A Rich Life

The Old Ideas on Saving & Investing Don't Work -- Here's What Does

Buy-and-Hold Goon to Rob: “What Exact Words in the Book ‘Irrational Exuberance’ Talk About Death Threats, Job Threats, Jury Trials, Prison Sentences and $500 Million Windfalls?”

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Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

“The title is “Irrational Exuberance.”

What exact words in the book talk about death threats, job threats, jury trials, prison sentences and $500 million windfalls?

Shiller was awarded a Nobel prize because he published research that discredited the Efficient Market Theory. If the market were efficient, stock price changes would be caused by economic developments and would reflect reality. He showed that, when the market is overpriced, it is irrational exuberance that causes price gains and that those gains thus cannot be counted on to finance a retirement.

All of the things that you refer to in your post are things that follow if a person points out what Shiller’s research shows in a community frequented by a significant number of Buy-and-Holders. It hurts the feelings of Buy-and-Holders for them to hear that they made a mistake in thinking that the market is efficient and that it is not necessary for them to exercise price discipline when buying stocks.

I don’t do it to hurt their feelings. I do it because people need to have accurate numbers to plan their retirements. If there were a way to give accurate numbers without hurting the feelings of the Buy-and-Holders, I would make use of it. But there isn’t. This is the risk that goes with the use of any research-based strategy. New research is published all the time. When we learn new things, we need to update our understanding of a subject. We need to acknowledge that we didn’t always know it all.

I am grateful for all that the Buy-and-Holders taught us. They of course got many things right. But not the efficient market thing. Not according to the last 37 years of peer-reviewed research in this field. I think that the Buy-and-Holders have hurt themselves and many others by failing to acknowledge the mistake they made re that one. The safe withdrawal rate is not always 4 percent. It is a number that changes with changes in valuation levels.

That’s my sincere take re these terribly important matters, in any event.

I naturally wish you all the best that this life has to offer a person, Anonymous.

Irrational Exuberance Reader (and Death Threat Receiver) Rob

Buy-and-Hold Goon to Rob: “It Is Not What YOU Think You Have Done. Instead, It Is What Others Say You Have Done.”

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Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

It is not what YOU think you have done. Instead, it is what others say you have done. Otherwise, your words are meaningless.

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.”

“Shiller Published His “Revolutionary” (His Word) Research Showing That Valuations Affect Long-Term Returns in 1981. Buy-and-Hold Has Not Been Updated to Reflect the New Research Findings for 37 Years Now. That’s the Problem. I Have Been Arguing for 16 Years That We Should Open Every Site to Honest Posting on the Last 37 Years of Peer-Reviewed Research in This Field. That Would Solve the Problem. Everyone Would Say What They Truly Believe and Over Time Buy-and-Hold Would Be Updated. There Would Be No Further Need for Cover-Ups. There Would Be No Further Need for Threats.”

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Set forth below is the text of a comment that I recently post to the discussion thread for another blog entry at this site:

I put credibility in having actual proof. Secondly, I put credibility behind the person directly impacted (Wade), as he would know if he was actually threatened.

He obviously knows that he was threatened. He is also obviously EMBARRASSED and ASHAMED that he let the threat influence his behavior.

The real question is — Why did you feel a need to threaten him?

Shiller published his “revolutionary” (his word) research showing that valuations affect long-term returns in 1981. Buy-and-Hold has not been updated to reflect the new research findings for 37 years now. That’s the problem.

That’s the problem for you. That’s the problem for me. That’s the problem for Bogle. That’s the problem for Shiller. That’s the problem for Pfau. That’s the problem for everyone.

Did I cause that problem? I had nothing to do with it. I have been arguing for 16 years that we should open every discussion board and blog on the internet to honest posting on the last 37 years of peer-reviewed research in this field. That would solve the problem for everyone. Everyone would say what they truly believe and over time Buy-and-Hold would be updated. There would be no further need for cover-ups. There would be no further need for threats.

I even suggested that we might be able to get by just acknowledging that there are two schools of academic thought re how stock investing work. I don’t view that as ideal. It is my belief that Shiller discredited Buy-and-Hold. So I think that we should be saying that it is Valuation-Informed Indexing that is the first true research-backed model. But I believe that cognitive dissonance is a real thing. So I have suggested that, if my Buy-and-Hold friends just feel too much pain in the idea of giving up on their strategy, they could acknowledge that there are two schools of thought and let those who believe in Buy-and-Hold promote Buy-and-Hold and those who believe in Valuation-Informed Indexing promote Valuation-Informed Indexing. I believe that that would get us all on the right side of the felony line. If people choose to use a 4 percent safe withdrawal rate even after they have been informed that a study that includes a valuation adjustment generates a very different number, I think that most juries would say that that is on them. So just doing that much would be a big advance.

Where is the Bogle speech acknowledging that there are two schools of academic thought re how stock investing works? I wrote to him about this on several occasions. Has he given that speech? Had it been written up on the front page of the New York Times?

Why not?

Your beef is with Bogle, Anonymous, not with me. I have done all that I can do. I love the man and I have bent over as far backwards as I can with that suggestion. If he hasn’t given the speech yet, your beef is with him. Have you written him? If not, can you please explain? There are millions of people who put together retirement plans at least in part in reliance on the long-discredited Buy-and-Hold retirement studies, the ones that Wade Pfau characterized as “dangerous.” A failed retirement is a serious life setback.

The threats will stop when Bogle gives his speech and it is written up on the front page of the New York Times. Wade will on that day return to saying all the wonderful things that he was saying in the 16 months before you threatened him. The ball is in your court, my dear Goon friend.

Highly Credible (Since He Stopped Pretending that He Believed There Was a Valuation Adjustment in the Greaney Retirement Study) Rob

“If Shiller Published His Research Today, It Would Set Off a Nuclear Explosion of Learning Experiences. Our Problem Today Is Trying to Recreate That Experience 37 years After the Fact. For Things to Go Forward Today, the Buy-and-Holders Have to Acknowledge Both the Initial Mistake Plus the 37-Year Cover-Up, Which Includes a Good Number of Criminal Acts. That’s Hard Stuff.”

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Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

Let us know when Bogle and Shiller call you. We will be waiting for your update.

If Shiller published his research today, we would all be working together to expand our knowledge of how stock investing works tomorrow morning. It would set off a nuclear explosion of learning experiences. That is how it is supposed to happen.

Our problem today is trying to recreate that experience 37 years after the fact. We should have seen that nuclear explosion in 1981. We obviously didn’t. My guess is that people were suffering from cognitive dissonance. The conditions were prefect for it. The change was a very big one. It was a 100 percent positive change but a very, very big change. So, as positive as it was, it was hard to process. And it was threatening to a lot of people on a personal level. Even though intellectually it was a huge advance, people who had built careers promoting Buy-and-Hold no doubt felt personally threatened. So the nuclear explosion of learning did not take place.

The evidence that Shiller is right is of course much stronger today. So in theory we could have that nuclear explosion of learning today. But the power of the cognitive dissonance holding us back is also many times greater. In 1981, all that the Buy-and-Holders would have had to say was “It turns out that I was wrong about one thing” and most reasonable people would not have given it a second thought given how many positive and genuine contributions the Buy-and-Holders made. For things to go forward today, they have to acknowledge both the initial mistake plus the 37-year cover-up of that mistake, which includes a good number of criminal acts. That’s very, very, very, very hard stuff. So we are all caught in a trap today.

The big question is — What will it take to break that trap?

A Second Great Depression would certainly do it. Our economic and political systems changed big-time as a result of the First Great Depression. Social Security, child labor laws, the minimum wage, on and on. So a new depression would open people’s minds to all sorts of wonderful advances.

I obviously do not want to see things proceed in that direction. I pray that things do not have to get that bad. What we need is an economic crisis bad enough that it shakes us up enough to open every discussion board and blog on the internet to honest posting re the last 37 years of peer-reviewed research in this field but not so bad that it brings on a Second Great Depression.

Will it happen? I don’t know. I hope so. I certainly think that it is possible that we could pull it off. But i don’t think it is a lock. I don’t think that we can survive as a nation if we do not find a way to provide millions of people with access to honest and accurate reports re what the research says about how stock investing works in the real world. I see that one as a lock. But I can’t stand the thought that we might have gone so far down the road with this cover-up at this point that the only way to overcome it is with a Second Great Depression. I am not at all sure that we would survive a Second Great Depression. My big fear is that we never get to experience the benefits of Shiller’s breakthrough findings because the cover-up has continued for so long that things have reached a point where it can only be overcome with a Second Great Depression and that could be game over.

Perhaps that discussion gives you some idea why I think this matter is important enough for me to devote 16 years of my life to it. If we follow U.S. law, we all enter a golden age of safe stock investing and economic growth. The Bennett/Pfau research paper shows that we can reduce the risk of stock investing by 70 percent overnight just by opening every discussion board and blog to honest posting re the last 37 years of peer-reviewed research in this field. But the other side of the story is that continued delay in doing what we all know deep inside we need to do could put us in a Second Great Depression and that could be game over. Those are pretty darn dramatic circumstances, you know? Yikes!

Shiller and Bogle are two of my favorite people. So I am confident that they will both do the right thing when circumstances look dire enough to convince them that they have no choice. But at that point will things already be so dire that it will be too late to turn the car around? I don’t think that anyone can say in advance. I think we are just going to have to let things play out a bit to find out.

I know that I want to do my part to help each and every one of us attain good outcomes and avoid bad outcomes. So I continue to do my little part. I can do no more and I can do no less, you know?

I naturally wish you all the best that this life has to offer a person, my dear Goon friend.

Worried (and Excited!) Rob

 

Valuation-Informed Indexing #425: Any Benefit to Living Through a Long Era of High Stock Prices That Eventually Ends?

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I’ve posted Entry #425 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Any Benefit to Living Through a Long Era of High Stock Prices That Eventually Ends?

Juicy Excerpt: I don’t think that there is any benefit to be had from living through a time when prices remain high for many years. There would be a benefit if prices could remain high indefinitely. You would have more money. But presuming that prices are sooner or later going to come down, what is the benefit? You get to enjoy a feeling of being wealthy for a longer stretch of time. But what good is that feeling if it does not last? You end up in the same place as if prices had returned to fair-value levels much earlier.

“Bogle Has Indicated an Interest in Knowing the Answers to the Questions Explored in the Bennett/Pfau Research and Bogle is One of My Heroes. So I Certainly Am Proud to Have Played a Big Role in Getting Those Answers to Him. One of the Bogleheads Forum Community Members Said That Our Research Challenges Many of the Most Basic Principles of Buy-and-Hold. Bogle Responded Defensively to That Challenge. He Should Have Welcomed the Learning Experience That Would Have Followed From Widespread Dissemination of the Research.”

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Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

“I have my name on the most important piece of peer-reviewed research published in this field in 30 years. That ain’t nothing.”

What paper has your name listed as an author?

If you count being listed in the credits section, then I can show you a few dozen that I have my name on. No big deal.

I am proud to have my name mentioned in the credits section of the Bennett/Pfau research. That’s the most important piece of peer-reviewed research published in this field in the past 30 years. Bogle has indicated an interest in knowing the answers to the question explored in that paper and Bogle is one of my heroes. So I certainly am proud to have played a big role in getting those answers to him. If Bogle were thinking clearly, he would have celebrated the research that Wade and I prepared together. He would not only have spoken up in our support when Linduaer attacked us, he would have called a special meeting of the Bogleleads Community so that we could explore that research together in great depth.

One of the community members there said that our research challenges many of the most basic principles of Buy-and-Hold. Bogle responded defensively to that challenge. That is unfortunate in the extreme. He should have welcomed the learning experience that would have certainly followed from widespread dissemination of the research. Bogle dropped the ball on that one and you Goons — who call yourselves friends of his — should have helped him rein in his defensiveness and advance the Buy-and-Hold cause in a big way (Valuation-Informed Indexing is really just Buy-and-Hold 2.0 — Buy-and-Hold is a research-based strategy and so, when new research is published, the strategy must of course be modified to incorporate the new research findings).

And of course I played a bigger role in the development of that research than the role usually played by someone mentioned in the credits section. I had been developing the Valuation-Informed Indexing concept for over seven years when Wade contacted me and asked me if I would be willing to work with him to prepare research showing the superiority of Valuation-Informed Indexing over Buy-and-Hold. I was the person who discovered the errors in the Buy-and-Hold retirement studies. We never would have had The Great Safe Withdrawal Rate Debate had I not done that and it was The Great Debate that got Wade interested in doing research on Valuation-Informed Indexing in the first place. So I am properly referred to as the co-author. Wade made clear in numerous e-mails that he sent me in the 16 months in which we worked together that he thought that my assistance was absolutely critical. He asked me many questions during the time we were preparing the research and he always thanked me profusely for the help that I was able to offer him.

The Bennett/Pfau research simply wouldn’t exist if it hadn’t been for the seven years of my participation in The Great Safe Withdrawal Rate Debate that preceded it. And, strangely enough, even you Goons played a positive role at times. It is though interactions with others that we come to understand new ideas more clearly and in more depth. I learned a lot in those seven years (and in the nine years since). You weren’t intending to help me learn with your ruthless abusiveness. But there were times when you did. I only wish that you had learned more yourselves. Had you been open to learning, we all would be in a better and happier and more life-affirming place today.

I offer no apologies for advancing the world’s understanding of how stock investing works through publication of that amazing piece of peer-reviewed research. I hope there comes a time when you can take delight in what one of your fellow community members did by co-authoring that research. I think it will happen. Probably not until after the crash. But I think that it will happen down the road a piece. And our interactions will become warmer and more productive when it does.

Please take good care, man.

Co-Authoring Rob

“Wade Pfau Wasn’t a True Believer When He Contacted Me. He Was Intrigued By My Writings in This Field, That’s All. He BECAME a True Believer Only in Time As He Explored One Question After Another and Learned Again and Again and Again That Engaging in Price Discipline When Buying Stocks Always Gives the Investor a Huge Edge.”

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Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

During the last two decades of waiting to see “how things turn out”, what has come out positive for you that would compel you to wait another couple decades to once again see how things turn out?

I have my name on the most important piece of peer-reviewed research published in this field in 30 years. That ain’t nothing.

I obviously have the greatest possible respect for Jack Bogle. Bogle has said on numerous occasions that the problem that he has with making use of the insights of Behavioral Finance in the development of investment strategies is that he wants to see concrete evidence that these insights will add something. Well, the Bennett/Pfau research shows in a clear and powerful way how much long-term timing adds. We showed that investors can reduce the risk of stock investing by 70 percent just by giving up their reliance on Buy-and-Hold and going with a research-based strategy.

That’s huge. If I had showed investors how to reduce risk by 10 percent, my face would be on the cover of Time Magazine’s Man of the Year issue. My only problem is that showing investors that they can reduce risk by 70 percent is so good that people find it unbelievable. Valuation-Informed Indexing is a stock investing strategy that is just too darn powerfully good!

But people will believe it once we open every discussion board and blog on the internet to honest posting. Then we will be able to answer people’s questions and bring them around gradually to what works. That’s what I did with Wade. He wasn’t a true believer when he contacted me. He was intrigued by my writings in this field, that’s all. He BECAME a true believer only in time as he explored one question after another and learned again and again and again that engaging in price discipline when buying stocks always gives the investor a huge edge (just as common sense would lead you to believe it should).

And we have laws in place in the United States to protect us all from the sorts of tactics employed by Goons like you, Anonymous. What do you think is going to happen when your prison sentence is announced? That is going to go viral. We are going to have site owners all over the internet writing up that development and trying to disassociate themselves from Buy-and-Hold in every possible way and trying to make the case that they have been secret believers in Valuation-Informed Indexers all along.

Wade would never have contacted me to become his co-author re that research had I not worked up the courage to post honestly re safe withdrawal rates on the morning of May 13, 2002. There can be huge benefits to posting honestly down the line! I didn’t know precisely what those benefits would be on the morning of May 13, 2002. But I knew that it did not feel good to sell out my fellow community members by failing to speak up about the errors in Greaney’s study. And, sure enough, I have seen victory after victory after victory (I am obviously not counting the setbacks caused by the criminally abusive stuff here) in the 16 years since. I have a funny feeling that I won’t be retracing my steps any time super soon.

My best and warmest wishes to you, dear Goon friend.

Triumphant (Not Counting the Criminally Abusive Goon Stuff!) Rob

“The Experts Couldn’t Have Continued Making the Mistake If We Had Called Them Out. So We Are All In On It. That Makes It Double Scary. Acknowledging That It Was the Heavy Promotion of Buy-and-Hold That Caused the Economic Crisis Is Like Accusing Ourselves of a Crime. The First Instinct Is to Go Into Denial.”

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Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

“They don’t want to be social outcasts.”

Not believable.

They can post anonymously.

It’s true that they could post anonymously.

I don’t think that people like even flirting with the idea of becoming social outcasts. The protection that comes from posting anonymously doesn’t assure them. It’s not just that they don’t want other people to know that they are social outcasts. They don’t want to know it themselves. If they post anonymously, they would still know themselves that they had done so, right? They don’t want that. People are afraid of being social outcasts and they just don’t want to even play at it (which is what they would be doing if they posted anonymously).

Acknowledging that we caused the economic crisis is a scary thing, Anonymous. It means saying that the experts made a mistake about a very important matter. That’s scary. And we are all in on it. The experts couldn’t have continued making the mistake if we had called them out. So we are all in on it. That makes it double scary. Acknowledging that it was the heavy promotion of Buy-and-Hold that caused the economic crisis is like accusing ourselves of a crime. The first instinct is to go into denial.

Also, please remember that even those who have doubts about Buy-and-Hold are not sure. We learned by talking things over with others. We can’t do that re Buy-and-Hold because of the ban. So we can’t really learn about the topic. When I say that lots of my friends expressed excitement over having the debate that we need to have, I am not saying that they signed on to everything that I said. They didn’t. They saw the merit of talking things over, that’s all. Some would in time have come to agree with me if we had let the debate go forward. But they are not going to go out on a limb today and express agreement with me, even anonymously. Make it clear to them that that is a safe thing to do, and they may do it, or they may at least pick up the debate and see where things go. But they haven’t yet talked things through enough to go out on a limb. We learn through talking things over and these people have not been permitted to talk things over in a safe way.

I’ve made the comparison to civil rights from time to time. Do you remember the movie “Guess Who’s Coming to Dinner?” It’s about a white girl who wants to bring the black man she is going to marry home to meet her parents. The parents are liberal. So they should be fine with this. But the entire tension of the movie is that they are uneasy about it. Fast forward to today and they would not have a problem. But it was hard in the early days of the civil rights struggles even for liberals to be quite that “progressive.” People need to be permitted to change slowly.

If you asked people of that day to say “Blacks are equal to whites,” they would have said it. If you asked them to say “blacks and whites should intermarry,” they would have hesitated, even if they were speaking under the cloak of anonymity. They wouldn’t be able to come up with any logical reason why blacks should not marry whites. They wouldn’t exactly oppose it. But they wouldn’t be quite capable of expressing enthusiasm for the idea.

That’s what you are asking people to do when you ask them to post anonymously in support of Valuation-Informed Indexing. There are people who would do that if there were no social stigma attached to it. But so long as that social stigma persists, they are going to hold back. It’s not just that they want to avoid direct punishment (which they could avoid by posting anonymously). They want to avoid the yucky feelings that come from violating a social taboo.

Show people that honest posting is both tolerated and encouraged and you will see more of it. Honor your word not to punish it and more people will venture forward. The anonymity thing is not enough to get the job done. Not today. Perhaps after the crash. But not today.

I hope that helps a small bit.

Social Outcast (With an Exclamation Point!) Rob

“You’re a Liar. I Might Just As Well Say That You Are a Human. It Comes With the Territory. The Question Is Whether You Want To Make Use of the Tools Now Available to All of Us Who Want to Be More Honest and Thus More Successful Stock Investors.”

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Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

Again we see that everyone out there is a liar, except for Rob Bennett.

I was aware that Greaney’s retirement study did not contain a valuation adjustment in May 1999, when I put my first post to the old Retire Early board. I didn’t say that the study was in error until May 2002. Does that sound honest to you, Anonynmous?

Humans are liars. That’s a reality. Humans are also truth-seekers. That’s also a reality. The reason why Buy-and-Hold and Valuation-Informed Indexing are so different is that Buy-and-Hold is driven by marketing concerns while Valuation-Informed Indexing is the first true research-backed investment strategy. The core question on the table is — Are we as a society going to insist that honest posting re how stock investing works be permitted or not?

I believe that we are going to go there. I believe that we awarded Shiller a Nobel prize because we understand how important it is that we achieve this advance. If we are going to go there sooner or later in any event, everyone involved is better off if we just go there now. So that is what I advocate.

The Buy-and-Holders see that investing advice has always been marketing-dominated and believe that that will always be the case and that they will always be able to stomp out any brush-fires of honest posting. I think it is going to get harder and harder to do that after the next price crash, especially if valuation levels well below fair-value prices remain in effect for many years. I think that as a society we are ready to make this huge advance and that it is going to happen soon. I think that we have no choice but to make this advance. The pain that will follow from sticking with a pure Get Rich Quick approach will soon be just too great and too pervasive for us not to recognize Shiller’s great accomplishment.

We’ll see, you know? I have my opinion as to how things will go and you have yours. The drama of the thing is that no one can say with absolute certainty until events play out in the real world.

I am a liar. So are you. So is Bogle. So is Shiller.

We are all liars. Because we are all humans. But deep down inside we all would like to be more honest because we know that we would achieve better investing results if we could pull that off. Shiller has pointed out the way forward and I believe very strongly that each and every one of us would choose that way if only we were thinking clearly. As of today, there are enough of us NOT thinking clearly that a Ban on Honest Posting remains in place at all large investing sites. It remains to be seen whether that ban will remain in place for too long after the onset of the next price crash.

You’re a liar, Anonymous. I might just as well say that you are a human. It comes with the territory.

The question is whether you want to make use of the tools now available to all of us who want to be more honest and thus more successful stock investors. The price is saying the words “I” and “Was’ and “Wrong.” You obviously see that as being too big a price to pay today. Perhaps that will change in the days following the next price crash. We will have to wait and see.

I do wish you all good things, in any event. I hope that that helps at least a tiny bit.

The Honest Liar (and Dishonest Truth-Teller) Rob

“Given That Humans Lie About Everything They Do and That It Is Only Humans Who Buy Stocks, Humans Obviously Lie About Stocks. Do You Think It Is a Better Approach to Pretend That Humans Become 100 Percent Rational Creatures When Buying Stocks and Thus Get All the Numbers We Use to Inform Our Investing Strategies Wildly Wrong or Do You Think It Would Be Better to Acknowledge That We Are Inclined to Tell a Lot of Lies and to Develop Tools That We Can All Use to Rein in the Lying a Bit?”

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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 hasn’t Shiller partnered up with you to take down this mass conspiracy and expose all of these liars?

No matter who you ask about, the answer is going to be the same, Anonymous. Shiller is much like Bernstein. And Bernstein is much like Bogle. And Bogle is much like Bennett (remember that I didn’t speak up about the errors that I knew about in Greaney’s study for three years).

And on and on and on. We are all human. And so we all seek social approval. We all want to be liked. Tell people that they need to divide the amount on their portfolio statement by two to know the true and lasting value of their holdings and you are not going to be liked. So we all engage in this lying thing. It’s what we humans do when it comes to stock investing.

You use the phrase “expose all these liars” as if the liars were the exception, as if lying about stock investing were not the norm. Have you checked the P/E10 value lately? To price stocks improperly is to lie about their value, is it not? For stocks to be as overpriced as they are today, we pretty much all have to be big-time liars, no? Does that not follow?

Shiller was awarded a Nobel prize because he pointed out the path to being more honest about stock investing. Being more honest would help us all. Humans are liars. We all feel an inclination to lie about these sorts of things. But humans also love truth. Both things are so. We invest more effectively when we tell the truth. So Shiller did a wonderful thing by showing us how we lie and by providing us the tool we need (P/E10) to become more truthful about stock investing.

Why does Shiller not play it the way I do? Why is he not more blunt?

I think that he feels that he can be more effective by telling people what they need to know to figure out the truth while not saying things so clearly as to stir up their rage. I say things clearly. But very, very few people hear my words. Because you Goons have seen to it that I am banned at every major investing site on the internet. So Shiller’s soft approach to telling the truth has had 100,000 times the impact of my more direct and clear approach.

I didn’t wake up one day and declare “Oh, I know what I will do, I will take Shiller’s soft pronouncements and state them more directly and more clearly.” I ended up doing that because of the circumstances in which I was placed. If Shiller is right that valuations affect long-term returns (he is), then Greaney’s claim that the safe withdrawal rate is always 4 percent has put many people on a path to suffering failed retirements — thousands of people who were friends of mine at the Retire Early board and who thought that his retirement study was legitimate and millions who I have never met but who followed similar studies and retirement articles based on those studies that would have been corrected had Greaney not engaged in the abusive behavior that he engaged in to stop people from learning about the errors in those studies.

I was not going to get Grreaney’s study corrected by following Shiller’s soft approach. I tried. My May 13, 2002, post didn’t even say that Greaey got the numbers wrong. That first post just asked a question — Should we take valuations into consideration? That’s pretty darn soft. Greaney’s reaction was not so soft. So I was forced to respond with something a bit more clear and direct. And here we are.

The soft approach is more popular. People LIKE Get Rich Quick. People LIKE Buy-and-Hold. Lots of people don’t want to be told about the 37 years of peer-reviewed research showing that it is a logical impossibility that Buy-and-Hold could ever work for a single long-term investor. Shiller doesn’t endorse Buy-and-Hold. So the Buy-and-Holders do not consider him a friend. But he avoids stating things in the direct and clear way that I often state them and thus he is perceived as less of a threat by our Buy-and-Hold friends than I am. Shiller is disliked but tolerated. I am outright hated.

Not by everyone. I am loved by the 10 percent who already have serious doubts about Buy-and-Hold and who would like to explore those doubts. And I am tolerated by most Buy-and-Holders. But I am hated by the Goons, the most intense Buy-and-Holders, a group that comprises about 10 percent of the population of Buy-and-Holders. And the much larger number of Buy-and-Holders who do not love me or hate me but only tolerate me hate the ugliness that appears before them when the Goons go after me and end up voting in favor of bans when they see no other way to bring the ugliness to an end.

The proper way to bring the ugliness to an end is to ban the Goons when they violate the rules of the boards and indeed the laws of the United States. That’s the answer. But most humans are afraid to speak up in opposition to anyone who is on the side of the majority. It’s a scary thing to do. So the Goons for the time being hold a veto power over what can be said on the internet about how stock investing works.

That needs to change.

Shiller’s soft approach hasn’t gotten the job done. The Buy-and-Hold retirement studies have not been corrected to this day. So soft isn’t doing the job. Those of us who understand what the last 37 years of peer-reviewed research is telling us need to try some new things. We need to be respectful. We need to be warm and friendly. We need to be grateful for the many powerful insights that were supplied by our Buy-and-Hold friends. But we do need to get the job done. We do need to provide access to honest and accurate reports re what the peer-reviewed research really says about safe withdrawal rates and about scores of other critically important investment-related topics.

That’s my job. That’s what I do.

I want Shiller to partner with me. 100 percent. In ordinary circumstances, he would be happy to do it. These are not ordinary circumstances. He will do it if you Goons calm down. But I have a funny feeling that he is not going to do it until he sees some evidence of calming. You could provide him the reassurances he needs to hear and we could all get about the business of doing some wonderful things. Or we could wait until after the next crash, when Jack Bogle himself will see the need to move forward so clearly that he will step forward and give the speech that we all need to hear to break this spell that we are under.

I will play it however you want to play it. I won’t travel to the wrong side of the felony line, obviously. But I am up for anything that is even remotely reasonable. Just tell me what it is that you want and I will be there for you.

My very strong hunch is that we are going to have to wait for Bogle’s speech in the days following the next price crash. It’s s shame that we have to wait. I hate that reality. But it appears to me that it is a reality all the same. I am pretty much resigned to it at this point in the proceedings.

Once Bogle gives his speech and it is written up on the front page of the New York Times, we will all be working together. Shiller will be part of the effort then. Obviously.

We will all be exposing those darn human liars who in the past have made stock investing 10 times more risky than it needs to be by telling all those awful Buy-and-Hold lies. And we will all live better and richer (in every sense of the word) lives from that point forward.

Given that humans lie about everything they do and that it is only humans who buy stocks, humans obviously lie about stocks. Do you think it is a better approach to pretend that humans become 100 percent rational creatures when buying stocks and thus get all the numbers we use to inform our investing strategies wildly wrong or do you think it would be better to acknowledge that we are inclined to tell a lot of lies and to develop tools that we can all use to rein in the lying a bit? You can probably guess at this point in the proceedings which approach I favor.

Sound good?

Does that help at all?

Human Liar (and Human Liar Exposer) Rob