Set forth below is the text of a comment that I recently posted to another blog entry at this site:
By the way even if the market did crash in the next few years to the magnitude you suggest none of the fantasy aftermath you have concocted would take place. It would just be used as a political tool and people would blame Obama and the Fed’s QE no one other than you would even suggest Buy and Hold. A million semi-credible reasons were presented as culprits for the last crash and not a single one was Buy and Hold. This means no goons, no prison sentences, no $500m checks, only continued irrelevance for you. What do you expect to be different this time? You of all people should know the folly in thinking “this time will be different” with regards to bubbles.
I don’t say that there is zero chance that you are right about this, Anonymous. It COULD happen the way you are saying.
The difference between us is that I have looked at the numbers. Every time we have gone to a P/E10 of 25, we have experienced an economic crisis (we are four for four). The one time we went to 33, we experienced a Great Depression. This time we went to 44. If we don’t open the internet to honest posting re the last 33 years of peer-reviewed research, we are looking at a Second Great Depression of twice the length and twice the depth of the first one.
I agree with you that the first inclination of the Buy-and-Holders will be to tell more lies. I don’t think that is going to be their final response to the next crash, however.
The core question here is — Is Jack Bogle the Frank Underwood of Personal Finance? Is he evil? Or is he a smart and good fellow who is a bit confused as to what the research really says?
I believe strongly that it is the latter.
I believe that Jack is as wrong as wrong can be. But I don’t think he sees it. He knows about Shiller. He knows that there is research showing that valuations matter. He knows about Linduaer and his threats of physical violence. He knows about Wade Pfau and about the wonderful research he did with me and about the threats that you Goons made to silence him. He knows all that and he is ashamed of his role in letting it all play out. All that suggests that he is not quite the saint that some at times have made him out to be.
I don’t believe that he is pure evil, however. If he were pure evil, why would he include that language in his book saying that Reversion to the Mean is an “Iron Law” (Bogle’s phrase) of stock investing? It was that statement that helped me understand that the Old School safe-withdrawal-rate studies could not possibly have gotten the numbers right (the Old School studies do not contain an adjustment for the level of valuation that applies on the day the retirement begins). If Bogle were pure evil, he would not have provided me that clue. If he were pure evil, he wouldn’t want anyone to learn the realities of stock investing for fear that he would be found out and he would not have written the many, many sound and helpful and wonderful and research-based passages in his writings. It doesn’t add up.
Bogle is not pure evil. He has done wrong things. He is proud. He cannot stand to see Buy-and-Hold fall. He is foolish in this respect. Valuation-Informed Indexing is a revised version of Buy-and-Hold that works in the real world. Valuation-Informed Indexing will improve the lives of middle-class investors in hundreds of different ways and Bogle will get a big part of the credit for VII because it is built on a foundation that was supplied by Bogle and the years of hard and good work he put into this project of figuring out how stock investing really works. So Bogle has his flaws. But the record does not support a finding that he is pure evil.
Our friend Jack Bogle is fucked up, you know? He makes messes. He needs his friends to tell him things he does not want to hear from time to time. He needs to have people around him who tell him what he needs to hear rather than what he wants to hear. He is a flawed human. He is not a saint and he is not The Frank Underwood of Personal Finance. He is a scared little boy who grew up to be a hard-working and smart man who is responsible for a good number of hugely important breakthroughs and one massive brain fart that caused the biggest economic crisis in U.S. history.
How is Jack going to react when he sees how much human misery he has caused with his phony pride?
His heart is going to melt.
He is going to work up the courage to walk to the front of that stage and say The Three Magic Words.
That’s what I believe, Anonymous.
You’re a cynic. You believe what you believe. You hold a far, far darker view of what makes our mutual friend Jack Bogle tick than I possess. I think the guy is going to come through for us. I love the guy and I think I know the guy and I think he is going to make the right play when his back is against the wall and he sees that he really has no other choice.
We’ll see, you know?
If the cynical view prevails, then the cynical view prevails. It’s not like I will have lost something by devoting 12 years of my life to fighting with all my might to take things in a positive direction. If the cynical view prevails, we all go down together. If the cynical view prevails, we are all in the soup — you, me, Bogle, Shiller, everyone.
At least I will have the small consolation of knowing that I gave this my absolute best shot.
I am not able to imagine any circumstances in which I would look back and wish that I had advanced just one death threat or one demand for an unjustified board banning or one act of defamation or one threat to get one academic researcher fired from one job. If we all go down together, I will feel just as strongly that we all should have worked together to spread the word about the 33 years of peer-reviewed academic research that permits us all to reduce the risk of stock investing by 70 percent while becoming free to retire five to ten years sooner than any of us dreamed possible back in the Buy-and-Hold/Get Rich Quick Era. I will never regret one word of the millions that I put forward in my effort to make my good friend Jack Bogle’s dream come true by presenting to the world the first truly Smart, Simple and Safe investing strategy for the millions of middle-class investors who have needed one for a long, long, long time.
But I don’t think that any of that is going to happen. I love my country. And with good reason. And I think that my country is going to come through for me when it sees that there really is no other option if we all want to keep our economic and political systems in place for the benefit of the next generation.
I naturally wish you the best of luck in all your future life endeavors.