Set forth below is the text of an e-mail that I sent on November 14, 2018, to Fred Bauer:
Fred:
My name is Rob Bennett. I read your article at National Review titled Social Media Have Been Captured by Elitists, Demagogues and Mobs. The topic is dear to my heart. I believe that the new internet communications medium has the potential to change the world in a very positive way. But it certainly has not yet lived up to its potential. I pray that as a people we will figure out how to make more effective use of it.
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I want to share with you the story that I have been working on for 16 years. This story is very much the product of the new communications medium. It shows both the very best of it and the very worst of it. It’s an amazing story.
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My best and warmest wishes to you.
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Rob
Let me guess. Fred never responded, but you still consider that an advance, right?
I certainly consider it an advance that he now has possession of the e-mail. He now can choose to read the article or not to read it. If he reads it, then he will know the story described in it. That’s a clear plus. If he elects not the read it, that’s of course his choice. That choice would leave him with the same level of knowledge of these issues that he possessed before and that’s as if should be if he makes that choice. At least he has that level of knowledge as the result of a choice that he made. That’s a lot better than him having that level of knowledge and never having had an opportunity to take his knowledge to a new place.
I see the sending of the e-mail as a win/win/win, with no possibility of any downside.
Would I like to get a response? Sure. But we don’t always get everything we want in this life. Sending the e-mail advances the ball in a tiny way. That makes me feel better about the state of the world. Will I send another e-mail today and push the world even one more step to a better place. I hope so. I expect that I will. We will have to wait and see how things go. But there certainly is the possibility that the world will be a slightly better place by the end of today than it is this morning. That’s certainly a cool reality to comtemplace.
My sincere take.
And my best wishes.
World Enhancing (I Hope!) Rob
“I want to share with you the story that I have been working on for 16 years. This story is very much the product of the new communications medium. It shows both the very best of it and the very worst of it. It’s an amazing story.”
But no actual detail about this “amazing” story.
So I could send out an email today to 10 people that do even know me and that would be 10 advances………..or is this somehow exclusive to you and your topics?
But no actual detail about this “amazing” story.
The article that was attached runs 11,300 words. Tons of detail!
I can’t tell the entire story in the e-mail being used to transmit it.’
The Subject Line if the e-mail set forth the headline for the article: Buy-and-Hold Is Dangerous. That sums it up. Either you are interested in reading an article making the case that Buy-and-Hold is dangerous or you are not. If you are note, you delete the e-mail and all is good in the world. If that subject holds a little bit of interest for you, you check out the first few paragraphs of the article and see if it pulls you in.
Easy, Peasy!
Detail-Providing Rob
So I could send out an email today to 10 people that do even know me and that would be 10 advances………..or is this somehow exclusive to you and your topics?
This topic is unique because there is a Ban on Honest Posting re the dangers of Buy-and-Hold in effect at every major investing site on the internet. If you send out an e-mail making the case that Buy-and-Hold is great, you are not advancing the ball very much because there are hundreds and hundreds of sites that publish articles every day making that point.
Before there was a Ban on Honest Posting, I just posted to investing sites. That’s what my famous post of the morning of May 13, 2002, was about. And hundreds of our fellow community members expressed the view that that was the most exciting and helpful post that they has ever seen posted to that board. Which is of course the reason why you Goons then came forward with your death threats and your demands for unjustified board bannings and your thousands of acts of defamation and your threats to get academic researchers fired from their jobs. This is a way around all that garbage.
Make sense?
Garbage Overcoming Rob
What if I sent out an email that says Rob Vennett has never provided documented proof of death threats or job threats, would that be an advance?
In my view it would not be an advance because it is not true.
From your perspective it is not an advance because it serves no purposes. You already have a Ban on Honest Posting in place without sending that e-mail. So sending the e-mail cannot get you anything that you do not already have. I am trying to let people know of the dangers of a Get Rich Quick investment strategy. So I have the Get Rich Quick urge that we all carry within us working against me. That’s a very different situation.
Can we overcome the Get Rich Quick urge if we learn what the last 37 years of peer-reviewed research teaches us about how stock investing works? It sure seems to me that we can. I was once a Buy-and-Holder. I knew when I saw Greaney’s first death threat and 200 of my friends endorsed it, that it was a big pile of smelly garbage. Now I have spent 16 years exploring what the last 37 years of peer-reviewed research says and I doubt that I will ever fall for the Buy-and-Hold garbage again. John Walter Russell was a Buy-and-Holder too in the early days. He spent eight years of his life researching my ideas and he became a big-time believer in following research-based strategies as a result. Wade Pfau started out as a Buy-and-Holder. Then I worked with him on our peer-reviewed research project. That caused him to declare that: “Yes, Virginia, Valuation-Informed Indexing works!”
If there were any research supporting the “idea” that it is not necessary to exercise price discipline when buying stocks, we never would have seen a single abusive post. I mean, come on. The best hope for Buy-and-Holders is for people just to go with their emotions and never think about this stuff. I don’t see how sending e-mails would help in that regard. The point of sending e-mails is to encourage thinking, which is always going to lead people away from Buy-and-Hold and in the direction of Valuation-Informed Indexing. E-mails help those of us who want people to learn how to invest effectively, they offer no help to those promoting Get Rich Quick strategies.
Again, my sincere take.
I naturally wish you all the best that this life has to offer a person.
Thoughtful Investor Rob
“In my view it would not be an advance because it is not true.”
In my view what I say is true, is true and what you say is false. As such, everything I say is an advance and everything you say, is not.
There is one part of your mind that tells you that Buy-and-Hold is a good strategy. You wouldn’t follow it if there were not one part of your mind telling you that.
But there is another part of your mind telling you that you should follow the laws of the United States and the published rules of all the sites. It makes you uncomfortable to see people learning that you have not done that. That’s why we see the anger and the contempt.
I don’t have that. I disagree with out about the effect of valuations. But I don’t hate you. I think of you as a friend.
So, no, you do not really think that what you are saying is entirely valid. If you did, you would be at peace.
Peace-Maker Rob
“But there is another part of your mind telling you that you should follow the laws of the United States and the published rules of all the sites. It makes you uncomfortable to see people learning that you have not done that. That’s why we see the anger and the contempt.”
Sorry, but that is not an advancement, because I say it is not true.
It will be interesting to see how it all plays out, Anonymous.
I wish you the best of luck with it all, in any event.
Untrue (According to My Goon Friends!) Rob
“It will be interesting to see how it all plays out, Anonymous.”
We have already seen it play out, Rob. The only thing that could change things now is if you are named our new Dictator.
Okay, Anonymous.
I hope that I am not named Dictator. It would be nice to think that we could all agree on at least that much.
Dictator (Not!) Rob
During the last two decades of waiting to see “how things turn out”, what has come out positive for you that would compel you to wait another couple decades to once again see how things turn out?
“The article that was attached runs 11,300 words. Tons of detail!”
But this post does not contain that 11,300 word article and therefore it is useless. Anyone who comes here and sees this post can have no idea what the article said.
During the last two decades of waiting to see “how things turn out”, what has come out positive for you that would compel you to wait another couple decades to once again see how things turn out?
I have my name on the most important piece of peer-reviewed research published in this field in 30 years. That ain’t nothing.
I obviously have the greatest possible respect for Jack Bogle. Bogle has said on numerous occasions that the problem that he has with making use of the insights of Behavioral Finance in the development of investment strategies is that he wants to see concrete evidence that these insights will add something. Well, the Bennett/Pfau research shows in a clear and powerful way how much long-term timing adds. We showed that investors can reduce the risk of stock investing by 70 percent just by giving up their reliance on Buy-and-Hold and going with a research-based strategy.
That’s huge. If I had showed investors how to reduce risk by 10 percent, my face would be on the cover of Time Magazine’s Man of the Year issue. My only problem is that showing investors that they can reduce risk by 70 percent is so good that people find it unbelievable. Valuation-Informed Indexing is a stock investing strategy that is just too darn powerfully good!
But people will believe it once we open every discussion board and blog on the internet to honest posting. Then we will be able to answer people’s questions and bring them around gradually to what works. That’s what I did with Wade. He wasn’t a true believer when he contacted me. He was intrigued by my writings in this field, that’s all. He BECAME a true believer only in time as he explored one question after another and learned again and again and again that engaging in price discipline when buying stocks always gives the investor a huge edge (just as common sense would lead you to believe it should).
And we have laws in place in the United States to protect us all from the sorts of tactics employed by Goons like you, Anonymous. What do you think is going to happen when your prison sentence is announced? That is going to go viral. We are going to have site owners all over the internet writing up that development and trying to disassociate themselves from Buy-and-Hold in every possible way and trying to make the case that they have been secret believers in Valuation-Informed Indexers all along.
Wade would never have contacted me to become his co-author re that research had I not worked up the courage to post honestly re safe withdrawal rates on the morning of May 13, 2002. There can be huge benefits to posting honestly down the line! I didn’t know precisely what those benefits would be on the morning of May 13, 2002. But I knew that it did not feel good to sell out my fellow community members by failing to speak up about the errors in Greaney’s study. And, sure enough, I have seen victory after victory after victory (I am obviously not counting the setbacks caused by the criminally abusive stuff here) in the 16 years since. I have a funny feeling that I won’t be retracing my steps any time super soon.
My best and warmest wishes to you, dear Goon friend.
Triumphant (Not Counting the Criminally Abusive Goon Stuff!) Rob
But this post does not contain that 11,300 word article and therefore it is useless. Anyone who comes here and sees this post can have no idea what the article said.
Valuations affect long-term returns. Therefore, Buy-and-Hold (and all other Get Rich Quick “strategies”, for that matter) is dangerous. That’s what the article says. It’s an expansion on that. It explores the IMPLICATIONS of that “revolutionary” (Shiller’s word) finding, as does every word of mine that appears at this site. If you want to know what the article says, read today’s blog entry and then work backwards. You will get the general idea in not too long a time.
The value of today’s blog entry is that it shows us what we are up against in trying to overcome our Get Rich Quick/Buy-and-Hold urge. Get Rich Quick/Buy-and-Hold is something that you want to AVOID, not something that experts should be encouraging. In an ideal world, I could say that at the Motley Fool site on May 13, 2002, and then thousands of people could jump in to help me spread the word and we could all live better lives from that point foward. We don’t live in an ideal world. Perhaps you’ve noticed. So I am doing it this other way instead. It gets us to the same place in the end. It’s just a much. much slower route.
The e-mail that I described in today’s blog entry is part of the story. It’s not the normal way of proceeding in our country. The normal way of proceeding is just to present the result of the peer-reviewed research and answer people’s questions and all that sort of thing. But due to our Get Rich Quick/Buy-and-Hold urge, the normal rules don’t apply in the investment advice field. There’s a lot of money to be made pushing a pure Get Rich Quick approach and there’s also a lot of money to be made claiming that your strategy us rooted in the peer-reviewed research. So the Buy-and-Holders do both! And of course it follows that they are hostile to any HONEST reports of what the last 37 years of peer-reviewed research teaches us re how stock investing works in the real world.
So we have to do things this other way. When people come here after the crash and want to know why I just didn’t tell the true story on all the investing sites, they can read lots of accounts of what went on. And when they wonder why I didn’t just try e-mailing people, I can show them that I did that.
If you didn’t possess a strong Get Rich Quick urge yourself, you would see that in two seconds. And you would approve.
E-Mailing Rob
“I have my name on the most important piece of peer-reviewed research published in this field in 30 years. That ain’t nothing.”
What paper has your name listed as an author?
If you count being listed in the credits section, then I can show you a few dozen that I have my name on. No big deal.
I am proud to have my name mentioned in the credits section of the Bennett/Pfau research. That’s the most important piece of peer-reviewed research published in this field in the past 30 years. Bogle has indicated an interest in knowing the answers to the question explored in that paper and Bogle is one of my heroes. So I certainly am proud to have played a big role in getting those answers to him. If Bogle were thinking clearly, he would have celebrated the research that Wade and I prepared together. He would not only have spoken up in our support when Linduaer attacked us, he would have called a special meeting of the Bogleleads Community so that we could explore that research together in great depth.
One of the community members there said that our research challenges many of the most basic principles of Buy-and-Hold. Bogle responded defensively to that challenge. That is unfortunate in the extreme. He should have welcomed the learning experience that would have certainly followed from widespread dissemination of the research. Bogle dropped the ball on that one and you Goons — who call yourselves friends of his — should have helped him rein in his defensiveness and advance the Buy-and-Hold cause in a big way (Valuation-Informed Indexing is really just Buy-and-Hold 2.0 — Buy-and-Hold is a research-based strategy and so, when new research is published, the strategy must of course be modified to incorporate the new research findings).
And of course I played a bigger role in the development of that research than the role usually played by someone mentioned in the credits section. I had been developing the Valuation-Informed Indexing concept for over seven years when Wade contacted me and asked me if I would be willing to work with him to prepare research showing the superiority of Valuation-Informed Indexing over Buy-and-Hold. I was the person who discovered the errors in the Buy-and-Hold retirement studies. We never would have had The Great Safe Withdrawal Rate Debate had I not done that and it was The Great Debate that got Wade interested in doing research on Valuation-Informed Indexing in the first place. So I am properly referred to as the co-author. Wade made clear in numerous e-mails that he sent me in the 16 months in which we worked together that he thought that my assistance was absolutely critical. He asked me many questions during the time we were preparing the research and he always thanked me profusely for the help that I was able to offer him.
The Bennett/Pfau research simply wouldn’t exist if it hadn’t been for the seven years of my participation in The Great Safe Withdrawal Rate Debate that preceded. And, strangely enough, even you Goons played a positive role at times. It is though interactions with others that we come to understand new ideas more clearly and in more depth. I learned a lot in those seven years (and in the nine years since). You weren’t intending to help me learn with your ruthless abusiveness. But there were times when you did. I only wish that you had learned more yourselves. Had you been open to learning, we all would be in a better and happier and more life-affirming place today.
I offer no apologies for advancing the world’s understanding of how stock investing works through publication of that amazing piece of peer-reviewed research. I hope there comes a time when you can take delight in what one of your fellow community members did by co-authoring that research. I think it will happen. Probably not until after the crash. But I think that it will happen down the road a piece. And our interactions will become warmed and more productive when it does.
Please take good care, man.
Co-Authoring Rob
It is not what YOU think you have done. Instead, it is what others say you have done. Otherwise, your words are meaningless.
A) Academic Researcher Wade Pfau’s Statements Showing Interest In and Confidence in Rob Bennett’s Work
1) “I do cite you and John Walter Russell in my paper as the earliest and strongest advocates of this approach [New School safe-withdrawal-rate research].
2) “Are you aware of Shiller offering asset allocation advice based on PE10? …. If you read Rob Bennett’s stuff carefully, I think he did provide an important contribution in terms of describing a way for PE10 to guide asset allocation for long-term conservative investors. I also think he was right on the issue of safe withdrawal rates.” — Posted at the Bogleheads Forum discussion board.
3) “I am also extremely grateful to Rob Bennett for motivating this topic and contributing his experience and encouragement.” — Written in Acknowledgments section of Wade’s breakthrough research paper.
4)”You deserve much of the credit as the whole idea of Valuation-Informed Indexing belongs to you.”
5) “I definitely need to cite some of your work as the founder of Valuation-Informed Indexing, as I have not found anyone else who can lay claim to that. Shiller pointed out the predictive power of PE10 but never discussed how to incorporate it into asset allocation, as far as I know.”
B) Academic Researcher Wade Pfau’s Statements on the Superiority of Valuation-Informed Indexing Over Buy-and-Hold
1) “What you see in the top part of the graph for each year is the amount of wealth accumulated after 30 years for someone following Buy-and-Hold against someone following Valuation-Informed Indexing….Valuation-Informed Indexing provides more wealth for 102 of the 110 rolling 30-year periods, while Buy-and-Hold did better in 8 of the periods.”
2) “I will take steps in my final paper to test a wide variety of assumptions about asset allocation, valuation-based decision rules, whether the period is 10, 20, 30, or 40 years, lump-sum vs. dollar-cost averaging, and so on, and to show that the results are quite robust to changes in any of these assumptions.”
3) “Any data mining that I am doing is in favor of buy-and-hold, not in favor of market timing.”
4) “The findings for “market timing” are so robust anyway, that it hardly matters how we do it.”
5) “The maximum drawdown from market timing is much less. That is how far the portfolio drops from past highs to current lows. The Buy-and-Holder once experienced a 60.96% drop, whereas the worst drop for market timing was 24.16%.”
6) “Market timing provides signficantly higher returns at a comparable level of risk.”
7) “The market timer enjoys a far less risky strategy.”
8) “On a risk-adjusted basis, market-timing strategies provide comparable returns as a 100 percent stocks Buy-and-Hold strategy but with substantially less risk. Meanwhile, market timing provides comparable risks and the same average asset allocation as a 50/50 fixed allocation strategy, but with much higher returns.”
9) “If everyone increased exposure after a market fall and vice versa, then this would dampen out the big swings in the market aggregates, and we might get shallower boom/bust cycles.”
10) ““‘I’m excited about this, as depending on what you have already done, I think I can design a study using the Shiller data to provide historical simulations of Valuation-Informed Indexing strategies against fixed Buy-and-Hold strategies and also lifecycle strategies (declining allocation to stocks as one ages). If Valuation-Informed Indexing consistently outperforms fixed and lifecycle strategies, then the proof is in the pudding so to speak. Given how well valuations help to explain withdrawal rates, I think there is a lot of potential for this topic.”
11) “Yes, Virginia, Valuation-Informed Indexing Works!”
12) “It makes complete sense to have an equity allocation that is in some way flexible. Having a completely inelastic demand for equities is a bit bonkers; no-one acts that way with life’s other important commodities.”
13) “I wrote up the programs to test your Valuation-Informed Indexing strategies against Buy-and-Hold, and I must say that the results look very promising…. I am quite excited about the findings so far. As you say in the podcast, Valuation-Informed Indexing should beat Buy-and-Hold about 90 percent of the time, and I am getting results that support this for various strategies.”
14) “I have been toying with the idea of sending the paper to the Journal of Finance, which is the most prestigious journal in academic finance.”
15) “Now that I am accounting for risk, I am even more amazed by how well Valuation-Informed Indexing works.”
16) You shouldn’t be too excited with great wealth accumulations if they happened due to unusually high valuations, and low wealth accumulations shouldn’t be as scary if valuations are also quite low.”
17) “My idea is to show many different tables with results over the whole period for returns and risks. Valuation-Informed Indexing always provides more returns for often less risk.”
18) “No matter what I try, Valuation-Informed Indexing will still perform better in 85-95% of cases for 30 years.”
19) “I have a new figure for showing this as well. And a nice figure showing the outperformance percentages across rolling periods of lengths between 1 and 40 years. I think it is all quite persuasive.”
20) “You haven’t seen anything yet! This was just the secondary study. I’m still working on the main one!”
C) Academic Researcher Wade Pfau’s Statements of Incredulity That He Was the First Academic Researcher to Examine the Valuation-Informed Indexing Strategy
1) ” I know that there is an extensive literature about the predictability of long-term stock returns dating back to Campbell and Shiller’s work in the mid-1990s. I also know that there is an extensive literature about short-term market timing strategies…. But my question is about LONG-TERM market timing strategies. In other words, using market timing over periods of at least 10 years to obtain better returns than a Buy-and-Hold strategy. The literature seems slim.”
2) “Let me just explain a bit more why I posted about this here. Valuation-Informed Indexing has had critics for years, but until Norbert did it in 2008, nobody seemed to have provided a serious investigation of it. I just couldn’t understand why. And that bothered me.”
3) “Two papers by Fisher and Statman are still all I can find that provide evidence against long-term market timing.”
4) “I’m so confused by why Fisher and Statman didn’t consider risk in their idiot switching tests. Valuation-Informed Indexing is much less risky by pretty much any standard I consider. I must wonder… did I make a mistake somewhere? Why haven’t academics already published research about this?”
D) Academic Researcher Wade Pfau’s Statements on the Dangers of the Conventional Retirement Planning Advice
1) “The traditional approach to retirement planning (as described on pages 10 and 11 of The Bogleheads’ Guide to Retirement Planning, for example) is counterproductive and possibly damaging.”
2) “Retirees now frequently base their retirement decisions on the portfolio success rates found in research such as the Trinity study…. This is not the information that current and prospective retirees need for making their withdrawal rate decisions.”
3) “This article provides favorable evidence based on the historical record for long-term conservative investors to obtain improved retirement planning outcomes (lower savings rates, higher withdrawal rates) using valuation-based asset allocation strategies.”
4) Wade sent me a link to an article in Business Week that was published more than eight years after my post pointing out the errors in the Old School retirement studies and which he characterized as “quite sympathetic to the point you were trying to make all along”.
5) “Though I was only trying to do an Old School safe-withdrawal-rate study, all that I ended up doing was showing in a different way what you had been saying all along: the safe withdrawal rate changes with valuations.”
6) “Valuations are the driving factor. ”
7) “This is similar to your drunk driving analogy, which I agree with.” The discredited but uncorrected retirement studies find that in most circumstances a 4 percent withdrawal rate provides a huge cushion for the retiree using it. However, in each of the three cases in history when stocks reached insanely high price levels, retirements using a 4 percent withdrawal came within a whisker of failing. To say that this shows that a 4 percent withdrawal is “100 percent safe” (these words are used in the Greaney study) for a retirement beginning at a time of insanely high price levels is like saying that driving drunk is “100 percent safe” because 97 sober drivers drove their cars 20 miles without incident while 3 drunk drivers were paralyzed for life in car accidents but did not die. The fact that 4 percent only worked by a whisker in the cases in which valuations were high at the beginning of the retirement shows that a 4 percent withdrawal is high-risk at times of high valuations, not that it is “100 percent safe.”
8) ” Actually, this issue shouldn’t really even be all that controversial. It’s just common sense that the probabilities from the Trinity study shouldn’t be interpreted as forward-looking probabilities for new retirees.”
9) Naturally, I am finding that Valuation-Informed Indexing can allow you to reach a wealth target with a lower savings rate, use a higher withdrawal rate, and also have a lower “safe” savings rate, than a fixed allocation.
E) Academic Researcher Wade Pfau’s Statements Showing His Concerns that Continuing to Report Honestly on the Investing Realities in the Face of the “Hostile Environment” for Doing So Created by Buy-and-Holders Would Harm His Career
1) “I was trying to pay tribute to your accomplishments in what I knew would be a hostile environment.”
2) “Valuations and long-term investors is a somewhat controversial topic.” Wade posted these words to his blog in October 2011 as his explanation of why he was abandoning his plan of doing further research on the superiority of Valuation-Informed Indexing strategies over Buy-and-Hold strategies. He had told me in earlier days that “You ain’t see nothing yet!” when I praised his breakthrough research in this area. After his flip to the dark side, Wade removed the page containing this blog entry from his site.
3) “We have both read and met to discuss your paper. Unfortunately, we did not find the paper’s incremental contribution to the academic finance literature, assuming the analysis proved to be correct, rose to the level that we are seeking for papers in the JFR. Thus sending the paper to a reviewer would be inefficient.” These words are from an academic journal’s “desk reject” of Wade’s breakthrough research.
4) ) ““ I was discouraged when I first received the “desk reject” by the editors of the same journal that published the Fisher and Statman paper. I realized that I didn’t have a chance with one of the top journals.”
5) “I think I should stay publicly quiet for a while, as I really don’t want anyone sending messages about any topics to officials at my university.”
6) I don’t want them [the Goons] working behind the scenes to derail me.”
7) “I did warn the editor of the Journal of Financial Planning that they may receive some ‘hate mail‘ after I mentioned your name in the safe savings rate paper.”
Again, you have DONE anything. Accomplishments are based on measured outcomes. All you have done is built a website for self promotion. That is all that you are doing on this thread as well.
If you didn’t think that Wade Pfau’s words were important and persuasive, you never would have threatened to send defamatory e-mails to his employer in an effort to get him fired from his job in the event that he continued doing honest work in this field.
I mean, come on.
Goon Skeptic Rob
If you had proof of a threat, you would post it. Further, Wade said it never happened.
After being threatened.
I place more credibility in the hundreds and hundreds of things he said in the 16 months BEFORE he was threatened.
Call me madcap.
Keeper of the Post Archives Rob
I put credibility in having actual proof. Secondly, I put credibility behind the person directly impacted (Wade), as he would know if he was actually threatened.
He obviously knows that he was threatened. He is also obviously EMBARRASSED and ASHAMED that he let the threat influence his behavior.
The real question is — Why did you feel a need to threaten him?
Shiller published his “revolutionary” (his word) research showing that valuations affect long-term returns in 1981. Buy-and-Hold has not been updated to reflect the new research findings for 37 years now. That’s the problem.
That’s the problem for you. That’s the problem for me. That’s the problem for Bogle. That’s the problem for Shiller. That’s the problem for Pfau. That’s the problem for everyone.
Did I cause that problem? I had nothing to do with it. I have been arguing for 16 years that we should open every discussion board and blog on the internet to honest posting on the last 37 years of peer-reviewed research in this field. That would solve the problem for everyone. Everyone would say what they truly believe and over time Buy-and-Hold would be updated. There would be no further need for cover-ups. There would be no further need for threats.
I even suggested that we might be able to get by just acknowledging that there are two schools of academic thought re how stock investing work. I don’t view that as ideal. It is my belief that Shiller discredited Buy-and-Hold. So I think that we should be saying that it is Valuation-Informed Indexing that is the first true research-backed model. But I believe that cognitive dissonance is a real thing. So I have suggested that, if my Buy-and-Hold friends just feel too much pain in the idea of giving up on their strategy, they could acknowledge that there are two schools of thought and let those who believe in Buy-and-Hold promote Buy-and-Hold and those who believe in Valuation-Informed Indexing promote Valuation-Informed Indexing. I believe that that would get us all on the right side of the felony line. If people choose to use a 4 percent safe withdrawal rate even after they have been informed that a study that includes a valuation adjustment generates a very different number, I think that most juries would say that that is on them. So just doing that much would be a big advance.
Where is the Bogle speech acknowledging that there are two schools of academic thought re how stock investing works? I wrote to him about this on several occasions. Has he given that speech? Had it been written up on the front page of the New York Times?
Why not?
Your beef is with Bogle, Anonymous, not with me. I have done all that I can do. I love the man and I have bent over as far backwards as I can with that suggestion. If he hasn’t given the speech yet, your beef is with him. Have you written him? If not, can you please explain? There are millions of people who put together retirement plans at least in part in reliance on the long-discredited Buy-and-Hold retirement studies, the ones that Wade Pfau characterized as “dangerous.” A failed retirement is a serious life setback.
The threats will stop when Bogle gives his speech and it is written up on the front page of the New York Times. Wade will on that day return to saying all the wonderful things that he was saying in the 16 months before you threatened him. The ball is in your court, my dear Goon friend.
Highly Credible (Since He Stopped Pretending that He Believed There Was a Valuation Adjustment in the Greaney Retirement Study) Rob
“The real question is — Why did you feel a need to threaten him?”
Why did you feel a need to beat your wife? Why wouldn’t you just stop??? What was the downside???
All your Wade quotes took place before these. From June 2012:
“I will make one more attempt at a reality check for you. You go on and on about how I allegedly lack personal integrity because I allowed the Goons to threaten me into silence. The reality is that though I may have for a brief moment got a bit too caught up in YOUR drama, I do not have any fears about the Goons.”
“The reality is that you are causing me 1000x more career damage than the Goons ever could have by filling Google with so much nonsense about me, and sharing embarrassing private details such as my overly ambitious journal submission strategies, etc. Those in particular are highly private. People don’t publicly share where they submit articles to unless those articles are accepted. You’ve violated my trust in so many countless ways and yet you still proclaim to be my friend.”
You, of course, refused to apologize or change your behavior, Instead, you flipped out and started the email barrage Wade mentions below in his final message, from November 2012:
“Your 1,000 email campaign (later to become 30,000) probably would have been a lot more effective had you stuck to the issues that the blogger discussed, rather than turning it into a personal vendetta against me.”
“I told you that after a brief initial concern, I was not intimidated by any alleged threats, and I wasn’t lying about it. The problem is that you dismiss any disagreement with you as being driven by fear about ‘goons’.”
“Rob, finally, if you really do care about the topic of valuations, and not just your own personal aggrandizement, then please try to trust my judgment and stop harassing me all the time. Productivity isn’t just measured by time spent engaged in an activity, but by the overall results.” (Sound familiar?)
“You are being nice to me now, and so it makes me look mean if I don’t reciprocate, but remember that just the other day you were advocating that I be sent to jail. And there is still the matter that you violated my privacy by posting my email messages.”
You had months to start behaving like a normal person, thereby maybe retaining a correspondence that you considered important. But you failed. Miserably.
But of course, nothing ever sinks in with you. You tuned out Wade at the time, and you’ve already tuned out this reminder. Tomorrow is yet another day where in your world, Wade was threatened, your horrendous behavior was totally justified, and someday Wade will come to his senses and talk to you again. Endless self-delusion.
Much like your delusion that anyone will have any interest in your 11,000 word manifesto. Even if someone actually started reading it (extremely doubtful) and even if that person slogged through enough to find some superficial plausibility (virtually impossible), five seconds on Google would reveal your sad and demented online history.
I put up my famous post pointing out that the retirement study posted at John Greaney’s web site lacks a valuation adjustment on the morning of May 13, 2002, Anonymous. It has been 16 years. The study has not been corrected to this day. That’s the problem.
All of this stuff that you talk about and that Wade talked about in the words of his that you quote above follow from that. When someone discovers that a study that he has posted that people have used to plan their retirements contains an error, that study must be corrected within 24 hours.. There is no exception to this rule. It is insanity to think that there could ever be one.
I love Wade Pfau. I love Jack Bogle. I love John Greaney. I love Mel Lindauer.
I also love the thousands of my fellow community members at the old Retire Early board that I became friends with when I posted there. I don’t like the idea of my friends experiencing failed retirements. So I had to speak up. And all of this other stuff followed.
Greaney has to correct his study. Then all the bad stuff goes away in an instant and a mountain of good stuff descends on us all.
Shiller did not hurt us when he published his Nobel-prize-winning research. He helped us in a very big way. We need to all start working together to get the word out about the many far-reaching implications of his work so that we can all begin living richer (in every sense of the word) lives as soon as possible.
That’s my sincere take re these terribly important matters, in any event.
Wade Pfau Loving (and Greaney Loving Too!) Rob
“I put up my famous post pointing out that the retirement study posted at John Greaney’s web site lacks a valuation adjustment on the morning of May 13, 2002, Anonymous. It has been 16 years. The study has not been corrected to this day. That’s the problem.”
Wade already explained how you were wrong on this. Is that why you attack him and lie about him?
He put up some crazy words that you Goons told him to put up so that he could get you off his back.
He said that he looked at the May 13, 2002, thread and saw that Greaney had said that those who did not consider the 4 percent withdrawal rate safe could just use a lower number and that that solved the entire problem. It doesn’t come close to solving the problem. The problem is that Greaney does not want us to point out the error in his study and to explain why a valuation adjustment is required. Taking a lower withdrawal rate and not discussing the error in the study will not do a thing to solve the problem.
Greaney needs to correct his retirement study. All of the Buy-and-Holders who have put forward that 4 percent number need to warn the retirees who believed them that that number is in error, that the safe withdrawal rate is a number that changes with changes in valuations. That’s the deal here. When Greaney does that and when the other Buy-and-Holders do that, all of the “controversy” goes away.
There shouldn’t be any controversy as to whether retirement studies that are found to be in error should be corrected or not. The reason why there is a controversy is that the darn cover-up has been going on for 37 years now. It had already been going on for 21 years when I put up my post. So I obviously had exactly zero role in causing the problem.
I have tried to bring the controversy to an end. I have urged everyone in this field to speak up in favor of correction of the studies. And I have suggested that, if there are Buy-and-Holders who just cannot bear to correct their studies, at the very bare minimum they need to include warnings on the studies letting aspiring retirees who make use of them know that there are two schools of academic thought as to how stock investing works and that studies prepared pursuant to the other school of thought produce very, very different numbers at times of high valuations.
That’s as far as I can go and still stay on the right side of the felony line, Anonymous.
I naturally wish you all the best that this life has to offer a person.
Conciliatory (But Within the Limits Set by U.S. Law!) Rob
“He put up some crazy words that you Goons told him to put up so that he could get you off his back.”
And Wade has told you this directly or is it something you made up like all the rest of the stuff.
He’s not a stupid person. Wade said on numerous occasions that he believes that the Buy-and-Hold retirement studies are “dangerous.” How would it solve the problem for someone who saw the danger in them to take a lower withdrawal rate. That would solve the problem for that one person. It wouldn’t solve the problem for all the people who were taken in by the claims in the studies.
I didn’t take a 4 percent withdrawal rate. Did that solve the problem for the people who did because they believes that Greaney’s study was legitimate. The only way that I could solve the problem was to point out the error in the study and to urge Greaney to correct it.
I would be insulting Wade if I were to pretend that he doesn’t understand this. He understands. He didn’t want to lose his job. He didn’t want to see his career destroyed. He saw how abusive Lindauer was and he saw that Bogle wasn’t doing anything about it. So he had to decide whether he was going to help out the people who had been taken in by the study or save his own career. He wanted to help the people who had been taken in. But he elected to save his career.
No one should be placed in these circumstances. Not ever.
The only way things can start getting better is for every person who has engaged in abusive behavior to come clean. If Shiller had just published his research, it would be easy. We would all enjoy a great learning experience together. But we have this problem of a 37-year cover-up to content with. That looks really, really, really bad.
The only thing that you can think of to do is to extend the cover-up for even longer. You cannot bear to acknowledge the role you played in keeping the cover-up going. But that is not the answer. Extending the cover-up makes things worse. I am trying to help you — whether you appreciate it or not — by bringing the cover-up to a full and complete stop.
I am 100 percent happy to help in any way that I can. Ask me to do something on the right side of the felony line and I will be there in three seconds and you will not have to ask a second time.
I have zero willingness to go to the wrong side of the felony line. That makes things worse for every single person involved. I won’t even consider suggestions that I go to the wrong side of the felony line. Not in 16 years. Not in 16 billions years.
There is no valuation adjustment in Greaney’s safe-withdrawal-rate study. Shiller showed 37 years ago that valuations affect long-term returns.
That’s the problem. Not anything else. That is it.
Making-Up-Stuff (According to the Goons!) Rob
Everything you posted is just your claims. There is not one single supporting piece of evidence from any other person or other source.
Shiller’s book is available in libraries all across the country.
Greaney’s study is posted at his web site.
A jury will decide the matter. That’s how our system works.
My best wishes.
Well-Prepared Rob
“Shiller’s book is available in libraries all across the country.”
And not one word in his book supports your claims.
A jury would first require charges and then would demand facts supported by evidence. They don’t take kindly to fairytales that seem to be the basis of everything you say.
And not one word in his book supports your claims.
The title is “Irrational Exuberance.”
Rational (Kinda, Sorta) Rob
A jury would first require charges and then would demand facts supported by evidence. They don’t take kindly to fairytales that seem to be the basis of everything you say.
I wish you the best of luck with it, in any event.
Fairy-Tale Telling (According to His Goon Friends) Rob
“The title is “Irrational Exuberance.”
What exact words in the book talk about death threats, job threats, jury trials, prison sentences and $500 million windfalls?
Shiller was awarded a Nobel prize because he published research that discredited the Efficient Market Theory. If the market were efficient, stock price changes would be caused by economic developments and would reflect reality. He showed that, when the market is overpriced, it is irrational exuberance that causes price gains and that those gains thus cannot be counted on to finance a retirement.
All of the things that you refer to in your post are things that follow if a person points out what Shiller’s research shows in a community frequented by a significant number of Buy-and-Holders. It hurts the feelings of Buy-and-Holders for them to hear that they made a mistake in thinking that the market is efficient and that it is not necessary for them to exercise price discipline when buying stocks.
I don’t do it to hurt their feelings. I do it because people need to have accurate numbers to plan their retirements. If there were a way to give accurate numbers without hurting the feelings of the Buy-and-Holders, I would make use of it. But there isn’t. This is the risk that goes with the use of any research-based strategy. New research is published all the time. When we learn new things, we need to update our understanding of a subject. We need to acknowledge that we didn’t always know it all.
I am grateful for all that the Buy-and-Holders taught us. They of course for many things right. But not the efficient market thing. Not according to the last 37 years of peer-reviewed research in this field. I think that the Buy-and-Holders have hurt themselves and many others by failing to acknowledge the mistake they made re that one. The safe withdrawal rate is not always 4 percent. It is a number that changes with changes in valuation levels.
That’s my sincere take re these terribly important matters, in any event.
I naturally wish you all the best that this life has to offer a person, Anonymous.
Irrational Exuberance Reader (and Death Threat Receiver) Rob
Of course Shiller holds back (lies) because the goons got to him as well. Right?
Shiller is human like all the rest of us. He wants to be liked. He wants to be respected. He doesn’t want to hurt the feelings of his fellow humans. I would like to see Shiller advance a clear and simple statement that “the Buy-and-Hold retirement studies are in error and are likely to cause millions of failed retirements unless they are correctly immediately.” That would be helpful.
He’s certainly holding back by not advancing that statement. Is he lying? I think so. He is telling the sort of lie that I told from May 1999 through May 2002, when I knew about the error in Greaney’s retirement study and I didn’t speak up. It’s a lie of omission, not a lie of commission. But if we were looking at any other field of human endeavor, we would certainly call that a lie. It’s hurting lots of people in a very serious way. The intellectual case for saying that the safe withdrawal rate studies are in error is rock solid. Why not say it?
The full reality, of course, is that Shiller has done more than any other human being alive to get us all to a place where none of us will ever need to lie about these matters again. He has told lots and lots and lots of truths about stock investing and he demonstrated a lot of intelligence and a lot of courage and a lot of love in doing so. So, yes, he is a liar in some circumstances, like all the humans. But he is also a great man and, while calling him a liar out of honesty, we should be sure to emphasize that point in charity as well.
Does that answer your question? Shiller is like all the rest of us. I have done the same sort of thing. Bogle has done the same sort of thing. Pfau has done the same sort of thing. Bernstein has done the same sort of thing. Kitces has done the same sort of thing. Richards has done the same sort of thing. Shultheis has done the same sort of thing. And on and on and on and on and on.
Is it helping us to continue doing this thing, to continue pretending that there is some magical. mystical way in which it adds something to the world for us to fail to exercise price discipline when buying stocks, that it is okay to tell investors not to do so, to suggest that it might be a mistake to engage in long-term market timing? I sure cannot see how. I believe that every last one of us will be relieved when we all make it to the other side of The Big Black Mountain, when we all feel 100 percent free to speak openly and clearly and honestly about our views re stock investing just as we do when talking about hundreds of other matters that affect all of our lives.
The problem that we face is that the penalty that the Buy-and-Holders impose on those who speak honestly about the last 37 years of research is so severe and the reward for doing so is so slight that few of us can work up the courage to give voice to obvious truths. And of course the fact that so few do it makes it a lot worse for the few who do. Once a certain percentage of the population is speaking honestly about how stock investing works, it will become the hip thing to do and then everyone will want to get in on the act and we will achieve advance after advance after advance. That will be super.
That’s obviously not where we are today. We need the penalty for posting honestly to be diminished and we need the reward for posting honestly to be enhanced. If Shiller is right, the constant promotion of Buy-and-Hold strategies is going to cause horrible life consequences for millions of people in days to come. Telling someone that “the safe withdrawal rate you are using was calculated in error and will probably cause your retirement plan to fail” is upsetting enough to cause that person to vote in favor of banning the person saying that from an internet discussion board. But seeing the money in the retirement account drop by 50 percent is a very, very different story. I think that we are going to see a change in public attitudes when that happens.
I think that people are going to want to know what happened to their retirement money, they are going to want to know why their lives have been destroyed. I can tell them. That’s my job. I am a journalist and this is a big story. So I will tell them. And then we will have that national debate that I have been saying should have been launched many years ago. And we will sort out all these questions as a people.
I hope that we will engage on these questions in honesty. That’s critical. I also hope that we will engage on these questions in charity. That’s equally critical. I am reasonably confident (but not entirely so) that we will manage to take things to a good place, a place that each and every one of us wants to go to deep in our hearts.
I will be joking around with Robert Shiller in those days. I will say “Robert, you were kind of a liar re that safe withdrawal rate question all those years, were you not, my good friend?” And he will say in return “Touche’, Rob, but no more so than you were from May 1999 through May 2002, right?” And I will laugh and we will embrace and we will both get back to the business of helping the flawed by generally good humans to overcome the Get Rich Quick urge that resides within all of us and to invest their retirement money more effectively.
Yes, Robert Shiller is a liar. Because he is one of those darned flawed humans. He is also a great man, one who has done more to advance our understanding of how stock investing works than any other human alive on the planet today. So I for one am willing to cut him a tiny bit of slack.
I hope that helps a small but, dear Goon friend.
Rob, Good Friend of the Great Liar Robert Shiller
“He is also a great man, one who has done more to advance our understanding of how stock investing works than any other human alive on the planet today. ”
You mean he has done more than you???? Are you sure???
You mean he has done more than you???? Are you sure???
I’ve also done something of huge importance, Anonymous. It drives you out of your mind to contemplate that reality. But it is a reality all the same.
I am a journalist. I could never do the things that Shiller and Bogle have done and I would never try. But I don’t see them doing the things that I have done either. Bogle knows that the Buy-and-Hold retirement studies lack a valuation adjustment. He’s been in the room when we were having discussions about it and I told him about it in several e-mails. Why hasn’t he done anything? I think it would be fair to say that he doesn’t feel comfortable engaging in journalist-type activities. Well, someone has to go about the business of getting those studies corrected before they do more harm. I am on the case. I am in the process of doing something that Bogle either is not able to do or is not willing to do. I offer no apologies whatsoever, you know?
Shiller is the same. You Goons ask me all the time, why doesn’t Shiller speak out more forcefully re the dangers of Buy-and-Hold? Part of it is that, like Bogle, he is not a journalist. To some extent he probably doesn’t know how to go about it. To some extent he probably doesn’t feel comfortable doing what it would take to get the job done. Professors don’t have to take the sorts of hits that I have been taking on a daily basis for 16 years running now. So he shies away from this important work. He has done and continues to do hugely important work. So I certainly don’t mean to be critical. But the world has room for more than one profession. I do a different sort of work than the work that Bogle and Shiller do. I love them for what they do. But I take pride in what I do too. That’s one of the reasons why I have not been willing to fold when you Goons have gone into freak-out mode.
Now —
Where will all this amazing journalism work take us once I get us all to the other side of The Big Black Mountain? It is going to take us all to some truly amazing places.
One of the problems that I have in convincing people of the merit of Valuation-Informed Indexing is that I lack “street cred,” according to one of my friends from the Bogleheads Forum. I do not hold a Ph.D. in Ecnomics, I have never managed a mutual fund, that sort of thing. People want to be sure that they are following good ideas when they invest their retirement money. So they want to see that the person that they are listening to possesses the proper credentials. That makes all the sense in the world. And I certainly don’t possess the type of credentials that Bogle or Shiller possess. I have said on numerous occasions that I do not consider myself an “expert” in this field as that term is generally used. I am not an expert and I do not possess any desire to ever become an expert.
So what value do I add?
If I open the entire internet to honest posting on the last 37 years of peer-reviewed research, I will make a HUGE positive contributions. I will change the lives of millions for the better. Say that I achieve my goal of getting Bogle to give a speech in which he acknowledges that the Buy-and-Hold retirement studies lack valuation adjustments and that all of those studies are corrected. Guess who will be helping us all out in big ways on the day following that speech? That speech will free Bogle up to offer his honest and informed thoughts on scores of critically important investment-related topics. And the same is true of Shiller. And of hundreds of others.
We need experts in this field to help us all out. I am not an expert in this field. I cannot do the job for them. But I can fill the need for an honest and reasonably well-informed journalist, a need which is crying for relief in the investment advice field. Buy-and-Hold was once a real thing. But they made a mistake. Shiller’s research had not yet been published at the time that Buy-and-Hold was being developed. They had research showing that short-term timing didn’t work. So they jumped to the unfortunate conclusion that long-term timing (price discipline) might not be needed either. Then, when Shiller showed that nothing could be farther from the truth, they fell under the spell of cognitive dissonance and just ignored what Shiller had showed. Now we are 37 years down the road and we all are in a big mess.
They needed a journalist!
The biggest reason why a lot of these people fell under the spell of cognitive dissonance is that they were experts! For the big shots in this field, Shiller’s research wasn’t just an intellectual advance. It was a personal threat. They had spent years developing their reputations as experts and all of those years were devoted to learning about and promoting Buy-and-Hold. How do you think they felt to read peer-reviewed research showing that it was all a big pile of smelly garbage? Those are the sorts of conditions perfect for a massive case of cognitive dissonance. They couldn’t deal with the reality that was presented to them. So they turned off their minds and pretended that Shiller hadn’t done work of any practical consequence.
I was a Buy-and-Holder. I followed the strategy for a time. But I never earned a degree studying it. And I never told clients to follow the strategy and charged them money for doing so. And I never attended conferences with other Buy-and-Holders and joked around with them and became friends with them and all this sort of thing. I did not have nearly the personal stake in the Buy-and-Hold project that Bogle did. Shiller didn’t have that personal stake either in one sense — he was not a Buy-and-Holder himself. But he associates professionally with lots of professors whose lives depend on Buy-and-Hold not being undermined. I would bet any amount of money that that is one reason why Shiller holds back from advancing clear statements telling us all how dangerous Buy-and-Hold is. He is compromised too to some extent even though his personal reputation was built undermining the case for Buy-and-Hold rather than building it.
My profession is one in which you are taught to expose cover-ups. That’s what I do. That is something that I take pride on. So I react very differently to death threats and threats of career destruction and all this other garbage than either Bogle or Shiller do. They get quiet when they see that stuff. They walk away. They worry that it would not be “professional” to point out that financial fraud is a crime and that the people responsible for this massive cover-up will likely be going to prison in the days following the next price crash. I put my readers first. I tell the story. I tell it with kindness because I feel great affection and respect for the people involved. But I tell the story honestly too. Because that is what I freakin’ do. That’s me. That’s your boy. I am a journalist. It’s in my blood. I couldn’t play it different if I tried. Telling me not to point out that a retirement study is in error is like telling a dog not to bark. Huh? What the f?
I am not the person to tell you what mutual fund to invest in or what stock to pick or how to take money out of a 401(k) fund or anything like that. There is nothing that I can say about any of those subjects that couldn’t be said better by thousands of other people. There is no way that I could add value addressing those sorts of matters and so I don’t bother trying to do so. If you need an investing expert, check out Bogle or Shiller. They are the two best out there, in my sincere assessment.
But if you want to know why Shiller’s “revolutionary” (his word) research findings have been ignored by most people in this field for 37 years now, I’m your guy. That’s a STORY. That one is a story and a half. That one is the biggest story in the history of personal finance, in my humble assessment. Putting a story like that in front of me is like putting a slab of beef in front of a hungry dog. I bite down and I don’t let go until the thing is finished. I didn’t get into this profession by accident. This is what I was born to do. I take the job seriously. Getting the numbers right in retirement studies is not a joking matter for this boy.
I’m doing something important. Something very, very, very, very important. Bogle and Shiller also do important work and I obviously don’t pretend to be in their class in their field. But I don’t see them putting much effort into doing what I have been doing for 16 years now. And someone very, very, very much needs to do this work. So I am not going to sit in the back of the room and not ask questions when I see people hawking retirement studies that are 37 years out of date, We need those studies corrected. I have been elected to get the job done and I intend to make it happen.
Bogle and Shiller and lots of others will be able to do better work for the rest of their lives once I have opened the internet to honest posting and they feel comfortable posting their sincere views. Things will just get better and better and better and better. When we look back, we will realize that we couldn’t possibly have gotten there without the contributions of John Bogle or without the contributions of Robert Shiller or without the contributions of Rob Bennett. We all have our own little role to play. I am grateful for what they have done. When they feel free to speak more openly about their true feelings, I have a funny feeling that they will both be saying that they are grateful for what I have done as well. Our skill sets play off of each other’s skill sets. The whole thing does not work without each person playing his part to the best of his ability.
I hope that helps a small bit, my dear Goon friend.
My best wishes to you.
The Reluctant Investing Expert (But the Enthusiastic Practitioner of Investigative Journalism) Rob
“I’ve also done something of huge importance, Anonymous. It drives you out of your mind to contemplate that reality. But it is a reality all the same.”
You haven’t done anything important. You thought you could be like Bogle or Shiller; or at a minimum, play a role similar to Mel. Instead, you have ended up looking like an internet troll and dealt with accordingly.
I wish you the best of luck in all your future life endeavors, in any event.
Please take good care, my dear friend.
Rob the Troll
Remember, Rob. It is not what you say you accomplished, it what others say you have accomplished.
Remember, Anonymous, Wade Pfau holds a Ph.D. in Economics from Princeton:
A) Academic Researcher Wade Pfau’s Statements Showing Interest In and Confidence in Rob Bennett’s Work
1) “I do cite you and John Walter Russell in my paper as the earliest and strongest advocates of this approach [New School safe-withdrawal-rate research].
2) “Are you aware of Shiller offering asset allocation advice based on PE10? …. If you read Rob Bennett’s stuff carefully, I think he did provide an important contribution in terms of describing a way for PE10 to guide asset allocation for long-term conservative investors. I also think he was right on the issue of safe withdrawal rates.” — Posted at the Bogleheads Forum discussion board.
3) “I am also extremely grateful to Rob Bennett for motivating this topic and contributing his experience and encouragement.” — Written in Acknowledgments section of Wade’s breakthrough research paper.
4)”You deserve much of the credit as the whole idea of Valuation-Informed Indexing belongs to you.”
5) “I definitely need to cite some of your work as the founder of Valuation-Informed Indexing, as I have not found anyone else who can lay claim to that. Shiller pointed out the predictive power of PE10 but never discussed how to incorporate it into asset allocation, as far as I know.”
B) Academic Researcher Wade Pfau’s Statements on the Superiority of Valuation-Informed Indexing Over Buy-and-Hold
1) “What you see in the top part of the graph for each year is the amount of wealth accumulated after 30 years for someone following Buy-and-Hold against someone following Valuation-Informed Indexing….Valuation-Informed Indexing provides more wealth for 102 of the 110 rolling 30-year periods, while Buy-and-Hold did better in 8 of the periods.”
2) “I will take steps in my final paper to test a wide variety of assumptions about asset allocation, valuation-based decision rules, whether the period is 10, 20, 30, or 40 years, lump-sum vs. dollar-cost averaging, and so on, and to show that the results are quite robust to changes in any of these assumptions.”
3) “Any data mining that I am doing is in favor of buy-and-hold, not in favor of market timing.”
4) “The findings for “market timing” are so robust anyway, that it hardly matters how we do it.”
5) “The maximum drawdown from market timing is much less. That is how far the portfolio drops from past highs to current lows. The Buy-and-Holder once experienced a 60.96% drop, whereas the worst drop for market timing was 24.16%.”
6) “Market timing provides signficantly higher returns at a comparable level of risk.”
7) “The market timer enjoys a far less risky strategy.”
8) “On a risk-adjusted basis, market-timing strategies provide comparable returns as a 100 percent stocks Buy-and-Hold strategy but with substantially less risk. Meanwhile, market timing provides comparable risks and the same average asset allocation as a 50/50 fixed allocation strategy, but with much higher returns.”
9) “If everyone increased exposure after a market fall and vice versa, then this would dampen out the big swings in the market aggregates, and we might get shallower boom/bust cycles.”
10) ““‘I’m excited about this, as depending on what you have already done, I think I can design a study using the Shiller data to provide historical simulations of Valuation-Informed Indexing strategies against fixed Buy-and-Hold strategies and also lifecycle strategies (declining allocation to stocks as one ages). If Valuation-Informed Indexing consistently outperforms fixed and lifecycle strategies, then the proof is in the pudding so to speak. Given how well valuations help to explain withdrawal rates, I think there is a lot of potential for this topic.”
11) “Yes, Virginia, Valuation-Informed Indexing Works!”
12) “It makes complete sense to have an equity allocation that is in some way flexible. Having a completely inelastic demand for equities is a bit bonkers; no-one acts that way with life’s other important commodities.”
13) “I wrote up the programs to test your Valuation-Informed Indexing strategies against Buy-and-Hold, and I must say that the results look very promising…. I am quite excited about the findings so far. As you say in the podcast, Valuation-Informed Indexing should beat Buy-and-Hold about 90 percent of the time, and I am getting results that support this for various strategies.”
14) “I have been toying with the idea of sending the paper to the Journal of Finance, which is the most prestigious journal in academic finance.”
15) “Now that I am accounting for risk, I am even more amazed by how well Valuation-Informed Indexing works.”
16) You shouldn’t be too excited with great wealth accumulations if they happened due to unusually high valuations, and low wealth accumulations shouldn’t be as scary if valuations are also quite low.”
17) “My idea is to show many different tables with results over the whole period for returns and risks. Valuation-Informed Indexing always provides more returns for often less risk.”
18) “No matter what I try, Valuation-Informed Indexing will still perform better in 85-95% of cases for 30 years.”
19) “I have a new figure for showing this as well. And a nice figure showing the outperformance percentages across rolling periods of lengths between 1 and 40 years. I think it is all quite persuasive.”
20) “You haven’t seen anything yet! This was just the secondary study. I’m still working on the main one!”
C) Academic Researcher Wade Pfau’s Statements of Incredulity That He Was the First Academic Researcher to Examine the Valuation-Informed Indexing Strategy
1) ” I know that there is an extensive literature about the predictability of long-term stock returns dating back to Campbell and Shiller’s work in the mid-1990s. I also know that there is an extensive literature about short-term market timing strategies…. But my question is about LONG-TERM market timing strategies. In other words, using market timing over periods of at least 10 years to obtain better returns than a Buy-and-Hold strategy. The literature seems slim.”
2) “Let me just explain a bit more why I posted about this here. Valuation-Informed Indexing has had critics for years, but until Norbert did it in 2008, nobody seemed to have provided a serious investigation of it. I just couldn’t understand why. And that bothered me.”
3) “Two papers by Fisher and Statman are still all I can find that provide evidence against long-term market timing.”
4) “I’m so confused by why Fisher and Statman didn’t consider risk in their idiot switching tests. Valuation-Informed Indexing is much less risky by pretty much any standard I consider. I must wonder… did I make a mistake somewhere? Why haven’t academics already published research about this?”
D) Academic Researcher Wade Pfau’s Statements on the Dangers of the Conventional Retirement Planning Advice
1) “The traditional approach to retirement planning (as described on pages 10 and 11 of The Bogleheads’ Guide to Retirement Planning, for example) is counterproductive and possibly damaging.”
2) “Retirees now frequently base their retirement decisions on the portfolio success rates found in research such as the Trinity study…. This is not the information that current and prospective retirees need for making their withdrawal rate decisions.”
3) “This article provides favorable evidence based on the historical record for long-term conservative investors to obtain improved retirement planning outcomes (lower savings rates, higher withdrawal rates) using valuation-based asset allocation strategies.”
4) Wade sent me a link to an article in Business Week that was published more than eight years after my post pointing out the errors in the Old School retirement studies and which he characterized as “quite sympathetic to the point you were trying to make all along”.
5) “Though I was only trying to do an Old School safe-withdrawal-rate study, all that I ended up doing was showing in a different way what you had been saying all along: the safe withdrawal rate changes with valuations.”
6) “Valuations are the driving factor. ”
7) “This is similar to your drunk driving analogy, which I agree with.” The discredited but uncorrected retirement studies find that in most circumstances a 4 percent withdrawal rate provides a huge cushion for the retiree using it. However, in each of the three cases in history when stocks reached insanely high price levels, retirements using a 4 percent withdrawal came within a whisker of failing. To say that this shows that a 4 percent withdrawal is “100 percent safe” (these words are used in the Greaney study) for a retirement beginning at a time of insanely high price levels is like saying that driving drunk is “100 percent safe” because 97 sober drivers drove their cars 20 miles without incident while 3 drunk drivers were paralyzed for life in car accidents but did not die. The fact that 4 percent only worked by a whisker in the cases in which valuations were high at the beginning of the retirement shows that a 4 percent withdrawal is high-risk at times of high valuations, not that it is “100 percent safe.”
8) ” Actually, this issue shouldn’t really even be all that controversial. It’s just common sense that the probabilities from the Trinity study shouldn’t be interpreted as forward-looking probabilities for new retirees.”
9) Naturally, I am finding that Valuation-Informed Indexing can allow you to reach a wealth target with a lower savings rate, use a higher withdrawal rate, and also have a lower “safe” savings rate, than a fixed allocation.
E) Academic Researcher Wade Pfau’s Statements Showing His Concerns that Continuing to Report Honestly on the Investing Realities in the Face of the “Hostile Environment” for Doing So Created by Buy-and-Holders Would Harm His Career
1) “I was trying to pay tribute to your accomplishments in what I knew would be a hostile environment.”
2) “Valuations and long-term investors is a somewhat controversial topic.” Wade posted these words to his blog in October 2011 as his explanation of why he was abandoning his plan of doing further research on the superiority of Valuation-Informed Indexing strategies over Buy-and-Hold strategies. He had told me in earlier days that “You ain’t see nothing yet!” when I praised his breakthrough research in this area. After his flip to the dark side, Wade removed the page containing this blog entry from his site.
3) “We have both read and met to discuss your paper. Unfortunately, we did not find the paper’s incremental contribution to the academic finance literature, assuming the analysis proved to be correct, rose to the level that we are seeking for papers in the JFR. Thus sending the paper to a reviewer would be inefficient.” These words are from an academic journal’s “desk reject” of Wade’s breakthrough research.
4) ) ““ I was discouraged when I first received the “desk reject” by the editors of the same journal that published the Fisher and Statman paper. I realized that I didn’t have a chance with one of the top journals.”
5) “I think I should stay publicly quiet for a while, as I really don’t want anyone sending messages about any topics to officials at my university.”
6) I don’t want them [the Goons] working behind the scenes to derail me.”
7) “I did warn the editor of the Journal of Financial Planning that they may receive some ‘hate mail‘ after I mentioned your name in the safe savings rate paper.”
“Remember, Anonymous, Wade Pfau holds a Ph.D. in Economics from Princeton:”
We all know Wade. He is the one hat said you are wrong. He wrote a whole article on it. Further, we see no one commenting on this board with any positive comments around anything you have done. All you have is selective editing that you have spun into a story.
The slider at the top of every page on this site reports on over 200 positive comments on my work offered by scores of good and smart people. So it’s all there for anyone who cares to look.
Do threats of physical violence and threats of career destruction influence what people say from the point at which those threats are advanced? Of course. Obviously. That’s why we have laws against financial fraud.
Will those laws be enforced in the days following the next price crash? I sure think so.
It will be interesting to see how things play out.
My best wishes to you.
Confident (and Loving) Rob
“The slider at the top of every page on this site reports on over 200 positive comments on my work offered by scores of good and smart people. So it’s all there for anyone who cares to look.”
It is your editing and spin on this website. We do not see others supporting you anywhere else within the financial community. We also see zero support here in the comments session. Instead, we just see your own self promotion.
Are you okay with waiting to see whether that changes in the days following the next price crash?
Patient Rob
“Are you okay with waiting to see whether that changes in the days following the next price crash?”
We have already waited a LONG time for all this to play out. At some point, you should think about cutting your losses and moving in to something that is actually productive.
Okay, Anonymous.
I doubt that there will be even one person (including you Goons) who will have any objection to how long it took when we all get to see how much richer (in every sense of the word) our lives are once we make it together to the other side of The Big Black Mountain.
I certainly wish you the best of luck with it all in any event. I hope that that helps a small bit.
Non-Productive (Or Super Productive, Depending on Whether or Not You Believe That the Last 37 Years of Peer-Reviewed Research in This Field Is Legitimate Research) Rob
“I doubt that there will be even one person (including you Goons) who will have any objection to how long it took when we all get to see how much richer (in every sense of the word) our lives are once we make it together to the other side of The Big Black Mountain.”
The “Big Black Mountain” is yet another one of your made up things.
It makes me happy to know that people who lose half of their life savings in the next price crash will be able to come here and read this thread and decide for themselves whether The Big Black Mountain is real or imaginary. That’s how we move forward as a society toward a far, far better understanding of how stock investing works in the real world.
My best to you.
Big Black Mountain Believer Rob
“It makes me happy to know that people who lose half of their life savings in the next price crash will be able to come here and read this thread and decide for themselves whether The Big Black Mountain is real or imaginary”
Is that the crash that you said would happen in 2011 or the one you predicted would happen in 2012, or the year after that, or the year after that, etc.?
I was wrong in my prediction, Anonymous. You’ve got me on that one.
But does it really help Buy-and-Holders that much if the crash comes in 2018 or 2019 or 2020 instead of 2012? Returns have been dramatically sub-par for 19 years running. The annualized real return for the past 19 years has been 3.2 percent. That’s less than half of the average long-term stock return. So investors are well behind where they expected to be. And then they experience a 50 percent loss or perhaps more? That’s going to hurt. That’s going to hurt big time.
All of this is the result of our relentless promotion of Buy-and-Hold in the late 1990s. If we had been telling investors to practice price discipline, we never would have seen those insane gains from 1996 through 1999 and we wouldn’t have been trying to pay down that debt for the past 19 years. I don’t think the overvaluation is helping you at all. I think it is hurting you.
I said at the time that I made the prediction that I was not sure that it would happen as I said. What matters is whether or not it happens, not the precise date at which it happens. If market gains are caused by economic developments, they are real and you can count on them when planning your retirement. If they are caused by irrational exuberance, then they are cotton-candy nothingness fated to be blown away in the wind sooner or later.
You are placing all your chips on the fact that we cannot say precisely when your phony gains will disappear. I think you are focused on the wrong question. The question that matters is whether the gains are real or phony. Shiller’s research shows that they are phony. I believe that Shiller’s research is legitimate. I don’t think that you should be counting on phony gains to finance your retirement. I think you need to know the true and lasting value of your portfolio.
Those are my sincere thoughts.
Bad Predictor Rob