Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
“Why do you get to dictate what people say about stock investing on the internet?”
The question is why do you think you should have this right? Why do you think you should be able to post what you want, where you want and when you want? Just as you decide what you will allow on your website, others have the same right to allow what they want. Every website owner controls their own content.
You are stating the general rule. But there are limits to the general rule. When you cross the line into committing financial fraud, you have gone too far.
Bernie Madoff went to prison because he created phony transaction statements that led the owners of shares in his fund to believing that the fund had purchased certain companies at certain prices and then sold those companies at better prices. Madoff could not say: “Oh, there’s no law against writing the names of companies and then dollar signs and numbers on pieces of paper and then mailing those pieces of paper to thousands of people.” No, there’s no law against doing that. But there is a law against financial fraud and Madoff’s clear purpose was to trick the owners of his fund into thinking that the transactions described on these pieces of paper had really taken place. Madoff is in prison today. Properly so.
So it is with John Greaney and with those who have posted in “defense” of him. Website owners control their own content. But to cover up an error that one has made in a retirement study is an act of financial fraud. If a site owner bans people from his site solely because those people have posted honestly on safe withdrawal rate, that is fraud. That gets you put into prison.
It is ultimately juries who have to decide which people who committed the crime in an objective sense go to prison and which do not. Wade Pfau presents a sympathetic case because he put his career on the line trying to get the authors of the Trinity study to correct their study. Wade ULTIMATELY committed financial fraud. But he obviously did so with his feet dragging. Wade obviously WANTED to do honest work. So, if I were sitting on his jury, I would let him off. I think that the men and women who are appointed to sit on his jury will also let him off. But I cannot decide the matter for them. The jury members get to make that decision. I trust our system to produce good results. So I just have to leave it to the jury to do good work.
Under no circumstances do I want to commit financial fraud myself. First of all, I do not want to leave it to a jury to decide whether I go to prison or not. I believe that a jury would be sympathetic to my case if I agreed to say that Greaney’s study contains a valuation adjustment. But why should I have my life riding on what a jury decides? It seems better to me for me just to not commit the crime in the first place. That’s why I told Wade that I thought that he was “insane” to flip to the Goon/Criminal side of this matter.
Second, I don’t want there to be more Wade Pfau’s in the future. Or more Mel Linduaer’s. Or more John Greaney’s. Or more Jack Bogle’s. I want us all to feel free to post honestly re these critically important matters at every discussion board and blog on the internet. Why even train people to become academic researchers in this field if we are not going to permit them to post honestly? We need the Wade Pfau’s of this world doing honest work. Every last one of us needs that. It’s a win/win/win/win/win.
If I commit financial fraud myself, I am making the situation worse rather than better. Each time another person with a desire to do honest work flips to the Goon side out of a fear of the intimidation tactics being used against them, it scares others who are on the edge and trying to work up the courage to post honestly. It takes us down, down, down. It’s because people were afraid to speak back to Bogle back in 1981 that Greaney ended up in the place where he is today. Greaney is a friend of mine. So I very much wish that someone had had the courage to stand up to Bogle back in 1981, So I sure don’t want to make the same mistake by failing to stand up to Greaney in 2017. Selling out my fellow community members would just create more Greaney’s down the line. I want there to be fewer prison sentences and shorter prison sentences, not more, longer prison sentences.
Does all of that not sound at least roughly right to your ears, Anonymous? Do you not think it is better to have shorter prison sentences and fewer of them? In my mind, this is not even a close call. In my mind, there should be no controversy over this one. I only wish that Bogle had come clean back in 1981, and that, if he failed to do so because he was suffering from cognitive dissonance (which is a real phenomenon), that his friends had all encouraged him to come at least partially clean by saying that there was at least a chance that he had made a mistake and that he thus encouraged everyone to post honestly re these matters.
Rob
Anonymous says
“Bernie Madoff went to prison because he created phony transaction statements that led the owners of shares in his fund to believing that the fund had purchased certain companies at certain prices and then sold those companies at better prices. ”
What phony transactions have been perpetuated by any goons, buy and holders, etc? Your claims of fraud have no basis.
Rob says
The Buy-and-Hold retirement studies are fraudulent studies, Anonymous.
Shiller published his “revolutionary” (his word), Nobel-prize-winning research showing that valuations affect long-term returns in 1981. If valuations affect long-term returns, there is precisely zero chance that the safe withdrawal rate could be the same number at all valuation levels. So why was the Trinity study (published in the mid-1990s) approved for publication in a peer-reviewed journal? The entire purpose of peer review is to protect us all from this sort of thing.
I don’t believe that Buy-and-Hold was fraudulent in the days before publication of Shiller’s 1981 research findings. Fama was awarded a Nobel prize too and I believe properly so. But it is a logical impossibility that the safe withdrawal rate is the same number at all valuation levels if valuations affect long-term returns. So the Trinity study should not have received peer-review approval. And in the event that the cognitive dissonance of those who believe in Buy-and-Hold was so great that the peer-review committee believed in their hearts that the safe withdrawal rate is always the same number (my personal belief is that this was probably the case), at the very minimum the committee should have attached a caveat to its approval warning readers of the Trinity study and all other Buy-and-Hold retirement studies that Shiller’s research indicates that it is not possible to calculate the safe withdrawal rate accurately without considering valuations. At least in that event readers of the Buy-and-Hold studies would be aware of the dangers of making use of them and could decide for themselves whether to use Buy-and-Hold numbers or valuation-adjusted numbers.
To not warn people of the dangers of the Buy-and-Hold retirement studies at a time when there is 36 years of peer-reviewed research discrediting those studies is an act of fraud. Experts have a responsibility to keep up with the research in the field in which they claim expertise.
Now —
What I think about this question doesn’t matter in practical terms. I have no power to prosecute anyone for fraud and I have zero desire to ever obtain such power. What matters is what millions of middle-class investors say in the days following the next price crash. If they are pissed off about losing 50 percent of their life savings, they will demand criminal prosecutions. If the jury members who are appointed find the lame word games that you Goons have been advancing for 15 years now unconvincing, you will be given long prison sentences.
The emotion of all this changes following a 50 percent price drop. Today, many investors hate hearing what the last 36 years of peer-reviewed research says. To accept what the research says is to accept that the portfolio values of today need to be reduced by 50 percent. Following the price crash, it is the Buy-and-Holders who will be feeling the wrath of the millions of investors who will at that point have seen their financial futures destroyed by the relentless promotion of the smelly Buy-and-Hold garbage and by the 15-year Ban on Honest Posting on the dangers of the Buy-and-Hold strategy.
Please mark me down as saying well in advance of the crash that the 15-year cover-up is the biggest act of financial fraud in the history of the United States. I believe that it will work to your benefit to help me spread the word re that one. I intend to do what I can to get your prison sentence reduced a wee bit. One of the arguments that I intend to make is that you Goons could never have pulled off this massive act of financial fraud by yourselves, that the failure of millions of non-Goon Buy-and-Holders to speak out against your abusiveness and against the clear logical deficiencies of the Buy-and-Hold strategy created a trap into which you Goons fell and that this reality suggests that you Goons are a little less to blame for the massive act of financial fraud than would otherwise be the case. The more credibility that I possess in the eyes of the millions of middle-class investors whose lives will have been destroyed, the more power my arguments in your defense will carry. So you are helping both of us if you spread the word that I have been speaking out in OPPOSITION to this massive act of financial fraud for many years now.
It is fraud, Anonymous. I am 100 percent sure. I have been saying that for 15 years. In a softer form in the early days when the realities of this massive act of financial fraud were less clear to me. And in a stronger and less compromising form as the realities become clearer and clearer. What I have been saying for 15 years now I still will be saying 15 billion years from today if I am around that long.
Madoff created false transaction statements. That’s fraud.
The Buy-and-Holders created false safe-withdrawal-rate statements. That’s 500 times worse because it destroyed many more lives. Shiller pointed out in his book that the continued promotion of Buy-and-Hold would cause the biggest economic crisis in U.S. history by the end of the first decade of the new Century. And here we are. The Buy-and-Hold Crisis has even caused political frictions on both the left and the right. I want no part of it. Please mark me down as OPPOSED to the economic crisis and to the continued promotion of the Buy-and-Hold strategy.
I love my country, Anonymous. That runs deep. No advocacy of Buy-and-Hold “strategies” for this boy.
All that said, I do wish you the best of luck in all your future life endeavors.
Rob
Anonymous says
“That’s 500 times worse because it destroyed many more lives. ”
Millions? Show us just one.
Rob says
There have been thousands of articles written about how the economic crisis that began in late 2008 has hurt each and every one of us, Anonymous. Do a Google search.
Shiller predicted that crisis in a book published in March 2000. His book also showed us how to avoid the crisis. Economic crises are caused by bear markets; the huge loss of consumer buying power experienced in bear markets always cause economic crises. And bear markets are caused by bull markets — a market’s job is to get prices right and, once millions of people come to believe in Buy-and-Hold and thus refuse to exercise price discipline when buying stocks, there is no way for the market to get prices right but to crash them. And bull markets are caused by the promotion of Buy-and-Hold strategies (price-indifferent strategies). Market prices are self regulating so long as we permit honest posting on how the long-term value proposition of stocks changes with changes in valuations. And of course it is only Buy-and-Holders who object to honest posting on the 36 years of peer-reviewed research showing how critical it is for all investors to exercise price discipline. Only Buy-and-Holders profit from the insane and criminal abusiveness we have been seeing on our boards and blogs for 15 years now.
You have heard from thousands of our fellow community members and you ignore what you hear. That’s the Goon way. The question for the future is — Will enough of the millions of people whose lives have been destroyed by your abusiveness work up the courage to stand up to you Goons in the days following the next price crash? I believe that will. We’ll get to watch it play out together in coming days.
I have already provided a mountain of proof that valuations affect long-term returns. Offering you a second mountain of proof will make no difference.But working with the American people to have you put behind prison bars, where you belong, will do the trick. That’s where this is headed, my long-time abusive-posting friend. I am 100 percent sure.
My best wishes to you and yours, in any event.
Rob
Anonymous says
From your blog, 9/28/16:
“Also, I have plans to prepare an article for posting sometime in 2017 that will offer a listing of the 101 most important acts of financial fraud. That article will provide the link to the Bogleheads Forum thread that you are seeking. In the event that the thread has been doctored (Surprise! Surprise!), I have a copy of the complete thread in my files, so I will be able to provide the words that appeared before the thread was doctored.”
2017 is nearly over. Where’s the article?
Rob says
Would you believe “sometime in 2018,” Chief?
The article is in draft form. I add items to it all the time. But I have not as of yet put it into polished form.
It may be that it would be better to publish that article and the four others of a similar nature that I have been working on behind the scenes for a long time now in the days following the crash. My guess today is that that is when you will see it. It is only after the crash hits that the article can be said to be in truly complete form and it is after the crash when it is likely to have the greatest impact. So I am leaning toward thinking that it would be best to save it for them.
I hope that helps a small bit.
Rob
Anonymous says
“Would you believe “sometime in 2018,” Chief?”
No. Nor do I believe it is in “draft form”. Nor do I believe that you will ever post on political sites. Nor do I believe that you will ever fix the porch, despite your wife’s simple desire to have a little pride in her home. Nor do I believe that I will ever be proven wrong on any of these things.
Yes, let’s just wait to see how it all plays out.
Rob says
I see it as our only realistic option at this point in the proceedings.
Please take good care, old friend.
Rob
Anonymous says
“There have been thousands of articles written about how the economic crisis that began in late 2008 has hurt each and every one of us, Anonymous. Do a Google search.”
You mean the crisis tied to the sub prime debacle? I don’t recall a single person, other than you, that comes to the conclusion it was a result of buy and hold.
Rob says
I have not heard anyone else say that Buy-and-Hold caused the economic crisis either, Anonymous.
Here are some words from Shiller’s book: “If over some interval in the first decade or so of the twenty-first century the U.S. stock market is going to follow an uneven course down, as it well might — back, let us say, to its levels in the mid-1990s or even lower — then 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.”
I think it would be fair to say that the reason why we don’t hear lots and lots of people putting the blame for our economic crisis on the continued promotion of Buy-and-Hold strategies is that people fear the tactics that have been employed by the Buy-and-Holders for years now to suppress discussion of the last 36 years of peer-reviewed research in this field. People do not like to see death threats directed at them. People do not like to see demands for unjustified board bannings directed at them. People do not like to see thousands of acts of defamation directed at them. People do not like to see threats to get them fired from their jobs directed at them. This is just human nature.
Our laws against financial fraud are much-needed laws, no? The announcement of your prison sentence will go viral and turn things around, no? That’s surely my expectation.
My best wishes to you.
Rob
Anonymous says
“I have not heard anyone else say that Buy-and-Hold caused the economic crisis either, Anonymous.”
You just proved my point. Further, you can’t just make up allegations of fraud to support your agenda. For example, I could point out how your advice over the last 7 or 8 years has caused millions to have shortfalls in their retirement by staying out of the market since you have been warning them of a crash and that through this advice, you have committed fraud. There are thousands and thousands of other opinions on investingthat will all have different outcomes. Does it mean that everything but your position is based on fraud? Of course not.
Rob says
If you stated your opinion that Buy-and-Hold is the ideal strategy and you did not make use of death threats and demands for unjustified board bannings and thousands of acts of defamation and threats to get academic researchers fired from their jobs as part of an effort to suppress discussion of the last 36 years of peer-reviewed research, I would not say that you had engaged in fraud, Anonymous. I believe that you are helping us all out when you make the case for Buy-and-Hold just as I am helping us all out when I make the case for Valuation-Informed Indexing.
But you cross the line into financial fraud when you engage in insanely abusive behavior. That’s my sincere take, in any event. We will have to see how the American people respond to losing most of their life savings to find out for sure how things will go for you. All that I can share with you today is my sincere take. I am happy to do what I can to help you out. I believe that I can make a case that you are feeling unusual pressures. If that helps, I will be glad to see you helped by my words. But I am not personally going to engage in financial fraud to help you. I can only say things that I believe to be true. I am not going to say that I believe that Greaney included a valuation adjustment in his study and I am not going to deny that there is 36 years of peer-reviewed research showing that such an adjustment is required.
Does all of that not make good sense?
Is there something else that you want from me?
If there is, I would be grateful if you would let me know what it is.
If you are not willing to say what it is that you want from me, it seems to me that we are both just going to need to wait this thing out a bit longer. I truly do not see any other realistic options that are available to us at this point in the proceedings.
Are we good re all that?
Rob