Set forth below is the text of a comment that I recently posted to another blog entry at this site:
Wasting 15 years locked on one tiny investing metric would be mind-bogglingly stupid. But toiling for 15 years in the basic struggle of good versus evil is a noble sacrifice. Which is why you frame everything in terms of morality.
For me, this is very simple, X.
I was a popular poster at the Motley Fool Retire Early board. I made lots of friends there. My aim was to help my friends. So naturally I posted honestly.
John Greaney was a Buy-and-Holder. He believed what the Wall Street Con Men told him. He was embarrassed when I pointed out the errors in his retirement study (which he made because he believed what the Wall Street Con Men told him). All the rest follows from that.
I don’t see this strictly as a matter of morality. There are moral issues, to be sure. It certainly would be immoral for me to say that I believe that Greaney included a valuations adjustment in his study. You are right that I don’t want to behave in an immoral way by doing that. But there is more here than just that.
If there were zero moral concerns at stake here, I still wouldn’t want to give bad investing advice. Leave aside all the moral stuff. I wouldn’t want to do it for INTELLECTUAL reasons. I like to get things right. It’s offensive to me intellectually as well as morally to give bad investing advice. And of course I think it is a bad idea legally to do that, that’s another concern. Probably the biggest factor of all for me is that it is just not kind to lie to people about the numbers that they are using to plan their retirements. That’s the biggest one for me.
I want to be a good friend to people I get to know and like on the internet. I want to be moral too. But in my personal hierarchy of concerns being a good friend is probably of greater importance than being moral. It may be that my priorities should be otherwise. But that’s the way it is for me. I cannot BEAR the thought of misleading my friends and seeing them suffer failed retirements as a result. It’s beyond even my comprehension that I could ever walk that dark path. I guess I would like to say that it is beyond my comprehension that I would ever behave immorally too. But I can’t say that that one is the one that comes first to mind when I think about this stuff. The one that comes first to mind for me is being a bad friend. For good or for ill, that’s me.
I of course don’t agree with you that P/E10 is “one tiny investing metric.” The peer-reviewed research that I co-authored with Wade Pfau shows that we can reduce the risk of stock investing by 70 percent by making use of that “one tiny investing metric.” Reducing investing risk by 70 percent is HUGE. It’s the biggest advance in the history of personal finance. There is nothing else even in a close second place. There is nothing else even in a somewhat distant second place. Whatever is in second place is VERY distant.
P/E10 is the price tag of stocks.
For someone to suggest that it might be okay to buy stocks without first looking at P/E10 would be like someone telling you that it might be okay to buy a car without first asking the salesman how much money he is going to take out of your account when you do so. You MUST know the price of a car before you buy it. And you MUST know the price of stocks before you decide on a stock allocation. Knowing the price is critical. Knowing the price is 80 percent of the game. Knowing the price is the difference between having virtually no chance of being successful in the long run and being virtually certain of long-term success.
Looking at P/E10 is the key to successful long-term stock investing, according to the last 34 years of peer-reviewed research in this field. It’s no “tiny investing metric” or anything even remotely close to it.
Is what I am doing a “noble sacrifice”? Yes and no.
I expect to get paid a $500 million settlement payment following the next crash, X. I don’t think that there are too many who are going to look on what I did as an act of self-denial after I cash that check. I do not think of myself as a pure altruist and I certainly did not start walking down this path as an act of self-denial.
But there obviously has been self-denial involved. You Goons point out all the time that I have not been able to make a living for 13 years and that few people come to this site because of the Campaign of Terror that you have led against me. I stood firm in the face of that fire. That involved making some sacrifices. So, yes, there has been sacrifice here even though I expect to be paid $500 million for my trouble. The payment of the $500 million has been long delayed and of course it is not a 100 percent certainty that I will be paid that amount. So there has been sacrifice.
This is a business for me. I do the work I do primarily for business reasons. I had no idea how corrupt this field was on the morning of May 13, 2002. I didn’t INTEND to spend the next 13 years exposing corruption when I put forward that post. But, faced with the choice of becoming corrupt myself or exposing the corruption so that we ALL can post honestly, I choice to expose the corruption. That was an act of self-denial, at least for a time.
So long as you put things in that context, I am happy to have this referred to as a huge sacrifice. It has become that. I just want to be clear that that was not the intent when I started out and that I do not think of myself as some supreme altruist. I think that a lot of people would have done what I have done if they had been placed in similar circumstances. For example, I think that my good friend Jack Bogle would have done what I have done had he been placed in similar circumstances. It’s possible that Mel Linduaer and John Greaney would have done so too. I don’t know for sure. But I think it’s within the realm of the possible and I would obviously prefer to think the best of them.
A lot of people have not engaged in this act of self-denial because they don’t understand the issues clearly enough to see why it is so important that someone do so. Either because I am a very lucky individual or because I am a very unlucky individual, I see these issues with a great clarity. My take is that my great clarity has been unlucky for me for 13 years now (at least in a financial sense) but will become very, very lucky for me in days to come. We’ll see, you know?
The bottom line is that I would not be able to live with myself if I played it differently. There’s zero chance. That one has been 100 percent clear to me going back to the first day.
I of course want to be friends with all the people who attack me. I have always tried to bend over backwards to show them that I want to be friends. But there is only so far I can bend. I cannot say that Greaney included a valuations adjustment in his retirement study, I cannot say that there is not 34 years of peer-reviewed research showing that a valuations adjustment is required and I cannot say that he corrected the study within 24 hours of learning of the error he made in it.
I cannot say any of those three things. It is beyond my imagining that things could ever change so that I could say any of those three things. All of the rest just follows from that, in my assessment Call it morality, call it caring about friends, call it intellectual integrity, call it fear of going to prison, call it whatever you want. For me, there’s just no give re those three claims. I don’t like being dishonest to my friends as a general rule. And I really, really, really, really don’t like being dishonest to my friends re important money matters.
That’s where I am coming from, in any event.
I wish you all the best that this life has to offer a person.