“Before He Died, I Was telling Bogle That He Should Update Buy-and-Hold to Reflect Shiller’s Research Findings. Had Bogle Done That, Buy-and-Hold Would Work. I Have a Funny Feeling That His Intention Starting Out Was to Develop an Investment Strategy That Worked.”

Set forth below is the text of a comment that I recently put to the discussion thread for one of my columns at the Value Walk site:

Spare us the flowery words about John Bogle. Upon the announcement of his passing, you still referred to him as the biggest con-man. There is no one, including you that has had a successful track record, based on outcomes, using market timing. Your own predictions of market crashes, including those made on this website have failed. If anyone would have followed your advice, they would have had a miserable financial outcome. When are you going to take responsibility for your own advice versus pointing fingers at others?

I love John Bogle. I’m sorry if that sounds “flowery” to you. But that’s the way it is. I view myself as the biggest supporter that Bogle has ever had. Before he died, I was telling him that he should update Buy-and-Hold to reflect Shiller’s research findings. Had Bogle done that, Buy-and-Hold would work. I have a funny feeling that his intention starting out was to develop an investment strategy that worked. So I definitely feel that I was trying to help the guy out in a way that lots of people who call themselves his friend were not. Anyway, Bogle’s stuff is the tops. But he was wrong in his many suggestions that it is not necessary for investors to practice price discipline when buying stocks, in this fellow’s sincere view.

Was Bogle a con man? In an important sense, he was. I wouldn’t say that he was a con man in every sense of the word. I think that, if you had given Bogle a lie detector test and asked him if he thought that Buy-and-Hold was a good strategy, he would have answered “yes” and he would have passed the test. I think that he sincerely believed in Buy-and-Hod. But I think that he was conning himself into sticking with that belief for decades after Shiller published his research showing that valuations affect long-term returns. If valuations affect long-term returns, then stock investing risk is not stable but variable and investors seeking to keep their risk profile stable over time MUST lower their stock allocations when prices go to insanely high levels. Bogle didn’t want to think about that because he had a personal pride interest in not acknowledging that he was wrong in thinking that long-term timing is not required. So I think that he was conning himself and that his unwillingness to speak plainly about these matters hurt lots of people.

I love the guy. I think he was the best. But it is true that I think of him as one of those darned flawed humans. He made many huge positive contributions. But he didn’t get them all right. And we insult him when we act as if his ideas are beyond criticism. That’s my sincere take, in any event.

Bogle came close to endorsing Valuation-Informed Indexing before he died. He said that it made sense for investors to lower their stock allocations three times in the course of an investing lifetime because of valuations and to increase them three times in the course of an investing lifetime. That’s the concept. That made me very happy. I think that the only reason why he did not come out an make a full endorsement is that this issue has become so “controversial” that he felt that it would be too embarrassing to do so. I put much of the blame for that on the people who act as if Bogle is beyond ever making a mistake. We all make mistakes from time to time. When we suggest that Bogle is not human. we set him up for a big fall down the line. We end up hurting him. I find that very sad.

Wade Pfau and I spent 16 months co-authoring research showing that Valuation-Informed Indexing has been FAR superior to Buy-and-Hold for as far back as we have good record of stock prices (that’s 150 years). It’s not only that market timing sometimes works. Market timing ALWAYS works. You just have to be sure that it is long-term timing that you are engaging in and not short-term timing (which really does not work — Thanks, John Bogle!).

And that’s just what you would expect to find, is it not? Long-term market timing is price discipline. Is there any market in which price discipline does not always work? I sure cannot think of any. So why would anyone think that price discipline (long-term market timing!) would not work when buying stocks? It always works. We should be telling people that. It is the most important thing to know about stock investing. When we all feel free to spread the word of what the last 38 years of peer-reviewed research in this field tells us about how stock investing really works, we will all be a richer (in every sense of the word) people.

Or so Rob Bennett sincerely believes, in any event, you know?

My best wishes to you, Sammy.

Rob