Set forth below is the text of a comment that I recently posted to another blog entry at this site:
“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.
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 good 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
“But the hard part is not the filing of the papers.”
No, the hard part is convincing anyone (let alone a lawyer) that “message board fraud / hurt feelings” is actionable. As you have found. Greaney continues to enjoy his peaceful litigation-free retirement, years after you supposedly took him on with love and courage.
You are right about Greaney, Bizarro.
And it is a pretty darn amazing reality to someone coming at things from my perspective. I can give you that much.
I think that things will change following the next price crash. I believe that there will be hundreds of law firms specializing in this type of case following the next price crash. But there are none doing that today. We are in agreement re the current-day reality.
I don’t say that I am God. I don’t say that it is not possible that I am wrong.
But I am telling you what I sincerely believe. And I wouldn’t feel comfortable playing it any other way.
My best and warmest wishes to you.
Rob
There are plenty of attorneys for fraud, but the problem is that there is no case, nor will there be.
I believe that the case is a 100 percent lock.
But I also believe that the papers will not be filed until after the next price crash.
We’ll see how it goes, Anonymous.
Rob
I think that things will change following the next price crash. I believe that there will be hundreds of law firms specializing in this type of case
Can we also have rivers of chocolate? I mean, as long as engaging in wild fantasies about the future…
The laws against financial fraud are already on the books, Anonymous. It’s no wild fantasy to believe that the people of the United States have a low opinion of those who cheat them out of their retirement money.
My “river of chocolate” is staying out of prison. If I say that Greaney’s retirement study contains an adjustment for the valuation level that applies on the day the retirement begins, I think it would be fair to say that I would be pretty much placing myself in the same boat you are already in today. Um — no thanks.
We’ll see how it all plays out as it all plays out.
Do you have any better ideas?
Rob
If it was 100″% lock, papers would already be filed. You either have a case with evidence or you don’t.
If stock investing were a 100 percent rational endeavor, as the Buy-and-Hold Model posits, papers would indeed have been filed by now. It’s not, as Shiller showed with the peer-reviewed research that he published in 1981. So it appears that we are going to have to wait until after the next price crash to see these cases brought, Anonymous.
I don’t want to go to prison! It’s not on my bucket list!
Find someone else, you know?
My best and warmest wishes to you and yours.
Rob
No one is going to prison. You are the only one talking about it.
You’re talking about it, Anonymous.
You say: “Oh, no, no, it’s not going to happen!”
But you show up here every day.
I wonder why.
Rob
You are the only one bringing this up. We are merely responding to you.
Backatcha, Anonymous.
When I posted at the Motley Fool board, was I the one who first brought up safe withdrawal rates?
I was not. It was John Greaney who brought up safe withdrawal rates. He did so on a daily basis. My famous post of the morning of May 13, 2002, was a response to claims that he advanced.
It was the same when you told me that I would be readmitted to the Bogleheads Forum last Spring. The first thread that I saw when I went there was one where a guy asked for a good retirement calculator. Someone had linked to FIRECalc. So I linked to The Retirement Risk Evaluator. And then the ban hammer came down. I had yet once again committed the terrible, terrible crime of helping people to understand the implications of the last 34 years of peer-reviewed research in this field. What a horrible, horrible person I have become!
If Buy-and-Hold never existed prior to 1981, there never would have been any conflict. We all want to invest in a way that reduces risk by 70 percent and that permits us all to retire five to ten years sooner. Had Buy-and-Hold been created in 1981, it would have called for investors to avoid short-term timing but always to be certain to practice long-term timing. We all would have been heroes. We wouldn’t be in an economic crisis today. We would be living through the greatest period of economic growth in U.S. history.
But that’s not the way it played out. Buy-and-Hold was developed in 1965 based on the research available in 1965. Then Shiller added his breakthrough in 1981. As a society we ignored that breakthrough for many years. And now here we are.
How do you propose that we get from the horrible place we are stuck in today to the wonderful place we all aspire to get to tomorrow? I believe that the only way that we can complete that journey is by having a mutual learning experience, by having conversations in which we participate in civil back-and-forth-discussions for the purpose of learning what really works.
I am the only one who brings up the prison sentences. Because we need the prison sentences to be announced to show the Wall Street Con Men and their Internet Goon Squads that there are consequences that follow from them engaging in the sort of behavior that we have seen for 13 years now. The laws against financial fraud are a good thing. The laws against financial fraud were intended to help us when we find ourselves in this sort of situation.
The laws against financial fraud are not self-enforcing. We need to educate people as to why they need to demand enforcement of those laws. That’s why I bring this stuff up. I am building a record to show people why we need to enforce those laws. After the next price crash, people will have all the information they need to see why it is so important that criminal actions be brought against you and the other Goons so that we all can bring the economic crisis to a quick end and get about the business of bringing on the greatest period of economic growth ever seen in U.S. history.
I hope that helps a bit.
The point that I was making above is that you visit here daily. You wouldn’t do that if you were not concerned about landing in a prison cell following the next price crash. Your words say “Oh, I am not worried about that.” You actions say “I am concerned.”
You are not willing to come clean because you think it is too late to avoid going to prison even if you do. I don’t disagree. I think your prison term will be shorter if you come clean today than it will be if you come clean after the next price crash. But I cannot say that I believe that you will not go to prison at all if you come clean today. You don’t want to go to prison AT ALL. So we are stuck.
If you have some bright idea as to how to get out of this mess, I of course want to hear it. I don’t think there are any bright ideas that would permit you to avoid a prison sentence altogether. I could be wrong. And I am certainly willing to do what I can do to help you out. But I am not going to say that I believe that you can avoid a prison sentence altogether because I do not believe that to be the case.
So what do you want from me?
I bring this stuff up to build a record for the people who will be trying to rebuild our economic system following the next crash. You Goons are allowed to listen in and you are welcomed to post here. I think that some of your comments and some of my responses to your comments will help people understand the underlying reasons why we are in an economic crisis and why it is likely to get worse in coming days. But I don’t see what I can do to help you other than to respond to your questions and comments to the best of my ability, which is something that I already do.
Is there something else that you want from me?
Rob
I believe that the only way that we can complete that journey is by having a mutual learning experience, by having conversations in which we participate in civil back-and-forth-discussions for the purpose of learning what really works.
Not by becoming “the most hated person on the internet”, then…
Doing those things is exactly what made me the most hated person on the internet, Anonymous.
You favor Valuation-Informed Indexing over Buy-and-Hold.
You don’t say that. But your actions show it to be so.
If you didn’t favor research-based strategies, you never would have become a Buy-and-Holder in the first place. That’s the primary appeal of the strategy. I know. I was a proud Buy-and-Holder myself once upon a time. So I know why people place their confidence in it. Valuation-Informed Indexing is the research-based strategy of today. Valuation-Informed Indexing is for today’s investors what Buy-and-Hold was for the investors of pre-1981 days. It is the strategy that you are naturally drawn to.
So why don’t you say that?
The incorrect understanding of how stock investing works came before the correct understanding was possible. So lots of people invested lots of time and money and psychic energy into the Buy-and-Hold project before the knowledge they needed to possess to know that it could never work was available to them. It hurts to come to understand that you have gotten so important a matter so terribly wrong.
It hurts a lot. It’s not just the pride thing. People who believe in Buy-and-Hold tell their friends about it. And their neighbors. And their co-workers. And their fellow community members. So they destroy a lot of lives as a result of their misunderstanding of the realities. It is hard to let that in. Very hard.
This is why I use the analogy of our understanding of race relations in the days before the Civil Rights Revolution to help people understand why there is so much resistance today among Buy-and-Holders to the idea of permitting honest posting on the past 34 years of peer-reviewed research. There were some bad people who were out-and-out racists in the days before the Civil Rights Revolution. But those bad people did not comprise the majority that voted in favor of laws saying that blacks could not go to the same schools as whites or drink from the same water fountains as whites. Most of the people who voted for those horrible laws were generally good people. So why in heck did they do this horrible thing?
It was a Conspiracy of Ignorance.
Those people knew on one level of consciousness that it was wrong to not let black children go to the same schools as white children. A child of five could figure that one out. Give me a friggin’ break. So why did they vote for laws that said otherwise? They lived in societies that were built around such laws. They knew that to overturn those laws would cause a great upheaval. Humans do not like upheaval. They like safety, they like stability. So these people kept it zipped re what they knew about the horror of these horrible laws.
They didn’t just keep it zipped when speaking to others. They kept it zipped when speaking to themselves. They pretended that they didn’t understand the horror of these laws. How many roads must a man walk down before he can hear people cry? They knew and they didn’t know at the same time. They were afraid of getting involved. They left it to others to solve the problem. They told themselves that it wasn’t all so bad, that the black children would end up okay somehow, that this was all just the way of the world and that there was nothing that anyone could ever do to change it. They kept it zipped and they lied to themselves about the millions of people whose lives they were destroying by keeping it zipped.
Sound familiar?
Yes, I became the most hated person on the internet by posting honestly on safe withdrawal rates and scores of other critically important investment-related topics. Not because anything I said was in any way wrong. Because everything I said was 100 percent right and good and helpful and loving. That’s what made it hurt so darn much. Jack Bogle would like to be doing honest work today. Bill Bernstein would like to be doing honest work today. Wade Pfau would like to be doing honest work today. Scott Burns would like to be doing honest work today. Mike Piper would like to be doing honest work today. And it is eating them all up inside that they don’t feel free to live their dream.
My job is to free all these people and all the thousands like them to live their dream. My job is to change things so that all these good and smart people can share with the rest of us what they know about how to invest effectively for the long term and thereby to enrich all of our lives in many wonderful ways.
On the surface, that doesn’t sound like something that would make me the most hated person on the internet, does it?
On the surface, it doesn’t sound like someone could become hated by arguing that black children should be able to attend the same schools as white children, does it?
But the people who led the Civil Rights Revolution were hated by lots of generally good and smart people, no?
Why?
Because to do the good thing that they were trying to do they had to uproot the society we all lived in. We had to change our laws. We had to change our schools. We had to change how we interact with other people. The changes were very, very, very good changes. But they were also very, very, very big changes. Which means that they were very, very, very frightening changes.
So it is with the transition from Buy-and-Hold to Valuation-Informed Indexing. It is a HUGE change. Every textbook must be rewritten. Every calculator must be rejiggered. Every web site must change its moderation practices. Lots of very rich and powerful people must stand before us and say the words “I” and “Was” and “Wrong.” It is likely that hundreds of thousands of lawsuits will be filed. It is likely that a good number of people will be sent to live in prison cells. We are talking very, very, very big change.
It’s all good. It’s good stuff piled on top of good stuff piled on top of good stuff piled on top of good stuff. Valuation-Informed Indexing is Jack Bogle’s dream come true. It is what he envisioned when he started working on his first-draft version of Buy-and-Hold. But incorporating the last 34 years of peer-reviewed research into the model we developed when we were in ignorance of the most important finding ever achieved in our study of how investing works stands everything we once believed we knew on its head. So it is a very big change. And big change scares people. That’s just the way it is.
Anyone who makes the case for bringing on such wonderful and yet such scary change is going to be hated. So, yes, I am hated by many smart and good people. I don’t like it. But there is no other way to get this job done. So I accept it.
I love my country.
Those four words sum the whole thing up. I love my country. So I cannot abandon her when she is under attack. The idea of the Buy-and-Holders that we can block millions of middle-class investors from learning about the 34 years of peer-reviewed research that they very, very, very much need to learn about is an anti-American idea. They hated my good friend Jack Bogle back in the day. They called him “Un-American” when it was him advancing knowledge for the good of all, which is the American way. Hate is going to be directed at those who bring about huge positive change. It’s the way of the world. I don’t like it. I accept it.
I am hated for the best of all possible reasons. I am hated because the distance between Buy-and-Hold and Valuation-Informed Indexing is so great. Buy-and-Hold is the purest and most dangerous Get Rich Quick strategy ever concocted by the human mind. Valuation-Informed Indexing is the first true research-based strategy, a strategy that permits us all to reduce the risk of stock investing by 70 percent while increasing returns enough to let us all retire five to ten years sooner.
If being hated is the price that I need to pay to make this brave new world of stock investing available to millions of middle-class investors, then I will be hated for a time. Ending this economic crisis is too important. Bringing on the greatest period of economic growth in our nation’s history is too important. I will be hated if that is what it takes to get this job done. I don’t like it. I accept it.
Does that help, Anonymous?
I am hated for all the right reasons. I am hated because I am doing something that frees millions from the ignorance of the past. I won’t be hated after we all make the shift from Buy-and-Hold to Valuation-Informed Indexing. I will be loved by everyone then. Even you. I will enjoy my $500 million payday without having to file any papers. My good friend Jack Bogle will insist. And I will thank the man for his huge contributions (there obviously would be no Valuation-Informed Indexing without all that I learned from Jack), fold the Big Green Check and place it in my pocket, and move on down the line.
I hope that all makes sense to you.
I wish that hate were not a part of life down here in the Valley of Tears. But it is. So I deal with it.
Our world is not only a world of hate. It is also a world of Big Green Checks. So there are compensations to be had for standing up to the hate and overcoming it.
Good.
Good for us.
Compensations are needed.
Otherwise how would we ever achieve the advances needed to support that 6.5 percent annual real return that makes life in this country that I love so much so appealing in the first place?
Change can be good.
I naturally wish you the best of luck in all your future life endeavors regardless of what investing strategies you elect to pursue, my old friend.
Rob
You favor Valuation-Informed Indexing over Buy-and-Hold.
You don’t say that. But your actions show it to be so.
Like everyone else, I consider valuations (and many other factors, such age and risk tolerance) when setting my asset allocation.
So which of your made up sides are we all on?
You don’t consider valuations in any rational way, Anonymous. The rational way would be to quantify its effect. The most likely annualized 10-year return in 1982 was 15 percent real. In 2000, it was a negative 1 percent real. Those two situations call for very different stock allocations. You don’t like to hear that. You demand that people who talk about that reality be banned from discussion boards at which you participate.
You don’t ban it because you think it is unimportant. You can it because you think it is very important. You don’t want to accept that you made a mistake going with a high stock allocation when stocks were priced to deliver a poor long-term return. So you tune out the message delivered by the peer-reviewed research. You want to be a rational investor. But you cannot bear the thought of paying the price of admission to the club — saying the words “I” and “Was” and “Wrong.”
That’s the story. The Buy-and-Holders did a wonderful thing back in the 1960s in saying that we should use the peer-reviewed research as a guide. But then the peer-reviewed research revealed an error in their initial beliefs. They thought that price discipline (long-term timing) was not required but the research done after they developed their first draft showed that price discipline (long-term timing) ALWAYS works and is ALWAYS 100 percent required. The Buy-and-Holders have been tuning that message out for 34 years now.
You say that you consider valuations. But you threatened to destroy Wade Pfau’s career if he continued posting honestly about the peer-reviewed research that he and I co-authored that gives people the guidance they need to know how much to change their stock allocations in response to valuation shifts. You don’t want to know. And you don’t want others to know. Because it hurts for you to say the words “I” and “Was” and “Wrong.”
Every learning experience that was every enjoyed by any human going back to the beginning of time began with an openness to learning new things. The Buy-and-Holders lack that openness. They cannot bear to acknowledge that they were wrong that price discipline is not always 100 percent required because to acknowledge that would be to acknowledge that they have done great financial harm to millions of people, that they have in fact caused the greatest economic crisis in U.S. history.
I cannot change any of that. The peer-reviewed research had shown that the Buy-and-Holders had gotten it wrong for 21 years at the time that I put forward my famous post of the morning of May 13, 2002. I am not the one who showed that you got it wrong and I am not the one who encouraged you to engage in a cover-up. I am some guy whose only expertise in this field is that I figured out how to get a post to show up on the internet and who thought it might be a good idea to tell my fellow community members that John Greaney got the numbers wildly wrong in his retirement “study.”
The reaction of the Buy-and-Holders to the wonderful thing that I did in pointing out that error told me what I needed to know to know that I never again wanted to have my name associated with the Buy-and-Hold strategy (except as its lead critic). People who are promoting something legitimate don’t behave the way you Goons have been behaving for 13 years now. Not no way, not no how. Not ever.
The jury will hear both sides. I intend to say all that I can to get your sentence reduced a bit. But I cannot tell outright lies. And the cold, solid truth in this case is that Greaney’s retirement study contains no adjustment for the valuation level that applies on the day the retirement begins. You have a funny way of demonstrating that you consider valuations. How often have you spoken out against Greaney’s failure to correct his study for 13 years now?
I truly consider valuations. That’s why I have consistently demanded that Greaney correct the study for 13 years now. So I ain’t going to prison and you are. And I have zero desire to change that reality. I am happy to do what I can to get your prison sentences reduced. I have zero desire to add a prison sentence for me. Please try to find someone else.
Rob
You don’t consider valuations in any rational way, Anonymous. The rational way would be to quantify its effect. The most likely annualized 10-year return in 1982 was 15 percent real.
Rational people don’t precisely quantify the future, since we know it doesn’t work very well. It’s easy to look back to 1982 and find a pattern. But when you try it real-time – like your guess in 2010 that the market was about to drop 65% – you find the future doesn’t cooperate.
The Cowboys may have won the Superbowl every 7th year historically, but that doesn’t guarantee anything going forward.
It works perfectly, Anonymous. It’s worked perfectly for 140 years now.
There are statistical ways of telling whether a correlation is real or not. If the Cowboys won the Super Bowl every seventh year for 140 years running and never on any of the other years, I would say that you should start trying t figure out what is going on. I am not able to offer you any theory on why the Cowboys would only win the Super Bowl in every seventh year. But, if it happened that way for 140 years running, I would at least open my mind to the possibility that there is something real there. When million to one shots start coming in, I just don’t see how you cannot wonder why that is.
You should read the book Stock Cycles by Michael Alexander. I don’t have it in front of me at the moment. So I cannot quote you the numbers he gives. But he examines the odds that the market could have continued behaving in the way in which it has behaved through its entire history just by chance. The numbers he gave were astronomical. It was something like a million to one (again, don’t quote me re this number, please) shot. Just something that showed that this is not just coincidence, this is real.
The Cowboys haven’t won the Super Bowl in every seventh year and only in every seventh year for 140 years running. You are trying to make it sound silly by giving that example. But the reality is that you are not able to find any REAL example in which the same thing kept happening for 140 years without a single exception and there wasn’t something real going on.
The difference in stock performance when valuations are low versus when they are high is not small. If we were talking about a two point differential, I could believe that it is just coincidence. The difference between the most likely 10-year annualized return from when stocks are priced as they were in 1982 versus when they are priced as they were in 2000 is 16 percentage points of return. That simply cannot be ignored. That’s not coincidence.
And that has been so for 140 years! There has never been a single exception to the rule. That’s coincidence? Huh? You might as well say that gravity is coincidence. Maybe gravity doesn’t exist. Maybe it’s not real. Maybe it’s just coincidence that things have been falling to the ground for thousands of years now. Who can really say about such things, right? No one has a crystal ball. Maybe it will all turn out different for the first time in history starting tomorrow morning. Maybe we should sell our cars today because tomorrow we will be able to float in the air and swim through the air to our destinations in a world where gravity doesn’t exist. No one can say for absolute sure, right?
They awarded Shiller the Nobel prize because he argued something roughly equivalent to the claim that the Cowboys will always win the Super Bowl on every seventh year, right? I believe that.
And Wade Pfau was jumping up and down in excitement over Valuation-Informed Indexing because he saw that the statistical support for it was roughly the same as the statistical support for the claim that the Cowboys will win the Super Bowl every seventh year. I believe that too.
And you Goons threatened to get Wade fired from his job if he continued posting honestly because you realized that the research that I co-authored with him made claims roughly equivalent to a claim that the Cowboys will win the Super Bowl every seventh year. I also believe that one.
And Bogle failed to take action re your act of financial fraud because he believes that Shiller’s Nobel Prize-winning work amounts to a claim that the Cowboys will win the Super Bowl every seventh year. That one sounds right to me as well.
And your jury will believe all those too. You won’t be sent off to prison for a long time following the next price crash.
I’m a believer!
Take it easy, man.
Rob