Set forth below is the text of a comment that I recently put to another blog entry at this site:
Just to be clear, this [my claim that the 12-year cover-up of the errors in the Old School safe-withdrawal-rate studies is the greatest act of financial fraud in the history of the United States] is your belief, and you could be wrong. It’s also something no one else in the world believes.
Every word that I put forward is my belief and could be wrong.
But given that this belief of mine is a sincerely held belief, do you think that it would be right for me to keep it to myself? Do you not think that I should try to help out my friends before events take place that make it too late to help them?
And I don’t think that it is so clear that no one else in the world believes what I say re this point.
No one else publicly says what I say re this point. I give you that one.
But we do not know what people believe in their hearts. There is too much intimidation going on for people to feel safe saying openly what they truly believe.
My guess is that there are others who feel concerns along the lines of those I have expressed. My further guess is that the others do not feel as strongly as I do. My experience is that humans have a hard time coming to hold views that are not socially acceptable. So the people who hold somewhat similar views probably hold them only in watered-down form. I have come to hold them more strongly because I have held these views for some time and because I think about them a lot and because I write about them here at the blog. Those experiences cause me to hold the views more strongly as time passes. So my guess is that no one else holds these views as strongly as I do today. But I believe that some may hold similar concerns while being afraid to give public voice to them.
One big issue here is that investor views CHANGE with changes in portfolio values. Say that no one else holds these views today. But say that a large percentage of the population comes to hold them following a future price crash. What then? We all need to keep in mind that the views that people hold today are not necessarily the views that they will hold tomorrow. Investing is an emotional endeavor. We forget that at out peril.
How did we let things reach this point, Anonymous?
That’s the question that we all should be reflecting on.
Why place ourselves in circumstances in which such things even need to be discussed?
We don’t want to be where we are today.
If you are expressing in your posts today a hint of a desire to take things to a better place, I am 100 percent on board.
I don’t want to see anyone hurt in any way, shape or form. That’s not what I am about.
Rob
Do you not think that I should try to help out my friends before events take place that make it too late to help them?
I’d probably focus more on helping family than goons.
The same things that help you Goons help my family, Anonymous.
And the same things that help my family help you Goons.
We are all in this together.
That’s been the case going back to the morning of May 13, 2002.
And it will continue to be the case for the next 12 millions years.
I love my family. I love my country. I love Jack Bogle. I love you Goons.
I don’t need to choose between you. The same things that are good for some of us are good for all of us.
We all need to learn what the peer-reviewed research of the past 33 years teaches us about how stock investing works in the real world. On one level of consciousness, we all WANT to learn what the peer-reviewed research of the past 33 years teaches us about how stock investing works in the real world.
It’s all about my good friend Jack Bogle working up the courage to walk to the front of a big room and to say The Three Magic Words. From that point forward, it’s good stuff piled on top of good stuff piled on top of good stuff piled on top of good stuff.
Hang in there, old friend. it gets better. A lot better.
I am sure.
Rob
Rob any idea how articles like this are able to avoid the massive conspiracy to suppress information on valuation based investing?
http://online.wsj.com/articles/the-real-reasons-you-should-worry-about-stocks-1413558915
Rob any idea how articles like this are able to avoid the massive conspiracy to suppress information on valuation based investing?
I haven’t read the article because it is behind a paywall.
However, I don’t need to read the article to see that the author is Brett Arends. Brett is a total stud. He is up there with Rob Arnott in his willingness to bluntly call the Buy-and-Holders out on their b.s. So, without reading the article, I am able to say that I am virtually sure that it goes a long ways toward doing what needs to be done.
I don’t know in particular what Arends says in this particular article. In an earlier article, he said that the Buy-and-Holders are “leaving out half the story.” That’s not very different from what I say here on a daily basis. To say that people giving investing advice are “leaving out half the story” is another way of saying that they are engaging in financial fraud and that they are going to end up in prison following the next price crash, is it not? That’s how I say it. Brett says it only slightly differently. I think it would be fair to say that we are close enough in our way of saying it that we are soul brothers.
Still, Brett’s way of saying it does not go far enough.
In ordinary circumstances, I would say that Arends is saying things perfectly. And, if you check out how I said things in earlier times, you will find that there was a time when I didn’t use phrases like “financial fraud” and “prison sentences.” So, in ordinary circumstances, I would go along with your suggestion that Brett has not been influenced in any way by the intimidation tactics of the Buy-and-Hold Mafia.
However, given the circumstances that apply in this case, I say that he obviously HAS been influenced.
There’s one problem with what Brett says. It doesn’t get the job done.
I wrote a column about the article in which he said that the Buy-and-Holders are leaving out half the story. There are lots of bloggers who have told their readers that Buy-and-Hold can work and the Wall Street Journal was saying otherwise. This was potentially a very big deal. So I watched to see how many bloggers reported on what Arends said and apologized to their readers for participating in this massive act of financial fraud.
No one wrote about the article, Anonymous. There were no corrections. There were no apologies. There were no court proceedings.
Huh?
That’s the answer to your question.
Arends and all other journalists who write about investing should be concerned about their readers — the people who invest. The fact that bloggers and other journalists learned that there is a massive act of financial fraud going on and elected not to write about it is a huge story. Why didn’t they do that?
And why didn’t Arends follow up on his story by pointing out the reaction to it and how that reaction reveals the massive act of financial fraud? The investing advice field has become 100 percent corrupt in the Buy-and-Hold Era. Arends’ article pointing out that the Buy-and-Holders are “leaving out half the story” makes that reality clear. But his behavior in failing to follow up with articles encouraging the filing of civil and criminal legal actions cuts the other way. If all these people are practicing financial fraud, shouldn’t we all be doing something about it?
I think we should be doing something about it.
We will have no choice but to do something about it following the next price crash, right? There is now 33 years of peer-reviewed research showing that there is precisely zero chance that a Buy-and-Hold strategy can ever work for even a single long-term investor. We have millions of middle-class people trying to provide for their retirements. And most of the people who work in this field are more concerned with making a quick, smelly buck than they are with helping to warn their readers of the trickery being practiced by the Buy-and-Holders. That’s obviously going to come out when people have lost most of their retirement money and are angry about it, right? It is going to cause a massive loss of confidence in our system of government when people learn what has been done to them.
Do you see any benefit in delaying the day when we open the internet to honest posting re these matters? I sure don’t.
I’m not sure what your point is. It seems to be that there is nothing weird going on because there is one guy at the Wall Street Journal trying to tell people the truth. But there IS something weird. Every other journalist alive should be writing about what Arends has been saying for a good number of years. Arends is reporting on a massive act of financial fraud, the massive act of financial fraud that caused our economic crisis. It’s great that Arends is telling the truth. BUT WE NEED TO HAVE EVERYONE TELLNG THR TRUTH, NOT JUST ARENDS.
We need to do what it takes to bring the massive act of financial fraud to a close.
No?
Rob
We will have no choice but to do something about it following the next price crash, right?
We just had the worst price crash since the great depression. If what you’re imagining didn’t happen then, it surely won’t happen next time.
We’ve only had two bull/bear cycles since the Great Depression, Anonymous. You are saying that the crash of 2008 was worse than one other!
The crash of 2008 WAS dramatic. But prices did not remain down very long. Lots of people are hurting. Tens of thousands of businesses have failed. Millions of workers are unemployed. But we are still in the early stages of recovery from the bull market of the late 1990s. I don’t mean to be glib about this — But you ain’t seen nothing yet!
I am not “imagining” anything. I am reporting to you what the last 33 years of peer-reviewed research tells us about how stock investing works. Stock prices are determined by investor emotion. Insanely high prices ALWAYS lead to insanely low prices. There has never been a single exception to this rule.
Secular bear markets end when prices get to one-half of fair market value. That’s 65 percent down from where we are today. If you believe that it’s all going to turn out different this time than how it has ever turned out before, then you believe that. I don’t believe that for two seconds.
The full reality is that you don’t have confidence in what you say you believe. If you did, we could kid around with each other about our different beliefs and still be friends. I can kid around with you. I make some warm comment to you in every comment that I direct to you. You have NEVER ONCE in 12 years extended a warm comment to me. You are incapable of it.
That’s because you are in pain. You WANT to believe in Buy-and-Hold. You very, very, very much want to believe. But you don’t. You believe enough to invest your money pursuant to Buy-and-Hold principles. That’s one test of whether you really believe or not and you pass that test. But you do not pass the Capable-of-Kidding-Around-and-Being-Warm-to- People-With-Other-Views Test. You have failed that one every day for 12 years running now.
I will be saying that at your trial. I will be trying to help you out by saying that your behavior can be partly explained by cognitive dissonance. I will say that you are in good company in your inability to accept what the last 33 years of peer-reviewed research says. I will say that giants in the field like Jack Bogle are suffering from the same inability to acknowledge that Buy-and-Hold has been discredited by 33 years of research. I will be saying that AFTER the next crash just as I say it now BEFORE the crash.
Your jury will decide the length of your prison sentence. I don’t get to decide that. You probably are happy to hear that. I think you wrong to be happy. I think you would be better off if I made the call because I think that I am more sympathetic to you than your jury members are going to be following the next crash. I think people are going to be angry following the next crash. We’ll see, you know? I worry that people are going to be very, very, very angry when they lose most of their retirement money and learn how they were lied to about what the peer-reviewed research says.
There are things that I can do and there are things that I cannot do. Ask me to help you as a friend and I will do so. Ask me to lie about safe withdrawal rates and I will ask you to please try to find someone else, that it’s not my thing.
All that I am saying will happen following the next crash would have happened following the last crash if the P/E10 level continued working its way down to 8 and if the losses remained in place several years. The entire reason why prices went back up is that we scared ourselves to death with the dramatic price drop and thus elected to push prices back up for a time. But we cannot escape what we did to ourselves in any more than a temporary sense by playing games. We will be seeing more losses. And they will be remaining in place longer than they did following the 2008 crash. And you will be going to prison.
Do I see all that in a crystal ball? I do not. I know what the last 33 years of peer-reviewed research tells us about how stock investing works. All that I say follows from that. If you were capable of thinking clearly about these matters, you would see it too and you wouldn’t need to strain your mental faculties to see it. You would see it in two minutes if you were capable of thinking clearly re these matters.
Shiller CHANGED our understanding of how stock investing works. In a fundamental way. His findings were “revolutionary.” You have been seeing me proven right on issue after issue after issue for 12 years now. It’s not because I am intellectually superior to you. It is because I am emotionally capable of accepting what the last 33 years of peer-reviewed research teaches us. That’s my edge.
I hope that helps a bit.
I wish you well, my long-time abusive-posting friend.
Rob
Sounds like you’re taking some past historical pattern and saying it will “always work” going forward. There’s no way to know that. Microsoft “always” outperformed Apple…until it didn’t.
There are an infinite number of data patterns we can tease out of the data. If they could be used going forward reliably, no one would have to work for a living.
When the “historical pattern” that you are examining applies not just for a small portion of the historical record but for the entire historical record, it is not just some small thing that may or may not repeat. It is your guide to how things work.
There is only one difference between how you say stock investing works and how I say stock investing works. You say that price changes are determined by economic developments. I say that price changes are determined by investor emotion (economic developments have a secondary influence because economic developments affect investor emotion but it is always investor emotion that rules the day).
If you were right that it was economic developments that determined stock price changes, Buy-and-Hold would be the ideal strategy. We don’t disagree re that. The only point re which we disagree is re whether it is economic developments (not predictable) or investor emotions (highly predictable in the long term) that determine stock price changes.
There is a way to test who is right.
If economic developments determine stock prices, prices should fall in the pattern of a random walk. That’s why the famous book is titled “A Random Walk Down Wall Street.” Economic developments are RANDOM. No one can predict economic developments.
Shiller showed that stock price changes are NOT random in the long term.
They are NOT.
There is a strong correlation between P/E10 and the price that applies for a broad index 10 years out.
This is IMPOSSIBLE if the theory underlying the Buy-and-Hold Model is valid.
Again — What Shiller found to be so is IMPOSSIBLE if the theory underlying Buy-and-Hold is valid.
What Shiller found to be so is so. So Buy-and-Hold is not valid.
That logic chain is rock solid, Anonymous. There can be no reasonable dispute re this. Buy-and-Hold was 100 percent discredited in 1981. Way back then, it was over.
There can be disputes over some of the things I have said re how stock investing works. I always give it my best shot. I am always honest. But I am of course one of the flawed humans. It’s possible that I have gotten some things wrong.
But there is zero chance that Buy-and-Hold is a legitimate strategy.
It CANNOT work if price matters. The Buy-and-Holders don’t change their stock allocations when prices change. If price matters, risk is greater when prices are higher. It is critical that investors keep their risk profiles roughly constant. It is a logical impossibility for a Buy-and-Holder to be able to do this.
Buy-and-Hold CANNOT be right. People can believe that it is right. People can believe whatever they please. But the peer-reviewd research of the past 33 years does NOT permit the possibility that Buy-and-Hold is right, Anonymous. It does NOT. That can never change.
Given that Buy-and-Hold was the first attempt at a research-based strategy and given that it failed, those of us who believe that investors should use the research as guidance re how to invest should be trying to develop the first TRUE research-based strategy. That’s what I have done with Valuation-Informed Indexing. That’s my contribution.
There is no legitimate dispute re the failure of Buy-and-Hold as a research-based strategy, Anonymous. Wade Pfau holds a Ph.D. in Economics from Princeton. He knows how to search the literature in this field. He spent a good deal of time trying to find a single study that showed that it might be okay for an investor to ignore price when setting his stock allocation. He never found a single study supporting this point. Not one.
Wade was amazed by this finding. He understood why it changes our understanding of how stock investing works in a fundamental way.
So he wanted to double-check. He went to the Bogleheads Forum to see if anyone there had ever heard of a single study supporting the key Buy-and-Hold claim that it is not necessary to consider price when setting one’s stock allocation.
Jack Bogle was not able to point to a single study supporting Buy-and-Hold.
Bill Bernstein was not able to point to a single study supporting Buy-and-Hold.
Larry Swedroe was not able to point to a single study supporting Buy-and-Hold.
Rick Ferri was not able to point to a single study supporting Buy-and-Hold.
It is all a lie.
It didn’t start out as a lie. It started out as a mistake (Fama never checked whether timing worked in the long term because long-term timing only works with index funds and Bogle had not yet made index funds widely available at the time that Fama did his research). But a mistake that is covered up for 33 years is no longer a mistake but a lie. The claim that there is peer-reviewed research supporting the Buy-and-Hold strategy is a LIE, the biggest LIE ever told in the history of personal finance.
These are undisputed and undisputable facts, Anonymous. We are not talking opinion here. Bogle says that timing doesn’t work or isn’t required. And the entire 140-year history of the stock market available to us shows that long-term timing ALWAYS works and is ALWAYS 100 percent required for every investor hoping to have any chance whatsoever of long-term investing success.
When you say that there is research supporting Buy-and-Hold and that price discipline is not required when buying stocks, you are telling lies, Anonymous. These lies have already hurt millions of people in very serious ways. Each day that the lies remain uncorrected, more people are done harm. Buy-and-Hold has caused four economic crises. In the event that stocks continue to perform in the future anything at all as they always have in the past, this fourth economic crisis will in days to come turn into The Second Great Depression.
The Second Great Depression has your name on it, Anonymous. And the jury will be told about your lies. The jury will also be told about your use of death threats and about your demands for unjustified board bannings and about your reliance on tens of thousands of acts of defamation and about your threats to get an academic researcher fired from his job because he published honest and accurate research on how stock investing works in the real world.
I don’t envy you, Anonymous.
I am willing to help. I consider you a friend. So I am happy to do anything that it is in my power to do.
I am NOT willing to engage in acts that constitute felonies under the laws of the United States. It is not in my power to commit such acts. I love my country.
That’s where things stand.
I naturally wish you all the best things that this life has to offer a person regardless of what investing strategies you wish to pursue.
Rob
What Shiller found to be so is so. So Buy-and-Hold is not valid.
Buying and holding stocks achieved a 10% return over the last few decades. Since that’s more than enough for investing success, how is it not “valid”? What’s wrong with my 10% return exactly?
You know the answer, Anonymous. Pretending that you do not doesn’t change anything.
You invest to finance your retirement. It doesn’t matter what your results are for a day or a week or a month or a year or even a decade. What matters is what your results are over the course of an investing lifetime.
Valuation-Inforned Indexing always gives the higher return over the course of an investing lifetime on a risk-adjusted basis. There has never been one exception in 140 years. VII is 140 for 140. Buy-and-Hold is 0 for 140.
That’s why we see death threats and demands for unjustified board bannings and tens of thousands of acts of defamation and threats to get academic researchers fired from their jobs for the “crime” of producing honest and accurate research. Buy-and-Hold is a scam, a lie, a Get Rich Quick scheme, a marketing gimmick. If it were anything but that, we would have seen very different behavior from your side of the table going back to the morning of May 13, 2002.
You can go to prison for a relatively short time or you can go to prison for a relatively long time.
You know which outcome I prefer.
You also know that it’s your call, not mine.
My best and warmest wishes to you and yours.
Rob
Valuation-Inforned Indexing always gives the higher return over the course of an investing lifetime on a risk-adjusted basis.
Your point is that I could have done better than my 10% return with the benefit of hindsight and the historical data. That is certainly true.
But since my buy and hold 10% return was more than enough to achieve my goals, why “could it never possibly work”? Why is it “invalid”? In practice it certainly did work. Just look at the Shiller return data.
I built the Retire Early board at the Motley Fool site to help people learn how to achieve financial freedom early in life, Anonymous.
I made a lot of friends there. Those people’s lives have been destroyed because John Greaney, another poster there, was embarrassed to acknowledge that he got an important number wrong in a retirement study posted at his web site. Greaney and his Goon friends elected to burn the board to the ground rather than acknowledge the mistake. I think it would be fair to say that John (one of the people who became my friend as a result of the time we spent posting together at that board) was hurt very, very deeply by his embarrassment.
It was Buy-and-Hold that did that to him.
Not just Buy-and-Hold. Buy-and-Hold by itself was a good thing. Buy-and-Hold was an advance over what came before. Buy-and-Hold was the first attempt at building a research-based investing strategy. There was great promise in that idea. It was that idea that led to the development of Valuation-Informed Indexing. So I obviously love that part of the Buy-and-Hold project. But the cover-up of the errors in the Buy-and-Hold Model (errors that were not discovered until 1981, 16 years after the publication of the research that led to the development of the Buy-and-Hold concept) have now destroyed millions of middle-class lives. It was the cover-up of those errors that caused our economic crisis. It was the cover-up of those errors that destroyed or ethically compromised so many of our discussion boards and blogs. It was the cover-up of those errors that will be putting you in a prison cell following the next price crash.
Do you want me to say positive words about that?
If you want to follow a Buy-and-Hold strategy, you obviously should do so. If you want to encourage others to follow a Buy-and-Hold strategy, you obviously should do that. I obviously would have it no other way. You have known that since the morning of May 13, 2002. I have said it thousands upon thousands of times. So that is not the issue here.
The issue here is not whether investors should follow Valuation-Informed Indexing strategies or Buy-and-Hold strategies. That is obviously up to them. Those who believe in VII should make the best case they can for VII. Those who believe in BH should make the best case they can for BH. All the investors should listen to both sides of the story and decide for themselves what to do with their retirement money. All of that is as obvious as anything could ever be obvious.
The problem we have is that the Buy-and-Holders have been telling lies for 33 years now. They have taken on trillions of dollars in legal liabilities by doing so. In some cases (like yours!) they have engaged in criminal behavior and will be going to prison following the next price crash.
Your 10 percent return doesn’t change that.
I can’t make it all better for my Buy-and-Hold friends by waving a magic wand in the air and taking us all back to the morning of May 13, 2002.
I have offered to do anything in my power to help you out. That doesn’t include committing acts of financial fraud myself. For obvious reasons.
So what the heck do you want from me? I get the strong feeling that you want something from me. If you can tell me precisely what it is that you want, I can give you a clear answer as to whether you are living in a dream world or whether what you want is something that I can deliver. My strong sense is that you are living in a dream world. But the only way that we both can know for sure is if you work up the courage to say precisely what you want.
We need to bring the 12-year (it’s 33 years if you go back to when Shiller published his “revolutionary” research) cover-up to a total and complete stop by the close of business today.
Agreed?
If the cover-up had been brought to an end before Greaney published his retirement study, he never would have suffered the embarrassment of having his friends learn that he got the numbers that they were using to plan their retirements wildly wrong. If the cover-up had been brought to an end within 24 hours of the time when Greaney learned that he got the numbers wrong, our friend John would not be on his way to prison. And, if the cover-up had been brought to an end sometime later than that but well before the 12-year mark, Anonymous would not be on his way to prison.
I vote for shorter prison sentences for my Buy-and-Hold friends!
How about you?
Any investing strategy that causes an economic crisis and that puts a good number of my friends in prison cells is an investing strategy not for for human consumption.
Fair enough?
There are responsibilities that go with giving investing advice. This stuff matters. We all need to try to get it right.
That’s my sincere take re these terribly important matters, in any event.
I hope that helps a bit, old friend.
Rob
So what the heck do you want from me?
You made a very strong unambiguous statement. To quote you:
…there is precisely zero chance that a Buy-and-Hold strategy can ever work for even a single long-term investor.
I was just wondering how this could be true, given that over the past few decades millions of investors have gotten 10% returns by doing just that.
But you don’t seem to have an answer, or a way to defend your point.
Refusing to exercise price discipline always reduces your risk-adjusted return. It is always a negative.
That’s what I mean when I say that Buy-and-Hold has never worked for a single long-term investor.
People can follow it if they choose to do so. That’s their call.
But how many people do you think would follow Buy-and-Hold strategies if they knew that there was 33 years of peer-reviewed research showing that it always reduces your risk-adjusted return?
The reason why there is a Ban on Honest Posting is that Buy-and-Hold couldn’t survive six months of honest posting re what the peer-reviewed research in this field says. You know it. I know it. Jack Bogle knows it. Robert Shiller knows it. Wade Pfau knows it.
We all need to make the shift to Valuation-Informed Indexing. Everyone benefits from that.
The rub is that Bogle and lots of others will be going to prison if the truth gets out.
I love Jack Bogle. I want his prison sentence to be as short as possible. So I want the truth to get out.
Bogle wants that too on one level of consciousness. He is afraid about going to prison. He wishes that he never got himself in this mess. He would do it different if he could go in a time machine back to 1981.
We don’t have time machines. So we need to do the best we can given the circumstances that apply.
I am 100 percent certain that Jack’s prison sentence will be shorter if he comes clean today than what it will be if he comes clean following the next price crash. So it is in my friend Jack’s best interest for him to come clean today. The logic there is 100 percent rock solid.
My guess is that Jack is hoping that there won’t be a crash. That’s like a little kid hoping that he won’t fail a test just because he never spent two minutes studying. It’s wishful thinking. It’s cognitive dissonance. It’s self-destructive.
I am Jack’s friend and I am trying to help him. And everyone else.
Being willing to practice price discipline is always a positive. Failing to exercise price discipline is always a negative. That’s why I say that Buy-and-Hold never works. It always subtracts and can never add.
If we all knew that from the first day, there never would have been a Buy-and-Hold. If Shiller had published his revolutionary research in 1961 rather than 1981, we would have all become Valuation-Informed Indexers going many years back.
Things didn’t play out that way.
Things played out this other way instead.
We all need to make the best of it.
That’s what I am doing.
You wouldn’t behave the way you do if you thought Buy-and-Hold was a real thing. It is a con, a Get Rich Quick scheme, a marketing gimmick, a lie. The Buy-and-Hold Lie is in the process of putting us in the Second Great Depression. Your prison sentence and Jack’s prison sentence and the prison sentences of lots of other good and smart people whom I consider friends get longer after we go into the Second Great Depression. So I do what I can to see that we all come clean by the close of business today.
You are going to have to come clean sooner or later in any event, Anonymous. Given that that is so, does it not make sense to come clean at a time when you will get a shorter prison sentence?
It sure seems so to me.
But it is your call.
Okay?
Does that cover it?
Is there something else?
Rob
Can it ever be a plus to go to a used-car dealership without first determining the fair market value of the car you are going to look at?
I say that it is always better to arrive for negotiations armed with information.
So it is when buying stocks.
If you elect to buy stocks even when they are overpriced, it is your call. I wish you the best of luck with it.
But I always want people to be informed. I don’t like to see people get taken. So I let them know about the lies that those pushing Buy-and-Hold “strategies” put forward. I want people to know how dangerous these strategies are.
The more information that gets out about what the research says, the fewer lies the Buy-and-Holders will be able to get away with. If we get enough information out, we will be able to attract ethical people to this field again. That’s a win/win/win/win/win.
I’ll let you in on a little secret, Anonymous. A lot of the Buy-and-Holders would like to see me win this thing. A lot of the Buy-and-Holders would like to feel free to give honest investment advice.
I think that Old Saint Jack is in that camp. That’s why I think his heart is going to melt following the next price crash. I would rather have Old Saint Jack on my side for many years into the future than to have him on my side in the days preceding the next price crash.
Sue me, you know?
Rob
Refusing to exercise price discipline always reduces your risk-adjusted return. It is always a negative.
That’s what I mean when I say that Buy-and-Hold has never worked for a single long-term investor.
But those two statements have nothing do with each other. They’re like the difference between:
“The historical data shows Chevys last longer than Fords”
and
“No Ford vehicle has ever worked for a single person”
Why not just say what you mean, instead of twisting it into fantasy?
Shiller’s findings were a huge advance. We all should be benefitting from that advance. In ordinary circumstances, the Buy-and-Holders would be jumping up and down in excitement over telling people about the advance. If you were doing that, we obviously would have no problem.
I can say good things about Buy-and-Hold. I do that all the time. I was a Buy-and-Holder myself for many years. I love what the Buy-and-Hold Pioneers did for us. So my belief when I discovered the error in the Old School SWR studies was that the Buy-and-Holders were going to be on my side and were going to help me spread the word. My discovery benefitted every investor alive and I expected to work WITH the Buy-and-Holders. It was the Buy-and-Holders who went into attack mode.
Buy-and-Hold is not just an investing strategy. It is a way that a lot of people make a living. The Buy-and-Holders have put the investing stuff in second place. They have put the “protecting turf” stuff in first place. Their idea is “employ smashdown tactics to destroy anyone who points out dangers associated with Buy-and-Hold and we can continue to market Buy-and-Hold as if it were a perfect strategy.” Most Buy-and-Hold advocates of today are 20 times more concerned with MARKETING than they are with helping investors.
That’s what needs to change.
I have zero problem with the idea of people continuing to market Buy-and-Hold. There are millions of people who believe in it, including many experts. Experts who believe in Buy-and-Hold not only have a right to promote Buy-and-Hold, they have a responsibility to do so. There is zero dispute re that point.
The Buy-and-Holders don’t want negative words to be said re Buy-and-Hold. They don’t mind too much if someone says “I am going with a low stock allocation today.” That is not a direct criticism of Buy-and-Hold. So it is permitted. But if someone says “I am using a withdrawal rate of 1.6 percent because that is the number that the peer-reviewed research says applies at these valuation levels,” there is a problem because the Buy-and-Holders say that the safe withdrawal rate is always 4 percent and to say that it is 1.6 percent is to call the Buy-and-Holders liars. When you call them liars, you undermine their marketing efforts. So they bring the hammer down.
I (and all other Valuation-Informed Indexers) need to be able to make the case for Valuation-Informed Indexing on the same terms that the Buy-and-Holders make the case for Buy-and-Hold. That means that we need to be able to say what the true SWR is and we need to be able to say that stock prices are set to drop by 65 percent within the next few years and that we need to be able to say that there is 33 years of peer-reviewed research that supports us. And on and on and on. The unwritten rules that have been set up under which people hold back from saying in clear and plain and blunt language why Valuation-Informed Indexing is superior DO NOT WORK. Those rules have proven to be an unmitigated disaster on every possible level. THOSE RULES MUST GO.
Now —
You are saying that Buy-and-Hold has delivered a return of 10 percent (not real — the number includes the effects of inflation) over an extended period of time. You are making a true statement. So you obviously have every right in the world to make it. It is not just a true statement, it is a statement that has persuasive power for millions of people. So it certainly makes sense that you advance that statement. I of course have no problem with that.
You see a conflict between your statement that Buy-and-Hold has delivered great results for an extended period of time and my statement that Buy-and-Hold has never worked (that is, delivered risk-adjusted results superior to Valuation-Informed Indexing in the long term). The reality is that there is not a conflict. The research and the data support my statement. I am not able to say that the research and the data support your implicit claim that, because Buy-and-Hold has delivered good results over an extended period of time, it is a good strategy because I am a firmly convinced Valuation-Informed Indexer. But I am able to say that there are many good and smart people who think otherwise. I certainly have no problem with those people saying what they believe. Just because I do not agree with them does not mean that they do not get to have their say.
Let’s say that I believe in Chevys and you believe in Fords. We have to follow some rules in which we interact with each other in a spirit of mutual respect and affection. That’s it.
I have on many occasions said many positive things about Buy-and-Hold. That’s how I contribute to the effort to create an environment of mutual respect and affection. Have you done that? Have you written long comments that go on and on telling the world about all that you have learned from Valuation-Informed Indexers? If you have not, why not? Have you told the world about all the great insights you have picked up from reading my stuff? I have on many occasions told the world about the great insights I have picked up from reading Bogle’s stuff. Why the disparity?
The researcher who is responsible for Buy-and-Hold has been awarded a Nobel Prize in Economics. So has the researcher who is responsible for Valuation-Informed Indexing. That’s the difficult reality under which both “sides” operate. Good and smart people believe in both strategies. But the two strategies are opposites. And the issue being discussed is a highly sensitive one — what should people be doing with their retirement money? People find it difficult to say: “One research-backed school of thought says that you should be going with 75 percent stocks today and another research-backed school of thought says that you should be going with 25 percent stocks today.” The suggestion is that the person putting himself forward is no expert. From a marketing standpoint, that’s not a good suggestion to be putting forward. Still, it is the reality. We are all today at a primitive level of understanding. We should be letting people know that.
Yet another point of confusion is that most investors are following Strategy C. Few people are following Buy-and-Hold dogmatically and few people are following Valuation-Informed Indexing dogmatically. Most have found some middle ground that makes them happy. That means that most are not following ANY research-based strategy. It may be that, given the fact that we are as a society only at a primitive level of understanding, it makes sense for people to reject BOTH research-based approaches. That’s up to them. But those who write about these matters should be saying that. The fact that we are 50 years down the road from the day when the first research-based strategy was developed and most investors still do not feel comfortable following ANY research-based strategy is an important fact. It is one that all of us should be pointing to from time to time.
I like Chevys. You like Fords. You say that I should not say “No Ford vehicle has ever worked for a single person.” What if I really believe that it is always a mistake to buy a Ford? What if there is something about the Warranty delivered on Fords that I just find unacceptable? In those circumstances, I MUST say that Chevys are always a better buy than Fords.
The valid part of your point is that I should from time to time add that there are lots of people who believe otherwise, that there are lots of people who actually believe that the Warranty offered by Ford is SUPERIOR to the Warranty offered by Chevy. I should make my readers aware that there is another side of the story that they need to be aware of.
I have zero problem with that way of approaching the matter. But I must say what I believe if I am to be an honest person. John Greaney said that a 4 percent withdrawal rate is always “100 percent safe.” I say today that that is a lie. I didn’t say on the morning of May 13, 2002, that it was a lie. I said on the morning of May 13, 2002, that I THOUGHT that it MIGHT be a MISTAKE. It is because of the 12 years of abusive behavior that Greaney has employed to keep that mistake covered up that I now say that his claim is a lie and an act of financial fraud and that it will be leading to a prison term for him and for those who have posted in “defense” of him.
The problem here is not a difference of belief re how stock investing works. The problem is the abusive tactics that ONLY the Buy-and-Holders have employed to cover up their mistakes and lies. The mistakes and the lies must be publicly acknowledged for us to become able to put the nasty side of this matter behind us. We must all agree to post HONESTLY from this point forward.
I honestly believe that Buy-and-Hold has never delivered risk-adjusted results superior to those delivered by Valuation-Informed Indexing over the course of an investor’s investing lifetime. So I am going to continue to say that. But I am ALSO going to continue to point out that I am a flawed human who might be getting something important wrong and that my Buy-and-Hold friends are good and smart people who have made many important contributions and who make points in support of Buy-and-Hold that all should be hearing and listening to and considering.
And I am going to continue to urge everyone ON BOTH SIDES to get involved pointing out that a good number of Buy-and-Holders have engaged in criminal acts over the past 12 years and that we all should be doing everything in our power to get those criminal acts exposed so that we can shorten the prison sentences of those of our Buy-and-Hold friends who have in some way or another lent support to the 12-year cover-up.
That’s where I come down re this one, Anonymous. I believe what I believe. And it is important that I post honestly.
But I also believe that my Buy-and-Hold friends believe what they believe (when they are not posting in “defense” of the tactics employed by the Linduaerheads and the Greaney Goons — that stuff is way, way, way over the line and no one should be foolish enough to get involved in the commission of criminal acts because some internet Goon got an important number wrong in a retirement study he posted at his web site) and that we all should make our readers aware of the full realities that apply re this matter.
I hope that helps a bit.
I naturally wish you all good things.
Rob
Buy-and-Hold has never worked (that is, delivered results superior to Valuation-Informed Indexing in the long term).
Your fundamental problem is that no else defines “worked” that way. And no one else ever will. If you haven’t already figured this out, people are not receptive to someone who arrogantly insists on redefining simple words. Such as “worked”, “friend”, “criminal” and “financial fraud”. You believe you strengthen your message by doing this, even though everyone (that is, everyone who bothers to respond to you at all) tells you it has the exact opposite effect.
The emotion turns on you following the next price crash, X.
Then the word games that people will be concerned about will be the word games in which “researchers” feel okay about calling a safe withdrawal rate that the last 33 years of peer-reviewed research in this field reveals to be insanely dangerous as “100 percent safe.”
I oppose that sort of thing. I am working to gain a reputation as the most severe critic of Buy-and-Hold alive on the internet today. There are now thousands of posts in the files supporting my efforts in that regard. This one will be one more. And so it goes.
I am not the one with a “fundamental problem.” I am not the one who will be headed off to a prison cell following the next price crash. Now that’s a fundamental problem!
Don’t let the bad guys get you down, old friend.
Rob
Um…
“There is a public interest in having people put away for a long time,” Chris Holder, of London law firm Bristows, told AFP earlier this month.
It said messages sent via social media could be a criminal offence if they contain “credible threats of violence” or target an individual in a way that “may constitute harassment or stalking”.
http://news.yahoo.com/britain-threatens-internet-trolls-two-years-jail-110001348.html
Something to think about —
http://www.playboy.com/articles/phil-spector-prison-pictures-released?utm_source=Outbrain&utm_medium=Social&utm_campaign=Outbrain_Entertainment_desktop&doc-title=Apparently-Prison-Has-Turned-Phil-Specto
Yowsa!
Rob
This one says some important things too:
http://www.theatlantic.com/health/archive/2013/01/theres-more-to-life-than-being-happy/266805/?single_page=true
Who knew that Victor Frankl was so well-informed on the safe-withdrawal-rate topic?
Rob
Let’s say that I believe in Chevys and you believe in Fords. We have to follow some rules in which we interact with each other in a spirit of mutual respect and affection. That’s it.
Ok, well it wouldn’t be very mutually respectful of you to make a statement like “No Ford has ever worked for any driver in the history of the world.”, would it?
It is the most respectful thing that I could possibly say given that I believe that to be the case, Anonymous.
Say that you made a mistake and that you are wrong. That’s what I believe to be the case.
My options are to ignore the mistake or to point it out.
If I ignore it, what am I saying about you? I am saying that you DO NOT CARE how many lives you destroy. THAT”S disrespectful.
I am showing you the respect of assuming that you want to fix any mistakes you have made.
Yes, I am being respectful to you, far more respectful than you are being to yourself.
You are covering up your mistakes rather than acknowledging them. You are acting as if you are a con man, as if you are incapable of ethical behavior. You are acting as if you are a truly low person.
I am holding you to a higher standard. I am demanding better of you.
No apologies.
THAT’S friendship, Anonymous. The fawning stuff is not friendship. That’s trying to make a quick, smelly buck. You don’t get that from me. I give you something real. I say what you have done right and I say what you have done wrong. That way, when I say what you have done right, it means something. Because I am not a liar.
It can NEVER be a good thing to fail to exercise price discipline. That ALWAYS hurts you. You should stop doing that.
Valuation-Informed Indexing is Buy-and-Hold with price discipline added to the mix. VII is a HUGE advance. VII is what Bogle was aiming at when he developed Buy-and-Hold. I have built a model for understanding how stock investing that permits my good friend Jack Bogle to realize his boyhood dream. None of these yes men have done that for him.
Bogle messed up. Lindauer messed up. Greaney messed up. You messed up.
Your true friends want you to put the mess-up behind you as quickly as possible and move on to better things. I am your true friend.
No apologies whatsoever.
Quit messing the f up! Fly friggin’ right!
Do that beginning NOW.
Rob
Was Ralph Nader being a big meanie when he pointed out that Corvairs were killing people?
Should he have said to the Corvair people “hey, all the evidence shows that you are killing millions, but keep up the good work!”
Should the Corvair people have waited 12 years to fix the problem that was causing their car to kill people?
When you get a number wrong in a retirement study, you want to fix it. FAST! Immediately!
No excuses.
No sad stories.
No bans on honest posting.
Get a correction published. Do it now while you are thinking about it. Do NOT delay!
Stop giving grief to your friends and learn how to pronounce the words “Thank you!”
Then learn how to pronounce the words “I Was Wrong!”
It’s never too late to say “Thank you!” and “I Was Wrong!”
It’s never too late to get off a bad track and to try to find your way onto a better one.
Retirement studies that get the numbers wildly wrong suck, Anonymous.
Greaney didn’t set up his web site with the idea of causing millions of failed retirements. But that is what he has done. He needs more true friends, people who tell him in no uncertain terms to fix the freakin’ study before it causes more harm.
My take.
Rob
When you find yourself committing acts that are felonies under the laws of the United Staes, that’s a clue.
It’s not possible to imagine a clearer clue.
It’s not a close call.
Rob
Was Ralph Nader being a big meanie when he pointed out that Corvairs were killing people?
No, because that was reality.
A statement like “There is precisely zero chance that a Buy-and-Hold strategy can ever work for even a single long-term investor.” Is pure fantasy.
Notice the sales of your masterpiece, “Passion Saving”? Notice your family’s struggles with money? Those are the fruits of 10+ years of offensive behavior toward others. Hope it was worth it.
It was 100 percent worth it, Anonymous.
I wouldn’t be able to live with myself if I had played it any other way.
My best and warmest wishes to you and yours.
Rob
Rob,
You can just sum up your site and message by saying the following:
“WWwwwwwwwwaaaaaaaahhhhhhhhhhhhh…….wwwwwwwwwaaaaahhhhhhhhhhh……wwwwwwwwwwwaaaaaaaahhhhhhhhh”
You continue to act like a little child. Grow up and start acting like a man for a change.
I stood up to Jack Bogle and the other Wall Street Con Men, Anonymous. Bogle has a lot of power and a lot of money and a lot of connections. And I have never flinched.
And I have stood up to the two most abusive Goons in the history of the internet — Mel Linduaer and John Greaney. And ALL their Goon friends.
What have you done that is comparable?
Rob