Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
Sammy’s level of respect for you is maybe one notch above child molester. The notion that replying to his comments serves any purpose at all is ludicrous. Even Goon Central had more meaningful discussion.
I am not suffering under any illusions that anything that I say is going to be given fair consideration by Sammy, Anonymous. If Sammy were capable of engaging in reasonable discussion, he wouldn’t be a Goon in the first place and there wouldn’t be any problem.
Why do people who are not Goons tolerate his behavior? That’s the question. That one affects all of us. If all of the Normals had written e-mails to the site administrator at Motley Fool back in May 2002, Greaney would have been given the boot 15 years ago and we wouldn’t be living through an economic crisis today. We know how people feel about this sort of behavior. We adopted laws making financial fraud a felony a long, long time ago. We have published site rules at every site at which I have posted prohibiting the tactics employed by Sammy. So why the heck is he still an issue?
Sammy remains an issue today because we all carry a Get Rich Quick urge within us and it is a powerful force. It doesn’t affect us all to the same degree. I think it would be fair to say that Sammy’s Great Rich Quick urge is more powerful than the Get Rich Quick urge residing in most of our fellow community members. But most of our fellow community members follow some sort of Buy-and-Hold strategy. And most of our fellow community members are using the numbers written on their portfolio statements as a reasonable indicator of the stock-market wealth they possess. And most of our fellow community members see someone like Sammy come along and say “oh, what a shame that some people don’t know how to behave” and then do nothing more about the problem. Fair enough?
That’s why stock investing remains risky today. The last 36 years of peer-reviewed research shows that there is no intellectual reason why investing in stocks should be any more risky than investing in Certificates of Deposit. The peer-reviewed research that I co-authored with Wade Pfau shows us that by opening the internet to honest posting on safe withdrawal rates and scores of other critically important investment-related topics, we would diminish the risk of stock investing by close to 70 percent. That’s pretty darn cool stuff, no?
Why is everyone who works in this field not working with me to get the word out re what the last 36 years of peer-reviewed research tells us about how stock investing works in the real world? There’s obviously a mountain of money to be made doing so. What’s the hold-up?
The hold-up is that the first rule of marketing is to flatter your potential customer. Valuation-Informed Indexing permits people to retire many years sooner and to reduce investing risk dramatically. But it does not flatter them. It does not tell them “oh, you are a 100 percent rational creature, all investors are” like Buy-and-Hold does. Valuation-Informed Indexing insults investors by telling them that they are highly irrational beings who will fall for any Get Rich Quick scheme that happens to come along if they do not work hard to resist their natural Buy-and-Hold inclinations. Valuation-Informed Indexing is what works. Buy Buy-and-Hold is what sells.
That’s the bottom line on all this. I am not able to go with what works from a marketing perspective when I consider how much human misery it causes. I am okay with a certain amount of marketing hoo-hah. But Buy-and-Hold crosses an important line when it deceives investors re how much money they need to accumulate to enter a safe retirement.
There were people who posted at the Motley Fool board who became friends of mine over time and who believed that the numbers in Greaney’s study were rooted in real research. I do not have it in me to play along with such lies. I view a failed retirement as a serious life setback. I feel strongly that, when I identify the safe withdrawal rate, I need to make a realistic effort to get the numbers right. If I discover at some point that I have made a mistake, I feel required to correct it and apologize for the harm that I have done.
I believe that a good percentage of the population is going to have sympathy for that position in the days following the next price crash, when they are able to see with their own eyes what the relentless promotion of the Buy-and-Hold “strategy” for 36 years after the peer-reviewed research was published showing that there is precisely zero chance that such a strategy could ever work out well for even a single long-term investor has done to our country. I’m not God. I could be wrong. But I know I love my country. And I know that someone who loves his country has an obligation to stick to it in circumstances like this. So we will see how that one turns out as time works its way through the hourglass.
I think that responding to Sammy’s comments serves a purpose. The good news of the 15-year saga is 50 times more good than the bad news of the 15-year saga is bad. To move forward to a world in which Buy-and-Hold and bull markets and economic crises are all a thing of the past, we are going to need as a society to make sense of what has been done to us and what we have done to ourselves. That story is contained in the materials set forth at this web site, including a good number of the comments that I have posted in response to Sammy.
We all need to be talking about this strange behavior. It is killing us. We cannot overcome it by ignoring it. Sunshine is a disinfectant. We need to get all the stuff that troubles us out into the open where we can make it clean. We need to overcome our Get Rich Quick impulse, not ignore it in the hopes that it will go away by magic.
Take a look at your own comment. You say that Sammy views me as nearly equivalent to a child molester. That’s a strong statement. Why would Sammy consider someone the near equivalent to a child molester solely because he happened to be the person who discovered the errors in a type of retirement study that was used by millions to plan their retirements? In intellectual terms, that makes zero sense.
In emotional terms, it makes sense. People care about their financial futures. If the last 36 years of peer-reviewed research is legitimate, millions of people have made terrible mistakes in planning their retirements. It hurts to hear that you have been taken. Lots of people have been taken. So we have seen a lot of emotional pain evidence itself during these 15 years of The Great Debate About Whether or Not to Permit a Great Debate. There is no one who is going to sprinkle pixie dust on us and make that pain go away, Anonymous. We are going to have to work up the courage to approach this matter like grown-ups and FACE THE FREAKIN’ PAIN.
We have to find some means to get accurate and honest investing advice out to millions of middle-class people. This is not optional. It is 100 percent imperative. It would be nice to think that we could do it without mentioning the 15-year cover-up. But that’s just not realistic. The first question people ask when anyone tells them about what the last 36 years of peer-reviewed research says is, “But what about what the Buy-and-Holders have been saying all these years — they say just the opposite!” You can’t spend hundreds of millions of dollars promoting a discredited investing strategy and then one day just turn on a dime and start promoting a true research-based strategy. There has to be a transition. There has to be an explanation of all that has gone down.
The proof that I am not a child molester is the fact that I am willing to work with my Buy-and-Hold friends and even with my Goon friends to do anything that is even a tiny bit reasonable to make the transition go as easy for my Buy-and-Hold friends and my Goon friends as possible. But there are obviously lines that cannot be crossed. I don’t commit financial fraud. Not in 15 years, not in 15 billion years. I don’t say that the Greaney study contains an adjustment for the valuation level that applies on the day the retirement begins. And I don’t deny that there is 36 years of peer-reviewed research showing that a valuation adjustment is required. Short of committing financial fraud and going to prison, I am up for just about anything that keeps feathers from being too ruffled.
When things get to a point where doing something a tiny bit reasonable comes to possess some appeal to you, please let me know. I am 100 percent in. Until that day, the best that I can think to do is to wish you all the best that this life has to offer a person. It’s the sort of thing that any self-respecting child molester would do for his friends.
Take care, man.