Set forth below is the text of a comment that I recently posted to the discussion thread for one of my columns at the Value Walk site:
You were the one to quit your job, right? Have you actively searched for a job since that time? It appears that you have not really taken steps to get a new job. Thus, we can conclude that you only have yourself to blame.
Expecting someone to pay you for your internet rantings is laughable.
It’s not laughable if it turns out that I was right about what I said in my famous post from the morning of May 13, 2002, Sammy. It has been 17 years and thousands of people have looked at the Greaney retirement study during that time. Not one has been able to identify a valuations adjustment in it. What does that tell you?
I read an article yesterday by Matt Taibbi at Rolling Stone titled “The ‘Whistleblower Probably Isn’t: It’s an Insult to Real Whistleblowers to Use the Term With the Ukrainegate Protagonist.” He writes: “I’ve met a lot of whistleblowers, in both the public and private sector. Many end up broke, living in hotels, defamed, (often) divorced, and lucky if they have any kind of job. One I knew got turned down for a waitressing job because her previous employer wouldn’t vouch for her. She had little kids. The common thread in whistleblower stories is loneliness. Typically the employer has direct control over their ability to pursue another job in their profession. Many end up reviled as traitors, thieves, and liars. They often discover after going public that their loved ones have a limited appetite for sharing the ignominy. In virtually all cases, they end up having to start over, both personally and professionally.”
That’s me. That’s my story. I am a whistleblower. I have been made to pay the price that whistleblowers are made to pay.
I blew the whistle on Buy-and-Hold. If it is true that valuations affect long-term returns, then there is precisely zero chance that a Buy-and-Hold strategy could ever work for a single long-term investor. People need to know that. Every investor alive on Planet Earth needs to know that. But there are thousands and thousands of wealthy and powerful and well-connected people who have built their careers around the promotion of Buy-and-Hold and who don’t want to acknowledge that the strategy was discredited by the peer-reviewed research in this field 38 years ago. Those who dare to “cross” them by telling the truth about how stock investing works see their ability to make a living in this field destroyed.
So be it, you know? We live in a good country. We have laws against a lot of this abusive stuff. I believe that in the days following the next price crash, we are going to see a good number of people work up the courage to speak up. From that point forward, we will all live better lives. Deep in their hearts, even the Buy-and-Holders would like to know how to invest effectively for the long run.
That’s my sincere take, in any event. We’ll see.
Whistleblower Rob
Evidence Based Investing says
“If it is true that valuations affect long-term returns, then there is precisely zero chance that a Buy-and-Hold strategy could ever work for a single long-term investor. ”
Buy and Hold investing is stock market investing, The investors, collectively hold 100% of stocks. Investor A might sell to Investor B, Investor C might stay at 100%, Investor R might stay at 0%. But collectively all the investors buy and hold the whole market.
If buy and hold investing does not work then stock investing does not work, because stock investing is buy and hold investing.
Rob says
We disagree, Evidence.
The purpose of all markets is to set prices properly. The stock market (us!) wants to get prices right. And, if honest posting on the last 38 years of peer-research were permitted, all signs are that we could pull it off or at least get close to hitting the target. The Buy-and-Holders urge price indifference. That’s the OPPOSITE of price discipline. Price indifference permits prices to get so out of hand that the only way for the market to get them down is to crash them. That causes a loss of trillions of dollars of consumer buying power and tens of thousands of business fail, throwing millions of workers into the unemployment line. To what good purpose?
If there were any peer-reviewed research showing that it is possible in some circumstances for Buy-and-Hold to work, we never would have seen a single death threat or a 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 mean, come on.
I am not a fan of the strategy. I think the Buy-and-Holders are great people. I think they got a lot of things right and helped us all out in a big way by doing so. But I do not believe that the market is efficient. I think that one was a mistake. Shiller revealed that mistake with his Nobel-prize-winning research. I wish that the Buy-and-Hoders had owned up to the mistake as soon as it was uncovered by the peer-reviewed research. Millions of people have been hurt in very serious ways as a result of the 38-year cover-up.
That’s my sincere take, in any event. I wish you all the best that this life has to offer a person.
Buy-and-Hold Critic Rob
Anonymous says
Rob,
I haven’t seen anyone fail because of Buy and Hold. Can you provide me to a link to someone as an example?
Evidence Based Investing says
“But I do not believe that the market is efficient.”
And it doesn’t matter whether it is efficient or not.
A buy and hold investor will receive the market return (minus very low costs) over any given period.
Investors as a whole will receive the market return (minus higher costs) over any given period.
The buy and hold investor will get a higher investment return than investors as a whole.
If buy and hold doesn’t work then investing doesn’t work.
Rob says
I haven’t seen anyone fail because of Buy and Hold. Can you provide me to a link to someone as an example?
The peer-reviewed research that I co-authored with Wade Pfau shows that every investor who ever followed a Buy-and-Hold strategy greatly increased his risk by doing so while also greatly diminishing his return. Good investment strategies do the opposite — they increase return while diminishing risk.
If Buy-and-Hols is so great, why have you Goons felt compelled to engage in criminal acts to “defend” it from my research-based challenges? You would never have acted that way if you truly believed that Greaney had included a valuation adjustment in his retirement study. You felt that there was no other way to get the job done because Buy-and-Hold had never been anything more than a marketing gimmick. Valuations have always affected long-term returns. The market has never been efficient.
Why not just be honest about it? If you are going to go to the trouble of developing retirement studies, why not set up the methodologies in such a way that they can produce accurate results that help people instead of destroying their lives?
Why do you think it is that researchers in every other field of human endeavor are permitted to do honest work? Why is the investment advice field so different? I think it is because the Buy-and-Holders don’t want to acknowledge the error that Shiller revealed 38 years ago.
Yes?
Honest Research Advocate Rob
Rob says
And it doesn’t matter whether it is efficient or not.
John Greaney was telling people that the safe withdrawal rate was 4 percent at a time when it really was 1.6 percent. A failed retirement is a serious life setback. I believe that we all should be trying to get the numbers right in retirement studies that we publish. I think that accuracy and honesty matter a great deal.
Sue me.
Stickler-for-Honesty-and-Accuracy-in-Retirement-Studies Rob
Anonymous says
Rob,
I just asked for one example. Since you said buy and hold never worked, you should have a long list. Just give us one person. It should be easy for you.
Rob says
That’s like asking for one example of someone who made a mistake by driving drunk. The answer is — “every single person who ever did it.”
We should be permitting honest posting on the last 38 years of peer-reviewed research at every investing discussion board and blog on the internet, without a single exception.
So says Rob Bennett, in any event.
I naturally wish you all good things.
Sober Driving Advocate Rob
Anonymous says
I am not asking for a list of everybody. You just have to list one person. It should be easy for you. Go ahead. We are waiting.
Rob says
You obviously have a list of people who have used Buy-and-Hold. Just go to your own list and choose the first name. There’s my response.
List-Keeping Rob
Rob says
“But I do not believe that the market is efficient.”
And it doesn’t matter whether it is efficient or not.
A buy and hold investor will receive the market return (minus very low costs) over any given period.
Investors as a whole will receive the market return (minus higher costs) over any given period.
The buy and hold investor will get a higher investment return than investors as a whole.
If buy and hold doesn’t work then investing doesn’t work.
I was rereading some old posts yesterday and I thought that I should offer a more in-depth response to this one.
The question of whether the market is efficient or not is the entire dispute. The difference between Buy-and-Hold and Valuation-Informed Indexing is that Buy-and-Holders disdain market timing and Valuation-Informed Indexers believe that it is the key to successful long-term stock investing. Market timing is price discipline. We all believe that price discipline is absolutely essential in every other market in which we participate. So how did there ever come to be a widespread belief that the stock market is the sole exception to the otherwise universal rule? The answer is — a mistaken belief in the Efficient Market Theory messed with our minds. If there had never been an Efficient Market Theory, there never would have been a Buy-and-Hold and we all would be Valuation-Informed Indexers today (and of course we all would be living far richer and happier lives).
The point that you make in your comment is that someone who follows a Buy-and-Hold strategy ends up getting the market return and the market return is likely going to be something in the neighborhood of 6.5 percent real, which is very good. So what’s the beef?
The beef is that, when large numbers of investors come to follow Buy-and-Hold (price indifferent) strategies, the stock market becomes an insanely dangerous investment choice. TIPS were paying 4 percent real in 2000. Stocks were offering a likely 10-year return of a negative 1 percent real. It is insane that there could ever be a time when a risk-free asset class could offer a return of 5 percentage points better than stocks. But that’s what Buy-and-Hold/Price Indifference did to us as a people. Buy-and-Hold/Price Indifference is poison.
Now —
Will the people who invested in stocks in 2000 eventually earn a return of 6.5 percent real on their investment? I believe that they will. But it might take them 30 years to get there. There is a time value to money. If stocks had been selling at reasonable prices in 2000 (as they would have been had it not been for the widespread promotion of the Buy-and-Hold “strategy”), people who invested in stocks in 2000 could have realistically expected to see a 6.5 percent return within 10 years. Because of Buy-and-Hold, they could not realistically expect to see that return until 30 years had passed. That’s a big difference. Giving up 20 years of compounding returns is a huge setback. That’s the price that we pay as a society when we fail to speak up about the dangers of this long-discredited “strategy.”
The stock market is great. I have nothing against the stock market at all. A 6.5 percent real return is awesome. What I don’t like is what the widespread promotion of a pure Get Rich Quick approach to stock investing does to the lives of millions of middle-class people. Shiller predicted the 2008 economic crisis in a book published in March 2000. How did he know what was coming? He had seen the 126 percent increase in stock prices in the last four years of the 90s and he knew from his research that irrational exuberance always disappears into the mist in the long term, so he knew that we were going to see losses so big as to bring on an economic crisis. Tens of thousands of entrepreneurs saw their businesses go under in that Buy-and-Hold Crisis. Millions of middle-class people lost their jobs.
Is that a case of Buy-and-Hold “working”?
I say “no.”
When an investment strategy causes that sort of human misery, it is not “working,” in my assessment. I call that “failing.” I say that it is the investment strategy that helps us to avoid economic crises (Valuation-Informed Indexing) that works, not the one that inevitably brings them on.
The wonderful 6.5 percent return is not the product of Buy-and-Hold. That wonderful return is the product of our powerful economic system. Stock investors are simply tapping into that productivity.
Buy-and-Hold and Valuation-Informed Indexing are two alternative ways to tap into that productivity. Buy-and-Hold is the way that pushes risk up to the highest levels possible by urging price indifference. With Buy-and-Hold, you see stocks selling at three times fair value at market peaks and at one-half of fair value at market bottoms. So those who want to tap into that productivity have to endure seeing five-sixths of their accumulated wealth of a lifetime disappear at some point in their lives (in some cases just before retirement!). With Valuation-Informed Indexing, you still get the great returns but price volatility is dramatically reduced (because most investors are practicing price discipline, acting to keep stock prices at reasonable and sustainable levels at all times).
Call me madcap but I prefer the far less risky approach to stock investing, the approach that DOESN’T cause economic crises and all the human misery that goes with them.
Economic-Crises-Avoiding Rob
Rob says
“But I do not believe that the market is efficient.”
And it doesn’t matter whether it is efficient or not.
A buy and hold investor will receive the market return (minus very low costs) over any given period.
Investors as a whole will receive the market return (minus higher costs) over any given period.
The buy and hold investor will get a higher investment return than investors as a whole.
If buy and hold doesn’t work then investing doesn’t work.
I keep mulling this one over in my mind. Today while I was on my walk I came up with a third response.
Saying that, if Buy-and-Hold doesn’t work, stock investing doesn’t work, is like saying that, if driving drunk doesn’t work, cars don’t work.
Cars are wonderful. It would be a big loss if we had to make do without cars. But driving drunk is a very dangerous way to make use of a car. I am pro-car and anti-drunk-driving.
Similarly, stock investing is wonderful. But Buy-and-Hold (price indifferent stock investing) is a very dangerous way to invest in stocks. Refusing to engage in market timing pushes risk to the highest levels to which it can be pushed, eventually always causing a price crash and an economic crisis and all of the human suffering that follows from an economic crisis. I am pro-stock investing. But I reject out of hand the idea that there is some sort of law that requires that we all invest in the most risky way imaginable. We have 38 years of peer-reviewed research showing us what works. We should open every site on the internet to honest posting and do all that we can to spread the word re Robert Shiller’s amazing Nobel-prize-winning research findings far and wide.
Pro-Car, Pro-Stock Rob