Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
“ When the same person says two things that are opposites, that presents a puzzle. ”
Actually, it is his words versus your interpretation of what he said or meant.
“ We have to do better.”
There is no”we”. You are responsible for YOU. You want everyone else to change to your way of thinking. That is not how YOU get better.
Set forth below are some of Wade’s words. It is not possible that any reasonable person could read those words and conclude anything other than that Wade believes that the Buy-and-Hold retirement studies are “dangerous” and that Valuation-Informed Indexing is gold. Those are the two most important issues that have been debated over the past 18 years.
I agree that I am responsible for me and only me. That’s why I insist that I be permitted to post honestly. When I see someone advocating the 4 percent rule and I fail to point out that there is 39 years of peer-reviewed research showing it to be false, I am failing my readers and myself.
I do not want everyone else to change to my way of thinking. I want everyone else to post their honest views just as I post my honest views. That’s how I learn from others. It would be horrible if everyone just agreed with me. I would hate that. That’s why I never engage in intimidation tactics against people who offer views that I do not agree with. But the fact that I like hearing views that I do not agree with from others does not mean that I like hearing views that I do not agree with from me. I believe that posts with my name on them should reflect accurately my views. That’s the thing that enrages Mel Lindauer and John Greaney. They want me to pretend to believe things that I just do not believe. And I do not feel even a tiny bit comfortable going there.
A) Academic Researcher Wade Pfau’s Statements Showing Interest In and Confidence in Rob Bennett’s Work
1) “I do cite you and John Walter Russell in my paper as the earliest and strongest advocates of this approach [New School safe-withdrawal-rate research].
2) “Are you aware of Shiller offering asset allocation advice based on PE10? …. If you read Rob Bennett’s stuff carefully, I think he did provide an important contribution in terms of describing a way for PE10 to guide asset allocation for long-term conservative investors. I also think he was right on the issue of safe withdrawal rates.” — Posted at the Bogleheads Forum discussion board.
3) “I am also extremely grateful to Rob Bennett for motivating this topic and contributing his experience and encouragement.” — Written in Acknowledgments section of Wade’s breakthrough research paper.
4)”You deserve much of the credit as the whole idea of Valuation-Informed Indexing belongs to you.”
5) “I definitely need to cite some of your work as the founder of Valuation-Informed Indexing, as I have not found anyone else who can lay claim to that. Shiller pointed out the predictive power of PE10 but never discussed how to incorporate it into asset allocation, as far as I know.”
B) Academic Researcher Wade Pfau’s Statements on the Superiority of Valuation-Informed Indexing Over Buy-and-Hold
1) “What you see in the top part of the graph for each year is the amount of wealth accumulated after 30 years for someone following Buy-and-Hold against someone following Valuation-Informed Indexing….Valuation-Informed Indexing provides more wealth for 102 of the 110 rolling 30-year periods, while Buy-and-Hold did better in 8 of the periods.”
2) “I will take steps in my final paper to test a wide variety of assumptions about asset allocation, valuation-based decision rules, whether the period is 10, 20, 30, or 40 years, lump-sum vs. dollar-cost averaging, and so on, and to show that the results are quite robust to changes in any of these assumptions.”
3) “Any data mining that I am doing is in favor of buy-and-hold, not in favor of market timing.”
4) “The findings for “market timing” are so robust anyway, that it hardly matters how we do it.”
5) “The maximum drawdown from market timing is much less. That is how far the portfolio drops from past highs to current lows. The Buy-and-Holder once experienced a 60.96% drop, whereas the worst drop for market timing was 24.16%.”
6) “Market timing provides signficantly higher returns at a comparable level of risk.”
7) “The market timer enjoys a far less risky strategy.”
8) “On a risk-adjusted basis, market-timing strategies provide comparable returns as a 100 percent stocks Buy-and-Hold strategy but with substantially less risk. Meanwhile, market timing provides comparable risks and the same average asset allocation as a 50/50 fixed allocation strategy, but with much higher returns.”
9) “If everyone increased exposure after a market fall and vice versa, then this would dampen out the big swings in the market aggregates, and we might get shallower boom/bust cycles.”
10) ““‘I’m excited about this, as depending on what you have already done, I think I can design a study using the Shiller data to provide historical simulations of Valuation-Informed Indexing strategies against fixed Buy-and-Hold strategies and also lifecycle strategies (declining allocation to stocks as one ages). If Valuation-Informed Indexing consistently outperforms fixed and lifecycle strategies, then the proof is in the pudding so to speak. Given how well valuations help to explain withdrawal rates, I think there is a lot of potential for this topic.”
11) “Yes, Virginia, Valuation-Informed Indexing Works!”
12) “It makes complete sense to have an equity allocation that is in some way flexible. Having a completely inelastic demand for equities is a bit bonkers; no-one acts that way with life’s other important commodities.”
13) “I wrote up the programs to test your Valuation-Informed Indexing strategies against Buy-and-Hold, and I must say that the results look very promising…. I am quite excited about the findings so far. As you say in the podcast, Valuation-Informed Indexing should beat Buy-and-Hold about 90 percent of the time, and I am getting results that support this for various strategies.”
14) “I have been toying with the idea of sending the paper to the Journal of Finance, which is the most prestigious journal in academic finance.”
15) “Now that I am accounting for risk, I am even more amazed by how well Valuation-Informed Indexing works.”
16) You shouldn’t be too excited with great wealth accumulations if they happened due to unusually high valuations, and low wealth accumulations shouldn’t be as scary if valuations are also quite low.”
17) “My idea is to show many different tables with results over the whole period for returns and risks. Valuation-Informed Indexing always provides more returns for often less risk.”
18) “No matter what I try, Valuation-Informed Indexing will still perform better in 85-95% of cases for 30 years.”
19) “I have a new figure for showing this as well. And a nice figure showing the outperformance percentages across rolling periods of lengths between 1 and 40 years. I think it is all quite persuasive.”
20) “You haven’t seen anything yet! This was just the secondary study. I’m still working on the main one!”
C) Academic Researcher Wade Pfau’s Statements of Incredulity That He Was the First Academic Researcher to Examine the Valuation-Informed Indexing Strategy
1) ” I know that there is an extensive literature about the predictability of long-term stock returns dating back to Campbell and Shiller’s work in the mid-1990s. I also know that there is an extensive literature about short-term market timing strategies…. But my question is about LONG-TERM market timing strategies. In other words, using market timing over periods of at least 10 years to obtain better returns than a Buy-and-Hold strategy. The literature seems slim.”
2) “Let me just explain a bit more why I posted about this here. Valuation-Informed Indexing has had critics for years, but until Norbert did it in 2008, nobody seemed to have provided a serious investigation of it. I just couldn’t understand why. And that bothered me.”
3) “Two papers by Fisher and Statman are still all I can find that provide evidence against long-term market timing.”
4) “I’m so confused by why Fisher and Statman didn’t consider risk in their idiot switching tests. Valuation-Informed Indexing is much less risky by pretty much any standard I consider. I must wonder… did I make a mistake somewhere? Why haven’t academics already published research about this?”
D) Academic Researcher Wade Pfau’s Statements on the Dangers of the Conventional Retirement Planning Advice
1) “The traditional approach to retirement planning (as described on pages 10 and 11 of The Bogleheads’ Guide to Retirement Planning, for example) is counterproductive and possibly damaging.”
2) “Retirees now frequently base their retirement decisions on the portfolio success rates found in research such as the Trinity study…. This is not the information that current and prospective retirees need for making their withdrawal rate decisions.”
3) “This article provides favorable evidence based on the historical record for long-term conservative investors to obtain improved retirement planning outcomes (lower savings rates, higher withdrawal rates) using valuation-based asset allocation strategies.”
4) Wade sent me a link to an article in Business Week that was published more than eight years after my post pointing out the errors in the Old School retirement studies and which he characterized as “quite sympathetic to the point you were trying to make all along”.
5) “Though I was only trying to do an Old School safe-withdrawal-rate study, all that I ended up doing was showing in a different way what you had been saying all along: the safe withdrawal rate changes with valuations.”
6) “Valuations are the driving factor. ”
7) “This is similar to your drunk driving analogy, which I agree with.” The discredited but uncorrected retirement studies find that in most circumstances a 4 percent withdrawal rate provides a huge cushion for the retiree using it. However, in each of the three cases in history when stocks reached insanely high price levels, retirements using a 4 percent withdrawal came within a whisker of failing. To say that this shows that a 4 percent withdrawal is “100 percent safe” (these words are used in the Greaney study) for a retirement beginning at a time of insanely high price levels is like saying that driving drunk is “100 percent safe” because 97 sober drivers drove their cars 20 miles without incident while 3 drunk drivers were paralyzed for life in car accidents but did not die. The fact that 4 percent only worked by a whisker in the cases in which valuations were high at the beginning of the retirement shows that a 4 percent withdrawal is high-risk at times of high valuations, not that it is “100 percent safe.”
8) ” Actually, this issue shouldn’t really even be all that controversial. It’s just common sense that the probabilities from the Trinity study shouldn’t be interpreted as forward-looking probabilities for new retirees.”
9) Naturally, I am finding that Valuation-Informed Indexing can allow you to reach a wealth target with a lower savings rate, use a higher withdrawal rate, and also have a lower “safe” savings rate, than a fixed allocation.
E) Academic Researcher Wade Pfau’s Statements Showing His Concerns that Continuing to Report Honestly on the Investing Realities in the Face of the “Hostile Environment” for Doing So Created by Buy-and-Holders Would Harm His Career
1) “I was trying to pay tribute to your accomplishments in what I knew would be a hostile environment.”
2) “Valuations and long-term investors is a somewhat controversial topic.” Wade posted these words to his blog in October 2011 as his explanation of why he was abandoning his plan of doing further research on the superiority of Valuation-Informed Indexing strategies over Buy-and-Hold strategies. He had told me in earlier days that “You ain’t see nothing yet!” when I praised his breakthrough research in this area. After his flip to the dark side, Wade removed the page containing this blog entry from his site.
3) “We have both read and met to discuss your paper. Unfortunately, we did not find the paper’s incremental contribution to the academic finance literature, assuming the analysis proved to be correct, rose to the level that we are seeking for papers in the JFR. Thus sending the paper to a reviewer would be inefficient.” These words are from an academic journal’s “desk reject” of Wade’s breakthrough research.
4) ) ““ I was discouraged when I first received the “desk reject” by the editors of the same journal that published the Fisher and Statman paper. I realized that I didn’t have a chance with one of the top journals.”
5) “I think I should stay publicly quiet for a while, as I really don’t want anyone sending messages about any topics to officials at my university.”
6) I don’t want them [the Goons] working behind the scenes to derail me.”
7) “I did warn the editor of the Journal of Financial Planning that they may receive some ‘hate mail‘ after I mentioned your name in the safe savings rate paper.”
Rob (Expressing the View of Rob, As Is Proper)
Set forth, are Wade’s words that are completely ignored by Rob Bennett:
“Hi Rob,
I forgot that I was still saying things like this even 2 weeks after the initial incident.
This was more than a year ago now, but I am thinking that I was just trying to explain politely to you that I’d rather have you quit writing about me, or at least stop using my name. I suppose that I figured the only way you might understand why is if I explained it in terms of your favorite conspiracy theories.
I will make one more attempt at a reality check for you. You go on and on about how I allegedly lack personal integrity because I allowed the Goons to threaten me into silence.
The reality is that though I may have for a brief moment got a bit too caught up in YOUR drama, I do not have any fears about the Goons.
The reality is that you are causing me 1000x more career damage than the Goons ever could have by filling Google with so much nonsense about me, and sharing embarrassing private details such as my overly ambitious journal submission strategies, etc. Those in particular are highly private. People don’t publicly share where they submit articles to unless those articles are accepted. You’ve violated my trust in so many countless ways and yet you still proclaim to be my friend.
And the further reality is that if I *did* lack personal integrity, I could have made this all stop just by saying the meaningless sentence you want so desperately to hear: “I think the errors in the traditional safe withdrawal rate studies must be corrected by using Rob’s analytically valid method.”
But I don’t believe that. I do not believe you have offered a valid correction to the safe withdrawal rate question. And I believe that retirement income strategies go much further than the question of a safe withdrawal rate. And so that is why I’ve had to endure your ongoing harassment for months on end now.
Usually I can figure out the Rob-logic behind what you are thinking, but I really don’t know how you think you come out of this whole episode looking like the good guy. I guess it is because you think you are saving my soul and putting me back on the path of righteousness, or something, huh? If only you had the power to do a little bit of self reflection…
Now that the whole email history is on display, we have the reminder of how angry you got at the very beginning when I referred to you as dogmatic. Yet, look at the way you’ve treated me for disagreeing with you on something which you don’t even understand. You quote numbers from JWR’s statistical work, but I’m not sure if you can even distinguish a mean from a median. So how can you be sure his work is right? I don’t know either, as I never did get around to digging into it, and I doubt I ever will now. But I’m not sure how a properly calculated lower confidence bound for a 2000 retiree could have been higher than zero.
Rob, suppose the stock market does drop 65% as you are expecting. It might happen, who knows.
Step 1: Stock Market Drops 65%
Step 2: ??
Step 3: Rob wins $500 million settlement from the Goons, the Goons are sent to prison, the investing public learns about and adopts VII.
What is Step 2? There isn’t one. You will still be in the same position as you’ve been in for the last 10 years. Why didn’t something happen for you after the 2008 financial crisis? You are like the guy who keeps predicting new ends for the world as each previous prediction date passes by.
That is why I’m telling you, from one human being to another, that it is time to move on. You are a smart guy, and you could use your talents for something productive. While warning people about the 4% rule is helpful, the way that you go about doing it is rather “catastrophically unproductive” as one wise fellow said to you years ago. I provide a loud voice that is critical of the 4% rule, and so spending your days assassinating my character is counterproductive to your underlying cause. So perhaps you can start fresh with a new issue of social import that carries less baggage for you. What happened in the past is a sunk cost, but you still have a chance to turn things around and start afresh today. And you can do all of this while still being honest and true to yourself.”
I have never ignored those words. I reported on them at this site. And I have on numerous occasions approved comments at the blog in which you Goons have quoted them.
Those words are a part of the story. They are an unfortunate part of the story. Wade should not have pretended to have changed his views on 40 different issues to appease you Goons. He hurt us all by doing that. I think that he should insist on recognition of his right to say what he truly believes re safe withdrawal rates and re scores of other critically important investment-related topics. I think we all should.
What Wade’s words really show is what a mess we have gotten ourselves into. It’s been 39 years since Robert Shiller published his Nobel-prize-winning research showing that there is precisely zero chance that a pure Get Rich Quick/Buy-and-Hold strategy (a strategy that does not call for price discipline/market timing) could ever work for a single long-term investor. Our national debate on the far-reaching implications of Shiller’s findings should have been launched at that time. Now that there has been a 39-year cover-up, it’s not just exposure of the mistake re market timing that upsets our Buy-and-Hold friends, it’s also the 39-year cover-up. So we have a real mess on our hands.
But the only way to get things back on a good track is for us all to insist on our right to post honestly re what the peer-reviewed research says. There is no other way. So Wade did not help us with those words. He helped with the 16 months of work that he did with me that led to publication of the Bennett/Pfau research in a peer-reviewed journal. He is a Hero to the Middle Class for that and I have of course never said different. But all that he did with the words that you have quoted here is to make you Goons stronger and to make those of us (the American people!) who would like to see honest posting re these matters weaker. Boo, baby, you know? That ain’t the way.
Anyway, that’s my sincere take.
I naturally wish you all the best that this life has to offer a person.
Wade Pfau Fan (Except When He Is Seeking to Appease the Lindaurheads and the Greaney Goons) Rob
Yes, you have reported them, but your responses show that you ignore his words. That seems to be a common theme with you.
I don’t trust any words that have been made in response to threats. That much is certainly more than fair to say.
Open the entire internet to honest posting re safe withdrawal rates and scores of other critically important investment-related topics and I will be paying very careful attention to every word that Wade Pfau (and lots of others) puts forward. But not today, no. Permitting honest posting is the very first step in our learning experience. We cannot learn anything for so long as most of us are afraid to say what we truly believe re these matters. For the time being, we are just stuck.
Heck, for a time, I was a Buy-and-Holder myself. Can you imagine? That happened because others were not pointing out the contradictions in the claims that the Buy-and-Holders advanced and so I just assumed that there was something to them. I learned better when Greaney put forward his first death threat and 200 of my friends at the Motley Fool board endorsed it.
We all like Get Rich Quick/Buy-and-Hold, anonymous. We love, love, love it. But it always hurts us terribly in the end. So I think that we need to as a society work up the courage to start calling out the Buy-and-Holders on their b.s. when it appears before us. That’s what the Buy-and-Holders would want us to do if they were thinking straight. If Greaney had truly believed that he had included a valuation adjustment in his study, we never would have seen that death threat. If he had truly believed that he had included a valuation adjustment in the study, he would have just pointed us to it and that would have been the end of it.
My sincere take.
And my best and warmest wishes to you.
Buy-and-Hold Skeptic Rob
“ I don’t trust any words that have been made in response to threats. That much is certainly more than fair to say.”
And there is another example. You have been told by many, including Wade that there are no threats, but you ignore that. You have never offered up links to any threats. And you ignore requests to show those threats.
Every word on my site shows the existence of the threats, Anonymous. I put a post to a Motley Fool discussion board on 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 study has not been corrected to this day. Are you saying that there were no threats made?
How could the study remain uncorrected for 18 years without threats being made? Are you trying to tell some kind of joke?
Threat-Revealing Rob
Wade said:
“ If only you had the power to do a little bit of self reflection…”
There’s not one day in the past 18 years in which I have not engaged in self-reflection re these matters. I always come to the same conclusion. My fellow community members at the Motley Fool board had become friends. I owed them honesty. I honestly do not believe that Greaney included a valuation adjustment in his study. So I need to say that.
My best wishes.
Rob
“I always come to the same conclusion.”
Which is that everyone else is wrong and only Rob Bennett is right. Got it.
My conclusion is that everyone else is human and Rob Bennett is human too.
I was a Buy-and-Holder once. I don’t say that I do not possess a Get Rich Quick urge within me.
And I kept my mouth shut re the error in Greaney’s study for three years. I engaged in the same sorts of rationalizations that Wade evidenced in those words of his that you quoted above.
But do the rationalizations get us anyplace good? It seems to me that they do not. Wade says in those words that you quote that he is a big critic of the 4 percent rule. That’s good. Has he gotten the Trinity study corrected with his approach? Has he gotten the Greaney study corrected? It seems to me that all that he has accomplished is to insure that Wade Pfau’s career is not destroyed by you Goons, that he can continue to turn a buck. That’s nice for Wade Pfau. It’s not so nice for the rest of the people living in the United States.
We all want the same things, Anonymous. Every single investor on the planet will be a Valuation-Informed Indexer sometime after we open the internet to honest posting. Not because we will force it. Not because we will silence those posting in support of Buy-and-Hold. Because the case is so strong. And people will look back then and ask “why did we think it was a good idea to ban honest posting even for a single day?” We all believe that the earth revolves around the sun now, do we not? That never would have happened had we never permitted honest posting by those who had taken a scientific approach to the problem and determined that those who insisted that the sun revolved around the earth were in error.
Everybody supports the laws against financial fraud and against extortion and against threats of physical violence. So it’s not just me. The only thing that is different about me is that I say that the laws that apply in all other fields of human endeavor should apply in the investment advice field as well. And, yes, I truly do believe that that is the way to play it. Why do I have a funny feeling that there is going to be universal agreement re that one in the days following the next price crash?
If no one agrees with me, why not just permit honest posting? How could it hurt you? The question answers itself. We only see criminal behavior used in defense of Buy-and-Hold because Buy-and-Hold is the only strategy that cannot be defended any other way. Buy-and-Hold purports to be research-based and yet Buy-and-Holders ignore the last 39 years of peer-reviewed research in all of their calculations. Huh?
It’s you who are saying that the laws of the United States should not apply in the investing realm. Those laws reflect our common beliefs as a people. It’s you who is saying that everyone else is wrong. You say that every time you engage in another criminal act. I am saying that we should uphold our social norms by enforcing our laws in the investing advice realm. I am saying that we should not abandon our social norms just because our Get Rich Quick urge is calling out to us. Get Rich Quick strategies are a snare and a delusion, in my sincere assessment.
Man-of-the-People Rob