Set forth below is the text of an e-mail sent to me by Jeff, the author of The Sustainable Life Blog, on October 25, 2013, followed by my response to him:
Hi Rob,
I just wanted to drop you a quick line and say how nice it was meeting you at fincon in St Louis this year. I don’t know about you, but I had such a great time hearing from all the speakers and meeting online friends (some for the first time).
It was great meeting you at Ignite Fincon and chatting with you about Value Index Investing. I thought it was really interesting, and I’d really like to know how you got started with Value Index Investing and what you enjoy most about it. I had such a great time meeting and talking to so many different people, I didn’t get much time to focus on the most interesting parts – like why they do what they do!
I remember that we chatted a bit about you being the most hated guy on investing forums and about you branding it as well. That was really great to hear about, and I think it’s so funny that people get so angry at you for those comments you left. Glad that you were basically proven right by the downturn though.
Please, don’t hesitate to email me if you’ve got any questions or need help with anything. I’ve been blogging for almost 5 years, and love to help out anyone that asks!
Once again, it was great meeting you..
Jeff
Jeff:
That’s super kind! Seeing your e-mail brought a nice measure of good cheer to my Saturday afternoon.
I got started with Valuation-Informed Indexing when I was putting together an early retirement plan in the late 1990s (I left corporate employment in August 2000 and our family of four has been living off our investments for the 13 years since). When you are handing in a resignation from a big-paycheck job (I was a Director at the Ernst & Young accounting firm), you need to be SURE that you have enough to make it on your own. So I investigated a concept called “Safe Withdrawal Rates.”
I discovered (ironically enough, I discovered this by reading John Bogle’s book — this is ironic because Bogle is the lead advocate of Buy-ad-Hold, the strategy that VII replaces) that the conventional SWR studies get the numbers wrong (they fail to consider the effect of valuations). I was posting daily at a Retire Early board at Motley Fool and a retired government engineer there named John Walter Russell became interested enough in what I was saying to spend the next eight years of his life researching questions related to VII. John did HUNDREDS of studies backing all this up and published them at his own site. John died a few years ago and the right to publish all his research passed to me.
At some point, I started posting at the Vanguard Diehards board at Morningstar.com. An academic researcher (Wade Pfau — he has a Ph.D. in Economics from Princeton) discovered my posts and wrote me to ask if I would be interested in doing some research with him. Our paper has been published in a peer-reviewed journal. I believe that it is the most important research published in this field in the past 30 years. It shows investors that simply by taking valuations into consideration when setting their stock allocations they can reduce the risk of stock investing by 70 percent. Once we reach a point where we can publicize these findings, stocks will become essentially a risk-free investment class. This is a huge deal.
The thing that I like most about VII is not the investing benefits. I have made my living as a journalist pretty much my entire life (I was hired at Ernst & Young as a tax lobbyist because they learned about my work reporting on tax legislation on Capitol Hill — I also hold a law degree and a Masters in Tax Law). So I have a strong interest in public policy issues. VII is rooted in the research of Yale Economics Professor Robert Shiller (who won the Nobel prize a week or two ago). Shiller’s findings don’t just make stock investing a risk-free endeavor. They also have huge implications re stabilization of our economic system.
Shiller predicted the 2008 economic crisis in a book published in March 2000. Do you know how he did it?
Shiller’s research shows that EVERY economic crisis in U.S. history was caused by excessive stock valuations. There has never been a single exception. Take away excessive stock valuations and you take away economic crises and all the huge increase in unemployment that always follows from them. Shiller’s work has the greatest potential for easing human suffering of any research being done today. What he has found (and what I have been writing about for 11 years) is the financial sector equivalent of the cure for cancer.
How do we stop stocks from becoming overpriced? It is amazingly easy.
I have a calculator at my site called “The Stock-Return Predictor.” It applies a regression analysis to the 140 years of historical return data to reveal the most likely annualized 10-year return for stock purchases made at any possible price level. It shows that the claim you always hear from Wall Street that “you can’t time the market!” is 100 percent false marketing mumbo jumbo. It has ALWAYS been possible and easy and necessary to time the market.
There is a hyper-technical way in which what they say is so. It is NOT possible to engage in short-term market timing (guessing where stock prices will be in a year or so) effectively. However, it is VERY easy to engage in LONG-TERM market timing. You can know today (with a high but not perfect level of
accuracy) where stock prices will be 10 years from today. Using the calculator, you can know when stocks are worth buying and when they are not. This permits you to retire as much as 10 years sooner than you ever before imagined possible.
The Stock-Return Predictor reveals the price tag of stocks. Middle-class people who don’t practice long-term timing are essentially making the most important purchase of their lives (we spend more in the course of a lifetime on stocks than we do on clothes or food or housing or cars) without knowing the price! It’s insane. Why do they do it? Every industry that exists would love to have its customers believe that its product is a good buy at any possible price. The Stock-Selling Industry is the only industry that has ever been able to persuade its customers that this is actually so. They get away with it because most investors are intimidated by the subject of investing. They defer to experts. And the experts in this field get paid depending on how effective they are in persuading people to buy stocks. The conflict overwhelms most people’s sense of right and wrong and they rationalize saying all sorts of things that have long been shown to be nonsense by the peer-reviewed academic research.
Once people understand that stocks are not worth buying at high prices, guess what happens? That makes it impossible for high prices ever to be seen again. As prices go up, people sell shares. The sales of the shares pull price down again. If they go too low, people start buying more and that pushes prices up again. Stock prices are self-regulating. So long as people are told about the research!
The trick today is getting the word out about what the research really says. Most of the people who work in this field have built careers around promotion of Buy-and-Hold. There are lots of powerful and wealthy people who very, very much do not want middle-class people to learn about Shiller’s research and its implications. So we face heavy resistance.
But things have changed in a big way since the crash. I couldn’t get a guest blog published anywhere on the internet in the old days. Today there are lots of blogs that welcome me. Shiller’s research shows that there will be another crash in a year or two. I believe that the gates will swing wide open then.
You probably know that many blogs have been hit hard by Google. I believe that VII is going to prove to be the salvation of the Personal Finance Blogosphere. Bloggers are not as beholden to the industry big shots as are most others in this field. We are at least capable of independence. If we can get a small group of independent bloggers writing about these ideas, they will spread and spread and eventually gain recognition everywhere. I have spoken with LOTS of people over these 11 years. Lots of the big names in this field want to feel free to tell their readers and clients what really works in the long run. But they are afraid. They need cover. The more people who speak the truth openly, the less afraid all the others who want to do so feel. So this thing will gain momentum fast once we get the fire started.
Please come back to me and ask questions about this at any time. My site is today the only site on the internet that explores the implications of Shiller’s research in an in-depth way. There is room for hundreds of blogs doing this kind of work. And we would be helping millions of middle-class people by doing it. VII is safe, smart, simple investing. I have had THOUSANDS of people encourage me to pursue this quest. People need this. They need it badly. And the demand is going to go through the roof following the next crash, which is likely coming= in not too long a time.
I hope that helps a bit.
Thanks again for your exceedingly king and encouraging note.
Rob
Anonymous says
Does Jeff still talk to you, or was he scared away by the goons as well?
Rob says
He did not respond to the words of the e-mail set forth above, Critter. That tells the tale.
Jeff is like all the rest of us. He wants to be friends with me because he likes me. That’s why he made contact with me. He finds the idea of the Campaign of Terror absurd, which is why he said what he said in his e-mail to me. But he cannot bear to go against all the people on the other side, all the people who either promote Buy-and-Hold strategies or who follow Buy-and-Hold strategies themselves. He is a social creature, like all of us. And he can’t go there. So he didn’t respond to the e-mail. And so the cover-up continues.
To end the cover-up, we have to call it out. We need to have articles about the cover-up appear at every site on the internet. We need to have it written up on the front page of the New York Times. That’s how cover-ups are exposed. That’s how we bring them down. We all know this.
The hard part re this particular cover-up is that exposing this particular cover-up does not mean just exposing “bad” people whom we have never met and whom we will never see in the future. In this case exposing the cover-up means exposing our friends and our neighbors and our co-workers and our fellow community members. Jeff liked talking to me at the bloggers conference. He wanted to stay in touch with me. But I am not the only person that Jeff liked talking to. He liked talking to LOTS of people who attended the conference. And 90 percent of the people he liked talking to have blogs where they have posted positive words about Buy-and-Hold. What are all those people going to think of Jeff if he comes back from the conference and writes a blog post saying that he spoke to this Rob Bennett fellow and he now realizes that the whole Buy-and-Hold thing is a con that is in the process of destroying millions of middle-class lives? Jeff would get closer to me by doing that. How many people whom he likes would he distance himself from by doing that?
That’s the story, Anonymous.
Humans are social creatures. Humans possess a Get Rich Quick urge. Buy-and-Hold exploits our Get Rich Quick urge. It sounds great in the short term. It destroys us in the long term. We are in the process today of moving from the short term to the long term. Buy-and-Hold stopped “working” in January 2000. From January 2000 forward, investors have done better (on a risk-adjusted basis) earning the 4 percent real that was available at that time with IBonds and TIPS. But the Buy-and-Holders are still not doing that bad. They did great before January 2000 and they can live with the results they have seen since. So the social pressure still favors continuing the cover-up. You’ll make more friends speaking in support of Buy-and-Hold than you will saying that Buy-and-Hold is a smelly Get Rich Quick scheme. I know whereof I speak.
But what happens after the next crash?
Do we continue to tell these lies? Do we continue to exert social pressure to keep people like Jeff from telling the obvious truths about this garbage investing strategy that is killing us all? Or do we decide that it is too darn important to provide some means for the millions of investors whose lives are in the process of being destroyed to continue tolerating all this nastiness?
I think we are going to make the change. I think that following the next price crash Jeff is going to feel free to speak out about what he learned from me. I believe that following the next price crash he is going to come forward with a statement saying that he felt funny about this ever since he spoke to me and that he wished that he had had the courage to come forward sooner.
But I could be wrong.
When I put forward my May 13, 2002, post, I thought that the smear campaign against me would last perhaps two days, three days at tops, and then people would see that the numbers support me and come to their senses and that would be the end of it. So I have a record of being terribly off base re this stuff. If you want to say that you think it’s happening again, there’s nothing that I can say in response except that I continue to believe otherwise and that I am physically incapable of participating in the cover-up myself regardless of what happens. So I will just soldier on.
It’s not personal, Anonymous. I cannot lie about this stuff. When I was putting together my plan, I worked hard to get it right and I cannot bear to say things that would cause someone going through the same experience to get it wrong. It’s not in me. I cannot go there.
That doesn’t mean that I don’t like you. That doesn’t mean that I don’t wish you well.
I’ll do my thing and you will do yours, you know? It would seem to me that the next price crash will tell us who is going to prevail. If some space opens up to tell the truth about the last 35 years of peer-reviewed research, I will become one of the richest people on the planet and everyone who reviews the record will say that I earned every darn dime that came my way. I will extend the hand of kindness to my many Buy-and-Hold friends yet one more time and this time it will be accepted and we will all work together from that day forward to rebuild our broken economic system. And we will meet with great success because we will from that point forward be able to speak openly about the most important 35 years of peer-reviewed research that has ever been published in the history of investing analysis (or in the history of economics, for that matter).
Or we will all go down together. That’s the other possibility. That’s where we end up if we all continue to live in fear following the next price crash, which I suppose is at least a theoretical possibility (one that I don’t permit myself to ponder much because I cannot bear to do so).
Or perhaps there is some third possibility that doesn’t occur to me because of my background or the set of life experiences that I have lived through, some possibility where the deepening of the economic crisis that comes with the next crash ends up not being so bad and people continue to lie about what the research says and nothing ever happens to stop them. I can’t see it but I have to accept that you must envision something like that playing out or you couldn’t continue to do what you do. I don’t think that something like that can happen. But I suppose that in fairness I should at least list it among the options given the possibility that I am once again getting it wrong, as has happened so many times before in my years of struggling to make sense of the things playing out before my eyes and failing miserably to do it properly.
Something is going to happen. I hope that we can all agree that that much is fair to say.
I will live with the results of that something. So will Jeff. So will Anonymous. So will Bogle So will Shiller.
I hope that we will do the best we can to see past our differences and remain friends no matter what that something is. That’s what I feel deep in my heart.
Is there anything else that can be said re these matters?
We still disagree. Obviously. I am never going to ban you from posting here no matter what. Obviously. I still believe what I believe and you still believe what you believe. Obviously.
I hope that helps. If it doesn’t, I don’t think that I have anything else to offer.
Please take good care, old friend.
Rob
Anonymous says
Please post just one quote, from the thousands of people you’ve emailed, that specifically says they fear buy-and-hold goons. Come on, you said many people have told you that verbally. Surely at least one must have written it down.
Rob says
That’s the entire web site, Anonymous.
The question is not how much evidence I have. I have a mountain of evidence.
The question is how ordinary people — the people whose lives are in the process of being destroyed by the massive act of financial fraud — respond to that evidence.
Today, those people see themselves as being ahead or at least not down by too much. So those people either support the con or at least do not feel strongly enough opposed to it to do something about the abusive stuff.
Will those people turn on the Buy-and-Holders following the next price crash? I believe they will.
But you are not going to come clean just because I believe that. You will be willing to come clean only when your prison sentence is announced and you see clearly the consequences of participating in a massive act of financial fraud. We are not there yet today. And you cannot bear to see the massive con come to an end (that would mean going to prison too even if for a bit less time). So you are going to hold out until that prison sentence is announced.
I am doing everything in my power to get the prison sentences announced by the close of business today. Everything that I can think of I have done. So I have honored my pledge to you (and to the millions of middle-class investors who are in the process of seeing their lives destroyed).
The next thing I am going to say is a horrible thing to acknowledge but I am going to say it anyway because I think it is important that it be publicly put on the table.
[b]It may not happen by the close of business today.[/b]
It is even theoretically possible that it will not happen by the close of business tomorrow. I know that this is hard to believe. But I have been going at this for 14 years running now. My conclusion after working this hard is that it may not happen even at the close of business tomorrow. It might. But I have come to believe that it is at least a theoretical possibility that it might not.
So what comes next?
After tomorrow comes the day after tomorrow.
After the day after tomorrow comes the following day.
My sincere take.
I naturally wish you all the best things that this life has to offer a person, my good friend.
Rob