Set forth below is the text of a comment that I recently put to another blog entry at this site:
The one link you pointed to supports that view, Anonymous. There are other links that tell a different story. Buffett has ridiculed the Efficient Market Theory on numerous occasions. The crazy idea that the Buy-and-Holders put forward that it is not necessary for investors to consider price when setting their stock allocations is rooted in a belief in the Efficient Market Theory. So Buffett has pulled the chair out from under the Buy-and-Holders on numerous occasions.
Also Buffett’s personal investing strategy is in direct conflict with Buy-and-Hold. Buffett ALWAYS considers the value proposition he is buying when he purchases stocks. Buy-and-Holders NEVER do. The peer-reviewed academic research in this field shows that the thing that the Buy-and-Holders need to do to take value propositions into account is to look at the P/E10 level that applies when they set their stock allocations. Do we have any reason to believe that Buffett would oppose the idea of Buy-and-Holders doing the very thing (looking at value propositions) that is the basis for all of his many years of success if he knew that there were an easy way (take five minutes once per year to check the P/E10 level) to do it? We do not.
The most reasonable explanation for Buffett’s contradictory remarks and behavior is that he has not seen the peer-reviewed academic research that I co-authored with Wade Pfau. I think it would be fair to say that, once exposed to the Valuation-Informed Indexing concept, Buffett would experience the same epiphany that Wade Pfau experienced when we began working together and that John Walter Russell experienced when we began working together and that hundreds of others of our fellow community members experienced when they learned about the concept. We need Bogle to bring the study to him by the close of business today.
This is imperative business, Anonymous. The Buy-and-Hold Crisis has put millions of people out of work and winning the endorsement of Warren Buffett for the first true research-based approach would help bring that crisis to an end. And of course there is the matter of the upcoming prison sentences for you Goons. It obviously will not be a good thing for you if your jury hears that you rejected this sensible and positive and constructive and life-affiming suggestion. On the other hand, if Buffett agrees to work with us to get the word out about our “revolutionary” (Shiller’s word) findings, there obviously are going to be some jury members who will view your behavior in a somewhat more forgiving light.
Please keep us up to date on Jack Bogle’s response to your request and on Buffett’s response to Bogle’s entreaties to him.
Rob
Been a long time since Buffett has outperformed the market. Ditto the millions who’ve tried to copy his techniques.
I am a big-time Buffett guy (I am of course also a big-time Shiller guy and a big-time Bogle guy).
But I naturally am grateful to you for taking time out of your day to share your thoughts with us, Anonymous.
Rob
Rob,
You are only stating what we readers of your blog have known for a long time now. You are far more intelligent, successful, and wealthy than Warren Buffet.
Naturally I wish you all the best in your endeavours. Good day to you kind sir.
My favorite Warren Buffett story is the one where his wife was feeling that she was about to vomit and she asked Warren to run and get something for her to vomit into. He came back with a colander!
That’s our boy, the smartest man in the investing advice field!
We’re all human, Anonymous. Greaney messed up re safe withdrawal rates. Linduaer messed up re safe withdrawal rates. Bogle messed up re safe withdrawal rates.
I helped them by pointing out the mess-up in time for them to save themselves further embarrassment.
They all messed up a second time by failing to promptly correct the error.
And you messed up on being a friend to these three by devoting years of your life energy to aiding the cover-up.
I am proud that I was a good enough friend to Old Saint Jack to do what I could to help him out re an issue on which he very much needed some help.
I only wish that the guy had more true friends.
Stubborn pride can bring down any of us. I pray that I never fall victim to it in such a terrible way.
My best wishes to you (and to all my super-genius, colander-carrying friends in the investing advice field!).
Rob
Only a complete troll sits around trying to point out other people’s mistakes all day.
We couldn’t possibly disagree more, Anonymous.
Getting the mistakes of the Buy-and-Holders fixed is huge. There’s a lot of good stuff in the Buy-and-Hold Model. When we get the mistakes fixed, it works in the real world.
I love working to get those mistakes fixed. I only wish we could do get things done faster!
Hang in there, man.
Rob
I should add that someone who is not man enough to correct his mistakes when they are pointed out to him does not possess the minimal level of integrity needed to work in the investing advice field.
That goes for John Greaney. That goes for Mel Linduaer. That goes for my good friend Jack Bogle. That goes for all of the individuals who have put up posts in “defense” of these three over the past 12 years.
Personal integrity has to come first. Intelligence without integrity doesn’t get the job done. Power without integrity doesn’t get the job done. Money without integrity doesn’t get the job done. Experience without integrity doesn’t get the job done.
Yes, even in the investing advice field.
That’s my sincere take re this terribly important matter, in any event.
Rob
My experience has been that I have often learned a lot from identifying my mistakes and acknowledging them and correcting them. I try to feel grateful to the people who help me out by pointing out my mistakes. That’s a good test of true friendship. People who don’t really care about you on a deep level aren’t going to go to the trouble to point out your mistakes, they are more inclined to flatter you. Your true and lasting friends hate to see you do harm to yourself. So they are more inclined to stick their necks out.
That’s another way of telling the same basic story set forth in the above two comments, just coming at it from a different angle.
Don’t let the bad guys get you down, Anonymous.
Rob
Please remember that we wouldn’t have the amazing Bennett/Pfau research paper (peer reviewed!) showing millions of middle-class investors how to reduce the risk of stock investing by 70 percent if I hadn’t worked up the courage to point out Greaney’s mistake back in May 2002.
I was scared then like everybody else is today. But I think it would be fair to say that that one act of courage by a somewhat frightened fellow has led us all to some amazing places in the 12 years since.
Fair enough?
Rob
I have a question for you, Anonymous.
Say that you were me. Say that you loved the core Buy-and-Hold concept (focusing on the long term and rooting your strategies in the peer-reviewed research) but that you became convinced that your Buy-and-Hold friends had made a terrible mistake that caused an economic crisis, wiping out years of the accumulated savings of millions of middle-class investors.
Would you keep it zipped, knowing that you would be able to make a lot more money in the short term by aiding the cover-up?
Or would you try to persuade your Buy-and-Hold friends to correct the error so that they could feel good about themselves again and so that we could bring the economic crisis to an end and bring on the greatest period of economic growth in U.S. history?
You know what I feel bound in conscience to do.
I would be grateful if you would ponder the question a bit and tell us what you sincerely believe you would do if you were placed in the circumstances in which I find myself.
Rob
Hi Rob,
What would you do if you found someone operating a blog preaching an approach to investing with obvious flaws; who incorrectly confused correlation with causation; and who improperly believed that the past was bound to repeat itself?
Would you reach out to that person, try to engage them in a discusion of their beliefs in an attempt to illuminate them? Or would you just chalk it up to yet another kook with a website and move on?
What if, as a result of those conversations, that person said you were a goon who deserved jail time for their approach to investing?
What would you do — as a friend?
Ryan Howard plays first base for the Phillies. He was a great player at one time and was signed to a very big long-term contract. He is a horrible player today. But when people talk about trades the team may make, his name never comes up. People are embarrassed to talk about the subject because Howard is a nice guy who once was a great player and because there are no teams interested in taking him today.
Today the front office began to lower the boom. They brought up a possible replacement. And there there were several interviews in which the idea was put forward that they will be releasing before the beginning of next season. Now everything has changed. Now it is considered fair game to mention the realities concerning Ryan Howard.
That’s what is going to happen re Buy-and-Hold following the next price crash.
People are afraid to talk today because the Buy-and-Hold Mafia is powerful and there are still people holding out hope that we will not see another crash. But following the next crash someone big will say things out loud that lots of people have been thinking for many years now. And then everything will open up. People will be rushing for the exits.
Once the taboo is broken, things are never again the same.
When it turns, it turns fast.
Where will you be then?
I am the best friend you have in this world, Curious.
That’s the real deal.
I can help. But only if I get cooperation.
You do deserve jail time. Put yourself in the shoes of the millions of people in the process of suffering failed retirements. Or in the shoes of the millions of people who lost their jobs in the economic crisis.
I have the credibility on this issue to help you get your jail time reduced. And that’s obviously all that I have. I cannot put you in jail and I cannot keep you out of jail. I have no such powers. I can try to help, I can try to put things in the light most positive for you. That’s all I can do.
I haven’t confused correlation with causation. I have explained WHY valuations affect long-term returns. The new model is based on a new understanding of how the market sets prices. The new model is consistent with the data. The old model is not.
I don’t say that the past is bound to repeat. I say that it very well might and that every person working in this field has a responsibility to let millions of middle-class people know what will happen to their retirement money if that turns out to be the case. If you tell the truth while still promoting Buy-and-Hold, you are in good shape if we have a crash and in good shape if we do not have a crash. That’s where you should want to be. That’s sane. Because you don’t know for sure what is going to happen.
I don’t know with certainty what is going to happen either. I have my strong beliefs, just as you have your strong beliefs. The difference is that I have never blocked anyone from hearing the Buy-and-Hold story. Everyone knows the Buy-and-Hold story. You have blocked people from hearing the Valuation-Informed Indexing story. That puts you on the hook for losses if things don’t go as you expect.
The jury wil hear testimony re whether I am just a kook with a web site. Wade Pfau will be testifying. And so will lots and lots of others. And the testimony will be given FOLLOWING the next crash. At that time it won’t be just me saying it might happen. It will be a present-day reality. It will be in all the papers.
I love my country and I will continue to fight to protect her from you, Curious. That’ the bottom line here. I have a funny feeling that love of one’s country is a virtue that is going to be coming into style following the next price crash and that turning a quick buck may be viewed as less of a sign of the ultimate “success” in those days. We will see.
I naturally wish you the best of luck in all your future endeavors regardless of what investing strategies you elect to pursue.
When lots of others are saying that Old Saint Jack cannot get around on a fast ball anymore, I will still be singing his praises. I will be recalling to people the day when he really was something special. The word “friendship” means something to me, old friend.
Rob
I have a question for you, Anonymous.
If he answers your question, will you let it stand, unedited? (Most likely his answer has already been deleted.) And will you let his answer be the last word in this thread? (Not in a million years.)
A perfect example of why it is utterly pointless to engage you in discussion.
As a general rule, I cannot promise to let an answer stand unedited. If Anonymous asks me for a one-shot opportunity to have an answer stand unedited, I would agree to that.
It’s the same with the idea of me letting his answer be the last word in the thread. As a general rule, no, I won’t do that. As a one-time exception, I could agree to not comment. If some other community member elects to comment, I would let the new comment go up regardless of any one-shot agreement (and I would reserve the right to respond to the comment put up by the other community member).
I hope that helps a bit, X.
Rob
And the testimony will be given FOLLOWING the next crash.
We just had the worst price crash in 50 years. But nothing you said came true.
That’s just false.
Things changed DRAMATICALLY in the months following the crash.
Take a look at discussions that were held at the Bogleheads Forum at that time. People were calling out Taylor Larimore on his b.s. That had NEVER happened before. And it wasn’t one or two people calling him out. It was a significant group of people. That was real change. And that sort of thing was happening everywhere. Money magazine ran a cover story questioning the investing advice they had given in every issue of the magazine ever published. Holy moly!
What happened from an emotional standpoint during the 2008 crash is that we tried out the idea of resetting stock prices to fair-value levels. That was a healthy development. But we scared ourselves. It was too much for us to handle emotionally. So we chickened out and permitted stock prices to go back up again. We didn’t permit them to go all the way back up to 44. But we let them go up to the mid-20s again. That gave people a good percentage of their money back. That made people less afraid. That stalled our collective effort to come to terms with the realities of stock investing.
We’ve been in a holding pattern since then. We’ve stayed at the mid-20s, with little bumps up and down. Please understand that we never entirely lose contact with our common sense even when we permit our Get Rich Quick urge to push prices up to insane levels. We all know that we are headed back down to 15 eventually. That’s why there is no confidence in the economic recovery. That’s why things cannot firm up and then take off. We don’t believe our own b.s. anymore.
You describe the crash of 2008 as “the worst crash in 50 years.” That was true only for a few months. A crash that takes away people’s money for only a few months is not a painful crash. That was an ATTEMPTED crash. A crash is an attempt to come to terms with reality. What happened in late 2008 and early 2009 was our FIRST EFFORT to come to terms with reality. Things will stay down for a long time following the next crash. And they will go down much further. This is an ongoing process. You don’t complete a process like this in a few weeks or a few months.
The mistake that the Buy-and-Holders make over and over and over again is to focus on the short term. The short-term DOESN’T MATTER. Please try to focus on the long term.
Go to Shiller’s site and look at what has happened throughout history when we went to a P/E10 level of 25 or higher. We don’t crash for two or three months and then head back up permanently. We stay down for years. Now — you might see a temporary rise back up. Please ignore that. Look at what happens in the LONG TERM. That’s what matters for the long-term investor. That’s ALL that matters for the long -term investor. The short-term stuff is a diversion. It does not matter. Your focus on the short-term stuff is making it hard for you to understand the long-term stuff, which is the stuff that matters.
That’s my sincere take, in any event.
I wish you well.
Rob