Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
“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.