Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
William Bernstein does not time the market and says Rob Bennett is wrong.
If you dropped all the criminal stuff and all the non-criminal abusive stuff, Bill would be happy to participate in our discussions in a 100 percent honest way and we would learn what he really thinks about all these matters. Full truth be told, HE would learn for the first time what he really thinks re all these matters.
I was a Buy-and-Holder once. I detected some of the contradictions. But there were so many good and smart people who thought that Buy-and-Hold was a good strategy that I didn’t trust my own instincts. I finally worked up the courage to express my doubts out loud and then I saw that there were a good number of smart and good people who shared my doubts and that there was an insane amount of defensiveness on the Buy-and-Hold side of the table. So those doubts grew. And over time I was able to put all the pieces of the puzzle together and become a confirmed Valuation-Informed Indexer (which is just Buy-and-Hold with the one huge error (that market timing is not required) corrected.
Bernstein already believes that the Buy-and-Hold retirement studies get the numbers wildly wrong. That’s a good start. Chapter Two of his Nine Pillars of Investing book is the best concise statement of the case for Valuation-Informed Indexing that I have ever seen. So we are not going to have much trouble bringing Bill Bernstein on board once we open the internet to honest posting and he is expressing his sincere views and hearing lots of others express their sincere views. We just need to take that one critical step. We need to follow the laws of the United States in discussions of stock investing just as we follow them in every other field of human endeavor.
I think we are going to get there, Anonymous. In the event that stocks continue to perform in the future at least somewhat as they have always performed in the past, we will be seeing a devastating price crash in the not too distant future. That will give a lot of people the courage they need to stand up to you Goons. And then we are on our way. It will not be too long a time after that when we will see people like Bill Bernstein singing the praises of market timing to the skies. I am sure.
Perhaps not 100 percent sure. But pretty darn sure. The intellectual case for market timing is just too strong for me to imagine that we could not get a guy like Bernstein to join the party once he could see that it was safe to do so. And I think that it is going to become an entirely safe thing in the days following the next price crash, when irrational exuberance over Buy-and-Hold/Get Rich Quick becomes irrational depression over Buy-and-Hold/Get Rich Quick.
We’ll see.
Bernstein Fan (The Chapter Two Version!) Rob
What criminal stuff? You keep repeating that line, yet haven’t linked to one single thing that proves any criminal “stuff”. It is all made up.
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 Bennett is living in the world of “No”
No Job
No Book
No Supporters
No evidence of criminal acts
No evidence of threats
No track record of investing success
No training in the field of finance and investing
No credibility
No dishonest posting.
That last one is a biggie to me. We have as a community developed hundreds of powerful investment insights over the past 18 years. We wouldn’t have gained access to any of them had I not worked up the courage to advance that amazing post pointing out that I could not find a valuation adjustment in the retirement study posted at John Greaney’s web site.
I’ll take the trade-off of gaining access to the hundreds of powerful insights in exchange for ttaking on he ocean of hate that has been directed at me over the past 18 years any day of the week and twice on Sunday. My preference would be that there would be no hate, that we would all benefit from an amazing learning experience starting on the first day. But I only get one vote, you know? And that is not the way that things have gone down. But I sure don’t regret advancing that amazing honest post and refusing for the 18 years since to agree to post dishonestly in hopes that that might turn off the hate machine.
Not this boy, you know? No freakin’ way, no freakin’ how.
My best and warmest wishes to you and yours.
Anti-Hate Rob
If Wade believes in VII, why does he not recommend it on his website or in his books?
First of all, I don’t believe that Wade believes in every single thing that I have ever said about stock investing. I have said hundreds of things. It would be exceedingly strange if there wasn’t anything that we disagreed about.
But yes, he certainly believes in the Valuation-Informed Indexing concept. He studied it for months from every possible angle. He said that he was so excited about it that he couldn’t sleep at night. He told me that, whenever he had doubts about something I said, he came around when he researched the matter. He stated concisely: “Yes, Virginia, Valuation-Informed Indexing works!” That’s a believer.
He doesn’t recommend it because he wants to be able to continue to make a living in this field and he has seen what happens to people who “cross” the Buy-and-Holders by posting honestly re these matters.
It’s the same story with Bill Bernstein. He says in his books that the Buy-and-Hold retirement studies are wildly wrong. But he didn’t dare to say that at the Bogleheads Forum board. He knew that if he told the truth at that forum, he would be banned. So he kept it zipped. His conscience compelled him to tell the truth in one paragraph in his book. His desire for self-preservation kept him from saying what he believed in the many threads on safe withdrawal rates that appeared at that board.
It was the same with Jack Bogle. Bogle said that he could see how Valuation-Informed Indexing could work. But he only said it once. Why? Why didn’t the Bogleheads have a hundred questions for him when he said that? Because everyone knew that anyone who asked a question was going to get banned. Bogle could have stopped that. Why didn’t he? Because he was afraid of Mel Lindauer and his Goon Squad. When people violate U.S. law and face no consequences, it scares people.
It’s the same with Shiller. Shiller has never said that the Buy-and-Hold retirement studies are in error. Why not? Bernstein said it. Pfau said it. Russell said it. Bennett said it. Why hasn’t Shiller said it? There would be a price to pay if he said it. He says what he thinks he can get away with.
And on and on and on and on. Bill Shultheis told me that my stuff is amazing. Then you Goons threatened him and he got real quiet. Carl Richards said that my work has “huge value.” Then he banned me from his site (his readers got upset when they read my comments of “huge value”). It’s the same deal with scores of others.
We need to provide people who want to post honestly re these matters a safe place for doing so. That safe place should be the United States. Our laws don’t permit threats of physical violence and extortion and financial fraud. But laws that are not enforced don’t do anyone any good.
But we are going to get to where we need to get. We don’t have any choice. If Shiller’s Nobel-prize-winning research is legitimate research, the 39-year cover-up is going to cause millions of people serious financial pain. Those millions of people are going to be mighty pissed off to see a large portion of their retirement savings disappear into thin air. They are going to come looking for answers to their questions. The 18 years of material at my site provides the answers they need to make sense of things.
I am going to say lots of positive things about the Buy-and-Holders. Because I believe lots of positive things about them. But I am not going to say that I believe that the retirement study posted at John Greaney’s web site contains an adjustment for the valuation level that applies on the day the retirement begins. Because I do not believe that there is a valuation adjustment in the study. It will be interesting to see what the members of your jury conclude about that one, Anonymous.
My best and warmest wishes to you and yours.
Buy-and-Hold Advocate (Except for the Financial Fraud Stuff) Rob
So all these people, such as Wade and Bill Bernstein are lying…..according to Rob Bennett, top investing expert.
I am not an investing expert. I am a journalist. A journalist who discovered a huge story, the story of how the investment advice field has become 100 percent corrupt over the past 39 years.
Everyone in this field lies. Some not by commission but only by omission. The vast majority do not know that they are repeating lies when they pass along to their clients the conventional wisdom. But the reality is that the conventional wisdom was discredited by peer-reviewed research which has since caused its author to be awarded a Nobel prize 39 years ago. If you charge high fees and pass along advice that was discredited 39 years ago, is that not a lie? I of course believe that we should be telling people the unusual circumstances that apply. But we also need to tell people that the stuff that they are hearing about long-term timing/price discipline not working or not being required is a lie. That’s truly dangerous stuff. People need to know the other side of the story.
Everyone in this field is telling lies to one degree or another. Anyone who doesn’t tell lies or at least keep quiet while others tell them is removed. You Goons mention all the time how no one posts here. Why is that? It’s because I told the truth about the Greaney retirement study, that it lacks an adjustment for the valuation level that applies on the day the retirement begins. If we were all thinking clearly, I would have been applauded for pointing that out (I have been applauded by thousands of our fellow community members, but that has not been enough to persuade you Goons to knock off the criminally abusive stuff). If we were all thinking clearly, we would all want to get the numbers in our retirement studies right.
I want to post honestly. And I want all these other people you mention to feel free to post honestly so that I and millions of others can learn from them. For that to happen, we need to stop penalizing those who work up the courage to post honestly and adopt a practice of rewarding them instead. If anyone is going to be penalized, it should be the ones engaging in criminal behavior. Those are all Buy-and-Holders. I wonder why.
Greaney’s study truly does not contain a valuations adjustment. It should be corrected before it causes even more harm and causes his prison sentence to be increased even farther in length than what it would be if his trial were held today.
That’s my sincere take, Anonymous.
I wish you all good things.
Greaney’s One True Friend Rob