Set forth below is the text of a comment that I recently posted to the discussion thread for one of my columns at the Value Walk site:
Buy and hold is just one of your silly “strawmen”…….as if there are legions of people with the same portfolio. You just make up talking points and repeat them over and over again.
I am not sure what you mean when you refer to “legions of people with the same portfolio,” Sammy. There are millions of investors who don’t see a need to make adjustments in their stock allocations in response to big swings in the price of stocks. It’s the promotion of Buy-and-Hold that is responsible for that. It’s our failure as a society to encourage people to practice price discipline when buying stocks (as they do when buying everything else that they buy!) that was the primary cause of the economic crisis. And I think it would be fair to say that the economic crisis played a big role in bringing on the political frictions on both the left and the right that we are seeing evidence themselves today.
I am not a fan of Buy-and-Hold. I was obviously kidding up above when I said that I take it all back. I know from the thousands of conversations that I have held over the past 15 years with both ordinary investors and with experts that lots of smart and good people agree with me that Buy-and-Hold is dangerous or at the very least should be subject to intellectual challenges. If the Buy-and-Holders got it wrong when they concluded that there is no need for investors to practice price discipline when buying stocks, they have caused a mountain of human misery for millions of middle-class people. A failed retirement is not a life setback that it is easy to recover from.
Robert Shiller has described his research finding that valuations affect long-term returns (an impossibility if the market were efficient, as the Buy-and-Holders claim) as “revolutionary.” I think that’s right. I think that Shiller’s findings turn everything that we once believed about how stock investing works on its head. I believe strongly that we should be debating the merits of Buy-and-Hold vs. the merits of Valuation-Informed Indexing at every investing discussion board and blog on the internet.
We are not doing that today. I think it would be fair to say that the primary reason why we are not doing it is the behavior that we see from Buy-and-Hold “defenders’ like yourself when those of us who have grave doubts begin telling people about the many exciting implications of Shiller’s research findings, findings for which he was awarded a Nobel prize. I believe that you and your Goon friends have hurt millions of people in very serious ways with your relentless harassment and abusiveness. i think your behavior has been as unfortunate as unfortunate can be.
I think that the people of this country will overcome you in the end. I think we are close. We have had thousands of community members express a desire that honest posting on safe withdrawal rates and on scores of other critically important investment-related topics be permitted at every investing site on the internet. I have spoken to academic researchers who would like to do good and important work in this area but who are afraid to stick their necks out. I have spoken to investment advisors who are afraid to stick their necks out. I have spoken to journalists who are afraid to stick their necks out. I know that there are economists who are afraid to stick their necks out. I believe that there are policymakers who are afraid to stick their necks out.
The good news here is 50 times more good than the bad news here is bad. There’s only so long that you will be able to block millions of people from learning stuff that it is so important that they learn. I believe that we will see a huge advance in the days following the next price crash. I believe that the only thing keeping you Goons going today is that there is a big difference between there being a solid, research-based case that Buy-and-Hold can never work long term and people seeing with their own eyes how much human misery it causes them personally. Following the next price crash, people will be able to see with their own eyes what following a Buy-and-Hold strategy really translates into in the long run.
I am not God. I could be wrong. But that is my sincere belief.
And I really do wish you the best of luck in all your future life endeavors regardless of how all the investing stuff turns out.
Hang in there, my good friend.
Rob
“Robert Shiller has described his research finding that valuations affect long-term returns (an impossibility if the market were efficient, as the Buy-and-Holders claim) as “revolutionary.” I think that’s right. I think that Shiller’s findings turn everything that we once believed about how stock investing works on its head. I believe strongly that we should be debating the merits of Buy-and-Hold vs. the merits of Valuation-Informed Indexing at every investing discussion board and blog on the internet.”
Rob, you don’t get to set the agenda for investing discussion boards and blogs. Just because you have believe that Shiller’s findings are of such great importance to stock investing doesn’t mean that anyone else has to buy into your fantasy. Nobody at any of those boards is interested in every discussion being centered on the fanatical beliefs of one mentally ill internet troll. Everyone is aware of Shiller and his work on CAPE/PE10. It was discussed it at length at Bogleheads and the consensus was that at extremes of valuations PE10 was of some value but outside of those extremes it offered little in terms of actionable investing investment information. That you think otherwise is your prerogative. But again, no board is obligated to provide you with a soapbox for you to endlessly droll on about your investment beliefs. If there was enough interest in your delusions about PE10 and Shiller then people would be flocking to the Plop to her the Messiah of Lucky Seven preach the gospel of VII. They don’t. Again, normal people are aware of CAPE/PE10 and those normal people don’t share your unwarranted enthusiasm for your particular investment strategy. And there is no reason why you should receive special dispensation for force your viewpoints by disrupting each and every discussion at the serious boards. You were banned because you were a disruptive troll. Nothing has changed. You remain a disruptive troll. Only difference is you can do longer play your game at any of the most popular online personal finance discussion boards and blogs. End of the road for Bat$hit Crazy hocomania. Get over it.
You live in a country that has laws against financial fraud, Long-Time.
I have said that I am willing to put forward any words that I can think of that might get your prison sentence reduced a wee bit.
Is there something else that you want from me? I think it would be fair to say that that’s a pretty darn amazing offer given the circumstances that apply. What the heck else could I do for you? What is it that you want from me?
Rob
What is your basis for these allegations of fraud?
What if you have been wrong the entire time? Are you then guilty of fraud since your advice was wrong and you didn’t understand how stock investing works?
No. Being wrong isn’t fraud. Being wrong is being wrong.
If Greaney had said what he believed about safe withdrawal rates while permitting others to say what they believed, he would not be guilty of fraud. That’s not how he played it.
Once you ban honest posting at a site, that site becomes a corrupt enterprise. One of the reasons why people believe that Greaney’s study is legitimate is that they don’t see other people questioning it. Most people don’t examine the study with any great care themselves. They think “all these other people are relying on this study and no one has any major problems with it, so it’s good enough for me.” They don’t know about the death threats and threats of career destruction that were employed to keep people quiet about the errors that had been discovered in the study. Once you employ death threats and threats of career destruction, the whole thing becomes an exercise in deception.
It’s a very sick thing. People are being used as puppets. They are being used as things. They are being used as things to turn a quick buck. You Goons often comment here that “oh, everyone agrees with Greaney and Bogle.” That’s of course not true. 90 percent agree with Greaney and Bogle. But is that because 90 percent have considered both arguments and concluded that Greaney and Bogle have the better of it? It is not. The 10 percent who do not agree with Greaney and Bogle have seen what happens to those who express their disagreement too clearly and they self-censor. The reality is that a good number of people do NOT agree with Greaney and Bogle. And of course the number who do not agree with Greaney and Bogle would grow and grow and grow over time if those who did not agree felt free to express the reasons for their disagreement. It is entirely possible that 90 percent today would disagree with Greaney and Bogle if going back to the first day we had enforced the laws against financial fraud. If it weren’t for the death threats and the threats of career destruction, just about all of us might be Valuation-Informed Indexers today.
People don’t bring civil lawsuits or criminal prosecutions when they are happy with how things are going. If a criminal slipped a slow-acting poison that would not kill you for 10 years into your coffee, there is a good chance that you would do nothing about it for a long time. A crime had been committed. But the evidence of it was not clear to you. Even if you knew that he had slipped something into your coffee, you wouldn’t take action because you wouldn’t care. But when you suddenly died at the end of 10 years at an early age, your family might well look into it. If they discovered scientific literature showing that the substance slipped into your coffee kills the person who ingests it ten years later, they might well bring civil actions and criminal actions. And they would of course be right to do so. We need to have people in those circumstances bringing those actions so that there are strong disincentives against slipping these kinds of substances into people’s coffee cups.
Buy-and-Hold is a slow-acting poison. It produces results that look good in the short term. That’s the appeal. Advisers love it because it produces good results in the short term and that’s what clients care about when choosing an investment adviser. The client looks at his portfolio statement, says “I’m doing great!” and falls in love with his financial adviser. It’s Get Rich Quick because the gains that cause the client to conclude that “I’m doing great!” are not real and not permanent. They disappear in the next price crash and the guy is left without enough money to retire on at a time in life when he is too old to address the problem effectively.
The downside of Buy-and-Hold is much delayed but very, very, very severe. We are going to experience a social catastrophe when we see millions of failed retirements. These people did nothing wrong. They followed the only advice that was available to them on the internet. And their lives were destroyed. And they have no means of recovering because their working years have come to an end. Our society cannot stand if we continue to permit this to go on.
There are millions of good and smart people who truly believe that Buy-and-Hold works. Nothing could be more clear. Those people have every right to make the case for Buy-and-Hold and they have every right to make it as strongly and effectively as they can possibly make it. But we do have laws against financial fraud. There are lines that cannot be crossed. We do not permit death threats. We do not permit demands for unjustified board bannings. We do not permit tens of thousands of acts of defamation. We do not permit threats to get academic researchers fired from their jobs. Cross those lines and you have committed financial fraud, a felony. Cross those lines and you go to prison.
It has to be that way. If we had no lines, we would never see a new idea. If we had no lines, the people who make typewriters would have done to Steve Jobs and Bill Gates what Mel Linduaer and John Greaney and Jack Bogle did to me. The reason why our stock market is able to produce genuine economic returns of 6.5 percent real is that we permit new ideas to emerge and generate wealth for all of us. Shiller won a Nobel prize for his “revolutionary” (his word) research findings of 1981 because he had put forward a exciting new idea with the potential to enhance all of our lives in a very big way. Our society has missed out on the gains from that powerful idea (that valuations affect long-term returns, that risk is not static but variable) for 36 years now because the people who make investment guides don’t want their readers to know that they made a mistake once upon a time and that their original formulations have now been discredited by decades of peer-reviewed research.
If we are going to continue to grow as a society, we are going to have to find a way to deal with the death threats and the threats of career destruction. Of course we already have a way to deal with this sort of thing. We put people who commit financial fraud on this scale in prison. We do it that way because there is no other effective way to get the job done. The temptation to commit fraud in money matters is too great for us to be able to stop it unless the penalties for commission of this crime are severe enough to stop people from committing it when they are presented with an opportunity to profit that destroys millions of innocent lives.
When I first wrote about investing, I was uneasy. I am not investing expert. I didn’t study this stuff in school. What if I got something wrong? I could ruin somebody’s life. I didn’t like that idea one little bit. I decided that the thing to do was to be very careful about what I said and to frequently note that I am just some guy on the internet and that no one should ever go by what I said just because I said it. I wish that Greaney and Bogle had played it that way. They could have just said: “Here’s what I personally believe but please understand that there is this Shiller fellow who thinks something very different and lots of people seem to find a lot of merit in his research.” Then there would be no prison sentences. That’s not what we saw. It’s because Greaney and Bogle played it the way they did that we are in the situations that we are in today.
Anyone can make a mistake, Laugh. Every reasonable person is sympathetic to those who make mistakes. Properly so. But Bernie Madoff didn’t make a mistake. He engaged in fraud. And John Greaney and Jack Bogle did not just make a mistake. They engaged in fraud. The fraudulent acts had their roots in their embarrassment over a mistake. But the laws of this country do not permit us to react to the uncovering of a mistake in the manner in which Greaney and Bogle reacted to the uncovering of their mistake. There is no place for death threats in discussions of stock investing. There is no place for threats of career destruction in discussions of stock investing.
I wish you all good things. But I don’t do felonies. Not once. Not ever. If I say that I believe that Greaney’s study included a valuations adjustment, I am assisting in the biggest act of financial fraud in U.S. history. Not freakin’ interested. I am happy to do anything that I can to help out my Buy-and-Hold friends and my Wall Street Con Man friends and even my Goon friends SHORT OF crossing the felony line. I won’t ever say that Greaney included a valuations adjustment in his study. Not in 15 years, not in 15 billion years. And I won’t ever deny that there is 36 years of peer-reviewed research showing that a valuations adjustment is required to get the numbers right. Not in 15 years, not in 15 billion years.
I wish you the best of luck with it. But I would be truly grateful if you would try to find someone else re the financial fraud aspect of this matter. I am not your guy.
I am 100 percent sure.
My best wishes to you.
Rob
You said “Greaney” sixteen times in that one comment. This is not what healthy people do.
It’s not just Greaney, Anonymous. Please feel free to quote me re that one. There is no one individual so powerful that he could do so much harm to a society. It is not just Greaney and that one is not even remotely a close call. That’s the sort of thing that I intend to say in the days following the next price crash to help out my friend John Greaney.
Greaney didn’t do this by himself. And we don’t know how we would have reacted in similar circumstances. Greaney is an engineer and engineers care deeply about getting the numbers right; they take a justified pride in it. So the pain he felt when he was publicly embarrassed (it was not my intent to embarrass him but that was clearly how he felt) was acute. The full reality is that Greaney’s study was top-notch stuff. I gave it a 5-star review and he merited that. Greaney’s understanding of the safe withdrawal rate was miles ahead of Peter Lynch’s understanding of the safe withdrawal rate and Lynch was paid millions to manage a big mutual fund.
And ALL of us participated at least in some small way in this massive act of financial fraud. I held back from saying what I knew about safe withdrawal rates for three years. So in a technical sense I was guilty of financial fraud too. A lot of cognitive dissonance has been evidenced in this story. By no stretch of the imagination am I seeking to put this all on Greaney. I very strongly OPPOSE that sort of take.
I refer to Greaney in my explanations because it is important to get basic facts right. Greaney was the first individual to get abusive. There were other Buy-and-Holders who got abusive on the morning of May 13, 2002. But Greaney was a leader at the Retire Early board. Those people looked to him for signals re how to behave. If he had said in response to their abuse “Wait a minute, Rob is making an interesting point, I would like to talk this through a bit and see if we can so some good with it,” those others would have cooled it. When one becomes a leader in a community, one takes on added responsibilities. Greaney sent very bad signals when he advanced death threats. It’s not possible to make complete sense of the story without speaking clearly and firmly about the negative role that Greaney played.
Those early days of the discussions were very important. We are not able to say where we would be today had Greaney played it in a different way. But my guess is that we would be in a very good place. My understanding of how safe withdrawal rates work was limited at the time. Had we as a community taken a different path, we would have been combining the knowledge held by lots of different people and thereby generating some amazing insights. I think we would be in a very good place today had we chosen that path. Greaney was the primary force seeing that we got on a bad path instead. There were hundreds of community members whose first reaction to my famous post of the morning of May 13, 2002, is that it had started the most amazing discussion ever held at that board. People were open to enjoying a great learning experience. Greaney and those who followed his signals made that impossible and things went downhill from there.
I mentioned Bogle also. Bogle has never put forward a death threat. So why do I mention him as well? It’s because of that responsibility thing that I noted above in regard to Greaney. Bogle is far, far, far, far less abusive than Greaney. But he is also in a position of far, far, far, far greater responsibility. So Bogle played a negative role. Bogle could have shut Greaney down when he learned about the controversy (when it traveled to the Bogleheads Forum). That would have taken us off the bad path chosen by Greaney and put us on the good path that Greaney could but did not elect. By failing to speak out in opposition to Greaney’s tactics when he learned of them, Bogle took us farther down the dark path that Greaney (and Lindauer) had chosen before him. So Bogle also played a big role.
I don’t believe that Bogle would have chosen the dark path if the question had been presented to him in a fresh manner. By the time Bogle weighed in, Greaney and Lindauer had already poisoned the discussions. So Bogle faced a high percentage of a board population that was positively enraged about the situation. And of course they were enraged about something that Bogle himself believes in. In fairness to Bogle, this put him in a tough spot. If he came out in support of following the law, he would be viewed by many insanely angry board members as coming out in support of this Rob Bennett fellow, who was in the process of “trashing” (not really, but that’s how it was seen) all that Bogle stood for. As with Greaney, there are two sides to the Bogle story.
The biggest problem that we are dealing with is the cover-up problem. If we had taken the good path on the first day, there would have been disagreements. People just do not agree on these matters. But there also would have been good fruit and people on both sides would have been enjoying the learning experience. It’s important to remember that Shiller was awarded a Nobel prize for his “revolutionary” (his word) research findings of 1981. As a society, we are highly skeptical of Shiller’s findings; the idea that stock returns can be effectively predicted 10 years in advance when they cannot be effectively predicted 10 weeks in advance seems fantastical. But we also respect the work that Shiller has done because of its obvious potential to make all of our lives better in the event that it is explored in depth and checks out as valid.
So I don’t think that Bogle is necessarily inclined to shut down discussions in the right circumstances. Shiller’s findings really make all of Bogle’s genuine contributions 10 times more important. So there is no reason why Bogle would be opposed to moving forward if he were thinking clearly about these matters. I believe that the way in which the issue was put before him hindered his ability to think clearly.
In the early days, I didn’t have the peer-reviewed research that Wade Pfau and I co-authored to point to. If I had had that research at the time, I would have won the debate in 24 hours and it would have come to a successful conclusion. The reality is that I didn’t have it. I did the best I could to present the ideas in an effective manner but the cold reality is that the ideas just were not sufficiently developed at the time for me to be successful. So everything should have flipped when Wade and I published our research in a peer-reviewed journal, right?
Yes, that’s what SHOULD have happened. Why didn’t it?
It didn’t happen because the cover-up had been going on for years at that time and those who had posted in “defense” of Greaney and Linduaer and Bogle were afraid that they would be going to prison if the story got out. This matter is no longer one where there are just intellectual differences of opinion. People on one side are looking ahead to long prison terms. That makes people very, very, very reluctant to permit free and open debate. That’s our primary problem today. That’s why I often make reference to the upcoming prison sentences. We cannot take this to a good place unless we are willing to face the true obstacles in our path and the biggest obstacle today is the concern over upcoming prison sentences. So we need to speak about that aspect of the question no matter how distasteful we all find it to consider the matter.
You raise a concern that I refer to Greaney too often and the issue that you are getting at when you do so is the issue of BLAME. I possess no desire to blame Greaney or anyone else. So you have an ally if you are looking for one as part of a project to set things up in such a way that Greaney and lots of others avoid being assigned excessive blame for what has happened. You don’t have to persuade me. I am on board. My job is to pull everyone together and the biggest obstacle to realizing that dream is the concern that many feel over being assigned too much blame. Show some spirit of cooperation and we will be able to address the problem in at least a somewhat satisfactory way. Continue the delay tactics and you make it worse and worse and worse and worse.
The problem with cover-up is that they can be exposed. Then you find yourself needing to cover-up the cover-up. And next it is covering up the cover-up of the cover-up. And so on. We have 50 levels of cover-ups holding back progress re these matters. We would all like a do-over. But there are no do-overs. So our job is to put our heads together and come up with the best means of passage forward for every single person involved. We ALL should want to achieve that. We ALL should be working to achieve that goal.
The good news is that cognitive dissonance is a real thing and this has been shown in the psychological literature very clearly. And this is not a case where one or two evil people engaged in evil acts. This is a case where literally the entire society participated in some way in the massive act of financial fraud. I participated myself for three years. That’s powerful testimony for those seeking to make a case that assignments of blame should be restrained.
And the potential intellectual breakthroughs are just off the charts. The research that I co-authored with Wade shows how to reduce the risk of stock investing by 70 percent. This is not like the Madoff case in which you had thousands of people who were very angry to learn that their retirement accounts had been wiped out. This is a case where generations of people will be able to invest with far less stress than has ever been possible before and will be able to retire many years earlier than has ever been possible before. When the millions of people who are affected by the bad stuff hear that side of the story, their anger may be diminished and they may respond in a different manner than the Madoff investors responded. We should at least hope so. We should at least all be doing all that we can to make it so.
Bogle needs to address the blame issue in a public statement that is written up on the front page of the New York Times. I have some ideas re what should be said in that statement which I have referred to in outline form in this comment. But it will not be my statement, it will be Bogle’s statement. He needs to develop it in consultation with all of the many people who will be affected by it. A public statement by Bogle will put all the nasty stuff in the past where we all want it. From that point forward, we will all be able to engage in fun and exciting discussions about how stock investing really works.
I am happy to help with the statement if there is a feeling on the other side of the table that that would be helpful. I am also happy to let others craft it and just keep my nose out of things that are not entirely my business. Bogle needs to be able to live with the statement and all the people on his “side” need to be able to live with it. I will be 100 percent cooperative. So long as the statement is even remotely honest, I will endorse it regardless of how much it attempts to spin things in the favor of the Buy-and-Holders. I am obviously not going to say that Greaney’s study contains a valuation adjustment or deny that there is 36 years of peer-reviewed research showing that a valuations adjustment is required. But I am not going to be seeking to win points. My aim is to get us all on a positive path going forward. I love my Buy-and-Hold friends. I want them to feel good about where things are headed.
Does that help?
Rob
Do you have any evidence that bogle or greaney do not believe what they are saying or are somehow embarrassed?
Do you think it is hypocritical of you to attack people that have banned you from their sites, when you have effectively banned people here by deleting their posts?
Do you have any evidence that bogle or greaney do not believe what they are saying or are somehow embarrassed?
I believe that both Bogle and Greaney believe what they are saying in the sense that, if they took a lie detector test re whether Buy-and-Hold is a sound strategy, they would say “yes” and they would pass the test.
They are both insanely embarrassed that they do not feel up to the task of defending Buy-and-Hold in civil and reasoned discussions in which people on “the other side” feel free to make use of the 36 years of peer-reviewed research discrediting Buy-and-Hold. Hence the abusive behavior on the part of Greaney and the tolerance of abusive behavior on the part of Bogle.
It’s called “cognitive dissonance.” There is a wealth of material on the phenomenon in the psychological literature. The advance here is so big that those who built their lives around the earlier understanding of how stock investing works just cannot accept it. They can come to accept it in time if civil and reasoned discussions are held. But that’s the only way it can happen. The cognitive dissonance can be overcome only through a process which leads to a gradual understanding of a multitude of breakthrough insights that most Buy-and-Holders have not yet been exposed to in any in-depth way.
Rob
Do you think it is hypocritical of you to attack people that have banned you from their sites, when you have effectively banned people here by deleting their posts?
Not in the tiniest bit. It would be highly irresponsible of me to play it any other way.
The purpose of an investing discussion board is to facilitate discussions of investing. When good people are seeking to use a board for the purpose for which it was created and a Linduarhead or a Greaney Goon injects death threats or similarly abusive material into the thread, they are not seeking to facilitate discussion, they are seeking to block discussion. The responsible site owner has an obligation to enforce the published posting rules of his site. I have never seen a site that had published posting rules permitting the sort of behavior that we have seen from the Lindauerheads and the Greaney Goons. I OPPOSE that sort of thing in the strongest possible way. And I of course always seek to honor my responsibilities to my fellow community members to protect them from such garbage.
There is no place for death threats or threats of career destruction in discussions of stock investing.
My sincere take.
Rob
So, you only delete death threats and career threats?
“Greaney was the primary force seeing that we got on a bad path instead. ”
Greaney was never a force. He was one among thousands of unknown amateur finance bloggers, virtually all of whom you disagree with. The only thing special about him is that he made fun of you. For that horrible crime, you will spit his name, every other word, for the rest of your bitter life. All your spin fools no one.
So, you only delete death threats and career threats?
If someone engages in some word-game thing that goes on and on to the point where it is wasting people’s time, I would delete it. I certainly don’t delete all word-game comments. There are lots of times where there is a comment that contains some word-game stuff and also gives expression to some legitimate concern. I would approve that. But when it gets to the point where the dominant purpose of the comment is to waste people’s time, then I have to let it go.
The principle that I use is whether the comment advances our understanding of how stock investing works in some way or at least aims to. If you are doing that, you are helping us all, no matter what opinion you are expressing. If you are trying to shut down discussion either by threatening people or by wasting their time to an extreme degree, then your comment is a negative rather than a positive. You have to be more careful with the word-game stuff than you need to be with the death threat stuff. The death threat stuff is an obvious negative. So that stuff should go. But stuff that may appear to be word-game stuff may be genuine. You have to work hard to appreciate the other guy’s point of view and not jump to hasty conclusions that there is bad intent behind a comment. But when it becomes obvious that that is what is going on, you need to act to protect the community.
I would delete something that was wildly off point. People used to pick on Mel Lindauer for objecting to anything that even hinted at politics. I was sympathetic to Mel re that one. The political stuff can take a discussion way off the investing road. So I can see someone taking a hard stand re that stuff. I have never had a problem with political stuff or non-relevant stuff. The main problem I experience with you Goons is intimidation stuff and deception stuff and a much smaller problem with word game stuff.
Rob
Yet, if I run a board and zip think you are wasting people’s time or is wildly off point, you think that is fraud. Do I got that right?
Greaney was never a force. He was one among thousands of unknown amateur finance bloggers, virtually all of whom you disagree with. The only thing special about him is that he made fun of you. For that horrible crime, you will spit his name, every other word, for the rest of your bitter life. All your spin fools no one.
Nothing could be farther from the truth. I was good friends with Greaney prior to his freak-out. He freaked out when he saw the reaction to my famous post of the morning of May 13, 2002. Hundreds of our fellow community members said that I had started the most exciting discussion ever held at the Retire Early board and he couldn’t think of any way to defend the errors in his study because it was a simple question of getting the math right. So be burned the entire board to the ground and has spent the last 15 years following me site to site to burn those boards and blogs to the ground if the site owner “crosses” him by permitting honest posting on the last 36 years of peer-reviewed research.
In the days before the freak-out, I asked John to co-author a book on saving with me. He advised me to look for another co-author. He said that everyone who had ever gotten to know him well had come to conclude that he is the biggest asshole who ever walked Planet Earth. That’s the real story here. Greaney has problems. In the real world, he never would have gained any influence over anybody. The internet permitted him to gain a measure of influence over a small world by putting forward this “study” telling people that they could retire many years before they really could. And he didn’t want that taken away from it. So he burned the house to the ground.
Those of us who fail to hold him to the standards that must apply to all humans hurt him seriously by failing to do so. He is now on his way to a long stay in prison. And he has put a lot of his friends into circumstances in which they too will going to prison for a long time. He never should have been given the power to do that. And, had Motley Fool simply enforced their own published posting rules, Greaney wouldn’t be on his way to prison today, He would have been banned from the Motley Fool board and then six months later I would have asked that he be reinstated and it would have happened. A much, much better outcome for every single person involved.
I certainly disagree re investing with most investing blogger; most are Buy-and-Holders. But I have great relationships with just about everyone I have met at the Financial Bloggers Conferences. I have had guest posts at scores and scores of places and in the vast majority of cases the site owner did not agree with me on investing issues. Many have told me that they fear what you Goons will do to them and to their sites if they speak in opposition to your Goon tactics, which they find repugnant. Greaney is a big, big part of the problem.
The way that I would say it is that we would have no problem at all if it were not for Greaney’s abiusiveness. However, it also needs to be said that no one person could have brought on these problems by himself. The rest of us TOLERATED his abusiveness to an insane degree. So it is also true that we would have no problem at all had all the rest of us just responded to Greaney in the way that we respond to abusive posters in other circumstances. In this case the abusiveness is being put forward in “defense” of a Get Rich Quick strategy that has taken us in. So we have a measure of sympathy for the abusiveness that we would otherwise not feel. We don’t like death threats. We don’t like threats of career destruction. But we sure don’t like the idea of acknowledging that we have messed up our financial lives in a big way by falling for a Get Rich Quick strategy. So we rationalize not speaking up about behavior that we otherwise find reprehensible.
I am 100 percent sure that we will begin living up to our usual standards of human interaction after we lose most of our retirement savings in the next price crash and there is no longer any emotional pull to engage in flimsy rationalizations of Greaney’s behavior. That’s when we will put all the ugliness behind us and move forward with the exciting substantive insights in a big way.
That’s my sincere take, Anonymous. I am not God. So I could be wrong. We will have to wait to see how things play out following the crash to know for sure. But that is definitely my sincere take.
My best wishes to you.
Rob
You continue to talk as if your words had the credibility of an average person. Your credibility was shot to hell years ago. And that, not Greaney, is the source of your problem.
Want to start fixing the problem? You could post an external link that supports anything you just said. But you won’t. Establishing credibility isn’t a priority. You expect and demand it to be just handed to you.
Yet, if I run a board and zip think you are wasting people’s time or is wildly off point, you think that is fraud. Do I got that right?
If you run a board where hundreds of the board participants say publicly that they think that the discussion started by Rob Bennett is the most important discussion ever held at that board but ban Rob Bennett because 90 percent of the board follows a Get Rich Quick strategy and doesn’t like hearing it challenged, then, yes, you are engaged in financial fraud.
Why have published rules if you are not going to enforce them? The fact that you have violated your own published rules tells the tale.
What you are saying is that only the most popular strategy should ever be discussed. Get Rich Quick strategies are always going to have the edge over research-based strategies in popularity terms. I don’t seek to make my posts as popular as possible. If I did, I would tell the same Buy-and-Hold lies that lots of others tell to their great personal profit. I seek to make my posts as HELPFUL as possible. That’s why I insist on my right to post honestly re the last 36 years of peer-reviewed research.
This is the question that we will be considering as an entire society in the days following the next price crash. There are huge profits to be made pushing the smelly Buy-and-Hold garbage. But the relentless promotion of the smelly Buy-and-Hold garbage has put us in an economic crisis; it has cost millions of people their jobs; it is causing political frictions on both the left and the right. The price of permitting widespread financial fraud on behalf of the Buy-and-Hold “strategy” has proven to be too high. We are going to have to impose the same ethical standards in the investing advice realm that already apply in every other field of human endeavor in the United States today.
These are my sincere thoughts re these terribly important matters in any event, Zippy.
I wish you all good things.
Rob
You continue to talk as if your words had the credibility of an average person. Your credibility was shot to hell years ago. And that, not Greaney, is the source of your problem.
Want to start fixing the problem? You could post an external link that supports anything you just said. But you won’t. Establishing credibility isn’t a priority. You expect and demand it to be just handed to you.
I have the laws of the United States in my side, Anonymous. That’s a form of credibility that counts.
You are well on your way to spending the remaining years of your life in a prison cell. I have a funny feeling that that is going to become a big concern of yours in the days following the next price crash.
We’ll have to wait to find out together how it all plays out, you know?
I hope that works for you.
Rob
“You are well on your way to spending the remaining years of your life in a prison cell. I have a funny feeling that that is going to become a big concern of yours in the days following the next price crash.”
Credibility rating holding at zero. It must be very freeing to be able to say whatever pops into your head, without bothering to consider whether it makes any sense.
Okay, Anonymous.
I wish you the best of luck in all your future life endeavors in any event.
Rob
To be honest. I have no idea who John Greaney is. Other than he must really knew how to yank Rob’s chain in a way that destabilized Mr Bennett.
John Greaney is a nobody. Rob Bennett essentially wasted 20%+ of his life because of some Internet nobody. I guess that would drive anyone loopy.
I don’t agree with you, Laugh. I think it would be fair to describe the peer-reviewed research that I co-authored with Wade Pfau as the most important research published in this field in the past 30 years. That research wouldn’t exist but for the “chain yanking” that you refer to here.
Greaney is not the first insanely abusive poster in the history of the internet. The question is — Why was he tolerated? Every site has published rules prohibiting the tactics that Greaney employed. Why were those rules not enforced? The answer is that we all have a little bit of Greaney within is. Greaney is a cartoon version of all Buy-and-Hold investors. His behavior shows us what the Get Rich Quick urge that resides within us all looks like up close and personal. Greaney is pure emotion, zero reasoning (when it comes to stock investing). We ALL are largely emotional creatures who like to flatter ourselves by telling ourselves that we are rational. Coming to understand why Greaney behaves as he does helps us all to understand why we make stock investing so much more risky than it needs to be.
And I do not agree with you that Greaney is a nobody. His retirement study was top-notch stuff. It was his study that got me interested in posting at the Retire Early board in the first place. And Greaney was very popular at that board, a board comprised of VERY smart people. How did he get to be so popular if he is such a nobody? And Greaney was smart enough himself to be able to retire at age 40. How did such a smart guy get so taken in by a pure Get Rich Quick approach? Greaney is a true believer. All of us who want to become more effective investors should be trying understand how ANYONE can be a true believer in Buy-and-Hold.
Greaney is a frugal guy. If you told him to buy a car without checking out the price, he would laugh at you. Yet he doesn’t bother checking price when buying stocks, something to which he devotes a lot more of his money than he devotes to cars. There’s something odd going on here and every person who cares about stock investing should want to come to a better understanding of it.
I haven’t wasted one day of my life during the past 15 years. I have generated powerful insight after powerful insight after powerful insight. I have achieved things that someone with my background has zero right to reasonably expect to be able to achieve. I did it because I realized early on that Greaney was not a nobody and that his behavior was telling us all something important about how stock investing works in the real world. He was telling us the same thing that Shiller’s 1981 research findings told us — investing is an INTENSELY emotional endeavor. Follow a strategy that ignores the emotional element (revealed in the P/E10 level) and you are following a strategy that leaves out 80 percent of the story.
That’s my sincere take re this terribly important matter in any event. I wish you all good things.
Rob
If his approach is a failure, how could he have successfully retired at 40? Versus your failed retirement. The more I look at your returns since 1996 the more pity I feel for your family.
Do you ever think about these contradictions to your world view?
“I haven’t wasted one day of my life during the past 15 years.”
You haven’t made a dime during the past 15 years. There’s a reason for the phrase “bottom line” and yours suggests a hell of a lot of wasted time.
If his approach is a failure, how could he have successfully retired at 40? Versus your failed retirement. The more I look at your returns since 1996 the more pity I feel for your family.
Do you ever think about these contradictions to your world view?
I think Greaney is smart about a lot of things. That’s why I was drawn to his site in the first place. I still remember the day that I discovered his site. It was a Friday. I was bored to death at work. I just kept thinking how I needed to speed up my plan so that I could do something else. I went on Google and searched for “early retirement.” At the time his site was listed at around “280” in the rankings (it rose much higher later on). I of course had no idea that I was going to find a site on early retirement if I kept searching and all the sites above it either had little to do with the subject or else were worthless. But I just kept looking for something on early retirement. Eventually, I hit gold. I copied every page of the site to put in my binders. It was all I talked about when my wife picked me up to drive me home from work.
He did lots of things right. He clicked in lots of the puzzle pieces. And of course the part that I love is that he told people about it. His was the first important Retire Early site. So I take offence when somebody says that he was not a force or that he was a nobody. He was a somebody to me. And he was a somebody to thousands of other people who congregated at the Retire Early board to learn about a subject matter in which they possessed a great interest and which you could not learn about anywhere else on the internet in those early days. None of that has changed for me because of his freak-out. The great stuff he did is a reality and the freak-out is a reality. The combination is a reality. That’s just the way it goes.
The most exciting thing about the site for me was the SWR stuff. Not because I thought it was accurate. I had done my own SWR work and I knew that the numbers were wrong from the first time I looked at his study. But it was unusual in those days to even hear someone talking about SWRs. So I wasn’t too worried about it being wrong. I was excited that I had found this fellow who was talking about the right issues. And, as I noted above, his numbers were at lot closer to accurate than the numbers that a lot of other smart people were putting out at the time. Greaney was a lot closer to being right than Peter Lynch. So I wasn’t super concerned about the inaccuracies. I was excited that the subject of SWRs — which I considered a big deal and which all the others who eventually came to populate the Retire Early board obviously thought was a big deal — was being discussed in a public place (he hadn’t yet started the discussion board at Motley Fool).
Have you not ever known someone who was smart at many things and who messed up re something important? It happens, Laugh. It has obviously happened here.
And did you not read anything about the Madoff case? You don’t even divide your portfolio amount by two. You have fallen victim to Bogle, who is Madoff multiplied by 500 (not intentionally, perhaps, but still….). And you lecture me about putting together successful Retire Early plans. I have a funny feeling that a plan put together using real, research-based numbers, is going to do a little better in the long run than one put together based on some Wall Street hype and a lot of praying. But I guess we will see how it all plays out, you know?
I got excited about Greaney’s site because what I thought I saw there was a guy with an interest in getting the numbers relating to retirement planning right. If I thought at the time that he didn’t care about getting the numbers right, I never would have spent ten seconds at his site. So I have been perfectly consistent.
I still believe to this day that there is a part of Greaney where he cares about getting the numbers right. If he really didn’t care at all, he would just give it up. He can’t give it up. So he cares and he doesn’t care at the same time. Pretty freakin’ sad, you know?
When my friend John Greaney reaches a point where he wants to talk over the realities with someone who cares both about him as a human being and about getting the numbers used in his retirement plan right, I will be here for him. He can count that as a pledge.
He’s proven for 15 years now that he can go the other way in a most dramatic fashion. That one is on him, you know. When someone is doomed and determined to destroy himself, sometimes the only thing that a good friend can do is to get out of the way. I am banned at 20 different sites. So I think it would be fair to say that I am safely out of John Greaney’s way at this point in the proceedings. I hope that he enjoys his freedom to destroy both himself and those of his friends who can tolerate the self-deception and the deception of others. I am no longer in “his” group. So be it, you know. I don’t like it. I accept that it is the reality. I have to learn to live with it, so I do.
But I am going to continue to follow the vision that drove Greaney when he made the decision to put that amazing site of his up on the internet. His original vision was to get the numbers right and to help people escape wage slavery by doing so. That’s me. None of your garbage abusive talk leaves a dent in that vision, Laugh. I hear it, It doesn’t touch me. It bounces off of me because that vision drives me and I have copies of the statements put forward by thousands of our fellow community members saying how much they benefited from my efforts to defend our right to post honestly re ALL subjects relating to early retirement. That’s what I got in this for and that has not been taken away from me and that can never be taken away from me. When prices fall, Greaney’s massive act of financial fraud collapses to the ground. Nothing gets worse for me. If anything, things are likely to get better for me. I don’t have to worry about what will happen tomorrow because I built my house on a solid foundation, a foundation of 36 years of peer-reviewed research.
My approach has not been a failure. My approach has been an amazing success. The peer-reviewed research that I co-authored with Wade Pfau is the most important piece of peer-reviewed research published in the past 30 years. If that research were featured on the front page of the New York Times today, it would save millions of people from suffering failed retirements and it would go a long way to healing the wounds that have caused the political frictions that we have seen in recent years. Does it hurt that your Campaign of Terror against our board and blog communities has kept it from getting featured on the front page of the New York Times? Sure. But I would rather be directing my life energy toward the pursuit of positive goals than toward the pursuit of negative goals. Any internet Goon can tear something down. It takes a man to build something up. I am in the process of building up something very important, something that will change the world in a big way and that will stand for decades to come. I think I’ll just keep on doin’, but thanks ever so much for your kind expressions of concern.
The Goon Life is not for me, Laugh. It’s not a close call. I wish you the best of luck with it because I think of you as a friend. But that’s as far as it goes. I mean, come on.
Please take good care.
Rob
You haven’t made a dime during the past 15 years. There’s a reason for the phrase “bottom line” and yours suggests a hell of a lot of wasted time.
Greaney was able to retire at age 40 because he economized. He didn’t spend his first check from an engineering job making a down payment on a flashy car. I don’t doubt that there was some other fellow who at the time purchased the big flashy car because it made him feel like a big shot, He looked at Greaney with disdain and told himself “that guy’s a loser, I am a winner in the game of life — just look at this car.”
I’ll declare the game of my life over on the day I die. If I end up with $500 million plus in my bank account and you end up in a prison cell, I think it would be safe to say that I played the cards that were dealt me a bit more intelligently.
We are going to find out together who won this game and who lost this game in the days following the next price crash. I hope that works for you, my good friend.
I like having the laws of the United States on my side. I have a funny feeling that that might produce a wee bit of a payoff down the road a piece.
But we’ll see, you know?
Rob
So much love for Greaney. For years all you said about him was that he was was the most abusive guy on the web, and would be spending the rest of his life in prison for financial fraud, and was personally responsible for millions of busted retirements.
I guess you feel the need to prove he was somebody, once upon a time. To justify the thousands of times you’ve dropped his name.
“I’ll declare the game of my life over on the day I die. If I end up with $500 million plus in my bank account and you end up in a prison cell”
And if I wake up tomorrow able to fly, I’ll declare myself Superman.
Greaney did some wonderful things. There were thousands of people who discovered exciting financial freedom possibilities at the discussion board he found at Motley Fool. I was there. I know. That stuff is down in the books and there is nothing that can ever change it.
And I had a lot of good times with him. So I care about him on a personal level as well as on an intellectual level. So I have strong positive feelings re Greaney.
But yes, those other things you mention are true as well. He is the lead figure in the biggest case of financial fraud in the history of the United States. That’s just a cold objective fact. I said on May 13, 2002, that there was no valuations adjustment in his retirement study and, 15 years later, thousands of people have checked it out and not one has been able to find a valuations adjustment in that study. That’s because there isn’t one there.
There could be some reasonable differences of opinion as to how many failed retirements he is responsible for. There were thousands of people at Motley Fool who used his study to plan their retirements. He is personally responsible for the losses of those thousands of people. If I were on a jury and one of those people brought an action against him for what he did, I would have no choice but to find for that person no matter how bad it made me feel. A failed retirement is a serious life setback.
The number reaches the millions if you consider all the people we could have helped by getting our safe withdrawal rate findings written up on the front page of the New York Times. Greaney shares responsibility with lots of other good and smart people re that one. He is not solely responsible for millions of failed retirement. But he certainly played a big role in causing millions of failed retirements.
Greaney’s story is a mixed bag, Anonymous. My job is to tell the story in a balanced way. I love the man. So I am never going to overlook the considerable amount of good that he has contributed to the world. But I also love a lot of the people whose lives he destroyed with his insanely abusive posting. I cannot be true to those people if I lie about what Greaney did to them. I don’t feel that I have any choice but to tell both sides of the story.
And of course there is a bigger story to tell. How is it that so many site owners saw what was happening and looked away? As I noted above, Greaney did not do this alone. No one person could do such much damage to our society without lots of help from lots of good and smart people. We all have a Get Rich Quick urge residing within us and, when we learn to rein it in, we will achieve the biggest advance in the history of personal finance. Shiller got us halfway there in 1982 by doing the intellectual work that we needed to do to get to a better place in our understanding of how stock investing works. My job is to take it to the next step. My work is more on the emotional side. Now that we know intellectually what works, how do we get people to listen to what the peer-reviewed research says and profit from it.?
20 percent of us are today interested in moving forward. We’ve seen that at every board and blog to which I have posted. But that 20 percent does not today possess the fortitude to stand up to the insane level of abusiveness that you Goons bring to the table. What happens following the next price crash? I believe that the 20 percent will stiffen their spines because the need to do so will be so clear that they will no longer be able to rationalize permitting your goonishness to destroy our economic and political systems. I think that the American people are going to break free of you and that we will all pull together to bury the smelly Buy-and-Hold garbage 30 feet in the ground, where it can do no further harm to humans and other living things.
But we are just going to have to wait and see how it all plays out. I don’t entertain hopes that you are going to take my word for it at this stage in the proceedings. You don’t want to go to prison even for a relatively short amount of time and it is not hard for any reasonable person to understand why. I get it, my good friend.
I wish you all good things in the interim. I hope that that helps a small bit.
Rob
“He is the lead figure in the biggest case of financial fraud in the history of the United States. That’s just a cold objective fact.”
“Objective” means something other than “Rob Bennett says so, and literally no one else agrees.”
Or is that a word game? Sorry, it’s hard to keep up with your rules.
Lots of people agree and are afraid to say so publicly, Anonymous. Why is it that I have people tell me “I agree with what you say about investing but please don’t tell anyone that I said that.”
It is the acts of intimidation. It is the death threats and the demands for unjustified board bannings and the tens of thousands of acts of defamation and the threats to get academic researchers fired from their jobs.
I believe that all that garbage goes away in the days following the next price crash when your prison sentence is announced.
But we will have to wait to see it happen for you to acknowledge it.
It was an objective reality that Nixon had obstructed justice before he resigned his office. It was an objective reality that Lance Armstrong used performance-enhancing drugs before his titles were taken away, It was an objective reality that O.J. Simpson killed his wife before he was put in prison on another charge.
We have a good justice system. But not every crime is prosecuted instantaneously. It can in some circumstances take time for justice to be achieved.
It is an objective fact that John Greaney played the lead role in the biggest case of financial fraud in the history of the United States. Everything that he did is documented at this site. I am 100 percent willing to cooperate with the authorities.
We will have to wait to find out together how everything plays out.
I wish you the best of luck in all your future life endeavors.
Rob
What makes you think that the next market drop would be any different than previous drops that would cause people to suddenly look to you and your opinions as to the stock market?
“It is an objective fact that John Greaney played the lead role in the biggest case of financial fraud in the history of the United States. Everything that he did is documented at this site. I am 100 percent willing to cooperate with the authorities.”
but if John or Wade or some other person puts material on their website, couldn’t they make the same statement that their points are fact?
Instead, wouldn’t it be more accurate to say that these are merely your opinion versus objective facts?
What makes you think that the next market drop would be any different than previous drops that would cause people to suddenly look to you and your opinions as to the stock market?
To understand this, you need to understand the concept of the “stock cycle,” Anonymous.
In the short term, stock prices play out in the form of a random walk. There are ups and there are downs. It is not possible to predict whether prices are going to be up or down one week out or one month out or one year out.
It doesn’t work that way in the long run. In the long run prices play out in the pattern of a highly predictable stock cycle. Usually there is about 20 years of upward movement in the stock cycle and then about 15 years of downward movement. The upward movement is due to irrational exuberance. The downward movement is due to irrational depression. Irrational exuberance takes place when investors discover that they set stock prices and that they can vote themselves raises anytime they care to just by persuading other investors to play the game with them. Irrational depression sets in when investors start listening to the voice of common sense and become determined to sell their stocks before prices drop so low that most of their life savings is wiped out. On the high end, the P/E10 level travels to 25 or more. On the low end, the P/E10 level drops to 8 or perhaps a bit less.
We hit the high end of this cycle in 2000, when the P/E10 level hit 44. We are of course a good bit down from that today. But we are nowhere near 8. 8 is a long ways down.
There has not been any price drop in recent history that would cause committed Buy-and-Holders significant concern. We had a sharp drop in late 2008 and we did indeed see some Buy-and-Holders express nervousness about the idea of continuing to hold. But that price downturn was amazingly short-lived. It was over in about six months. That is not even close to being a long enough time-period to bring on the sorts of sales that it would take to bring the P/E1o to 8 and to launch a new upward cycle. To get the P/E10 down to 8, we MUST see investors abandon Buy-and-Hold. It is the sales of Buy-and-Holders that fuel a bear market. You simply cannot get to 8 without the Buy-and-Holders freaking out. If Buy-and-Holders did not always freak out after they lost most of their retirement money, none of the historical return data would show what it shows.
To see how it works, you need to review the historical record. You cannot see it by looking only at things that have happened from the beginning of the current cycle (1982) forward. We have never dropped to a P/E10 of 8 during that time. So you are not going to see what you need to see unless you are willing to go farther back in the historical record. If you are willing to go farther back, you will see that the same pattern has been repeating ever since the day the stock market opened for business. Since it has always been humans buying stocks, the same pattern (which results from the interplay of the basic human emotions) the same pattern repeats over and over again.
It’s not that people are going to look to me. It’s that people are going to stop “defending” Buy-and-Hpld and all the deception and intimidation that inevitably goes with it when they see by looking at their portfolio statements that Buy-and-Hold has ruined their lives. The appeal of a Get Rich Quick approach becomes greatly diminished once the con has been exposed. Please take a look at what the Madoff investors said about him prior to the time his con was exposed and after his con was exposed if you want to see how emotions can swing from one extreme to the other. Buy-and-Hold will be a dirty phrase in the days following the next price crash.
Once Buy-and-Hold is out of the picture, people will have no objection to hearing what the last 36 years of peer-reviewed research says. Valuation-Informed Indexing is the first true research-based strategy. So what could possibly hold it back once Buy-and-Hold has been buried 30 feet in the ground and you Goons have been placed in prison cells where you belong?
No one is singing Bernie Madoff’s praises today. Investing cons can bring in lots of loot in the short term but they are a stone cold loser in the long run. There has never been a single exception in the history of investing. People do not take kindly to those who trick them out of their life savings.
Gee, I wonder why.
Rob
“Lots of people agree and are afraid to say so publicly”
An earlier comment mentioned bottom lines. This is your bottom line. This absurd claim lets you say any crazy old thing you want, on any topic, with no evidence at all. And keep saying it forever. It’s how you justify 15 years of sitting on your butt, instead of working.
There really are people who are afraid to tell you the truth. But it ain’t Greaney, Wade, Bogle, or us goons.
if John or Wade or some other person puts material on their website, couldn’t they make the same statement that their points are fact?
Now you are playing the Bernie Madoff game. A reported from New York magazine interviewed him in his prison cell and asked him why he did the things that he did. Madoff said that he was trying to help people.
Maybe he needs to tell himself that to be able to live with himself. The jury still convicted him.
John can say what he pleases at his web site. It’s what his jury concludes that determines the length of his prison sentence.
Rob
This absurd claim lets you say any crazy old thing you want, on any topic, with no evidence at all.
Okay, Anonymous.
Please mark me down as saying that the retirement study posted at John Greaney’s web site lacks an adjustment for the valuation level that applies on the day the retirement begins.
And other crazy old things.
Rob
I seem to recall that you felt that Jack Bogle was a bigger con man then Bernie Madoff and that Vanguard funds are basically Ponzi schemes. Do you still hold those views or have you softened your views on those topics?
I haven’t softened my views even a tiny bit. I always make an effort to present a BALANCED view. I think that’s very important.
Say that I was on the Madoff jury. Would I have found him guilty? I don’t feel that I would have had any choice. The guy created fake transaction statements. He was telling his investors that they had profited from transactions that never even took place. That’s as clear a case of fraud as I can imagine.
Bogle’s claims are rooted in peer-reviewed research. I always point out how Shiller was awarded a Noble prize. Well, Fama was too! Buy-and-Hold is rooted in very solid stuff. And the claims that the safe withdrawal rate is always 4 percent follows logically from Fama’s research. If the market is efficient, Buy-and-Hold is the ideal strategy. It logically follows. So there are many important distinctions between what Bogle did and what Madoff did.
Now —
Say that there is an investor who suffers a failed retirement because of the demonstrably false claims made in the Buy-and-Hold retirement studies. I am sitting on the jury. His lawyers points out that there is no valuations adjustment whatsoever in the Buy-and-Hold retirement studies. He points out that Shiller published peer-reviewed research in 1981 showing that valuations affect long-term returns. Yet the errors in the Buy-and-Hold retirement studies were never corrected. He points out that there was a poster at an internet discussion board who pointed out these errors in 2002 and that hundreds of members of the board community said that this was the most exciting discussion they had ever seen appear at this board. He notes that the author of the study with the error in it responded by threatening to kill the family members of any poster who posted honestly on the matter.
Then this discussion goes to a community in which Bogle participates. He sees the same behavior take place in this community — thousands of obviously false claims, threats of physical violence, the usual drill. And Bogle does nothing, Then an academic researcher with a Ph.D. in Economics who has studied the matter in great depth for months says that he is absolutely certain that the Buy-and-Hold retirement studies are in error. He writes to the authors of the Trinity study asking for a correction. A group of internet Goons who cite Bogle as their hero threaten to get this fellow fired from his job if he continues to do honest work and the guy says that he is afraid of what these people could do to him and he relents and issues a few statements that are 100 percent the opposite of scores of statements he had been making for months.
A case of financial fraud as bad as the one led by Madoff? It sure seems so to me. And I of course have only provided a very short sketch of all the ugly stuff that has gone on. I think it would be fair to say that this is the clearest case of financial fraud in the history of the United States, at least as clear as the Madoff case, which is as clear a case of financial fraud as I can imagine.
Which case is worse? The Madoff case affected thousands of people. Very, very, very bad. This one affects MILLIONS of people. Shiller wrote in his book that we would suffer an economic crisis late in the first decade of the new Century if we continued to push Buy-and-Hold so relentlessly. And that economic crisis caused millions of people to lose their jobs. It has been cited as a big reason for the political frictions we have seen on both the left and the right in recent years.
The Bogle fraud has done us more harm than the Madoff fraud. By a factor of 500. It’s not even possible to compare the two cases of fraud. The Buy-and-Hold fraud is far, far, worse.
Flipping back to the other side of the story again, we wouldn’t have Valuation-Informed Indexing — which reduces the risk of stock investing by 70 percent, according to the peer-reviewed research that I co-authored with Wade Pfau — had Buy-and-Hold not come before it. All that Valuation-Informed Indexing is is Buy-and-Hold with the one error that has been discovered in it fixed. I have never seen any evidence that the Buy-and-Holders were intending to commit fraud when they started out. They did have peer-reviewed research supporting their claims from 1965 through 1981. All of the Buy-and-Holders are good and smart people. It’s hard not to have sympathy for their positions. A good number of the Buy-and-Holders have even put their necks on the line by trying in subtle ways to rein in you Goons. They have not been willing to stick to it long enough to get the job done. But it is not hard to sympathize with people who went along with an act of financial fraud because they had to feed their families and knew that their ability to do so would be destroyed if they insisted on their right to do honest work in this field.
Ultimately we will have to decide as a society which act of fraud was worse. I would say that the number of lives destroyed by Buy-and-Hold was far, far, far greater. But the circumstances in which the Buy-and-Hold fraud took place are far more sympathetic. I see it as my job to report the story fairly and completely and honestly and charitably so that the people of the United States can come to understand exactly what happened and why and what we need to do to be certain that something like this never, ever happens again. That’s why I solder on.
We are going to need a full account of what caused this economic crisis when we see it deepen in the days following the next crash. I want to say everything that I can possibly say that is supportive of my Buy-and-Hold friends without ever crossing the line and engaging myself in criminal behavior. There are lots of good things that can be said about my Buy-and-Hold friends without crossing that line. I intend to say those things. There is nothing positive that can be said about failing to speak out when one discovers an important error in a study that one knows people are using to plan their retirements. So I hope to be able to say when I am called to testify that I have for at least 15 years been 100 percent unwilling to engage in dishonest behavior re these matters regardless of what threats were made to influence me to do so.
I hope that helps a small bit, Zippy.
Rob
What about my Vanguard funds? Are they all Ponzi schemes?
The entire stock market is a Ponzi scheme at these prices, Zippy.
You could say that that’s always been true. You could say that that is why stocks have gained a reputation as a risky asset class — because things can seem to be going along great and then all of a sudden prices get too high and the market becomes a Ponzi scheme.
But the Ponzi scheme element of stock investing became optional in 1981. We now know how stock investing works. If we could tell everyone how stock investing works according to the peer-reviewed research, the market would never again be a Ponzi scheme. Investors would have access to the information they need to invest pursuant to their self-interests and there is every reason to believe that large numbers would do just that.
You Goons have held things up for 15 years now. People obviously cannot make good use of information that they are not permitted to access. But I believe that that will change in the days following the next price crash.
We will have to watch to see how things play out.
Don’t let the bad guys get you down, my good friend.
Rob
I thought you said Shiller’s research was published in 1981. So somehow almost 40 years later it hasn’t changed a thing other than give you an excuse to carry on a deranged internet-based campaign.
Rob, you need to find something else to do. You will not accomplish whatever bizarre fantasies you have constructed. Your family will look at you with pity, derision, and contempt.
Your point is not a bad one but it is overstated. Shiller’s research has changed everything and nothing at the same time. What I say is that as a society we are working our way through a PROCESS in which we achieve the transition from Buy-and-Hold to Valuation-Informed Indexing. It is sad that we have not made greater progress in 36 years. It is thrilling that we are so close to achieving such an amazing advance in our understanding of how stock investing works.
Shiller was awarded a Nobel prize. That’s not nothing. That’s a very big something.
Wade and I co-authored a peer-reviewed research paper that will in days to come show every investor on the planet how to reduce the risk of stock investing by 70 percent. That’s not nothing. That’s a very big something.
10 percent of the population already follows a Valuation-Informed Indexing strategy and warmly welcomes opportunities to engage in discussions about how stock investing works in the real world. That’s not nothing. That’s a very big something.
People like Jack Bogle and Bill Bernstein and Larry Swedroe and Bill Shultheis and Carl Richards and Michael Kitces includes snippets of research-based investing mixed in with heavy doses of the smelly Buy-and-Hold garbage ALL THE TIME. Bernstein has never said: “The Buy-and-Hold retirement studies are wildly inaccurate and should be corrected before they destroy even more livess” as I have. But he said way back in May 2002 that, to know the accurate safe withdrawal rate when stocks are as insanely overpriced as they were at the top of the bubble, you need to subtract 2 percentage pointd from the 4 percent number. That sort of thing is not nothing. That sort of thing is a very big something.
Intellectually, we have made enormous strides. The thing holding us back is that we have not applied the law that usually governs affairs conducted in our nation in the way that we usually apply it. The Wall Street Con Men have great amounts of money and power and connections. They have been able to get away with things that the leaders in any other field wouldn’t dream of being able to get away with for two minutes.
The Wall Street Con Men are human like all the rest of us. Give them the opportunity to cover up their mistakes and some of them are going to take advantage of it and most of the rest are going to keep quiet about what they see. That’s just human nature. It’s as unfortunate as all get out but it’s really the way it has always been. It could be argued that its not when our country messes up that is the exception but that it’s all the wonderful ways in which our country gets it right that is exceptional. This case is a case in which we have not quite managed to live up to the high standards that make our country such a great place to live.
I certainly wish that every site on the internet were open to honest posting on safe withdrawal rates and scores of other critically important investment-related topics as of this morning, Laugh. I fervently wish that. We would all be living better lives today if that were the case.
But it’s all in how you look at it. We could be living in a world in which we didn’t have 36 years of peer-reviewed research showing us how stock investing really works. Shiller just happened to marry a psychologist. It was through discussions with his wife about how the human mind works that he got started down the trail that led him to revolutionizing this field. He might have married someone else, he might have never gotten started down that trail. Where would we all be then? If that had happened, we would still experience the next price crash. But we would all be bewildered as to why it happened. Our economic system would go down, and in all likelihood our political system as well, and there wouldn’t be much we could do about it. At least this way we can tell the story of how we messed up and pull things back together and resolve never, ever again to let something like this happen.
It’s unfortunate that we have gone 36 years without spreading the word about the amazing insights developed in response to Shiller’s “revolutionary” (his word) research. But the good news here is 50 times more good than the bad news here is bad. I like it that I just happened to be born at a time when it is possible to reduce the risk of stock investing by 70 percent just by opening my mind to what the peer-reviewed research in the field says about how stock investing works in the real world. I could have been born at some other time and missed out on all this exciting stuff.
The Goon brain drives one in a negative direction. You are imprisoned by your negativity. I don’t want to deny that the death threats and the threats of career destruction have been a stone cold drag for 15 years now, destroying millions of human lives for no good reason whatsoever. But to me that is the small part of the story. The part of the story that people will remember many years from now is the part where thousands of good people put their lives on the line and put up posts expressing a desire that honest posting on the peer-reviewed research be permitted. Those people matter, Laugh. Those people shined a light into the darkness in which you Goons attempted to envelope us all. I don’t ever let myself forget those brave, kind, intelligent acts of defiance against your unrestrained hatefulness. Those people matter to me. It makes me happy to think what they will have achieved when we all make it together to the other side of The Big Black Mountain.
I have a funny feeling that you too will be looking at the efforts of those thousands and thousands of people in a different light in the days following the next price crash. But we will just have to exercise a little patience to find out for absolutely sure.
My best and warmest wishes to you.
Rob
Given Buffets praises for Bogle, I don’t think anyone will buy your story about Bogle.
https://www.yahoo.com/finance/news/vanguards-founder-jack-bogle-reveals-122400657.html
It would be hard for anyone to match my praise for Jack Bogle’s investing advice. I rank him as the second most important investing adviser in history, second only to Shiller. There would be no Valuation-Informed Indexing without the many powerful contributions put forward by my good friend Jack Bogle.
We’ll have to see how it all plays out, Anonymous.
My best wishes to you.
Rob
And…….that means your story about Jack being a con-man is fake.
No, it means that he is a great man who has made many hugely important contributions who also made a mistake re valuations and is now engaged in the biggest act of financial fraud in U.S. history to keep it covered up.
I have tried to help my good friend out by sending three e-mails to Bogle urgning him to come clean. What have you done, Anonymous?
Rob
I encouraged Bogle, because he is right.
I think it is foolish to be calling him a con-man to fit some sick fantasy.
Thousands of people have looked at the Greaney study in the past 15 years and not one has been able to find an adjustment for the valuation level that applies on the day the retirement begins.
The study is in error. And so are all the other Buy-and-Hold retirement studies. Greaney didn’t do anything different than any of the other Buy-and-Holders who have produced retirement studies.
I am going to continue posting honestly. We will see how it all plays out following the next price crash.
I wish you (and my good friend Jack Bogle) all good things.
Rob