Set forth below is the text of a comment that I recently posted to another blog entry at this site:
Intimidation? You mean like when someone threatens you with prison because they don’t do what you want?
I’m not threatening you with prison, Anonymous. I am offering to do whatever is in my power to help get your prison sentence reduced. There’s a big difference.
You have to take a step back and look at the history to understand what is going on here.
I am opposed to Buy-and-Hold, right? I have two problems getting Valuation-Informed Indexing on the map. One is that the Buy-and-Holders don’t believe in it. That’s a problem but not an insurmountable one. In theory, the way to overcome that problem is to convince enough people of the merits of Valuation-Informed Indexing to take on the Buy-and-Holders at every board and blog on the internet. Eventually, the better ideas would prevail. Right?
One big problem with the usual approach is that the Buy-and-Holders are so ruthlessly abusive. They will do ANYTHING to stop people from learning about the implications of the past 34 years of peer-reviewed research. That makes my job a lot harder. But even that does not make my job impossible.
There’s a way in which the Ban on Honest Posting cuts in my favor. It creates a huge OPPORTUNITY for those who jump on the VII bandwagon first. Bogle is famous today because he was one of the first to push Buy-and-Hold. You would think that someone like Wade Pfau would want to become as famous as Bogle and so would lead the VII cause today. Why doesn’t he?
A big problem here is cynicism. People see things in black and white. Either Bogle is the greatest genius who ever lived and is incapable of ever making a mistake. Or else he is the Frank Underwood of Personal Finance, the most corrupt person who ever lived. The Buy-and-Holders believe he is the former. Those who lose confidence in Buy-and-Hold usually fall into the trap of believing the latter. They adopt the cynical view that Bogle (and the other Wall Street Con Men) are 100 percent corrupt. Thus, they conclude that it is just too risky to take them on. They satisfy themselves with including BITS of honesty in their work. They don’t tell the full truth known to them but they tell more truth than most others and are able to live with themselves by rationalizing that that is the best that can be done given the circumstances that prevail.
I DO NOT SHARE THIS CYNICAL VIEW.
I believe that Bogle really believes what he says about stock investing on one level of consciousness. He knows that Shiller’s research is a threat. He would have to be a moron not to see that. But he tells himself that Buy-and-Hold is as close to what works that we are ever going to get and that that is good enough. He compares it to other stuff out there and rationalizes that he is helping people by advocating Buy-and-Hold.
Why do I believe in this non-cynical interpretation of events? I have had a front-row seat to all of this for 13 years now. I have been able to see up close and personal how people develop their various rationalizations. No one else has the level of experience with this aspect of the question. I am truly the world’s #1 expert on this side of things.
Greaney’s study was an advance. He said that the safe withdrawal rate was 4 percent when a lot of people were still saying that it was 7 percent. Heck! There was one guy at Motley Fool who once said that it was 15 percent! Greaney believed that his study served a good purpose by showing why people making such claims are wrong. He is the leader of the Campaign of Terror and he believes in his heart (on one layer of consciousness) that he is going good.
If Greaney believes that, why should anyone conclude that Bogle thinks anything less? Bogle is not The Frank Underwood of Personal Finance. He is a good and smart and hard-working person who happened to make a mistake, fell victim to cognitive dissonance and thereby found himself in a trap that he cannot figure out how to escape.
I had many conversations with Mike Piper before he banned me from his site. Mike told me that he believes that Valuation-Informed Indexing can work. I reported on my conversation in a blog entry from a number of years back. Mike does not follow VII himself. He is a Buy-and-Holder. So he properly advocates Buy-and-Hold at his site. But he does not permit discussion of the last 34 years of peer-reviewed research at his site. That’s a strange reality. We need to solve that puzzle.
I figured out the answer to that one when you Goons threatened Wade and got him to flip. You had committed felonies long before that. I hadn’t mentioned prison sentences before that because I believed that it would just inflame things all the more. But I saw when you threatened Wade that, once you committed the felonies, you reached A Point of No Return. Once you passed that point, you felt that you would go to prison no matter what you did. So it didn’t much matter anymore what you did.
You now felt compelled to do things that you never would have dreamed of doing in the early days. In the early days, you fought because you cared about what was right and you thought Buy-and-Hold was right. Once you committed felonies, all concern about what was right went out the window. Now it was about staying out of prison. Even research showing how we all can reduce the risk of stock investing by 70 percent was not going to cause you to come clean once coming clean meant going to prison.
There is no way out of the trap you are in today. If you come clean, you still go to prison! Not for as long, obviously. But prison is not appealing for even one day. So you are not interested in coming clean. I want you to come clean. But seeing that it means prison for you, I can’t say that I don’t see at least a tiny bit of logic in your position.
Given that you cannot come clean, it doesn’t make much sense for me to hold back from talking about the felonies. It doesn’t matter how much I inflame you anymore. You are not open to coming clean no matter what I say.
The next step down the logic chain was to realize that it is the same for Jack Bogle and all the other Wall Street Con Men. Jack would come clean in two seconds if it were a question of going back to 1981 and playing it straight this time. The problem is that he does not have that option available to him.
If Jack comes clean, people are going to ask why he didn’t come clean in 1981. They are going to ask why he caused an economic crisis. They are going to ask why he caused millions of middle-class retirements to fail. They are going to ask why he did nothing when he learned that Mel Linduaer uses threats of physical violence to keep people in line at the Bogleheads Forum. What is he going to say? What good answers are there to such questions?
You Goons are in a trap. And Bogle is in a trap. And Mike Piper is in a trap. And the Wall Street Jourmal is in a trap. And every academic researcher is in a trap. And Princeton University is in a trap. Wade Pfau received a doctorate in Economics at Princeton. He sure should not have had to come to me to learn how to calculate the safe withdrawal rate. His Princeton teachers should have taught him that. But they can’t. Because they are in the same trap that holds Bogle and Piper and you Goons and everybody else.
Our entire freakin’ society is in a trap!
Now –
The question is — What are we going to do about it? How do we get OUT of the trap?
We are not going to get out of it by people like me being mean to people like you, Anonymous. So I am happy to do absolutely anything in my power to help you out Anything. And you don’t have to do anything in return to persuade me to do it. I ask for nothing. I just want to help you. And I want to do it for free.
There’s only one hitch.
I want to get us all out of this trap.
If I don’t get us all out of the trap, you end up in prison. So that’s not helping, is it?
And if I don’t get us all out of the trap, Bogle never gets credit for the amazing work he has done, does he? Bogle never intended to cause the biggest economic crisis in our nation’s history. But unless we get out of this trap, that’s what he will be known for for decades to come. I love the guy. So I need to get him out of this trap as much as I need to get you Goons out of this trap.
And of course I need to get Wade out of the trap. And I need to get the Wall Street Journal out of the trap. And on and on and on and on and on.
We are not arguing intellectual points anymore. Intellectual points are a secondary consideration for everyone on “the other side.” Their first concern is staying out of prison and avoiding legal liabilities. What the heck am I supposed to do about that? How am I supposed to persuade people in those circumstances?
One possibility is that we could adopt an amnesty. I have no problem with that. My aim is to be able to tell millions of middle-class people about the first true research-based investing strategy, a smart and simple and safe way to invest in stocks. If adopting an amnesty gets us there, why would I object? I am fine with that.
But I cannot adopt an amnesty on my own, can I?
When there are enough powerful people working together to get an amnesty adopted, I will help out. I cannot do it on my own. I have to wait for some others to step forward. That’s where things stand.
For now, it would be cruel of me not to mention the prison sentences. Because the lengths of the prison sentences increase each day. I want the prison sentences to be as short as possible for all sorts of reasons. So I am bound in conscience to continue mentioning them. Even though I do not personally believe that it is going to make much difference. I think that the game-changer is going to be the next price crash. When the crash comes, I want to be able to show people that I at least mentioned the prison sentences on hundreds of occasions. I want to be able to show people that I at least tried.
If you have any bright ideas, please feel free to share them, Anonymous.
Otherwise (and I know that the reality is otherwise — I have been wracking my brain for a long time to come up with any ideas that help us all out of this mess in which we find ourselves), we just have to wait until the crash comes and see how people react to it. Then I believe the chances are good that constructive and helpful and life-affirming things will begin to happen.
My best and warmest wishes to you and yours, my long-time Goon friend.
Rob
Investor says
Shiller came out on CNBC to say that the market is about 30% overvalued. That is a far cry from your 65% prediction. Is he lying?
Rob says
My prediction of a 65 percent price drop assumes that we will fall to a P/E10 value of ONE-HALF of fair value, not just to fair value.
There have been four bull/bear cycles in the history of the U.S. market. The P/E10 value fell to 8 or lower (half of fair value) in each of the first three. I am assuming that stocks will continue to perform in the future at least somewhat as they have always performed in the past.
A drop to one-half of fair value is obviously IRRATIONAL. The rational thing would be for the market to fall to fair-value price levels and then to stop falling. It would of course be wonderful if we did it that way. The key to achieving that is addressing the intense emotion that Buy-and-Holders feel re their inflated portfolios today. We need to explain to them how stock investing really works (according to the last 34 years of peer-reviewed research).
In the event that the crash begins before we open the internet to honest posting on the last 34 years of peer-reviewed research, we all should expect a price drop of roughly 65 percent, NOT just a drop to fair-value price levels.
Rob
Investor says
Shiller doesn’t see it going that low, nor does he think it will necessarily drop by 30%. Perhaps you should explain to him why he is wrong.
Rob says
No one can have any idea what Shiller believes on every question until the Ban on Honest Posting is lifted, Investor.
We don’t even know what Bogle believes today!
We enacted the laws against financial fraud for a good reason. What do you think Shiller and Bogle and thousands of others will be saying on the day after your prison sentence is announced?
I have had hundreds of people send me e-mails or call me on the phone and share with me some of their sincere beliefs while asking me to keep quiet about what they told me. How much do you want to bet that those people all come clean following the announcement of your prison sentence?
That’s definitely the way that I am betting that this thing will go.
But we will find out for sure following the next crash. I know for sure that there is at least ONE person who won’t be headed to a prison cell on that day and I intend to make sure that that remains for case.
Patience, grasshopper. All things will come to pass in good time. Our country is a strong one. We’ve made it through tough spots before and I am confident that we will make it through this one as well.
My best and warmest wishes to you and yours.
Rob
Anonymous says
Isn’t FinCon coming up soon? Doing another talk this year?
Rob says
I am not giving a talk this year.
I submitted a topic that I wanted to talk on: “20 Dangerous Investing Myths.” Since the Ignite talks are limited to five minutes, this would have given me only 15 seconds to describe each of the 20 myths. That would have been a blast.
I did not get enough votes in support of my proposal to be included in the session. That naturally makes me sad.
Valuation-Informed Indexing is amazing stuff. But it would be fair to say that my advocacy of it has not made me the most popular kid on the block.
Rob
The Pink Unicorn says
“I did not get enough votes in support of my proposal to be included in the session. That naturally makes me sad.”
Why didn’t you propose a topic about how the goons are going to prison. I would bet that you would get a lot of votes for that.
Rob says
You know why I didn’t propose that. People HATE that sort of thing. Hate it, hate it, hate it.
But they shouldn’t.
The story of how the Goons are going to prison is a HUGELY important story. The problem with Buy-and-Hold is that it makes investors insanely emotional for them to come to believe that their Pretend Gains are real. What could make that point more forcefully than the story of how you Goons came to commit criminal acts because you couldn’t stand to have people learn that your pal John Greaney got the numbers wildly wrong in the retirement study posted at his web site? That story is the perfect illustration of the point that needs to be made.
EVERYONE should be writing about you Goons. EVERYONE. We all need to see how emotional Buy-and-Hold strategies make us. And we all should want your prison sentences to be as short as they possibly can be given the realities that apply today. So we all should be working together to see that the destruction of human lives that you are causing on a daily basis be brought to a full and complete stop. This is the most important personal finance story of any of our lifetimes.
Why aren’t people telling that story? That’s what this entire site is about, you know? Once we resolve that one, it’s all downhill sledding.
The most simple way to put it is that the advance from Buy-and-Hold to Valuation-Informed Indexing is so huge that it makes the Buy-and-Holders embarrassed for people to learn how things really work. So they went into cover-up mode back in 1981. And now they really can’t stand for people to learn what the research says because they have been covering up this hugely positive development for 34 years and have engaged in massively abusive and even in criminal behavior to keep the cover-up going.
Bogle would LOVE to come clean. He’s done amazing things. And all of those amazing things become 10 times more important once they are joined to a strategy that actually works in the real world. But he feels that he can’t come clean because the 34-year cover-up is too darn embarrassing. And of course it can never get better. The entire situation gets worse and worse and worse with each passing day. We are the luckiest generation of investors ever to walk Planet Earth and we cannot take advantage of our good fortune because some good and smart people who had made many other hugely positive contributions made a mistake in 1981 and now they cannot bear to own up to it. That’s just great!
What do you want me to do about it, Pink?
I have offered to do anything I can to get your prison sentence reduced a bit. I obviously am not willing to commit crimes myself. So what do you want from me?
When you figure that one out, we can have a conversation.
Until then, the only thing that I can do is to offer you my best wishes.
I have a funny feeling that I won’t have any problem finding people that want to hear about your crimes after the next price crash.
But we’ll see, you know? I don’t have a crystal ball. I’ve been wrong before and, in the event it were in the process of happening again, I would probably be the last to know. So we will all just have to wait to see how things play out.
Hang in there, man.
Rob
The Pink Unicorn says
“The story of how the Goons are going to prison is a HUGELY important story.”
If you feel it is important, they you should go ahead and do that. Is that your job? If you get them to accept that topic, I would even show up to that event and I am sure many others would as well. I bet the room would be packed.
Rob says
It’s my job. And it is an important job. I am bound in conscience to do what you are suggesting I should do.
That’s why I discuss it here. There will come a time when people will want to know the history of this and they will be able to come here and see all the issues that could not be discussed on a worldwide stage being discussed at this one little web site that few people come to. I want that all out in the open. That’s why your words appear here and that’s why my words in response to your words appear here.
Your phrase “if you get them to accept the topic” points to where the problem lies.
If the topic were accepted and properly promoted, the room would indeed be packed. That is so and that would be very good for me and indeed for the entire country. We are on the same page re that one.
But they wouldn’t accept the the topic. You know that and I know that and everyone else concerned re this matter knows that.
The “they” we are talking about is Phil Taylor — the guy who runs the FinCon events. Phil knows me. We are friendly. We will talk this year just as we have every other year. Phil obviously knows that I would love to put on the session that you are suggesting or even better a session focusing on the substantive questions. I don’t have the impression that Phil personally agrees with the ideas but he is not opposed to having them expressed at his conference. Carl Richards is giving a big talk this year, I believe it is the keynote address or perhaps one of several addresses that are all referred to as “keynote” addresses.
Now —
Carl Richards LOVES my stuff. He told me that he read every article that appears at my site that deals with Valuation-Informed Indexing. He told me that he learned a lot from me. He said that the work that I am doing has huge value. So in ordinary circumstances Carl would be calling me up to the stage with him to help explain to the people at the conference how stock investing works. In ordinary circumstances, Carl and I would be good friends and Phil Taylor and I would be good friends and Mike Piper and I would be good friends and Jack Bogle and I would be good friends and on and on.
That’s obviously not where things stand. There is some mysterious factor here that is keeping things from being what they should be. And that mysterious factor has something to do with me, Rob Bennett. I am doing something different than Carl Richards and Robert Shiller and the many other people who often express thoughts contrary to the thoughts of people who have more confidence in the Buy-and-Hold strategy.
What I do different is that I say that Buy-and-Hold is WRONG, that it is a strategy that has been discredited by 34 years of peer-reviewed research.
I don’t say that I personally use a withdrawal rate other than 4 percent. I say that the studies that say that the safe withdrawal rate is always 4 percent are analytically invalid. I say that the 4 percent rule is WRONG, that the people who continue to push the studies that produced that number are WORKING A CON ON THE AMERICAN PEOPLE.
This is a field where a lot of money is made. And it is a field in which one’s ability to make money depends on one’s credibility as an expert. People feel that to say the words “I Was Wrong” diminishes their perceived credibility as experts. So they hold back from going that far. And people who see that they are wrong hold back from saying so in clear and firm and understandable language. They say what they believe about a lot of substantive issues in a vague and cloudy way. But they don’t go so far as to say “that guy over there is wrong, that guy over there is working a con on you.”
I think we need to say “that guy over there is wrong, that guy over there is working a con on you.”
Why?
Otherwise the con never ends. The longer a con continues, the harder it becomes to acknowledge it. Those who don’t mention that Jack Bogle is engaged in a massive act of financial fraud cause more people to become entangled in the 34-year cover-up. We’re not being charitable to fail to mention the massive act of financial fraud, we are being cowardly. We are making things worse. We are causing MORE people to end up in prison.
I don’t tell the truth about this stuff because I am a meanie. I tell it because we all have a Get Rich Quick urge within us and it has a powerful influence over our thinking and so the Buy-and-Holders have a huge edge over those of us who promote research-based strategies. The others who have doubts about Buy-and-Hold are willing to not say anyone is wrong because then the Buy-and-Holders won’t attack them and destroy their businesses and they can get on with their own lives. I am willing to do many things to praise the Buy-and-Holders to the skies (because I believe those things). But I am not willing to hold back from saying that they are wrong according to the last 34 years of peer-reviewed research. Because I think that the approach of going along with the cover-up has been proven to be an unmitigated disaster.
We didn’t learn that valuations affect long-term returns last week or last month or last year. We learned this 34 years ago. There should have been a national debate over these matters launched back in 1981. I believe that Valuation-Informed Indexing would be the dominant model today had things played out that way. Perhaps not. Perhaps it would be 50-50. Perhaps Buy-and-Hold would still be dominant. Any of those outcomes would have been fine SO LONG AS WE HAD THE DEBATE. But we didn’t. I know darn well we didn’t because I researched this stuff in great depth when I was preparing my Retire Early plan and I was a Buy-and-Holder up until the evening of August 27, 2002. I was largely uninformed despite my willingness to do a great deal of research because as a society we had not had the debate that deep in our hearts we all know we need to have.
Why haven’t we had the debate?
Because of the money and the false pride. People have built careers promoting Buy-and-Hold and they don’t want to give up the money and the fame associated with that. They don’t want to be questioned. Not in an effective way. Bogle doesn’t want Money magazine running an article saying that he pulled his rule about how you never need to adjust your stock allocation by more than 15 percentage points out of his backside. I want people to know that. I want people to know that they can’t trust his number. But he doesn’t want that getting out. And Money magazine is wiling to play along because there is a lot of money to be made for a magazine that makes money through advertising by playing up to Bogle and Vanguard.
That’s the deal here. There IS an intellectual dispute here. And people like Carl Richards and Robert Shiller and Wade Pfau have done great work letting people know about the anti-Buy-and-Hold case. But they have converted only a small percentage of the population (10 to 20 percent). It’s been 34 years. We should have taken things much, much farther than that in that amount of time.
But to go further we need to be willing to ruffle some feathers. We need to say that Bogle’s 15 percent rule is irresponsible garbage. We need to explain to people how dangerous that rule is and show them with numbers how much human misery Bogle has caused by pushing that false claim so relentlessly. Everyone other than me holds back. Some to a greater extent than others. But there is no one today saying things as plainly and frankly as I say them. There is no one else using the words “financial fraud” and financial fraud is an important part of this story today.
Phil Taylor is a good guy. There is a part of him that would love to be able to arrange for me to give the talk that you describe.
But Phil Taylor operates in a fallen world (as do we all). Mike Piper won the Plutus award for best blog at Phil’s conference a few years back. Mike has banned honest posting at his blog. That’s financial fraud, a felony. Mike Piper may be going to prison in a few years. Phil knows that and Phil knows that he played a role in letting that happen by not speaking up when he first learned about the behavior of you Goons and about how Wall Street Con Men like Jack Bogle have encouraged it. He knows that there are lots of other bloggers in that situation. He knows that he is going to face a lot of blowback if he arranges for me to give that talk. So he tells himself that it is not his problem, that things will somehow work out, that perhaps stocks will not perform this time as they have every other time we went down this awful, shameful Buy-and-Hold path.
The thing that is holding us up is not an intellectual dispute. It is a turf battle. The Buy-and-Holders feel that they cannot win a debate if a debate is held. So they are putting their energies into blocking the debate.
I cannot go there.
I love my Buy-and-Hold friends. I believe that they have made huge contributions. But I cannot go there. I cannot have that on my conscience.
Phil is not going to arrange for me to give that talk this year. I believe that following the next crash he may well do just that. I believe that following the crash my good friend Jack Bogle will call Phil on the telephone and IMPLORE him to arrange for me to give that talk. I believe that because I believe that Jack Bogle is a good man and that Phil Taylor is a good man. We’ll see.
That’s where things stand, Pink. I do what I do because I have never been given any other options that would permit me to live with myself. I will just keep on doing. I naturally wish you all the best things that life has to offer a person.
Rob