Yesterday’s blog entry reported on an e-mail that I sent to Academic Researcher Wade Pfau on February 25, 2011. He sent his response later the same day.
Wade thanked me for my messages, saying that our correspondence “gives me a lot to think about.”
He offered an observation regarding one potential pitfall for those following a Valuation-Informed Indexing strategy. He said: “The worse thing would be if he abandoned the valuations strategy in 1999 to join his friends with 100% stocks. I
think this is a real and unavoidable concern. Someone really has to be strongly committed to the strategy to not deviate at the worst possible time. But I think people can do it if they get a firm understanding about the historical data.”
I sent an e-mail to Wade on that day offering further comments on his exchanges with Drip Guy and other Goon posters. The text is set forth below.
Wade:
You’ll never find consistency in the statements of Drip Guy and the other Goons. Their primary aim is to block fruitful discussions and they will say whatever needs to be said to achieve that aim.
I was FORCED to put up the post of May 13, 2002, that kicked off The Great Safe Withdrawal Rate Debate. Greaney founded the Motley Fool’s Retire Early board. I built the board into the most successful board at the site (posting only about saving). I had to take time off to write my book and a fellow named “Wanderer” became the best poster. Wanderer committed the “crime” of saying that he thought investing in real estate (instead of stocks) could make sense at times. Greaney signaled to his Goons that he wanted Wanderer gone and the deed was done. Greaney’s SWR study was the tool used (if the SWR can never drop below 4 percent, the long-term return for stocks is implicitly always 6.5 percent real and stocks thus can never be beat on a risk-adjusted basis (no need to study anything to invest in a stock index) by other asset classes. If I did not do something at that point, the board could never again serve as a useful place to learn about planning for an early retirement.
By pure coincidence, John Walter Russell had retired the week I put up the first post and was looking for something constructive to do. He did the first New School research on the sixth day of the discussions (May 18, 2002) and found that the sensitivity numbers for the Old School SWR studies were poor. Lots of community members got very excited about learning more.
From that point forward the battle has been over whether honest discussion should be permitted or not. Mel Lindauer (co-author of “The Bogleheads Guide to Investing”) and others knew who I was when I put my first post to the Vanguard Diehards board in July 2005. So my first post was met with abusive posting. Lindauer and others demanded that Morningstar ban me because I was not willing to post dishonestly but Morningstar was not willing to go along given that I had never violated any posting rules. When I announced an intention to appear at one of the annual meetings (where I would be able to direct questions to Bogle), the Lindauer group formed the new Bogleheads board off the premises of Morningstar.com and encouraged people to switch boards. Now the Lindauer/Drip Guy group does not need to get an independent site administrator to impose board bannings and they can maintain the ban without anyone being able to ask embarrassing questions.
You’ll never get anywhere with Drip Guy. I don’t mean to say that he does not follow Buy-and-Hold principles in his own investing. I believe he does. I asked Greaney how much he lost in the crash and he said “well in excess of $1 million.” That persuades me that they personally follow what they preach. But they have zero willingness to entertain the possibility that they have made mistakes. That by itself is not a problem (except for them). The problem is that they also have zero willingness to permit the hundreds of community members there who would like to be able to discuss both sides in civil and reasoned discussions to do so. I see that as a BIG problem in scores of different ways.
There are smart people in the community who say helpful things. But once honest posting is banned the thing becomes a corrupt enterprise.
It might be that Drip Guy and the others would play it a different way if they had a chance to do it over. But they now have to deal not only with having been wrong on SWRs but also with having destroyed numerous boards and blogs in their efforts to block community desires that honest posting be permitted. Drip Guy doesn’t feel even a tiny bit inclined to own up to that, according to every sign I have seen from him. So he often talks incoherent babble. He doesn’t see himself
as having any other choice at this point.
Sorry for the long answer. But I see no other way to help you make sense of the Drip Guy matter and of the fact that a good number of smart community members fail to speak up about it when it becomes an obvious issue.
They know that Drip Guy is in the Lindauer camp. That’s what matters as a practical reality, not whether what he says makes sense or not. And Bogle appears with Lindauer at the annual meetings. Community members there have noted that Bogle allows photos to be taken of him and Lindauer standing next to each other. That sends a signal to people as to what can and cannot be said at the forum.
That’s what needs to change. The entire Campaign of Terror against our board and blog communities comes crumbling down on the day that Bogle appears in a public forum and says the magic words “I” and “Was” and “Wrong” or the somewhat- less-helpful-but-still-magic words “I’m” and “Not” and “Sure.” When those words are said, all of the negative energy converts to positive energy and from that point forward everyone is working together to learn how stock investing works in the real world instead of pursuing counter-productive political agendas. No one gets left behind then. Learning how stock investing works (for the first time — the study of stock investing was
never a systematic academic enterprise before the research was done on the efficient market theory) is a win/win/win/win/win with no possible downside for anyone.
Rob
Mel Lindauer (co-author of ”The Bogleheads Guide to Investing”) and others knew who I was when I put my first post to the Vanguard Diehards board in July 2005.
No he didn’t. daryll40 who responded to your first post obviously did, but Mel learned everything he needed to about you from your contributions at the Vanguard Diehards board.
I believe Mel knew, Evidence.
In the very early days, I got an e-mail from one of the co-authors of Mel’s book asking for a copy of my book “Passion Saving.” Do you think that was a coincidence? I don’t.
I had been posting honestly on safe withdrawal rates for years. The message being conveyed was — you keep that up and we will destroy you, but, if you play ball, we can help you out big time.
I cannot offer 100 percent proof of that. But the fellow who asked for the saving book put up numerous defamatory posts in later days. That tells a tale.
You say that Mel learned what he needed to know from my posts at Vanguard Diehards. He learned that I was the person who discovered the errors in the Old School studies. Did he thank me? If not, why not?
I believe Mel knew. The details will come out in discovery proceedings.
I of course wish you the best of luck in all your future endeavors, Evidence.
Rob
But the fellow who asked for the saving book put up numerous defamatory posts in later days. That tells a tale.
It does indeed. That you regard the posts from Taylor Larimore or Michael LeBoeuf (Mel’s co-authors) as defamatory tells us much about you.
That you regard the posts from Taylor Larimore or Michael LeBoeuf (Mel’s co-authors) as defamatory tells us much about you.
It was Michael who sent the e-mail.
Yes, I do consider a good number of Michael’s posts as defamatory. I also consider a good number of Taylor’s posts as defamatory.
A claim often made by Buy-and-Holders is that there is “research” showing that market timing does not work. I asked Taylor for a URL to the research showing that long-term timing does not work. His response was that I am a “troll.”
Huh? I ask to see the URL for the supposed research that supports Buy-and-Hold and I am a troll? How so, Evidence?
There of course is no such research. I am a troll because I asked a question that Taylor cannot answer.
The correct response from Taylor was: “That’s a great question, Rob. I need to look into that. We all do. If we are going to say that there is research supporting this strategy, we need to be able to cite the research and provide links to it.”
I didn’t get that response from Taylor. I got defamatory attacks from him. He cannot defend Buy-and-Hold in civil and reasoned debate. No one can. It is not science. It is air.
Rob
If we are going to say that there is research supporting this strategy, we need to be able to cite the research and provide links to it.
Physician heal thyself.
I’ve healed myself, Evidence.
Shiller published research 30 years ago showing that there is zero chance that a Buy-and-Hold strategy could ever work for any long-term investor.
John Walter Russell spent the last eight years of his life doing research into hundreds of particulars.
Wade Pfau devoted close to 18 months of his life researching these questions. He has published research showing that we can dramatically reduce the risk of stock investing by being willing to take prices into consideration when buying stocks, just as we take it into consideration when buying anything else.
Buy-and-Hold is a scam. Nothing could be more clear.
The reason why the 10-year effort to “defend” the scam has been so vicious is that there is precisely zero research or data supporting the “idea” that there is no need to consider price when buying stocks.
I have healed myself. I have never posted a death threat. I have never engaged in an act of defamation. I have never urged an unjustified board banning. I have never threatened to get someone fired from a job for publishing honest research.
It is the ones who have done these things over and over again who need to heal themselves. it is the Buy-and-Holders who need to heal themselves.
Please take good care, my long-time abusive posting friend.
Rob
Buy-and-Hold is a scam
Thankfully for ordinary investors, that is not true. The total return available from the stock market is exactly the return achieved by a buy and hold policy (minus the low costs associated with low turn over index investing).
The total return available from the stock market is exactly the return achieved by a buy and hold policy (minus the low costs associated with low turn over index investing).
That’s what MAKES it a scam, Evidence.
The research shows that the most likely 10-year annualized return available from stocks when they are selling at the prices that applied in 2000 is a negative 1 percent real. TIPS were at the time offering a guaranteed return of 4 percent real. That’s a differential of 5 percent real for 10 years running. An investor who fell for the Buy-and-Hold Scam lost 50 percent of his accumulated life savings as his penalty for believing that Get RIch Quick can work.
Compare what would happen if we permitted honest research in this field and then on top of that we permitted honest posting on the internet on the results of that research.
The U.S. economy generates enough earnings to support an annual stock return of 6.5 percent real. If it had not been for the insane bull market of the late 1990s brought on by the relentless promotion of Buy-and-Hold strategies, we all would have been earning good returns for the past 12 years. We wouldn’t be in a position where we need to cut back spending. We wouldn’t have an economic crisis. We wouldn’t have seen tens of thousands of businesses fail. We wouldn’t have seen millions of people lose their jobs. We wouldn’t be seeing the political instability we are seeing today.
Buy-and-Hold is the greatest financial scam ever concocted by the human mind. If Buy-and-Hold was a legitimate strategy, there never would have been a single death threat or a single act of defamation or a single board banning. It is a marketing gimmick. For the marketing gimmick to succeed, people need to be kept in the dark re the great benefits that flow to those willing to take price into account when setting their stock allocations.
For our free-market economic system to survive, John Bogle needs to work up the courage to walk to the front of a stage and say the three magic words “I” and “Was” and “Wrong.” Bogle has received great benefits from the society he lives in. He needs to be willing to give a little something back, in my assessment.
My best wishes to you and yours.
Rob
The return available to investors as a whole is the buy and hold return. A small subset of investors may earn a return in excess of the buy and hold return only if a larger subset (to cover expenses) earn a return below the buy and hold return.
The return available to investors as a whole is the buy and hold return.
You left out the words “from stocks,” Evidence.
The correct way of stating it is: “The return from stocks available to investors as a whole is the Buy-and-Hold return.”
The most likely annualized 10-year return from stocks in 2000 was a negative 1 percent real.
The guaranteed return from a non-stock asset class (TIPS) at the time was 4 percent real.
If academic researchers were permitted to do honest research, they could have told us this. If honest posting were permitted on the internet, we could have given our fellow middle-class investors honest retirement planning advice.
Then we would all be richer today. Then we wouldn’t have had to cut back spending and bring on an economic crisis.
You know who else would be better off?
The Stock-Selling Industry!
Yes, the people who push Buy-and-Hold so relentlessly would be better off if we warned millions of middle-class investors of its dangers.
How so?
If we permitted honest posting and thereby brought the economic crisis to an end, we would all be financially better off. Guess what happens in societies in which everyone is better off financially? People buy more stocks!
Honest investment research and honest posting benefit us all, Evidence. It is a win/win/win/win/win. My feeble brain is not even able to imagine any possible downside.
Is your far more powerful brain able to come up with anything?
Rob
Wade continues to openly discuss SWRs and appears to still have his job. This worldwide conspiracy goon group isn’t as effective as make them out to be.
http://wpfau.blogspot.com/2012/05/michael-kitces-on-4-as-income-floor.html
And look, the Bogleheads are discussing PE10 as a valuation metric. These goons are borderline incompetent.
http://www.bogleheads.org/forum/viewtopic.php?f=10&t=76625&newpost=1400546
Wade continues to openly discuss SWRs and appears to still have his job.
We have known since the morning of May 13, 2002, that the Old School safe withdrawal rate studies were analytically invalid and that the errors in them were going to cause millions of failed retirements if not promptly corrected. Wade was giving voice to his honest beliefs when he said that the retirement studies must be corrected. It is a scandal that the Greaney Goons threatened to get him fired from his job unless he agreed to post dishonestly. It is an even greater scandal that he gave in to their demands.
The Ban on Honest Posting helps absolutely no one, least of all the Buy-and-Holders who failed to speak up about the errors in these studies for 10 years after they became public knowledge. We do not see eye to eye re this one, Diversified.
Rob
And look, the Bogleheads are discussing PE10 as a valuation metric. These goons are borderline incompetent.
Knowing about millions of failed retirements that could have been avoided does not cause me to laugh, Diversified.
I don’t get the joke. I believe that the same standards of ethics that apply in every other field of human endeavor should apply in discussions of stock investing as well.
I wish you all the best.
Rob
Rob is hilarious! Let us count the ways:
1) Extreme sense of self importance
“everyone must know me because of my irrelevant online message board post over 10 years ago”.
I’ve actually read the post and its pretty insignificant. Just a confused person with word diarrhea. You are quite possibly even more confused (and certainly more crazy) now then you were then.
2) Conspiracy against self
Non-existent death threats mentioned hundreds of times but never produced.
Grand conspiracy across the Internet to keep Rob’s word of truth from getting out and saving the Universe.
3) Conspiracy against others
Threats of job loss totally manufactured with no evidence.
4) The volume, length, and pointlessness of thousands of Internet posts goes without saying
5) The amount of time and extreme ineffectiveness with the approach to ‘saving the universe’. Basically repeatedly bashing his head against the wall until it is certainly oatmeal.
6) The podcasts…I can’t think of a way to describe these besides completely insane. Well, secondary descriptors can be: Long winded, directionless, blabber, paranoid, self aggrandizing, puffery, delusional.
7) Lawsuits and 500 million dollars. ‘nough said.
Extreme sense of self importance
It would be fair to say that I place enough value in the work I do to not want to post dishonestly re the numbers that my friends use to plan their retirements, Drip Guy.
I wish you the best of luck in all your future endeavors in any event.
Rob