Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
Why do these comments only exist on this website? If Wade and others truly said everything that you say, why don’t we see this on other websites?
Because they are afraid to say these things, Anonymous. They are afraid that what happened to me will happen to them.
The human race did not start out knowing everything there is to know about how stock investing works. The Buy-and-Holders took a good first stab at setting up a research-based model. At the time that model was developed, the belief in the academic world was that the market is efficient. If the market were efficient, risk would be constant and market timing would be a mistake. No one had checked whether long-term timing works at that time. Shiller discovered that stock market risk is not constant but variable and that long-term timing always works in research published from 1981 forward.
If we all were perfectly rational creatures, we all would have incorporated Shiller’s research into our thinking at the time it was published and Valuation-Informed Indexing would have become the dominant model for understanding how stock investing works 38 years ago. We are not perfectly rational creatures. The idea that market timing always works and is required for investors seeking to keep their risk profile constant over time came as a shock to those who believed in Buy-and-Hold and cognitive dissonance set in.
By the time that I advanced my famous post of the morning of May 13, 2002, pointing out that the retirement study posted at John Greaney’s web site lacks an adjustment for the valuation level that applies on the day the retirement begins, the cover-up had already been going on for 21 years. There was a great deal of embarrassment among Buy-and-Holders about the cover-up and most who work in this field had become fearful of what would happen to them if they spoke frankly about the matter. So most held back.
But the people who work in this field are like most other people — they want to do good work and to help people with the work they do. So there have been numerous expressions of intense interest in the Valuation-Informed Indexing concept and of support for the idea of widespread promotion of it. But people have seen the insanely abusive behavior of you Goons and have seen that numerous experts in the field and owners of web sites have failed to take effective action to rein you in. So support for the idea of opening every site on the internet to honest posting has not gained the traction that it needs to gain for us to bring The Buy-and-Hold Crisis to a full and complete stop.
It takes a lot of courage to speak honestly in the face of death threats and demands for unjustified board bannings and thousands of acts of defamation and threats to get academic researchers fired from their jobs. Once we see prison sentences and large awards for damages suffered and front-page news reports in the New York Times and other leading newspapers, everyone will feel free to speak honestly and we will be able to quickly put all of the ugly stuff behind us and work together to achieve an amazing learning learning experience, the most important learning experience in the personal finance field in the history of the United States.
In the meantime, those who believe that it would be a good idea to permit (and encourage!) honest posting should all be doing everything in their power to assure others of like mind that they will stick with them when they are attacked by you Goons. Appeasing you Goons makes things worse. Standing up to you makes things better.
My best wishes to you, Anonymous.
Frightened (But More by What Is Happening to Our Country as a Result of the 38-Year Cover-Up Than of You Goons) Rob
“ Because they are afraid to say these things, Anonymous. They are afraid that what happened to me will happen to them.”
And there is no link to them making a statement like this, so we just have to take your word for it, right. Just like the death threats and job threats.
No.
There are scores and scores of places where all kinds of people who work in this field say that they are afraid to tell the truth about Buy-and-Hold. That’s the entire story. The fact that the Buy-and-Holders made a mistake re market timing is trivial. Who cares? We all make mistakes. We say “sorry” and move on. That hasn’t happened re the mistake re market timing for 39 years. That’s why we had an economic crisis in 2008. That’s why we are likely going to see another in the next year or two or three. That’s the entire story. Drop the intimidation stuff and we all enjoy an amazing learning experience and we all move forward together. It’s all upside and zero possible downside.
I have that list of 45 comments by Wade Pfau that I post frequently in response to your comments. He has several comments in that group in which he says that he is afraid of what you Goons will do to his career if he continues doing honest work.
Rob Arnott wrote me an e-mail telling me that the stuff at my site is “solid.” He also said that he has seen the same intimidation tactics that I have reported on. He said that academic researchers who were planning to do research backing up his ideas were taken aside by Buy-and-Holders and told that publishing such research would be a career limiting move.
Carl Richards wrote to me to tell me that my stuff is amazing. He congratulated me for doing work of huge importance. And he banned me from his site. Because his Buy-and-Hold readers said that they would stop reading his stuff if he did not ban me. He sees great value in the work. But he is afraid of the Buy-and-Holders.
Shiller doesn’t include any how-to information in his book. It is not possible that that is not because he is afraid of what the Buy-and-Holders will do if he calls them out on their b.s. The first thing that an editor of a book on investing would look for is the how-to stuff. That’s what people buy investing books to see. So why the heck would you leave that out of a book on stock investing if you were not afraid that the people following the old model would freak out? It’s the only possible explanation.
And on and on and on and on and on. Remember Scott Burns? I told him about the errors in the Buy-and-Hold retirement studies and he said that he was going to write an article about it. He did write an article but he did not mention my name and he did not offer his own view as to whether the studies are in error. Huh? I wrote to him to ask what the deal was and he said that it was “catastrophically unproductive” of me to point out the error. Isn’t the idea to get the numbers in retirement studies right and not wrong? There’s nothing catastrophically unproductive about pointing out an error in a retirement study. That’s what we all are supposed to do. Scott didn’t like it because he did not himself have the courage to point out the error and it made him look bad someone else to do it.
We will have to decide as a society whether we are going to permit honest posting after the next price crash. I think that will end this. People will not feel threatened to hear about the dangers of treating irrational exuberance as something real after the irrational exuberance portion of their portfolios has disappeared. So we will be able to move forward in our understanding of how stock investing works at that point. And we will never again see one of these horrible bull markets that end up destroying so many lives.
We’ll see, you know? I am not capable of saying that I believe that Greaney included a valuations adjustment in his retirement study. So I am just going to continue walking down the path that I have been on for the past 18 years and see how things play out. I believe that we are a good people deep down inside. So I believe that we are going to end up in a good place. And at that point I do not believe that there will be any controversy any more as to whether honest posting re the last 39 years of peer-reviewed research should be permitted or not. But, again, we will just have to wait and see to find out for sure.
I naturally wish you the best of luck in all your future life endeavors.
How about this one — Brett Arends in the Wall Street Journal:
“For years the investment industry has tried to scare clients into staying fully invested in the stock market at all times, no matter how high stocks go. It’s hooey. They’re leaving out more than half the story. Anyone who followed the numbers would have avoided the disaster of the 1929 crash, the 1970s or the past lost decade on Wall Street…. I wonder how many stayed fully invested because their brokers warned them ‘you can’t time the market’.”
Why wasn’t that on the front page? The editors of the Wall Street Journal have consciences. They want to do what they can to get the word out that Buy-and-Hold is a scam. But they don’t put it on the front page because they fear the reaction they will get from the millions of people who have been taken in by this Get Rich Quick garbage and have their retirements riding on it.
It’s never been a problem getting people to acknowledge privately that Buy-and-Hold is a big pile of Get Rich Quick garbage, a dishonest strategy that does a good job of turning a quick buck. The trouble comes with persuading them to state things clearly and not to back down in the face of death threats and demands for unjustified board bannings and extortion.
My best wishes.
Hooey Free (I Hope!) Rob
So you don’t have any links to the actual comments. Just you “reporting” your rake on it.
Got it.
It will be interesting to see how it all plays out, Anonymous.
I do wish you all good things.
Reporting Rob
We have already seen it all okay out. Time for us to all get in with our lives.
Please feel free to get on with your life.
I am going to continue to say that I do not believe that Greaney’s retirement study contains a valuations adjustment. That’s my life. I get to say what I do with my life.
I naturally wish you the best of luck with your life, regardless of what investment strategies you elect to follow.
Live-and-Let-Live Rob
I wrote to him to ask what the deal was and he said that it was “catastrophically unproductive” of me to point out the error.
No he didn’t.
What actually happened is laid out here.
http://www.passionsaving.com/200711.html
“The Dallas Morning News columnist said that he appreciated my “efforts to add another level to the safe withdrawal rate discussion.” But he added that: “You go about it in a manner that is catastrophically unproductive by adding missionary zeal that inflates your importance and demeans others. The whole idea that there is a new school of Safe Withdrawal Rates reeks of personal aggrandizement.”
In response to this you sent him a 4,500 word email that mentions “I” or “my” over a hundred times and which went over many of your usual “hocomania” topics.
In response to that, Scott was much more succinct, he said “Sadly, your response is exactly what I wrote you about.”
The key phrase is “You go about it in a manner that is catastrophically unproductive”. This has been the message that you have received over and over again. It has always been your manner of debating/discussing and you never learn your lesson.
Correcting an error in a retirement study is pretty darn important stuff, Evidence. My “manner” in discussing these issues has been to insist that the error be promptly corrected or, at the very least, that everyone seeing one of the Buy-and-Hold retirement studies be notified that there are two schools of academic thought as to how stock investing works and that the Valuation-Informed Indexing school produces very, very, very different numbers than the Buy-and-Hold school.
I offer no apologies for my missionary zeal in insisting that those retirement studies be corrected. A good number of the people who relied on Greaney’s study to plan their retirements had become friends of mine during the time that we posted together at the Motley Fool site.
I have zero problem with crediting my Buy-and-Hold friends for the many important contributions that they have made. But I feel strongly that they hurt themselves as well as millions of ordinary investors by failing to take prompt action to correct the error they made in their retirement studies. None of us know it all. All of us make mistakes from time to time. But there are responsibilities that apply in the investment advice filed that must be honored, in my sincere assessment. One of those responsibilities is that one must correct a retirement study that one has advanced once one learns of a serous error in that study.
If I need to add hundreds of instance of the word “I” to make that point, I am fine with that. The important thing is that the point be made clearly and firmly and repeatedly until the study is in fact corrected. Please note that the Scott Burns approach (which is followed by a good number of others, to be sure) has not to this day resulted in correction of the Greaney study or any of the other Buy-and-Hold retirement studies. When someone comes up with an approach that gets those studies corrected (or that at a minimum makes people who see the studies aware that there are two academically respected schools of thought as to how stock investing works), I will salute the fellow or gal who pulls it off. Until that happens, I will continue with the approach that makes sense to me — praising the Buy-and-Holders to the sky for their mountain of genuine good work while at the same time insisting on prompt correction of the studies.
I hope that that helps a small bit, good friend.
Correction Seeking Rob
You didn’t correct any error. Wade Pfau even covered that back in 2010.
It will be interesting to see what he says when he is put under oath at your trial.
I wish you the best of luck with it, Anonymous.
Testifying Rob
“ It will be interesting to see what he says when he is put under oath at your trial.”
The trial that takes place in Rob’s Fantasyland?
The trial that takes place in the days following the next price crash, when the dangers of the fantasy of believing that it might not be necessary for all investors to practice market timing (price discipline!) become evident to many who block out that reality today.
My best wishes to you, Anonymous.
Reality Principle Rob
If there is any crash, it will be blamed on something like debt levels, Mideast tensions, etc. The market will recover and the buy and holders will do even better than before. No one will even think about you or your market timing schemes. I just hope you can take advantage of the current job market and scrape up a few dollars to pay the bills because your investing career has been a bust.
Okay, Anonymous.
I don’t doubt that there will be people who will blame the next price crash on debt levels on or Mideast tensions or whatever. That’s the old way of thinking about these things.
I believe that the last 39 years of peer-reviewed research offers us a better way of thinking about these things. The beauty of understanding that it is bull markets that cause bear markets and bear markets that cause economic crises is that that understanding liberates us. We cannot do anything about debt levels or Mideast tensions because something of that sort is always going to be with us. For so long as we deny ourselves access to the hundreds of powerful insights that follow from an appreciation of Shiller’s Nobel-prize-winning research, we remain subject to the craziness of a stock market that can take away half of our accumulated savings of a lifetime overnight and without warning. If Shiller is right (I believe that he is), then none of that even needs to happen again. Learning that valuations affect long-term returns is like discovering antibiotics. It is an advance that helps every person living on Planet Earth to live a better life. Once we all get to a place where we feel free to consider what really works with stock investing, I don’t believe that there will ever be one person who will wish that we could go back to the days when we didn’t realize how essential it is that all stock investors practice market timing (price discipline!). The widespread practice of market timing is the only way to restore sanity to stock investing by keeping prices at reasonable levels at all times.
It may be that I am more optimistic than you or more idealistic. Perhaps that’s the core difference. You would say more foolish. Whatever it is, I am what I am and I offer no apologies for it. I can acknowledge that it is possible that I am wrong. I don’t believe that I am or else I wouldn’t say the things that I do. But I do acknowledge that I am one of those flawed humans and that it is at least possible that I am wrong. But, given how important this stuff is, I don’t feel that I have any option but to post honestly about these matters.
I wish that that were okay with you. But I naturally wish you all the best that this life has to offer a person in any event, dear friend.
Idealistic (Foolish?) Rob
Your market timing system didn’t work for you. You have spent through a good portion of your savings and now you have to go back to work. If you had followed buy and hold, you would have benefited from the incredible bull market. Unfortunately, you missed out.
Millions of people lost their jobs in the Buy-and-Hold Crisis of 2008, Anonymous. Those people matter.
Hundreds of thousands of entrepreneurs saw their businesses destroyed.
Political frictions increased on both the left and the right.
None of that stuff is necessary. Once we permit honest posting re the last 39 years of peer-reviewed research, insane bull markets become an impossibility. Which means that insane bear markets become an impossibility too. Which means that economic crises become an impossibility.
As for me, I have my name on the most important peer-reviewed research published in the past 30 years. I believe that I will somehow manage to squeak by on the $500 million settlement payment that I will have coming to me in the days following the next price crash.
I don’t want to benefit from any insane price increases. To say that someone could benefit from an insane price increase is like saying that someone could benefit from driving drunk. Not everyone who drives drunk ends up dead the first night that he does it. But I don’t want to live that way, putting my life at risk and putting the lives of others at risk. It’s not for me. I don’t feel that I am missing out on anything by driving sober and I don’t feel that I am missing out on anything by following a research-based investment strategy rather than a pure Get Rich Quick approach.
No apologies, you know?
My best wishes to you and yours.
Sober (and Unapologetic About It) Rob
“ There are scores and scores of places where all kinds of people who work in this field say that they are afraid to tell the truth about Buy-and-Hold. That’s the entire story.”
The entire made up story.
It’s not a made-up story, Anonymous.
Shiller was awarded a Nobel prize for his work. So he must be saying something very, very, very different from what the Buy-and-Holders who came before him are saying. Please identify 20 ways in which the Buy-and-Hold strategy has been changed to reflect Shiller’s findings.
You can’t identify 20 changes. The fuller truth is that you cannot identify 10 changes. Or even five. Or even one.
The Buy-and-Hold of today is the same as the Buy-and-Hold of 1980, And yet research that is so important that it has been awarded a Nobel prize was presented to us all during the past 39 years. We just haven’t yet incorporated it into our thinking re how stock investing works. That’s the issue. That’s the dispute. That’s the conflict.
How do you think that happened? The piece that Shiller provided to the stock investing puzzle is the most important piece ever supplied. It would make all the difference in the world if every expert in this field encouraged investors to always practice market timing instead of being in a situation where there is this relentless promotion of the “idea” that there might be some magical, mystical alternate universe where market timing (price discipline!) is not 100 percent required. The market for accurate, honest investment advice is huge, People could be making millions promoting Valuation-Informed Indexing. So why aren’t they?
The only possible explanation is that the Buy-and-Holders are engaging in intimidation, making people feel that there will be a price to be paid if they say what they really believe about how stock investing works in the real world. And of course I have 18 years of documentation of just that sort of thing. Death threats. Demands for unjustified board bannings. Thousands of acts of defamation. Threats to get academic researchers fired from their jobs.
That’s Buy-and-Hold. That’s the economic crisis of 2008. That’s the entire story. All of that criminal stuff is what Buy-and-Hold IS. All of that criminal stuff is how Buy-and-Hold survives today, 39 years after the peer-reviewed research showing that there is precisely zero chance that this “strategy” could ever work for a single long-term investor.
I don’t say that that is all that Buy-and-Hold ever WAS. Buy-and-Hold started out as a beautiful thing. It was the first research-based strategy. But research never stands still. We learn new things over time. Those new things need to be incorporated into the old understanding for the old understanding to remain research-based. That hasn’t happened over the past 39 years. The Buy-and-Holders act as if Shiller’s research dos not exist. They still denigrate market timing 39 years after Shiller showed that valuations affect long-term returns and that therefore stock investing risk is not stable but variable (and that any investor seeking to keep his risk profile stable over time MUST practice market timing to have any hope of doing so).
I love what the Buy-and-Holders believed in when they started out. That’s why I have incorporated all of the Buy-and-Hold insights that checked out (which is all of them except for one the about market timing not being required) into the Valuation-Informed Indexing model. Valuation-Informed Indexing is what Buy-and-Hold would be today had the Buy-and-Holders remained true to their core belief that investors should look to the peer-reviewed research for guidance re how stock investing works. The message of the peer-reviewed research changed in 1981. Valuation-Informed Indexing reflects the change. Buy-and-Hold does not.
And the Buy-and-Holders do not want the world to know that. So we see all this ugly stuff to keep discussion of the past 39 years of research suppressed.
I like the last 39 years of peer-reviewed research. I think it is important. So I am working at cross purposes to the abusive Buy-and-Holders. Not because I do not like them as people. Because I believe that we all need to know what the research says. If Buy-and-Hold as it is currently promoted can survive that, fine. But the Buy-and-Holders themselves obviously do not believe that Buy-and-Hold can survive as currently promoted if word get out re what the research says. Otherwise, they wouldn’t behave in the manner that they do.
It’s all intimidation. That’s all that Buy-and-Hold is today. There was a time when that was not so. But today there is 39 years of peer-reviewed research showing that valuations affect long-term returns that did not exist in the old days. And, if valuations affect long-term returns, then there is precisely zero chance that a strategy that does not call for market timing could ever work for a single long-term investor. So there is a conflict between what we once thought the research said and what those who follow the peer-reviewed research know today that it really does say. The Buy-and-Holders have the edge in that conflict because they got there first and have built an entire industry around the idea that market timing is not required, with all the wealth and power and connections that go with it.
What Valuation-Informed Indexing has going for it is the millions of investors who need to know the realities and who will be upset if they see 50 percent of their life savings disappear into thin air That’s why I believe that we will see things move forward in the days following the next price crash.
We’ll see.
Rob
“It’s not a made-up story, Anonymous.”
Yes it is, but I understand your need to cope with the fact that you have just wasted the last 2 decades of your life.
Okay.
I have indeed invested 18 years of my life in this. That certainly creates a bias within me. I do not say different.
Please take good care, old friend.
Life Wasting Rob
With a zero return, I think “wasted” is closer to the mark instead of “invested”.
In terms of dollar bills, the return has indeed been zero.
In terms of building a model for understanding how stock investing works that will be improving the lives of millions for many years to come, the return has been off the charts.
I have lost every process battle. And I have won every content battle.
That puts me in a strange place. I’ll grant you that much. But it’s not a bad place. There’s bad in it. It’s a mix of bad and good. But the good is 50 times more good than the bad is bad. So I think it would be more accurate to say that I am in a very good place than to say that I am in a bad place.
Valuation-Informed Indexing is the future, Buy-and-Hold is the past. And I have played a big role in bringing about the transition. I can live with that, you know?
My best wishes.
Fully Invested (Not in Stocks, in Valuation-Informed Indexing!) Rob
“ In terms of dollar bills, the return has indeed been zero.”
And that is the point. We invest and measure success on return rates. Silly made up talking points don’t pay the bills.
So peer-reviewed research is never considered? The only thing that matters is the short-term dollar effect?
Then why was Shiller awarded a Nobel prize?
There are different ways of measuring things. I would rather avoid committing any felonies and have the dollars arrive somewhere down the line.
If all else were equal, I would prefer to have the short-term dollars. But, if I kept my mouth shut re the error in Greaney’s study, a lot of my friends at the Motley Fool site were going to be hurt in very serious ways. I prefer to be able to sleep at night. That counts for something in my eyes. I have lost the battle of short-term dollars. But I can sleep at night and I stand to make more dollars in the long run than I could ever have dreamed of making at earlier times in my life.
Given the cards that I was dealt, I made the right call. The circumstances are weird as all get-out. But I don’t decide what cards are dealt. I just have to play the ones that are dealt me to the best of my ability.
If you think that you played your cards well, then you think that. I wouldn’t trade places for all the money in the world. We all get to play our own cards and then live with the consequences of our choices. The only thing that I would change if I had a chance to do it all over is that I would have worked up the courage to speak out three years earlier.
I care about doing right by my friends. That counts for more in my eyes than the number of short-term dollar bills coming in or out.
Card-Playing Fool Rob
“ So peer-reviewed research is never considered? The only thing that matters is the short-term dollar effect?”
Your jaded opinions do. It matter when it comes to investment returns funding a retirement. You have been out of stocks for over 2 decades. That is not shirt term. If a buy and hold portfolio bombed out for 2 decades into a person’s retirement, you wouldn’t call it short term. You would be running headlines everyday showing those numbers.
I have been out of stocks since the Summer of 1996. That’s 23 years, going on 24 years. I wouldn’t call that a short amount of time. But please take note that this is the longest stretch of time in U.S. history in which stocks have remained at insanely dangerous price levels. If the value proposition is not there, the value proposition is not there. I would prefer to be in stocks. We all need to work together to pull prices down and restore the value proposition that has generally been attached to stocks throughout history.
I have of course done well being out of stocks. You always fail to adjust today’s stock price for the amount of overvaluation when you do these comparisons. If you make the adjustment, you will see that I am doing fine on a risk-adjusted basis. I don’t have the same return as those who have been in stocks. But I have been taking on only a tiny portion of the risk that they have been taking on. That’s a good trade-off. And there has never yet been a time when investors who followed a Valuation-Informed Indexing strategy did not soundly beat those who followed Buy-and-Hold strategies over the course of an investment lifetime. There’s every reason to believe that that is how it will turn out again. After the next crash, millions will be able to see in a very concrete way why it is not a good idea to stick with a high stock allocation when prices go to crazy levels.
Or so Rob Bennett maintains, you know.
Actually, I believe that you have inner doubts about Buy-and-Hold yourself. If you thought that it could stand up to scrutiny, you would not behave the way you do. The defensiveness is not a good sign. If your strategy does not make you feel confident enough to engage in civil and reasoned discussions, there is something seriously wrong with your strategy.
Boastfulness is not the same thing as confidence. Boastfulness is a fake confidence. It’s something that you evidence when you are trying to convince yourself
Confident (at Least Relative to Many Buy-and-Holders) Rob
“ I have of course done well being out of stocks. You always fail to adjust today’s stock price for the amount of overvaluation when you do these comparisons. ”
Just your typical Rob math. Risk adjustment is never done in reverse as those are actual results. Your results are horrible.
I didn’t perform the risk assessment in reverse. I performed it in a looking-forward way at each time that a stock allocation choice was presented to me. That’s what I advise all others to do. I suggest that they use the historical return data going back to 1870 as a guide. That’s the best source of information available to us as to how risky stocks are at any particular CAPE level.
And of course this approach has been working well, just as it has worked well for 150 years now. You imagine that Buy-and-Hold might work well in some future time-period, when all of the rules of stock investing that have applied from the beginning of time have been stood on their heads. Is it possible? It’s possible. But it’s the longest of all possible long shots. I feel better going with published peer-reviewed research than with marketing gimmicks. You don’t need to use death threats and demands for unjustified board bannings and extortion to back up your ideas when you have peer-reviewed research supporting them. Staying on the right side of the felony line is a big deal to me.
Going to prison is the worst result possible, in my sincere assessment. If I ever felt even the smallest temptation to commit a felony as part of my effort to “defend” my investment strategy, I hope that I would see that as a sure sign that I need to be searching for a new investment strategy. Not this boy, you know?
All my best.
Results-Oriented Rob