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:
Sigh. Obviously my point was that you were given the explanation. Not that you agreed with it.
I get that your one uncompromising principle in life is “he who defines the question wins the argument.” You barrage people with this nonsense until they ban you or just give up the hopeless attempt to reason with you. To you, this is victory. So good for you, you win again. Hope it makes your day.
I like the part where you say that my one uncompromising principle is that “he who defines the question wins the argument.” I wouldn’t state it quite that strongly. But the general thrust of that statement is on point.
Buy-and-Hold makes perfect sense to anyone who believes that the market is efficient, that investors act in their own self interest. It all follows from that. If you believe in the premise, the strategy is ideal.
Valuation-Informed Indexing is for people who believe that humans are emotional creatures, that they are often their own worst enemies and that the job of an expert in this field is to steer people away from Buy-and-Hold strategies, to point out their dangers.
The only difference between the two sides is the starting-point premise. If you believe that investors pursue their self-interest, you tell them to look at their portfolio values and to applaud themselves for keeping up their confidence in stocks even when it was questioned by events or by the voices of doubters. If you believe that investors are destroying themselves by pricing stocks so insanely high, you tell them to consider where they will be following the next price crash and to take steps now to protect their financial futures.
People believe different things. And, yes, whoever defines the question wins the argument. Buy-and-Holders see evidence everywhere that Buy-and-Hold works. Valuation-Informed Indexers see evidence everywhere that Buy-and-Hold is dangerous.
You say that Buy-and-Holders “give up the hopeless attempt to reason with you.” Putting forward death threats is not “reasoning,” Dan. It is bullying.
I accept that there are lots of Buy-and-Holders who will never be convinced by anything that I say. I have no problem with that. I could be wrong. I don’t want the responsibility that would come with knowing that people were going along with what I said just because I said it.
My problem with you Goons is that your nastiness makes it impossible for the thousands of community members who have said that they DO want to hear what I say and take it into consideration to do so. Those people have a right to be able to hear both sides and to use what they hear to make informed decisions. The tactics that you have employed for 15 years now to block productive discussion at hundreds of places has hurt millions of good people. You are off base with the abusive stuff.
You say: “To you, this is victory” (referring to times when Buy-and-Holders have banned me because they see that many people find great value in my stuff and they see that as a threat. Yes, I do consider the bannings a kind of victory. They are sad sorts of victories because every board or blog that bans honest posting renders itself a corrupt enterprise by doing so. But, yes, the fact that my Buy-and-Hold friends have demanded that I be banned shows that my arguments are too strong for them to feel that they could prevail in reasoned debate and that certainly is a win for the case that I am making.
I would prefer to have fewer such victories and more reasoned debate. That helps everybody. But I am proud to be able to say that I am on the side that has never in 15 years put forward a single abusive post. I even permit people who have threatened to kill my wife and children to post daily at my blog and I always wish them well and often pick up valuable insights as a result of my interactions with them. I love that sort of thing. I live for that sort of thing. I believe that it is because the U.S. culture generally encourages that sort of thing that we have become such a great country. And I believe that in the end our belief in free discussion will win the day even in the investing realm and that my work will be seen by the millions of people who want to see it before making decisions about what to do with their retirement money.
I would say that I have won every discussion that has been held on the merits and lost every discussion that has been held in the process realm. I always make strong arguments that get banned because the Buy-and-Holders who own the sites are threatened by the excitement they see among their readers when these ideas are advanced. I don’t want to be banned and I always urge my Buy-and-Hold friends not to give in to the urge to silence those posting about the last 36 years of peer-reviewed research. But, yes, when they break down and ban me in desperation, I view that as a win for Valuation-Informed Indexing and as a loss for Buy-and-Hold.
If Buy-and-Hold inspired confidence in those following it, we would never see this sort of thing happen. And if Buy-and-Hold does not inspire confidence in those following it, what are the real chances that the Buy-and-Holders are going to stick with their high stock allocations after suffering devastating losses in the next stock crash? The behavior of the Buy-and-Holders is not the only thing that causes me to doubt the merit of the strategy. But it certainly is a persuasive reality, in my eyes.
My best wishes to you.
Rob
“I would say that I have won every discussion”
In any other field, someone who wins every time is famous. You are not famous, to say the least. Why not?
When I say that I have won every debate, I mean that I have prevailed on the substantive side of things.,
I have LOST every debate on the procedural side of things. That’s why not only am I not famous, I am the OPPOSITE of famous. I was famous in a minor way in the days before May 13, 2002. People LOVED my saving stuff. If I had never posted on investing, there would be thousands of people commenting at this blog today, people who I had brought in with my saving stuff and then people that those people brought in and so on and so forth. My investing stuff is anti-marketing. It not only does not bring in new people; it drives people who liked my saving stuff off the site.
Buy-and-Hold and Valuation-Informed Indexing are rooted in opposite premises. If the market is efficient, Buy-and-Hold is the ideal strategy; that absolutely follows. However, if valuations affect long-term returns, Valuation-Informed Indexing is the ideal strategy and Buy-and-Hold is the most dangerous strategy ever concocted by the human mind. 100 percent of the evidence available to us today supports Valuation-Informed Indexing. Valuation-Informed Indexing is the strategy of the future, Buy-and-Hold is the strategy of the past. But the transition has been difficult.
Buy-and-Hold got there first. Buy-and-Hold was dominant when Valuation-Informed Indexing came along. The people who promote Buy-and-Hold have lots of money and lots of power and lots of influence. If Valuation-Informed Indexing is to win supporters, those of us who believe that the last 36 years of peer-reviewed research is legitimate are going to need to be willing to respond to hundreds and hundreds of questions that are in the minds of the millions of middle-class investors who are open to being persuaded. And the Buy-and-Holders very, very, very much do not want us to be able to do that. They are willing to engage in insanely abusive and even criminal behavior to block that from happening. So, for the time being, the strategy that is supported by 100 percent of the evidence available to us is followed by only 10 percent of the investing population.
Get Rich Quick strategies start out with a big edge. Say that there’s an investor with $400,000 in his 401(k) portfolio. This fellow is hoping to use that money to finance his old-age retirement. Say that he is a little worried that he has not saved more. Say that he wishes that he had $600,000 in his account today but that he is hoping that he can make up the shortfall before he hits retirement age. The Buy-and-Holders give him hope. They say that that $400,000 number is real. And they add that the return on stocks has been somewhat less than the norm for 17 years now, that things could turn around and that he could earn oversized returns in coming years if he just sticks with stocks.
Rob Bennett, in contrast, tells this fellow that there is 36 years of peer-reviewed research showing that the true, lasting value of this fellow’s portfolio is not $400,000 but $200,000. He is a lot farther behind on his retirement planning than he realizes. The key to successful marketing is getting people to like you. Who do you think most investors like more, the ones pushing the pure Get Rich Quick strategy and telling him that he is many years closer to retirement than he really is or the one telling him the straight story, that he is much farther behind than he realizes?
Valuation-Informed Indexing is marketing death.
At least in the short term.
In the long term, not so much.
People LOVED Bernie Madoff in the days before his con was exposed. After it was exposed, they hated him as much as they loved him in the earlier days. “Strategies” that live by emotion also die by emotion. When the emotion flips. It always flips. There has never been one time in U.S. history when a bubble created by the promotion of the Buy-and-Hold strategy did not pop. When the bubble pops, people want to hang those who pushed the smelly Get Rich Quick garbage that destroyed their lives. I don’t want to be hanged. So I tell people the true, research-backed story on safe withdrawal rates and on everything else.
We are living through the most insanely emotional time for stock investing in the history of the United States, as revealed by the P/E10 values that have applied in recent years. It’s not reasonable to expect a research-based strategy to be popular at such a time. That’s so by definition. If the discussion of research-based strategies were even tolerated, valuations could never rise to the levels where they have stood in recent years. So, no, Valuation-Informed Indexing is not popular today. And the fellow who has been developing and promoting the concept for the past 15 years is not too famous at this particular point in time.
But what happens after prices crash, when people are looking for explanations of why their life savings has been wiped out?
That’s what matters, Anonymous. I believe that we will all pull together to spread the word re what really works in stock investing in the days following the next price crash. Then Valuation-Informed Indexing will be as popular as all get-out. Then Buy-and-Hold will be buried 30 feet in the ground, where it can do no further harm to humans and other living things. Then Rob Bennett will be a lot more famous than he has ever aspired to be or even wants to be. Seeing a Get Rich Quick strategy destroy your life and the lives of millions of others changes your view as to the merit of that particular Get Rich Quick strategy. My sincere take.
I am not God. I could be wrong. We will have to wait to see how it all plays out,.
I wish you all good things in any event.
Rob
Hey Rob, I have a serious question. You say–falsely–that Buy & Hold is the dominant investment strategy. You also say that Buy & Hold has not nor can it ever work for a single investor. That presents quite the conundrum. If as you say your belief that Buy & Hold is the dominant investment strategy is true; that means millions of Americans have used it to acquire the funds for their retirements, then have retired and lived out their days in retirement until passing away to the great beyond. Seemingly that means that Buy & Hold did indeed work for far more than a single investor. Do you have some magic Bat$hit Crazy Hocomania Rationalization to account for the discrepancy between reality and HocoFantasy? Thanking you in advance for the MysticalMagicalHocoPixieDust which explains away this paradox.
There is no conflict, John.
There were many years when people typed out letters on typewriters and then mailed them. E-mail didn’t exist. So typewriters seemed like the way to go. Then computers were created and with them e-mail and that’s the more usual way of doing things today.
Now we have a choice. We can still find typewriters and use them if we please. Or we can be even less modern and write out our communications long-hand. Or we can go the modern way and send an e-mail. It’s up to us. The typewriter manufacturers do not threaten to kill our loved ones if we employ e-mail to communicate with others.
I don’t say that life did not exist on Planet Earth prior to 1981. We didn’t know how stock investing worked in those earlier days. We took on far more risk than was necessary. And we obtained greatly reduced returns. But, yes, we struggled on somehow. Buy-and-Hold hurt us. But we didn’t know any better. So we endured things we had to endure. And we survived.
Are you saying that because we survived with an inferior investing strategy that we should be forbidden for all time from ever discovering anything better? If that’s what you are saying, I disagree. The last 36 years of peer-reviewed research is the most exciting 36 years of peer-reviewed research in the history of investing analysis. I think we should make use of it to make our lives richer in every possible meaning of the word. I think we should tell all of our friends about it.
Typewriters do not “work” for me today because they are too much of a pain compared to e-mail. So I go with what works in a world in which human advances have been achieved over the course of time.
I hope that helps a small bit.
Rob
“I accept that there are lots of Buy-and-Holders who will never be convinced by anything that I say.”
By all observable evidence from at least the last five years, there is no one, anywhere, who is convinced by anything you say. But if that’s wrong, please feel free to post a link that shows otherwise, and I’ll apologize.
Every one of the thousands and thousands and thousands of posts that you have advanced shows otherwise, Anonymous.
You would never have visited here a single time if you had not been present to see the thousands of our fellow community members express their deep sense of gratitude for my work and encourage me to stand up to the ruthless viciousness of you Goons.
Those people matter. I will continue to post honestly. We will find out how long your prison term is going to extend when your trial is held in the days following the next price crash.
My best and warmest wishes to you.
Rob
If VII had a superior and demonstrated track record (actually implemented), then I would have no problem supporting VII and investing my own money, as such. However, that is not the case. To the opposite, buy, hold and rebalance has a consider track record of success.
You are of course free to do as you please, Anonymous.
I am also free to do as I please. And I believe that the last 36 years of peer-reviewed research in this field is legitimate research.
I naturally wish you all good things.
Rob