“The Errors in the Buy-and-Hold Model Are Very, Very, Very Simple and Obvious Ones. We Suffer From Cognitive Dissonance re These Errors Because the Errors Are So Simple and Obvious That We Assume That We Must Be Wrong to Even Think That They Are Errors; If They Were, Surely These Hot Shot Experts Would Have Discovered Them a Long Time Ago.”

Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

“I put up a post pointing out the error in Greanry’s retirement study on the morning of May 13, 2002. The study has not been corrected as of today. Today’s date is November 1, 2018.

You say that my points have been addressed. But the study has not been corrected. Does that reality not tell a tale? People used that study to plan retirements.”

Noted expert, Wade Pfau, has already explained how you were wrong. To this day, you have not apologized. This is long over due.

I deleted this one when it appeared last night on grounds that it is a time-waster and an insult to the intelligence of my readers, However, after sleeping on it, I have had second thoughts and restored it on grounds that it gives me an opportunity to fit in the rant posted below.

The reference here is to something that Wade said when he was threatened by you Goons and flipped to the dark side so that his career would not be destroyed. Wade told me on numerous occasions (the texts of his e-mail appear at this blog under the “Wade Pfau” category) that he agrees with me on the subject of safe withdrawal rates. He has referred to the (uncorrected to this day) Buy-and-Hold retirement studies as “dangerous.” That says it.

When Wade was trying to come up with some explanation for his flip, I believe that he had Greaney help him with the wording because the explanation that he put forward was too lame for his own brain to have come up with. It was something that Greaney has said on earlier occasions. So I am pretty darn sure that that is where it came from.

The explanation offered was that Wade went back to the thread where my famous post from the morning of May 13, 2002, appeared and saw that Greaney had a post on it in which he said something to the effect of: “If you don’t think that 4 percent is safe, just take a lower withdrawal rate.” Wade said that those words solved the entire problem. That is of course not so.

The point of friction is: Are people who believe that the last 37 years of peer-reviewed research in this field is legitimate research permitted to post their honest views at every discussion board and blog on the internet? I say that they are. Greaney says that they are not (they may believe that the Buy-and-Hold retirement studies are in error but they may not let their fellow community members know what they believe and why). At the time he was flipping, Wade pretended to believe what Greaney believes.

The research showing that the Buy-and-Hold retirement studies are in error (that it is not possible to calculate the safe withdrawal rate accurately without taking the effect of valuations into consideration since valuations affect long-term returns) was published in 1981. About 10 percent of the population today appreciates the problems with the Buy-and-Hold strategy. All of us who believe that the last 37 years of peer-reviewed research is in error should want to get that percentage up. I certainly do. It doesn’t help get that percentage up for me to use a different withdrawal rate than the one recommended by Greaney in my own retirement plan and to fail to tell my fellow community members that I am doing that and why I am doing that.

The question that people should be asking themselves re this entire matter is — Why the heck did it take 21 years for someone to see that it is not possible to calculate the safe withdrawal rate without taking valuations into consideration? It’s OBVIOUSLY not possible to do that. In a sensible world, my post of May 13, 2002, would have been greeted with a yawn, not a nuclear explosion. What’s that all about?

We are all under a spell, I wrote that in a post from yesterday afternoon. We are all under a spell. The name given to that spell in the psychology literature is “cognitive dissonance.” We suffer from cognitive dissonance because we don’t question the Buy-and-Hold stuff, we don’t point out that the emperor is wearing no clothes, we don’t take note of the parts that make no sense and ask the “experts” pushing this strategy on us to please explain. The errors in the Buy-and-Hold Model are very, very, very simple and obvious ones. We suffer from cognitive dissonance re these errors because the errors are so simple and obvious that we assume that we must be wrong to even think that they are errors; if they were, surely these hot shot experts would have discovered them a long time ago.

The errors are real. It is not possible for any market to function without the exercise of price discipline and there has never been any reason to believe that the stock market is different than every other market in this regard. It is ESSENTIAL that investors exercise price discipline when buying stocks. Shiller has described the intellectual leap from the finding that short-term price changes are unpredictable to the Buy-and-Hold belief that the market sets prices properly as “one of the most remarkable errors in the history of economics.” That’s it. That’s the story of our 16-year saga. The entire Buy-and-Hold thing has just been one long mistake going back to the first day. Our problem is that the mistake has been covered up for so long that the Buy-and-Holders cannot today bear to acknowledge that the whole thing has been a big mistake and so they become violently abusive when someone points out the mistake.

I cannot solve that problem by taking note of the error in Greaney’s study, using a different withdrawal rate in my own planning and then then not saying anything to my fellow community members taken in by Greaney’s false claims. If I want to help my fellow community members (which is what we all should be trying to do when we post on a discussion board), I need to point out the freakin’ mistake to them. That’s the thing that Greaney doesn’t like. That’s the thing that he wants to block. That’s the thing that causes him to advance death threats and demands for unjustified board bannings and thousands of acts of defamation and threats to get academic researchers fired from their jobs. That’s the story here. Are we going to let the mistake destroy even more lives? Or are we going to speak up and incur Greaney’s wrath?

I say that we need to speak up. I want to see every investment discussion board and blog on the internet opened to honest posting on the last 37 years of peer-reviewed research in this field. I don’t want there to be a single exception. If we were to permit a single exception, that would hurt us all, So why do it? Why not just permit honest posting? Let the Buy-and-Holders say what they believe, let the Valuation-Informed Indexers say what they believe and let all the people listening in decide after hearing both sides how they are going to play it.

If people CHOOSE to use the Buy-and-Hold retirement studies after hearing both sides, that’s on them. I obviously think they would be making a mistake to do that. But it’s their money and so it’s their call. Perhaps I am the one who is wrong. I am not going to tell anyone else what to do with his or her money. But if people choose to follow the Buy-and-Hold numbers only because the Buy-and-Holders blocked their ability to hear about the errors in the Buy-and-Hold studies, that’s fraud. Boards that do not permit both sides to be heard are corrupt enterprises. People who block posting about Valuation-Informed Indexing can be held liable in civil lawsuits after they cause investors to suffer financial losses in the next price crash. In extreme cases, they could be prosecuted criminally for engaging in acts of financial fraud. Not this boy, you know? No way, no how.

That’s the rant. That’s the rant that I have been advancing for 16 years now. I love my Buy-and-Hold friends. I love my Wall Street Con Man friends. I even love my freakin’ Goon friends. But I don’t love failed retirements. I don’t love financial fraud. I don’t love civil lawsuits, I sure don’t love criminal prosecutions. So I speak up in OPPOSITION to that sort of stuff. Over and over and over and over and over.

I would be joined by every single person alive in the United States today if only Shiller’s Nobel-prize-winning research showing that valuations affect long-term returns had only been published last week. We’re all in the same boat. We all want to invest effectively. We all want to avoid failed retirements. The problem that we face is that 37-year cover-up. Those who participated in that cover-up are embarrassed about it and don’t want people to find out. So they engage in all sorts of crazy behavior to block Valuation-Informed Indexers from speaking honestly about what the last 37 years of peer-reviewed research in this field teaches us. And so far their efforts have “succeeded” in making life worse for each and every one of us, including themselves to be sure.

I say “no” to all that. I say that the same ethical standards that apply in every other field of human endeavor should apply in the investment advice field as well. I say that, if the only way that you can think of to “defend” Buy-and-Hold is to engage in criminally abusive behavior, you should be looking for a new investing strategy to defend. If you can defend Buy-and-Hold WITHOUT engaging in criminally abusive behavior, by all means have at it. Millions of good and smart people believe in Buy-and-Hold with their hearts and minds and souls. When they make their case in a civil and reasonable way, they help all of us to come to a better understanding of these matters. So that stuff is pure gold and we should all welcome it. But we should all adopt a zero tolerance policy towards the sorts of stuff that we have seen advanced by those posting in support of Mel Lindauer and John Greaney.

No death threats. Death threats have no place in investing discussions. No demands for unjustified board bannings. Unjustified board bannings have no place in investing discussions. No thousands of acts of defamation. Thousands of acts of defamation have no place in investing discussions. No threats to get academic researchers fired from their jobs, Threats to get academic researchers fired from their jobs have no place in investing discussions. My sincere take. No apologies whatsoever.

Rant completed (for now — but sure to be extended in coming days).

Best wishes, etc., etc.

Rob the Friendly Ranter