Set forth below is the text of a comment that I recently posted to another blog entry at this site:
Rob, grand conspiracy theories are an indicator of mental illness, nothing more.
I pointed out the errors in the Old School SWR studies in a post dated May 13, 2002, Anonymous.
Today’s date is April 21, 2014.
Not one of the studies has yet been corrected.
That tells the tale.
I don’t call it a “grand conspiracy.” I think it would be reasonable to call it a “conspiracy of ignorance.” That’s something different than what people signify when they use the phrase “grand conspiracy.” There were no people who met in a smoke-filled room and agreed to give bad investing advice until the U.S. economy collapsed.
That said, the reality remains that today’s date is April 21, 2014, and not one of the Old School studies has been corrected as of this morning.
That’s a big problem.
It’s not just that we are going to see millions of failed retirements. That part alone constitutes one of the biggest social crises we have seen as a nation. We are going to have millions of old people left homeless because the Big Shots in The Stock-Selling Industry were not honest enough to acknowledge a mistake they made for 33 years after the peer-reviewed research uncovered it. We obviously cannot as a society leave those people homeless. So there is going to be a government bailout. That is going to explode the Federal budget deficit at a time when most people believe that we should be trying to lower it. This part of the question alone constitutes a catastrophe.
But the massive bailout that will come about as result of the millions of failed retirements is the relatively SMALL problem here.
The bigger problem is the hundreds of people who have participated in the 12-year cover-up, the biggest act of financial fraud in the history of the United States. My good friend Jack Bogle knows about this. He has done nothing. Motley Fool knows about this and has done nothing. Index Universe knows about this and has done nothing. Morningstar knows about this and has done nothing. Lots of my blogger friends know about this and have done nothing.
I am telling, Anonymous.
I only have two choices. I can participate in the cover-up myself. Or I can tell. Participating in the cover-up myself means that I go to prison too. ZERO INTEREST. Telling means that a good number of my friends go to prison. I don’t like that outcome. But that is what I have been left with, presuming that I don’t want to go to prison myself. So we are back to ZERO INTEREST.
You call it whatever you like. Call it a conspiracy if you must. Call it a Conspiracy of Ignorance if you want to be more accurate. Call it something altogether different if doing so makes you happy.
But please don’t ever pin any hopes on the thought that I might add my name to the long list of people now associated with this massive act of financial fraud.
I am telling.
If you can stop me, stop me.
If you cannot stop me, word will get out.
That’s where it stands. There will be no negotiation on this point.
I naturally wish you all good things.
Rob
Yogi Bear says
Rob, at least get your delusions straight WITHIN the same blog piece, would ya?
LOL
“I don’t call it a “grand conspiracy.” I think it would be reasonable to call it a “conspiracy of ignorance.”
“… hundreds of people have participated in the 12-year cover-up, the biggest act of financial fraud in the history of the United States.”
Rob says
Those two comments are consistent, Yogi.
People didn’t get together in a room and set out to trick millions of investors as to how stock investing works. That would be a “conspiracy” in the way that you are using the word.
Our economic crisis is the result of a “conspiracy of ignorance.” That’s something different.
What happened is that there was no systematic, ongoing, academic study of how stock investing works prior to the 1960s. The Buy-and-Hold Pioneers started that. They did a wonderful thing. Eugene Fama produced a breakthrough finding when he showed in 1965 that short-term timing never works. Good and smart people did this work and then developed the Buy-and-Hold Model for understanding how stock investing works by exploring the implications of Fama’s findings. We all owe those people a huge debt of gratitude. They were hardly conspirators in the way that you use the word. They were teachers. They were helpers. They were friends.
Long-term timing did not exist as an option at the time. Bogle did not found the Vanguard Group of funds until 1974. So indexing was not a practical possibility for most investors. So Fama never thought to investigate whether long-term timing works. He only investigated short-term timing. When he wrote up his results, he said that he had discovered that “timing doesn’t work,” which is what he had thought that he had shown rather than that “short-term timing doesn’t work,” which is what he would have said if he had been aware at the time of the critical distinction between short-term timing and long-term timing. That was the mistake that ended up bringing on the worst economic crisis in U.S. history a good number of years later because it remained uncorrected for so long.
Shiller was the first researcher to investigate long-term timing. He found that it always works and that it is always 100 percent required for every investor seeking to have some realistic hope of long-term investing success. Every analysis done over the 33 years since Shiller’s “revolutionary” (his word) finding has confirmed Shiller’s result. There is zero intellectual dispute re the question of whether long-term timing is always 100 percent required. There is no finding in the history of investing analysis with so much support in the historical data.
If men were angels, Bogle would have walked to the front of a big room within a week of when he learned of Shiller’s revolutionary finding and announced that new research had been published showing that he had got an important point wrong and that he wanted to make sure that every investor alive quickly learned of the error and changed his or her investing strategy as a result of the wonderful advance achieved by Shiller. Bogle didn’t do this. Bogle is one of those darn humans. He was embarrassed by his mistake. He was reluctant to admit a mistake. He rationalized. He told himself that valuations were so low (stocks were priced at one-half of fair value at the time) that it was not likely that the Shiller finding would ever have any practical impact (the failure to practice long-term timing causes failed retirements only when stocks are insanely overpriced). So the mistake remained uncorrected and a huge bull market commenced.
By the time when the failure to correct the mistake had come to cause a threat to the continued viability of the U.S. economic system (when stocks became insanely overpriced in 1996), an entire industry had been built around the Buy-and-Hold Model, a model rooted in the demonstrably erroneous claim that long-term timing (price discipline) is not 100 percent required for every investor hoping to have even a slim hope of achieving good long-term investing results. By this time, the Buy-and-Holders were looking at huge financial liabilities as a consequence of their 15-year cover-up of the implications of Shiller’s revolutionary finding. The Buy-and-Holders went into severe cover-up mode. It was made known throughout the industry that publicly exploring the implications of Shiller’s finding would result in career death for any expert in this field who dared to “cross” the Buy-and-Holders by revealing to their clients or readers the research-revealed realities of how stock investing works.
I stumbled onto the scene in May 2002. I knew from reading Bogle’s book (Bogle has a conscience — he plants clues as to the realities in many of his writings — MOST of the Buy-and-Holders do this) that the numbers in the Greaney retirement study were wrong. I of course had zero knowledge of the Buy-and-Hold Mafia or of the ruthlessly brutal intimidation tactics that it employs to keep millions of middle-class investors from learning the realities of stock investing for another year, another month, another day. I learned that a large segment of the discussion board community at the Motley Fool’s Retire Early board very, very much wanted to learn what the peer-reviewed research in this field really says. And that another significant segment of the board community very, very much wanted to block those people from learning what they wanted to learn and would resort to any intimidation tactics (including death threats) to stop them from doing so.
For 12 years now, we have seen the Buy-and-Hold Mafia devote unending efforts to keep honest discussion of the findings of the last 33 years of peer-reviewed research from appearing on the internet. Things reached a point at which it became clear to those leading the Campaign of Terror against the people of the United States that they would be going to prison if ever the truth got out. At that point they went so far as to threaten to get Academic Researcher Wade Pfau fired from his job (be sending defamatory e-mails to his employer) if he dared to continue to produce honest and promote honest research papers (Wade and I are coauthors of a peer-reviewed paper showing investors how to reduce the risk of stock investing by nearly 70 percent merely by tuning out the Get Rich Quick garbage advice of the Buy-and-Holders who suggest that there might be some mystical, magical alternate universe in which long-term timing is not 100 percent required).
The 12-year cover-up of the errors made in the Old School safe-withdrawal-rate studies is the biggest act of financial fraud ever committed in the history of the United States. That one massive act of financial fraud will in all likelihood cause more human misery than ever other act of financial fraud committed in the history of the United States prior to the morning of May 13, 2002. So the second statement that you quote above is 100 percent accurate.
But the massive act of financial fraud is not something that was intended back at the starting point. It was not the product of a “conspiracy” as that word is commonly used. There was no group of men or women who met in smoke-filled rooms to plot a means of taking money from others are putting it into their own pockets. Most of the fraud was committed by people like Wade Pfau, people who entered this field with every hope of doing good and then learned that their careers would be destroyed if they blew the whistle on the Buy-and-Hold Mafia and who learned to keep it zipped so that they would be able to provide for their families (and who rationalized doing so on grounds that this field has become so corrupt in the Buy-and-Hold Era that any thought that anyone working in this field could ever again do fully honest work is simple-minded).
Everyone who tolerates continued promotion of the Buy-and-Hold Lie that price discipline is not 100 percent required 33 years after the peer-reviewed research showed that to be the case beyond any reasonable doubt whatsoever is guilty either of fraud or incompetence or suffering from cognitive dissonance (the vast majority are in the latter group).
Call it what you like, Yogi. The field is 100 percent corrupt today and will remain 100 percent corrupt until 10 people work up the courage to blow the whistle on those who have posted in “defense” of Mel Linduaer and John Greaey and Jack Bogle and their massive act of financial fraud.
But none of what happened was planned at the start to turn out the way it did. What we are seeing is a large number of good and hard-working and scared people hoping that the stock market will begin performing in ways in which never before in history has performed so that they can somehow be left off the hook for telling so many lies and thereby hurting so many millions of people who have placed their trust in their “expertise.”
My job is to help the millions of middle-class people learn what they so desperately need to know about what the peer-reviewed research says while also trying to do everything in my power to see that the financial liabilities and prison sentences of those who have posted in “defense” of Lindauer and Greaney and Bogle are kept as light as is humanly possible given the circumstances that apply at this point in time.
My thought is that we should lift the Ban on Honest posting at the close of business today and start fresh tomorrow morning showing the millions of middle-class investors how to turn stocks into a virtually risk-free investment class by reporting honestly to them what the last 33 years of peer-reviewed research says and hope that that good news causes the millions of middle-class investors to feel some mercy toward the reckless and relentless and ruthless individuals who have posted in “defense” of Lindauer and Greaney and Bogle over the course of the past 12 years.
Does all of that make good sense to you, old friend?
Rob
Anonymous says
All of what you just said was of your own opinion and not backed by fact.
Rob says
I put forward my post pointing out the errors in the Old School safe-withdrawal-rate studies on the morning of May 13, 2002. Those studies have not been corrected to this day.
The only other possible explanation of that reality (other than the accounting of events that I advanced above) is that Jack Bogle is the Frank Underwood of Personal Finance. That’s what he is if all of this was done with deliberate intent.
Jack Bogle is not the Frank Underwood of Personal Finance. He has a conscience. He wants to do good for people.
How can I be so sure?
It was Jack’s freakin’ book that told me what I needed to know to see that Greaney got the numbers wrong in his study! Jack said in his book that “Reversion to the Mean is an ‘Iron Law’ of investing.” The pretty much says it, does it not? If Reversion to the Mean is an Iron Law, there ain’t no way in God’s green earth that the safe withdrawal rate could be the same number at all valuation levels. So it could be said that Jack discovered the errors in the Old School studies before I did! It could be said that your beef is with Jack, not with me.
Jack has a conscience. So does Bill Bernstein. So does Larry Swedroe. So does Scott Burns. So do all the others.
They are afraid, Anonymous. They made a mistake. And then, like little boys caught doing something bad, they covered it up. Then the cover-up went on so long that they really, really, really covered it up.
And now we are in an economic crisis caused by their mistake. Now there are millions of people who have lost their jobs because of their mistake. Now there are millions of people on the way to suffering failed retirements because of their mistake. Now there are people headed to prison cells because of their mistake. Now they really, really, really, really, really feel a need to cover up not only the mistake itself but the many years of telling thousands upon thousands upon thousands of lies to cover up the mistake.
All that I have ever done to these people is to try to help them out of the tight spot they have lied themselves into, Anonymous.
I am the one who came up with the Cognitive Dissonance thing. I sweated blood a good number of years back trying to figure out why my good friend Jack Bogle told so many obvious lies about so important a subject as how people should invest their retirement money. I came up with the cognitive dissonance thing,. It’s true. I am not saying that it is a lie. But it is the most charitable explanation of Jack’s behavior over the past 33 years that anyone who loves him with a deep and sincere love could ever come up with. That was me. That was the guy whose e-mails he doesn’t return.
Jack is living in fear. And all the others are living in fear.
And I am breaking my nuts trying to get them off the hook.
And I am going to win. And they are going to thank me. And then we are all going to get together and rebuild our broken economy.
Until all that good stuff happens, we have to endure more of your Goon garbage.
But we have all deep in our hearts known how this was going to end for a long, long time now. You can beat Rob Bennett for so long as you have Jack Bogle on your side. But you are not going to be able to stand up to the power of Rob Bennett and Jack Bogle working together for 24 hours. And Jack is going to flip following the next price crash. What freakin’ choice is he going to have?
So you Goons are, like, totally screwed, my old friend. I’m sorry to have to be the one to tell you. But of course the full reality is that you have known on one level of consciousness for a long time. Which is why you post here every day. It’s not for your amusement. It’s because you are trying to work out some sort of deal where I would agree not to tell and you could stay out of prison. Um — Department of Long Shot Bets.
Everybody who is paying even a little bit of attention knows the story, Anonymous. People are afraid. Because Jack and his friends have a lot of power. But Jack and his friends need to flip following the next crash. It ain’t just Rob Bennett who will be telling the truth about stock investing then. Robert Shiller will be talking more clearly then. And Wade Pfau. And lots and lots of others. Bill Bernstein will not be playing down Chapter Two of his book following the next crash. There will be a lot of money to be made telling the truth about stock investing at that time. These are not the sorts of people who turn their noses up at a quick way to make a buck.
I think it would be fair to say that you Goons will be thrown away like used tissues when The Big Flip comes. Guess who will be the only one putting in a kind word for you then? Your old friend Rob. I wonder if you will finally thank me.
You’re not fooling anyone, Anonymous. You are running with a crowd that will throw you to the curb in two seconds when you no longer serve a purpose for them. And on one level of conscience you know it. I cannot help you change the past. The best that I can ever do for you is to help you change the future.
Anyway, that’s the deal.
We know they are corrupt because the errors in the retirement studies have not been corrected for 12 years now since they became public knowledge.
And we know that they would like to find a way to escape being corrupt because pretty much all of them mix in honest stuff with the Buy-and-Hold garbage on a regular basis. Why would the do that if they were 100 percent corrupt and liked it? The cynical view does not explain the facts.
Yes, it’s my opinion. It is also the only take re what has been happening for 12 years now that makes even a tiny bit of sense.
I wish you the best of luck in all your future endeavors, my soon-to-be-thrown-to-the-curb friend.
Rob
Anonymous says
and Jack Bogle working together for 24 hours. And Jack is going to flip following the next price crash. What freakin’ choice is he going to have?
Did he flip during the last price crash a few years ago? You know, the worst one since the great depression? What freaking choice did he make?
Rob says
He might have flipped as a result of the last crash had we stayed down at moderate P/E10 levels for a longer time. You should go back and review the threads at the Bogleheads Forum from that time. There were lots of people in the early stages of freaking out. That changed when prices went back up. But, if they had remained down for five or ten years, yes, even that level of drop would have eventually brought on many freak-outs. And, as more and more people freaked out, the pressure on Jack Bogle to tell the truth would have grown stronger and stronger.
This crash will be worse.
First of all, it will be taking place after people have already lost a lot of money. So it will hurt more.
Second, more time has passed. So it is harder for people to dismiss it by saying “oh, it’s a short-term thing.”
Third, it will prolong the recession/depression. People have been expecting the economy to improve for years now. Those hopes die with another price crash.
Fourth, it will be deeper. We are taking about a drop to a P/E10 level of 7 or 8. We never went below 13 last time.
Fifth, it will last much, much longer. We usually stay at rock-bottom lows (near 7 or 8) for five years or longer. Last time we were only at moderate P/E10 levels and only for a few months.
Sixth, we will be seeing more political unrest. We saw that last time. But this time it will be far more intense. That will cause freak-outs even among people who have no money in the market.
We did not make the shift to Valuation-Informed Indexing when we hit bottom on our three earlier secular bear markets. But we of course didn’t have 33 years of peer-reviewed research showing us what works in those days. This is the first optional economic crisis in U.S. history. This is the first one that we could have avoided just by opening the internet to honest posting. I believe that we will as a society elect to permit honest posting rather than than watch this take us all the way down into the Second Great Depression.
Buy I don’t know everything. We’ll see.
Rob
Anonymous says
Buy I don’t know everything. We’ll see.
I think that’s fair to say. And that you’ve been 100% wrong so far.
Rob says
Okay, Anonymous.
Rob
Anonymous says
Jack Bogle is quite old what makes you think he will even live to see the next major crash?
Rob says
Jack is the leader of the Buy-and-Hold Movement. He is a symbol. That’s why I refer to him all the time.
If Jack dies, it will be someone else. I will work with whoever is put forward. None of this is personal in any way, shape or form.
Jack’s accomplishments are many and real and he will be applauded for them for many, many years to come by Buy-and-Holders and Valuation-Informed Indexers alike regardless of what comes to pass with this other piece of business.
Fair enough?
Rob