steps. That’s the bottom line here. When Bogle gives his “I Was Wrong” speech, that is going to change things in a big way. Once Jack gives that speech, people are no longer going to be afraid that they are going to be sued by the Wall Street Big Shots. That will cause a lot more people to speak out. Once Bogle gives that speech, people like Lindauer and Greaney won’t be able to get away with their b.s. intimidation tactics any more. That will also cause a lot more people to speak out. Once Bogle gives that speech and more people begin speaking out, bloggers and others who try to make money off this stuff are going to see that there is a huge opportunity to make lots of money creating tools that help people following Valuation-Informed Indexing strategies. That will cause even more people to speak out. One good thing will beget another good thing, which will beget another good thing, and on and on.
The tough part is getting Bogle to make that speech. We all should be working together to try to help Old Saint Jack understand how critical it is that he give that speech by the close of business today.
There are two things holding my good friend Jack back.
One, he is suffering from cognitive dissonance, as are so many other Buy-and-Holders. He really believed that this strategy worked. He is proud of the word he has done. He is capable of seeing that there might be small flaws in it. But he has a very hard time believing that his wonderful idea was the cause of the economic crisis and the cause of millions of failed retirements and all this sort of thing. It’s all just too much for him to take in at this moment in time.
We need to help Jack (and all the other Buy-and-Holders) understand what happened here. There are no magic words that can be said to make this happen. Jack will come around in time. He is obviously not dumb. But it is rare to see anyone get this on their first exposure to the ideas. People come around gradually. They need to be able to ask lots of questions. They need to hear lots of people offering their thoughts. They need to be exposed to the ideas multiple times for them to kick in. All this sort of thing.
The bottom line is that Jack must hear honest discussions. And of course the same is true of the many other Buy-and-Holders who today are having a hard time with this.
Two, Jack wants to be loyal to his tribe, the Buy-and-Holders. He doesn’t want all of his friends to become angry with him. He doesn’t want to see people held financially liable for giving bad advice for so long after the Buy-and-Hold Model was discredited by the academic research. He doesn’t want to see people go to prison. We need as a nation to address those concerns of his. We need to hear him give that speech and so we need to do what we can do to make him feel comfortable giving it.
The core issue here is that Buy-and-Hold and Valuation-Informed Indexing are OPPOSITE strategies. They are the same on every point except one — how the investor sets his stock allocation. But getting your stock allocation right is 80 percent of what it takes to be a successful long-term investor. So the real-world differences between these two strategies are great. And the Buy-and-Holders really believed that they were promoting something good, the world’s first research-backed strategy.
Under the ordinary way of doing business, people would have gradually been exposed to the new ideas starting in 1981 and, by now, we all would have made the transition to Valuation-Informed Indexing. It was the huge bull market that caused things not to turn out that way. People gave Buy-and-Hold the credit for the huge gains they thought they were earning in the late 1990s. They fell in love with Buy-and-Hold. So there is now a huge psychological resistance to making the switch to Valuation-Informed Indexing.
We have to start somewhere. We have to get the ideas out there. We need to hear lots of people commenting on them. If there are holes, we obviously need to hear that. If there are not holes, we need to hear that. We need to hear as much as we can hear from as many people as we can persuade to participate constructively.
We need to work together to bring the abusive tactics to a full and complete stop. We have seen from the first day that the majority of our community members LOVE exploring the Valuation-Informed Indexing idea so long as they do not see any death threats or demands for unjustified board bannings or tens of thousands of acts of defamation or threats to get academic researchers fired from their jobs. We need to be 100 percent adamant that that stuff comes to a full and complete stop. We are the luckiest generation of investors who ever lived. So we can figure out the rest together so long as we deal with the Goon problem in a clear and firm and absolute and final way.
I think that covers it, Anonymous.
If I was asked to give a short version, I would say that we will have honest, non-corrupt boards and blogs when every last one of us feels free to say that Buy-and-Hold is a dangerous Get Rich Quick scheme if that is what we believe. I remember saying that at a blog and one fellow telling me that he had never heard that idea expressed before. That fellow’s reaction tells the story of why we are in an economic crisis today. There is now 33 years of peer-reviewed academic research showing that Buy-and-Hold is the purest and most dangerous Get Rich Scheme ever concocted by the human mind (not intentionally, to be sure — but still). People need to hear that, over and over and over again. They need to hear the other side of the story too, of course. But they already DO hear the other side of the story. People need to hear the anti-Buy-and-Hold story as firmly and clearly and regularly as they today hear the pro-Buy-and-Hold story.
All of this will happen naturally once the intimidation comes to a stop. But the intimidation MUST come to a stop. It is killing us. We all know on some level of consciousness how dangerous the intimidation tactics are to our way of life. That’s why they are prohibited by the published rules of every board and blog. That’s why we adopted laws making financial fraud and the cover-up of financial fraud a felony under the laws of the United States.
I hope that helps a bit. Please take good care.