Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
“Mike Piper promotes Buy-and-Hold. It follows that Mike Piper is a liar.”
Wow! Glad to see you are still able to rock the Major League Mania, there, Hocus!
Okay, Mr. X.
Robert Shiller is the one who published peer-reviewed research in 1981 showing that valuations affect long-term returns. If Shiller’s research is legitimate (he was awarded a Nobel prize), then the market is not efficient and Buy-and-Hold (which is rooted in a belief in an efficient market) is indeed a lie.
Shiller doesn’t say it that way. Lots of people who believe that Shiller’s research is important don’t say it that way. I wish that they would. The clearer statement is always the better statement, in my view. If there is some reason to believe that Buy-and-Hold is not a lie, I want to have someone bring that evidence to my attention and it is far more likely that that will happen if I advance the clear statement. If Buy-and-Hold really is a lie, I want to get the word out to everyone who invests so that we can work together to build a model for understanding how stock investing works that is real and that helps people. I don’t see how anyone benefits from all of the beating around the bush that we see in this field.
I love the Buy-and-Holders. They made many amazing contributions to our understanding of how stock investing works. There would be no Valuation-Informed Indexing but for those many amazing contributions. But, if Shiller’s research is legitimate, Buy-and-Hold is indeed a lie. And we need to hear everyone who understands this saying it in clear and firm and unapologetic and uncompromising terms.
That’s my sincere take re this terribly important matter, in any event.
Please feel free to spread the word everywhere on the internet that Rob Bennett believes that Buy-and-Hold is a lie. To be fair, you should say that I believe that prior to 1981 it was a mistake. But 36 years after the mistake was uncovered by the publication of peer-reviewed research, I think it would be more than fair to say that the mistake has been transformed into a lie, a lie that I don’t want to be associated with in any way, shape or form. You would be doing me a favor by letting people know that this is my sincere position.
My best and warmest wishes to you.
Rob
Anonymous says
I have plenty of peer-reviewed research to support buy, hold and rebalance. I would like to have a weekly un-edited column on your website along with a comments section that is not subject to moderation control.
I need you to confirm your approval by close of business today, so that we can end this campaign of terror that has suppressed our buy, hold and rebalance community.
Rob says
I’ll have to get back to you re that one, Anonymous.
Um — please don’t call me, I’ll call you.
My best wishes.
Rob
Anonymous says
“Robert Shiller is the one who published peer-reviewed research in 1981 showing that valuations affect long-term returns. If Shiller’s research is legitimate (he was awarded a Nobel prize), then the market is not efficient”
As we’ve told you many times, that’s simply false. Stock P/Es or bond interest rates can remain high or low for long periods of time based on demand for capital. Many studies have shown that today’s valuations (P/Es or interest rates) have some effect on future returns. That’s also basic common sense – if you invest in bonds today at 3% rates, your 10 year returns are likely to be lower than if you invest when they’re 16%.
But that has *zero* –nothing– to do with market efficiency. Demand for capital can be high or low, for days or decades, in an efficient market.
Anonymous says
Just make sure you get back to me. That way we can reduce your prison sentence.
Rob says
Many studies have shown that today’s valuations (P/Es or interest rates) have some effect on future returns.
You say here that “many studies have shown that today’s valuations have some effect on future returns.” If that’s so, then the retirement study posted at John Greaney’s web site gets the numbers wildly wrong. Thousands of people have looked at Greaney’s study and not one has ever found an adjustment for the valuation level that applies on the day the retirement begins.
I pointed this out in my famous post to Motley Fool’s Retire Early board on the morning of May 13, 2002. Greaney has not corrected his study to this day.
Not good.
Rob
Rob says
Just make sure you get back to me. That way we can reduce your prison sentence.
Makes sense!
Rob
Anonymous says
“I would like to have a weekly un-edited column on your website along with a comments section that is not subject to moderation control.”
Your laughing off this request constitutes financial fraud, as you have defined it. Hypocrisy.
Rob says
I’m bad to the bone, Anonymous.
Everybody knows it too! That’s the thing.
Rob
Anonymous says
“the retirement study posted at John Greaney’s web site”
I’d focus on understanding the basics of what you’re talking about, not personal vendettas.
Rob says
People use retirement studies to plan retirements, Anonymous.
I know this to be so because I was a member of the community that congregated at the Retire Early board during the days when Greaney was pushing his “study” on us. There were people there who handed in resignations from high-paying corporate jobs because they believed that the claims that Greaney made in that study were legitimate. A lot of those people had come to be friends of mine over the years.
And here we are.
Rob
Anonymous says
“There were people there who handed in resignations from high-paying corporate jobs because they believed that the claims that Greaney made in that study were legitimate. A lot of those people had come to be friends of mine over the years.”
Name one.
Just kidding, we all know you can’t.
Rob says
There were thousands. I don’t have a copy of the entire Post Archives of the board. But I have copies of hundred of threads, far more than enough to satisfy any jury members as to the realities of the situation.
I wish you the best of luck with it, Anonymous. But that’s as far as it goes. No financial fraud for this boy. Call me madcap.
Rob
Anonymous says
You said they were friends. You can’t remember even one name?
Rob says
I remember lots of names. So do you.
It’s the members of your jury who will decide the length of your prison sentence. That one is not my call.
That’s how our system works.
I wish you the best of luck with it. But that’s as far as it goes.
Rob
Anonymous says
And here, when you’ve been cornered into yet another lie, you sputter your nonsense about prison and start deleting comments. Don’t you ever get tired of this routine?
Rob says
I love my country, Anonymous. That runs deep.
My best wishes to you and yours.
Rob
Anonymous says
After all these posts, you have finally convinced me, Rob. I am ready to pay my fair share of the $500 million settlement. Please send me your bank account information and your social security number and I will arrange a transfer between my Nigerian bank account and your account.
Rob says
When Bogle wants to arrange for the settlement, he can send me a letter stating so. I will present the letter to one of the big law firms and one of the lawyers will send a letter back setting up a meeting to work out the various details.
My best and warmest wishes to you and yours.
Rob
Long Time Hoco-Researcher says
Robert Shiller is the one who published peer-reviewed research in 1981 showing that valuations affect long-term returns. If Shiller’s research is legitimate (he was awarded a Nobel prize), then the market is not efficient and Buy-and-Hold (which is rooted in a belief in an efficient market) is indeed a lie.
Shiller doesn’t say it that way.”
Schiller doesn’t say it that way because he is not a mentally ill internet troll. Rob Hocus No 2 Step Bennett is.
Rob says
What I add is that I say things clearly and simply and firmly and boldly. Everything that I say is rooted in Shiller’s “revolutionary” Nobel-prize-winning research finding that valuations affect long-term returns. But, yes, I say things differently.
I have advanvced the ball in a very important way by doing that. People need to know the practical, how-to stuff. They need to know whether they have saved enough to retire. They need to know what stock allocation they should be going with to keep their risk profile stable. They need to know what caused this darn economic crisis. Shiller hints at the answers to those questions but pulls back from stating the answers in way that most investors can understand the practical import of his message.
I certainly don’t apologize for advancing the ball in a major way, Long-Time. Everyone who has doubts about Buy-and-Hold should have started doing this 36 years ago. We would all be in a lot better shape if they had. There obviously can never be any downside to exploring new ideas. Everyone who is exposed to the ideas in clear form has the option of accepting them or rejecting them. So this is a win/win/win/win/win.
Buy-and-Holders perceive a downside because hearing the ideas expressed clearly stirs up their own inner doubts about the long-term merit of their investing strategy. Shiller showed that it is investor emotion that causes bull markets, not the economic realities, and the Buy-and-Holders show just how emotional investors get during bull markets in the reactions they offer to clear statements re the implications of Shiller’s research findings.
We need to work through this process as a society, Long-Time. We cannot make the journey from a place where most of us believe in Buy-and-Hold to a place where most of us believe in Valuation-Informed Indexing without passing through a place where lots of Buy-and-Holders are going to experience upset that they for a long time followed a gravely flawed investment strategy. If this could be done in way that didn’t cause any pain to Buy-and-Holders, I would do it that way. But I am not sparing my Buy-and-Hold friends pain by keeping my mouth shut, not if the last 36 years of peer-reviewed research is legitimate. If the last 36 years of peer-reviewed research is legitimate, the Buy-and-Holders need to hear the case for Valuation-Informed Indexing stated as clearly and simply and firmly and boldly as it can possibly be stated. Then they need to have the opportunity to ask questions. They they need time to ponder the new ideas and to determine for themselves whether or not to integrate them into their thinking about how stock investing works in the real world.
I am your best friend in the world, Long Time. You don’t see it, but I am. I paid a price to achieve benefits for you that no one else was willing to pay. I put my neck on the line so that you could learn something new. That cannot possibly hurt you. It could possibly help you in a huge way. But there’s zero chance that it could hurt you. If I am wrong re every single thing that I have ever said about stock investing, you would have ended up ahead had you permitted me to speak on the same terms that every other community members speaks because you would have been able to see Buy-and-Hold survive a challenge that it has never faced before and to see it survive that challenge and that would have given you added conference in a strategy that must inspire confidence in those who follow it if it is to work in the long term.
Every word I write benefits you. If you let it. You have to be willing to let the words in for them to have their desired effect. But that part is out of my hands. My job is to always screw up the courage to put the words forward in a clear and simple and firm and bold way. Once I have done that, I have done all that I can do. Once I have done that, I have done something very important and loving.
I was a Buy-and-Holder on the morning of May 13, 2002. I thought that the errors in the Buy-and-Hold retirement studies were going to be corrected once I pointed them out. It never occurred to me that what happened could possibly happen in this country, in which we and have laws protecting us all from this sort of thing. When the Greaney Goons came after me and my fellow community members, I looked on the internet for sites where the implications of Shiller’s revolutionary insight of 1981 were being explored on a daily basis so that I could ask some of those people to visit the Retire Early board at Motley Fool and help us all out. I learned that there are no such sites! What the h?
Shiller holds back from talking about the how-to aspects of his Nobel-prize-winning research. And no one else has picked up the ball in 36 years. Why? Because Valuation-Informed Indexing is very, very, very different from Buy-and-Hold. They both claim to be research-based strategies and yet one leads to one set of strategic recommendations and the other leads to a very different set of strategic recommendations. It is upsetting for Buy-and-Holders to hear that they are walking down a dark path, that they may be hurting themselves rather than helping themselves, that they may be hurting their friends to whom they recommend Buy-and-Hold rather than helping them.
None of that is my doing. I wasn’t around in 1981. I cannot even speak with any certainty as to why the people who were around at the time made the choices they made. What I can say is that they made a choice to delay the national debate that we very much need to have to determine once and for all whether Fama is right or Shiller is right. And, 36 years down the road, the result has been death threats and demands for unjustified board bannings and tens of thousands of acts of defamation and threats to get academic researchers fired from their jobs. This is what we have become as a result of the 36-year cover-up. The 36-year cover-up was not a good thing. This ain’t the way.
It is my job to take it the other way, the American way, the ‘the other fellow gets to have his say as well” way. That way is best for every single person involved. I love my Buy-and-Hold friends. I want to help my Buy-and-Hold friends out in every single way available to me. Lying to my friends about the numbers that they use to plan their retirements is not one of the ways available to me. For obvious reasons. It is my job to search for things OTHER THAN THAT that I can do to make the lives of my Buy-and-Hold friends easier.
I can’t do it by myself. We have 15 years of Post Archives showing that. I need at least 10 good and strong people who will stand with me to get this job done. I believe with 100 percent certainty that I will have that in the days following the next price crash. That’s Door One.
Or the Buy-and-Holders themselves could elect to act in a way that would make life better for every single person involved. That’s Door Two. A better and quicker door. It makes all the sense in the world for us to collectively choose Door Two. But it would be an exceedingly non-Goonish thing for us to do. I don’t think we will do it. Not after what I have seen. But the door remains standing before us. I can point out the opportunity to my Buy-and-Hold friends, knowing that the odds that they will choose the life-affirming door are something less than great.
And that’s it. Those are the two doors, Long Time. Door One opens for me regardless of what you do. Door Two requires your cooperation. So the odds are strong that it is going to be Door One. But there is something about the fact that you show up here on a daily basis week after week, month after month, year after year, that tells me that you feel some unease about going through Door One. Good for you. Door One is a terrible door. For all of us. But for you in particular.
If you want to choose Door Two instead, I am with you 100 percent. I think that would be super.
But please don’t ask me to join Shiller and all the others in talking about his “revolutionary” (his word), Nobel-prize-winning insights in the guarded and hesitant and fuzzy and cautious way that most others talk about them. This decision not to risk upsetting the Buy-and-Holders was no doubt motivated by a feeling that it is the charitable way to go. I have 15 years of Post Archives showing me that there is nothing even a tiny bit charitable about it. It is not the charitable way to go, it is the cowardly way to go. The 36-year cover-up is killing us all. The 36-year cover-up of the implications of Shiller’s 1981 research finding that valuations affect long-term returns was the primary cause of the economic crisis that in turn was the primary cause of the political frictions that we have been seeing on both the left and the right in recent years. Not this boy. Please try to find somebody else, you know?
I naturally wish you the best of luck in all your future life endeavors, old friend.
Rob
Anonymous says
It sounds like Shiller is guilty of playing a large part of the cover up since he would know the truth. Will he be going to prison as well?
Anonymous says
How do you feel buy and hold won’t work, when the track record of returns has been great?
Anonymous says
If you had to guess, when do you think it would be the latest that we would see the big crash? How long then will it be that Jack Bogle gives his “I was wrong” speech?
Rob says
Shiller popularized the 10-year rule of thumb. Prices returned to unsustainable levels in mid-2009. Adding ten years takes us to mid-2019. That’s my best guess.
I don’t know how long it will be before Bogle gives his speech. Look at what happened in the wake of the 2008 crash. First, there was shock. Then people began trying to come to terms with what happened. We saw an article in the Wall Street Journal speculating that we might end up in the Second Great Depression. Shiller began offering much more explicit investing advice; he said that investors should not get back into stocks until the P/E10 value dropped below 10. Taylor Larimore reneged on his pledge never to consider selling shares in a crash, saying that he felt he had to sell if prices remained low much longer (then they went back up). People started questioning Buy-and-Hold at the Bogleheads Forum. Money magazine published a special issue in which they questioned whether and how the conventional investing wisdom had gotten it all wrong.
Had prices remained low for a longer period of time, people would have begun considering ideas that previously had been considered taboo. At some point, Bogle would have talked over with his friends whether he should give an “I Was Wrong” speech. Depending on the reaction, he would have gone forward quickly or held back. I cannot say how long it would take for a process like that to play out. It’s an emotional change that we are looking for. The question that you are asking is like asking “how long does it take for a person in a bad marriage to decide to file for divorce?” Someone can live in denial for years while evidence that a change is needed continues to accumulate and then one day wake up in the morning with confidence that it is time to take steps.
Rob
Rob says
How do you feel buy and hold won’t work, when the track record of returns has been great?
The long-term track record of Buy-and-Hold has been horrible, just frighteningly bad, Anonymous. I mean no personal offence. But it is my view that you are fooling yourself.
Do you divide by two (because stocks are today priced at two times their genuine value) when determining where you stand today? I know from things that you have said in prior comments that you do not. You show here that you do the same thing when looking at the historical return data. You ignore critical analytical steps so that you can fool yourself into believing that Buy-and-Hold has performed acceptably or even well.
You need to spend some time studying the research paper that Wade Pfau and I co-authored an had published in a peer-reviewed journal. It shows that Valuation-Informed Indexing has beat Buy-and-Hold on a risk-adjusted basis for 145 years, the entire time-period for which we have good records re the U.S. stock market. That’s good? Huh? If going zero for 145 is good, I don’t think I want to look at what bad performance might look like.
The horrible long-term performance of Buy-and-Hold is hardly surprising. All investors should aim to keep their risk profiles roughly constant, right? I would like to think that there is no disagreement re that one. Has there ever been a strategy better designed to cause investors’ risk profiles to jump all over the place than Buy-and-Hold? We have known since 1981 that valuations affect long-term returns. So we know that investors who want to keep their risk profiles constant need to adjust their stock profiles in response to big valuation shifts. And Buy-and-Hold tells investors NOT to change their stock allocations in response to valuation shifts. Huh? What the f?
It doesn’t make sense, Anonymous. It makes EMOTIONAL sense. Buy-and-Hold is a marketing powerhouse because it appeals directly to the Get Rich Quick urge residing within all of us. But coming up with good marketing slogans is something very, very different from coming up with investing strategies that stand the test of time. For that, I believe you need to consult the peer-reviewed research. As you know, there has never been a sliver of peer-reviewed research supporting the key Buy-and-Hold claim that it is not necessary for those of us buying stocks to practice the same price discipline that we practice when buying all the other goods and services that we purchase in this consumer wonderland of ours.
If there were one tiny bit of an INTELLECTUAL case for Buy-and-Hold, we never would have seen a single death threat or a single demand for a single unjustified board banning or a single act of defamation or a single threat to get a single academic researcher fired from a single job. I mean, come on.
No sale re the smelly Buy-and-Hold garbage with this boy, my good friend. And it’s not a particularly close call either. Not after what I have seen over the first 15 years of our Great Debate On Whether to Permit a Debate on the How-To Implications of the Last 36 Years of Peer-Reviewed Research.
All that said, I naturally wish you the best of luck in all your future life endeavors, my long-time Goon friend.
Rob
Rob says
It sounds like Shiller is guilty of playing a large part of the cover up since he would know the truth. Will he be going to prison as well?
We’ll work out together as a society who goes to prison and who doesn’t following the next price crash, Anonymous. I would be shocked and stunned and amazed if we decided as a society that Shiller should go to prison. I get the feeling that you Goons would like everyone who did even the smallest thing wrong to be treated the same as you Goons. You see that as your protection. Shiller has not behaved perfectly. Therefore, if we Goons go to prison, Shiller must go to prison as well. It doesn’t work like that.
I have drawn the parallel to the race relations issue. If someone makes a racist comment today in a public place, there is a heavy price to be paid. The person might lose his job. There was a time when racist comments were relatively common. Do you think that, as we changed as a society to become less tolerant of racism, we went around and rounded up every person who had committed even tiny racist crimes and sent them to prison? We didn’t. We employed common sense in making distinctions between different levels of bad behavior.
Just about all of us are guilty of some bad behavior during the Buy-and-Hold Crisis. I have often noted that I failed to speak up about the errors that I knew about in the Greaney retirement study because I was afraid of what his Goon squad would do to me. I rationalized my behavior. I said that Greaney’s study was a big improvement over the safe-withdrawal-rate analysis that was being advanced by Peter Lynch not too many years before the Greaney study was posted (this is so). But I held back from expressing my concerns that Greaney’s study, while an improvement from what had come before, still got the numbers wildly wrong. I was a coward.
Shiller has behaved in cowardly manner re a number of matters. We all have. There are very few exceptions. We are not going to elect as a society to put every person who on occasion acted in a cowardly manner in prison. I believe that all of the cowardly behavior will be brought to light and that most of the people who engaged in cowardly behavior will apologize for the harm they have done to others. I believe that Shiller will be making some apologies. But I don’t believe that he will be going to prison. I believe that he is going to be playing a huge role in helping us all move from the awful place where we find ourselves today to the wonderful place where we all deep in our hearts aspire to be tomorrow.
I think that you are wrong when you suggest that Shiller “knows the truth” in an all-encompassing way. We all learn by talking things over with others. Shiller is not able to talk things over with others to the extent he could if there were no social taboo against speaking openly and honestly re these matters. So there are lots of things that Shiller has not yet learned that he would have learned a long time ago had circumstances been different.
I have no doubt but that Shiller knows much more than he has thus far been willing to say in his public comments. But I do not believe that he today knows everything. I believe that he will be enjoying an amazing learning experience along with all the rest of us in days to come. He will be teaching us all by giving voice to things that he already knows but has thus far been afraid to speak about and he will be learning by hearing what lots and lots of others think about aspects of the question that he has not yet been able to explore in great depth himself.
That’s why I describe the opening of the internet to honest posting on investment-related topics as a win/win/win/win/win. Learning is the one true free lunch. When we learn together, we all end up better off than we were before we did so. It’s good stuff piled on top of good stuff piled on top of good stuff piled on top of good stuff with no possible downside for even a single one of us. This ain’t no zero sum game we’re playing!
I hope that helps a tiny bit.
My best and warmest wishes to you.
Rob