Set forth below is the text of a comment that I recently added to another blog entry at this site:
Rob,
You need to correct your mistakes. Start with your “I was wrong” speech and then we can go from there. After you give the speech, I will give you your list of mistakes to correct.
Again with the sarcasm.
I say that Bogle needs to give an “I Was Wrong” speech. So I presume that what you are suggesting here is that I have not been clear re what errors Bogle has made.
His error (one that LOTS of good and smart people made) was in believing that the research showing that short-term timing does not work showed that timing IN GENERAL does not work.
There has NEVER been even the slightest indication in any study that long-term timing might ever not work or might ever not be 100 percent required. That was a MISTAKE.
It was an understandable mistake at the time. No one had ever tested long-term timing at the time when Buy-and-Hold was being developed. But Shiller published the first research showing that long-term timing (price discipline) is ALWAYS 100 percent required in 1981. That’s 33 years ago. You cannot say that the mistake remains understandable today. For at least 12 years now (and almost surely longer than that, although I cannot personally testify to things that happened prior to May 13, 2002), the 1981 finding that long-term timing (price discipline) is always 100 percent required has been COVERED UP.
Do you now understand what the mistake is that I am asking my good friend Jack Bogle to own up to, Anonymous?
When Jack comes out and says publicly in clear and firm and understandable words that there is precisely ZERO support for Buy-and-Hold strategies in the academic research, we will never again see a retirement study published that does not contain an adjustment for the valuations level that applies on the day the retirement begins. We will never again hear anyone say that a 15 percentage point change in one’s stock allocation might be sufficient at a time when valuations have reached insanely dangerous levels. We will never again see a bull market. We will never again see an economic crisis. We will never again see discussions of investing marred with 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.
Such garbage will no longer serve any purpose once everyone knows about the mistake and about how much damage it has done to millions of middle-class people and even to the confidence that millions of people hold re our free-market economic system and re our political system. This mistake is the biggest mistake ever made in the history of personal finance. It caused our economic crisis. There are now millions of people unemployed because of our unwillingness as a society to acknowledge this mistake and fix it.
Once we fix the mistake, stocks will be transformed into a virtually risk-free asset class. The Bennett/Pfau research shows that it is the belief that there is some mystical, magical world in which Buy-and-Hold strategies might work for one or two long-term investors that is responsible for 70 percent of the risk of stock investing. There is no such magical, mystical world. Stocks are just like anything else you can buy in this Consumer Wonderland. You MUST consider price when making purchases. If too many people fail to do so, the entire market collapses because it is price discipline that permits markets to work their magic.
Bogle is of course just one guy. But he is the lead proponent of Buy-and-Hold. When he gives his “I Was Wrong” speech, it will be written up on the cover of the Wall Street Journal and the New York Times. That will launch a national debate. Every blog on the internet will be writing about the mistake and how it nearly brought down our economic system and about how all of our financial futures will be looking so much better once we all gain the power to talk openly about the first true research-based strategy (Valuation-Informed Indexing, or Buy-and-Hold 2.0).
It was all a mistake, Anonymous. There was never a grain of truth to any of it. Getting the mistake fixed promptly is the most important economic/political item on our nation’s agenda today.
All of the ugliness comes to an end on the day that Bogle gives that speech. Because the ugliness serves no purpose once the mistake has been acknowledged and fixed. We ALL should be working together to persuade Old Saint Jack to give that speech by the close of business today.
That’s my sincere take re these terribly important matters, in any event.
Thanks for asking an important question (albeit in a backhanded sort of way).
And please know that I extend my best and warmest wishes to you and yours.
Rob
Anonymous says
I am guessing that you figure you are winning the ongoing debate
Rob says
Yes, that would be fair to say, Anonymous.
The full reality is that it was all over on Day Six, when John Walter Russell posted his sensitivity analysis for the Greaney retirement study. Any retirement study with that sort of sensitivity number needs to be corrected within 24 hours. I agreed then and now with the community member who said that anyone who would give two seconds of consideration to the idea of using such a study to plan a retirement taking place in the real world would have to be out of his friggin’ mind.
We’ve gone a lot deeper in the following 12 years. Amazing stuff piled on top of amazing stuff piled on top of amazing stuff. But the issue that kicked off The Great Safe Withdrawal Rate Debate was settled beyond any reasonable doubt on Day Six.
That’s the problem, really. I would love to find a way to help you guys save face. But there is nothing that can be said in “defense” of Buy-and-Hold that is honest. It was just a mistake that should have been corrected 33 years ago, when the peer-reviewed research revealed it to be a mistake.
The story here is how we have gone 33 years without correcting the mistake. There are lots of angles to that one. I have been exploring those angles on a daily basis for 12 years now. We need as a society to thrash all that out to come to peace with what has happened. We need healing and it is by telling the truth in a loving way that we will achieve healing. Everything that I do is aimed at bringing on the day that we all achieve healing as soon as possible.
The core issue was resolved a long, long. long, long time ago and it is too sad that there are otherwise responsible people who pretend otherwise to this day. When you get an important number wrong in a study that people are using to plan their retirements, you fix it. End of sentence, end of section, end of chapter, end of story.
No exceptions.
My sincere take.
Rob
Anonymous says
I like how you have taken one relatively niche topic that you have a differing opinion on and in your mind turned it into the greatest issue facing the US. I bet when you first embarked on this mission you didn’t think this but after decades of failure and festering away in your basement you have escalated and escalated in your own mind. Death threats, prison sentences, $500M checks, greatest issue facing this nation, I LOVE MY COUNTRY!
BTW, no one gives a crap that you claim to love your country. This empty display of patriotism doesn’t bolster your position in anyway it it just makes you look like every other idiot with terrible ideas that just shouts AMURICA to try and justify idiocy.
Majority of Americans don’t even know what buy and hold is let alone practice it. Majority of the market is not retail investors practicing buy and hold.
Rob says
I bet when you first embarked on this mission you didn’t think this
I did not.
When I put up the famous post of May 13, 2002, I was 90 percent sure that Greaney got the SWR number wrong. I was not 100 percent sure. And I certainly had no thought that Buy-and-Hold had ever caused an economic crisis or that the risk of stock investing could ever be reduced by 70 percent or anything along those lines. All of that has come as a shock. It was a very positive and exciting shock because all of this is very good stuff. But I certainly did not know or even suspect any of that stuff back in the early days.
I try to remind myself of that often. Because it helps me understand what is going on with people like Bogle. I love Bogle. I am not kidding around when I call him “friend.” He has taught me hugely important things. There would be no VII without what Bogle taught me. Yet I say that he is guilty of financial fraud and that he may be going to prison as a result. That’s an exceedingly odd combination of beliefs.
This really is revolutionary stuff. What Shiller says in the subtitle of his book really is so. His finding that valuations affect long-term returns changes everything we once thought we knew about stock investing.
My job is to take things to a positive place, to heal all the wounds and to take things in a constructive direction. There are two steps to that process. First, I need to open the entire internet to honest posting. Then I need to put hundreds of questions before people and have thousands of people, both experts and non-experts, participating in a wonderful learning experience.
To get the internet opened to honest posting, I need to take a firm line with you Goons. We will never get there if you are not sent to prison. So I can’t let sentimentality or softness stand in my way re that one.
But I don’t want this to tear our country apart. So, when people like Bogle do things that are supportive of you Goons, I need to do everything I can to explain to people why a world-renowned expert like Bogle could be suffering cognitive dissonance on a matter like this.
I need to be as honest as it is possible to be without crossing the line and becoming uncharitable while also being as charitable as it is possible to be without crossing the line and becoming dishonest.
Anyway, you are are right that I did not know most of what I say today on the morning of May 13, 2002. I was a Buy-and-Holder myself at that time. It was on the evening of August 27, 2002, that I abandoned Buy-and-Hold. That was the night when Greaney put forward his first death threat and 200 of my fellow community members endorsed his post. An investment strategy that could cause 200 people to endorse a death threat is an investment strategy not fit for human consumption. A true research-based strategy would make investors LESS emotional, not more so.
Buy-and-Hold has made investors more emotional than they have ever been at any earlier time in U.S. history. The P/E10 levels that we have experienced during the Buy-and-Hold years show that to be the case. I want to take things in the opposite direction (while also making full use of all of the many genuine and powerful insights that the Buy-and-Hold Pioneers discovered for us).
Shiller provided the missing piece that makes the entire thing work. All of the work that Bogle and Fama and the other Buy-and-Hold Pioneers did produces wonderful fruit when we add Shiller’s revolutionary insight to the mix. Without Shiller’s insight, the other stuff kills us. Price discipline is the brake on the car. The most powerful car in the world is a death trap with the brakes ripped out. Fama without Shiller is a car with the brakes ripped out. Fama WITH Shiller is the first true research-based investing strategy. Valuation-Informed Indexing is the investing strategy that Bogle dreamed of developing when he was a young man.
I want to see Bogle’s dream come true. I want to see this entire industry cleaned up. I want to see the economic crisis brought to an end. I want to see all the educational firepower that exists in this field put to positive use once again. I want to see Bogle walk to the front of a big room and say the words “I” and “Was” and “Wrong” and start feeling good about himself once again.
Rob
Rob says
This empty display of patriotism
I love my country and that’s why I fight to protect her from internet Goons like you, Anonymous.
There’s nothing empty about it. I fight hard. I don’t just talk love of country, I walk the walk.
I’ve been doing it for 12 years now. Give me a friggin’ break.
And you are going to discover that there are MILLIONS of people who love this country.
If you don’t believe it now, you’ll just have to wait to see what happens following the next price crash.
We’ve been perceived as down for the count before. We always stood up in time before. That’s what I believe is going to happen once again.
But we will see, you know? It’s all going to play out in the real world in the not-too-distant future.
I love my country. And I do not believe that I am the only one.
My take is that you had better keep an eye on Old Saint Jack. I get the sense that there might be some patriotic spirit in that one that you are overlooking.
But again — we will see for sure soon enough.
Rob
Rob says
Majority of Americans don’t even know what buy and hold is let alone practice it.
The majority is not practicing price discipline. That’s why we are in an economic crisis.
The majority is not practicing price discipline because the Buy-and-Holders say it is not necessary.
The Buy-and-Holders go farther than that. The Buy-and-Holders say that there is some mystical, magical research showing that it is not necessary to practice price discipline when buying stocks.
It is the biggest lie ever told in the history of personal finance. It is a lie that has caused vast human misery every time the Wall Street Con Men have brought it out again.
But the Buy-and-Holders continue to push this lie relentlessly and repeatedly and ruthlessly, destroying more and more and more humans lives every time they do so.
Not this boy.
Find someone else.
No can do.
Rob