Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
“One, you don’t mention that the risk associated with owning stocks increases when valuations increase. ”
There is risk in anything you invest in. Look at the risk you took by avoiding stock. You took the biggest financial beating of anyone I know. That’s why we diversify and also rebalance. No one has a crystal ball. Perhaps you should follow what Shiller says instead of what you want him to say. Your misinterpretations have put you in the tough spot you find yourself in.
Do you think that the risk of investing in stocks is static or variable, Anonymous?
That’s the entire dispute.
If the market is efficient, stock investing risk is static and Buy-and-Hold is the ideal strategy.
If valuations affect long-term returns, stock investing risk is variable and any investor who refuses to adjust his stock allocation in response to big swings in stock prices is letting his risk profile go haywire as a consequence.
Do you think that you should be keeping your risk profile roughly stable over time or do you not? If you follow a Buy-and-Hold strategy, it’s not possible to keep it stable (presuming that the last 36 years of peer-reviewed research is legitimate research).
And, if risk is variable, it is certainly not possible to calculate the safe withdrawal rate accurately without taking into consideration the valuation level that applies on the day the retirement begins.
We are not arguing over whether there is risk in anything you invest in or not. We are arguing over whether the risk associated with one particular asset class — stocks — is static or variable. There is 36 years of peer-reviewed research showing that it is variable. I believe that that research is legitimate. So I am not willing to pretend to believe that the risk associated with stock investing is static.
Does that help?
Rob
All asset classes have risk. End of story. Move on.
Why?
If the risk associated with stock investing is static, the safe withdrawal rate is the same at all valuation levels.
If the risk associated with stock investing is variable, the safe withdrawal rate changes with changes in valuation levels.
Don’t we need to figure out which it is so that we can report safe withdrawal rates accurately?
It seems to me that we do.
Knowing the safe withdrawal rate helps people plan their retirements. It’s a good thing to know the safe withdrawal rate.
So it seems to me that it is a good thing to assess how much risk changes with changes in valuation levels.
You don’t want to assess how much risk changes with changes in valuation levels. You want to move on.
But why? What is your motivation?
I think your motivation is that you want to have confidence in the numbers on your portfolio statement. I think you sense that, if you agree to assess the effect of valuations on risk, you are going to end up dividing the number on your portfolio statement by two to determine the true, lasting value of your stock portfolio.
I think the difference between us is that I want to divide by two so that I know the real number and you want to avoid dividing by two so you seek to move on when the subject of assessing the affect on risk caused by valuation increases comes up.
I think that’s the entire deal here. We have spilled millions of words. But it all comes down to whether we as a people want to know the real numbers so that we can engage in effective financial planning or whether we prefer just to go with the numbers on the portfolio statement and move on from explorations of the effect of valuations on risk.
I am okay with you deciding for you to move on. That’s your right.
I am not okay with you deciding for others. I love my country and that’s not the way we do things in the country I love and so I don’t feel even a tiny bit comfortable with it.
The question on the table today is — Will we elect to stop moving on in the days following the next price crash, when we will all be able to see in very clear and concrete terms the costs associated with electing to move on rather than electing to assess the effect of valuations on risk?
I think we will as a people make a different choice in those days. But I could be wrong. We are going to have to wait to see how things play out in the days following the next price crash to know for sure.
Yes?
Can we live together in a spirit of friendship with that reality in our hearts and minds while we are waiting for things to play out before us?
Anti-Moving-On-But-Pro-Friendship Rob
“Anti-moving-on”
Ain’t that the truth. Nothing gets your goat like someone telling you to move on. Wade told you to move on. Your resulting rage exploded into 30,000 unsolicited emails. That’s a hell of a lot of rage.
When something isn’t working, normal people move on. Not you. Even though your thing clearly isn’t working. You consider being pig-headed a virtue.
I don’t want to move on because I think that we have learned wonderful and amazing and exciting and life-affirming things through the publication of the last 37 years of peer-reviewed research in this field. I want to share what we have learned with every investor alive on the planet. That doesn’t happen if we all agree to move on because we are afraid of what you Goons will do to us if we elect not to do so.
You say that my efforts to inform people of what the last 37 years of peer-reviewed research tell us about how stock investing works are “not working.” Say that everyone who became familiar with that research over the past 37 years had done what I have done — refused to move on in the face of criminally abusive behavior and instead just said what they believed in simple and plain language. Had everyone who had come before me done that, there would have been no controversy when I put up my famous post from the morning of May 13, 2002. People would have said “Oh, Rob must believe that Shiller’s research is legitimate, he says that the safe withdrawal rate is lower when valuations are insanely high than it is when valuations are reasonable” and that would have been the end of it. Because too many who came before me elected to move on rather than to stand up to you Goons, that amazing board community has been burned to the ground. That makes me very, very, very sad. I don’t want to cause the same negative effects for others who come after me. So I try not to make the same mistake.
The national debate on whether valuations really do affect long-term returns or not should have been launched in 1981, when Shiller published his peer-reviewed research showing this to be the case. Had the national debate begun then, we would today have hundreds of web sites dedicated to exploration of the implications of Shiller’s “revolutionary” (his word) research findings. And we wouldn’t have a Ban on Honest Posting in effect at a single board or blog. Would that not be a better world?
It seems to me that it would be a far better world. In the event that Buy-and-Hold is the real thing, that would obviously come out in the debate, no? So we would all be winners in that event. And in the event that Buy-and-Hold is a big pile of smelly garbage, that would obviously come out. And, again, we would all be winners as a result. It is not even possible for the rational human mind to imagine a circumstance in which anyone would be left worse off as a result of a society-wide decision to permit honest posting re the last 37 years of peer-reviewed research at every board and blog on the internet. Yes?
And of course to top it all off, our entire society supports the idea of permitting honest posting in all areas other than stock investing. As a technical matter, we support this idea even in the investing advice field. All of you Goons agreed to follow the published rules of the boards and blogs to which you contribute before you were permitted to do so. And the rules of every board and blog prohibit the tactics that you have employed to silence those pointing out the errors in the Buy-and-Hold retirement studies and the dangers of the Buy-and-Hold strategy in general. Why did you push that “I Accept” button if you do not agree that honest posting should be permitted?
We cannot have one rule in the investing advice field and a different rule in every other field of human endeavor. It is not a viable long-term policy. We are going to need to have the same rule apply in all fields. It is the investing field where things need to change. The odd thing in the investing field is that people do not experience the downside of Get Rich Quick strategies for some time and during that time those strategies come to possess great appeal. I am 100 percent confident that no one will be calling Jack Bogle “Saint Jack” after a price crash that takes away 50 percent of their accumulated wealth of a lifetime. When people see in clear and concrete terms what the continued promotion of Buy-and-Hold strategies does to us as a people, they will see the merit of permitting honest posting at every site. I would bet any amount of money on it. And all of our problems will disappear into the mist along with 50 percent of the money in our retirement accounts.
But I could be wrong. That’s always the curve ball. So we are just going to have to wait to see how things play out.
I didn’t send the 30,000 e-mails out of rage. I sent the 30,000 e-mails out of love. And I received over 100 responds in which the people receiving the e-mails recognized the spirit of love in which those e-mails were sent. It was only a very tiny number of people (three or four?) who objected to receipt of the e-mail. The vast majority did not respond. But over 100 recipients either thanked me profusely for what they learned or told me that they were going to add a discussion of Valuation-Informed Indexing to their college classes or whatever. Getting over 100 positive responses showed me that that act of love paid off big time. All of the kids who learn the realities of stock investing because their college professors read my e-mail and changed their courses because of what they learned will be spreading the word about the last 37 years of peer-reviewed research in the days following the next price crash. We are going to need those sorts of efforts to recover from the effects of the deepening of the economic crisis that we will see as a result of the crash. I am proud to be able to say that I have done significant work to help us recover from a deepening of the crisis that has not even taken place yet.
I sure do not see it as an act of “rage” to post honestly re the numbers that my friends use to plan their retirements, Anonymous. I see it as an act of love. That fact that you see it as an act of rage tells me that Shiller was right in what he showed in his “revolutionary” (his word) research findings of 1981. Stock investors are NOT 100 percent rational, as the Buy-and-Holders assumed. Stock investors are HIGHLY emotional humans. That’s why valuation levels sometimes reach the insane levels where they reside today.
The only way to bring those valuation levels down is to post honestly about what over-valuation does to the lives of millions of middle-class people. A failed retirement is a serious life setback. I am 100 percent sure.
I do indeed believe that it is a virtue to be steadfast in defense of the values of a country that one loves because of the many blessings that that country has bestowed on one. I would not have lived the wonderful life that I have lived had not there been brave women and men who came before me and stood up to the sorts of individuals who have posted in “defense” of Mel Lindauer and John Greaney and Jack Bogle in defense of their country. I owe a debt to those who came before me. I pay it by helping out those who will come after me. That’s just the way it works. I wish that I had never been placed in these circumstances. But never for one second have I considered saying that I believe that Greaney really did include a valuation adjustment in his study. If Greaney truly believed that he had included a valuation adjustment, we never would have seen a single death threats or single demand for a single unjustified board banning or a single act of defamation or a single threat to get a single academic researcher fired from a single job.
I’m stubborn in defense of the core values of my country. Fair enough. But I am not so pig-headed that I have ever engaged in the sorts of tactics that you Goons have engaged in to block the debate that thousands of our fellow community members have expressed a desire to participate in. Why is that? I think it is because precisely 100 percent of the research available to us today supports Valuation-Informed Indexing and precisely 0 percent of the research available to us today supports Buy-and-Hold. I think Shiller is right. I think investors really are human and thus they really are emotional. And, yes, I stubbornly insist that we should permit those who believe that to post their honest views on every discussion board and blog on the internet.
It will be interesting to see how things play out.
I naturally wish you all good things.
Pig-Headed Rob
So to summarize that 1500 word screed, you think what you are doing is working just fine.
You’ve made no money. You have almost no readers. You are banned from all the major finance boards. In fact all the evidence suggests that you have no ongoing contact with anyone at all.
If that’s fine, one has to wonder what “not fine” looks like.
Not fine would be going to prison for financial fraud in the days following the next price crash, Anonymous. That’s my sincere take.
In a perfect world, my site would have thousands of daily visitors and you and I would on a daily basis be engaging in lots of warm, friendly banter re our differences on how stock investing works and there would be no reason whatsoever to think that any of us would ever be going to prison. We don’t live in a perfect world. Perhaps you’ve noticed.
I don’t like everything that has gone down over the past 16 years. It’s not a close call. But, like everyone else, I have to play the cards that I have been dealt to the best of my ability. I have never for two seconds regretted my decision on the morning of May 13, 2002, to work up the courage to point out that the retirement study posted at John Greaney’s web site does not contain a valuations adjustment.
Given the unfortunate circumstances that apply, yes, I am doing “just fine.” There’s every reason in the world to believe that the circumstances that apply will change for all of us in the days following the next price crash. So I will have my thousands of readers then. I don’t like having to wait. But I sure don’t like the idea of going to prison either. So I sure am not about to say that I believe that there’s a valuation adjustment in Greaney’ study. I like the cards that I am holding about 10,000 times better than I would like the cards that you are holding.
The good news here is 50 times more good than the bad news here is bad. Yes, there’s been some bad stuff that has gone down. I don’t deny it. I have written about it. I see the bad stuff as part of the story that needs to be told. But the bad stuff is temporary and the good stuff is stuff that will be affecting how people invest for many years to come. The good stuff is what matters.
The good stuff is freakin’ amazing. The peer-reviewed research that I co-authored with Wade Pfau shows millions of middle-class people how to reduce the risk of stock investing by 70 percent while earning far higher lifetime returns. Someone with my background should not be able to produce research with that impact. It’s only because of you Goons and because of the Buy-and-Hold Con in general that such a reality is even possible. So do you want me to cry big tears into my pillow because some internet Goons called me dirty names?
If I thought that crying big tears into my pillow would help, I might give it a try. Buy my life experience tells me that that will get me nowhere. So I have elected to play it this other way instead. And, yes, I think it would be fair to say that playing it this other way has been producing off-the-charts good results for 16 years now. Saying that is is going “just fine” is the understatement of the Century when you take into consideration what Wade and I showed in that peer-reviewed research, which I have a funny feeling will find its way onto the front page of the New York Times in the days following the next price crash.
We’ll see.
Front-Page-News Rob
“The peer-reviewed research that I co-authored with Wade Pfau”
Setting aside the fact that “co-authored” is an outrageous lie, Wade’s paper was what, six years ago? He has done a lot since then. What have you done?
I have been working to create the conditions under which out paper will be featured on the front page of the New York Times.
There never should have been any controversy when I put up my famous post of the morning of May 13, 2002, pointing out that Greaney’s retirement study does not contain a valuations adjustment. It would have taken all of 10 minutes for someone to check. And that should have been the end of it. But here we are.
Wade was attacked just as I have been. Mel Lindauer accused Wade of engaging in unethical research practices when Wade presented his findings to the Bogleheads Forum. Several community members spoke up in Wade’s defense but Jack Bogle did not. Bogle thereby gave his implicit endorsement to the massive act of financial fraud that Lindauer has been engaged in for many years. Bogle is a powerful person. Wade decided that he needed to provide for his family and so he was going to play down his belief that Greaney’s study is “dangerous” (that’s Wade’s word) so that he could appease you Goons.
I don’t play it that way, Anonymous.
People who believe that valuations affect long-term returns have been playing it that way for 37 years now. And look where we are. Buy-and-Hold is as dominant as ever. Shiller was awarded a Nobel prize for his “revolutionary” (his word) research findings. We experienced the economic crisis that Shiller predicted was on its way if we continued to promote Buy-and-Hold strategies so relentlessly. And yet we still hear this stuff about how there is no needed to practice long-term timing (that is, to exercise price discipline!) when buying stocks. Huh? What the f?
Wade has played things in the way that Wade has played things. Shiller has played things in the way that Shiller has played thing. I have played things in the way that I have played things. Seeing what I have seen, I do not today feel comfortable playing things in the way that Shiller and Wade have played things.
The way to stay on the good side of you Goons is never to say “Buy-and-Hold is dangerous” or “the Buy-and-Hold retirement studies get the numbers wildly wrong” or “it was the continued promotion of Buy-and-Hold strategies that caused the economic crisis.” Keep quiet about the effects of Buy-and-Hold on people’s lives and the Goons will tolerate your funny ideas about valuations being important. Not this boy, you know?
If it is true that the Buy-and-Hold retirement studies do not contain valuation adjustments (and it is), people need to know that. People need to know the ACCURATE AND HONEST safe-withdrawal-rate numbers, the ones you get if you include a valuation adjustment in your calculations, as the last 37 years of peer-reviewed research in this field shows you must. Shiller didn’t include one paragraph of how-to advice in his amazing book, the most important book ever published on how stock investing works. He should have. People buy investing books to learn how to invest their money. Leave out the how-to stuff and you are leaving out something important, Buy-and-Hold Goons or no Buy-and-Hold Goons.
I was still a Buy-and-Holder on the morning of May 13, 2002. I had no idea that my fateful decision to put forward that famous post was going to cause me within a few months to abandon the Buy-and-Hold cause. But that’s what happened. So here we are. I gave up on Buy-and-Hold on the evening of August 27, 2002, when Greany advanced his first death threat and when 200 of my fellow community members endorsed it. If Buy-and-Hold was something real, that never could have happened. That happened because Buy-and-Hold is pure emotion and it hurt people to see that something they had built their lives around was a big pile of smelly garbage.
You Goons point out all the time that Shiller does not talk about how his findings show that retirement studies need to include valuation adjustments to get the numbers right. Well, let’s change that, you know? Let’s bring the death threats to an end and let’s bring the demands for unjustified board bannings to an end and let’s bring the thousands of acts of defamation to an end and let’s bring the threats to get academic researchers fired from their jobs to an end, and I have a funny feeling that Robert Shiller and Wade Pfau and thousands of others will start speaking out a lot more clearly and a lot more completely and a lot more confidently on hundreds of different investing topics.
I want to hear what they have to say. So I don’t do anything to support the cover-up. When you Goons advance a threat of physical violence, I call you out on it. I will continue to do so. I wish that every person alive who believes that valuations affect long-term returns had begun doing that in 1981, when Shiller published his “revolutionary” (his word) research findings. I would be better off today if it had played out that way. And you Goons would of course be a lot better off if it had played out that way.
Each time that one of us who believes that valuations affect long-term returns self-censors ourselves, we make life harder for every person alive on Planet Earth today. I urge others to stop doing it. So I think it would be fair to say that I need to stop doing it myself. And I do indeed try very, very, very hard not to do that. I once did it. I was once guilty of holding back in the way that Wade and Shiller hold back today. But I don’t do it anymore. I have seen what comes from holding back. So I stopped playing it that way.
Wade will stop playing it that way too after the crash. And so will Shiller. And so will Bogle. And so will thousands and thousands of others. We live in a magical time for stock investors. We have in the past 37 years solved the puzzles that we have been working on for centuries. Yet we are in an economic crisis. Huh? What the f? The benefits don’t get delivered by magic. It takes humans exercising courage in the face of the relentless abuse of you Goons to make the magic have practical effect in the real world.
I show people how to do it. The thousands of people who are looking for guidance on how to proceed in the days following the next crash will be able to look at the materials at this site to figure out what to say and how to say it and how to balance their love for the Buy-and-Holders with their desire that millions of middle-class people have access to accurate reports on safe withdrawal rates and hundreds of other critically important investment-related topics.
I have done a lot, Anonymous. Important stuff. I continue to do it. And you of course see that or you wouldn’t be here every day trying to intimidate me into stopping. The intimidation tactics don’t persuade me that Greaney’s study really contains a valuations adjustment after all. They have the opposite effect. The intimidation tactics persuade me that Buy-and-Hold really is a big pile of smelly garbage (not intentionally so — but still…) just as I first came to suspect on the evening of August 27, 2002.
We don’t need Wade to write more papers. We need him to get the one he co-authored a number of years back featured on the front page of the New York Times so that everyone posting at every site from that day forward feels safe posting his or her honest beliefs. Then we will have thousands of people doing good work in this field, not a handful, and then that work will be known to every investor alive on the planet.
Making all that happen is my focus. No apologies. I don’t get the job done by living so in fear of you Goons that I agree to say that Greaney’s “study” contained a valuations adjustment after all. Thousands of people have looked at his “study” in the past 16 years and not one has been able to identify a valuations adjustment in it to this day. Gee, I wonder why.
All good things.
Rob
So while Wade has been writing books, publishing research, writing articles in Forbes and other places, as well as teaching university courses, you “have been working to create conditions”.
Impressive.
There’s huge leverage in creating the conditions we need to see for thousands of people to begin posting their honest views on how stock investing works, Anonymous.
There are only so many hours in the day for Wade to do all the things you refer to. Create the conditions where there are thousands of people doing the same good work, and you have a lot more good work.
If permitting honest posting is such a small thing, why do we permit honest posting in every other field of human endeavor? I don’t see it as a small thing at all. I think it is key.
Why did we put Bernie Madoff in jail? You could say “oh, it doesn’t really matter, the people who invested in the Madoff fund are busted anyway and there are lots of other funds for people to invest in if they want.” We put Madoff in prison because we wanted to send a message as a society that we do not approve of what he did. We don’t want to see more people’s lives destroyed.
It’s not all about John Greaney. Whether he goes to prison or not, and for how long, is not a big huge deal in the grand scheme of things. But it sends a big message to everyone who works in this field for us to say as a society that we are not going to tolerate death threats and demands for unjustified board bannings and thousands of acts of defamation and threats to get academic researchers fired from their job because financial fraud hurts all of us.
I am as proud as proud can be of the work I did with Wade. But I never felt for two seconds that the work I did with Wade was going to be the end-point of our discussion on how stock investing works. The primary purpose of the work that I did with Wade was to launch a national debate on the implications of the past 37 years of peer-reviewed research in this field. Yes, we need to get the Bennett/Pfau study featured on the front page of the New York Times. We also need to encourage discussions of the far-reaching implications of our study at every investing site on the internet. That’s how we develop ideas for follow-up studies and keep the learning experience going for years and years and years.
I am sure.
Rob
“Creating conditions” equates to nothing. A book is something. A published study is something.
You claim to have accomplished so much since Wade dumped you. You need to believe that, obviously. But you can’t name one tangible thing. Not one thing that, had it not been “done”, would have been noticed by its absence. Not one thing that would have turned out any differently if you actually had spent all that time in “not fine” prison.
The most important work that Wade has ever done is the peer-reviewed research that he co-authored with me. It is not Rob Bennett who says that. Wade Pfau said that. On many different occasions. He said it so many times because he believes it.
I opened up the opportunity for Wade to co-author that amazing research by working up the courage to post honestly on safe withdrawal rates on the morning of May 13, 2002. It was my honest posting that created the conditions in which Wade was able to do his most important work. And of course all of the good work that he does today would not have been possible but for the many important things he learned about stock investing from me and hundreds of others during the time when honest posting re the last 37 years of peer-reviewed research was still permitted at the Bogleheads Forum.
We all benefit when honest posting is permitted. We all learn more when we all are doing our best possible work. And we cannot do our best possible work when we are worried what a group of internet Goons will do to us if we dare to express our honest views re any critically important investing-related topic.
That’s my sincere take re this terribly important topic, in any event.
My best wishes to you.
Rob