Set forth below is the text of a comment that I recently posted to another blog entry at this site:
Unfortunately, analogies don’t make an invented reality any less invented.
The purpose of the analogy is to help people understand what is going on, Anonymous.
No, the analogy by itself does not make what I am saying true. I certainly agree with that point.
The comment that I was responding to was something to the effect of “if Bogle were behaving in a corrupt manner, it would be easy to get people to pay attention to that.” I can see how someone would think that. I certainly thought it myself prior to May 13, 2002. I believed in Bogle. I believed in Motley Fool. I believed in all of my friends at the Early Retirement Forum. And on and on.
If you had told me at that time that Greaney would be successful in his efforts to get me banned at Motley Fool, I would have said you were nuts. All I would have to do is to contact the site administrator and tell him what Greaney was up to and that would solve the problem. That didn’t work out so well for me, did it?
Bogle is a great person. There is no one alive who believes that more strongly than I do. But he is a human and he is flawed and he makes mistakes and then he is tempted to cover up those mistakes rather than acknowledge them. That’s the reality.
People who love Bogle have a hard time accepting that. That’s why I mentioned Paterno. There are many people who love Paterno as much as the people who love Bogle love Bogle. Paterno’s accomplishments were real. He was also a great person. He was also flawed. When the stuff came out about what happened at Penn State, there were students who protested in support of Paterno. They didn’t care about the facts. They still loved the guy. Like it or not, that’s the way the humans are.
It’s my job to make sense of this for people. You have a hard time accepting that Bogle did anything wrong. So I am offering analogies to help you see that the people taken in by false claims do not appreciate at the time that they are being taken that the claims are false. The people who loved Nixon at the time he was being investigated couldn’t appreciate what the evidence showed because their real love for the man made it impossible for them to do so. The people who loved Paterno at the time things were coming out about Penn State couldn’t appreciate what the evidence showed because their real love for the man made it impossible for them to do so. The people who love Bogle today cannot appreciate what the evidence shows because their real love for the man makes it impossible for them to do so.
People are not rational creatures. That’s the core story here. People are rationaliZING creatures. They make decisions as to what to believe based on emotion. Then they concoct rationalizations to support those emotional choices.
The question is — What happens when the money disappears from their retirement accounts?
The emotions CHANGE. When that happens, you will no longer see investors concocting rationalizations for Buy-and-Hold. You will see the opposite. You will see people directing their mental energies to concocting all sorts of overly negative appraisals of what the Buy-and-Holders did. In those days, people will be saying that Bogle INTENTIONALLY got it wrong. Which is a take that is as emotional as today’s popular take that he did not get it wrong at all.
My job is to help people avoid both extremes. Bogle is a great man who made a mistake. That’s the reality. Both parts of that sentence are true and both parts of that sentence are important realities that need to be known by all investors.
The analogies do not make what I say so. The purpose of the analogies is to take the discussion out of the investing realm, where people’s emotional biases control them, and to show how the same basic dynamics have played out in other areas of human endeavor. People behave emotionally in ALL endeavors. Including investing. If you want to understand how investing works, you need to gain an appreciation of how things go down in other areas of human endeavor. Because it is the same humans who make decisions in both non-investing contexts and in investing contexts.
I hope that helps a bit.
Rob
Anonymous says
We just had the worst price crash in decades a few years ago. Nothing changed.
Rob says
You’re wrong,Anonymous. Lots changed. There were posters at the Bogleheads Forum calling out Taylor Larimore on his dishonesty when the P/E level was at 13 in early 2009. That had never happened before the crash. Never.
Then prices went back up and those who see the dishonesty learned to zip it again. Had the P/E10 level stayed at 13 or dropped lower and stayed lower until now, there would be no Buy-and-Hold today.
Prices don’t go to low levels for a few months and then go back up. Please look at the historical record. When prices fall to low levels, they stay there FOR YEARS. We could be at a P/E10 level of 8 or so for five years or more.
People get angry when that happens. They don’t like it that they have lost most of their retirement money. And the only way they will be able to get it back will be by bringing lawsuits against those who in some way have helped or tolerated those who have posted in “defense” of Mel Linduaer and John Greaney and Jack Bogle. I think it will be fair to say that there will be hundreds of big-name lawyers making big names for themselves bringing lawsuits against you Goons. Are you able to imagine any possible reason why they would want to turn down the opportunity to become multi-millionaires while helping their country recover from the worst economic crisis in its history? I sure cannot.
But I could be wrong. I am not God. I do not say that know it all.
You should check things out for yourself. I presume that the threads in which people called out Taylor Larimore on his dishonesty still exist in the Bogleheads Forum archives. If they don’t, I wrote reports on them here. I have copies of hundreds of threats from the Bogleheads Forum. So I will be able to help out all the people bringing lawsuits even if those threads are taken down. But my guess is that you can read them at the Forum itself today. So do that, for heaven’s sake!
And you can look at Shiller’s site to see how long we stay at insanely low P/E10 levels at the end of secular bear markets.
There is a section of Bernstein’s book in which he discusses congressional hearings that were held in the Buy-and-Hold Crisis of the early 1930s. Please remember when reading those words that we didn’t have 34 years of peer-reviewed research showing the dangers of the pure Get Rich Quick approach at that time. Now we do. That changes the legal situation dramatically. And of course we are a much more litigious society today. Plus, we have a larger percentage of the population with money invested in stocks and we have larger amounts invested (because we are a richer people) and we have more powerful communications mediums like the internet that will help people to learn what they need to learn to bring their civil lawsuits and to organize and unite to demand that prosecutors bring criminal actions.
I hope that all helps a bit, Anonymous.
My best and warmest wishes to you and yours.
Rob
Anonymous says
You’re wrong,Anonymous. Lots changed. There were posters at the Bogleheads Forum calling out Taylor Larimore on his dishonesty when the P/E level was at 13 in early 2009. That had never happened before the crash. Never.
My god! Someone posted a message to someone on a message board! $500 MM checks and prison terms are nothing compared to such a dramatic event!
Prices don’t go to low levels for a few months and then go back up.
They just did. In reality, prices move randomly based on future events. Thinking you can predict these events by simply looking at the historical record is foolish.
Of course the Cowboys will win the Superbowl this year – just look at the historical record!
Rob says
My god! Someone posted a message to someone on a message board!
Taylor had been engaging in deception and intimidation on a regular basis and no one had the courage to call him out on it. Then we had a price crash and a number of people all of a sudden were doing it. Yes, that is a big change.
When people work up the courage to call someone out on a discussion board, they will also work up the courage to file lawsuits and to demand criminal prosecutions. Why wouldn’t they?
So, yes, the next price crash will make a big difference.
In reality, prices move randomly based on future events.
Thinking that is exactly the error that the Buy-and-Holders made, Anonymous. If what you were saying here were so, Buy-and-Hold would be the ideal strategy. I am happy to grant you that much.
But the entire historical record shows otherwise. That’s what Shiller showed in 1981. That was his “revolutionary” (his word) finding. That’s the thing we need to teach people.
There are statistical tools that can be used to determine whether prices are falling in a random-walk pattern or not. You should spend more time using these tools and less time repeating marketing slogans that you have picked up from the Wall Street Con Men. It’s been 34 years since those following the peer-reviewed research in this field have known that what you are saying here is simply not so.
Why do you think it is that you have never learned what the last 34 years of peer-revewed research says? Do you think this is just one of those things that happen from time to time? Or is there something else going on? I am not trying to put forward a cynical suggestion here. I think it is important for us all to understand how this economic crisis came to be. The primary purpose of the work I do is to help people come to terms with what has happened to us. Money considerations played a role. But money considerations have NOT been the primary factor. A big part of the problem is ignorance, an ignorance that we are as a society are now in the process of overcoming. We all need to pull together to overcome our ignorance and to move on to a much better understanding of the realities of stock investing.
Thinking you can predict these events by simply looking at the historical record is foolish.
You are entitled to your opinion. I am happy to acknowledge that millions of good and smart people agree with you.
But I don’t agree with you. And it would be an act of financial fraud for me to say I did. So I do not feel comfortable going there.
Of course the Cowboys will win the Superbowl this year – just look at the historical record
Can we predict the weather? They say there is going to be a snowstorm here tomorrow. Will we see one?
The odds are that we will see one. It’s possible that we will not. Weather predictions are not infallible. But humankind today possesses the tools to know when the likelihood is high that we will see a snowstorm.
The same is true in the investing field since 1981. We now know that the range of possible returns is not a constant but VARIES with changes in valuation levels. And we are able to assign rough probabilities re what particular returns will apply in the real world.
That’s a HUGE advance. It’s an advance that we need to tell everyone about.
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 endeavors regardless of what investing strategy you elect to pursue.
Rob
Seriously? says
“When people work up the courage to call someone out on a discussion board, they will also work up the courage to file lawsuits and to demand criminal prosecutions. Why wouldn’t they?”
A snarky note on a message board requires no effort, no intelligence, no validity, and virtually no time. There are many orders of magnitude between that and a successful lawsuit or criminal prosecution. If you cannot understand that, then there really is no common point of reference to discuss anything with you.
Rob says
There was nothing even a tiny bit snarky about the comments in which people called Taylor Larimore out on his dishonesty, Seriously. Most of the people who made those comments liked the guy and admired the guy. They had kept quiet about their doubts about lots of things he said for years. They were worried about what their fellow community members would think of them after they spoke their minds. It took a lot for them to work up the courage to do what they did. Their comments were rooted in love, not snarkiness.
I know how those people feel. It took me a lot of time to work up the courage and love to call John Greaney out on his b.s. And it took me a lot of time to work up the courage and love to call Mel Linduaer out on his b.s. And it took me a lot of time to work up the courage and love to call Jack Bogle out on his b.s.
If people can work up the courage and love need to take on Larimore and Lindauer and Greaney and Bogle on discussion boards, they can work up the courage and love needed to file lawsuits and to demand criminal proceedings. It certainly takes more work to bring a lawsuit. Obviously. But there are huge benefits to be had by bringing these lawsuits. We are talking about people who will have lost most of their life savings. Are you saying that no one will be able to work up the energy to file a lawsuit to obtain recovery of most of his life savings? Huh? That does’t make even a tiny bit of sense.
Bernie Madoff is in prison today. Someone must have worked up the energy to make that happen. The 13-year cover-up has destroyed the lives not of thousands but of MILLIONS. I have a funny feeling that there will be no shortage of people working up the energy to take action.
The hard thing is working up the courage to violate the Social Taboo. That’s been the story re these matters going back to the morning of May 13, 2002. Get Rich Quick investing strategies are cons. We LOVE them. Love them, love them, love them. It’s in our human nature to fall in love with Buy-and-Hold/Get Rich Quick investing strategies. But it is also in our human nature to feel great shame when we fall for such garbage. So we HATE coming clean. We hate it, hate it, hate it.
The story of the past 13 years is that it is very, very, very hard for us to work up the courage to act. We don’t want to admit to ourselves that we have fallen for a Get Rich Quick scheme. And we don’t want to call out our friends and neighbors and co-workers for doing so. We don’t want people getting mad at us for calling them “fools,” which is what we are doing when we point out that someone has followed a Buy-and-Hold/Get Rich Quick investing strategy. So there is a big wall to climb in getting these lawsuits filed.
But the hard part is not the filing of the papers. The hard part is working up the courage to say out loud the words “that is a big pile of smelly garbage.” Take a look at my work. I say those words freely and plainly and frequently today. But it wasn’t like that back in May 2002. I was tentative then. I was cautious. I felt uneasy going to the places to which I was going. That’s how the people who called out Taylor on his trickery felt. And they were the ones who had worked up the courage to go that far. That was a minority of the board population even in the days when the P/E10 level was 13. Most have never gone that far or anything close to it.
But the feeling spreads.
When one person works up the courage to violate the Social Taboo, it helps others form the courage needed.
The feeling of tentative courage spreads and spreads and spreads. Then it becomes less and less and less tentative. Then people actually become PROUD to be telling the truth and to be helping people rather than destroying their lives.
Filing a lawsuit is nothing to someone who has lost most of his life savings and who now sees that it is because he was tricked and who has thousands of friends encouraging him to do the right thing. It is hard to get from Point A to Point B. But the hard part is not the filing of the papers. The hard part is the part where the person comes clean WITH HIMSELF. Once we can be honest with ourselves about how we are not nearly as smart as we once pretended we were, all sorts of things become possible.
Or so Rob Bennett believes, you know?
I believe all these things will happen. But I am not God. I can never be 100 percent sure. We are all just going to have to wait and see how things play out.
I know that I am happy to be on the side that I am on. That’s the one thing that I can say with 100 percent certainty. I love my country. I feel good in a very deep place to know that I am fighting to PROTECT her, not to destroy her.
I hope that all that makes at least a measure of sense to your Goon ears.
My best and warmest wishes to you and yours, my old friend.
Rob