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 interesting that you say “thanks ” and warm wishes here, yet you call people “goons” and tell them they are going to prison on your own blog. Why the two different personalities?
There’s only one personality, Sammy.
I love my Buy-and-Hold friends. The Buy-and-Holders were the pioneers. There would be no Valuation-Informed Indexing today had not Buy-and-Hold come first. Jack Bogle is properly seen as a hero by millions of middle-class investors. I learned to use the peer-reviewed research as my guide to how stock investing works from Jack Bogle.
I also learned about the errors in the Old School safe withdrawal rate studies from reading one of Jack’s books. He said that it is an “Iron Law” of stock investing that prices always revert to the mean. If that is so, then there is zero chance that the safe withdrawal rate could be a constant number (it was once thought that the SWR was always 4 percent). If Jack is right that prices always revert to the mean, then the SWR must VARY with changes in the valuation level; there is going to be more reversion (prices falling over time) when prices are insanely high than there will be when prices are only a little high. I could not have put up my famous post of the morning of May 13, 2002 (the post that kicked off the 14-year saga in which I have tried to spread the word about Valuation-Informed Indexing and in which I have connected with thousands of ordinary investors anxious to learn what I have to share and in which you Goons have engaged in brutally abusive posting to block them from learning what they want and need to learn) without having learned what I learned from Jack. Jack Bogle got this all off the ground. I rate Bogle as the second most important investing analyst of all time (second only to Robert Shiller).
I consider myself a Boglehead. I do NOT consider myself a Lindauerhead. It’s in the difference between Jack Bogle and Mel Lindauer (one of the leaders of you Goons) that the Goon part of our story enters the picture.
Shiller published his “revolutionary” (his word) research in 1981. If humans were perfect creatures Bogle would have at that time acknowledged that he made a mistake re valuations and we all would have quickly become Valuation-Informed Indexers and we would not be living through an economic crisis today. We are not perfect creatures. Bogle had a lot invested in the Buy-and-Hold concept as he originally envisioned it. He couldn’t accept what Shiller showed. He fell victim to cognitive dissonance. He went into self-denial. He ignored Shiller’s revolutionary findings. He continued to push the same old Buy-and-Hold stuff and he continued to make the no longer accurate claim that the peer-reviewed research supported Buy-and-Hold (Shiller’s finding that valuations affect long-term returns discredited Fama’s finding that the market is efficient — if the market were efficient, returns would play out in the pattern of a random walk).
In a practical sense, none of this mattered much in 1981. Valuations were at rock-bottom lows. It was hard for anyone to imagine that we would ever again see fair-value price levels, much less prices levels at double fair-value levels or at triple fair-value levels (which is what we saw in January 2000). So “experts” continued to push Buy-and-Hold and investors of course ate it up. The Buy-and-Holders were telling people that their bull market gains were real, that they were much farther along in the financing of their retirements than the peer-reviewed research showed them to be — We all are drawn to Get Rich Quick schemes! Buy-and-Hold — intended to serve as a research-backed strategy had been transformed into the polar opposite, the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind.
I entered the scene on May 13, 2002. I politely pointed out that, if what Bogle said was so, the safe withdrawal rate was not a constant number but a number that varied with changes to valuation levels (dropping to 1.6 at times of high valuations and rising to 9.0 percent at times of low valuations). What I didn’t know was that the investing advice game was no longer on the level. The experts in this field had been covering up Shiller’s revolutionary finding for 21 years at that time. I thought that I was doing something obviously good by applying Shiller’s finding to our understanding of how to go about planning our retirements. In the eyes of the experts in this field, I was doing something very bad and threatening, exposing a cover-up that was in the process of destroying millions of middle-class lives.
I oppose the cover-up, Sammy. And I of course oppose the insanely abusive practices that have been employed to keep the cover-up going for the past 14 years. I call those who employ such tactics “Goons” not because I feel some personal dislike for them. I call them Goons because it is my job to tell the story as accurately as I can and the word “Goons” conveys the point that needs to be made. The fact that Buy-and-Holders almost universally either engage in these tactics themselves or tolerate the use of these tactics by others shows that they lack confidence that their ideas can be defended in reasoned discussion. The Buy-and-Holders still follow Buy-and-Hold strategies. But they no longer possess confidence that they can defend their ideas in a fair fight. That’s telling. That’s something that every investor alive needs to know.
I have learned a great deal from my Buy-and-Hold friends and I continue to learn from them and I expect to continue to learn from them for many years into the future. Valuation-Informed Indexing is the realization of Bogle’s dream — it is the first true research-backed stock investing strategy. I am always going to be in debt to my Buy-and-Hold friends and I of course am always going to wish them well in all their endeavors. My expressions of warmth and friendship and gratitude toward my many Buy-and-Hold friends (including you!) are 100 percent sincere.
The Goon stuff HURTS my Buy-and-Hold friends. They need to incorporate the findings of the last 35 years of peer-reviewed research to make their strategy work in the real world. The Goon stuff makes people afraid to speak out about their true beliefs re how stock investing works. People do not want to see their loved ones threatened with physical violence. People do not want to see their careers destroyed. We are living in a strange Twilight Zone time-period where for the first time in history we know how to reduce the risk of stock investing dramatically but in which we don’t tell people about it because we fear the wrath of the people who got us on the right track in the first place but now engage in insanely abusive practices aimed at blocking us from spreading the word about what the peer-reviewed research really says. Humans!
There is no conflict between loving Buy-and-Holders and hating the tactics that a small number of Buy-and-Holders have employed to stop the idea of rooting one’s investing decisions in the peer-reviewed research from achieving its full potential. Permitted honest posting on all these matters is a win/win/win/win/win. It is not even possible to imagine how anyone could be harmed by learning more about what the research actually says. The Goon stuff is the OPPOSITE of what Buy-and-Hold stood for in its early days. Buy-and-Hold was about employing science in the investing realm. The Goon stuff is about BLOCKING the advance of scientific findings.
I hope that helps a bit, Sammy. I love it that you care about this stuff and that you once had an intense desire to learn as much as you could about it. I even love your skepticism. Your skepticism has made me work hard to sharpen my thinking and that of course helps me and all who read the words that I generate. I HATE the abusive stuff that you advance when you are stuck for responses to my references to the findings of the peer-reviewed research of the past 35 years. I call you a “Goon” when you stoop to becoming something lower than what I know from experience you are capable of being. I want you to be the best Sammy that you can be. As your friend, I want to discourage your Goon tendencies. I would feel that I had let you down as a friend if I failed to ever comment on them.
I naturally wish you the best of luck in all your future life endeavors, old friend.