I’ve posted Entry #330 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Two Ways That Bogle Could Have Reacted to Shiller’s Research Without Admitting a Mistake.
Juicy Excerpt: It was easy to rationalize not incorporating Shiller’s findings into one’s investing strategy in 1981; stock prices were at rock-bottom prices — the thinking no doubt was that this was a “no harm/no foul” situation. The potential harm grew larger as prices rose throughout the 1990s. But then so did the embarrassment that would result from suddenly coming clean. It is a lot easier to own up to a mistake within a few weeks of when it is discovered than it is to do so several decades down the line. The price crash and economic crisis of 2008 of course made it more imperative than ever that the Buy-and-Holders come clean while also making their psychological need to avoid doing so all the more pressing at the same time.
It’s been 35 years now. Everyone who works in this field understands on some level of consciousness that the most important question before investors today is the question of how much they should adjust their stock allocations in response to valuation shifts. And yet very few address themselves to this question in a serious way. Discussing the implications of Shiller’s findings has become socially taboo. Holding open debate on these critically important matters opens too big a can of worms. Doing so might help us avoid future economic crises. But how do we explain to ourselves our failure to not take advantage of what we learned in 1981 to avoid the last one?
Anonymous says
Buy and holders adjust by rebalancing their portfolios. It has been proven to be highly successful.
Next issue.
Rob says
You say that Buy-and-Hold has been “proven.” And you follow the strategy yourself. So, I think it would be fair to say that to some extent you believe what you say.
But your behavior shows that you lack confidence in the strategy. Anonymous. If you possessed confidence, it would bother you not at all that people like me don’t believe in Buy-and-Hold and urge others to abandon the strategy. If you possessed confidence, you would see the debate that naturally would follow from the voicing of such claims to be an opportunity for the “proven” Buy-and-Hold strategy to prevail in the court of opinion once again.
If Buy-and-Hold has truly been proven, we will not see another price crash, not one big enough to shake people’s belief in it. So you have nothing to worry about in that event.
I don’t agree that the strategy has been proven. I say that it has been discredited by the last 36 years of peer-reviewed research in this field. If the last 36 years of peer-reviewed research is legitimate, we will be seeing a price crash big enough to persuade even the Wall Street Con Men to come clean. When they come clean, I will work with them. I very much look forward to doing that. As you know, I feel the greatest respect and affection possible for my Wall Street Con Men friends.
I am not going to say something that I believe with my heart, mind and soul to be false. I shouldn’t have to. My refusal to do so has been the “next issue” going back to the morning of May 13, 2002. I have zero willingness to cross the felony line and you have zero willingness to let the millions of middle-class investors who want to learn more about Valuation-Informed Indexing to do so. So we are working at cross purposes.
The “next issue|” will be resolved in the days following the next price crash. I wish you the best of luck with it but I have a funny feeling that things are not going to play out in a positive way for you. But you know what? I could be wrong. The only way we are going to find out for sure is to exercise a little patience and watch events play out before us.
I hope that works for you, my old friends. There is no other way that things can work themselves out given where they stand today. So exercising a little patience is what we are all stuck with.
My best wishes to you.
Rob
Anonymous says
“But your behavior shows that you lack confidence in the strategy. ”
Wrong. Since the balance of my accounts are approaching $4 million, I have plenty off proof that it works and that is what gives me confidence.
Rob says
I read an article about Bernie Madoff on the day that his con was exposed. One guy posted a comment referring to what Madoff did as “fraud.” Another fellow spoke up. He said: “Oh, it’s not fraud, I made over $1 million investing in the Madoff fund.”
Every Ponzi scheme that has ever been advanced had made money for someone. That’s why people are drawn to them. It’s the Get Rich Quick impulse that resides within all of us that makes Ponzi schemes seem so darn exciting.
The peer-reviewed research of the past 36 years shows what happens in the long run. Buy-and-Hold has never helped one investor in 145 years of stock market history. It has been a catastrophe for must who have followed it. It has done okay for a small number. It has never once in 145 years beat Valuation-Informed Indexing on a risk-adjusted basis. Hence the tactics we see from those with an emotional need to “defend” it.
I wish you the best of luck with it, Anonymous. But you will someone have to struggle on through life without an endorsement of your investing strategy from this boy. It’s not my particular cup of tea.
Please take good care.
Rob
Anonymous says
Madoff wasn’t buying stocks, bonds, CD’s, etc. Rob. Try again.
Rob says
I don’t know what that means, Anonymous.
Madoff had a fund. He created false transaction statements that made it look like the investors in the fund were doing well. He was working a con. He was sent to prison when the con was exposed.
Bogle claims to follow the peer-reviewed research. Yet the retirement studies put out under the Buy-and-Hold name don’t contain valuation adjustments despite the 36 years of peer-reviewed research showing that such adjustments are required. When questions are raised about this, Bogle’s Goon Squads threaten to destroy the careers of the people asking the questions.
Which is the bigger act of financial fraud. The Buy-and-Hold lies have destroyed many more lives than the Madoff lies. I want no part of it. The only way in which I want my name to be associated with this massive act of financial fraud is that I would like to go down in history as the person who EXPOSED it.
Does all of that not make good sense?
Rob
Anonymous says
It is not surprising you don’t understand when you are comparing a Madoff fund that owns nothing versus something like a Vanguard fund that would own stocks (pieces of companies), bonds, TIPs, cash, etc.
Rob says
Tell it to the people who believed that the Buy-and-Hold retirement studies were legitimate studies, Anonymous. Those are the people who will be leading the call for prosecution of this massive act of financial fraud in the days following the next price crash.
I’m just a mild-mannered reporter, you know? I don’t write the laws. I report on violations of them for the benefit of the millions of middle-class people who need access to honest and accurate reports of the safe withdrawal rate.
Rob
Anonymous says
I have a funny feeling we will be waiting a very long time before you have anything to report.
Rob says
Okay.
Rob
Anonymous says
It looks like Larry grew tired of the attacks by you and your VII goons, Rob.
https://www.bogleheads.org/forum/viewtopic.php?f=10&t=217022&sid=93f0d33a5236254e910ce078363a8f62
Rob says
I don’t think that there is such a thing as a VII Goon, Anonymous. If there is, they are doing a very poor job of intimidating people.
I am sympathetic to Larry’s concerns in that I believe that effective board moderation is essential to retaining good posters. But I of course don’t agree with him at all when he says that the moderators at Bogleheads do a good job. The moderators there are some of the most abusive posters that I have ever seen! The Goon posters at that board look to the moderators for tips! Holy moly!
I wish Larry all the best in any event.
Rob
Anonymous says
Rob – “If you possessed confidence, it would bother you not at all that people like me don’t believe in Buy-and-Hold and urge others to abandon the strategy.”
If you possessed confidence in VII it would bother you not at all that people like everyone don’t believe in VII and urge you to abandon the strategy.
Rob says
It doesn’t bother me that most people don’t believe in Valuation-Informed Indexing today. I think it’s good that people are skeptical. And I can learn from the questions put to me by skeptical people.
It bothers me that you Goons disrupt conversations that people who are open-minded about VII are trying to have to be able to learn more about it.
The only way that a new idea can grow is by people being exposed to it. I am 100 percent confident that VII will grow in popularity if people are exposed to it. But you Goons have blocked progress and done great harm to millions of people by doing so. I strongly oppose your abusive and in many cases criminal tactics.
All investors should be exposed to the arguments for both Buy-and-Hold and Valuation-Informed Indexing and then decide for themselves which strategy to follow. For that to happen, we need to reach a decision as a society that we will enforce the laws against financial fraud in a reasonable manner. When you are put in prison, millions will be freed to learn what they need to know to invest effectively in the future, Anonymous.
Rob
Anonymous says
So, you think it would be fraud if I ran a website to discuss buy, hold and rebalance, but don’t talk about VII, yet there are hundreds, if not thousands of strategies out there and there and is nothing compelling you, me or anyone else to talk about those other strategies……hmmmmmm…..
Rob says
There’s no fraud if you say “I believe that a 4 percent withdrawal will work” but there is fraud if you say “the peer-reviewed research supports my claim that a 4 percent withdrawal is safe” and you ignore 36 years of peer-reviewed research showing that you need to make an adjustment for valuations. The law compels you either not to claim that the peer-reviewed research supports your strategy or to report accurately what the peer-reviewed research says. The Buy-and-Holders entered a new world when they claimed support for their strategy in the peer-reviewed research.
Anyway, it’s not what you say or what I say that matters. It’s what your jury says that matters. Your jury members will be living through the destruction that was brought on by your mountain of deceptions. They will quite properly take the circumstances before them into account in making a determination as to the length of your prison sentence.
Rob
Anonymous says
It is YOUR interpretation as to what the research says. I believe Wade Pfau when he says that you do not understand the SWR issue, as such, there is no fraud.
Rob says
Your jury will hear the entire story, Anonymous. They will learn about what Wade said in scores and scores of e-mails before you threatened him. And they will hear what he said following your threats. Then they will decide on the length of your prison sentence.
Does not that way of handling it make perfect sense?
Rob
Anonymous says
There is no jury. Ever hear the phrase “pissing in the wind”? Look down. Your shoes are wet.
Rob says
If that’s what you think, then let it go, Anonymous. Go enjoy your life, you know?
I certainly have no power to send you to prison and I certainly have no interest in ever acquiring such a power. If you don’t believe that there is going to be a jury, what difference does it make what I think?
Go live a happy life with my blessing, my old friend.
Rob
Anonymous says
“Does not that way of handling it make perfect sense?”
No, it makes no sense.
Rob says
Then we disagree.
When did that ever happen before in this crazy mixed-up world of ours?
I wish you all good things. That’s pretty much all I’ve got for you at this point in the proceedings.
Rob
Anonymous says
“If that’s what you think, then let it go, Anonymous. Go enjoy your life, you know?”
I think you need to take your own advice.
Rob says
Huh?
You’re the one who comes here.
I’m not going to let go of telling the world about Valuation-Informed Indexing. I think it is the future. I think that the shift from Buy-and-Hold to Valuation-Informed Indexing is the biggest advance ever achieved in the history of personal finance. Why would I ever want to let go of that?
The discussion here is about your prison sentence. That is the thing that I am suggesting you “let go.” Do I ever bring up your prison sentence? I don’t deny that I believe you are going to prison when you ask me about it. But the only time it ever comes up is when you ask me. If you stop asking about it, I think it would be fair to say that it would be a long. long time before I would mention it again.
Does that work for you? It sure works for me.
I don’t care about your prison sentence except to the extent that it helps the entire world learn about Valuation-Informed Indexing, which is important stuff. If you stop asking about the prison sentence, I can spend my energies talking about VII, which is what I would prefer to do.
Do we have a deal?
Rob