Set forth below is the text of a comment that I recently put to another blog entry at this site:
What do you want Bogle to say exactly, that one might vary their allocation as certain valuation extremes? I’m sure he’d be fine with that.
Bogle says that the most that anyone should change his stock allocation at valuation extremes is 15 percent. He argues that even that much of a change is not a particularly good idea. But he says that a 15 percentage point allocation change is acceptable at the height of a massive bubble.
The most likely annualized 10-year return when stocks are priced as they were in 1982 is 15 percent real. The most likely 10-year annualized return when stocks are priced as they were in 2000 is a negative 1 percent real. An 80 percent stock allocation makes sense in the first scenario. A 20 percent stock allocation makes sense in the second scenario.
Going from an 80 percent stock allocation to a 20 percent stock allocation is a change of 60 percent, not a change of 15 percent. Bogle’s number is off the mark by 400 percent.
That’s not acceptable. It’s not a close call.
The most charitable thing that one could say about Bogle’s number is that he pulled it out of his backside, that he never even bothered to look at the data when giving that number. If that’s the case, he needs to say that. Millions of middle-class people look up to Bogle and expect him to give reasonable investing advice. He dropped the ball re this one in a major way.
And everyone in this field should have been pointing this out going back to the day he first dropped the ball, which was many years ago. Money magazine should have run a cover story pointing out how Bogle dropped the ball. There should be threads at the Bogleheads Forum on a daily basis reporting on how Bogle dropped the ball. There should be bloggers writing articles explaining how he dropped the ball and demanding that he correct the error.
Why are we not seeing that, Anonymous?
We are not seeing it because Bogle has misled millions of investors into believing that the smelly Buy-and-Hold garbage can work. Those people are scared to death of what the research shows. So they become upset when anyone reports honestly and accurately what the research shows. So those whose primary goal is to turn a buck keep it zipped re what the last 33 years of research shows. And we all continue our journey down, down, down.
I ain’t going there, Anonymous.
I never went to Investing School. I never managed a big fund. I acknowledge right up front that I have been wrong about important things before in my life and that it is entirely possible that I am wrong again. I acknowledge that, if I were, I would probably be the last to know.
But I am not going to post dishonestly re the numbers that people use to make important investing decisions. It is not going to happen. Not in 12 years, not in 12 billion years.
Bogle pulled that number out of his backside and he has hurt millions of people by failing to say so. People hear that number and they presume that there is some sort of research or data or expertise or logic behind it. And there is none. It is just a number that one of the Wall Street Con Men pulled out of his backside. Nothing more and nothing less.
I love Jack Bogle. I have learned many important things from him. I learned about the errors in the Old School SWR studies by reading his book. Valuation-Informed Indexing is a bunch of Bogle’s ideas combined with a correction of the one huge mistake he made and has refused to correct for the 33 years since it was brought to light by the peer-reviewed research. It gives me a great feeling of pride to know that I have accomplished what Bogle set out to accomplish as a young man and failed to accomplish at the time because the research he needed to pull it off had not yet been published. I look forward to the day when I can stand next to Old Saint Jack on a stage and talk honestly about what we know about how stock investing works and have him helping out and feel free to give him the credit for all the wonderful insights for which he truly is responsible.
But I want nothing to do with a massive cover-up that in all likelihood is going to end with my good friend Jack being disgraced and humiliated and possibly being sent to live his final days in a prison cell.
Find someone else, you know?
I can’t go for that.
No can do.
It’s not my particular cup of tea.
It’s not a close call.