Set forth below is the text of a comment that I recently posted to the discussion thread for one of my columns at the Value Walk site:
It is bad behavior when you hijack other people’s threads. It is bad behavior when you repeat the same thing over and over again despite people asking you to move on as they have heard your tired lines eat too many times. It is bad behavior when you post repeated lies (like you just did). It is bad behavior to make up things like death threats and job threats and refuse to back them up with proof when confronted. It is bad behavior to avoid answering questions, despite board owners asking you to support your claims. It is bad behavior to make slanderous comments about well respected financial experts, such as Jack Bogle and Wade Pfau.
If someone says “the safe withdrawal rate is 4 percent” and the peer-reviewed research of the past 34 years shows that it is really 1.6 percent at the time because of the valuation level that applies, Buy-and-Holders view it as “hijacking the thread” to tell people that. But the people who are trying to determine the safe withdrawal rate for purposes of planning their retirement need to know that, Sammy. They need to know the right numbers.
The Buy-and-Holders say that the safe withdrawal rate is 4 percent “over and over.” If we are required in conscience to let people know that that number is wrong, then we are required in conscience to let people know that that number is wrong as often as the Buy-and-Holders put forward the number. That is, we need to say that “over and over.”
The root problem here is that there are two schools of academic thought as to how stock investing works, the model based on Fama’s research (Buy-and-Hold) and the model based on Shiller’s research (Valuation-Informed Indexing). Both of these men were awarded the Nobel Prize for their research, so it can be said that both models are legitimate. But both cannot possibly be right. The two models are rooted in opposite premises.
The answer is for advocates of both models to tell people that there are two models and that the numbers they favor are the ones supported by their model and that their readers need to know that there is another model that generates very different numbers. When you do it that way, you are leaving it to the reader to make the decision as to which model to follow. You are providing information that you personally believe is accurate but you are not trying to hide anything from the reader that he needs to know. That solves the problem.
I think it would be fair to say that the Buy-and-Holders don’t do this because they feel that it would hurt their marketing efforts. They want to be perceived as “experts” and letting people know that there is another model that generates very different numbers undermines the claim that they are true experts. We all should want to undermine that claim. The reality is that no one in this field is a true expert today. The science is just too new. We are still in the early stages of learning how stock investing works. We have made important progress in recent decades. But we do not today know enough for sure to say in full honesty that we are certain of what we are saying, that we possess true expertise.
I believe that Valuation-Informed Indexing is the answer, Sammy. I believe that strongly. I also acknowledge that I have been wrong before and that it could be that it is happening again.
Can you say the same?
Can Jack Bogle say the same?
Bogle needs to say that. When Bogle and the other Buy-and-Holders get in the habit of saying that, all those who feel doubts about Buy-and-Hold will begin speaking up. We will see lots of articles questioning the root premises of Buy-and-Hold. We will see new types of calculators being developed. We will be hearing hundreds of podcasts describing strategies that we have never heard about before.
Perhaps Buy-and-Hold will prevail in the marketplace of ideas. Perhaps Valuation-Informed Indexing will prevail. There’s only one way to find out. We need to launch a national debate re these questions.
That’s my sincere take re these terribly important matters, in any event.
I wish you the best of luck in all your future life endeavors.