"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 They Need for Making Their Withdrawal Rate Decisions."
"Big Moves Out of Stocks Should Not Be Done at All. But Strategic Asset Allocation Can Be Done At Very Rare Times, Maybe Six Times in an Investor’s Lifetime, Three Times When the Market Is Stupidly High and Three Times When Stupidly Low."
"There Is An Extensive Literature About the Predictability of Long-Term Stock Returns. There Is an Extensive Literature About Short-Term Market Timing. My Question Is About Long-Term Market Timing. The Literature Seems Slim."
"For Years, the Investment Industry Has Tried to Scare Clients Into Staying Fully Invested in the Stock Market at All Times, No Matter How High Stocks Go. It's Hooey. They're Leaving Out More Than Half the Story."
"There Are Time-Periods Where Stocks Are a Terrible Addition to That Portfolio. Yet Inexplicably, We As Planners STILL tend to Suggest That It Is 'Risky' to Not Own Stocks When in Reality the Only Risk Is to Our Business."
"There Is a Growing Behavioral Economics Movement, But It So Far Has Had Limited Impact. Economists Are Not Fond of the Softness and Imprecision of Psychology. These Notions Are Considered Vaguely Unprofessional and Flaky."
"I Was Hooked on the Idea of [Passive] Index Indexing, But Something Inside Made Me Wonder "Too Good to Be True?" and "What's the Downside?" I Happened on to Your Site and Valuation-Informed Indexing Seems to Make Sense."
"Rob's Da Man! Never in the History of the Diehards Forum Has One Poster, Always Making Civil and Well Thought-Out Posts, Managed to Irritate So Many Without Anyone Being Able to Articulate a Good Reason As to Why."
"Rob Bennett: Some People Disagree With Him, and He Rubs a Lot of People the Wrong Way. But He Has Interesting Ideas About Valuation-Informed Indexing, and He Delves Into a Lot of What Makes a Successful Investing Strategy."
"The Return Predictor Is Based upon the Principle that Over the Long Term, Stock Market Prices Will Reflect the Ten-Years Earnings Growth of the Underlying Companies. Prices Return to a Common Growth Pattern."
"You Go About It in a Manner that is Catastrophically Unproductive by Adding Missionary Zeal that Inflates Your Importance and Demeans Others. The Whole Idea That There is a New School of Safe Withdrawal Rates Reeks of Personal Aggrandizement."
“What Warren Buffett Did Was Essentially Quite Close to What Rob Bennett Has Written. Buffett Has in Fact Been Cleverly Incorporating Long-Term Market Timing Based on Valuation of the Market in His Allocation of Money to Stocks.”
"You've Got to Say One Thing for Rob. He Has NEVER Lowered Himself to Ad Hominen Attacks -- Subliminal or Otherwise -- on Any Other Person on This Board. Not Once. Ever. At Least Give Him Credit for That."
"Mr. Bennett, You Are Spot on About Integrating Some Type of Valuation Filter to One's Stock Allocation. Astute Investors Have Incorporated Some Type of 'Valuation Timing' Into Their Investment Decisions Since the Beginning of Time."
"There Is Nothing More Doubtful of Success Than a New System. The Initiator Has the Enmity of All Who Profit By Preservation of the Old Institution and Merely Lukewarm Defenders in Those Who Gain By the New One."
"Difficult Subjects Can Be Explained to the Most Slow-Witted Man If He Has Not Formed Any Idea of Them. But the Simplest Thing Cannot Be Made Clear to the Most Intelligent Man If He Believes He Knows Already What Is Laid Before Him."
"I Certainly Have Seen the Academic Profession Squelching Unfashionable ideas and Have Often Been on the Wrong Side of It. Kuhn Shows How Most Pathbreaking Scientific Ideas Are Rejected at First, Usually for Decades.”
"Rob Bennett Was an Early Pioneer in 3rd Generation Modeling by Advocating (Through Various Online Forums) that Withdrawal Rates Must Be Adjusted for Market Valuations Consistent with Research by Campbell and Shiller."
"I Am Fascinated by the Growing Body of Research that Revolves Around the P/E10 Ratio by Robert Shiller, Doug Short, Wade Pfau, Michael Kitces, John Hussman, Crestmont Research, Jim Otar, Mike Philbrick, Adam Butler & Rob Bennett."
"Rob Is an Enigma in the Personal Finance World. He Has Interesting Theories on Investing Based on Market Valuations. But He Weaves a Tale Which Makes the Stories of Alexander Litvinenko & Gareth Williams Seem Tame by Comparison."
"I Have Read Everything I Can About Valuation-Informed Indexing. Buy-and-Hold Is Extremely Problematic. I Respect the Passion, Hard Work and Research That You Have Put Into This Very Important Issue. Your Work Has Huge Value."
"The Amount of Return You Can Expect From a Diversified Equity Portfolio Is Inversely Correlated to the Market Valuation at the Start of the Holding Period. It Is One of the Most Robust Statistical Relationships in Modern Finance."
"I've Had Similar Experiences. I Know of Two Young Professors Who Wanted to Do Research on Fundamental Index and Reported to Me That Their Colleagues Advised Them That This Line of Research Could Derail Their Career Prospects."
"As with Drug Studies Funded by Drug Companies, It Would Be Churlish to Suppose that the Chicago School of Business Was in the Bag. But It Would Also Be Idealistic to Assume That There Was No Funding Bias at All."
"This Sort of Intimidation Is Not Acceptable. The Cigarette and Pharmaceutical Industries Found Research Supporting Their Products By Funding It. But That Was Big Money Supporting Outcomes, Not Dissuading Others."
"The Situation [Referring to the Intimidation Tactics Used to Silence Academic Researcher Wade Pfau's Reporting of the Dangers of Buy-and-Hold Investing Strategies] Seems Well Below Any Professional and Academic Acceptable Standards."
"It Is Obvious that Rob, in Attempting to Identify New Safe Withdrawal Rate Strategies...Is Goring Your Ox. If Rob Improves on [the] Safe Withdrawal Rate Methodology, the Implication Is Clear: You Are All, Metaphorically, Out of Business."
"Naturally, I Am Finding That Valuation-Informed Indexing Can Allow You to Reach a Wealth Target With a Lower Saving Rate and to Use a Higher Withdrawal Rate in Retirement Than You Could With a Fixed Allocation."
"A Careful Examination of Past Returns Can Establish Some Probabilities About the Prospective Parameters of Return, Offering Intelligent Investors a Basis for Rational Expectations About Future Returns."
"How Can It Be That One-Year Returns Are So Apparantly Random and Yet Ten-Year Returns Are Mostly Forecastable? In Looking at One-Year Returns, One Sees a Lot of Noise. But Over Longer Time Intervals the Noise Effectively Averages Out and Is Less Important."
"The Notion That Rich Valuations Will Not Be Followed By Sub-Par Long-Term Returns Is a Speculative Idea That Runs Counter to All Historical Evidence. It Is an Iron Law of Finance That Valuations Drive Long-Term Returns."
"It's January and the Temperature Is Below Freezing. If You Asked Me Whether It Will be Warmer or Cooler Next Tuesday, I Would Be Unable to Say. However, If You Asked Me What Temperature to Expect on April 9, I Could Predict "Warmer Than Today" and Almost Surely Be Right."
"If the Response Is "Who Knew?", It Won't Be Much Comfort for Retirees in the Employment Line at Wal-Mart. This is Especially True Since a Rational Understanding of History and the Drivers of Longer-Term Stock Returns Can Help Retirees To Avoid That Surprise."
"New of the Demise of the Random Walk Has Only Very Slowly Spread, In Part Because Its Overthrow Came as a Shock. If the Random Walk Hypothesis Were Correct, the Most Likely Return Would Be the Historic Average Return. The Evidence, However, Is Strongly Against This."
"I Don't Care If You Do or Don't Believe That the Market Will Behave Similarly in the Future As It Has in the Past. Either Way, This [The Stock-Return Predictor] Is an Excellent Way to Understand What the Market Has Done In the Past."
"It Really Is a Shame and Indefensible That So Many Feel the Need to Jump Into It With No Interest of Posting on the Topic But Just to Disrupt. Are You That Insecure? Some on the Forum Have an Interest in This Topic. If You Don't, Stay Out!"
"Irrational Behavior Does Follow Patterns. But How Many Experts in Behavioral Finance Believe That Such Knowledge Can Be Used to Predict Markets? Basically, None. Your Model Cannot Attain the Level of Predictive Value You Claim."
"The Safe Withdrawal Rate Studies Are Based on History. This [The Retirement Risk Evaluator] Shows, Based on the Same History, What the Probabilities Are for the Future at Various Starting Points. If the First Has Value, Then Surely This Does Too."
"There Are Hundreds of People Who Contributed to This. This Calculator [The Stock-Return Predictor] Demonstrates in a Compelling Way the Power of This New Internet Discussion-Board Communications Medium."
"A P/E10 of'26' Is Bad. Now Look at the 30-Year Return Predicted by the Calculator -- 5.4 Percent Real. That's Not Bad. There Are All Sorts of Strategic Implications That Follow From Understanding That Stocks Provide Different Sorts of Returns Over Different Sorts of Time-Periods."
"I Would Never Invest in Anything Without Having Any Idea What the Expected Return Is. For Instance, I Would Not Walk Into a Bank And Say "I'll Take One Certificate of Deposit, Please" WIthout Asking What Rate They Are Offering."
"I've Seen Things Said on Investing Boards That I Have Never Heard Said in Discussions of Any Non-Investing Topic. The Question of Whether Valuations Affect Long-Term Returns Is a Topic That Causes People More Emotional Angst Than Does Abortion or Impeachment Proceedings or the War in Iraq."
"It's Not Possible For Those Who Have Come to Believe That Stocks Are Always Best to Accept that Valuations Matter. The Two Beliefs Are Mutually Exclusive. If Valuations Matter, There Is Obviously Some Valuation Level At Which Stocks Are Not Best. The Two Paradigms Cannot Be Reconciled."
"Dear Rob -- I Just Became Aware of Your Past Research in September. Since Then, I've Read Archives From Many Discussion Boards and Websites, and I Always Find Your Writing to Be Very Interesting and Intriguing."
"I Think Rob Bennett Did Provide An Important Contribution in Terms of Describing a Way for P/E10 to Guide Asset Allocation for Long-Term Conservative Investors. I Also Think He Was Right on the Issue of Safe Withdrawal Rates."
"Because the Precise Timing of This Mean Reversion Is Not Known in Advance, Expecting the Result to Happen in the Short-Term Will Not Be Possible. But Long-Term Investors Who Can Be Patient Can Wait for This Mean Reversion and Will Eventually Come Out Ahead."
"Your Work Is at Odds with the Ethos of the Board -- Here the Theme is John Bogle's Philosophy, Which Eschews Market Timing. This Board Came Into Existence to ESCAPE One Individual, the Very Individual With Whom You Have Openly Aligned Yourself."
"Why Is It Such an Odious Violation of the Tenets of Bogleheadism to Explore Whether Someone Who Has Enough Patience Might Be Able to Benefit from the Transitory Nature of Speculative Returns (the Idea That the P/E Ratio Eventually Ends Up Where It Started)?"
"Let Me Explain 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 Couldn't Understand Why. That Bothered Me."
"If You Really Don't Like Market Timing in Any and All Forms, You May Not See Any Point in an Empirical Investigation. You View Me as One of a Long Line of Hucksters Trying to Sell You Some Snake Oil. I Don't Want to Be Such a Person."
"Having a Completely Ineleastic Demand for Equities Is a Bit Bonkers. No One Acts That Way with Life's Other Important Commodities. Campbell Advocates a Linear Valuations-Based Strategy so That You Wouldn't Be Making Big Changes. This Would Be Like Rebalancing But More Flexible."
"The Whole Idea of Valuation-Informed Indexing Belongs to You. Do You Mind if I call the Paper 'Valuation-Informed Indexing'? I Would Give You Credit. 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."
"I Definitely Need to Cite You 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 P/E10 But Never Discussed How to Incorporate It Into Asset Allocation, As Far As I Know."
"I Tested a Wide Variety of Assumptions About Asset Allocation, Valuation-Based Decision Rules, Whether the Period Is 10, 20, 30 or 40 Years, and Lump-Sum vs. Dollar-Cost Averaging To Show That the Results Are Quite Robust to Changes In Any of These Assumptions."
"I Wrote Up the Programs to Test Your Valuation-Informed Indexing Strategies Against Buy-and-Hold and I Am Quite Excited. You Say in the RobCast That VII Should Beat Buy-and-Hold About 90 Percent of the Time. I Am Getting Results That Support This."
"Never Underestimate the Power of a Dominant Academic Idea to Choke Off Competing Ideas, and Never Underestimate the Unwillingness of Academics to Change Their Views in the Face of Evidence. They Have Decades of Their Research and Academic Standing to Defend."
"Since They Did Not Diagnose the Disease, There Is Little Popular Confidence That They Know the Cure. What If Economics Is, Actually, At the Same Level as Medicine Was When Doctors Still Believed in the Application of Leeches?"
"I Love the Humans Dearly (the Title of the Book I Am Writing Is Investing for Humans: How to Get What Works on Paper to Work in Real Life) But They Can Be a Trial at Times. Hey! Helping the Humans Learn What It Takes to Invest Effectively Is Not All That Different From Being Married!
"Wow, I Did Not Realize You Had Achieved This Much Success and Had Many Devoted Believers/Followers. That’s Great, Then Ignore the Opposition. It Is Great to Have Opposition: That Means You Are Doing Something Right."
"I Do NOT Believe I Know It All. I Believe That Shiller Discovered Something Very Important and It Appalls Me That More People Are Not Exploring the Implications of His Findings. My Aim Is To Launch a National Debate."
"I LOVE Everything About Buy-and-Hold Other Than the Failure to Encourage Investors to Take Price Into Consideration When Setting Their Stock Allocations. That's a Mistake That Was Made Because Shiller’s Research Was Not Available at the Time The Strategy Was Being Developed."
"Valuation-Informed Indexing Sounds Like a Real Thing. If It Is and I Can Thoroughly Understand It, Then It Will End Up In My Classrooms and in My Students' Minds (Of Course, With References to You and Wade)."
"As a Fan of Thomas Kuhn's The Structure of Scientific Revolutions, I Know That Progress Can Be Frustratingly Slow and What Is Typically Needed Is Either a Crisis or the Ascent of a New Generation of Scientists Who Did Not Build Their Careers on the Old Models and Theories."
"We Trace the Deeper Roots [of the Financial Crisis] to the Economics' Profession's Insistence on Constructing Models That, By Design, Disregard the Key Elements Driving Outcomes in Real World Markets."
"Rob Gets Himself So Worked Up Over What Someone Else Is Doing With Their Own Money and Not Bothering Rob in the Least. As Long As They Aren't Knocking on Your Basement Door, What Do You Care? They Are Happy and Content. Leave Well Enough Alone and Focus on Your Own Account."
"I've Been on Forum Since the BBS Days and I Think Rob is Special. He Could Be an Internet Meme If He Put Some Effort Into It. Someday, He Will Realize That the Only Thing He's Good At Is Being an Epic Loser. He Just Needs to Embrace That Idea and Run With It. Watch Out, LOLCats, Here Comes Pathetic Guy!"
"You Guys [the Greaney Goons] Are the Same Jokers Who Have Done This Before, Sparring with Rob Over Nonsensical Issues On This Site and Others, Leveling Personal Attacks, and You Don't Even Use Real Names! Rob Is Entitled to His Opinion, But the Fact That You Challenge Every Jot and Tittle of What He Says Makes It Clear You Have An Unholy Agenda. Please Take It Elsehwere."
"Rob, Take This As Friendly Advice. You're a Smart and Articulate Guy and You Could Be Making Valuable Contributions to This Discussion. I've Dealt with the Mentally Ill Before and I've Found That They Sometimes Can Be Reasonable If Gently Redirected."
"I’m a Numbers Guy. And I Believe I Understand Rob’s Thesis, that Future Returns, Over the Next Decade, Have a Tight Inverse Correlation to the PE10 for the Starting Point. Remember, Correlation Doesn’t Need to be 100%, Only That There’s a Bell Curve of Potential Outcomes that Shift Meaningfully Based on the Input."
"I Have had Academic Researchers Tell Me That They Dream of the Day When They Will be Able to do Honest Research Once Again. I Have had Investment Advisors Tell me That They Dream of the Day When They Will be Able to Give Honest Investing Advice Again."
"Let’s Call a Spade a Spade, Shall We? Wade Pfau Stole Your Research and Put His Name on it, Throwing You Just a Tiny Crumb of Acknowledgement to Ward Off a Lawsuit. He’s Profiting Handsomely By His Theft, Leading a Charmed Life, Widely Published, Widely Respected. While Rob Bennett Continues to Toil in Total Obscurity. It’s So Incredibly Unfair, I Think If It Happened to Me, It Could Actually Drive Me Insane."
Set forth below is the text of an e-mail that I sent to Tracie, author of the Penny Pinchin’ Mom blog, on May 16, 2017:
My name is Rob Bennett. I write the “A Rich Life” blog and have posted 340 entries to the weekly “Valuation-Informed Indexing” column at the ValueWalk.com site. Your name came up this morning when you retweeted one of my tweets and I thought I should contact you re the idea below.
I of course understand that you don’t run an investing site. However, Valuation-Informed Indexing (the only subject I have written about for 15 years) is a strategy born from the frugality mindset that you advocate everyday. My wife and I became very frugal in our spending habits at one time in our lives. I did not feel comfortable following the conventional investing advice, which says that stocks are ALWAYS worth buying at ANY price. Huh? That’s not the way it works with anything else. It sounds like a con. I investigated. And indeed that is the case.
With Valuatiion-Informed Indexing, investors go with higher stock allocations when prices (valuations) are low and with lower stock allocations when prices are high. I am the co-author of peer-reviewed research that shows that investors who follow this common-sense approach can thereby reduce the risk of stock investing by 70 percent while earning far higher returns. This is investing heaven.
So why haven’t you heard about it? For the same reason that advertising agencies trying to persuade you to waste money on things you don’t need don’t give you the best spending advice. Most investing advisors make their money by persuading people to buy stocks. They are the last people that middle-class investors should be trusting to tell them the straight story. A group of people who advocate conventional investing strategies threatened to send defamatory e-mails to the employer of the co-author of my study if he continued promoting it. I have been subjected to so many death threats that I have lost count of them.
I would be happy to answer any questions if you have an interest in seeing a guest post on this topic. I am always trying to spread the word. I am thinking that I might have better luck moving away from investing blogs, where people feel that they need to push the conventional ideas to stay in business.
I wish you the best of luck in all your future life endeavors in any event.
My name is Rob Bennett. I write a weekly column called “Valuation-Informed Indexing” at the ValueWalk.com site and house tons of materials on the same subject at my own PassionSaving.com site. I enjoyed your article on the Expertocracy and would like to describe for you a frightening example of the phenomenon, the one that applies in the investing advice field.
The dominant model for understanding how stock investing works is the Buy-and-Hold Model, which is rooted in the research of Nobel-Prize-Winning Economist Eugene Fama. Fama showed in 1965 that stock prices play out in a random walk in the short term (less than 10 years). The Buy-and-Holders concluded that market timing is a bad idea and thus advise investors always to stick with the same stock allocation.
Robert Shiller, another Nobel-Prize-Winning economist, discredited that conclusion (but not Fama’s finding itself) with research published in 1981. He showed that, while short-term timing really does not work, long-term timing (adjusting one’s stock allocation in response to big shifts in stock valuations) ALWAYS works. Follow-up research that I prepared with Wade Pfau, who holds a Ph.D. in Economics from Princeton, shows that investors can reduce the risk of stock investing by 70 percent while suffering no reduction in long-term return solely by being willing to go with higher stock allocations when prices are low and lower stock allocations when prices are high.
What Shiller really showed is that the primary determinant of stock prices is investor emotion, not economic developments. The implications are far-reaching. If Shiller is right, stock prices are self-regulating. The long-term value proposition for stocks is poor when prices are high; if investors are told this, they will sell when prices rise and those sales will bring prices back down to reasonable levels again. However. if Buy-and-Hold is pushed hard, investors will be afraid to sell and prices will continue rising until they reach insanely dangerous levels. Then prices will crash and trillions of dollars of pretend money will disappear, causing an economic crisis. Shiller predicted the economic crisis that began in September 2008 in a book published in March 2000 because he saw how high prices had risen and understood that trillions of dollars of spending power would leave the economy as prices worked their way back to fair-value levels (we still have a long way to go!).
The expertocracy angle is that many economists, journalists and investment advisors hold back from saying in clear terms what they know or believe about stock investing because ideas rooted in Shiller’s research are perceived as a threat by those promoting Buy-and-Hold strategies. I can tell many stories along these lines; getting this story exposed has been my life project for 15 years now. As one example, when Wade Pfau was publicizing our research findings, a group of Buy-and-Holders threatened to send defamatory e-mails to his employer in an attempt to get him fired from his job. Many people in this field are afraid of what the expertocracy will do to protect their turf.
Please send me a return e-mail if you have any questions or would like to talk over some of these issues.
I wish you the best of luck in all your future life endeavors.
This is terrific. Thank you for writing. Very grateful that you read my piece, and took the time to explain what it looks like in your field.
Set forth below is the text of an e-mail (the heading is “Shiller’s ‘Revolutionary’ Research Findings”) that I sent to James Altucher on May 6, 2017:
This is Rob Bennett. I am the fellow who tried to hand you a brochure at the end of the FinCon Masters Event in New York City last Tuesday night. I said that I liked it that you think. I noticed that because for 15 years I have been pushing an idea that my brain says is supported by all the evidence but that has not caught on because (in my view) many people permit their need for social approval to cloud their thinking.
Shiller showed in 1981 that valuations affect long-term returns. This means that stock prices are primarily determined not by economic factors but by shifts in investor emotions. The implications of this insight are far-reaching and have only rarely been explored in any depth.
One big implication is that long-term returns are highly predictable for those who invest in index funds. I worked with Wade Pfau, who holds a Ph.D. in Economics from Princeton, to produce peer-reviewed research showing that investors can reduce the risk of stock investing by 70 percent by being willing to adjust their stock allocations in response to big shifts in valuations.
Another big implication is that it was the bull market of the late 1990s that served as the primary cause of the economic crisis of 2008. Stocks were overpriced by $12 trillion at the top of the bubble. Shiller’s work shows that this pretend money disappears as valuations work their way downward. As investors lose significant portions of their life savings, they cut spending and businesses fail and workers lose their jobs. Shiller predicted the economic crisis in his book (published in 2000) but his explanation of it was ignored when the crisis came.
It is this latter point that is the most important, in my assessment. Shiller was awarded a Nobel prize, so as a society we appreciate the importance of his work. But we patronize him. Most experts in the field continue to push Buy-and-Hold strategies without even mentioning the 36 years of peer-reviewed research showing that they cannot work. Why? Many investors would like to better understand the implications of Shiller’s work (I know this because of the reactions that I have seen to my own writings). And there is of course a huge amount of money to be made showing people a better way to invest.
Why haven’t Shiller’s “revolutionary” (this is the word used to describe his research in the subtitle of his book) findings caught on in 36 years?
I believe that the Shiller revolution represents such a big advance over the earlier understanding of how stock investing works that we have not yet been able to incorporate frank discussions of it into the public debate. I have been banned at over 20 web sites because I have tried to get discussions started and because about 20 percent of most community members express a desire to participate in such discussions and thereby pose a threat to those promoting the now dominant ideas. Those who believe in and promote the conventional ideas are threatened by an advance that would help them and lots of others if they could open their minds enough to explore it in some depth.
If you have an interest in any of this, please ask any questions that occur to you. I would love to talk it over with you.
I enjoyed your talk, and, as I said, I like your style. You create thought-provoking work.
Set forth below is the text of an e-mail that I sent on January 16, 2014, to Emily Bazelon, the author of an article in the New York Times Magazine on internet bullying. The heading for the e-mail was: “A Case of Internet Bullying That Affects Us All in Big Ways.”
I saw your article on internet bullying in the New York Times Magazine and noted that you have done a lot of other work on internet bullying as well. I have a story to tell about a case of internet bullying that has had far-reaching economic and political implications.
The easiest way to tell you enough about the story for you to see if you have an interest in learning more is to point you to an article at my web site titled Academic Researcher Silenced by Threats to Get Him Fired From His Job After Reporting on Dangers of Buy-and-Hold Investing Strategies.
Set forth below is the text of an e-mail that I sent to Jaime Hardy, owner of the EventualMillionaire.com site, on October 24, 2013, followed by her response:
This is Rob Bennett, at “A Rich Life.” We spoke at FinCon13 re the possibility of me hiring you as a coach. I hope the rest of the conference was successful for you. I much enjoyed giving the talk I gave at the Ignite sessions. That was a trip. And I think I did a good job of getting the essence of my story down to five minutes!
My recollection is that there were three questions you wanted to ask of me before deciding whether it made sense to proceed. Please send the three questions when you get a chance. I don’t know whether this idea makes sense or not. But I would like to explore the possibility a bit more in an effort to find out.
My warmest wishes to you.
So great to connect online.
Here are some questions to answer and then I’ll give you some actions to try. Then we can chat in later November when I have a spot for coaching open up. Make sense?
What is the number one objection from the average person – not one of the haters?
Have you been able to convince others to see your side? When?
What do you think your positioning/branding is currently on your current site?
Thanks Rob! Can’t wait to hear your answers.
My email inbox is a bit too full right now – so I’ll do my best for a speedy reply. Answering this email from the doctors office about to get my cast off!
Set forth below is the text of an e-mail that I sent to Danielle Citron at the University of Maryland Law School on September 24, 2013:
My name is Rob Bennett. My bio is here.
I saw your name in the New York Times article on revenge porn. Thank you for doing the important work you are doing!
The article suggested that the book you are working on may address internet harassment in general and not just revenge porn in particular. If that is the case, I can tell a story about internet harassment that is truly jaw-dropping in scope and that affects everyone living in the United States today.
To understand my case, you need to understand a bit of background re the history of our growing knowledge of how stock investing works. There are two major schools of thought: (1) The Buy-and-Hold Model, which is rooted in the research of University of Chicago Economics Professor Eugene Fama; and
(2) The Valuation-Informed Indexing Model, which is rooted in the research of Yale Economics Professor Robert Shiller. The Fama model is dominant today. I advocate the Shiller model. My web site has more material explaining the implications of the Shiller model than any other site on the internet.
An individual who was embarrassed when I let people know that he got a number wrong in a retirement study has waged a 11-year smear campaign against me with the aim of making it impossible for me to earn a living from my work on the internet. Thousands of community members at various discussion boards and blogs have expressed a desire that honest posting on both points of view be permitted on the internet. But his Goon Squad disrupts conversations wherever they are held on this topic. Numerous site owners have reacted in fear of what will be done to them if they allow the issues to be discussed and have banned posting on the implications of the Shiller model at their sites.
I spent 16 months working on research with an academic researcher with a Ph.D. in Economics from Princeton. The researcher (Wade Pfau) was thrilled with what we accomplished. He told me that our research product was worthy of publication in the Journal of Finance, the top journal in the field. These
internet Goons threatened to send defamatory e-mails to Wade’s employer with the aim of getting him fired from his job if he did not stop pursuing this research. Wade had seen what had happened to me and agreed to stop publishing similar research (one study had already been published in a peer-reviewed
journal at the time this happened).
If you have an interest in learning more about the story, I have extensive documentation of the entire 11-year history of the matter. Please just send me an e-mail letting me know and we can set up a time to talk by telephone.
Here is an article giving background on the investing issues:
Here is an article giving an in-depth report on the Wade Pfau matter
(please note that there are links to reactions from numerous academics at the end of the article):
Set forth below is the text of correspondence that I engaged in with Jeff, owner of the Sustainable Life Blog, on October 6, 2013:
I just wanted to drop you a quick line and say how nice it was meeting you at fincon in St Louis this year. I don’t know about you, but I had such a great time hearing from all the speakers and meeting online friends (some for the first time).
It was great meeting you at Ignite Fincon and chatting with you about Value Index Investing. I thought it was really interesting, and I’d really like to know how you got started with Value Index Investing and what you enjoy most about it. I had such a great time meeting and talking to so many different people, I didn’t get much time to focus on the most interesting parts – like why they do what they do!
I remember that we chatted a bit about being the most hated guy on investing forums and branding it as well. That was really great to hear about, and I think it’s so funny that people get so angry at you for those comments you left. Glad that you were basically proven right by the downturn though.
Please, don’t hesitate to email me if you’ve got any questions or need help with anything. I’ve been blogging for almost 5 years, and love to help out anyone that asks!
Once again, it was great meeting you..
That’s super kind! Seeing your e-mail brought a nice measure of good cheer to my Saturday afternoon.
I got started with Valuation-Informed Indexing when I was putting together an early retirement plan in the late 1990s (I left corporate employment in August 2000 and our family of four has been living off our investments for the 13 years since). When you are handing in a resignation from a big-paycheck job (I was a Director at the Ernst & Young accounting firm), you need to be SURE that you have enough to make it on your own. So I investigated a concept called “Safe Withdrawal Rates.”
I discovered (ironically enough, I discovered this by reading John Bogle’s book — this is ironic because Bogle is the lead advocate of Buy-ad-Hold, the strategy that VII replaces) that the conventional SWR studies get the numbers wrong (they fail to consider the effect of valuations). I was posting daily at a Retire Early board at Motley Fool and a retired government engineer there named John Walter Russell became interested enough in what I was saying to spend the next eight years of his life researching questions related to VII. John did HUNDREDS of studies backing all this up and published them at his own site. John died a few years ago and the right to publish all his research passed to me.
At some point, I started posting at the Vanguard Diehards board at Morningstar.com. An academic researcher (Wade Pfau — he has a Ph.D. in Economics from Princeton) discovered my posts and wrote me to ask if I would be interested in doing some research with him. Our paper has been published in a peer-reviewed journal. I believe that it is the most important research published in this field in the past 30 years. It shows investors that simply by taking valuations into consideration when setting their stock allocations they can reduce the risk of stock investing by 70 percent. Once we reach a point where we can publicize these findings, stocks will become essentially a risk-free investment class. This is a huge deal.
The thing that I like most about VII is not the investing benefits. I have made my living as a journalist pretty much my entire life (I was hired at Ernst & Young as a tax lobbyist because they learned about my work reporting on tax legislation on Capitol Hill — I also hold a law degree and a Masters in Tax Law). So I have a strong interest in public policy issues. VII is rooted in the research of Yale Economics Professor Robert Shiller (who won the Nobel prize a week or two ago). Shiller’s findings don’t just make stock investing a risk-free endeavor. They also have huge implications re stabilization of our economic system.
Shiller predicted the 2008 economic crisis in a book published in March 2000. Do you know how he did it?
Shiller’s research shows that EVERY economic crisis in U.S. history was caused by excessive stock valuations. There has never been a single exception. Take away excessive stock valuations and you take away economic crises and all the huge increase in unemployment that always follows from them. Shiller’s work has the greatest potential for easing human suffering of any research being done today. What he has found (and what I have been writing about for 11 years) is the financial sector equivalent of the cure for cancer.
How do we stop stocks from becoming overpriced? It is amazingly easy.
I have a calculator at my site called “The Stock-Return Predictor.” It applies a regression analysis to the 140 years of historical return data to reveal the most likely annualized 10-year return for stock purchases made at any possible price level. It shows that the claim you always hear from Wall Street that “you can’t time the market!” is 100 percent false marketing mumbo jumbo. It has ALWAYS been possible and easy and necessary to time the market. There is a hyper-technical way in which what they say is so. It is NOT possible to engage in short-term market timing (guessing where stock prices will be in a year or so) effectively. However, it is VERY easy to engage in LONG-TERM market timing. You can know today (with a high but not perfect level of accuracy) where stock prices will be 10 years from today. Using the calculator, you can know when stocks are worth buying and when they are not. This permits you to retire as much as 10 years sooner than you ever before imagined possible.
The Stock-Return Predictor reveals the price tag of stocks. Middle-class people who don’t practice long-term timing are essentially making the most important purchase of their lives (we spend more in the course of a lifetime on stocks than we do on clothes or food or housing or cars) without knowing the price! It’s insane. Why do they do it? Every industry that exists would love to have its customers believe that its product is a good buy at any possible price. The Stock-Selling Industry is the only industry that has ever been able to persuade its customers that this is actually so. They get away with it because most investors are intimidated by the subject of investing. They defer to experts. And the experts in this field get paid depending on how effective they are in persuading people to buy stocks. The conflict overwhelms most people’s sense of right and wrong and they rationalize saying all sorts of things that have long been shown to be nonsense by the peer-reviewed academic research.
Once people understand that stocks are not worth buying at high prices, guess what happens? That makes it impossible for high prices ever to be seen again. As prices go up, people sell shares. The sales of the shares pull price down again. If they go too low, people start buying more and that pushes prices up again. Stock prices are self-regulating. So long as people are told about the research!
The trick today is getting the word out about what the research really says. Most of the people who work in this field have built careers around promotion of Buy-and-Hold. There are lots of powerful and wealthy people who very, very much do not want middle-class people to learn about Shiller’s research and its implications. So we face heavy resistance.
But things have changed in a big way since the crash. I couldn’t get a guest blog published anywhere on the internet in the old days. Today there are lots of blogs that welcome me. Shiller’s research shows that there will be another crash in a year or two. I believe that the gates will swing wide open then.
You probably know that many blogs have been hit hard by Google. I believe that VII is going to prove to be the salvation of the Personal Finance Blogosphere. Bloggers are not as beholden to the industry big shots as are most others in this field. We are at least capable of independence. If we can get a small group of independent bloggers writing about these ideas, they will spread and spread and eventually gain recognition everywhere. I have spoken with LOTS of people over these 11 years. Lots of the big names in this field want to feel free to tell their readers and clients what really works in the long run. But they are afraid. They need cover. The more people who speak the truth openly, the less afraid all the others who want to do so feel. So this thing will gain momentum fast once we get the fire started.
Please come back to me and ask questions about this at any time. My site is today the only site on the internet that explores the implications of Shiller’s research in an in-depth way. There is room for hundreds of blogs doing this kind of work. And we would be helping millions of middle-class people by doing it. VII is safe, smart, simple investing. I have had THOUSANDS of people encourage me to pursue this quest. People need this. They need it badly. And the demand is going to go through the roof following the next crash, which is likely coming in not too long a time.
I hope that helps a bit.
Thanks again for your exceedingly king and encouraging note.
Yesterday’s blog entry reported on correspondence I had in 2013 with Kevin, owner of the Out of Your Rut blog. Set forth below is follow-up correspondence:
I think apathy more than anything is keeping other bloggers from seeing the light. There’s also go along to get along factor; inertia is very powerful, as I’m sure you understand. If I’m a blogger and making money selling ad space or affiliate links to investment companies, I hear no evil, see no evil, speak no evil. The bull runs forever.
What’s keeping buy and hold afloat are the actions by the Fed and the US govt to maintain a perpetual bull market in stocks, no matter what the economic backdrop is. The economy is on wobbly legs, and a rising stock market is the only game in town. When that goes down, it will be the last leg holding the house of cards up.
I wouldn’t be surprised to find that these “goons” are more significant than you think. Fraud is keeping systems afloat, and some pretty powerful people have a vested interest in keeping it going.
You may want to back down until the worm turns. It will. And then people will listen. I’m of the opinion that getting into debates with these types is worse than counter-productive. Their aim isn’t to debate, it’s to discredit. And right now “the facts”, contrived and manipulated as they are, are supporting their case. Right now, nothing can kill the bull, the Fed won’t allow it. That’s ultimately what QE and zero interest rates are all about.
Set forth below is the text of an e-mail sent to me by Kevin, the owner of the Out of Your Rut site, on October 2, 2013, and the text of my response to him. For several years, I wrote a weekly column titled Beyond Buy-and-Hold at Kevin’s site.
I skimmed through the 125 comments that were on this post, and they’re pure mud-slinging by Heywood and “Reality”. I deleted all the comments including yours, and put up my own reply. Hope you don’t take offense to that as I meant none toward you.
Those two are just looking for trouble, and they won’t get any help on OOYR. Constructive, adult disagreements are fine, but attack style is out of the question.
Do these guys bother you elsewhere???
It’s good to hear your voice again.
Yes, the Goons bother me elsewhere.
They have my name in a Google notification service. So if I post at any blog on the internet, they know and they posts an endless number of abuse posts until the site owner agrees with their demands. There are blog owners who have put up Guest Blogs by me and the Goons sent an e-mail to the owner of the blog telling him that they would destroy his site if he did so again.
I spent 16 months working with Wade Pfau, an academic researcher with a Ph.D. in Economics on a piece of research that I believe can fairly be called the most important research published in this field in the past 32 years. It shows investors that, by looking at valuations when setting their stock allocations, they reduce the risk of stock investing by 70 percent. I have had long-time Buy-and-Holders tell me after they looked at that research they were rethinking their beliefs about how investing works.
The response of the Goons was to send an e-mail to Wade telling him that they would send defamatory e-mails to his employer with the aim of getting him fired. Wade sent me several e-mails telling me that he was afraid of what they could do to him. When they continued, he worked out a deal with them in which he took down every comment I had written at his site (which he thanked me for profusely when I wrote them) and put up comments praising the leader of the Goons. Wade dropped plans to do follow-up
research on Valuation-Informed Indexing (he told me when we did the first research paper that “You ain’t seen nothing yet!” and that he expected eventually to get research on Valuation-Informed Indexing published in the Journal of Finance, the most respected journal in the field).
The 11-year cover-up of the errors in the Old School safe withdrawal rate studies is the greatest act of financial fraud in the history of the United States. We are going to see many people going to prison for this massive act of financial fraud following the next price crash.
It is my strongly held view that every blogger on the internet should be speaking out about this.
It is not entirely true that the Goons are “just looking for trouble.” They are looking to INTIMIDATE. For 11 years, that has worked. They are now not just covering up the errors in the retirement studies. They are now covering up the cover-up. Things get worse and worse and worse as they commit more felonies as as bloggers in this field and experts like Bogle and Swedroe and Ferri and Burns and Bernstein fail to speak up.
Rob Arnott (the former editor of the Financial Analysts Journal) wrote me an e-mail in which he told me that “your ideas are sound.” He described acts of intimidation by Buy-and-Holders that he has experienced himself. Two young researchers wanted to do research in this area. They were taken aside by an older Buy-and-Holder who told them that they would be hurting their careers if they were to do so. Rahiv Sethie, an Economics Professor at Columbia, told me that all of my ideas follow from Shiller’s findings and that he could see why Valuation-Informed Indexing would work. But he hasn’t published research showing this. Given these other events, I don’t think it is too hard to figure out why he holds back.
Arnott copied Bogle on his e-mail to me. So Bogle knows all about this.
This is not an economics story. It is primarily a POLITICAL story. The question on the table is whether citizens of the United States should be permitted to know what the last 32 years of peer-reviewed academic research in this field tells us about how stock investing works. Wall Street wants us to believe that Buy-and-Hold can work. There is now 32 years of peer-reviewed research showing otherwise. Investors MUST take price into consideration to have any chance of achieving long-term success.
I believe that things will change following the next crash (the research shows that we have another
crash of 65 percent coming up ahead). The problem with waiting for the crash is that another crash
of that magnitude will put us in the Second Great Depression. I am not sure that our political system
can sustain a Second Great Depression, one that will according to the research be far deeper and far longer-lasting than the depression we experienced in the 1930s.
This is not just about giving me a hard time. It is about keeping information from millions of middle-class people who very much need to hear it.
It’s important to understand that the Goons do not benefit from a Second Great Depression any more
than any of the rest of us. They are in emotional pain. The Buy-and-Hold advocates created a monster when they encouraged so many people to believe in this stuff. And of course the advocates too would
like to get out of the corner into which they have painted themselves.
The positive news here is 50 times more positive than the negative news is negative. The answer
is just to get a discussion started and then we see good things piled on top of good things piled on top of good things.
Do you know from your conversations with other bloggers what they are afraid of? It seems to be that
if there were 10 of us who stuck together, the Goons would be powerless to do harm to any of us. All of their power to destroy us comes from the fact that they can take us on one by one. I’ve spoken to financial advisors and academic who have been intimidated too. It seems to me that the logical step is for 10 people (a combination of financial bloggers, political bloggers, academics and financial advisors) to agree to meet at a discussion board set up at one site and to keep a record of the intimidation tactics. Then anyone being hassled could point to that site. I would think that would end the nasty stuff in no time.
Do you see merit in that idea? Please let me know if you have thoughts in reaction to all this.
Yesterday’s blog entry offered the text of an e-mail that I sent some time ago to a fellow who posts on the internet as “George Washington.” Set forth below is the text of the correspondence between us that followed from that e-mail:
I don’t have any other leads right now, but will tell if you if I think of any.
I had hoped that the article would remain longer on the front page of Zero Hedge (which is actually a much more popular site than the Big Picture), but it was only there for an hour or so …
Thanks much for your response. You are a hero!
I do understand that Zero Hedge is probably bigger traffic-wise.
Big Picture was a much better fit, though. I am very happy that
you thought to place it there.
The people at Zero Hedge are 100 percent open to accepting
that valuations matter. That’s a plus. But they tend to be on the
doom and gloom side. All of the comments I saw at that site
were intelligent. But they tended to be laced with cynicism.
My work is aimed at providing a SOLUTION to the problem.
I try hard to avoid saying that the people pushing Buy-and-Hold
have bad motives. I truly believe that in the vast majority of
cases they do not (even though some of the behavior I have
seen is off-the-wall stuff).
Barry Rithlotz followed up without me saying anything with
a link to an article at my site titled “Why Buy-and-Hold Can
Never Work”. He put that link up at 4:00 PM yesterday and
I saw the biggest traffic day in my blog’s history as a result
of the traffic from then until midnight. And I have several
e-mails in my box this morning from people who came in
through that link and who are trying to learn more about the
concept. So it is clear to me that Big Picture is the perfect
sort of place for my stuff.
I am going to write Barry and ask whether I can have any
sort of ongoing relationship with the site. Is there anything
you can suggest re how I proceed? I ask because I presume
that you have some sort of relationship with him and because
it would be huge for me if he were open to featuring some more
of my stuff in the days ahead.
If you are not able to offer any tips, I fully understand. You have
already helped me so much that I cannot tell you how big a deal
it is to me. I just don’t want to make any mistakes. So I feel that
I need to ask.
Please do keep in mind my offer to help you any time in the future
that I am able to. You really have made a big difference, more
than you can understand given your limited knowledge of what
is going on here (the story is one that you would not be able to
believe if you knew it all).
I send Barry and some other folks links to my posts. He ran my post on your method after I emailed him the link, and he obviously took enough interest to post a follow-up link.
So my best advice is to send him your new posts, with a personal email.
Best of Luck!
P.S. I certainly understand about breaking through when people have been trying to hold back your work. I encounter that not only in financial areas, but also issues of war-and-peace-, the environment, etc.