Set forth below is the text of a comment that I recently posted to another blog entry at this site:
If I witnessed a crime as heinous as you believe this one to be, I would call the police, the FBI, newspapers, TV stations, everyone. You just sit, waiting for other people to do something.
I’ve filed several police reports. I’ve spoken with the FBI. I’ve contacted many newspapers. I haven’t contacted any TV stations, but TV stations often look to the major newspapers to determine what is news so I think it makes sense to start with newspapers. I’ve done everything you recommend here, X.
And I will continue doing it. It is a rare day that goes by in which I do not contact someone re this matter.
You need to look at the math. The relentless promotion of Buy-and-Hold strategies caused the market to be overpriced by $12 trillion. Do you have any idea how much money that is?
That $12 trillion was essentially marketing money for Buy-and-Hold. The money wasn’t real. It was temporary, pretend money. But the Buy-and-Holders told people it was real. And they took credit for it! They told people that they could use this money to finance their retirements! That is why we are in such a mess today.
Now –
Which newspaper do you think wants to be the one to tell people that the money they were planning to use to finance their retirements is Pretend Money?
Which investment advisor do you think wants to do that?
Which policymaker wants to do that?
And, after we experience an economic crisis because of the relentless promotion of this Get Rich Quick garbage, who do you think wants to spill the beans by telling people that it was caused by the Buy-and-Holders?
The newspaper that ran articles saying Buy-and-Hold might work?
The investment advisor who advised his clients to consider Buy-and-Hold “strategies”?
The policymaker who did nothing while he saw the Buy-and-Holders promote their Get Rich Quick con 24/7 everywhere investors turned to for advice?
Everybody wanted to be on the gravy train for so long as it was running.
And now that it is not running so hard anymore few want to make the world angry at them for telling them the truth.
Get Rich Quick sells, X. It never, never, never works in the long run. But, man, does it sell! That’s why Buy-and-Hold is so freakin’ popular. The Buy-and-Holders cannot provide a URL to a single study that supports it. But millions don’t care. They love them some Get Rich Quick and they are happy to give their business to anyone who pushes Get Rich Quick extra hard. And I think it would be fair to say that no one pushes Get Rich Quick harder than the Buy-and-Holders.
Now –
There’s a snag in all this Get Rich Quick nonsense.
The snag is that Buy-and-Hold always causes financial devastation for everyone taken in by its claims. The collective losses are always large enough to bring on an economic crisis. So we all end up in the soup in the end. Some funny joke, huh?
That’s when prison sentences are announced for people like you, X.
We KNOW that Get Rich Quick is bad for us. We also know that it is insanely profitable in the short term. So we adopted laws to stop people from pushing it too hard. We made financial fraud a felony. We did that for a good reason. We did it because otherwise people like you would destroy our economic system. We wanted to create a DISINCENTIVE for the use of all the insanely abusive practices that you have engaged in over the past 12 years to stop people from learning what the peer-reviewed research really says.
You ignored those laws, X. Your bad.
The good news here is that we did not have 33 years of peer-reviewed research showing us how dangerous Buy-and-Hold is after the earlier three economic crises. We now have that. So we never have to go through this again.
There won’t be any reason for people to be reluctant to hear the truth following the next crash. Most of their money will already be gone! The abusive tactics just won’t work anymore.
Emotions will be the opposite of what they are today. Today people are desperate not to hear that they were conned. Following the next crash, they will be angry as can be. They will be looking to hang those who have advocated Buy-and-Hold strategies from a tree. The internet will supply them with the names of the people they are looking for.
Do you see?
I have spoken to the police and to 30,000 academic researchers and to all the big names in this field. I will continue to do so.
What will soon be changing is the REACTION that I will be obtaining when I tell people about this massive act of financial fraud.
I hope you understand. This is a society-wide problem and it is going to take an entire society to solve it.
Get Rich Quick is not the answer. Get Rich Quick is the problem.
We are on our way to solving that problem. The research that I co-authored with Wade Pfau shows that 70 percent of the risk of stock investing comes from the temptation to believe the Wall Street Con Men and follow Buy-and-Hold “strategies.” All that is coming to an end. No one likes a Ponzi scheme after it busts.
I naturally wish you all of the best that this life has to offer a person regardless of what investing strategies you elect to pursue.
Rob
Anonymous says
First of all, there is no “WE”, it is just you and your opinion. Secondly, if law enforcement saw a crime, then charges would be filed.
End of story. End of fantasy.
Rob says
The 34 years of peer-reviewed research showing that there is precisely zero chance that a Buy-and-Hold strategy could ever work for even a single long-term investor is not opinion, Anonymous. It is peer-reviewed research. There is a difference.
You Buy-and-Holders claim that the 140 years of return data on which that 34 years of peer-reviewed research is based in “a coincidence.” But you didn’t say that the entire historical record was “a coincidence” in the days before the peer-reviewed research showed that there is precisely zero chance that a Buy-and-Hold strategy could ever work for even a single long-term investor. In the days before the peer-reviewed research showed that, the Buy-and-Holders ADVOCATED using the 140 years of return data as a guide. I wonder why there was such a sudden change in 1981.
It is not uncommon in cases of financial fraud for prosecutors to hold back on bringing charges until the investors have suffered losses. There was an accountant who wrote to the SEC about the Madoff Fund fraud years before charges were brought. The SEC did not bring charges until the fund collapsed. That is what will happen in this case. After millions of middle-class investors have lost most of their retirement money, there will be millions asked that those who put up posts in “defense” of Mel Linduaer and John Greaney and Jack Bogle be brought to justice. We will all pull together at that time and begin rebuilding our broken economy. You will be in prison and will not be able to hold us back any longer.
I naturally wish you all the best of what this life has to offer a person regardless of what investing strategies you elect to follow.
Rob
Anonymous says
As for Madoff, he wasn’t buying stocks. It has nothing to do with anyone’s investment strategy.
Rob says
Madoff didn’t buy stocks because he was working a con.
The authors of the Old School safe-withdrawal-rate studies didn’t include an adjustment for the valuations level that applies on the day the retirement began because they were working a con.
The main distinction between the two cons is that the Madoff con only ruined thousands of lives while the Buy-and-Hold Con ruined MILLIONS of lives.
That’s not a good thing, Anonymous. The more lives ruined, the worse the con.
No?
Rob
Anonymous says
Which newspaper do you think wants to be the one to tell people that the money they were planning to use to finance their retirements is Pretend Money?
If it’s true, all of them. Bad news sells. Just open your local newspaper.
Rob says
There’s some truth in that, Anonymous.
What you are describing is bad journalism. The job of a journalist is to inform people, to report things accurately. But an easy way to make a buck in the journalism field is to sensationalize. It’s not just bad news that sells. Sensational bad news sells. And sensational good news sells. What we should all be trying to encourage is good journalism, accurate journalism, non-sensational journalism.
Your point will come into play following the next price crash. Then lots of journalists will be taking a closer look at all of the inconsistencies in the arguments of the Buy-and-Holders. And they will be saying things about the Buy-and-Holders a lot worse than the things that I say about them. And that will hurt us all. Because the things that they will be saying will be sensationalized and not true. And, if people believe those things, that will make it harder for us all to pull together and overcome the economic crisis and get things back on the right track.
If good news didn’t sell, we could never see a bull market. When prices got too high, all the newspapers would be full of accurate, research-based investment advice pointing out that stocks offered a poor long-term value proposition and that people should be lowering their stock allocations. We didn’t see much of that in the late 1990s, did we? That’s why that bull market got so out of hand. Bad sensationalized news does sell. You are right about that. Good sensationalized news sells too. That’s why we are in an economic crisis today.
The answer is for responsible people to call out reporters when they offer sensationalized accounts, whether good and bad. And to call out sensationalized investment advice too. We should be trying to tell this story HONESTLY and ACCURATELY. That’s the job. It’s not just about turning a quick buck. It’s fine to turn a buck. But you have to aim to do so while offering HONEST and ACCURATE reports.
The Buy-and-Holders pointed the way to doing this right back in sunnier times. It was the Buy-and-Holders who came up with the idea of rooting investment advice in the peer-reviewed academic research. That’s the answer. That’s the future.
If you say that you root your research in the academic research, you MUST be open to considering ALL the research. You can’t say “I will root my advice in the academic research unless research comes out showing that I once made a mistake, then I will spend the rest of my lifetime attacking anyone who explores that research because I don’t want anyone to learn that I am capable of making mistakes.” That’s where you get into fraud territory, Anonymous. That’s bad stuff.
There are good journalists and there are bad journalists. There are good investment advisors and there are bad investment advisors. We all experience temptations to make ourselves look better than we really are. That’s a trap. It’s a trap that the Buy-and-Holders fell into in 1981 when they elected to cover up what Shiller’s “revolutionary” (his word) research findings showed rather than to walk to the front of a room and say the words “I” and ‘Was” and “Wrong” and thereby take us to a far better place than we were capable of getting to before that revolutionary research was published.
I didn’t tell Jack Bogle to lead that cover-up, Anonymous. I wasn’t even around at the time. If you feel a need to be angry at somebody, be angry at my good friend Jack. He is the lead figure who led us down this dark path. I had absolutely nothing to do with it. I have been the lead figure trying to get us on a better path for 13 years now.
I don’t want to see bad things happen to you when the emotion turns. I want to help. But I cannot do anything to help you without your cooperation. I can’t just make things up.
I hope you understand.
I wish you all good things in any event.
Rob
Anonymous says
If you say that you root your research in the academic research, you MUST be open to considering ALL the research.
All the research in the world can’t tell you what’s going to happen in the future. All it can do is look at historical patterns. Projecting these into the future might work, or the market might just ignore you. For example history said in 2010 that the market was overvalued. But it has doubled since then.
Rob says
I think you are wrong about what the research tells us, Anonymous.
I agree 100 percent with this sentence: “Projecting these into the future might work or the market might just ignore you.” That’s a helpful caveat. If you think it would be helpful to add those words to the bottom of all of my posts, I have no problem with the idea. I would experience no pangs of conscience from having people read those words and seeing my name associated with them.
Where we go on different paths is with this sentence: “All the research in the world can’t tell you what’s going to happen in the future.” If you stated it a bit less strongly, I would sign on to that one too. I can sign on to the following statement: “All the research in the world can’t tell you what’s going to happen in the future with precision.” We do NOT know with precision what is going to happen in the future. But I sincerely believe that we know a whole big bunch more than what you think we know.
The research permits us to test two very different ideas about how stock prices are determined. One idea (the Buy-and-Hold idea) is that it is unexpected economic developments that cause price changes. There are millions of good and smart people who believe that. It has been the dominant belief for a long time. But I do NOT believe that. And the reason why I do not believe it is that I see things in the research that persuade me that it is a different understanding of how things work that is the correct understand.
The second idea (the Valuation-Informed Indexing idea) is that it is INVESTOR EMOTIONS that cause price changes. Economic developments certainly play a role because economic developments cause changes in investor emotion, which in turn cause changes in prices. But this second idea posits that it is investor emotion that is the primary determinant of stock prices and that economic developments play only a secondary role.
THAT CHANGES EVERYTHING IF IT IS INDEED SO. It is the biggest advance in the history of personal finance. There is nothing else in even a remotely close second place.
So I think we all should be exploring the implications of this idea. It is by reviewing the research that I learned about this idea and it is by talking about the implications of the research that millions of us could learn more about it. So I view the research as being very important. There was a time when all of my Buy-and-Hold friends would have had zero problem agreeing with me that the research is important.
You are not convinced that this is all such a big advance. Millions of other good and smart people are not convinced. I get that. Loud and clear.
Say that I am right. If I am right, you would want me to try to convince you, would you not? You would have to be insane to not want that. Anyone who says that he does not want to know how stock investing works is insane.
So, you are not today convinced. Given that reality, you should continue to follow Buy-and-Hold strategies yourself and to encourage others to do the same. That all makes perfect sense.
But, if I am right, you would want me to try to persuade you. So you need to permit honest posting. If I cannot post honestly, I obviously cannot make my case in an effective way. So we MUST permit honest posting.
Your response is going to be that most of the experts believe in Buy-and-Hold. Duh! What would you expect so long as the Ban on Honest Posting remains in place. For any idea to gain traction, people must explain it in enough detail to persuade others to become convinced of its merits. So long as the Ban remains in place, no one could do that. So obviously we cannot have the majority of experts endorsing the new idea until we first lift the Ban on Honest Person.
That’s the very first step. That’s the step that makes all the rest of the magic happen.
I believe that the research tells us a great deal about what is going to happen in the future. Not everything. But a great deal. Because it changes our thinking on how stock prices are determined. And that’s fundamental. Changing our understanding of how stock prices are determined is a fundamental change in our understanding of how stock investing works. It means that risk is not a constant but a variable. It means that long-term returns are highly predictable. It means that that not only does one form of market timing always work but that one form of market timing is 100 percent required for all investors seeking to Stay the Course in a meaningful way by keeping their risk profiles roughly constant. Hundreds of books could be written on the significance of Shiller’s “revolutionary” (his word) finding and I believe that someday in the not too distant future they will be.
What the market did since 2010 is short-term stuff. I have zero interest in that sort of thing. There was a day when my Buy-and-Hold friends agreed that it was a good idea to focus on the long term and tune out the short-term noise. I seem to recall a guy going by the name “Jack Bogle” saying things along those lines. A pretty darn nice fellow. Smart too. You might want to check out his stuff if you ever get a chance.
My best wishes to you and yours, Anonymous.
Rob
Anonymous says
That’s the very first step. That’s the step that makes all the rest of the magic happen.
Sounds like you want the right to enter respectful discussions about valuations and proclaim over and over: 130 YEARS OF DATA PROVES [any opinion other than mine] CANNOT POSSIBLY WORK. Common sense tells you no adult social community is going to allow such trolling.
Rob says
There is now 34 years of peer-reviewed research showing that Buy-and-Hold is the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind, Anonymous. People need to know that. The continued promotion of the smelly Buy-and-Hold garbage has ruined millions of middle-class lives and has put us in the worst economic crisis in our history. The Wall Street Con Men and their Internet Goon Squads are committing financial fraud by keeping this from people.
I’ll do what I can to get the word out, Anonymous. I can do no more and I can do no less. I expect to see a lot more success following the next price crash. But we’ll all have to wait and see how it plays out, you know?
I wish you all the best that this life has to offer a person in any event.
Rob