Set forth below is the text of an e-mail sent to me by Jaime Tardy, owner of the EventualMillionaire.com site, on November 7, 2013:
Hi Rob!
So I’m going to be completely honest here. If thats ok! (If not, stop reading! 😉
I think you need to let go of the attacks. I think it makes the story a negative one instead of a positive one. Yes- there are haters, but we can’t let the haters get into the story.
I saw your speech at ignite. I was sitting with a few millionaires, and their reaction was that you were very bitter about this. They didn’t understand why you were talking about the haters so much.
I know you are starting a movement – and a movement has haters. (just look at politics!) But they don’t need to be a part of the story in my opinion. (they are a product of the movement – and hopefully one day they will see the light and join your side!)
Does that make sense?
🙂
Hope you have an amazing day Rob. I know you are passionate about what you do- your persistence in the face of everything is inspiring!
Was Jaime really sitting next to millionaires? If they are not following VII, then their money is all cotton candy, right Rob?
This is a 100 percent on-point observation, in my assessment, Anonymous.
In most cases, a large portion of the money they are counting on to finance their retirements is cotton candy. Absolutely. And that explains the behavior.
You often ask me “Is this all a massive conspiracy?” It is. But not in the way you suggest when you ask that. I call it a “Conspiracy of Ignorance.”
None of us understood how stock investing worked prior to 1981. Many possessed clues, to be sure. But no one had ever put the entire puzzle together. Then the Buy-and-Holders pushed the idea of using peer-reviewed research to develop a systematic way of developing knowledge of how investing works and generated a mass of hugely important insights, swinging and missing on the biggest issue of all, the importance of always including adjustments for valuations in one’s calculations. And then Shiller fixed the big mistake that caused Buy-and-Hold to go so wildly off the mark by showing in 1981 that valuations affect long-term returns and that therefore stock investing risk is variable rather than fixed. That of course changes everything.
So now we have it all. Now we’re set.
Except for this darn conspiracy that “defends” and even promotes Buy-and-Hold to this day. Huh? What the h? What’s that about?
It’s partly that there is so much darn money to be made with the promotion of Get Rich Quick schemes and the uncorrected version of Buy-and-Hold is the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind (unintentionally, to be sure — but still). Part of this is a money thing, a financial fraud thing. That’s real. And that’s a big problem.
But that is not the entire story. Not by a long shot.
There are millions of people whose lives are in the process of being destroyed by the continued promotion of Buy-and-Hold. The Buy-and-Hold Crisis is a huge economic issue and even a huge political issue. It is simply not possible that a bunch of Wall Street Con Men could pull something like this off by themselves. We live in a free country. There are lots and lots of smart people who love this country and who will step up to the plate and speak up against the Wall Street Con Men and their Internet Goon Squads when they see their country under attack. And yet they have not done so in this case. To understand this story, we have to come to terms with this important reality. This is not solely a money thing. How do we explain this additional aspect of the story.
I was on that stage when that speech was being delivered. I heard the reaction not only to my own speech but to all the other speeches. The reaction to my first slide, the one that contained the title of the speech [“How to Become the Most Hated Blogger on the Internet”] was the strongest positive reaction of the night. It wasn’t a close call. People LOVED the title. The crowd was eating out of my hand at that point.
The reaction to the second slide was also positive, but a bit less so. I would say that the intensity of the positive reaction was cut in about half with the second slide. Then it dropped off a cliff. The mood became cold for the remainder of the speech. There was no booing. But there was no further positive reaction. Perhaps a small smattering of applause here and there. I don’t recall there being much more laughter, again perhaps a small amount here and there.
Things got cold enough that I was worried that people would not cheer at the end of the talk. That would be very embarrassing because they cheered at the end of every other talk. I was very aware of how cold things had gotten and I just soldiered on, a bit concerned. They did applaud, no more and no less than for the other speakers. So I would say that most were not outright angry at me. But the crowd was certainly not eating out of my hand at the end like they were at the beginning. By the end of the talk, people were either neutral or probably in some cases borderline hostile.
There were four or five people who came running up at the end of the talk offering the most effusive praise imaginable. That small group loved me. We sat around and had beers for about two hours. But I don’t at all think that that group was representative of the group as a whole.
So I found Jaime’s comment very helpful. I need to understand why people react as they do. It is AMAZING that people told her that I seemed bitter. I 100 percent believe that she is telling the truth. Her comment is 100 percent consistent with other things I have been told or that I have seen with my own eyes. People think I am bitter. It’s not just you Goons who see it this way. You Goons are more vocal about it and more blunt about it. Most people are too polite to say out loud that they think I am bitter. But most people don’t think you Goons are nuts when you say it. They think you are a bit rude. But they get where you are coming from.
They generally do NOT get where I am coming from. They are fine with me saying to pay attention to valuations. They have heard that thousands of times and consider it a reasonable point. So they have no distaste for the expression of that general point. They don’t relate when I say that returns are highly predictable or that Buy-and-Hold caused the economic crisis or that retirement studies get the numbers wildly wrong or that financial fraud is being practiced or that people will be going to prison. That sort of language is a big turn-off to most people. I am sure. I have lots of experience with this. I know whereof I speak re these matters.
Even my wife feels this way. I read my Value Walk column at the lunch table each Tuesday so that my boys get to know what their dad does with his life. Every now and again, my wife will offer a sort of bitter (!) side comment. She will say something like: “You make good points in that column. I can’t help but notice that you didn’t call anyone a Goon in that one. Hmmm…” So this is an almost universal phenomenon.
My FinCon talk was NOT bitter!
I was very aware when I was preparing it that there was a risk that it would be perceived that way. So I went to a good bit of trouble to remove any hint of bitterness from the presentation. Every slide was humorous. There was one of a boy standing in a corner with a dunce cap on. That’s a humorous way of making a point, not a bitter way of making a point. Another was of a baby crying. Again, that’s a humorous way of making a point, not a bitter way of making a point. They were all like that.
People find the CONTENT of my message bitter. That’s what is killing me.
If Shiller is right (I obviously believe that he is), then the real value of every stock portfolio is about half of its nominal value. People hate hearing that. They hate it, hate it, hate it, hate it, hate it. Everybody hates it. Not just Goons, not just Buy-and-Holders, not even just investors. EVERYBODY hates it.
Journalists hate it because they did not speak up when the bull market was getting out of control. Policymakers hate it because they permitted forces to be unleashed that have costs millions of people their jobs. Economists hate it because it shows that their Rational Man assumption is bogus. Even Behavioral Finance advocates hate it because it puts them on the spot — they want to push new ideas but they don’t want to have to embarrass their friends in the process of doing it. Even Valuation-Informed Indexers hate it. John Walter Russell used to say that you Goons would hold up a red flag and that I would charge every time. He tried to doctor the numbers in the Retirement Risk Evaluator because he didn’t want to offend people by reporting the numbers accurately and honestly.
Nothing that I say is even the tiniest bit intellectually advanced in an intellectual sense, Anonymous. Everything I say is pretty much two plus two equals four if you believe that Shiller’s research is legitimate. But people don’t like hearing it. So people who are able to add two and two and get four avoid saying it. Except for me. I am different in that I am the first person stupid enough to just say this stuff out loud and thereby get people who once loved me to hate me with a burning hate. You don’t talk honestly about the damage that a society does to itself by permitting a bull market to get out of hand. It violates a Social Taboo to do what I have done. It is just not something that civilized people do.
I think that we all need to start discussing in an honest way what the last 35 years of peer-reviewed research shows. That’s what I truly believe. I don’t want to violate any Social Taboos. I don’t want to start any controversies. I don’t want to upset people. I don’t want to make people hate me. But I very, very much want to post honestly re safe withdrawal rates and scores of other critically important investment-related topics. I can’t even imagine playing it any other way. So I soldier on. I do the best that I can do given the cards that have been dealt me.
A good portion of the money that the people sitting next to Jaime have accumulated over the course of their lives is today invested in cotton-candy nothingness. That’s what Shiller showed with his research. It’s a big deal. People need to know the true size of their portfolios if they are to plan effectively for the future. These are smart people we are talking about; you don’t get to be a millionaire without possessing some smarts. And yet they ignore common sense when they invest their retirement money. That’s not smart at all. When I point that out to them, it makes them hate me. That’s the story here.
I think this will change following the next price crash. I think their anger will be redirected following the next price crash. I saw that happen with Bernie Madoff. The people invested in his fund LOVED him so long as his con worked its magic on them. Once they saw through the con, they hated the man. That’s what I think is going to happen with Bogle and with those who have posted in “defense” of him following the next price crash.
I am not God. I could be wrong. I have obviously been wrong about things in the past. It could be that it is happening again. I don’t have a time machine. I cannot take you into the future and prove this to you. I am just stating my sincere opinion.
That’s it, you know?
If you saw things from my perspective, you wouldn’t give two seconds of consideration to the idea of agreeing to post dishonestly to appease you Goons.
I suppose that, if I saw things from your perspective, perhaps I wouldn’t give two seconds of consideration to the idea of coming clean by the close of business today. That’s speculation. I am not able to see things from your perspective. So I cannot be entirely sure. I say that because it seems like something that perhaps I should say given what I said about how you would behave if you could see things from my perspective.
I cannot do other than what I am doing. So my intent and expectation is that I will just continue doing it.
I love you guys (and witches). I wish you all good things. I don’t see any benefit that follows from being nasty about any of this. So I make an effort to avoid taking that dark path.
I wish you all good things. But I intend to soldier on all the same. I believe that the reaction that we will see following the next price crash will tell the tale.
I believe that I will be friends with most of Jaime’s millionaire friends following the next price crash. And I believe that I will be friends with Bogle then. And I believe that I will be friends with you Goons then.
But this is all just one fellow’s opinion, you know? Nothing more and nothing less.
I hope that helps a tiny bit.
Rob
Of course Jaime doesn’t get you. Not at all. She tells you to stop talking about goons, even after you explained that you can’t and won’t ever do that. You kindly say that her comment helped you – but how?
It helped me come to the understanding of things that I gave voice to in the comment just above, Anonymous.
I didn’t know this stuff on the morning of May 13, 2002. I have used these 14 years as a learning experience. Jaime helped me by telling me what the people sitting near her thought of my talk. Lots of people don’t tell me to my face that they find me “bitter” (one of the things that I like about you Goons is that you are frank about things that many others are too polite to say). Jaime told me what those people really think of me. She performed a service to me by doing that.
Rob
She tells you to stop talking about goons, even after you explained that you can’t and won’t ever do that.
Are you Goons so different re this one?
Rob
“Are you Goons so different re this one?”
Of course. We play poke the troll – but we take care of our families too. Ok, off to work!
I don’t believe you, Anonymous.
I say that you are in pain.
But I naturally wish you all the best all the same.
Rob
Rob,
Doesn’t it come down to perception? You don’t feel you were bitter, but they do. As they say, you must know your audience. Your intentions don’t matter as it is opinions that count.
There’s a good bit of truth in what you are saying here, Anonymous.
What does this say about what happens following the next price crash? When millions of people lose most of their retirement savings, will that change perceptions of Buy-and-Hold?
I say “yes.”
But we are going to have to wait until it plays out to know for sure.
Perceptions of Bernie Madoff sure changed after his con was exposed. Jack Bogle is Bernie Madoff times 500, in my assessment. I love the guy, as you know. I am his biggest fan. But still….
Rob
“Jaime told me what those people really think of me.”
Since when do you need Jaime for that? You have told us many times how Wade et al really feels. And you just said we goons are afraid, for telling you the exact same things she tells you. You’re taking it easy on Jaime because she’s a girl. Anyone else would be headed to prison by now.
None of this is so, Anonymous.
I’ve acknowledged from the first day that the Get Rich Quick message pumped so relentlessly by Mel Lindauer and John Greaney and Jack Bogle and you Goons is popular. Nothing could be more clear. I just add that it’s financial fraud to claim that there is some sort of mystical, magical peer-reviewed research showing that there is no need to practice price discipline when buying stocks. That’s an obvious lie. No one has ever produced any such research. Buy-and-Hold is a marketing gimmick that has been responsible for taking hundreds of billions of dollars out of the pockets of the millions of middle-class investors who earned the money with their hard work and put them into the pockets of a small number of Wall Street Con Men, who obtained those dollars as the result of trickery and deceit.
I don’t decide who gets sent to prison following the crash and who doesn’t. I wouldn’t be feeling too good about my future if I had more than one or two posts in my file in which I had “defended” the behavior of Mel Linduaer, John Greaney or Jack Bogle. I wouldn’t be too concerned if I were Jaime Tardy.
But we’ll see, you know?
It’s not my place to decide that question and I don’t want it to be my place. The members of your jury will decide the length of your prison sentence. That’s how our system works.
If you want to play stupid games where you pretend that what Jaime has done is somehow equivalent to what you have done, I cannot stop you. But the prosecutors will have access to the materials at this site when building their case. And the members of your jury will make the call. I will obviously help out in that effort in any way that I can. I believe that the laws against financial fraud are good laws, much-needed laws.
Can we all just wait to see how it all plays out? Does that work for you?
Rob
Rob,
We have already experienced drops, including the 2008/2009 market, yet nothing changed for you. What would be any different in future market downturns?
There are little drops all the time, Anonymous. If a drop doesn’t take us below fair-value valuations levels, the Get Rich Quick stuff is still making people feel that they are ahead of the game.
There’s only one time in many, many years when we dropped slightly below fair-value valuation levels. That was in early 2009. Then we went to a P/E10 of 13, a wee bit below the fair-value number of 15. And we did indeed see attitudes changing at that time. That’s when we saw people working up the courage to call Mel Lindauer and Taylor Larimore liars at the Bogleheads board. We never saw people saying things that bluntly in the days when I was there.
The dissatisfaction was not strong enough to change ownership of the board. But prices shot back up far above fair-value levels within a few months. What will happen when we see the P/E10 level remain below 10 for several years? That’s what has happened in all earlier bull/bear cycles before the irrational depression that always follows irrational exuberance comes to an end. I believe that we will see the ownership of the board change hands at that time. And, yes, I believe we will see prison sentences announced at that time.
But again — I CANNOT PROVE THIS.
I am telling you what I believe will happen. I am NOT telling you what I want to see happen or what I will push to see happen. If anything, I intend to play it the other way. I intend to put forward some words aimed at getting your prison sentence REDUCED. I want to put the nasty stuff behind us. I believe that any energy wasted on retribution is a big waste of energy and even a dangerous use of energy. I want to see us all working together. I see it as my job to steer things so that we all begin working together to achieve goals that benefit all of us.
So what I am describing is not what I want to see but only what I expect to see. I think about how pissed I would be if people who called themselves “experts” had been lying to me about all this stuff for years. The answer is — I would be pretty darn pissed. The lies haven’t had any effect of me for a long time now. I saw on the evening of August 27, 2002, that Buy-and-Hold is just a con, a money-making thing, with zero support in the peer-reviewed research. So it hasn’t cost me any money (the “defenses” of it of course have, but that’s something different).
I am not going to hold people back from going nuts unless I have credibility in their eyes. That’s why I have worked so hard to get so many posts in my file showing that I have OPPOSED this massive act of financial fraud for 14 years running now in every possible way. Those thousands and thousands of posts will add to my post-crash credibility and help me to help you.
Or at least so I believe. It’s not possible for me to say precisely what will happen. I worry that people are just going to freak out and that nothing I say in your behalf will make much difference. I will give it my best shot, that’s all. I obviously cannot control results. All that I can do is to push for settling this matter BEFORE we see the massive crash and so that’s what I do.
This one will not be like any earlier crash. The amount of money lost in a crash is determined by how much overvaluation there was at the top of the bull market that caused it. In two of the earlier Buy-and-Hold Crises, the highest P/E10 level we saw was 25. The one time we went to 33 we created the Great Depression. This time we went far, far beyond the number that caused the Great Depression. This time we went to 44. So we will be losing an unprecedented amount of phony baloney wealth this time. The Wall Street Con Men have never before pushed Buy-and-Hold so hard as they did this time (for example, they never before told the lie that there is peer-reviewed research supporting the pure Get Rich Quick “strategy”) and so of course we all should be expecting them to cause more human misery this time than they have ever caused before (I am assuming here that stocks may continue in the future to perform at least somewhat as they always have in the past).
Please don’t mis-interpret any of my words here as “doom and gloom.” The reality could not be further from the truth. The last 35 years of peer-reviewed research provides the missing key to understanding how stock investing works that humankind has been looking to find for a long time. The good news here is 50 times more good than the bad news here is bad. Yes, we may go into a Second Great Depression. I hope not but that’s certainly a possibility. But the Second Great Depression should not last as long as the first one did.
We need to get one large web site to permit honest posting on safe withdrawal rates and scores of other critically important investment-related topics. It’s all downhill sledding from that point forward. We all want the same things. Bogle and the other Wall Street Con Men did not INTEND to cause the Second Great Depression. They BELIEVE the garbage that they have been pumping out for decades now. When they see the results of their trickery, I am 100 percent certain that they are going to come clean and flip to the research-based side.
Then it will be easy. We will be able to spread the word quickly re what really works when we have the money of the Wall Street Con Men behind us. We can outdo the damage of the past 35 years in perhaps one year when we are all working on the same side. I think it is entirely realistic to expect us to experience the greatest surge of economic growth in our history in the days following the onset of the Second Great Depression. This is big stuff. We now know how to reduce the risk of stock investing by 70 percent while increasing returns dramatically. It is impossible to exaggerate how big an advance that is. This is how we restore people’s faith in the capitalist system. When we show people that capitalism can work for ordinary people, not just Wall Street Big Shots, we change the political dynamic in a big way.
Anyway, those are my thoughts re these terribly important matters.
I naturally wish you the best of luck in all your future life endeavors regardless of how things play out, my old friend.
Rob
Did Jaime give you the contacts you asked for? No. She didn’t even acknowledge the request. She knows how important the issues are, and could have helped, but didn’t. If that’s not goonish, it’s certainly very disappointing.
I agree that it was disappointing, Anonymous.
Do you know what else was disappointing? My own behavior re these matters from May 1999, when I put my first post to the Motley Fool’s Retire Early board, to May 2002, when I worked up the courage to put forward my famous post noting the errors in Greaney’s retirement study (errors shared by every Buy-and-Hold retirement study). I was the most popular poster at that board. I knew about the errors from the first time I looked at Greaney’s site, which was prior to the formation of the Motley Fool board. I was a coward for those three years. I hurt my friends for those three years. All that I had to do to help them was to tell a simple truth and I was too worried about what would be done to me to do so. That’s truly disappointing stuff.
We all should be disappointed in ourselves. Every last one of us. That’s one of the arguments that I will be advancing on behalf of you Goons. You couldn’t do what you have done without the complicity of a big number of policymakers and economists and researchers and investment advisors and journalists and bloggers and ordinary investors. We ALL have goonishness within us, each and every last one of us.
The humans sometimes do disappointing things.
Those same humans also sometimes do inspiring things.
You have to try to catch them in their best moments!
Or else blot the bad moments out of your brain!
Someone had to speak up. Someone had to bring this crazy detour on the journey we have taken together to learning how stock investing works in the real world to a full and complete stop. Only a crazy person would volunteer for the job. I would have a hard time finding anyone for vouch for me as a non-crazy person but even I was level-headed enough not to actually volunteer for this job. I sort of got roped into it. You were there. You saw how it went down.
It’s my job today, whether I like the idea or not. I will make the best of it. I think it would be fair to say that I have no other options available to me.
Jaime has other options. Wade has other options. Jack has other options. Robert has other options. I do not.
Maybe that’s the difference maker. Maybe it’s not that I am more ethical than other people. Maybe it’s just that I am the only one with no other options. I won’t object too much if you tell the story that way. It seems to me that it is possible that there might be some truth to that way of looking at things.
In any event, here we are.
We are all just going to have to try to make the best of the situation as it exists, like it or not.
Is that not so?
Rob
“Can we all just wait to see how it all plays out? Does that work for you?”
How long do you think we will all have to wait? At some point, does it become a moot point?
I have a hard time imagining how it could become a moot point for me, Anonymous. The only thing that I can come up with is if there were peer-reviewed research published lending the first iota of support to the Buy-and-Hold strategy. That might do it. But I think it would be fair to characterize that one as a pretty darn far out-there possibility.
Is there something that could make it a moot point for the millions of middle-class investors whose lives you are in the process of destroying? You tell me. Is there some point at which people don’t care anymore that they lost their life savings because of the lies of a group of internet Goons?
I don’t think there is a point in time at which that happens. I certainly would not ever want to bet my freedom on it.
But I don’t know everything. I could be wrong. If you think there is such a point, please feel free to bet your freedom on it. Your freedom is yours to gamble away recklessly or to hold close, as you see fit.
That’s my sincere take, in any event.
I don’t play this game. It’s not my personal cup of tea. For me personally, it’s not even a close call.
Rob
It would be a moot point if run out of time for VII to work for your retirement needs. After all, you need to see that 65% drop so that you can get into the market and reap the gains on the rebound you would be expect, right?
What you are describing has never once happened in the 145 years of stock market history available to us for study, Anonymous.
But, yes, it is a theoretical possibility.
But say that Buy-and-Hold outperformed Valuation-Informed Indexing for the first time in history. What then?
Are you saying that I should advocate Buy-and-Hold at that time? That’s crazy. Something works one time in 145 years and I agree to put my name on it? I don’t think so.
It would be a reason to back away from Valuation-Informed Indexing a bit. I can go that far. And it would be a point in favor of Buy-and-Hold. I could go along with that too. But that’s a far cry from saying that there should be a ban on honest posting.
I would argue just the opposite. If for the first time in history Buy-and-Hold performed well, I would say that would be all the more reason why we should launch a national debate on these issues. That’s what I have been saying all along. I personally advocate Valuation-Informed Indexing. But I have been saying since the first day that I could be wrong and that we need to hear THOUSANDS of people posting honestly to come to a full understanding of these issues. It makes zero sense to trust one guy or even a small number of guys and gals. None of us possess superpowers. I need Bogle putting me on the hot seat as much as Bogle needs me putting him on the hot seat.
So my bottom line is that, even in the unlikely event that Buy-and-Hold outperforms VII for the first time in history, we need to launch a national debate so that we can continue to learn. That’s the scientific process. One of the many things that Bogle got 100 percent right is that we need to be more scientific in our investigations of how stock investing works. We need to move in that direction regardless of whether the next set of years lends support to the case for Buy-and-Hold or to the case for Valuation-Informed Indexing or to the case for some third model that we have never yet considered but that some smart guy or gal is cooking up as we speak.
We all benefit from learning experiences. We never know what we don’t know. That’s by definition. So we have to rely on “outsiders” to teach us new things. Those who challenge our thinking are our best friends. We learn more from those who ask us hard questions than from those who mindlessly pat us on the back and tell us that we are the greatest and that the matter is a settled question.
That’s my sincere take re this terribly important question, in any event.
Please continue to take your shots at Valuation-Informed Indexing. Drop the death threats. Can the demands for unjustified board bannings. Nix the tens of thousands of acts of defamation. Deep six the threats to get academic researchers fired from their jobs. But continue to ask the hard questions that force me to think harder and to develop a sharper understanding of the concept that I am promoting. It’s when you hit me with your best stuff that I know that deep inside you are my friend no matter how abusive you might be in the language you direct at me.
Hang in there, man. It gets better. A LOT better.
Rob
So you think it is impossible that you will be dead or your portfolio won’t have enough time to recover if this mammoth crash takes decades to develop
What makes you think this way?
35 years of peer-reviewed research, based on 145 years of stock market history.
It’s not impossible that the moon is made of green cheese, Laugh.
But I wouldn’t feel comfortable putting my freedom at risk betting on the long-shot possibility.
My best wishes.
Rob
“What you are describing has never once happened in the 145 years of stock market history available to us for study,”
This was also the data that lead you, in 2012, to believe there would be a 60-70% stock crash by the end of 2015, correct?
It’s the data that led me to believe that, yes.
It’s also the data that led me to include a caveat to the prediction pointing out that precise predictions are not possible.
You insist that we live in one of two worlds: (1) a world in which stock market prices cannot be predicted; or (2) a world in which stock market prices can be predicted with precision.
Both of those worlds are fantasy worlds. The data does not lend support to a belief in either of those fantasy worlds. Stock market prices have always been highly predictable in the long term but precise predictions have never been possible. The data has been telling this same story over and over again for 145 years now.
You hate this reality with a burning hate. It burns your buns.
Please try to understand that I did not create this reality. I am not the author of the 145 years of U.S. stock market history. I am a humble blogger who REPORTS on what the 145 years of data tells us about how the stock market works, nothing more and nothing less.
The data says what it says. The data doesn’t care how emotional you get when someone tells you what the data says. The data doesn’t even know that you exist. Getting angry at the historical stock-return data is like getting angry at a rock or a tree or an ocean. The data is not responsive to your anger. The data doesn’t even freakin’ know that you exist.
Your getting even more angry will not change a thing. The data will just keep on saying what it has been saying for 145 years now. That’s what data does — it tells us the truth about how the stock market works. The data doesn’t need to make you happy so that you will hire it and pay you money. The data is objective. The data isn’t trying to be popular. The data isn’t compromised in the important way that every investing analyst alive is compromised. Your insane rage at the fact that Buy-and-Hold never works in the long run doesn’t even leave a mark on the data that shows this to be so..
I am not without emotion. I held back on what I knew about the data for my first three years of posting at the Motley Fool board. Then I offered a phony apology for telling what I knew on the fourth day of our proceedings after being hit with a hailstorm of hate for having told the tale straight. And even today I don’t work it as hard as I know I should because seeing the humans (both the Goon variety and the non-Goon variety) get angry at me for telling the truth about what the data says brings me down a notch emotionally and I of course can only take so much of that, being a human rather than a tree or a rock or an ocean.
But I TRY to be as much like the data as possible. I try to tune out the hate and just REPORT stuff as it is rather than letting considerations of what message will make me popular or unpopular interfere with transmission of my words or cause me to compromise my words or whatever. I make an effort to rise above that stuff, not to say things stronger than they really are but also not to say things weaker than they are, just to tell the story straight, with no chaser. I doubt very much that I get it 100 percent right every time. But I think it would be fair to say that I work it harder than any of my fellow humans and that I have been doing so in the face of bitter opposition to a greater extent than anyone else around for 14 years running now.
That’s our story. I don’t know everything and I don’t claim to know everything. But I do know with a high degree of confidence that Shiller discovered something of huge importance in 1981 and that my Buy-and-Hold friends have failed to incorporate his finding into their model for 35 years now to the great financial pain and emotional embarrassment of millions.
Every investor alive needs to know that stock returns are highly predictable in the long term. Every investor also needs to know that precise predictions are not possible. And every investor needs to know that the Buy-and-Hold claim that returns are not predictable AT ALL is a LIE. There is zero support for this claim in the peer-reviewed research in this field.
This irresponsible claim was not always a lie. There was a time when it was just a mistake. But a mistake that is covered up for 35 years becomes a lie. A lie that in some cases can lead to the imposition of prison sentences by the members of a society seeking to defend itself from Goons like you, Anonymous.
That’s my sincere take re these terribly important matters, in any event. I COULD BE WRONG. Perhaps you will never spend a day in the clink. Feel free to believe that. Please do so with my blessing.
Please just also understand that I am going to continue to say WHAT I BELIEVE. I believe that this saga is going to come to an end with a prison sentence being announced for you and a good number of your Goon friends. I believe that and my belief re that informs my every post. I care about you. I don’t only care about you, I also care about the millions of middle-class Americans whose lives your lies are in the process of destroying. But I do care about you as well. I believe that you got caught up in something 50 times bigger than what you imagined you were getting caught up in and that makes me sad for you. So I care and I will continue doing what I can to get that prison sentence of yours reduced a wee bit.
Do I believe that my efforts re this particular matter are going to bear good fruit? I do not. I have seen too much to believe that you are going to come clean by the close of business today or even by the close of business tomorrow. If you were capable of such a thing, you wouldn’t be a Goon in the first place and then of course we would not be having this conversation. So please understand that I am not living under the illusion that these words are going to make a difference.
For you.
I say them because they make a difference FOR ME. It is going to hurt me to hear your prison sentence announced. I consider you a friend despite it all. I don’t fully understand what makes you do what you do. But I believe that, if I knew everything that has ever happened to you, I would possess a better understanding of what motivates you than I do in fact possess. I make an effort to do what I would do if I possessed a better understanding of your illness than I do in fact possess. I aim to treat you how I would want you to treat me if it were me suffering from the illness. So it is important for me to know that I have put these words forward. My desire to cover all possible bases is what motivates me. I want to be able to sleep in peace after that long-delayed prison sentence of yours is finally announced and the rest of us come to enjoy our Second Independence Day.
That’s the deal.
Don’t let the bad guys get you down, my old friend.
Um — good question!
Rob
I’m not sure how you would use the historical record to predict a crash larger than any that has occurred?
Historical data isn’t good at predicting things that have never happened before.
Why would you think that the economy would recover from this ‘largest crash that has ever happened’?
The peer-reviewed research (which is based on the historical record) shows us how prices are set. They are set by investor emotion. The more that emotions get out of control, the more pain there is that is suffered in the economic crisis that follows. Since the promotion of Buy-and-Hold caused investors to become more emotional than they have ever been before, we should expect to see more human misery in the economic crisis that we have created for ourselves.
It is possible for weather forecasters to predict a bigger snowfall than an area has ever before experienced. They look at the factors that cause snowfalls and they estimate what is coming. If the conditions are such that it appears that a bigger snowfall than has even been seen before is likely, that’s the prediction. This is how it is done in every field other than the investing analysis field. It is the investing analysis that is the strange case. That’s because there is so much money to be made in telling people the opposite of what the peer-reviewed research shows.
The economy should recover quickly because this is so huge an advance. It is only in the past 35 years that we have known how stock investing works. This benefits every person alive on the planet, even non-investors. Non-investors benefit because we now can avoid economic crises by permitting people to learn about what the last 35 years of peer-reviewed research says. The biggest political problem we are facing today is a loss of confidence in elites. That will go away when we are able to show people how they can retire many years earlier while taking on only a tiny fraction of the investing risk that people were told in the Buy-and-Hold Era that they needed to take on. When the millions of people who work for a living are permitted to participate in the benefits of capitalism, we obviously are going to see a much more positive political dynamic assert itself.
I only wish that we did not need to experience a Second Great Depression to experience all this good stuff. Humans! Whachagonnado?
Rob
This just sounds like far out conjecture to create scenarios where you don’t look like a fool for the past 20 years.
If it gets to 30 and you haven’t pulled ahead you should just give up.
But what would “give up” mean in this context?
Would “give up” mean that I would endorse Buy-and-Hold? Buy-and-Hold has never once in 145 years produced good results. I am going to endorse that? Huh?
“Give up” could mean that I would stop endorsing Valuation-Informed Indexing. That makes a bit more sense to me. If we are still at very high valuation levels 10 years from now, then, yes, I certainly believe that that would be cause for me to pull back on the strength of my endorsement of Valuation-Informed Indexing. It would suggest that there is some flaw in the model, some error in the understanding of how stock investing works that is behind it. I can go that far.
But I don’t think that giving up entirely on Valuation-Informed Indexing would quite make sense even in that extremely unlikely circumstance (what you are describing has never once happened in 145 years). It would be a reason to pull back, not to give up. We have to do something with our retirement money as we save it, no? Buy-and-Hold and Valuation-Informed Indexing are the only two research-based models we have. Are we going to give up on all research? If not, then we have to at least lean on one of the two models. If both have failed at some point but one has failed only in one case and the other has failed in all but one case, it still seems to me that the evidence is heavily weighted in favor of the model that has only failed once. A model that has only failed once is not a perfect model but it is a far better model that has only worked once.
And it is not entirely clear that, if we do not see a crash that takes us to a P/E10 level of 8 within the next 10 years, that Valuation-Informed Indexing will have actually failed for the first time. My first reaction is to see that as a failure since the predictions would not have worked. But it is always important to remember that VII is a long-term strategy. VII has been producing AMAZING numbers for 145 years now. If its predictions fail for the first time in history and it still produced solid numbers that are better than Buy-and-Hold for most investors, is that really a failure?
I don’t think we can call it a success. If the model’s predictions fail, that is telling us something and it is not telling us something good about the model. I definitely would see it as a negative mark for VII if its predictions failed to come through for the first time in history. But it still seems to me that VII would remain the best model that we have available to us and that is a “success” of a limited sort.
For me to give up entirely on VII, I would have to see some evidence that it is actually INFERIOR to Buy-and-Hold. That I have never seen and that I would not see (at least not entirely, perhaps in a limited way) even if we did not see another price crash for another 10 years.
All that said, I do NOT think that VII is a 100 percent proven model at this point. It has far outperformed BH for 145 years running. That is a very big deal. But the mistake that the Buy-and-Holders made was to fall in love with a model that they truly believed was the answer before all the evidence was in. Now they feel too embarrassed to acknowledge even the possibility that they made a mistake.As a result, they no longer are even willing to discuss the peer-reviewed research of recent decades. I obviously do not want to repeat that mistake. So I want to work hard to keep my mind open to evidence that VII might not be everything that the evidence available to us today certainly indicates that it is.
That was a good question, Laugh. That raised some fresh points.
Rob
What you need to think about is that 10 years ago you probably said ‘I will give this up if in 10 years it looks like I am wrong’. And you probably believed yourself then. Yet here you are.
It reminds me of listening to a compulsive gambler tell me something to the effect of ‘I did what I had to do’. When I asked ‘Why exactly did you have to do it?’, he just got angry.
I have had a portfolio of stocks and bonds and a few other things that has adjusted slowly over time over the past 3 decades. I guess I don’t see any of the problems you are talking about. The return on my personal money in my long term portfolio has been about 11% CAGR nominal. I purchased a huge amount of financial services stocks when they hit very low ‘Armageddon’ prices during the financial crisis but I measure that return separately from my long term portfolio.
I think it depends on what time-period you look at, Laugh. You are going by what has happened over the past 30 years. I am going by what has happened over the past 145 years. I see my approach as being more scientific than yours because I am not looking at one time-period that I just happen to be living through. I believe that by looking at the entire historical record I am better able to ground myself in objective realities and to thereby look beyond what might be the subjective impressions of a particular time and place.
I do acknowledge that I could be wrong. I have said that and I believe that. But it’s one thing to say “I could be wrong” and something very different to say “I AM wrong” in circumstances in which I do not believe that to be the case. The first thing is the practice of humility, the second is the practice of deception. I believe that I could be wrong because I have played the role of the gambler you describe in earlier times in my life. But I am not today persuaded that I actually am wrong. I see a big difference between warning my readers that I could be wrong and that they had better be cautious in considering anything I say versus lying to my readers by telling them that I believe that I actually am wrong. One is on the right side of the line in my eyes and one is not.
One of us is playing the role of the gambler that you describe, I think that much is fair to say. Only time can reveal with certainty which one of us it is. Heaven help us both, you know? We are both flawed humans. We both have to face this scary world with limited brains and fragile bodies every day we wake up to it. My heart goes out to you. Believe it or not, I believe that there’s some tiny part of you that you keep hidden deep within in which your heart goes out to me too. If I didn’t believe that, I am not sure that I could get up in the morning.
As for what I would have done had I known 10 years ago what I know today, there’s no way to say. You are right to suggest that I didn’t think a P/E10 of 8 was more than 10 years away 10 years ago. That one is an objective reality. But it’s not possible to compare the 2006 version of me with the 2016 version of me directly. I have learned more through all the work I have done over the past 10 years. So, yes, I have seen things over those 10 years that have caused my confidence in Valuation-Informed Indexing to be diminished a bit. But I have also seen things that have caused my confidence in VII to grow stronger. Overall, my confidence is today stronger.
It could be that I am lying to myself because I have so great an emotional investment in this strategy. That sort of thing really does happen with the humans. All the time. I don’t know what I can do about it. That reality is just part of what it means to be one of those darned humans. Imperfectly designed creatures can never know for sure. It’s a frustrating reality. But there it is all the same, you know?
I voted for Walter Mondale and I voted for Mitt Romney. Given the differences in what these two people believe, it seems to me when I try to think things though objectively (as if I could!) that I must have made the “”wrong” choice in one of those two elections.But whatchagonnado? I gave it my best shot both times. Maybe in November I will flip back and vote for Hillary. Maybe I will go Libertarian. Maybe I will turn the Romney thing up a notch and vote for Trump. Who the heck knows what one of the crazy humans is going to do next? We wake up in the morning and we give it our best shot for 16 hours and then we go to bed and get rested to give it another try after another eight hours or so.
Some of us say a prayer or two before drifting off to sleep. Are we sure that there’s a Big Guy in the Sky to hear them? My personal guess is that not too many of us are perfectly sure. We might say we are. The ones who say they are most sure are probably the ones who are less sure (they are trying to convince themselves more than they are trying to convince others). I feel sorry for these people (people like me!). They are doing their best. And yet they have to live through all this damned uncertainty. And of course it is pretty much the same on “the other side.” Those who don’t say the prayers are kinda, sorta but not really 100 percent sure too. Those who don’t say their prayers are scared too, just of somewhat different possibilities.
We are all in this together, my old friend. That’s my bottom line assessment when I look at the millions of words that have been spilled (please don’t ask me to provide a precise count!). We all want to know for sure and not one of us does know for sure, no matter how “stridently” we express ourselves. My rock is my belief that, if I stop feeling love for you, someone who cares enough about this stuff to stand up to me and give me guff when I state things a wee bit too strongly, then I am surely on the wrong track. Theoretically I could be wrong about even that one. But, as noted above, I couldn’t even bear to get out of bed in the morning if I lost confidence in that one. So I am holding tight to that one.
And don’t you ever forget it, you damned smelly Goon!
Please take good care, old friend.
Rob
I had a feeling you would hone in on the three decade thing so I have another example. The branch of my family that remained in Europe during WWII has a single family office manager. The investment record for the family office stretches back to the late 1800s. There is some data before that, all the way back to the mid 1600s but it isn’t enough to construct a full picture and the portfolio was probably managed in a highly active way at different points in that timeline.
In any case, that portfolio since the 1800s has been managed in mostly/semi a buy and hold manner. There have been major withdrawals at times but it has generally grown substantially over that time period, which is longer than 145 years.
You seem to be struggling with defining the problem you are solving. There are no failed middle class retirements because of buy and hold. The middle class doom has nothing to do with the stock market. They never had anything in the stock market. The middle class doom is because middle class jobs are becoming eliminated in favor of lower paying jobs or higher paying jobs and frankly there is nothing anyone can do about that. In my opinion you have always had mild psychological issues but the impact of the technology bubble and the financial crisis has created an immense clouded tunnel vision effect on you.
Here are some scientific discoveries achieved since the mid-1600s (from Wikipedia):
1665 – Robert Hooke: Discovers the Cell
1687 – Sir Isaac Newton: Classical Mathematical description of the fundamental force of universal gravitation and the three physical laws of motion
1751 – Benjamin Franklin: Lightning is electrical
1821 – Thomas Johann Seebeck is the first to observe a property of semiconductors.
1859 – Charles Darwin and Alfred Wallace: Theory of evolution by natural selection
1915 – Albert Einstein: theory of general relativity
1945 – Howard Florey Mass production of penicillin
2015 – Traces of liquid water discovered on Mars
Shiller’s “revolutionary” (his word) findings of 1981 represent the biggest advance in our understanding of how stock investing works in the history of investing analysis. The peer-reviewed research that I co-authored with Wade Pfau is a dream come true for millions of middle-class investors — it permits them for the first time in history to invest in stocks on a virtually risk-free basis while permitting capitalist economies to avoid the economic crises that the promotion of Buy-and-Hold strategies have been bringing on for many, many years, causing great misery for millions.
Yes, people struggled on somehow even in the Dark Ages. But we are moving on. Most of us LOVE the idea of being able to reduce stock investing risk by 70 percent while earning returns sufficiently greater to permit us to retire five to ten years sooner. Most of us LOVE the idea of avoiding the recessions and depressions that have given capitalism a bad name in the minds of millions of people.
We are not going to permit the insanely abusive behavior of an internet Goon who got an important number wrong in a retirement study that he posted to his web site hold us back.
Just one of those crazy hunches that I have been known to experience from time to time.
But please don’t take my word for it. You will be able to see for yourself how things play out following the next price crash. One of us is right and one of us is wrong. If I am right, I receive a windfall of $500 million. If you are wrong, you get sent to prison for a long stretch of time. I like the cards that I am holding. I wouldn’t trade my cards for your cards for anything in the world.
Hang on to your hat, my long-time Goon friend. It’s going to be a bumpy ride!
Rob