Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
We are all to believe that MMM, Wade Pfau, Jack Bogle, William Bernstein, John Greaney, Michael Kitces and Scott Burns are all scared to tell the whole story. They are all part of a mass cover up. Only Rob Bennett has been the one to tell the whole truth.
All of the evidence is available to you, Anonymous.
Bill Bernstein said in a book published in 2002 that the 4 percent number was off by 2 percentage points when stocks were priced at their highs. But he didn’t say that the studies that said that the safe withdrawal rate is always 4 percent needed to be corrected. Huh?
Wade Pfau said that the Buy-and-Hold retirement studies are “dangerous.” But he hasn’t insisted that they be corrected either. Huh?
Jack Bogle endorsed Valuation-Informed Indexing in one interview. He said: “Big moves out of stocks should not be done at all. But strategic asset allocation can be done at very rare times, maybe six times in an investor’s lifetime, three times when the market is stupidly high and three times when stupidly low.” That’s what I say. But he only said it one time. Most of the time he says that timing doesn’t work and fails to distinguish short-term timing from long-term timing. Huh?
Greaney said that people should not overstate the safe withdrawal rate, that they should not give wrong numbers. But when he learned that the numbers in his own study are wildly off the mark, he didn’t correct them. Huh?
Kitces said that low valuations can bring the safe withdrawal rate up higher than 4 percent but that high valuations do not bring it down lower than 4 percent. Huh?
Burns wrote about my work on safe withdrawal rates in his column but failed to name me. He referred to those of us who believe that the safe withdrawal rate changes when valuations change as a “New School” but then criticized me for using that term. Huh?
Lots of people have told different bits of the truth. Much of what I have done is just to report what other people have discovered. The difference is that those other people flip back and forth from positions that make sense today to positions that no longer make sense now that Shiller has published his “revolutionary” (his word) research findings. I try to remain consistent. I don’t flip back and forth. That makes people who do flip back and forth look bad. So I am disappeared.
Shiller’s 1981 research findings did not bring on a small change in our understanding of how stock investing works. He discredited the foundation stone on which the entire Buy-and-Hold Model was built. So he changed everything. As a society we have not yet come to terms with what he did. We need to come to terms with it. We have to stop pretending that we can duck the hundreds of questions that his research brought to the table. We have to talk about where our knowledge of how stock investing works stands today. We need to engage in serious and honest and frank interactions re hundreds of questions that we once thought were settled but no longer are. This stuff is important. We need to get it right.
I don’t know it all. I don’t say that I do. My stuff is just the product of a person who believes that Shiller’s research is legitimate research and who explores every question that comes up with that belief in mind. I need to hear feedback from all the people you mention and from lots of other people so that I can do better work. And all those others need the same. We all need to stop pretending that we know it all and get about the business of trying to learn as much as we can as quickly as we can.
All of the people who you refer to would LOVE to give their honest take on every question. Read your own comments at this blog if you want to know why they don’t do it today. You point out over and over and over again that I can not make a living in this field because I posted honestly re the safe withdrawal rate issue. That’s why other people don’t do the same. Other people want to be able to make a living. Stop punishing honest work and you will get more of it. There’s no mystery re that particular aspect of the question. Stop punishing people who are trying to help you and more people will try to help you.
The difference between Buy-and-Hold and Valuation-Informed Indexing is that Fama says that stock price changes are caused by economic developments and Shiller says that they are caused by investor emotion. That makes all the difference in the world. Stock prices went up by 126 percent from 1996 through 1999. If Fama was right, that huge jump was amazingly good news. If it was economic developments that caused that huge price jump, our economy must have been going gangbusters at that time and that is obviously a good thing. If Shiller is right that only a small portion of those gains came from economic growth and the vast majority just came from a temporary emotional flight of fancy, then we hurt ourselves very seriously in those years. We told people that those gains were real and they made plans for the future based on their belief that that was so when it was not. People cannot engage in effective financial planning if they have no idea how much they have in savings.
Shiller changed the world. And the world has not yet caught up. That’s the story here. I was still a Buy-and-Holder on the morning of May 13, 2002. All that I was concerned about at that time was the safe withdrawal rate. But when I saw the insanely emotional reaction to my safe withdrawal rate post, I knew that Shiller was right. So I stopped writing about Buy-and-Hold and from that point forward I wrote only things rooted in a belief that valuations affect long-term returns. Since I have been doing that for 16 years now, I have explored things that no one else had explored. It’s not that I am smarter. It’s that I have been doing it longer.
We did not know everything that there is to know about how stock investing works in 1981. Part of the scientific process is learning new things and then correcting your old understandings as new information comes in. That learning process was cut off. I think it is because this is so important an issue that the people who unintentionally got things wrong couldn’t bear to acknowledge it even to themselves. The conditions were perfect for cognitive dissonance. But they are aware on some level of consciousness that Shiller’s work is saying something important and new and so they have become insanely defensive about these matters. So the learning process that should have been going on for 37 years has been proceeding very slowly.
We all want the same things, Anonymous. We all want to know the truth about how stock investing works.
We know how to handle things. We need to handle things in the investing advice realm in the same manner as we handle things in every other field of human endeavor. We need to let people say what they believe and not punish them if they say something new. New can be good. We should be skeptical of new ideas to be sure. Skepticism is good. But we should not go to the point of threatening to kill people just because they advance new ideas that are rooted in peer-reviewed research that was awarded a Nobel prize. Those ideas have enough behind them that we should permit discussion of them.
As the new ideas are discussed, they will come to seem less strange. We will over time come to accept the new paradigm. Some of the new ideas will probably be rejected. That’s of course fine. But some of them will also probably be accepted. That’s also of course fine. We will only be able to separate the good stuff from the bad stuff once we permit honest posting by every single person willing to contribute in a positive way to our discussions, Buy-and-Holders and Valuation-Informed Indexers alike.
That’s my sincere take, in any event.
My best wishes.
Whole Truth (I Hope!) Rob
A mass conspiracy and everyone is lying………..other than Rob Bennett, right?
Robert Shiller was awarded a Nobel prize, Anonymous.
It wasn’t Rob Bennett who awarded him that Nobel prize.
So, no, it is not just me. There are lots of good and smart people who believe that valuations affect long-term returns, that investors are not 100 percent rational but are actually at times highly emotional, that overvaluation is the product of irrational exuberance and that the gains that investors experience as the result of overvaluation are not lasting and cannot be counted on to finance a retirement.
Are we a majority today? Not by a long shot. We are about 10 percent of the population.
Do you want to hear more people exploring the implications of Shiller’s “revolutionary” (his word) research findings? Drop the death threats. Drop the demands for unjustified board bannings. Drop the thousands of acts of defamation. Drop the threats to get academic researchers fired from their jobs. Drop all of that criminally abusive garbage and you will see a lot more people speaking openly and boldly and clearly about the dangers of the long-discredited Buy-and-Hold strategy.
There are many, many people who would be only too happy to help you out. But the price of their participation is civility. Get back on the right side of the law and these people will teach you many wonderful things about how stock investing works in the real world. But, yes, you must first do that. The laws against financial fraud are good and necessary laws. They are there to protect us from the sorts of tactics that you Goons have employed to suppress discussion of the errors in the Buy-and-Hold retirement studies for 16 years now.
I am certainly not the only one trying to tell the truth. There are lots of people trying. The “conspiracy” is people trying to protect themselves from the reach of your ruthlessness. Change you. And you will change the world. In a very, very, very positive way.
My sincere take.
And I am 100 percent sure.
My best and warmest wishes to you and yours.
World-Changing (Without Apologies!) Rob
“Robert Shiller was awarded a Nobel prize, Anonymous.”
We are not talking about Robert Shiller and his Nobel prize. We are talking about all your claims that these people are not being honest as part of a mass cover up. Each and every one of them, as well as a good number of other people in the financial community, would all gave to be in on a campaign of dishonesty, if we are to believe what you are saying.
Bill Bernstein said that the numbers in the safe withdrawal rate studies are in error in March 2002, which is the same month as when I advanced my famous post at the Retire Early board saying the same thing. Bernstein said that, when stocks are as overpriced as they were at the top of the bubble, you need to subtract two points from the 4 percent number used by the Buy-and-Holders to identify the correct safe withdrawal rate for retirements beginning at that time. The only difference between Bernstein and me is that I said that the incorrect studies should be corrected because otherwise people would be misled by them and would suffer failed retirements while Bernstein just pointed out the error one time and then kept quiet about it from that point forward. So he was not viewed as being as serious a threat to Buy-and-Hold as I was and you did not threaten to kill his family members or demand that he be banned from all the boards.
Tell Bill that you are okay with him being fully honest and he will be fully honest. I am sure.
On the other hand, if you continue to engage in criminally abusive behavior, he is going to continue to go only so far as he believes he can get away with. He will try to tell you the truth when he sees an opportunity. But he is not going to go so far as to endanger his career or the lives of his loved ones.
Is he part of a mass cover-up? There certainly are a lot of people engaging in insanely dangerous investing practices because he does not speak up more clearly and more frequently. That much is certainly fair to say. But he did stick his neck out in a big way back in March 2002. So I don’t think that we can call him a bad guy. He has done the best that he thinks he can afford to do.
And of course all of the others play it in similar ways. Bogle endorsed Bernstein’s book. So Bogle is fine with seeing the truth get out too. And Bogle has put forward statements hinting at the truth himself. I learned about the errors in the safe withdrawal rate studies by reading Bogle’s book. But of course Bogle didn’t speak up when Wade Pfau was being threatened. So he is only willing to go so far as well.
Do you want to know the truth about how stock investing works, Anonymous? If you do, you know what you need to do. If you don’t, just keep doing what you have been doing. It’s been “working” for 16 years.
I want to know the truth about how stock investing works and I want to tell millions of others the truth about how stock investing works. So I am going to continue what I have been doing for the past 16 years. I hope that is okay with you.
My best wishes.
Truth-Telling (Only a Little Bit More Than Bill Bernstein and Jack Bogle and All the Other Wall Street Con Men) Rob
Why hasn’t Shiller partnered up with you to take down this mass conspiracy and expose all of these liars?
No matter who you ask about, the answer is going to be the same, Anonymous. Shiller is much like Bernstein. And Bernstein is much like Bogle. And Bogle is much like Bennett (remember that I didn’t speak up about the errors that I knew about in Greaney’s study for three years).
And on and on and on. We are all human. And so we all seek social approval. We all want to be liked. Tell people that they need to divide the amount on their portfolio statement by two to know the true and lasting value of their holdings and you are not going to be liked. So we all engage in this lying thing. It’s what we humans do when it comes to stock investing.
You use the phrase “expose all these liars” as if the liars were the exception, as if lying about stock investing were not the norm. Have you checked the P/E10 value lately? To price stocks improperly is to lie about their value, is it not? For stocks to be as overpriced as they are today, we pretty much all have to be big-time liars, no? Does that not follow?
Shiller was awarded a Nobel prize because he pointed out the path to being more honest about stock investing. Being more honest would help us all. Humams are liars. We all feel an inclination to lie about these sorts of things. But humans also love truth. Both things are so. We invest more effectively when we tell the truth. So Shiller did a wonderful thing by showing us how we lie and by providing us the tool we need (P/E10) to become more truthful about stock investing.
Why does Shiller not play it the way I do? Why is he not more blunt?
I think that he feels that he can be more effective by telling people what they need to know to figure out the truth while not saying things so clearly as to stir up their rage. I say things clearly. But very, very few people hear my words. Because you Goons have seen to it that I am banned at every major investing site on the internet. So Shiller’s soft approach to telling the truth has had 100,000 times the impact of my more direct and clear approach.
I didn’t wake up one day and declare “Oh, I know what I will do, I will take Shiller’s soft pronouncements and state them more directly and more clearly.” I ended up doing that because of the circumstances in which I was placed. If Shiller is right that valuations affect long-term returns (he is), then Greaney’s claim that the safe withdrawal rate is always 4 percent has put many people on a path to suffering failed retirements — thousands of people who were friends of mine at the Retire Early board and who thought that his retirement study was legitimate and millions who I have never met but who followed similar studies and retirement articles based on those studies that would have been corrected had Greaney not engaged in the abusive behavior that he engaged in to stop people from learning about the errors in those studies.
I was not going to get Grreaney’s study corrected by following Shiller’s soft approach. I tried. My May 13, 2002, post didn’t even say that Greaey got the numbers wrong. That first post just asked a question — Should we take valuations into consideration? That’s pretty darn soft. Greaney’s reaction was not so soft. So I was forced to respond with something a bit more clear and direct. And here we are.
The soft approach is more popular. People LIKE Get Rich Quick. People LIKE Buy-and-Hold. Lots of people don’t want to be told about the 37 years of peer-reviewed research showing that it is a logical impossibility that Buy-and-Hold could ever work for a single long-term investor. Shiller doesn’t endorse Buy-and-Hold. So the Buy-and-Holders do not consider him a friend. But he avoids stating things in the direct and clear way that I often state them and thus he is perceived as less of a threat by our Buy-and-Hold friends than I am. Shiller is disliked but tolerated. I am outright hated.
Not by everyone. I am loved by the 10 percent who already have serious doubts about Buy-and-Hold and who would like to explore those doubts. And I am tolerated by most Buy-and-Holders. But I am hated by the Goons, the most intense Buy-and-Holders, a group that comprises about 10 percent of the population of Buy-and-Holders. And the much larger number of Buy-and-Holders who do not love me or hate me but only tolerate me hate the ugliness that appears before them when the Goons go after me and end up voting in favor of bans when they see no other way to bring the ugliness to an end.
The proper way to bring the ugliness to an end is to ban the Goons when they violate the rules of the boards and indeed the laws of the United States. That’s the answer. But most humans are afraid to speak up in opposition to anyone who is on the side of the majority. It’s a scary thing to do. So the Goons for the time being hold a veto power over what can be said on the internet about how stock investing works.
That needs to change.
Shiller’s soft approach hasn’t gotten the job done. The Buy-and-Hold retirement studies have not been corrected to this day. So soft isn’t doing the job. Those of us who understand what the last 37 years of peer-reviewed research is telling us need to try some new things. We need to be respectful. We need to be warm and friendly. We need to be grateful for the many powerful insights that were supplied by our Buy-and-Hold friends. But we do need to get the job done. We do need to provide access to honest and accurate reports re what the peer-reviewed research really says about safe withdrawal rates and about scores of other critically important investment-related topics.
That’s my job. That’s what I do.
I want Shiller to partner with me. 100 percent. In ordinary circumstances, he would be happy to do it. These are not ordinary circumstances. He will do it if you Goons calm down. But I have a funny feeling that he is not going to do it until he sees some evidence of calming. You could provide him the reassurances he needs to hear and we could all get about the business of doing some wonderful things. Or we could wait until after the next crash, when Jack Bogle himself will see the need to move forward so clearly that he will step forward and give the speech that we all need to hear to break this spell that we are under.
I will play it however you want to play it. I won’t travel to the wrong side of the felony kine, obviously. But I am up for anything that is even remotely reasonable. Just tell me what it is that you want and I will be there for you.
My very strong hunch is that we are going to have to wait for Bogle’s speech in the days following the next price crash. It’s s shame that we have to wait. I hate that reality. But it appears to me that it is a reality all the same. I am pretty much resigned to it at this point in the proceedings.
Once Bogle gives his speech and it is written up on the front page of the New York Times, we will all be working together. Shiller will be part of the effort then. Obviously.
We will all be exposing those darn human liars who in the past have made stock investing 10 times more risky than it needs to be by telling all those awful Buy-and-Hold lies. And we will all live better and richer (in every sense of the word) lives from that point forward.
Given that humans lie about everything and that it is only humans who buy stocks, humans obviously lie about stocks. Do you think it is a better approach to pretend that humans become 100 percent rational creatures when buying stocks and thus get all the numbers we use to inform our investing strategies wildly wrong or do you think it would be better to acknowledge that we are inclined to tell a lot of lies and to develop tools that we can all use to rein in the lying a bit? You can probably guess at this point in the proceedings which approach I favor.
Sound good?
Does that help at all?
Human Liar (and Human Liar Exposer) Rob
To sum it up, Shiller is a liar, but as soon as Bogle confesses, Shiller flips and then you join forces with Bogle and Shiller to save the world. Do I have that right?
Shiller and Bogle are humans. So, yes, that means that they are liars. It comes with the territory.
But they are trying to help us all overcome the inclination to lie. They have each made many extraordinary contributions.
As a people we have been struggling to move forward. The old world of lies is more comfortable than the newer, better one. But the new world is so much better that we know in our hearts that in time we will all need to pull together and move forward.
I hope that’s okay with you, Anonymous.
I wish you all good things.
World Saving, Goon Comforting Rob
Let us know when Bogle and Shiller call you. We will be waiting for your update.
It will be in all the papers when it happens, Anonymous. I am sure.
But just to be sure, I will make a mental note not to forget to write up a blog entry reporting on the development.
I hope that it happens by the close of business today, you know? Or perhaps even sooner.
My best and warmest wishes to you.
On-the-Edge-of-His-Seat Rob
I’ll add a more serious note.
If Shiller published his research today, we would all be working together to expand our knowledge of how stock investing works tomorrow morning. It would set off a nuclear explosion of learning experiences. That is how it is supposed to happen.
Our problem today is trying to recreate that experience 37 years after the fact. We should have seen that nuclear explosion in 1981. We obviously didn’t. My guess is that people were suffering from cognitive dissonance. The conditions were prefect for it. The change was a very big one. It was a 100 percent positive change but a very, very big change. So, as positive as it was, it was hard to process. And it was threatening to a lot of people on a personal level. Even though intellectually it was a huge advance, people who had built careers promoting Buy-and-Hold no doubt felt personally threatened. So the nuclear explosion of learning did not take place.
The evidence that Shiller is right is of course much stronger today. So in theory we could have that nuclear explosion of learning today. But the power of the cognitive dissonance holding us back is also many times greater. In 1981, all that the Buy-and-Holders would have had to say was “It turns out that I was wrong about one thing” and most reasonable people would not have given it a second thought given how many positive and genuine contributions the Buy-and-Holders made. For things to go forward today, they have to acknowledge both the initial mistake plus the 37-year cover-up of that mistake, which includes a good number of criminal acts. That’s very, very, very, very hard stuff. So we are all caught in a trap today.
The big question is — What will it take to break that trap?
A Second Great Depression would certainly do it. Our economic and political systems changed big-time as a result of the First Great Depression. Social Security, child labor laws, the minimum wage, on and on. So a new depression would open people’s minds to all sorts of wonderful advances.
I obviously do not want to see things proceed in that direction. I pray that things do not have to get that bad. We we need is an economic crisis bad enough that it shakes us up enough to open every discussion board and blog on the internet to honest posting re the last 37 years of peer-reviewed research in this field but not so bad that it brings on a Second Great Depression.
Will it happen? I don’t know. I hope so. I certainly think that it is possible that we could pull it off. But i don’t think it is a lock. I don’t think that we can survive as a nation if we do not find a way to provide millions of people with access to honest and accurate reports re what the research says about how stock investing works in the real world. I see that one as a lock. But I can’t stand the thought that we might have gone so far down the road with this cover-up at this point that the only way to overcome it is with a Second Great Depression. I am not at all sure that we would survive a Second Great Depression. My big fear is that we never get to experience the benefits of Shiller’s breakthrough findings because the cover-up has continued for so long that things have reached a point where it can only be overcome with a Second Great Depression and that could be game over.
Perhaps that discussion gives you some idea why I think this matter is important enough for me to devote 16 years of my life to it. If we follow U.S. law, we all enter a golden age of safe stock investing and economic growth. The Bennett/Pfau research paper shows that we can reduce the risk of stock investing by 70 percent overnight just by opening every discussion board and blog to honest posting re the last 37 years of peer-reviewed research in this field. But the other side of the story is that continued delay in doing what we all know deep inside we need to do could put us in a Second Great Depression and that could be game over. Those are pretty darn dramatic circumstances, you know? Yikes!
Shiller and Bogle are two of my favorite people. So I am confident that they will both do the right thing when circumstances look dire enough to convince them that they have no choice. But at that point will things already be so dire that it will be too late to turn the car around? I don’t think that anyone can say in advance. I think we are just going to have to let things play out a bit to find out.
I know that I want to do my part to help each and every one of us attain good outcomes and avoid bad outcomes. So I continue to do my little part. I can do no more and I can do no less, you know?
I naturally wish you all the best that this life has to offer a person, my dear Goon friend.
Worried (and Excited!) Rob