Set forth below is the text of a comment that I recently posted to another blog entry at this site:
The price of apples fluctuates based on many factors. If today’s price is $1, I have an asset worth $1, and can sell it for that price. There’s no pretend money at all.
If today’s fair price for an apple is $1 and someone tries to sell an apple for $3, there are ways to find out that that person is overcharging. People do that. They compare prices. Then they refuse to buy apples that are being sold at insanely inflated prices. It is that process of comparing prices that is the magic that makes free markets work. Price discipline is the magic that permits markets to get prices right. Deny the participants in a market the information that they need to act in their own self-interests and you destroy that market.
The stock market is just like any other market. The market participants are naturally drawn to correcting mispricings because it is in their self interest to buy more stocks when prices are good and to buy fewer stocks when prices are insanely inflated. The difference in the stock market as it has come to operate in the Buy-and-Hold Era is that the Wall Street Con Men and their Internet Goon Squads have made it impossible for market participants to obtain the information they need to act in their self-interests and thereby to exercise price discipline and set prices properly. It is because of the massive act of financial fraud that we have seen in the 33 years since Shiller published his research showing that there is precisely zero chance that a Buy-and-Hold strategy could ever work for even a single long-term investor that we are in an economic crisis today and that we have millions of people on the way to experiencing failed retirements.
It is not reasonable to compare the stock market with any other markets until we work up the courage as a society to enforce the laws against financial fraud. Once your prison sentence is announced, “Buy-and-Hold” will become an obscene phrase among investors. Investors who are able to engage in discussions of what the last 33 years of peer-reviewed research tells us about how stock investing works in the real work will act in their self-interests and will see that mispricings are corrected.
Was there no Pretend Money in the Madoff fund?
The only difference between the Madoff fund and Buy-and-Hold is that in the promotion of Buy-and-Hold we have seen financial fraud on a scale 5,000 times bigger. Madoff’s lies causes thousands of failed retirements. The Lindauer/Greaney/Bogle lies are in the process of causing MILLIONS of failed retirements. There is no comparison re the scope of the two acts of financial fraud. But the core principle — a mountain of deceptions that aims to exploit the Get Rich Quick impulse that resides within us all — is identical.
Rob
Evidence Based Investing says
People do that. They compare prices. Then they refuse to buy apples that are being sold at insanely inflated prices.
Yes. If they want to buy an apple they compare prices of apples being sold today. If they find 2 people selling apples, one at $1/apple the other at $3/apple they will buy from the $1/apple guy.
The quote for MSFT shares this morning on the NASDAQ pre-market is $47.17/share. If I wanted to buy MSFT shares and I found someone trying to sell MSFT shares at $140/share I would certainly not buy from them.
But that is the great thing about the stock market, it brings all the buyers and sellers together and establishes a single market price which is why you don’t find anyone trying to sell MSFT shares at $140/share.
Rob says
But the buyers and sellers do not have access to commentary on the last 34 years of peer-reviewed research. They do not have access to the information they need to act in their self-interest.
A market cannot function so long as there is a ban on honest posting. We need to persuade Bogle to walk to the front of a big room and to say the words “I” and “Was” and “Wrong”. From that point forward, the stock market will work like all other markets.
But not until then. The free flow of information is what makes markets work.
Or so Rob Bennett sincerely believes, in any event.
Rob
Evidence Based Investing says
They have access to the price that shares are currently selling for.
Just like apple buyers have access to the prices that apples are currently selling for.
Rob says
They don’t have access to honest reports re the last 34 years of peer-reviewed research.
Apple buyers have access to accurate information.
If all the prices listed in grocery-store circulars were lies, the apple market would become as dysfunctional as the stock market is today.
Greaney told lies about safe withdrawal rate on a daily basis. And for years we all lived in fear of him because he was so abusive.
Kitces would LOVE, LOVE, LOVE to provide honest information on stock investing. But he knows that Bogle and his Goon Squads (you!) would destroy his career if he “crossed” them by reporting things honestly.
The announcement of your prison sentence changes all that, Evidence. No one is going to be afraid of you when you are in prison. And no one is going to continue to post goonishly once they see that you and the other Goons are in prison.
That’s the next big step. That’s the Second Independence Day for millions of middle-class investors.
Wish us luck!
Rob
Evidence Based Investing says
If all the prices listed in grocery-store circulars were lies, the apple market would become as dysfunctional as the stock market is today.
The sign in the grocery store that says Apples $1 means I can buy an apple for $1.
No lie.
The stock quote that says MSFT $46.65 means I can buy a share of Microsoft for $46.65
No lie.
Rob says
If the apples have worms in them, newspapers report this and the price of the apples goes down.
If stocks have worms in them, the Wall Street Con Men threaten to destroy the careers of all who dare to post honestly.
The market (and our economic system in general) will become functional again when prison sentences are announced for those who have been engaging in financial fraud for 13 years now (or for 34 years if you count back to when Shiller published his “revolutionary” [Shiller’s word] research).
My best wishes to you.
Rob
Anonymous says
“If stocks have worms in them, the Wall Street Con Men threaten to destroy the careers of all who dare to post honestly.”
Challenge: Post an actual real world documented example of this ever occurring, OTHER than something involving yourself.
Rob says
That’s the entire site, Anonymous.
I used to believe in the Buy-and-Hold garbage. I know how it feels to be tricked re this stuff.
Wade Pfau searched and searched and searched trying to find one peer-reviewed study even suggesting that there might be some alternate universe where price discipline is not 100 percent required in the stock market just as it is in every other market that has ever existed.
It’s all a Big Lie. You have been conned.
Johnny Rotten asked the fans attending the last Sex Pistols concert: “Have you ever had the feeling that you have been taken?” That’s you.
That was once me too. I am not saying that I am any smarter than you. I realized on the evening of August 27, 2002, that it was all a massive con. I’ve never looked back since. Legitimate strategies can be defended without death threats. When you find yourself making use of death threats, you need to ask yourself where you made a wrong turn. Because that ain’t the way.
When you want my help, I’ll be here for you. That’s not a time-sensitive offer. Ask anytime you please, even after the crash if it comes to that.
But please stop embarrassing yourself by asking me to participate in the biggest con ever worked on the people of the United States. I worked at a job I hated for nine years while I planned my early retirement. I spent every night and every weekend assembling the materials in my 40 binders. If I hadn’t worked it that hard, I could easily have been taken in myself. And I don’t find that idea one bit funny. I earned my retirement money. I expect to be able to find honest and accurate reports re what the peer-reviewed research in this field says about how to invest it.
I deserve that. We all do. We all should demand it.
I am your best friend in the world. You don’t know it. But I am.
I’m happy to help you. Not by joining in the con. That wouldn’t help at all. Once I joined the con, nothing I said would count anymore. I wouldn’t be able to help you at that point.
You have been taken. You will get it after you lose most of your life savings in the next crash. Please don’t say that no one tried to warn you. I tried. And thousands of your fellow community members expressed a desire that honest posting be permitted.
You let your Get Rich Quick urge run wild. That’s how the con men reel you in. They know your weakness and they profit by exploiting it. You gave them power over you. That was a terrible mistake.
Or so Rob Bennett sincerely believes in any event.
We’ll see how things go in coming days.
Hang in there, man.
Rob
Anonymous says
But the buyers and sellers do not have access to commentary on the last 34 years of peer-reviewed research. They do not have access to the information they need to act in their self-interest.
Are you suggesting the Wall Street institutions that set stock prices don’t have access to the same information as you?
Rob says
Yes.
Wade Pfau hold a Ph.D. in Economics from Princeton. I have never taken a single course in investing. Wade should know 50 times what I know about investing.
Go take a look at the hundreds of posts at this site that relate to Wade and the things he learned about stock investing during the 16 months that we worked together. He was learning amazing things on a daily basis. He was stunned and amazed by this. He remarked on it over and over again.
The same thing happened with John Walter Russell. John was obviously a very smart person. And he studied stock investing. But his most fundamental ideas about how stock investing works changed when he met me. Then he spent eight years of his life researching the Valuation-Informed Indexing concept. The more he researched, the more be believed and the more he learned. His knowledge grew deeper and deeper and deeper.
The same thing happened yet again with Larry Evans (if I am recalling the name correctly). When Larry discovered my site, he was slightly hostile. He believed in the Buy-and-Hold garbage and he couldn’t accept that I had really proved that it was all wrong. So he challenged me. He said that he would spend three weeks reading every article at the site and then would write an article giving his assessment of my ideas. He asked whether I would be willing to agree in advance to post his article even though I would not know at that time what he would say. I said that would be fine. He called me after the three weeks and said that every claim that I had ever made checked out. He said that he was laying awake at night thinking how huge an advance VII represents. He was stunned and amazed and excited.
Buy-and-Hold was a mistake, Anonymous. It is the most dangerous investing strategy ever concocted by the human mind. There is no rational discussion that can be held re this matter. Because 100 percent of the evidence is on one side and 0 percent is on the other. It is pretty darn hard to hold a rational argument when all the evidence is on one side. There is no controversy. There is nothing to talk about. Fama never even looked at long-term timing (price discipline). So it is of course impossible that he ever came up with the smallest bit of evidence that there might be some magical, mystical alternate universe where long-term timing (price discipline) might not be 100 percent required.
The Wall Street institutions have access to the same information that I have access to in a practical sense. Obviously.
But they don’t have access to that information in a real sense.
Look at what happened with Wade Pfau. He LOVES, LOVES, LOVES Valuation-Informed Indexing. He thinks it is the answer. He thinks it is the future. He had visions of winning the Nobel Prize with the research he was planning to do showing why VII is better than Buy-and-Hold in every possible way.
Then his career was threatened by some very powerful people. Wade saw all those years he spent in school going down the drain. He saw Jack Bogle and his Wall Street Con Men pals taking away the bread from his family table. He saw the lives of his wife and children being destroyed because he wanted to do honest work that would make the Buy-and-Holders “look bad.” So he gave in to the threats.
Does Wade have access to the information he needs to understand how stock investing works?
In one sense, he does. But in reality, he does not.
Wade has participated in the biggest act of financial fraud in the history of the United States. How do you think that makes him feel? It makes him feel horrible. Wade didn’t get into this field to destroy millions of middle-class lives. He got into this field to help people. It hurts him that he has destroyed millions of lives. So he lies to himself about what he has done. He pretends that financial fraud is no big deal. All the Big Shots in this field are engaging in financial fraud today. So what does it matter if one more researcher flips to the dark side?
Wade has access to the materials he needs to do helpful research. But he cannot bear to look at it. If he looks at it, it reminds him of how he has failed himself and his family and his profession and his country. So he tells the lies he feels he needs to tell to turn a buck in this 100 percent corrupt field. And he tries hard to keep himself as dumb as someone with his intelligence can be. Because it’s only those who keep themselves ignorant of the implications of the past 34 years of peer-reviewed research who are able to earn a buck in this field so long as the long-discredited Buy-and-Hold “idea” remains dominant.
It’s the same with Jack Bogle.
It’s the same with Todd Tresidder.
It’s the same with Bill Bernstein.
It’s the same with Mike Piper.
It’s the same with the owners of the Motley Fool site.
It’s the same with Carl Richards.
It’s the same with the owners of the Early Retirement Forum.
It’s the same with Bill Shultheis.
It’s the same with the owners of Morningstar.
It’s the same with Larry Swedroe.
And on and on and on and on and on.
All of those people would like to feel free to tell the truth about the last 34 years of peer-reviewed research. And all of these people know what the Buy-and-Hold Mafia would do to them if they dared to “cross” them by speaking honestly re the last 34 years of peer-reviewed research. It is only the advocates of a single investing strategy who respond to challenges to their claims with death threats and with threats of career destruction. It is only Buy-and-Holders who do that. And we have seen the Buy-and-Holders do it over and over and over and over and over again. I wonder why.
There are people who work on Wall Street who would like to understand stock investing better than they do today. But they know the price they would have to pay. And they like the money that can be made in this field by being dishonest more than they like the good feeling that comes from telling the truth about the last 34 years of peer-reviewed research.
I like the good feeling that comes from telling the truth about the last 34 years of peer-reviewed research more than I like making a smelly and dirty buck. That’s my secret. Sue me.
I expect to make a lot of bucks too. I expect to make 500 million of the suckers. But I intend to make them honestly. And that one is non-negoitable.
I hope that helps a bit.
I wish you the best of luck in all your future life endeavors, my dishonest and abusive-posting friend.
Rob
Laugh says
How exactly do institutional investors not have access to this info? This makes zero sense. They have access to massive amounts of research.
Rob says
They are humans, Laugh.
Humans are the rationalizing animal.
Once we make a decision that we want to go one way for emotional reasons, we use our brainpower to justify that decision.
Brainpower becomes a negative once you make an emotion-based decision to go the wrong way.
You cannot rein in your Get Rich Quick urge with research. Unless you address the emotional urge that is at the core of stock investing risk, you will interpret all the research available to you in whatever way you need to to justify your emotional choice.
We all need to address the emotional aspects of the investing project. Those aspects are 80 percent of the story.
Those are the aspects that cause the Buy-and-Holders to flip out. That’s because they know on one level of consciousness how important they are.
Rob
Anonymous says
“I expect to make a lot of bucks too. I expect to make 500 million of the suckers.”
Honest question: Do you think your rapidly dwindling low-return portfolio and savings can last that long?
Rob says
I am not all-knowing, Anonymous. But I am personally not able to see any way in which it wouldn’t.
I have enough in the way of assets to last roughly 13 billion years. I’d say that there is about 1 billion give in either direction, depending on how interest rates play out over that time. So let’s put it at something between 12 billion years and 14 billion years. My strong hunch is that will be more than long enough for us to see good things happen.
But I have been wrong before. Let’s say that it happens again. Then what?
I could get a job. That might stop me from engaging in too many Goon Conversations. But there are already thousands of those in the Post Archives here. I could certainly pay the few dollars it takes to keep the site in operation with the mountains of material already available here. So that works.
I might die. I could get hit by a car or get cancer. But then my boys could take over the site. So that works.
My boys could get caught up in other things and not have a strong interest. In that event I have a friend who has offered to take over the site. So that works.
I don’t expect any of those things to happen. I expect that my 13-billion-year (give or take a billion years) stash will be more than enough to get us all to the other side of The Big Black Mountain with lots and lots of dollars to spare. But if worst comes to worst, I still think that my country ends up surviving the Buy-and-Hold Crisis and entering the biggest period of economic growth in our history.
But I think we are just going to have to wait and see. I am not expecting to see you Goons come clean until you see the next crash with your own eyes. And at that point it won’t make much difference. So I am waiting to see how it goes.
I am answering your question with a sincere response. I don’t own a crystal ball. I don’t know with 100 percent certainty. I am telling you what I truly believe while noting that I have been wrong about such things before and that it is possible that it is happening again.
I hope that helps a bit, my long-time abusive-posting friend.
Rob
Anonymous says
If we could no longer grow apples and there was a limited supply, you would have to pay whatever the market rate is at that time for apples. Stock in any particular company is not a commodity. You cannot “grow” more stock. If you want to own it, you will need to pay market price.
As for your friend Bernie, people were not buying stock or apples. They weren’t buying anything. The use of Bernie Madoff sows a lack of understanding as to how to use a proper analogy.
Rob says
No one ever needs to buy stock at any one point in time. We buy stocks to finance our retirements. If we buy at reasonable prices, we are able to retire much earlier. So it makes sense to do that. To say that you need stocks so much that you are willing to pay three times what they are worth even though that means delaying your retirement for many years does not make sense (in my assessment!).
Investors who ignore price are not buying stocks or apples either. They are buying cotton-candy nothingness. When stocks are selling at three times fair value, one third of the money you turn over is going to buy stocks and two-thirds is going to buy cotton-candy nothingness.
Bogle is Bernie Madoff times 500. Buy-and-Hold is fraud. That’s why the Buy-and-Holders threatened to destroy Wade Pfau’s career when Wade reported accurately that there has never been a single study showing that it is not always 100 percent required to exercise price discipline (long-term timing) when buying stocks. It is financial fraud to say this 34 years after the peer-reviewed research showed it and the Buy-and-Holders don’t want to go to prison.
The problem is that continuing the cover-up extends the length of the prison sentences!
That’s my sincere take re these terribly important matters, in any event.
My best wishes to you and yours.
Rob