“Bull Markets Are Liars Markets. The Honest Thing to Do Would Be to Price Stocks at Their Proper Value. But As a Society We Have Elected to Price Them at Two Times Fair Value. Because There Is a Temporary Benefit to Be Had by Doing So. We All Get to Pretend That We Are Closer to Retirement Than We Would Be If We Priced Stocks Properly. So We Tell Ourselves a Lie That Makes Us Happy for a Time.”

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

In short, they are all liars and onlyRob Bennett is the one person in this world that is telling the truth. Got it.

It certainly is true that there have been a lot of lies that have been told on the Buy-and-Hold side. And it certainly is true that I have put a lot of effort into the project of telling the truth re these matters. I believe that a failed retirement is a serious life setback. And I have formed friendships with a lot of the people in our communities. So I do feel an obligation to be honest with them re these matters. I haven’t lived up to that 100 percent. From May 1999 through May 2002, I didn’t point out the error in Greaney’s study. I wasn’t dishonest in a direct way. But I wouldn’t call that completely honest behavior. I held back on something that I knew people needed to know about. I don’t say that I am some perfect person. But I definitely say that I have made a major effort to be honest re these matters under very difficult circumstances.

And I think that in fairness we should note that a lot of the “liars” have made efforts from time to time get the truth out. I mentioned above that Bernstein pointed out that the Buy-and-Hold studies were off by two full percentage points at the top of the bubble. I think it would be fair to say that that was his conscience talking. He would LIKE to be more honest. And Pfau said that the Buy-and-Hold retirement studies were “dangerous.” Again, that was his conscience talking. Even today, after he was threatened and flipped, we see Pfau trying to be honest. He was asked at his Reddit Ask Me Anything session whether he thought that a 4 percent withdrawal was safe for a retirement starting today. He said “no.” He didn’t go into detail. He didn’t say that he thought that the studies that get the numbers wildly wrong should be corrected. He didn’t argue that we should open every discussion board and blog on the internet to honest posting, as I often do. So he wasn’t being entirely honest. But he certainly wasn’t being entirely dishonest either. I think it would be fair to say that this is a case where we have to take the good with the bad.

How much honesty do you think we would see in other fields of human endeavors if we made the penalty for being honest as high as we make it in the investment advice field? Do you think that the tobacco companies ever would have come up with the idea on their own to put cancer warnings on their packages if they hadn’t been required to by people outside their industry that demanded it? I don’t. I think that, if we had left it entirely to the industry to police itself, the tobacco industry would still be running advertisements telling people that one of the benefits of smoking is that it leads to good health — it relaxes you, you know? All people that work in a field want to make money by doing that work. That’s just a reality of human life. Sometimes, we need to have an outsider put some pressure on us to do the right thing. I bet that a lot of people who work in the tobacco field are happy that they are required by law to warn people buying their product that it may give them cancer. Most people want to do the right thing. But when there are huge financial rewards for doing the wrong thing, most of us are capable of being compromised. We need to work as a society to create conditions where people at least feel comfortable being somewhat honest re the most important stuff despite the pressures to turn a quick buck that otherwise might cause them not to live up to the standards that they would prefer to live up to.

I think that people in this field are like people in most other fields. They would LIKE to be honest. But this is a money field. And, where there is money involved, there are going to be pressures to be dishonest. That’s just the way it is. We have published rules at every site protecting those of us who want to do honest work from the sorts of individuals who have posted in “defense” of Mel Lindauer and John Greaney, do we not? That’s an indication that we would like to see honesty. We all had to check the “I Agree” button re those rules, right? So we all at one time expressed a desire to permit honesty. Even Lindauer and Greaney at one time expressed that desire. We have laws making financial fraud a felony. Shiller was able to get his book published. Shiller was awarded a Nobel prize. I have had thousands of my fellow community members express a desire that I and all others be permitted to post honestly re these matters. There are lots and lots and lots of indicators that as a society we would like to see more honesty in evidence in discussions of safe withdrawal rates and scores of other critically important investment-related topics.

When you make the price of honesty high enough, you get less of it, Again, that’s just a reality. Wade should not have been placed in circumstances in which he would have to give up his livelihood as his price for being honest. Lindauer and Greaney and those who posted in “defense” of them should have been removed from our communities when they first went off the rails. And of course that should have been done for the benefit of Lindauer and Greaney as well as for the benefit of all the rest of us. If we had banned Lindauer and Greaney, they wouldn’t be looking ahead to prison terms today. Was it not an act of dishonesty for the site administrators to fail to remove them when they first were asked to do so? It sure seems to me that it was. They chose not to act honestly because there were a few dollars to be made by letting these popular posters continue to engage in their acts of intimidation. That certainly wasn’t honest. But the fact that we have rules at every board prohibiting their behavior shows that we at least as a people DESIRE honesty.

Bull markets are liar’s markets, you know? That’s what it all comes down to. That’s what Shiller really showed with his Nobel-prize-winning research. Stocks are today priced at two times their fair value. Is it not a lie to price stocks at two times their fair value? It sure seems so to me. The honest thing to do would be to price stocks at their proper value. Buy as a society we have elected to price them at two times fair value. Because there is a temporary benefit to be had by doing so. We all get to pretend that we are closer to retirement than we would be if we priced stocks properly. So we tell ourselves a lie that makes us happy for a time. That’s the entire story here.

If you want to look at the dark side, you could say that we are bigger liars than any group of investors who ever came before us because we have kept prices higher longer than than any earlier group of investors. We are the biggest liars that ever walked Planet Earth!

That’s one way of looking at it. Another way of looking at it is that we are the people (through Shiller) who discovered The Big Lie of stock investing, that whatever price we assign to stocks is the right price merely because we assigned it and we are a perfectly rational people incapable of telling lies to ourselves. We are the people who awarded Shiller a Nobel prize, are we not? So maybe we are not the worst liars who ever lived, we are the people who celebrated a man for exposing The Big Lie of stock investing and for helping us all to protect ourselves from its negative effects. Both things are true, you know? Humans are liars and humans often engage in efforts to stop lying. We have both pro-lying and anti-lying instincts within us. There has never been a group of humans who told no lies and there has never been a group of humans who did not make any efforts to restrain lies.

The claim that the safe withdrawal rate is always 4 percent is a lie, Anonymous. I am sure of that much. If you want to say that at one time it was more a mistake than a lie, I am fine with that. That’s what I think. But it is more than a mistake today. People who are making honest mistakes do not advance death threats and demands for unjustified board bannings and thousands of acts of defamation and threats to get academic researchers fired from their jobs. I think that Greaney knew on some level of consciousness that there were problems with his study before I even advanced my famous post of the morning of May 13, 2002. That’s why he was so defensive. That’s why he immediately went into freak-out mode. And that’s why a lot of his friends did the same. And that’s why a lot of people who didn’t even think of themselves as friends of Greaney but merely as people who believed that Buy-and-Hold is a good strategy did the same. Lots of people sensed the lie at the root of all this before it was even exposed.

The good news is that as a society we are on our way to exposing the lie. I wish that the process had been completed a lot more quickly. But I guess that it takes whatever time it takes. After the next crash, we are all going to be feeling the pain brought on by our participation in this Big Lie in a very deep and intense way. Are we going to decide to give up the lie at that time? I think we are. And I will be happy to do whatever I can to help us come to terms with what we have done to ourselves by buying into this horrible Get Rich Quick lie that has over the years caused so much human misery. When we see lies told on our boards and blogs, we are seeing why stock prices are so high today. Do you get that? I am trying to tell the truth about stock investing and a lot of people are telling lies about me because they don’t want the truth about stock investing being told. They want those high prices to remain in place! They like thinking that they are closer to retirement than they really are!

It’s a circle. Tell the truth about safe withdrawal rates and people can plan their retirements more effectively. But do people even want that? If people really wanted that, they never would have priced stocks at two times fair value in the first place! People LIKE lies about stock investing, just as people once liked being told lies about how smoking is the key to good health because it relaxes you. A lot of lies survive for a long time because people like them. That’s the story here.

The smoking lie has been reined in a good bit over recent decades. I think that’s because of the research that was done showing that smoking causes cancer. The industry tried to stop the story of that research being told but they ultimately failed because there was just too much good to be done for too many people by the truth getting out. I think that’s what we are going to see in the investing advice field. The lie that the stock price is always right has survived for a long time. Shiller called it “one of the most remarkable errors in the history of economics.” It think it would be fair to refer to it as one of the most remarkable LIES in the history of economics. It’s a lie that we like to tell ourselves because it satisfies the Get Rich Quick urge that resides within us all. We believe this stuff because we like to believe this stuff. We are weak and imperfect humans.

But humans are not only weakness and imperfection. We are capable of engaging in research projects that expose the lies that we tell ourselves. We now have 37 years of research exposing the lie at the core of the Buy-and-Hold project. And I think that, when we see in flesh-and-blood terms what the Buy-and-Hold Lie has done to us all, we are going to begin taking that 37 years of peer-reviewed research seriously at all of our boards and blogs. We are as a society in the process of taking down The Great Buy-and-Hold Lie and we are today very, very close. We are one stock crash away, in my assessment.

I could be wrong. I would be lying to you if I told you otherwise, But that’s what all of the evidence that has appeared before me over the past 16 years tell me. The lie at the core of the Buy-and-Hold project (the lie that investors are purely rational and always price stocks properly) is well on its way to being exposed. But it survives today. And so everyone who works in this field feels pressure to pretend that he or she believes in it, at least to a small degree. Show no respect for The Big Lie and you threaten all of the powerful and wealthy and well-connected people who make a good living telling it to millions.

That’s my take, Anonymous All Get Rich Quick thinking is a lie. The Buy-and-Hold Lie is hurting us terribly. We are in the process of exposing it but we are not quite there yet. Until we get there, those who work in this field feel pressured to tell lies that they would prefer not to tell. Once they see The Big Lie is going down, things will change quickly. That will probably be in the days following the next price crash, when it will no longer be 37 years of peer-reviewed research telling us that Buy-and-Hold is a Big Lie but flesh-and-blood realities being reported in the newspaper every morning. Even Bogle will not be able to live with the results of The Big Lie when he sees them with his own eyes. And, when Bogle flips, everybody flips.

Not this boy, you know? I was once a Buy-and-Holder. I once told myself lies (we all do that, everyday) and so I didn’t know what I know today. I know today that I don’t want to be part of it. I am grateful for all the good that the Buy-and-Holders have done and I love them as people, But I cannot tell lies to my friends about the numbers that they are using to plan their retirements. That’s not me.

I believe that there will come a say when you will declare that it is not you either. But we will just have to wait to see how it all plays out to know for sure.

I naturally wish you all the best that this life has to offer a person, in any event.

Liar Rob (I’d Be Telling Yet Another Lie If I Said Otherwise, No?)