Set forth below is the text of a comment that I recently posted to another blog entry at this site:
Vanguard publishes article on 4% retirement rule. What ban?
http://vanguardblog.com/2014/11/07/the-4-spending-rule-20-years-later/
Where’s the discussion of the effect of the valuation level that applies on the day the retirement begins? That’s the error that caused the problem. She doesn’t even discuss that issue.
She says that the problem is that we are in a low-return environment today. The Old School studies took that into account. Greaney’s study too that into account. It is an insult to him and to all the authors of Old School SWR studies to say that they didn’t consider the possible that we might enter a time-period when returns would be lower. The entire point of all SWR studies is to identify the withdrawal rate that works in worst-case scenarios. Entering a bad return environment is obviously a bad-case scenario. So that is not the mistake that was made.
And she says that the studies failed to take the possibility of bad return sequences into account. Again, the Old School studies do that! It was the Old School SWR studies that taught us all the importance of considering return sequences. That was the gold in them. Before the Old School studies came out, people like Peter Lynch were saying that the SWR is 7 percent. The Old School studies put an end to that. It is a grossly unfair insult to the authors of the Old School studies to say that they did not consider the effect of returns sequences when they were the ones who achieved that huge breakthrough that advanced our knowledge of how retirement planning works in a very big way.
The elephant in the living room is valuations. There is 33 years of peer-reviewd research showing that the valuation level that applies on the day the retirement begins is the most important factor in determining the safe withdrawal rate. There is a Social Taboo against talking about this because 90 percent of the experts in this field have been ignoring this factor for 33 years after the peer-reviewed research showed that it is critical and in a not-small number of cases have engaged in financial fraud (a felony) to keep millions of middle-class investors from learning about the important of this factor.
I cannot change the history, Trebor. I love the Buy-and-Holders for their many positive contributions and I always will. Those contributions are real and important and are already written in the book and thus can never be negated. But the Buy-and-Holders are going to look very, very, very bad following the next crash when they try to once again explain away the realities staring millions of middle-class investors in the face.
Price matters when buying stocks just as much as it does when buying anything else. Ignore price and you get it all wrong. No matter how smart you are. No matter how much of a big shot you are.
Price matters.
That’s the future.
Either we acknowledge that as a society and stop with the 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 or we all go down together. Those are the two options before us. We can enjoy the benefits of being the luckiest generation of investors that ever lived or we can see our economic system fail.
I am telling.
Not because I have some grudge against the Buy-and-Holders. Because I love them. Jack Bogle never wanted all his wonderful work to turn out this way. The woman who wrote this article never wanted her hard work to turn out this way. Not one person wanted this. Even Mel Linduaer and John Greaney never wanted this.
But here we are.
Every time another Buy-and-Holder tells another lie he or she makes it harder for all the others to acknowledge the mistake they made in 1981. The sooner you come clean, the shorter your prison sentence will be. Because the sooner you come clean, the sooner the millions of middle-class investors will be able to learn about the first true research-based investing strategy and the sooner we will be able to bring the Buy-and-Hold Crisis to an end.
Again, that’s my sincere take re these terribly important matters in any event.
My best and warmest wishes to you and yours and to all of my many good Buy-and-Hold friends.
Rob
I was listening to Dave Ramsey this morning. He is a strong advocate of buy and hold and seems to dislike market timing. Is he going to prison as well?
Ramsey’s investing advice is shameful in the extreme. I recorded a podcast about him. I think it is insulting to the Buy-and-Holders to compare them to Ramsey. Most Buy-and-Holders are paragons of responsibility compared to Ramsey, in my assessment.
Giving bad investing advice is not a crime. So he won’t go to prison just because he gave such bad investing advice. Financial fraud is a crime. If he advanced death threats or made demands for unjustified board bannings or put forward tens of thousands of acts of defamation or threatened to get academic researchers fired from their jobs as part of an effort to silence critics of his Get Rich Quick investing advice, then he’s got something to worry about.
There are thousands of posts in the Post Archives documenting how those posting in “defense” of Mel Linduaer and John Greaney and Jack Bogle have done those things. I haven’t see that sort of thing re Ramsey. But I don’t follow him at all closely. So I am not the one to say one way or the other.
The bottom line is that we will work this out as a nation. Buy-and-Hold was a legitimate strategy until Shiller published his “revolutionary” (his word) research in 1981. The Wall Street Con Men have been silencing those who try to tell the world about the implications of that hugely important research for 34 years now and have been engaging in criminal acts to keep the cover-up going for at least 13 years now. This site tells the story in great depth and with a huge amount of documentation addressing every question raised by this massive act of financial fraud.
Following the next crash, there will be millions of people who will have lost most of their life savings as a result of the massive act of financial fraud. They would be performing a public service if they brought lawsuits to recover their losses from the “individuals” who have posted in “defense” of Mel Lindaurer and John Greaney and Jack Bogle. I will do everything in my power to help them bring successful lawsuits. I love my country and both civil lawsuits and criminal prosecutions are a big part of what make it work. So let’s hope that those millions of people are successful in their efforts. I certainly think they will be.
But we will have to wait and see to find out for certain. It is at least a theoretical possibility that we will as a people instead elect to let our country fall into the Second Great Depression. No one has a crystal bal. No one can say for absolute certain. That’s the drama of the thing.
My best and warmest wishes to you and yours, Anonymous.
Rob
Can you provide a link to the podcast?
I cannot provide a link at this time, Anonymous.
There is a technical problem with the site pages that contain links to the podcasts.
If I am able to get that fixed and you ask again after that happens, I’ll provide the link.
Rob
How long have you had the problem with the Robcasts page?
I noticed it a week or two ago.
It’s possible that it has been a problem a bit longer than that. I don’t check those pages too often.
Rob
The goons must had done something to block access to the podcasts.
I can’t honestly say that I would put it past you, Anonymous.
But it’s not me saying that. I haven’t looked into the matter. I don’t know what happened.
Rob
“I haven’t looked into the matter.”
Umm, do you intend to look into it? This is your business, that you want to leave to your kids. After the next crash, when we are scrambling to hand over $500 million just because, maybe we will pass over you and give it to someone who has working podcasts.
I’m certainly going to look into it, X.
Your follow-up comment hints at the reason why I haven’t made it my top priority.
I don’t enjoy taking care of the site-operation stuff. I like the writing. I like helping people. I like answering their questions. I like trying to figure things out, solving puzzles. The site-operation stuff is part of the job and so I have to do it. But it’s never been something I enjoy and it never will be. So I tend to put it at the back of the list.
And it’s not what matters.
What matters is whether the ideas are strong, whether Valuation-Informed Indexing is the future. If Valuation-Informed Indexing is the future, all of the technical stuff will get worked out over time and everything will be good. If Valuation-Informed Indexing is not the future, none of the rest matters. I am not going to make this a successful site by putting up podcasts that explore an investing strategy that doesn’t work. I mean, come on.
My focus is on the ideas. I love the RobCasts. They explore the ideas in great depth. They add a lot. So, yes, I want to get the problem fixed.
But the site was a very powerful resource before any of the RobCasts existed and it would be a very powerful resource without them. What matters is that core idea — Do valuations affect long-term returns, as the peer-reviewed research of the past 34 years shows to be the case, or is the market efficient, as many smart and good people quite understandably believed prior to 1981?
Getting that question right — and of course coming to a full understanding of why as a society we have elected for 34 years to hold back from exploring the implications of the obvious answer to that question — is the focus of this web site. The RobCasts explore a lot of the questions that need to be explored in great depth. So they are of huge value to all interested in the subject of stock investing and retirement planning. But my recording of the RobCasts here back in 2009 did not bring the Ban on Honest Posting to an end, did it? The RobCasts have huge value. But they did not turn the key that needs to be turned.
What will turn that key?
I believe that it is going to be the next price crash.
But once upon a time I thought that it might be the recording of the RobCasts. And at yet another time I thought that it might be the creation of the five unique calculators. And at yet another time I thought that it might be the founding of the SWR Research Group board. And at yet another time I thought that it might be my working up the courage to point out that Greaney failed to include an adjustment for the valuation level that applies on the day the retirement begins in his retirement study. There have been lots of things that have been produced over the past 13 years. They have all been important.
But we remain as a society stuck in the mud in July 2015.
My job is to get us unstuck.
That’s the issue on which I am focused 24/7.
I don’t have all the answers. But I sure know a whole big bunch more about this problem today than I did on the morning of May 13, 2002. So I soldier on.
Do you know what I really find confounding about the RobCasts issue?
The thing that I find most confounding is that you Goons don’t use the RobCasts to become better investors. Had you been using them and spreading the word about them going back to when I recorded them, there would today be hundreds of other web sites with similar material. It’s because those RobCasts did not get promoted all over the internet that we haven’t had the national debate that we need to have to bring this economic crisis to an end and to move on to a far better way to invest our retirement money. As always, you Goons are right at the center of things!
We will figure that one out. We have no choice. And when we figure that one out, we will have so many podcasts being produced that further develop the Valuation-Informed Indexing concept that my modest efforts will not matter quite so much anymore. And that will be a very good thing, in my assessment.
I hope that helps you understand where I am coming from re this one a bit better.
I naturally wish you all the best things that this life has to offer a person.
Rob
“The thing that I find most confounding is that you Goons don’t use the RobCasts to become better investors. ”
If your “RobCasts” offered something better versus my current plan, then I would use them. However, your system is not doing all that great compared to mine. Sorry, but I will stick with what works.
You’re of course right to stick with what you think works, Anonymous. But there is an important piece of the puzzle that you are missing.
No one person has perfect knowledge of what works. Not you. Not me. Not anyone. So we all need to remain open to what the other guy sees.
You can use the RobCasts to challenge your beliefs.
Two things can happen as a result of that.
You can become persuaded that there is some value in Valuation-Informed Indexing and you can reap the benefits that follow.
Or you can become even more convinced that there is no value in VII. Which is a good thing. If your plan is a good plan, you want to be as confident of its value as possible. Remaining open to challenges to it and coming to terms with those challenges increases confidence. That’s a win.
There is no downside to hearing out the other guy.
Never.
It’s impossible that there ever could be a downside.
That’s why our laws are written the way they are. That’s why the owners of all of our boards and blogs have adopted published rules that prohibit the behavior we have seen from you over these 13 years.
You shouldn’t be following VII if you don’t think it is the way to go. But you should be weighing the merits of the case regardless. And to weight the merits of the case, you need to hear the merits of the case. You need to hear it from lots of different people. You should be encouraging as many Valuation-Informed Indexers as possible to post at every board and blog. And you should be encouraging them all to hold nothing back, to post their sincere views in as blunt and honest and straight-forward and clear a manner as possible.
That’s my sincere take re these terribly important matters, in any event.
Rob