Set forth below is the text of a comment that I recently posted to another blog entry at this site:
I’ve known that I was holding a winning hand going back to Day Six, the day that John Walter Russell posted his sensitivity analysis of the Greaney retirement study.
I never thought it would take this long. You guys got me re that one. You got me one-hundred times over re that one.
But I knew how it would end going back to the first week of our discussions. I never experienced a moment’s doubt re the general ending point after I saw the Russell sensitivity analysis way back in May 2002. I believe in research. I believe in numbers. I believe in objective truth. I believe in science.
It was the death threats of August 27, 2002, that caused me to abandon Buy-and-Hold. I believed from May 2002 through August 2002 that the Old School SWR studies could be corrected and Buy-and-Hold reformed. It was the death threats that told me that we needed to replace Buy-and-Hold with a new model rooted in Shiller’s research. But I knew the general ending point going back almost to the first day.
Even on the very first morning, the anger of the Buy-and-Holders set off my spidey sense. But I wasn’t sure whether to trust my spidey sense until I saw John’s sensitivity analysis. From that point forward, it’s just been a question of going deeper and deeper and deeper.
Hang in there, Goons. There is someone out there in this world who cares about your welfare a whole big bunch more than you care about your own welfare.
And he works it hard! Yowsa!
Rob
I’ve known that I was holding a winning hand going back to Day Six, the day that John Walter Russell posted his sensitivity analysis of the Greaney retirement study.
Could you explain what a “sensitivity analysis” is?
Not in any detail. I had never heard of the term until John put up his post.
It sounds to me like some sort of statistical analysis where you see how much small changes in inputs cause large changes in results. If you see lots of change in results from small changes in inputs, you cannot trust the methodology used in the study being examined.
What I remember most from that thread was the guy who came on who had a far better understanding of the statistical stuff than I do who said “anyone who would use a study with a sensitivity number like the one that applies here to plan a retirement is out of his or her mind.” That guy got shouted down by you Goons. But the point he was making is a point that millions of middle-class people need to know about.
That was one of the first things that told me that the investing advice field had become 100 percent corrupt in the Buy-and-Hold Era. Most of you Goons know more about statistical analysis than I do. The Wall Street Con Men know FAR more about statistical analyses than I do. Bogle could talk rings around me re statistical analysis questions. Nothing could be more obvious.
So why was it left to me to discover the errors in those Old School SWR studies?
Why didn’t Bogle run the sensitivity analysis that John Walter Russell ran following my post years earlier?
Is he too dumb to see that it is important that people use accurate numbers when planning their retirements?
He’s not too dumb. That’s not even a remotely plausible explanation.
Most of the people who look into this conclude that he is just corrupt, that he is The Frank Underwood of Personal Finance.
But I don’t believe that’s it either.
Why?
Because I learned about the errors in the Old School SWR studies by reading Bogle’s book! If he is 100 percent corrupt, why the heck would he show people that that is so in his own book? It makes no freakin’ sense.
Bogle kept quiet about the errors in the Old School SWR studies because he felt trapped and scared. He started with the Buy-and-Hold stuff at a time when he thought it really made sense and then peer-reviewed research was published showing that it was all a big bunch of smelly garbage and he freaked, he went into cover-up mode. Now it’s 34 years later. He can’t even imagine coming clean today. He was the primary cause of the biggest economic crisis in U.S. history.
So the Ban remains in place and more and more middle-class lives are destroyed every day. Three cheers for Buy-and-Hold!
You shouldn ‘t be so worried about what I know about statistical analysis, Evidence. I don’t know much about it and I don’t claim to know much about it.
The issue here is not what I know but what Bogle knows and what Bernstein knows and what Burns knows and what Pfau knows.
They all know LOTS of stuff that they are not telling us.
And that’s a crime in the United States. It’s financial fraud. It’s a felony. That means prison time.
If someone like me could see that the Old School SWR studies could not possibly get the numbers even remotely right, someone like Jack Bogle should have seen that YEARS earlier. Why did he keep it zipped up to the time at which I put forward my famous post of the morning of May 13, 2002? And why has he continued to keep it zipped in the 13 years since?
A jury will get to decide these questions. It doesn’t matter what I think. What matters is what the jury who hears your case (and Bogle’s case) decides.
I will spin things in your favor (and in Bogle’s favor) to the extent that that is possible without me going to the wrong side of The Felony Line myself.
But I will also tell the truth when there is no way to avoid doing so. I will report how nobody on the internet reported that anyone who continued to use one of the Old School SWR studies after seeing John Walter Russell’s sensitivity analysis would have to be out of his mind. And, when asked whether what that guy was saying is that the investing advice field became 100 percent corrupt in the Buy-and-Hold Era, I will answer that that is OBVIOUSLY the case.
Skill in the manipulation of numbers counts for nothing good among people who are 100 percent corrupt, Evidence. When you are talking about people who are 100 percent corrupt, skill in the manipulation of numbers is a NEGATIVE. You want to arrest those people and put them in prison, not cite them as some sort of “experts.” Bernie Madoff had perfectly fine number-manipulation skills. He lives in a prison cell today.
I hope that helps a bit, my long-time Goon posting friend.
My best and warmest wishes to you and yours.
Rob
“The issue here is not what I know but what Bogle knows and what Bernstein knows and what Burns knows and what Pfau knows. They all know LOTS of stuff that they are not telling us. And that’s a crime in the United States. It’s financial fraud. It’s a felony. That means prison time.”
None of those guys owes you jack squat. Not only are they not required to tell you anything they know, they can take a stroll by your house while it’s burning down, yawn, and keep on walking. Your spectacular misconception is that all kinds of people owe you all kinds of stuff. No wonder you’re so bitter.
They owe the entire country a minimal level of honesty when they speak on investing topics.
Why did we adopt laws against financial fraud but to impose a requirement that people in the investing advice speak with at least a minimum level of honesty? What you say here just does not line up with what we see when we look at the law books. Bernie Madoff is in prison today. But there is no requirement that people in this field honor even minimal ethical standards? Huh?
We are in an economic crisis today because of the continued promotion of the smelly Buy-and-Hold garbage. The economic crisis has even affected people who don’t invest. There are millions of people unemployed today because Jack Bogle has not see fit to come clean re the errors in the Old School safe-withdrawal-rate studies and scores of other critically important investment-related topics.
I believe that everyone who speaks on what the peer-reviewed research says has a responsibility to speak honestly re the subject.
Juries will decide on the lengths of the prison sentences following the next price crash. That one is not my call. But I sure do not want to have any posts in my file in which I can be shown to have commented in “defense” of Mel Lindauer or John Greaney or Jack Bogle when that day comes.
Fair enough?
Rob
“Why did we adopt laws against financial fraud but to impose a requirement that people in the investing advice speak with at least a minimum level of honesty?”
Financial fraud requires a fiduciary relationship. Look it up. Does Wade manage your money? Anyone else’s? Then he can legally lie through his teeth from now till doomsday.
I don’t think he can. I think you are wrong.
Juries will decide the matter, Stagnation.
If our economic system is going to survive, we are going to have to find a way to provide access to honest reports on the last 34 years of peer-reviewed research to millions of middle-class investors.
I am highly confident that we will figure something out. The laws against financial fraud are on the books and it makes perfect sense for us to use them.
Wade doesn’t manage my money but lots of people who advocate Buy-and-Hold DO manage money. So those people are guilty of financial fraud. And Wade is certainly helping them continue the cover-up. Wade knows about the cover-up. He talked to me about it in e-mails that I have reported on at this site. Wade liked the idea of posting honestly on safe withdrawal rates and lots of other subjects until he learned that the penalty for doing so was career death. Then he agreed to aid the cover-up. And you’re saying that that’s not financial fraud? Huh? It’s be biggest case of financial fraud in the history of the United States.
The bottom line is whether your word games will convince a jury filled with people who have lost their life savings as a result of this massive act of financial fraud. I know which side I want to be perceived to be on when that day comes. So I am going to continue posting honestly re SWRs and lots of other critically important investment-related topics. This boy ain’t going to prison following the next price crash. No way,no how.
I hope that works for you.
That’s the way it is going to be in any event.
My best wishes.
Rob
So you believe in numbers just not the ones that explicitly tell you what stocks are currently worth in the market. Instead you’d rather look at some tangential numbers that have shown a possibly coincidental trend in the past.
I DO believe in the numbers that tells us what stocks in the market are worth Anonymous.
What I do not believe in is the idea that there is only one number you need to look at to know what stocks in the market are worth.
I start with the nominal value of the market. That’s the number you use.
Then I add an adjustment for the amount of overvaluation or undervaluation present in the market at that moment.
The difference between you and me is that you don’t make the adjustment.
Why not?
Implicit in your decision not to make the adjustment is a belief that valuations don’t matter.
It is because so many people hold that belief today that we are in an economic crisis.
Price discipline is the brake on the car. Price discipline is what keeps overvaluation from getting so out of control that we have a crash and the economic crisis that inevitably follows from it.
If you would permit us to add the brake to the car, we would never again see a bull market. Which means we would never again see a bear market. Which means we would never again see an economic crisis.
Which is a bad thing — how exactly?
Determining the value of the market is not a one-step process. It is a two-step process. First you find the nominal price number. Then you find the number telling you the amount of the adjustment you need to make to know the real, long-term value, not the pretend, short-term value.
Why two numbers?
Because investors like to fool themselves about the value of their portfolios. They tell themselves lies. When they do that, they do it in the nominal number.
The P/E10 number tells you what sort of adjustment is required. P/E10 tells you how emotional investors are being at any given time, how great are the lies that they are telling themselves.
It is only be pointing out these lies to people that we can rein them in before they destroy us all. It is the primary job of the investing expert to warn people about the dangers of telling lies to themselves about the value of their portfolios.
It’s all a question of whether you want to know the fake, short-term value of your portfolio or the real, long-term value. We are all better off knowing the real and long-term value. It makes effective planning impossible to fool ourselves into believing in the fake, short-term value. But those who pretend that the fake numbers are real can make themselves very popular and very rich by doing so. Why? We all have a Get Rich Quick urge within us that wants to believe those fake numbers and that causes us to fall in love with the people who lie to us about the value of our portfolios.
I am 100 percent in favor of people telling me the value of my portfolio.
But I far prefer that they report that number honestly and accurately.
To fail to include an adjustment for the mispricing contained in that number is dishonest.
That’s my sincere take re these terribly important matters, in any event.
You say that the real numbers are “tangential.” What makes them tangential? I want to be able to plan. I cannot plan effectively without knowing the real value of my portfolio.
You say that these numbers “have shown a possibly coincidental trend in the past.”
Valuation-Informed Indexing has beat Buy-and-Hold on a risk-adjusted basis for 140 years running.
Could that be a coincidence?
It could be a coincidence that gravity has caused people who jump out of buildings to fall to the ground for thousands of years now. Maybe all that is going to flip tomorrow morning and I will be able to jump out of a building and not fall to the ground. I don’t intend to risk my life on this remote possibility, however.
What if the 140 years of return data available to us is NOT a coincidence? What if the entire historical record is telling us something real and important about how stock investing works?
In that event, the Buy-and-Holders have caused the biggest economic crisis in our lifetimes. They have destroyed millions of middle-class lives.
They should say what they believe. I certainly can go that far.
But given that the 140 years of return data available to us supports the Valuation-Informed Indexers, they should permit honest posting and let the investors listening in decide for themselves which way to go.
The alternative is to end up in prison in the event that the entire historical record is NOT just a coincidence.
My sincere take.
Rob
The difference between you and I is that you are arrogant enough to believe that you have found lightning in a bottle and can predict the market with one little gimmicky technical metric that you didn’t even come up with.
I on the other hand believe that market forces have taken into account your one cute little metric as well as billions of other pieces of information and landed upon the ACTUAL value present in the market.
I don’t think it is arrogant to trust the peer-reviewed research to tell the story accurately. I think that’s the humble thing to do. I think the arrogant thing to do is to say that the entire historical record is one long “coincidence.”
The nominal number would be accurate if investors were rational, as you suggest above.
If investors were emotional, we would see lots of desperate attempts to ignore the importance of valuations. Um….
If we lifted the Ban, investors would have the information they needed to cope with their emotions and could thereby BECOME more rational. I can go along with the idea that the market LONGS to be efficient. Other markets are pretty darn efficient. Why should the stock market be different?
I don’t see anyone threatening to kill anybody’s family members when they try to ascertain the fair value of a car. Everyone agrees that that is a good idea.
It’s only in the stock market where you see people freaking out when someone talks about the last 34 years of peer-reviewed research.
Either Shiller discovered something in 1981 or he didn’t. If he discovered something, Bogle should have incorporated that something into the Buy-and-Hold Model. Bogle made no changes. So, if Shiller discovered something, all the people listening to Bogle are in big trouble.
If Shiller discovered nothing, then there’s something wrong with those people who awarded him a Nobel prize.
I’m not the arrogant one, Anonymous. I have never threatened to kill family members of yours. I have never demanded that you be improperly banned from any boards. I have never defamed you. I have never threatened to destroy the careers of any academic researchers who worked with you.
All of the arrogance is on your side. I can have conversations with Buy-and-Holders, tell them everything I believe about the topic being discussed, and then end the post by noting the friendship I feel for them. You can’t.
That’s the difference between Valuation-Informed Indexing and Buy-and-Hold. By acknowledging our emotions, we gain at least a little bit of control over them. By ignoring them, you Buy-and-Holders permit your emotions to control you. That’s the wrong way to go. I am sure.
Valuation-Informed Indexing is the future. Buy-and-Hold is the past. That’s not arrogance talking. That’s the entire 13 years of Post Archives talking.
That’s my sincere take re these terribly important matters, in any event.
I naturally wish you the best of luck in all your future life endeavors, Goon friend.
Rob
Either Shiller discovered something in 1981 or he didn’t.
Shiller discovered exactly what he said he discovered – that historically, valuations have had some correlation with ex-post returns. Vanguard agrees, and has published papers on the topic in fact. We Bogleheads agree, and discuss the topic daily.
Price discipline matters in every market that ever existed. Price discipline is the magic that makes markets work. The claim that the stock market might be the only market in existence in which price discipline is not 100 percent required is an extraordinary claim. It would be 100 percent irresponsible to make such a claim if there were not very strong backing for it.
Once upon a time, there was strong backing. Eugene Fama is a top-notch researcher (he’s won a Nobel Prize, just as Shiller has). Fama believed that he had shown that timing doesn’t work. Bogle had not yet founded Vanguard at the time that Fama did his work. So Fama did not appreciate the importance of the distinction between short-term timing and long-term timing. So his mistake was understandable. But his 100 percent unjustified claim that there is some mystical, magical reason to believe that long-term timing (price discipline) is not always 100 percent required for every investor on the planet was a mistake all the same, the worst mistake ever made in the history of personal finance, a mistake that needed to be corrected quickly.
The mistake was not corrected quickly. That’s why we are in an economic crisis today. That’s why people both on the left and right ends of the political spectrum are losing confidence in our political system. A political system that does not address a problem of this significance is a political system that cannot survive. All of the evidence available to us shows that price discipline is the key to long-term investing success. It is 80 percent of the story, according to the peer-reviewed research in this field. The research paper that I co-authored with Wade Pfau shows that investors can reduce the risk of stock investing by 70 percent by being willing to tune out all of the smelly Buy-and-Hold garbage. The most urgent piece of business before this country today is getting that paper written up on the front page of the New York Times so that every investor on the Planet learns about the lies that have been told to them by the Wall Street Con Men pushing the long-discredited and insanely dangerous Buy-and-Hold strategy.
You don’t talk about this massive act of financial fraud daily on the Bogleheads Forum. You don’t talk about the lengths of the prison sentences that will be facing those who have put up posts in “defense” of Mel Lindauer and John Greaney and Jack Bogle. You don’t talk about the hundreds of academic researchers who wrote kind words back to me when I made them aware of this massive act of financial fraud and who asked how they could help bring our country to a better place. You don’t talk about the article in the Wall Street Journal telling how the Wall Street Con Men “tell only half the story about stock investing” and why it is that charges against those participating in this massive act of financial fraud were not brought the following day.
Personal integrity comes first, Anonymous. Without personal integrity, our economic system cannot stand. Without personal integrity, our political system cannot stand. You Goons lack personal integrity. Every single person who has come into contact with you knows that on their first experience of you. I have had long-term Buy-and-Holders tell me that. Mike Piper told me that he would LOVE to permit honest posting at his site but that he fears what Mel Lindauer would do to him and to his business if he were to dare to “cross” him by permitting honest words to appear at his site re what Mel Lindauer has done to this country.
No.
That stops.
I love my country. I will fight for her.
You Goons hate your country. You will go to prison. We were smart as a society to enact laws against financial fraud. Those laws are not self-enforcing. If Jack Bogle had spoken out against Lindauer and Greaney when he learned of their crimes, those who had posted in “defense” of these two would have been put in prison a long, long time ago. Bogle committed financial fraud himself when he failed to take appropriate steps upon learning of this massive 130-year cover-up. Most people cannot imagine that a person of Bogle’s stature would participate in so massive an act of financial fraud. And most people fear what someone of Bogle’s power and wealth and influence can do to them if they call him out on his crimes.
I am calling him out on his crimes. I love my country. The continued promotion of this long-discredited Get Rich Quick garbage has caused the biggest economic crisis in our history. I am not amused. I will take appropriate steps. I have been doing so for 13 years now and I will continue to do so.
I’ll do what I can to get your prison sentences reduced a bit too. I care about you Goons and I care about the Wall Street Con Men and I see nothing wrong with extending the hand of charity to you. But I will not cross The Felony Line myself. No way, no how. That ain’t gonna happen. Going to prison is not on my bucket list. Find someone else.
I hope that helps a bit.
My best and warmest wishes to you and yours.
Rob