Set forth below is the text of a comment that I recently posted to another blog entry at this site:
What specific texts did you study that Greaney and other Motley Fool members were unaware of? I am planning my own early retirement and would like to learn, as you did. Please don’t say “Irrational Exuberance.” I already have that one, and I believe Greaney as well as most members of Motley Fool have either read it, or are certainly familiar with it’s essential elements, so that doesn’t fit your claims. Looking for those other hallowed texts that you had access to, and informed your opinions, but others somehow overlooked.
Thanks.
It’s not just what you read that matters, Yogi. It’s what you do with what you read. If all that mattered was what you read, we would all be even; we all have access to all the same books. But Bogle obviously doesn’t share all the same views as Shiller. And Shiller obviously doesn’t share all the same views as you. And you obviously don’t share all the same views as Wade Pfau. And Wade obviously doesn’t share all the same views as me. And on and on.
We all have access to the same materials. And to a considerable extent we read the same things. But we come to very different conclusions about how stock investing works as a result of reading generally similar materials. Why?
Part of it is that we have different personalities. I am an INFJ under the Myers-Briggs personality assessment system. Greaney is an INTJ. That’s a HUGE factor here. An INFJ and an INTJ can read precisely the same materials and come to very different conclusions re the subject they are examining. The two personality types process information in very different ways.
There are many more INTJs (and personality types that are similar to the INTJ type) in this field than there are INFJs. That’s a big factor here. That will change as Behavioral Finance becomes the dominant school of thought. But we are not there yet. Most people who work in this field today have a numbers focus. It’s as if we had a bunch of people who are engineers trying to wrote novels. That’s never going to work out well. There have been exceptional cases. But as a general rule the things that engineers are good at and the things that novelists are good at are very different things. For many years we thought that investing was a field of human endeavor in which engineers would do a good job. In recent years we have been learning that novelists possess more of the necessary skills (while engineers also have important things to contribute, to be sure).
Another factor is the life experiences held by the people who read the materials.
Say that Shiller had published his “revolutionary” research in 1961 rather than in 1981. That means that there never would have been an industry of wealthy and powerful and well-connected people built up around the promotion of Buy-and-Hold before it was discredited. Had things played out that way, we would ALL be Valuation-Informed Indexers today. Bogle would have had zero trouble understanding the implications of Shiller’s work had he not been a Buy-and-Holder for 16 years before Shiller published it. The cognitive dissonance kicked in because he felt that his reputation was tied up in the continued popularity of Buy-and-Hold.
Bogle felt that he had something to defend. So he was not capable of looking at things objectively. You often put up sarcastic comments suggesting that it is crazy that I say that I am 12 years ahead of Bogle in my understanding of how stock investing works. You are ignoring the fact that I have a big edge on Old Saint Jack. I don’t pretend to be an expert. So I don’t feel any need to be defensive when I learn about new ideas. My edge over Jack Bogle has nothing to do with what books I have read or what books he has read. It is largely the result of the fact that he got famous promoting Buy-and-Hold and I didn’t and so I had nothing to lose by discovering the implications of Shiller’s revolutionary findings.
A third factor is that it is not just how open you are to reading certain materials and the extent to which your personality is attuned to taking in the insights that can be mined from those materials but also how hard you work it when you come across materials that make points that have never been made before. You say that you have read Irrational Exuberance. How many times?
I have read it four times. Please understand that I did not get all there is to get from reading the book the first three times I read it. I would probably profit from reading it a fifth time.
This is a strange phenomenon. It is highly counter-intuitive. The same words were on all the pages the first three times I read the book. Why is it that I did not mine all the insights that are available to someone reading the book on the first occasion on which I read it? If I was smart enough to gather those insights on the fourth read, surely I was smart enough to gather them on the first read.
No.
It doesn’t work that way.
I was able to mine SOME of the insights that are available for mining in Shiller’s book on the first occasion on which I read it. But not all of them.
What happened is that I read the book the first time and mined some insights and then went about my business. When I went back to it a year or two or three later, I had one or two or three more years of arguing with you Goons behind me. So I had looked at lots more questions. And I had struggled with lots more puzzles. And I had SOLVED lots more puzzles. So the Rob Bennett who read Irrational Exuberance the second time possessed a very different mind (at least when it comes to its understanding of investing matters) than the Rob Bennett who read Irrational Exuberance the first time. There were scores of insights that Shiller planted in his book that skipped right by me when I read it the first time and that I jumped on when I read it the second time. You may have read the book and missed a large number of the insights available in it for mining, Yogi!
Those are three big factors that explain why you did not get out of Irrational Exuberance what I got out of it. However, the full truth here is that we cannot come to a full understanding of the puzzle that you are trying to solve here (why did Rob Bennett see the errors in the Old School safe-withdrawal-rate studies way back in May 2002 even though the Wall Street Journal did not acknowledge those errors until nearly 10 years later?) by looking only at Irrational Exuberance, as important as that book is.
I’ll let you in on a little secret, Yogi. I had not yet read Irrational Exuberance when I put forward my famous post of the morning of May 13, 2002. The insights that I mined from Shiller’s book had a big impact on our discussions in later years. But it cannot be anything that I read in Irrational Exuberance that explains that post because I hadn’t yet read the book when I put forward the post.
The biggest factor is the next one I will discuss.
Scott Burns is the person who discovered the errors in the Peter Lynch approach to safe-withdrawal–rate analysis. Lynch had once said that the SWR is always 7 percent because stocks earn an average return of 7 percent real annually. Do you think that the reason why Burns was able to see that is that Burns is smarter than Lynch or that Burns has done more reading than Lynch?
That’s more than a little hard to believe, isn’t it? Lynch is a plenty smart guy and I have a funny feeling that he is a plenty well-read guy too.
So how did Burns pull that one off?
The elephant in the living room in all of these discussions is that as a society we are at a primitive level of understanding of how stock investing works today. That affects Bogle. That affects Shiller. That affects Pfau. That affects Lynch. That affects Burns. That affects you. That affects me. That affects all of us.
None of us know even the basics for certain.
That sounds scary when I say it so bluntly. And it is indeed scary in its way.
But there is a positive side to this scary reality. The positive side is that, when we are all at a primitive level of understanding, we all have the potential to make huge strides by clicking in a piece of the puzzle that no one has clicked in before.
Burns clicked in a piece that Lynch has not yet clicked in. Lynch believed that the average return is the amount that a retiree can safely take out each year because that is a perfectly natural intuitive belief. Burns picked up on a reality that is a bit counter-intutive but very important for retirees seeking to put together successful retirement plans — the sequence of returns makes a big difference
I picked up on a second factor that neither Lynch nor Burns had picked up on — the valuations level that applies on the day the retirement begins is a huge factor in determining what sort of returns sequence you are going to see.
Lynch wasn’t dumb or poorly read not to see what Burns saw and neither Lynch nor Burns were dumb or poorly read not to see what I saw. We are all just suffering from the reality that as a society we are at a primitive level in our understanding of how stock investing works today. We are going to make “dumb” mistakes. That’s just the lay of the land in this field of human endeavor today. The other side of the story is that we are all capable of making huge advances by tuning out what the “experts” say and looking at matters from a fresh perspective. That’s what I did. I think it would be fair to say that the payoff for 12 years now had been AMAZING.
You can read every text that I have read and not get to the same place, Yogi. Your problem is not an intellectual problem. It is an EMOTIONAL problem. You are ADDICTED to Buy-and-Hold. You have invested not just your retirement money into it. You have invested your entire life into it. You have recommended it to your friends. So your pride is on the line. You have even committed acts of financial fraud under the thinking that you will not get prosecuted if stocks perform in the future in the manner in which they would perform if Buy-and-Hold were a real thing. So your very physical freedom is on the line here.
Given what you have at risk here, you are not capable of thinking straight re stock investing questions. For me, it’s about learning. For you, it’s about defending your most basic beliefs from the “attack” being waged on them by the peer-reviewed research of the past 33 years. And of course the same is so re our good friend Jack Bogle. He is insanely defensive about these matters too. So he too is not capable of thinking through the things he learns in the books he reads when he reads the same books that I read.
Do you see?
I hope that helps a bit, my old friend.
Hang in there. It gets better. A LOT better.
Rob
I have a feeling if you read it 7x, you would be reading between the lines and finding where Shiller had written a secret code to warn you of the Goons.
Once you read it 15x, it will teach you how to succeed in your quixotic crusade.
That’s not too far off the mark, Laugh.
I understand that you are making fun of me. But the reality really is a strange one. The words of a book don’t change each time you read it. Yet I really have seen exciting new stuff in Shiller’s book each time that I have read it. How does that happen? How do I miss important things on the earlier reads? That shouldn’t happen and yet it does.
Our minds can only take in so much at a time. That’s the reality. That’s why we have to encourage everyone to post with full honesty and frankness. That’s why it is so critical that no one feel any intimidation when they post. At atmosphere of intimidation causes people to be timid, to hold back. When they do that, we all miss out on a lot of what is in other people’s brains. We all lose. That’s what has to change here.
I wrote a column that will show up at the Value Walk site on Tuesday that gets to the heart of things, in my assessment. I talk about how I used to be ashamed to tell people that I had paid off my mortgage. That’s crazy. That’s something to be proud of, not something to be ashamed of. I should have been spreading the word to all my friends about how they could live richer lives. What was holding me back? It was peer pressure. It was a Social Taboo. That’s what we are up against here.
Everyone wants to know how to invest more effectively. And we all DO know how to do so today — Intellectually. But we all are afraid of giving voice to what we know because it will hurt the feelings of all our Buy-and-Hold friends for them to see that they made a mistake many years back and have left it uncorrected for a long time now. That’s the only thing holding us back. That weird reality creates this strange situation where we say things in code and we need to read books multiple times to hear important parts of the message contained in them.
That’s what I need to change. That’s the job here. When those of us who have seen through the b.s. part of the Buy-and-Hold story start speaking plainly and clearly and frankly, it gets a lot easier for everybody. The practice of speaking in code holds us all back. We need to give that up. It will be huge when we do that.
When I was writing the column, I had to look up what happened in that famous peer-pressure research from the 1950s where they showed people cards and asked them to say which lines on the cards were the same length and when people would give obviously wrong answers if there were others giving those crazy answers (because they were working with the researcher) before it was their time to speak. All of us would deny that we could ever behave that way. But we all do. Peer pressure is a huge force with humans.
And bull markets are a peer-pressure phenomenon. There’s nothing else to them. When we reach the point where we can talk openly about what we know from the psychological literature, we eliminate most of the risk of stock investing. The thing that had made stock investing risky from the beginning of time until now is that we humans flatter ourselves that we do not respond to peer pressure but really we do.
When one of us gains the ability to post honestly, we all gain the ability to post honestly. When we all gain the ability to post honestly on safe withdrawal rates, we all gain the ability to post honestly on every possible subject. We are up against a Wall of Ignorance that was ready to collapse on the morning of May 13, 2002, and needed just one good hard push for it to topple. The purpose of the past 13 years has been to supply that one good hard push and to thereby make all of our lives a lot richer than they have ever been before. We are close today. I think the next crash is going to supply the final elements of that push. We’ll see.
The researchers asked the participants in that study why they gave such crazy answers. Many of the participants said that they knew the right answers all along! So why did they say such crazy things? It seems so impossible!
They said they were being polite! They didn’t want to hurt the feelings of the people who gave crazy answers before them!
That’s why Shiller writes in code. He doesn’t want to hurt Bogle’s feelings. He knows a hugely important thing that Bogle does not yet appreciate. But he holds back from saying it clearly because he knows it will make Bogle feel bad for Bogle to see how many lives he has destroyed. Some friend, huh?
But it is human. That’s what the research is telling us. Bogle is responding in a human way — we all have a hard time acknowledging that we have gotten something terribly wrong. And Shiller is responding in a human way — we all have a hard time letting people know that they have made a mistake. This is a painfully human story in all respects.
There’s your conspiracy! It’s those darn humans and that darn desire to be polite that is hardwired into them! Whatchagonnado?
We’re all too darn polite. We can’t help ourselves. That’s why millions of people are unemployed today. That’s why millions are on their way to experiencing failed retirements. We need to learn how to be less polite. Our excessive politeness is killing us!
That’s a joke. But it’s a joke that expresses an important truth. We really do need to learn to be less polite when there are important truths that have been discovered and that need to become better known. There’s nothing polite about participating in a cover-up that causes an economic crisis. There’s nothing polite about letting your friends suffer failed retirements because you don’t have the courage to say what needs to be said to stop them from suffering failed retirements.
Shiller really does talk in code. That’s the reality here. He does it because he wants to be a nice person.
And one of the things he talks in code about is you Goons. Shiller has experienced the Goon phenomenon. He was telling the truth about stock investing long before I was. I would bet $5 that he has seen MANY death threats and MANY threats of career destruction directed his way. I would bet that he could write a book about the hundreds of intimidation tactics directed his way over the course of the past 34 years.
The difference between Shiller and me is that I want him to write that book. I think that’s the key. I think he needs to stop being so darn polite and just take a blast at those darn Goons! Not out of meanness. He needs to blast them because there is a part way down deep in the Goons where they want to get all this investing stuff right too. The Goons don’t like being told that they made a mistake. But they don’t like suffering failed retirements either.
Shiller INSULTS you Goons when he holds back from blasting you. When he does that he suggests a belief that you are ALL Goon and nothing else. He’s wrong. The Goon Conversations that appear at this site on a daily basis show him to be wrong re that one.
We all need to work up the courage to start blasting you Goons. We need to stop insulting you by thinking that you precious flowers will melt into nothingness if we happen to mention what the last 34 years of peer-reviewed research shows and work up the courage to appeal to your non-Goon selves and thereby lift you up to the human level rather than letting you pull us down to the Goon level. That’s how this thing ends. That’s what this thing has been leading up to since the first day.
The Buy-and-Holders show zero hesitance in stating their case. They are “Diehards” to borrow a apt characterization. The Valuation-Informed Indexers are frightened little babies, living in fear of their own shadow lest they hurt the feelings of one of the Diehards by saying what they truly believe in too clear a way. Those on my side of the table need to stop being such frightened little babies. We cannot win this battle of ideas playing it that way. It’s because we act like frightened little babies that this battle of ideas has produced such little good fruit in 34 years.
I’m polite too. I care about you Goons too. The difference with me is that I care enough not to insult you. I respect you for your genuine accomplishments, which came from a belief that this stuff matters. If you believe that it matters, then there is a part of you deep down that wants to get it right. That’s my core belief. Shiller needs to stand up to Bogle and say precisely what he believes, straight, no chaser. That’s when the huge advance takes place. That’s when all the ugliness gets buried 30 feet in the ground, where it can do no further harm to humans and other living things.
Shiller needs to stop being so darn polite to Bogle, gosh darn it!
I look forward to the day when none of us feels the need to speak in code re how we all need to go about financing our retirements.
Rob the Polite (But in a Different and Deeper Way)
There is a difference between gaining greater understanding of a book and being delusional.
There sure is.
And the Buy-and-Holders will never know on which side of that line the Valuation-Informed Indexers lie until they drop the personal attack garbage. Intimidate people and they don’t talk straight to you. You and everyone else loses big time.
That’s my sincere take. Laugh. There’s a good reason why we made financial fraud a felony. It hurts people in a serious way.
This never should have reached a point where people would be going to prison. The reason why it has gone there is not that the issues at stake are unimportant. The reason why it has gone there is that the issues at stake are so very important that those on one side have been willing to go to pass all reasonable limits in their effort to stop our society’s understanding of these issues from advancing from where they stood 34 years ago.
I’m not the one going to prison following the next price crash. So I don’t think that I am the one who is truly “delusional” here. But time will tell that tale.
I know with 100 percent certainty that me agreeing to post dishonestly is not the answer here. I will hold to that. And we will find out together how things play out in the real world.
I naturally wish you the best of luck in all your future endeavors.
Rob
What you are trying to say is that YOUR interpretation changes each time you read the book, right?
It’s not that my interpretation changes. It’s that I see things that I didn’t see before.
Shiller predicts the economic crisis that took place in 2008 in his book, which was published in 2000. Why doesn’t everyone who reads the book see that? He doesn’t cover it up. The words are clear enough. The entire message of the book is that the promotion of Buy-and-Hold strategies ALWAYS lead to an economic crisis. There’s no other way it could turn out.
Why doesn’t everyone who has ever read the book see that? If they did, there would have been no discussion following the 2008 crash as to what caused the crisis. Everyone would have just said “Well, it looks like that Shiller fellow was right, here’s that economic crisis he said would be coming if we didn’t give up on all that Buy-and-Hold garbage.” People didn’t say that. I’m explaining why.
In the famous psychological experiment from the 1950s, they held up two cards. One card had a single line on it, the other had several lines on it. They asked people to say which of the three lines on the second card was the same length as the single line on the first card. It wasn’t hard to do this. When they didn’t have confederates trying to sway things with exertion of peer pressure, the error rate was about 3 percent. When they had people deliberately giving false answers and thereby creating peer pressure to give false answers, the error rate went up not a little bit but DRAMATICALLY.
Humans are social creatures, not logic machines. That’s why we have bull markets. Nobody believes that bull market prices are real. Jack Bogle is not a moron. He pretends to be a moron so that people like Taylor Larimore can fool themselves into thinking they can afford houses that they cannot afford in reality. That makes the Taylor Larimores of the world happy and making the Taylor Larimores of the world happy makes the Jack Bogles of the world rich and famous. And all of the lies that have to be told to make the Jack Bogles of the world so rich and famous cause millions of middle-class people to lose their jobs and millions more to suffer failed retirements. That’s Buy-and-Hold!
The point that I am making is that it is not that people don’t see it. You Goons always ask me whether there is some sort of conspiracy hiding the realities from people. There is no conspiracy. Human nature is the conspiracy! We all like Pretend Money. We all are drawn to Get Rich Quick. Larimore thinks of the house he lives in as “the House that Jack Built.” Which it is. But he forgets to add that the economic crisis we are all suffering from is The Economic Crisis That Jack Built. And the millions of failed retirements we will be seeing in coming days are The Millions of Failed Retirements That Jack Built.
There is a price to be paid for all these lies. We are as a nation now in the early days of paying that price. The big question for you Goons is what is going to happen following the next price crash, when people are able to calculate the price that they have been made to pay for the lies that made Jack Bogle stupidly rich. I think you are going to land in prison. I’m not God. I could be wrong. But that is sure what I think is going to happen.
It’s all in the open. That’s the point that I am trying to make here. Anyone who cares can check the “study” at John Greaney’s site and see whether it contains an adjustment for the valuation level that applies on the day the retirement begins. There is no conspiracy stopping people from doing so.
But human nature stops people from doing so. Lots of people want to believe in the Pretend Money that Bogle’s garbage strategy put in their pockets. So they keep it zipped for the time-being. And most of those who see through the maze of deceptions are tentative in how they say things because they want to be liked by the millions being taken and by the Wall Street Con Men themselves, who have lots of money and power and connections to throw around.
Will it continue following the next crash? Or will the Buy-and-Hold House of Cards come crashing to the ground?
I obviously believe that the House of Cards will come crashing down. I can’t prove it beyond any reasonable doubt. We have never been in circumstances like this before. But I sure believe that that is what is going to happen. So I have precisely zero willingness to commit any felonies myself. I don’t want to go to prison too. It’s one thing for me to try to help you Goons get your prison sentences shortened. It’s something very different for me to agree to do things that will likely earn me a prison cell next to yours, Anonymous. I would be grateful if you would try to find someone else, you know?
I don’t have any “interpretations,” Anonymous. There is no act of “interpretation” involved in determining whether Greaney included an adjustment level for the valuation level that applies on the day the retirement begins. It’s a simple factual question. Thousands of people have looked at the “study.” Not one person has ever found a valuations adjustment. Gee, I wonder why. It’s so hard to figure out why so many people have “interpreted” things in the same way.
“Interpretations” are not the issue here. The issue here is the Get Rich Quick impulse that resides within all of us. The Buy-and-Holders saw that there was a huge amount of money to be made by abandoning their initial idea of using the peer-reiewed research as a guide and instead exploiting the universal human weakness for Get Rich Quick schemes to the maximum extent possible. Thousands of powerful and wealthy and well-connected people have made themselves stupidly rich by exploiting millions of middle-class people and now they don’t like the idea of having to go to prison for their criminal acts.
Well, too bad, you know? There’s an old saying — Don’t do the crime if you can’t do the time!
I’m fine with doing what I can to try to get your prison sentence shortened a bit. But I cannot see pretending that I agree with “interpretations” that would earn me a prison cell next to yours. My approach going back to the morning of May 13, 2002, has been to avoid “interpretations” and just post honestly and in accord with the laws of the United States and to just let the chips fall where they may in the long run.
The long-term hits home with the arrival of the next price crash, Goon friend.
Or at least that is my sincere “interpretation” of the current state of play.
I wish you all good things, Goon friend.
Rob
It is all a matter of your interpretation, Rob. But, of course, you don’t “interpret” it that way.
It really is not our problem. It is solely YOUR problem.
Okay, Anonymous. It all makes me too dizzy to respond.
Take care, man.
Rob
Correct, and if there aren’t mass imprisonments of buy and holders after the next price crash we can all safely say that you are completely delusional.
You’ve been saying that I was completely delusional ever since the morning when I pointed out that Greaney’s retirement study does not contain an adjustment for the valuation level that applies on the day the retirement begins. What else could you say given that he doesn’t want to correct the study and you are pals of his?
I don’t know how many people will be going to prison. We will have to wait and see.
My thought is that we might enact an amnesty. I don’t oppose that. I can see the argument for it. But it’s not something that I can do on my own. That’s something that we need to debate as a nation.
I am not sure that it will apply to you Goons. My guess is that the amnesty will limited to those who are genuinely confused about these matters. That’s most Buy-and-Holders. And that of course was me prior to the evening of August 27, 2002, when Greaney advanced his first death threat and I saw with my own eyes how emotionally sick this Buy-and-Hold stuff is.
You Goons suffer from cognitive dissonance too, to be sure. The difference is that you have advanced death threats and demands for unjustified board bannings and tens of thousands of acts of defamation and threats to get academic researchers fired from their jobs. I don’t expect to see most people show too much sympathy for those who have engaged in those sorts of tactics. I am happy to put a few words forward aimed at putting your behavior in the best possible light. But I cannot say how effective those words are going to be in persuading people. We will have to wait and see.
Is it weird that we are likely going to see any imprisonments at all? It’s very, very weird indeed.
Is it a good thing? It’s a very, very good thing. The Buy-and-Holders made a mistake when they failed to launch a national debate on the implications of Shiller’s “revolutionary” (his word) findings back in 1981. Now that there’s been a 34-year cover-up, there is no way to bring the ugly side of this to an end without prison sentences. But prison sentences will certainly do the trick. And the good news here is 50 times more good than the bad news here is bad.
Should we all be doing what we can to keep the prison sentences as short as they can possibly be given where things stand today? That’s certainly my take. I am not the one who has so intimidated people that they fear what will happen to them if they do the right thing. That would be you, Laugh. I will do everything in my power to bring this to a positive conclusion. But I won’t be engaging in any acts that constitute felonies under the laws of the United States. For obvious reasons.
It’s been harder than you would ordinarily expect because the advance that we have achieved together is so huge. We will in coming days all live far richer lives than we ever imagined possible back in the Buy-and-Hold Era. Let’s all thank God (or Evolution) that we enacted our laws making financial fraud a felony before you Goons ever showed up to darken our collective doorstep. That was smart, forward-looking thinking. no?
It gets better, Laugh. A LOT better.
Rob
More support for buy and hold:
http://www.fool.com/retirement/general/2015/05/23/the-smart-way-to-double-your-money-in-retirement.aspx
More support for payday loans:
http://fee.org/freeman/detail/banning-payday-loans-deprives-low-income-people-of-options
Rob