Set forth below is the text of a comment that I recently put to another blog entry at this site:
None of this is about having information or lacking information, Anonymous. It is about giving in to the Get Rich Quick impulse or reining in the Get Rich Quick impulse.
The Get Rich Quick impulse is risk. There is now 34 years of peer-reviewed research showing that. That research is based on 140 years of historical data. When you give in to the GRQ impulse (that is, when you fool yourself into thinking that there might be some mystical,magical alternate universe where price discipline might not be required when buying stocks), you add to your risk. When you make use of tools showing you how dangerous Buy-and-Hold strategies are, you add to your risk. It’s been that way since the first stock market opened for business.
There were institutional investors who had information coming out of their ears who jumped out of windows during the Great Depression. Their tons of information didn’t help them one whit. Books and articles and calculators and podcasts that told them about the importance of price discipline when buying stocks would have helped them a great deal.
When my mother was alive she used to say to me that she couldn’t understand why my older brother still smoked because “he’s so smart.” He’s plenty smart. But being smart or not being smart has absolutely nothing to do with why somebody smokes or doesn’t smoke. Having lots of information has nothing to do with why one becomes addicted to a Buy-and-Hold strategy or not. The Get Rich Quick impulse is an emotional thing. It is not rooted in one’s brain.
That’s the problem I have with you. You are plenty smart. But you use your intelligence to avoid the findings of the peer-reviewed research in this field, not to explore them. I call this model “Valuation-Informed Indexing,. So I make a suggestion that being informed makes a difference. However, the full truth is that it is not being informed that does the trick. Not by itself.
If you never become addicted to smoking in the first place because you are informed of the dangers, then in that case being informed can make a difference. And being informed can make a difference once you have an epiphany and come to see how much a pure Get Rich Quick approach can hurt you. But there is something beyond being informed that is needed to make one an effective long-term investor.
I don’t today have an entirely clear understanding of what that something is. Why do some people get this stuff and others have such a hard time with it?
I look at the people who get it and try to identify similarities. That has given me little clues but nothing that has impressed me enough for me to be able to write full articles describing the secret. I think that part of it is caring about something other than investing enough to overcome the power that the Get Rich Quick urge has to fool us all about what works in investing.
I care deeply about journalism. I once believed in Buy-and-Hold. So I have as much of a Get Rich Quick urge as you. I think that what pulled me out was my love of journalism. In the early months of these battles, I saw a story. And I couldn’t let that go. I had to figure it all out, learn what I needed to learn to tell the story properly. I think that is what helped me see things that others couldn’t see and rise above all the emotional pressures.
John Walter Russell and Wade Pfau cared about their statistical craft. They are researchers and getting the numbers right means something to the. So they overcame the emotional pressures too, completely in John’s case and partially in Wade’s case. I think they both saw this as sort of a puzzle and they wanted to see the puzzle pieces click in. That gave them what they needed for the information to have an effect.
Not everybody who invests is going to be a journalist or a researcher. So we need to identify other motivators for seeing through the garbage GRQ stuff. I have a vague idea that the answer is to have positive investing emotions. People in this field cite fear and greed as investing emotions all the time. Those are both negative emotions. Greed brings on bull markets, fear brings on bear markets. I think there have to be positive investing emotions too. People need to nourish hope and love as investing emotions that could counter the two negative investing emotions.
For example, you might have hopes for an early retirement. Those hopes might give you what you need to counter all the Buy-and-Hold garbage and to become able to study and understand clearly the last 34 years of peer-reviewed research. Or you might feel love for a son or a daughter and want to help them obtain a strong financial footing and that love might empower you to see through the Get Rich Quick fantasies of a world where price discipline doesn’t really matter all that much.
Do we care enough about our long-term investing results? We think we do. I am beginning to question whether we really do on a deep level. The long term is a distant thing for most of us. It is an abstraction. We get a little surge of positive feeling every time prices go up because seeing that makes us feel that we are smart, it flatters us. To overcome that, we need to have as strong a feeling about the long-term. And to care about the long-term, we need to have positive investing emotions like love and hope as well as negative ones like fear and greed.
That’s part of the reason why I use that catch phrase in my conversations with you Goons where I point out that “I love my country.” That’s a positive emotion. I try to focus on that, how our country will be better off when honest posting is permitted, to help me work up the courage to violate the Social Taboos that tell us all that we should not hurt people’s feelings by telling them about what the peer-reviewed research shows us about the chances that GRQ strategies will be successful in the long run. I love my country. That’s a reason for wanting people to know the realities of stock investing.
These are still sketchy ideas. I think coming to a better understanding of this aspect of the question is an important project for coming days. Why is it that the peer-reviewed research clicks for some while other perfectly smart people remain mired in all the Buy-and-Hold/Get Rich Quick garbage? Informing people is important. I am a journalist, I obviously care about informing people. But there is another element here, some sort of emotional element, that is needed for the information side of things to click.
I am no smarter than you Goons. But I get it and you don’t. Why? What do I possess that you lack?
I didn’t get it myself prior to the evening of August 27, 2002. Why does the current-day me get it when the prior-day me did not?
Why does Bogle sort of, kind of get it and sort of, kind of not get it? Why is the same so for Bernstein and Burns and Swedroe and Schultheis and Piper and Tresidder?
Hope and love are the counters to fear and greed, I believe. But what do we need to do to help people to feel more hope and love and for the information we supply them to therefore make a difference in aiding their efforts to understand this stuff?
I think I feel a column coming on!
Rob
Rob,
Why do you continue to do what you do? Clearly, you are not making any money running this board and it doesn’t seem to have resulting in a consulting business or other kind of revenue generating endeavor. You also don’t seem to have a following. So after spending all these years going down the same path, the question remains why you keep doing what you are doing?
I’m not making any money, Reality. You got that one right. I haven’t made a dime in 13 years. That makes me very, very, very sad. It makes my wife even sadder!
I don’t think you are right when you say that I don’t have a following. There’s one sense in which you are right. No one posts comments here but you Goons. That reality leaves the impression that I do not have a following. But I have had thousands of people express great enthusiasm re my stuff. I have had some of the biggest names in the field tell me that they rank my site as the #1 investing site on the internet. That translates into MILLIONS of followers once the Ban on Honest Posting is brought to a full and complete stop. That translates into wealth at Bill Gates and Steve Jobs and Warren Buffett levels. I could get by on those sorts of amounts, you know?
The short answer to your question is that I have never been offered any options for handling things in any other way. Back in the 1960s, the Buy-and-Holders started us all off on a grand quest to learn in a scientific way how stock investing works. They generated dozens of genuine and powerful insights. They made a mistake re valuations. Shiller corrected the mistake in 1981. The Buy-and-Holders elected to cover up the mistake rather than to acknowledge it. We are now in the economic crisis that inevitably was going to follow from that terrible choice. The Buy-and-Holders would be thrilled to go back in time to gain an opportunity for a do-over. But no time machines are available to them. So they go with this abusive stuff instead to put off for a day or a week or a month or a year the time when they will finally have to come clean and acknowledge that valuations really do affect long-term returns after all.
I love my country, Reality. That’s a four-word explanation of why I do what I do. I love my country.
Our country is in a jam. We shouldn’t be. We are the luckiest generation of investors who ever walked Planet Earth. Combine Shiller’s “revolutionary” (his word) finding with the many good findings of the Buy-and-Holders and it becomes possible to reduce stock investing risk by 70 percent. The peer-reviewed research that I co-authored with Wade Pfau shows that. So we are in an amazingly positive situation.
But the Wall Street Con Men have power and money and influence and a ruthless determination to block millions of middle-class people from learning how stock investing works in the real world. So tens of thousands of entrepreneurs have seen their businesses fail. And millions of workers have lost their jobs. And millions more are on their way to suffering failed retirements.
I don’t think we will be able to make it if we don’t open the internet to honest posting following the next price crash. It’s not just that we are going to see a deepening of the economic crisis, possibly putting us into the Second Great Depression. Even the continued viability of our political system is in jeopardy. Millions of middle-class people are not going to get the joke when their retirement plans fail. They are going to be angry. They are going to be asking lots of hard questions. I want to be available to soften their anger to the extent that that will be possible. I need to have credibility in their eyes to be able to do that. I won’t have credibility if I tell lies just to make a buck today. So I continue to post honestly.
We have a great country, Reality. I believe that we will get through this. We have gone through dark times before and survived them. The Buy-and-Holders are not bad people. Jack Bogle is a hero of mine. None of the material at this site would exist were it not for the things I have learned from reading Bogle’s books and speeches. I think it is going to melt Jack’s heart when he sees the human misery he caused with his support for the Campaign of Terror led by you Goons. I think Jack is going to flip and demand an end to the Ban on Honest Posting. I expect to be working closely with Jack to turn things around. I think the years following the next crash are going to be exciting and positive times. I believe that even some of you Goons will be getting involved in constructive projects in those days. We’ll see.
I love my country and I want to help. I want to help the millions of middle-class investors. I want to help all the investment advisors who don’t like the idea of giving up their personal integrity to be able to make a buck in this field. I want to help all my Buy-and-Hold friends who started out doing something very, very good and important and now find themselves on a very dark path indeed. I get a kick out of helping people. I look forward to taking all the bad stuff we have seen over the first 13 years of our Debate About Having a Debate and turning it into gold.
I talked to lots of people at the Financial Bloggers Conference (FinCo15) that I returned from the other day. There were a few who debated me. That’s of course fine. There are lots of good and smart people who still believe in Buy-and-Hold and I think we all learn from them making their case to the best of their ability. There were a greater number whom I would describe as confused, who see that there are holes in the Buy-and-Hold dogmas but who cannot begin to perceive how fatal a mistake the Buy-and-Holders made when they elected to cover up the last 34 years of peer-reviwed research in this field. And there were a good number of people whom I spoke to who agreed with me on most points but who hold back from saying so in clear and firm and simple language because they know how that would upset lots of people and do damage to their careers.
We are on the one-yard line, Realty. It’s been 34 years since Buy-and-Hold was discredited by the peer-reviewed research. When you see people using death threats to intimidate those trying to tell people about the peer-reviewed research, you know that the “strategy” under discussion is in its last days. Buy-and-Hod died intellectually 34 years ago. It is close to dying in practical terms. It is one stock crash away from its demise. Or at least so Rob Bennett believes.
I love my country. I enjoy putting the talents that God gave me to productive use. I get a kick out of helping people. I am honored and humbled to be the lead player in the most important political/economic story of my lifetime; what journalist would turn down that opportunity? I care about every soul that I have connected with over the past 13 years, including you Goons.
Does that tell you what you need to know?
I call the situation that I am in “the Perfect Trap.” I can’t make a penny because if the model for understanding how stock investing works that I have developed becomes better known, lots of powerful people will have to say the words “I” and “Was” and “Wrong” and they really, really, really don’t want to do that. Yet I cannot let go because the shift from Buy-and-Hold to Valuation-Informed Indexing is the biggest advance we have ever achieved in the history of personal finance by a factor or 50 or more. Yowsa!
Could I be wrong?
Anybody can be wrong about anything. I check myself every day trying to find any sign that I am wrong. I have never found anything of any consequence. So I have to continue on the path that I am on today. In the event that I am wrong, I will just have to live with it. These things happen in this world. I cannot deny the mountain of evidence that says that I am right. I couldn’t live with myself if I did that.
If I am not wrong, our country is close to entering the greatest period of economic growth in our history. We will in not too much more time be seeing 34 years of powerful insights becoming opened up to us in one day. Imagine seeing all the advances that we have seen in the computer electronics field arrive on our doorsteps in a single day. That’s what we are going to see in the investing field except to a far bigger extent than what that suggests because it is far more important that we get investing right than that we be able to communicate through computers.
We are in the process of changing the world in a very big way and in a very positive way, Reality. I’m not trying to keep any of this to myself. I am open to sharing with everyone. This is good stuff piled on top of good stuff piled on top of good stuff piled on top of good stuff. No downside whatsoever. You don’t see projects with that sort of upside too often. I have never seen anything like this anytime, anywhere.
That’s the story. I love the good that thousands of us have done with a burning love. I don’t love the Goon stuff even a little bit. But I do acknowledge that even you Goons have made many positive contributions mixed in with all the smelly garbage that you specialize in. This story is so positive that even those doomed and determined to destroy themselves and their country end up making positive contributions! Wow!
Love is the answer, Reality. It really is. I 100 percent believe that you are going to see that following the next price crash. I’m rooting for you!
Rob
“It makes my wife even sadder!”
Of course. Any wife would be saddened by a husband who is capable of working but hasn’t “made a dime in 13 years”. Since you acknowledge that fact, to what extent (if any) does it bother you?
It bothers me.
But it doesn’t bother me enough to persuade me to betray my fellow community members and to betray my profession and to betray my country and, yes, to betray my family.
Timothy is 15 and Robert is 13. They are going to be making their own way in this world in not too long a time, Anonymous. Are they going to be making their way in a country trying to survive the Second Great Depression? Will that Second Great Depression bring us to the Third World War in the way that the First Great Depression brought us to the Second World War? Or will they be making their way in a country enjoying the greatest period of economic growth in its history, a country in which the risk of stock investing has been reduced by 70 percent and in which millions have learned what they need to know to retire many years earlier than what they thought was possible in the Buy-and-Hold Era?
We all have jobs to do in this world. Opening the internet up to honest posting on safe withdrawal rates and scores of other critically important topics is mine. It’s a hard job. It’s not a job that I sought for myself; it is one that was handed to me. I don’t see anyone else stepping forward to take on this important work. So I soldier on.
When I am awarded the $500 million settlement payment, that will be my wife’s money too. She will have earned it with her patience as I earned it with my determination. No one gets paid $500 million for nothing. My wife will have earned every dime of that money. She will be able to live the rest of her life proud of the sacrifices she made so that our country could recover from the economic crisis caused by the Buy-and-Holders (inadvertently — but still!).
She has hung in there in the face of all that you Goons have dished out to us. I am proud of her. She shouldn’t have to exercise such patience. But we don’t all get everything that we deserve in this life. We all have times when we have to bear up in the face of injustices. She’s done a good job of that. To her great credit.
I hope that helps you understand the thinking going on in the Bennett household a bit better, Anonymous. We certainly don’t approve of any of your Goon garbage. But we try not to let it influence our behavior too much. We try to keep our eyes on the prize — the shift from Buy-and-Hold to Valuation-Informed Indexing that will liberate millions of middle-class workers from the ignorance that made stocks a risky investment class for many years prior to the publication of Robert Shiller’s “revolutionary” (his word) 1981 research.
My best and warmest wishes to you and yours.
Rob