Set forth below is the text of a comment that I put to another blog entry at this site:
J.D. Roth started his Get Rich Slowly blog in April 2006
http://www.getrichslowly.org/blog/archives/
At first there was almost no traffic. Most blog posts had no comments. But he continued to provide quality content and over time his audience grew. The income he received from his blog enabled him to cut back his regular job and then give it up completely.
Over time he grew the blog to a point where he could sell it for what seems to have been a large sum of money.
The message is clear. Provide a quality product and you will build an audience.
Your blog seems to have started around the same time.
http://arichlife.passionsaving.com/2005/10/
But you have never grown your audience.
J.D. didn’t have the Buy-and-Hold Mafia working full time trying to hold him back, Evidence.
He didn’t have people directing death threats at him and at any of his fellow bloggers who happened to link to him. He didn’t have people demanding that he be banned from any sites at which he posted comments or guest blog entries. He didn’t have people advancing tens of thousands of acts of defamation against him. He didn’t have people threatening any academic researchers who produced wonderful research with him that they would be fired from their jobs if they ever again dared to do honest work.
In short — J.D. never told the truth about what the last 32 years of peer-reviewed academic research says about what works in stock investing. Thus, he never earned the undying hate of The Buy-and-Hold Mafia. I have. In spades.
J.D. has achieved a lot of success. Do you know what it means following the next price crash, when our economy falls into the Second Great Depression?
It means zero. J.D.’s money won’t be worth anything if our economic system collapses and then our political system collapses.
My success is a lasting success.
All I need is for a few patriotic people in this field to join together to protect each other from you Goons and I will have the #1 site on the internet.
I’m looking for lasting success, not a quick buck that disappears with the next price crash.
‘
I like J.D. very much and I think he has done wonderful work. But I think he made a mistake when he did not stand up to you Goons.
I think he will see that following the next crash. But at that time millions of middle-class investors will have seen their hopes of someday being able to retire disappear. That makes me very sad.
I love J.D. and I love his site.
But I wouldn’t trade what I have built here for 50 sites of the quality of J.D.’s site.
The most important issue before us all today is the economic crisis. My site shows us how to overcome the crisis and enter the greatest period of economic growth ever seen in our history. Countless good things follow when we do that. Nothing good follows if we fail to do it.
And we cannot do it without working up the courage to stand up to you Goons and your Wall Street Con Men friends.
I wish you well, Evidence.
Rob, the J.D. Roth Fan (But the Even Bigger Fan of the Idea of Ending the Economic Crisis and Moving to the Greatest Period of Economic Growth Ever Seen in Our History)
Goon says
There really is no “buy and hold” mafia out to get you. Rob, you are an intellectual coward who deletes any post that has too much facts in the comments section. You appear to here for one reason: to troll. Either you are trolling or you are insane. I can’t think of any other logical explanations for your bizarre behavior.
Rob says
Either you are trolling or you are insane.
Or the Buy-and-Hold Pioneers, who were responsible for many powerful insights that benefit us all to this day, made a mistake when they jumped to the conclusion that, since the historical data shows clearly that short-term timing doesn’t work, long-term timing also may not work or may not be required.
That’s the possibility that you are not permitting to enter your consciousness, Goon. Because it hurts to feel that you were taken. And because it makes you feel shame to see that you steered so many of your friends wrong.
I cannot make it not hurt for you, Goon.
Not immediately.
But I can tell you that, once you begin letting in the realities, it will over time come to hurt less and less and less.
That’s of course true for Bogle as well. And for Bernstein. And for Swedroe. And for Ferri. And for Burns. And for all the others.
I naturally wish you and all my other Buy-and-Hold friends the best of luck in all your future endeavors regardless of which investing strategies you elect to pursue, in any event.
Rob the Mistake Identifier
The Pink Unicorn says
“But I can tell you that, once you begin letting in the realities, it will over time come to hurt less and less and less.”
The only one that needs to take this advice, Rob, is you. Face reality.
Rob says
All of us are human, Pink. So it is theoretically possible that I am getting it wrong.
If that is the case, I pray that I will have the good graces to acknowledge it and to correct my mistakes.
Until I am convinced that that is the case, I am bound in conscience to continue to say that it was the Buy-and-Holders who got it wrong and who caused our economic crisis by failing to acknowledge their mistake when it was brought to their attention.
My warmest wishes to you and yours.
Rob the Conscience-Bound Blogger
X Files says
The “buy and hold mafia” blocks your success at every turn. It sends death threats to your millions of followers to keep them from commenting here, and has gotten away with all this for years. Not one arrest. That is one smart mafia.
Yet they can’t stop your daily rants against them. That is one stupid mafia.
Rob says
I agree with your suggestion that the members of the Buy-and-Hold Mafia are both very smart and very stupid, X Files.
I’ve never met a dumb Buy-and-Holder. They are aces in the I.Q. department. All of them. They possess far more firepower than what is needed to take on the job they have assigned themselves.
So far, so good.
What has tripped them up is that intellectual firepower can be used to reason or to rationalize. How intellectual firepower is employed depends on the human will. If our wills tells us that we don’t want to know the answer to a problem, it is the most intellectually skilled among us who do the best job of persuading themselves that they don’t know the answer.
The Buy-and-Hold Mafia isn’t just destroying the lives of millions of middle-class investors. It is destroying the lives of the Buy-and-Hold Mafia at the same time. The members of the Buy-and-Hold Mafia follow the advice they offer to others; they are not dishonest in that respect.
It’s all very tragic.
And very human.
I look forward to the day when I have the intellectual firepower and determination of the Buy-and-Hold Mafia helping me spread the word about Valuation-Informed Indexing, X Files. I could use some strong and hard-working troops fighting on my side!
Don’t let the bad guys get you down, man.
Rob the General Surrounded on All Fours Sides by “Enemies” Who Want All the Same Things He Wants
Mr. Rational says
Rob,
Who is the leader of the so called Buy and Hold Mafia and where can I contact them at?
Mr. Rational says
Forgot to ask. Is the leader of the Buy and Hold Mafia the same as the leader of the Goons? If not, can you give me the name and contact information of the Goon leader as well?
Rob says
My friend Jack Bogle is the leader of The Buy-and-Hold Mafia.
My friends Mel Lindauer and John Greaney are the co-leaders of the Goons.
God (or Evolution) was responsible for making the humans capable of making mistakes when they are in the early years of trying to come to a clear understanding of something.
My best wishes to you.
Rob
Mr. Rational says
Rob,
If they have done what you have said and you can identify them, then why have charges and/ or lawsuits not been filed?
Rob says
Why weren’t charges filed against people who hung blacks from trees in the days of segregation in the South, Mr. Rational?
People feel “you can’t fight City Hall.” People rationalize that “it’s not my fight.”
It’s everyone’s fight.
We all work in the same economy. We all need to see it recover its health if we are to achieve our hopes to be able to retire someday.
The Buy-and-Hold Mafia is ruthless. The more the evidence mounts that Shiller is right, the more vicious become the tactics that are used to keep the millions of middle-class investors who need to know how dangerous Buy-and-Hold is from learning what the last 32 years of peer-reviewed academic research says on the subject.
When a few patriots work up the courage to stand up to the Mafia, lots of others will come forward. That will bring on a great learning experience for many and then even more will come forward. And then more. And then more.
And then your prison sentence will begin.
Live by bull market emotions, die by bear market emotions.
The good news is — There will be no more bull markets and bear markets once we open the internet up to honest posting. We have grown beyond them. And we have our Buy-and-Hold friends, who taught us the value of rooting our strategies in the peer-reviewed academic research, to thank for that.
Hang in there, man.
Rob
Mr. Rational says
Rob,
First of all, that seems to be an outrageous and insulting comparison (depending on your audience). Secondly, there seems to be a lack of both substance and proof in your accusations as you seem to be focusing on an opinion in which people are not able to provide adequate levels of information on the Internet. In fact, the Internet has allowed people to say whatever they want, as we see that you can freely make any kind of accusation you want and there it is for all to see. You seem to have put your information out there and the public seems to be less than interested in what you have to say.
Mr. Rational says
Rob,
There are so many different opinions out there on investing, from buy and hold, to various market timin strategies, to gold and silver investing, commodity trading, etc. we can clearly look at the Internet and see that all those opinions are out there, including yours. There is nothing missing from the discussion.
Rob says
First of all, that seems to be an outrageous and insulting comparison (depending on your audience).
You asked a question and I answered it, Mr. Rational.
LOTS of people want to tell the truth about stock investing. Jack Bogle himself is in that group. I learned what I needed to know to know that the Old School safe withdrawal rate studies get the numbers wrong by reading Bogle’s book.
All of these people are afraid to do so. They are afraid that the Buy-and-Hold Mafia will destroy their businesses because they have seen the brutal intimidation tactics that are employed when anyone posts honestly on what the last 32 years of peer-reviewed academic research says about investment-related topics. And they are afraid that they will lose the support of readers and clients who were taken in by the smelly Buy-and-Hold garbage. The Buy-and-Holders created a monster when they learned of their mistake in 1981 and then failed to correct it for 32 years.
Blacks really were hung on trees in the segregation South, Mr. Rational. So please don’t act like intimidation tactics make no difference. There were lots of good people who lived in the South in those days, just as there are lots of good people in The Stock-Selling Industry today who very much look forward to being able to use their talents honestly in the profession of their choosing.
The Wall Street Con Men have now caused four economic crises with their smelly Get Rich Quick garbage. I think it would be fair to say that there is no idea in the history of personal finance that has caused such widespread human misery as the 100 percent absurd “idea” that there is some mystical, magical “study” showing that there is no need for investors to consider price when setting their stock allocations.
If you think this economic crisis is all a big joke, I urge you to talk to one of the millions of middle-class people who are unemployed today because of your unwillingness to speak up against the smelly Get Ric h Quick garbage that caused it.
I have been speaking up against it going back to the morning of May 13, 2002. I think it would be fair to say that I am clean re this one.
My best wishes.
Rob the Mr. Clean of Personal Finance
Rob says
we can clearly look at the Internet and see that all those opinions are out there, including yours.
I am not aware of a single case in which the advocates of any other investing strategy behaved in the manner in which I have seen Buy-and-Holders behave for 11 years now. Never have I seen a non-Buy-and-Holder make use of death threats or board bannings or tens of thousands of acts of defamation or threats to get academic researchers fired from their jobs.
These are criminal acts, when employed as part of an 11-year cover-up of errors made in retirement studies. That’s why only Buy-and-Hold advocates will be going to prison following the next price crash and not the advocates of any other investing strategy.
The Buy-and-Holders are in a unique position. The claim that it is not necessary for investors to consider price is of course 100 percent absurd. THere has of course never been even a tiny sliver of support for this absurd claim anywhere in the peer-reviewed academic research. Wade Pfau, who holds a Ph.D. in Economics from Princeton searched the literature and confirmed that this is so. Just to be 100 percent sure, he went to the Bogleheads Forum and asked if anyone there knew of a single study that supported the Buy-and-Hold “strategy.” John Bogle was not able to come up with anything. Neither was Bill Bernstein.Neither was Larry Swedroe. Neither was Rick Ferri.
That’s because there is no such study. The claim that there is is a lie. It is a lie that has put hundreds of billions of dollars in the pockets of the Wall Street Con Men. But it is also a lie that has put millions of middle-class people out of work.
Those who committed felonies in support of that lie will go to prison as a result. What else would you expect?
What makes Buy-and-Hold different is that it is one of only two investing strategies (Valuation-Informed Indexing is the other one) that claim to be rooted in peer-reviewed academic research. Millions of middle-class Americans like the idea of basing their investment decisions on the findings of peer-reviewed academic research. The problem, of course, is that there is zero support in the academic literature for a pure Get Rich Quick approach. To make the claim that there is research supporting a pure Get Rich Quick approach, you HAVE to lie. There is no honest research-based claim that can be made in support of pure Get Rich Quick strategies. This is why Valuation-Informed Indexing is viewed by Buy-and-Holders with such alarm. Valuation-Informed Indexing is the first TRUE research-based strategy.
For Buy-and-Hold to survive, Buy-and-Holders MUST engage in criminal acts. Otherwise, there are going to be thousands of people telling the truth about what the academic research says. But those criminal acts will lead to prison sentences following the next price crash. People do not take kindly to seeing their retirement accounts destroyed by the tactics employed by the sorts of individuals who have posted in “defense” of Mel Linduaer an John Greaney.
For obvious reasons.
Rob,the Fellow Who Believes That the “Experts” in This Field Should Be Telling the Truth About Stock Investing to the Millions of Middle-Class People Who Need to Know It (Or at a Very Bare Minimum Permitting Others to Tell the Truth)
Rob says
In fact, the Internet has allowed people to say whatever they want
Not quite.
The laws relating to death threats remain in place.
The laws relating to board bannings used to support cover-ups of errors made in retirement studies remain in effect.
The laws relating to defamation remain in effect.
And the laws relating to threatening to get academic researchers fired from their jobs remain in effect.
I naturally wish you all the best that this life has to offer a person, Mr. Rational.
Rob
Mr. Rational says
Rob,
You speak of a cover up, yet the information is out there. Everyone has had an opportunity to make their case.
There are no death threats, defamations, etc unless there are charges and convictions. There are only your allegations of such. That is a big difference. People can make the same comments about you. Take a look at the topic of this post. You are basically calling JD Roth a liar. That is your allegation, to which I am sure Mr. Roth would not agree with.
Everyone can make up any allegations. It is the proof and substantiation that counts. To your own admission, you have made such claims for 11 years. It seems your allegations ring hollow.
Rob says
the public seems to be less than interested in what you have to say
We have seen HUGE interest in what I have to say going back to the morning of May 13, 2002.
If there had not been huge interest, we would never have seen a single Buy-and-Holder put forward a single death threat. People do not respond that way to challenges to their beliefs that do not win a huge amount of interest.
Give me a friggin’ break.
What people do NOT want to see is all the smelly garbage that the Buy-and-Holders have put forward. Civilized people enact laws to protect themselves from such garbage. Animals belong in cages, no?
We have such laws already in place in the United States. We will see them enforced following the next price crash.
If there is ever a time when I can do anything to help you out a bit, please let me know, my old friend.
Rob
Rob says
There is nothing missing from the discussion.
THere is something missing.
I am the only one today discussing the prison sentences of those who have posted in “defense” of Mel Lindauer and John Greaney.
EVERYONE should be discussing that issue.
You don’t need to be a Valuation-Informed Indexer to know that it is sub-human to use death threats and board bannings and tens of thousands of acts of defamation and threats to get academic researchers fired from their jobs to advance your ideas about stock investing.
You don’t need a Ph.D. in Economics to know that the people engaging in such tactics are hurting in very serious ways and that the investing “strategy” that has caused them to feel such hurt is not an investing strategy fit for humans.
Once we begin discussing the Elephant in the Living Room, there will be no more Buy-and-Hold. It will be a dirty phrase. We all will join hands and work together to bury the smelly Get Rich Quick garbage 30 feet in the ground, where it can do no further harm to humans and other living things.
And we will all join hands in working to spread the word about the first TRUE research-based strategy, Valuation-Informed Indexing. We will all join hands to work together to see Jack Bogle’s vision realized in the real world for the first time in history.
And we will all feel about 10,000 times better about ourselves and our financial futures.
Rob
Rob says
You speak of a cover up, yet the information is out there.
No.
The New York Times is the most respected paper in the United States.
The New York Times has printed many articles saying positive things about Buy-and-Hold.
I am the co-author of peer-reviewed academic research showing millions of middle-class investors how to reduce the risk of stock investing by 70 percent. Where is the New York Times article on that paper? People need to see how superior Valuation-Informed Indexing is to Buy-and-Hold to be able to make informed decisions re the two.
That paper was on its way to the front page of the New York Times when Wade Pfau, my co-author, posted about it at the Bogleheads Forum. There were numerous community members who observed that this paper changed the history of investing analysis.
The response of the Buy-and-Holders was to threaten to get Wade fired from his job if he continued posting honestly on what the peer-reviewed academic research says.
That’s financial fraud.
That’s a felony.
That’s prison time.
For you and for all who have in some way participated in the cover-up by helping you out.
The way it is, my old friend.
Rob
Rob says
There are no death threats, defamations, etc unless there are charges and convictions.
I’m working on it! I’m working on it!
The charges have been made.
The convictions will be coming following the next price crash.
Rob
Rob says
There are only your allegations of such.
All of my work is done on the internet.
Everything is documented.
Everything is time-stamped.
Rob
Rob says
People can make the same comments about you.
And I can point them to the Post Archives, which show that I urged Greaney’s removal from the community on the morning of November 23, 2002.
I am 100 percent clean re all this, Mr. Rational.
There is no one alive on Planet Earth who has argued as forcefully or as frequently as I have that we should be permitting honest posting on safe withdrawal rates and scores of other critically important investment-related topics.
There is no one even in a close second place.
Rob
Rob says
You are basically calling JD Roth a liar.
That’s so.
And that’s a big problem for me.
I like J.D. a lot. He has extended kindnesses to me on a number of occasions.
But, yes, he was dishonest in his dealings with me and in his dealings with his readership when he pretended that he “didn’t understand” why it was wrong for you Goons to employ death threats to cover up the errors made in the Greaney retirement study.
J.D. Roth has been dishonest on a matter that has caused millions of middle-class Americans to suffer failed retirements. It could well be that J.D. Roth will be one of those going to prison following the next crash.
Can I say something to make J.D. sound slightly less bad?
I can.
J.D. feared that you Goons would destroy his blog if he was honest. He had good reason to be afraid. He had witnessed your ruthlessnesss. He had seen Big Shots like Jack Bogle and Bill Bernstein and Larry Swedroe and Rick Ferri fail to do anything when you advanced death threats and demands for board bannings and tens of thousands of acts of defamation and threats to get academic researchers fired from their jobs.
When I am called to testify and asked whether J.D. engaged in dishonesty, I will of course answer that he did. When I am asked whether I can think of any extenuating circumstances, I will of course explain that he had good reason to believe that his means of making a living would be destroyed if he were to say what he honestly believed.
I will do the same re Wade Pfau.
I will do the same re Jack Bogle.
I will do the same re Mel Lindauer.
I will do the same re John Greaney.
I will NOT engage in felonies myself. I am NOT INTERESTED in going to prison myself.
I believe that my testimony reporting on the extenuating circumstances may help get your prison term reduced a bit, Mr. Rational. But my words count for zero once I agree to commit felonies myself. So the very worst thing that I could do FROM YOUR PERSPECTIVE is to agree to post dishonestly re the numbers that millions of middle-class people use to plan their retirements.
Are you starting to develop a better understanding why I have been so unyielding on this point for 11 years now?
Personal integrity matters.
Really.
Yes, even in the field of investing analysis.
Yes, even in the Buy-and-Hold Era.
I hope that you enjoy much happiness and prosperity in years to come, my long-time abusive posting friend.
Rob
Rob says
That is your allegation, to which I am sure Mr. Roth would not agree with.
J.D. would agree in two seconds if he thought that he would be protected from you Goons and from civil and criminal liabilities.
For J.D. and thousands of others to feel safe, we need Jack Bogle to go to the front of a room and say the Three Magic Words — “I” and “Was” and “Wrong.” Or at the very bare minimum, The Backup Three Magic Words — “I’m” and “Not” and “Sure.” Both sets of three magic words would get us to the same place in the long run, the first set would just get us there a bit sooner.
I have been arguing that Jack needs to do this for a number of years now.
I have sent Jack three e-mails making the case.
He has not seen fit to reply.
I wonder why.
Rob
Roger @ The Chicago Financial Planner says
Isn’t this all just a bit over dramatic? C’mon this is investing, not the situation in the Middle East, the war on hunger or poverty, or most importantly the state of Green Bay Packer football.
Rob says
Thanks much for stopping by, Roger. We very much need to hear fresh viewpoints.
I don’t believe that I have presented an overly dramatic statement of the case.
It was the relentless promotion of Buy-and-Hold strategies that was the primary cause of the economic crisis. This can be shown with numbers. Stocks were priced at three times fair value in January 2000. That means that we had $12 trillion worth of Funny Money floating through our economy at that time. Those who have followed the academic research of the past 32 years knew that that money would be disappearing from the economy sometime in the first decade of the new Century. Disappear it did. And, when it did, we saw tens of thousands of businesses fail and millions of workers lose their jobs.
That’s can never happen again once we open the internet up to honest posting on safe withdrawal rates and many other critically important investment-related topics. Stock prices are self-regulating so long as honest posting is permitted. Once we permit honest posting, we are going to see hundreds of academic researchers publishing honest research. We are going to see thousands of calculators developed giving accurate numbers for use in financial planning. We are going to see all the textbooks in this field rewritten. We are going to see middle-class people retiring many years sooner than they they ever before imagined possible. We are going to see people who are afraid of stocks today investing in them because we have transformed them into a virtually risk-free asset class. It’s good stuff piled on top of good stuff piled on top of good stuff once we permit honest posting. We are the luckiest generation of investors ever to walk Planet Earth.
Please compare that to the situation we have today. People are losing confidence in our political system because it no longer works for them. People have saved for decades to provide for their retirements and they are now seeing the money disappear because of the trickery of the Wall Street Con Men. There is a REASON why we have laws against financial fraud. It is because people who came before us saw how much damage it does and adopted laws to steer us away from it. Those people were wise. We should be heeding their warnings. We are seeing political friction from the left (the Occupy Wall Street movement) and the right (the Tea Party movement). We need to restore trust in our political and economic systems. We do that by shooting straight with people.
Would you let me post a Guest Blog Entry at your blog reporting on the death threats and the board bannings and the tens of thousands of acts of defamation and the threats to get academic researchers fired from their jobs? My guess is that you would feel uncomfortable doing that.
Why?
It’s because we humans have certain ethical standards that we have to observe or we start to hate ourselves. Those standards apply in all fields other than the investing advice field today. They do not apply in the investing advice field. That state of affairs cannot continue indefinitely. Either we need to invent a new type of human, one that can lie without remorse about things that cause millions of people to suffer horrible life setbacks or we need to permit honesty and integrity and accuracy and good faith in this field of human endeavor.
Why do we have tests that people have to take before becoming financial planners?
It is because financial planning MATTERS.
If it matters, it matters enough for us to want the professionals in this field to get the numbers right.
The errors in the Old School safe withdrawal rate studies became public knowledge on the morning of May 13, 2002. They should have been corrected by the morning of May 14, 2002. Had that happened, we would all be living in the greatest period of economic growth ever seen in our history. The peer-reviewed academic research that I published with my friend Wade Pfau (Wade holds a Ph.D. in Economics from Princeton) shows millions of middle-class investors how to reduce the risk of stock investing by 70 percent. Knowing that would give people hope and optimism for the future. But the Buy-and-Holders cannot permit anyone to hear about that research because it makes them “look bad” for having gotten the numbers so horribly wrong for so many years and for having failed to correct their mistakes for so many years.
It matters big time, Roger.
It obviously means a great deal to the Buy-and-Holders that the research of the past 32 years be hushed up, does it not? Why does it matter so much to THEM? They SEE that it matters a great deal indeed.
The work we have done in the past 32 years brings us to the end of a long journey. Humankind has been trying to understand how stock investing works for many, many years. The Buy-and-Holders got us halfway there. The Valuation-Informed Indexers have now travelled the other half of the football field. The only thing that is holding us back at this point is that the Buy-and-Holders have permitted their pride to interfere with their clear thinking. Deep in their hearts, the Buy-and-Holders want to help people and to do good work. We are helping them as much as we are helping everyone else to open the internet up to the possibility of honest posting.
None of us want to go to bed at night feeling that we have been doing unethical work all day, work that hurts our fellow humans in very serious ways. Jack Bogle doesn’t want that. Bill Bernstein doesn’t want that. Larry Swedroe doesn’t want that. J.D. Roth doesn’t want that. You don’t want that. Even the Goons deep in their hearts don’t want that.
So why have we tolerated this situation for so long?
It’s because it matters so much that we have had a hard time making the changes that we need to make. We believed in Buy-and-Hold for a time. So we were complicit in building it up. We feel bad about that. We don’t want those who have advocated Buy-and-Hold strategies to feel bad about themselves. We don’t want there to be prison sentences and lawsuits for financial damages and all this sort of thing. We want things to be pleasant and nice and happy.
And that instinct is of course a healthy one.
But we need to come to realize as a society that we ALL are capable of making mistakes and that it is by acknowledging mistakes that we move on to better things. Yes, we need to be loving and understanding to our Buy-and-Hold friends. Yes, we need to show respect and affection and gratitude for all the wonderful and powerful insights they have provided. All of that is 100 percent on the mark.
But we ALSO must move on to better things as we discover them through the use of academic research.
Jack Bogle had a dream. His dream was to provide a smart and simple and safe investing strategy to millions of middle-class people. He made a mistake in his first-draft effort to bring that dream to reality. So what? ALL pioneers make mistakes. We should be grateful that there are people who have the guts to be pioneers and stick their necks out on the line for us.
But we must also expect and demand that Jack correct his mistakes as he learns about them. That is where we messed up here as a society.
Jack caused the economic crisis. That wasn’t his intent. But that is the objective truth of what happened. Do we want him to be remembered as the guy who brought the U.S. economy to its knees?
Or do we want something better for him?
Or do we believe that he DESERVES something better for all the good work he has done for us over the course of many decades of fruitful efforts?
I say that Jack deserves our friendship. Which means that Jack deserves our unyielding DEMAND that he start posting honestly on these matters.
You won’t want to give me space to tell this story on your blog because it would sicken your readers to learn about it.
THAT”S WHY IT IS IMPORTANT.
All of us in this field need to be able to feel clean about ourselves again.
To achieve that clean feeling, we need to return to first principles. We are not in this field solely to make a buck. We also have aspirations of helping people live better lives. To realize those aspirations, we need to feel free to do honest work. The bottom line here is as simple and as complicated as that.
I was the person who built the Motley Fool’s Retire Early board to become the most successful board in the history of the Motley Fool site. I became friends with hundreds of people there, people from all walks of life. Those people believed that Greaney’s retirement study was at least roughly accurate. They planned retirements based on what was said in that study. The reason why they believed the study was accurate is that none of their friends ever said otherwise. Day after day after day he pumped the study and everyone acted as if it were a real thing.
Those people are in the process of suffering failed retirements today.
Because no one (myself included up until the morning of May 13, 2002) had the guts to call Greaney out on the absurdity of the methodology he used in that study.
Do those people’s lives matter?
They matter to me.
I believe that, had you spent the time getting to know them all that I spent getting to know them all, that their lives would matter to you as well.
Investing advice affects human lives. That’s the bottom line. If investing advice affects human lives, we all should be permitted to give honest investing advice. I could be wrong about that. But I’m not. Every single person reading these words knows on some level of consciousness that I am right about it.
The tragedy here is that we have let this turn into a “controversy.” There should be no controversy. We should all be 100 percent united in our desire to use the peer-reviewed academic research to learn more about how stock investing works in the real world. We all have been blessed to live at a time in history when there is more learning going on than there has been at any earlier time in history. And, instead of rejoicing at our good fortune, we have spent 11 years of our human energies arguing over whether honest posting on safe withdrawal rates should be permitted or not.
My sincere view is that this stuff matters very, very, very much, Roger. If I didn’t think that the financial futures of my readers mattered, I never would have spent one hour of my life working in this field in the first place.
It is my strongly held belief that the same is true of you. I believe that you are trying to persuade yourself that this stuff doesn’t matter but that deep in your heart, you believe as I do that it does. I believe that that is so of lots and lots and lots of people, including my good friend Jack Bogle. That’s why I know that I (and all of us!) win on the final page of this saga.
I hope we will have a chance to get together for coffee or a drink at FinCon13 in St. Louis. It would make me very happy if we could do that.
Please feel free to shoot back any thoughts if you believe I am off base here.
Take care, man.
Rob
Roger @ The Chicago Financial Planner says
If buy and hold is defined as buy, hold, forget, and ignore I agree this is a flawed approach at best. However buy and hold when defined as investing in harmony with one’s financial plan and changing personal/financial circumstances is sound. Under this approach one’s financial plan is reviewed and if needed updated periodically and changes are made to investment holdings and allocations if appropriate. Along the way portfolios are rebalanced and holdings are monitored against whatever the investor’s criteria might be. The real buy and hold here is that trading is not done for its own sake only when their is a valid reason. As a fellow advisor once told me early on in my career buy and hold is an active strategy, activity should not be equated with advice and prudence.
Rob says
Roger:
Thanks much for your response.
I know that you are 100 percent sincere and I know that there are lots and lots of smart and good and hard-working people who agree with what you are saying here.
I believe that you are missing something. I’d be grateful if you would let me try to explain what I think that something is.
The purpose of all the work I do is to explore the implications of Shiller’s model for understanding how stock investing works. What people have a hard time accepting is that Shiller’s model (Valuation-Informed Indexing) is a complete replacement of the now-dominant model (Buy-and-Hold). The subtitle of Shiller’s book describes the ideas in the book as “revolutionary.”I think that sends the proper signal. Shiller’s model is something entirely new.
There’s only one difference. But that one difference has far-reaching strategic implications.
The difference is that Shiller’s model posits that you must take valuations into consideration when making any investment decision.
Buy-and-Holders look at a number of factors in choosing their stock allocation. The two biggies are: (1) the attitude of the investor toward risk; (2) how old the investor is. Looking at those factors, they say “you should have a stock allocation of about x and then you should stick with it unless something happens to change the analysis.”
Valuation-Informed Indexers look at an additional factor — the valuation level that applies at the time the allocation decision is being made. We believe that it is not possible to make a good decision on ANY investing question without taking valuations into account.
We believe that the investor should aim to keep his risk profile roughly constant. We also believe that the valuation level that applies affects how risky stocks are (stocks are more risky when valuations are high). Thus, we believe that investors MUST change their stock allocations in response to big price swings. We believe that it is a a terrible mistake not to do this. This is of course the OPPOSITE of what the Buy-and-Holders say. The Buy-and-Holders say that it is a bad idea to change your stock allocation, that it is something to avoid rather than something to be certain to do.
These ideas are rooted in opposite understandings of how stock investing works. They cannot be reconciled.
I feel great respect and affection for the Buy-and-Holders. The friction you see on these threads does not come from some personal animus on my end. I LIKE Buy-and-Holders. But I of course want to be free to tell people what I truly believe about stock investing. And the reality here is that a good number of Buy-and-Holders are not comfortable with what I say. It makes them feel uneasy.
A Buy-and-Holder might say that Investor A should always go with a stock allocation of 60 percent. A Valuation-Informed Indexer might say that that same investor should go with an allocation of 60 percent when prices are at moderate levels, an allocation of 90 percent when prices are super-low and an allocation of 30 percent when prices are super high. The research shows that by making that one change the investor will be able to retire five to ten years sooner and will experience a dramatically reduced risk level. The stock allocation an investor chooses is of great importance. The difference it makes to get the stock allocation right is counter-intutively great.
The problem we have is that, because the difference between the two models is so great, it shocks people to hear that the research supports Valuation-Informed Indexing. Most people have never heard that before. I sincerely believe that is so. There really was a time when lots of smart people believed that the research supported Buy-and-Hold. But my view (and this view is shared by many others) is that that earlier belief was discredited by Shiller’s research.
Now —
I don’t mind it even a tiny bit that lots of people still advocate Buy-and-Hold. Lots of people still believe in Buy-and-Hold. It would be wrong for those people NOT to advocate Buy-and-Hold. I have zero problem being friends with those people.
But I must object when others try to intimidate me into saying things I do not believe. I believe that Buy-and-Hold caused the economic crisis. Whenever stock valuations get insanely high, we have a crisis. There has never been a single exception in the historical record. If investors knew that stocks offer a poor long-term value proposition when prices are high, prices could never get insanely high again because the lowering of the value proposition would cause sales and the sales would pull prices back to fair-value levels.
That’s the dispute. Should investors who want to keep their risk profiles constant be changing their stock allocations in response to big price swings or should they be sticking with the same stock allocation at all times?
I want the new model to become more popular over time. It can never become more popular if the people who believe in it always pull their punches for fear of upsetting any Buy-and-Holders. I like the Buy-and-Holders. I have zero personal desire to upset them. But I feel bound in conscience to say what I truly believe about how stock investing works and I believe that it would be very, very wrong for me to change what I say to please Buy-and-Holders because of intimidation tactics applied by Buy-and-Holders who get upset to hear about these new ideas.
I hope that helps explain a little bit where I am coming from. I certainly appreciate your input in any event. I promise to return to your words a few times and reread them with the aim of picking up on points contained in them that I may be missing out on at the moment because of my personal biases. We all have them, of course. And we are always the last to know about how they are hurting us!
Rob
Roger @ The Chicago Financial Planner says
Interesting. One one question is this: Does anyone actually run a real portfolio based on this and if so what are the real results. By real results I mean real vs. back-tested. I’m not disputing what you are saying but the bottom line to me and I think to any investor is how has this done in the real-time world. Thanks
Rob says
Roger:
Here is the peer-reviewed research co-authored by Wade Pfau and myself that shows that Valuation-Informed Indexing has been far, far superior (providing far higher returns at greatly reduced risk) to Buy-and-Hold for the entire 140 years for which we have historical data available to us:
http://mpra.ub.uni-muenchen.de/29448/
You seem to be suggesting that research that looks at the entire historical record is “backtesting.” In this case, that is not so. Shiller put forward the first paper on the basic concept in 1981. That’s over 30 years ago. We now have 32 years of REAL TIME CONFIRMATION that this is what really works. In those 32 years, the market has continued to perform how it always performed in the past (as reported by Shiller in 1981) and NOT in accord with how the Buy-and-Hold Model posits that it should perform.
I can give some examples of how this concept has been applied in a forward-looking way.
I put my first post to the Motley Fool board on May 13, 2002. I said that, given what we know about how valuations affect long-term returns, the Old School safe withdrawal rate studies must have the numbers wrong (those studies do not adjust for the valuation level that applies on the day the retirement begins). One of the first questions I was asked by my Buy-and-Hold critics was: “Well, if our SWR calculations are wrong, what is the true SWR?” I didn’t know. I had never done a calculation. Logic told me that the existing calculations had to be wrong but logic did not tell me what the right number was.
I was putting my reputation on the line there. People were obviously going to look into this deeper than I had up to that point. I was going to be proven right or wrong. Not in a back-tested way. In a real-time, going-forward way.
I was proven right. John Walter Russell ran the numbers and found that the true SWR at the top of the bubble was 1.6 percent. Nothing even remotely in the same neighborhood as 4.0. And about ten years later, every major publication in this field had run articles reporting that the Old School SWR studies got the numbers wildly wrong. There have been articles in the Wall Street Journal, the Economist, Smart Money, Reuters, and on and on and on. How did I know that 10 years earlier than the biggest-name experts in the field?
Another case is when Shiller wrote the following words in his book (which was published in March 2000):
“Individuals, foundations, college endowments and other beneficiaries of the market are going to find themselves poorer, in the aggregate by trillions of dollars. The real losses could be comparable to the total destruction of all the schools in the country, or all the farms in the country, or possibly even all the homes in the country.”
How did Shiller know in March 2000 what was going to happen in September 2008? He knew because he knows how stock investing really works. The word “overvalued” means just what it suggests. It means that stocks are mispriced. And the entire purpose of a market is to get prices right. So mispricings are always corrected over the course of 10 years or so. When there are massive mispricings, there are massive corrections. Those corrections are called “recessions,” or, in extreme cases, “Great Depressions.” We are living through one of the extreme-case massive corrections today.
I’ll point you to a third case, this one involving the King of Buy-and-Hold, Jack Bogle. I recorded a RobCast on this one, RobCast #41, “Bogle and Valuations.”
http://www.passionsaving.com/personal-finance-podcasts-page-six.html
Bogle said in the wake of the 2008 crash that stocks were at the time priced at $9 trillion less than they had been previously priced. He pointed out that it is absurd to believe that the U.S. economy lost $9 trillion of real value in a few months of time. He is of course correct about this.
So what happened?
If the Buy-and-Hold Model is valid, stock prices accurately reflect economic values. But the #1 advocate of Buy-and-Hold in the world says that they do not. Huh?
If Shiller is right, stock prices in the short term reflect not economic values but investor emotion. Investor emotion can of course swing wildly without any rational cause. So the loss of $9 trillion in value that we saw in 2008 entirely fits the Valuation-Informed Indexing model but not at all the Buy-and-Hold Model. Again, this was not backtesting. None of us Valuation-Informed Indexers knew in advance that Bogle was going to make such a statement and then developed our model to fit that statement. We described first how the model works and then Bogle (someone with zero reason to want to slant things in our direction) made a statement confirming the reality of our model.
May I direct your question back at you?
Is there any forward-facing-test support for the Buy-and-Hold Model?
There is not.
Buy-and-Hold became popular with the 1974 publication of “A Random Walk Down Wall Street.” Many people became convinced by the results they saw following that date that Buy-and-Hold works. But stocks were priced at insanely low levels in 1974. Valuation-Informed Indexers say that stocks MUST provide insanely good results starting from such price levels. So the results we saw from 1974 through 1995 are 100 percent in accord with what a Valuation-Informed Indexer would expect and predict.
From 2000 forward, stock results have been poor. Stocks were overpriced throughout that time-period. So those results are again 100 percent in accord with what Valuation-Informed Indexing says we should see.
There are four years in which Buy-and-Hold paid off big time — 1996 through 1999. Those were amazing years for Buy-and-Holders, I certainly give you that. But the question is — Are those returns permanent? The Valuation-Informed Indexing model posits that stocks are priced today for a 65 percent drop sometime over the next few years (there has never yet in history been a single time when we had a massive bull market and not ended up at a P/E10 level of 8 or lower). If we see a 65 percent price drop, no one is going to say that Buy-and-Hold works.
I have 140 years of historical data that supports Valuation-Informed Indexing. But the Buy-and-Holders say that that is not enough for me to be permitted to post on any internet discussion board or blog. But it is not possible for me to have MORE than 140 years of support. There are only 140 years of data available to us.
You are suggesting that only forward-facing tests count. But Buy-and-Hold has never been subjected to any forward-faving tests! Buy-and-Hold started in 1974 and we are still in the same Bull/Bear cycle that was getting started then. So we do not know how Buy-and-Hold will end up performing in the first forward-facing test it has ever been put to. It could be that, by the time this first test is complete, there won’t be one human being with a good word to say about Buy-and-Hold.
I don’t say that I am God, Roger. I have zero problem with the idea of adding words to every post I advance saying “this fellow has been wrong about a lot of important things over the course of his life and it is entirely possibly that it is happening again.”
Do you think my Buy-and-Hold critics would be okay with adding the same words to THEIR posts?
Are Buy-and-Holders fallible?
If they are fallible and if they made a mistake in this case, how is it that they will ever discover this?
Will it take a Second Great Depression?
My view is that we are all fallible and that we all should acknowledge it and show respect and affection to those of our friends who make an effort to show us where we might have gotten something wrong. It is that belief that is reflected in the published rules of every board and blog I have ever visited. It is my belief that every single one of us, Buy-and-Holders and Valuation-Informed Indexers alike, should want to see those published rules honored both in act and in spirit.
I have learned a great deal from my many Buy-and-Hold friends. I think that I have something important to teach them in return. I would like to have the opportunity to pay back that intellectual debt.
I am grateful for your willingness to engage in a little back-and-forth discussion here.
Rob
Roger @ The Chicago Financial Planner says
Rob interesting stuff, but it doesn’t address my question. Can you point to investment results in the real world supporting the valuation approach to investing you advocate? Is their somebody actually achieving superior results using this approach?
Rob says
All of the returns reported on in the Bennett/Pfau paper are from the real world, Roger. Those results are the results that those following valuation-informed strategies obtained.
If you are asking whether there are people who follow valuation-informed strategies, the answer is “yes.” Please take a look at the “People Are Talking” section of the site. It runs down the left-hand side of this page. You will see quotes from over 100 people endorsing my work. A number of these people are financial planners who advocate valuation-informed strategies. A percentage of their clients are obviously following their advice. Those investors are obviously obtaining far higher returns than Buy-and-Holders while taking on dramatically less risk.
The problem is that the number is too small. Many people have told me that they of course know about the 30 years of peer-reviewed academic research showing that there is precisely zero chance that a Buy-and-Hold strategy can ever work for even a single long-term investor. But they are afraid to give voice to what they believe in a public forum in clear and firm and certain language. Millions of middle-class people believe that the Buy-and-Hold advocates are shooting straight with them. Most of us have never experienced a case of financial fraud so pervasive. I know that I have never seen anything like this before.
This includes people like Jack Bogle. It was by reading Jack’s book that I learned about the errors in the Old School safe withdrawal rate studies. So Jack obviously gets it, at least on some level of consciousness. But what do you think would happen if Jack came clean about what he knows? I think it is fair to say that he is concerned that he would be attacked in the same way that I was and in the same that John Walter Russell was and in the same way that Wade Pfau was and in the same way that the researchers who wanted to do research on Rob Arnott’s ideas were and in the same way that so many others were. Jack Bogle himself does not feel that he can come clean at this point in the proceedings. The cover-up has gone on too long.
Do you have any suggestions?
I have thoughts on how to proceed. But I am not going to say that it will all be 100 percent easy for every single person involved. Looking back, that’s how we will all see it. In the long run, the benefits of telling people the truth about stock investing are so great that I don’t believe that there will be one person who will say it was the wrong thing to do. But how do we get ourselves out of the corner into which we have painted ourselves? How do we achieve the transition from the horrible place where we find ourselves today to the wonderful place where deep in our hearts we all want to be tomorrow?
That’s a question that we address as an entire society. We need policymakers involved. And economists. And academics. And investment advisors. And journalists. And bloggers. And ordinary investors. We all have a stake in seeing that we survive the economic crisis. So we all need to be involved in the solution to the problem.
That’s my sincere take re this important matter, in any event. I see it as my role to inform as many people as possible to the realities so that we all can play the role we need to play in the most intelligent and balanced and calm way possible, given the circumstances that apply.
I hope that helps a bit.
Rob
Rob says
Roger:
Here are some people who I would talk to if you want to talk to real live people who have followed valuation-informed strategies and who obtained good results from doing so:
1) Rob Arnott — He told me that my ideas on investing are “sound.” I am sure that Rob has clients who follow his advice. He would have many more of them if academic researchers felt free to do research showing how successful his strategies are. Rob told me that two young researchers who wanted to do research on his ideas were taken aside and warned that they would be doing damage to their careers if they published such research. That’s the problem that I am always talking about. But if all you are looking for is people to say “I did this and it works,” I am confident that Rob can give you names of people to call.
2) Robert Shiller — Shiller is of course the grandfather of Valuation-Informed Indexing. He has some sort of financial advisory business now in addition to his academic work. He could point you to people. Like Rob Arnott and myself, Robert Shiller has faced pressure from Buy-and-Holders to keep it zipped. He has referred to these pressures in oblique ways in a number of his public comments. I have a theory that Shiller may have already written a follow-up to “Irrational Exuberance” in which he spells out the practical, how-to implications of his research findings and that he is just waiting until after the next price crash to publish it because he believes that it will get a better reception at that time.
3) Bogleheads Forum Posters — I met a good number of people at the Bogleheads Forum who follow valuation-informed strategies. People would say things like “I have been doing what Rob advocates for many years and obtaining very good results.” It would be nice if you could just go to the forum and ask for people who have followed this strategy to identify themselves and then talk to them. I don’t think the owners of the forum would permit that. But you might be able to run some searches that would identify those people and then send them e-mails. They keep quiet. They know what will happen to them if they share their experiences in plain, easy-to-understand statements. But these people are like all other people. They want to help their friends. So, if you listen carefully, you will see them trying to work around the limits that the site owners place on them and trying to help out their fellow community members with the real story from time to time.
4) Brett Arends at the Wall Street Journal — Brett writes about the problems with Buy-and-Hold frequently. He wrote a column saying that Buy-and-Hold is “hooey” because “they’re leaving out more than half the story.” I am sure that he got lots of letters from readers of the paper telling him that they followed true research-based strategies. Again, his editors need to be careful re how much they let him say or the Wall Street Con Men will remove their advertising from the Journal as punishment. But I am confident that Brett can give you names of real live people who follow research-based strategies.
5) Michael Kitces — Michael is a Maryland financial planner. Michael told me shortly after the 2008 crash that a lot of financial planners were talking privately about whether they should start telling the truth about what the research says. Clients were leaving their advisors because the long-term results under Buy-and-Hold were so bad that it was scaring them that they would never be able to retire. If you read Michael’s blog you will see that he is always trying to sneak honest stuff into it without being too obvious. Michael knows the story. I am sure that he has many clients who follow a research-based approach.
6) Adam Butler — Adam is a portfolio manager at Butler, Philbrick & Associates. He told me that the industry is trying to contain the discussion of what the research in this field says because if the truth gets out clients will know that the Buy-and-Hold emperor is wearing no clothes. He can give you some names.
7) Wade Pfau — Wade of course no longer publishes fully honest research since the Buy-and-Hold Goons threatened to get him fired from his job if he continued doing so. But Wade was very excited to learn how stock investing really works (I reported on a good number of his e-mails to me and I can provide you links to those reports if you think they would help) and he is a good guy. He now travels in circles where people talk privately about the dangers of Buy-and-Hold (Wade is friends with Michael). So I am sure that he now knows people who follow research-based strategies and who obtain good results.
8) Todd Tressider — Todd writes the Financial Mentor blog. He wrote an in-depth article pointing out the errors of the Old School safe withdrawal rate studies and he has been selling a report on Amazon on how to do retirement planning in a research-based way. I am sure that he has heard many good stories from readers of his report.
9) Rich Toscano with Pacific Capital Associates in San Diego told me that “you are doing a great service.” Rich obviously gives honest investing advice to his clients. He could let you know about some success stories.
10) Carolyn McClanahan, the Director of Financial Planning for Life Planning Partners, told me that her firm advocates Valuation-Informed Indexing. So she could put you in touch with some people.
People have been following research-based strategies for a long time, Roger. People get into this field for the same reasons that people get into other fields, because they want to do good work and feel good about themselves. So there naturally are people who give honest advice rooted in the academic research. If you go looking for them, you will find them. They are out there. My guess is that about 10 percent of the population follows research-based strategies today.
I’d like to make it 90 percent!
I could use your help!
The members of the Buy-and-Hold Mafia have big and scary Goons doing their dirty work!
But I’ll let you in on a little secret. Those big and scary Goons cannot do a thing to us if we stick together. Their intimidation tactics work only if the good people react in fear to them. If we stand up to them and just go about our business, they go down. In some cases, they land in prison! Once prison sentences are announced, that will go viral and I have a funny feeling that we won’t be hearing too much anymore about the use of Goon tactics being used by the Buy-and-Holders to spread their “ideas.”
Anyway, those are some names to get you started. I believe that you will find that the closer you look into this, the better you will feel about it. I have been developing the Valuation-Informed Indexing concept for 11 years now and I can tell you that it has never once let me down. This is good stuff.
Take care, man.
Rob