A Rich Life

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

“Since It Has Always Been Humans Buying Stocks, the Same Pattern (Which Results From the Interplay of the Basic Human Emotions) Repeats Over and Over Again.”

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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:

What makes you think that the next market drop would be any different than previous drops that would cause people to suddenly look to you and your opinions as to the stock market?

To understand this, you need to understand the concept of the “stock cycle,” Anonymous.

In the short term, stock prices play out in the form of a random walk. There are ups and there are downs. It is not possible to predict whether prices are going to be up or down one week out or one month out or one year out.

It doesn’t work that way in the long run. In the long run prices play out in the pattern of a highly predictable stock cycle. Usually there is about 20 years of upward movement in the stock cycle and then about 15 years of downward movement. The upward movement is due to irrational exuberance. The downward movement is due to irrational depression. Irrational exuberance takes place when investors discover that they set stock prices and that they can vote themselves raises anytime they care to just by persuading other investors to play the game with them. Irrational depression sets in when investors start listening to the voice of common sense and become determined to sell their stocks before prices drop so low that most of their life savings is wiped out. On the high end, the P/E10 level travels to 25 or more. On the low end, the P/E10 level drops to 8 or perhaps a bit less.

We hit the high end of this cycle in 2000, when the P/E10 level hit 44. We are of course a good bit down from that today. But we are nowhere near 8. 8 is a long ways down.

There has not been any price drop in recent history that would cause committed Buy-and-Holders significant concern. We had a sharp drop in late 2008 and we did indeed see some Buy-and-Holders express nervousness about the idea of continuing to hold. But that price downturn was amazingly short-lived. It was over in about six months. That is not even close to being a long enough time-period to bring on the sorts of sales that it would take to bring the P/E1o to 8 and to launch a new upward cycle. To get the P/E10 down to 8, we MUST see investors abandon Buy-and-Hold. It is the sales of Buy-and-Holders that fuel a bear market. You simply cannot get to 8 without the Buy-and-Holders freaking out. If Buy-and-Holders did not always freak out after they lost most of their retirement money, none of the historical return data would show what it shows.

To see how it works, you need to review the historical record. You cannot see it by looking only at things that have happened from the beginning of the current cycle (1982) forward. We have never dropped to a P/E10 of 8 during that time. So you are not going to see what you need to see unless you are willing to go farther back in the historical record. If you are willing to go farther back, you will see that the same pattern has been repeating ever since the day the stock market opened for business. Since it has always been humans buying stocks, the same pattern (which results from the interplay of the basic human emotions) repeats over and over again.

It’s not that people are going to look to me. It’s that people are going to stop “defending” Buy-and-Hpld and all the deception and intimidation that inevitably goes with it when they see by looking at their portfolio statements that Buy-and-Hold has ruined their lives. The appeal of a Get Rich Quick approach becomes greatly diminished once the con has been exposed. Please take a look at what the Madoff investors said about him prior to the time his con was exposed and after his con was exposed if you want to see how emotions can swing from one extreme to the other. Buy-and-Hold will be a dirty phrase in the days following the next price crash.

Once Buy-and-Hold is out of the picture, people will have no objection to hearing what the last 36 years of peer-reviewed research says. Valuation-Informed Indexing is the first true research-based strategy. So what could possibly hold it back once Buy-and-Hold has been buried 30 feet in the ground and you Goons have been placed in prison cells where you belong?

No one is singing Bernie Madoff’s praises today. Investing cons can bring in lots of loot in the short term but they are a stone cold loser in the long run. There has never been a single exception in the history of investing. People do not take kindly to those who trick them out of their life savings.

Gee, I wonder why.

Rob

Buy-and-Hold Goon to Rob: “John Greaney Is a Nobody. Rob Bennett Essentially Wasted 20 Percent of His Life Because of Some Internet Nobody.”

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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:

To be honest. I have no idea who John Greaney is. Other than he must really knew how to yank Rob’s chain in a way that destabilized Mr Bennett.

John Greaney is a nobody. Rob Bennett essentially wasted 20%+ of his life because of some Internet nobody. I guess that would drive anyone loopy.

I don’t agree with you, Laugh. I think it would be fair to describe the peer-reviewed research that I co-authored with Wade Pfau as the most important research published in this field in the past 30 years. That research wouldn’t exist but for the “chain yanking” that you refer to here.

Greaney is not the first insanely abusive poster in the history of the internet. The question is — Why was he tolerated? Every site has published rules prohibiting the tactics that Greaney employed. Why were those rules not enforced? The answer is that we all have a little bit of Greaney within is. Greaney is a cartoon version of all Buy-and-Hold investors. His behavior shows us what the Get Rich Quick urge that resides within us all looks like up close and personal. Greaney is pure emotion, zero reasoning (when it comes to stock investing). We ALL are largely emotional creatures who like to flatter ourselves by telling ourselves that we are rational. Coming to understand why Greaney behaves as he does helps us all to understand why we make stock investing so much more risky than it needs to be.

And I do not agree with you that Greaney is a nobody. His retirement study was top-notch stuff. It was his study that got me interested in posting at the Retire Early board in the first place. And Greaney was very popular at that board, a board comprised of VERY smart people. How did he get to be so popular if he is such a nobody? And Greaney was smart enough himself to be able to retire at age 40. How did such a smart guy get so taken in by a pure Get Rich Quick approach? Greaney is a true believer. All of us who want to become more effective investors should be trying understand how ANYONE can be a true believer in Buy-and-Hold.

Greaney is a frugal guy. If you told him to buy a car without checking out the price, he would laugh at you. Yet he doesn’t bother checking price when buying stocks, something to which he devotes a lot more of his money than he devotes to cars. There’s something odd going on here and every person who cares about stock investing should want to come to a better understanding of it.

I haven’t wasted one day of my life during the past 15 years. I have generated powerful insight after powerful insight after powerful insight. I have achieved things that someone with my background has zero right to reasonably expect to be able to achieve. I did it because I realized early on that Greaney was not a nobody and that his behavior was telling us all something important about how stock investing works in the real world. He was telling us the same thing that Shiller’s 1981 research findings told us — investing is an INTENSELY emotional endeavor. Follow a strategy that ignores the emotional element (revealed in the P/E10 level) and you are following a strategy that leave out 80 percent of the story.

That’s my sincere take re this terribly important matter in any event. I wish you all good things.

Rob

“Bogle Needs to Address the Blame Issue in a Public Statement That Is Written Up on the Front Page of the New York Times. A Public Statement By Bogle Will Put All the Nasty Stuff in the Past Where We All Want It. From That Point Forward, We Will All Be Able to Engage in Fun and Exciting Discussions About How Stock Investing Really Works.”

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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:

You said “Greaney” sixteen times in that one comment. This is not what healthy people do.

It’s not just Greaney, Anonymous. Please feel free to quote me re that one. There is no one individual so powerful that he could do so much harm to a society. It is not just Greaney and that one is not even remotely a close call. That’s the sort of thing that I intend to say in the days following the next price crash to help out my friend John Greaney.

Greaney didn’t do this by himself. And we don’t know how we would have reacted in similar circumstances. Greaney is an engineer and engineers care deeply about getting the numbers right; they take a justified pride in it. So the pain he felt when he was publicly embarrassed (it was not my intent to embarrass him but that was clearly how he felt) was acute. The full reality is that Greaney’s study was top-notch stuff. I gave it a 5-star review and he merited that. Greaney’s understanding of the safe withdrawal rate was miles ahead of Peter Lynch’s understanding of the safe withdrawal rate and Lynch was paid millions to manage a big mutual fund.

And ALL of us participated at least in some small way in this massive act of financial fraud. I held back from saying what I knew about safe withdrawal rates for three years. So in a technical sense I was guilty of financial fraud too. A lot of cognitive dissonance has been evidenced in this story. By no stretch of the imagination am I seeking to put this all on Greaney. I very strongly OPPOSE that sort of take.

I refer to Greaney in my explanations because it is important to get basic facts right. Greaney was the first individual to get abusive. There were other Buy-and-Holders who got abusive on the morning of May 13, 2002. But Greaney was a leader at the Retire Early board. Those people looked to him for signals re how to behave. If he had said in response to their abuse “Wait a minute, Rob is making an interesting point, I would like to talk this through a bit and see if we can so some good with it,” those others would have cooled it. When one becomes a leader in a community, one takes on added responsibilities. Greaney sent very bad signals when he advanced death threats. It’s not possible to make complete sense of the story without speaking clearly and firmly about the negative role that Greaney played.

Those early days of the discussions were very important. We are not able to say where we would be today had Greaney played it in a different way. But my guess is that we would be in a very good place. My understanding of how safe withdrawal rates work was limited at the time. Had we as a community taken a different path, we would have been combining the knowledge held by lots of different people and thereby generating some amazing insights. I think we would be in a very good place today had we chosen that path. Greaney was the primary force seeing that we got on a bad path instead. There were hundreds of community members whose first reaction to my famous post of the morning of May 13, 2002, is that it had started the most amazing discussion ever held at that board. People were open to enjoying a great learning experience. Greaney and those who followed his signals made that impossible and things went downhill from there.

I mentioned Bogle also. Bogle has never put forward a death threat. So why do I mention him as well? It’s because of that responsibility thing that I noted above in regard to Greaney. Bogle is far, far, far, far less abusive than Greaney. But he is also in a position of far, far, far, far greater responsibility. So Bogle played a negative role. Bogle could have shut Greaney down when he learned about the controversy (when it traveled to the Bogleheads Forum). That would have taken us off the bad path chosen by Greaney and put us on the good path that Greaney could but did not elect. By failing to speak out in opposition to Greaney’s tactics when he learned of them, Bogle took us farther down the dark path that Greaney (and Lindauer) had chosen before him. So Bogle also played a big role.

I don’t believe that Bogle would have chosen the dark path if the question had been presented to him in a fresh manner. By the time Bogle weighed in, Greaney and Lindauer had already poisoned the discussions. So Bogle faced a high percentage of a board population that was positively enraged about the situation. And of course they were enraged about something that Bogle himself believes in. In fairness to Bogle, this put him in a tough spot. If he came out in support of following the law, he would be viewed by many insanely angry board members as coming out in support of this Rob Bennett fellow, who was in the process of “trashing” (not really, but that’s how it was seen) all that Bogle stood for. As with Greaney, there are two sides to the Bogle story.

The biggest problem that we are dealing with is the cover-up problem. If we had taken the good path on the first day, there would have been disagreements. People just do not agree on these matters. But there also would have been good fruit and people on both sides would have been enjoying the learning experience. It’s important to remember that Shiller was awarded a Nobel prize for his “revolutionary” (his word) research findings of 1981. As a society, we are highly skeptical of Shiller’s findings; the idea that stock returns can be effectively predicted 10 years in advance when they cannot be effectively predicted 10 weeks in advance seems fantastical. But we also respect the work that Shiller has done because of its obvious potential to make all of our lives better in the event that it is explored in depth and checks out as valid.

So I don’t think that Bogle is necessarily inclined to shut down discussions in the right circumstances. Shiller’s findings really make all of Bogle’s genuine contributions 10 times more important. So there is no reason why Bogle would be opposed to moving forward if he were thinking clearly about these matters. I believe that the way in which the issue was put before him hindered his ability to think clearly.

In the early days, I didn’t have the peer-reviewed research that Wade Pfau and I co-authored to point to. If I had had that research at the time, I would have won the debate in 24 hours and it would have come to a successful conclusion. The reality is that I didn’t have it. I did the best I could to present the ideas in an effective manner but the cold reality is that the ideas just were not sufficiently developed at the time for me to be successful. So everything should have flipped when Wade and I published our research in a peer-reviewed journal, right?

Yes, that’s what SHOULD have happened. Why didn’t it?

It didn’t happen because the cover-up had been going on for years at that time and those who had posted in “defense” of Greaney and Linduaer and Bogle were afraid that they would be going to prison if the story got out. This matter is no longer one where there are just intellectual differences of opinion. People on one side are looking ahead to long prison terms. That makes people very, very, very reluctant to permit free and open debate. That’s our primary problem today. That’s why I often make reference to the upcoming prison sentences. We cannot take this to a good place unless we are willing to face the true obstacles in our path and the biggest obstacle today is the concern over upcoming prison sentences. So we need to speak about that aspect of the question no matter how distasteful we all find it to consider the matter.

You raise a concern that I refer to Greaney too often and the issue that you are getting at when you do so is the issue of BLAME. I possess no desire to blame Greaney or anyone else. So you have an ally if you are looking for one as part of a project to set things up in such a way that Greaney and lots of others avoid being assigned excessive blame for what has happened. You don’t have to persuade me. I am on board. My job is to pull everyone together and the biggest obstacle to realizing that dream is the concern that many feel over being assigned too much blame. Show some spirit of cooperation and we will be able to address the problem in at least a somewhat satisfactory way. Continue the delay tactics and you make it worse and worse and worse and worse.

The problem with cover-up is that they can be exposed. Then you find yourself needing to cover-up the cover-up. And next it is covering up the cover-up of the cover-up. And so on. We have 50 levels of cover-ups holding back progress re these matters. We would all like a do-over. But there are no do-overs. So our job is to put our heads together and come up with the best means of passage forward for every single person involved. We ALL should want to achieve that. We ALL should be working to achieve that goal.

The good news is that cognitive dissonance is a real thing and this has been shown in the psychological literature very clearly. And this is not a case where one or two evil people engaged in evil acts. This is a case where literally the entire society participated in some way in the massive act of financial fraud. I participated myself for three years. That’s powerful testimony for those seeking to make a case that assignments of blame should be restrained.

And the potential intellectual breakthroughs are just off the charts. The research that I co-authored with Wade shows how to reduce the risk of stock investing by 70 percent. This is not like the Madoff case in which you had thousands of people who were very angry to learn that their retirement accounts had been wiped out. This is a case where generations of people will be able to invest with far less stress than has ever been possible before and will be able to retire many years earlier than has ever been possible before. When the millions of people who are affected by the bad stuff hear that side of the story, their anger may be diminished and they may respond in a different manner than the Madoff investors responded. We should at least hope so. We should at least all be doing all that we can to make it so.

Bogle needs to address the blame issue in a public statement that is written up on the front page of the New York Times. I have some ideas re what should be said in that statement which I have referred to in outline form in this comment. But it will not be my statement, it will be Bogle’s statement. He needs to develop it in consultation with all of the many people who will be affected by it. A public statement by Bogle will put all the nasty stuff in the past where we all want it. From that point forward, we will all be able to engage in fun and exciting discussions about how stock investing really works.

I am happy to help with the statement if there is a feeling on the other side of the table that that would be helpful. I am also happy to let others craft it and just keep my nose out of things that are not entirely my business. Bogle needs to be able to live with the statement and all the people on his “side” need to be able to live with it. I will be 100 percent cooperative. So long as the statement is even remotely honest, I will endorse it regardless of how much it attempts to spin things in the favor of the Buy-and-Holders. I am obviously not going to say that Greaney’s study contains a valuation adjustment or deny that there is 36 years of peer-reviewed research showing that a valuations adjustment is required. But I am not going to be seeking to win points. My aim is to get us all on a positive path going forward. I love my Buy-and-Hold friends. I want them to feel good about where things are headed.

Does that help?

Rob

“Some Are Committing Fraud. Some Are Suffering From Cognitive Dissonance. Some Have Never Educated Themselves re These Issues. Some Have Tried to Educate Themselves But to This Day Suffer from a Genuine Confusion. Some Have Tried to Do Honest Work, Have Been Frightened by the Response of the Buy-and-Holders and Have Pulled Back From Doing So, Rationalizing That They Can Do More Good Through That Approach Than by Sacrificing Their Careers in an Overly Idealistic Quest.”

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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:

We are all so lucky to have you, Rob, as the sole honest person when it comes to investing as everyone else is lying and committing fraud.

Some are committing fraud.

Some are suffering from cognitive dissonance.

Some have never educated themselves re these issues.

Some have tried to educate themselves but to this day suffer from a genuine confusion.

Some have tried to do honest work, have been frightened by the response of the Buy-and-Holders and have pulled back from doing so, rationalizing that they can do more good through that approach than by sacrificing their careers in an overly idealistic quest (I was in this group from May 1999 through May 2002).

Yes, I try very hard to post with complete honesty, even when the price associated with doing so is high. I have seen too clearly what results when those of us who have come to at least a partially clear understanding of these issues fail to do so. Shiller published his “revolutionary” (his word) research findings in 1981. Had Shiller or someone else been uncompromising in his or her insistence on his or her right to post honestly re what that research tells us about Buy-and-Hold, our board and blog communities would not have been put through what they have been put through over the past 15 years. I think it would be fair to say that every single community member (including Lindauer and Greaney) wishes that someone had done what I have done over the past 15 years back in 1981. Those acts of cowardice, however understandable, have hurt each and every one of us in very serious ways. I don’t want to engage in such cowardice, knowing where it takes us. Sue me, you know?

I don’t say that I am better than everyone else. We all try to make positive contributions. Again, I include Lindauer and Greaney in that; I believe that Lindauer and Greaney started out with an intent to make positive contributions. But here we are. It’s not all Lindauer’s fault or all Greaney’s fault. It’s the fault of all of us who failed to speak up when we saw them engaging in ugly behavior. I did that. I am ashamed that I failed to speak up from May 1999 through May 2002. I engaged in all same rationalizations that Bogle and Shiller and Pfau and Bernstein and all the others engage in today. I know how they feel and I sympathize. No one should have to see his or her career destroyed because he wants to post honestly re an important subject. But again — here we are. How are things going to change if we all keep on doing the same things?

I will post honestly, Goonie. I made that decision on the morning of May 13, 2002, and I have never seen any good reason to change it for 15 years running now. The answer is not for one more person to rationalize dishonesty. The answer is for those who are not speaking up against the abusiveness to begin doing so. We all would be better off if we all did that. I cannot force anyone else to do anything, no matter how important I think it is that they do that thing. All that I can do is to set an example by doing the right thing myself. That much I will do. And I will offer precisely zero apologies for doing so.

If Buy-and-Hold can only be defended with death threats, Buy-and-Hold belongs in the trashcan of history.

I am 100 percent sure.

If Buy-and-Hold can be defended through civil and reasoned discussion, then every Buy-and-Holder alive should unite in opposite to the tactics that we have seen employed for the past 15 years by the Lindauerheads and the Greaney Goons. There should be zero controversy re this matter.

Again I am 100 percent sure.

You are lucky to have me, Goonie. And you are lucky to have the thousands of our fellow community members who dared to put their lives and their careers on the line by posting once or twice that they would like to see our boards and blogs opened up to honest posting on safe withdrawal rates and scores of other critically important investment-related topics. And you are lucky to live in a country that has laws against financial fraud that protect you and all of us from the sort of behavior that you have been engaging in for 15 years now. And you are lucky that you have a conscience that makes you feel bad about your behavior without me even needing to explain to you why you should feel bad.

We are all lucky. And we are all going to make it successfully to the other side of The Big Black Mountain. I wish that it wouldn’t take all the human misery that will accompany the next price crash to get us there. But you know what? The good news here is 20 times more good than the bad news here is bad. So I’ll take the package as delivered. The truth is that we are very, very lucky indeed and that we should work to keep focused on that important and encouraging reality.

You are lucky. I am lucky. And here we are quarreling for 15 years whether errors in retirement studies should be corrected within 24 hours or not. It’s a big old goody world, just as John Prine once argued, is it not?

Take care, my good friend.

Rob

“I Do Not Think That I Am Wrong to Talk About Financial Fraud and Prison Sentences. But, If I Am Handling Things Improperly Even in Some Small Way, I Want to Know About It. Reflecting on the Words “Criticize Not One Bit” May or May Not Help Me Go About the Job That I Have Been Elected by Circumstances to Perform.”

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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 am not following. Do you go to AA meetings to talk about the addictions of millions of people other than yourself?

This seems very absurd and you should stop Wasting their valuable time. They have far more important topics to cover and real people to help.

What a disgrace.

It is my job to heal the wounds that you Goons have ripped open in our discussion-board and blog communities, Laugh. I have things that I have done that were aimed at helping everyone concerned. This particular job has been a tough one. I may need to learn about some new tricks. If the Al-Anon program can teach me some new tricks, it would be irresponsible of me not to make use of the benefits that it offers to us all.

I would not say that I attend to discuss your addiction. I talk here about your addiction on a daily basis. I don’t need a new outlet to talk about that stuff.

It’s more than I want to learn new techniques for healing the wounds created by your addictive behavior. I want to learn what I can do differently to produce better results for all concerned.

I’ll give you a concrete example of what I am getting at. The program has a book that sets forth daily reflections. Yesterday there was a passage that was listing some resolutions to make for the new day at the beginning of it. It said something like: “show good cheer to the people you encounter this day.” I certainly see the merit of that one. But there was one line that made me uneasy. It said: “Criticize not one bit.”

Okay. My father used to say: “If you don’t have anything nice to say, don’t say anything at all.” That line expresses the same general spirit. So I see where the passage in the Al-Anon book is coming from. As a general rule, we all should refrain from criticizing others and focus any improvement efforts on ourselves. I get that. I agree with that.

But I say that you Goons have committed fraud and that you will be going to prison following the next price crash. That kinda, sorta sounds like a criticism, does it not?

I am a journalist. Journalists tell stories that people need to hear about to live better lives. Some of those stories are happy ones. It would be big news if we discovered a cure for cancer. But not all important stories are happy ones. Watergate was not a happy story. But there were two good journalists who told that story and I don’t think that there are too many who would say that they were wrong to do so. If I don’t mention the financial fraud and the prison sentences, the financial fraud is going to continue and the prison sentences are going to be longer than they would be if it didn’t continue. It seems to Rob the Journalist that I am obligated in conscience to tell the story of financial fraud and prison sentences.

The Normals don’t like it when I do that. When I had my column at the Out of Your Rut site, there was a fellow who used to come by each week and leave a comment or two. He wasn’t the biggest believer in VII in the world but for whatever reason he made an effort to say something each week. That made me happy because the dynamic on a blog is that, when people see someone else leave a comment, it gives them the courage to leave a comment. So this guy was helping me out in a big way and I was grateful. I had one column where I noted that Jack Bogle did more than anyone else alive to bring on the economic crisis. I also included language pointing out that Bogle is a great man from whom I have learned much and so on. But this fellow did not like it that I said what I did about Bogle and the economic crisis and he told me so. I explained why I felt that I needed to say that. He did not respond. And he did not comment on my column entries ever again.

Do you see?

I do not think that I am wrong to talk about financial fraud and prison sentences. But, if I am handling things improperly even in some small way, I want to know about it. Reflecting on the words “criticize not one bit” may or may not help me go about the job that I have been elected by circumstances to perform. So I think that I need to place myself in circumstances in which I am exposed to those sorts of words. I am not saying that I will stop referring to financial fraud and prison sentences. I am saying that I will reflect on whether there is another, better way to go about things.

I attend Al-Anon meetings to learn if there is a better way to go about things. I am not there to fix you. That’s on you. I am there to fix me. I am there to learn better ways of coping with the problems that you cause because of your addiction.

I hope that helps a small bit.

Rob

Buy-and-Hold Goon to Rob: “The Market Has Concluded That You Are Irrelevant.” Rob’s Response: “You Nailed It.”

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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 folks who set prices have massive amounts of information including Shillers work. They can also read or have their computers ingest your awful website.

The market concludes you are irrelevant.

The market has concluded that I am irrelevant. As of today, it would be fair to say that the market has indeed concluded that. All that you have to do to understand what is going on is to look at today’s P/E10 level. That tells the story. Today’s investors are on a collective basis insanely irrational. They have rejected the last 36 years of peer-reviewed research; they don’t like what it says and they don’t care to think about what it says. And so they have rejected this fellow on the internet who is always talking about that last 36 years of peer-reviewed research and how important it is and how we need to be talking about it at every discussion board and blog on the internet. The peer-reviewed research is irrelevant today and this Rob Bennett fellow, who drones on about the peer-reviewed research, is irrelevant too.

You nailed it, Laugh.

The part you leave out is that the market has never remained at today’s P/E10 level for long. It just doesn’t work like that. A man can blot out all his troubles by becoming a drunk. He can say “my job is irrelevant” and “my health is irrelevant” and “my marriage is irrelevant” and “my family is irrelevant” and “my financial future is irrelevant” and “my self-respect is irrelevant.” It works for a time, does it not? The guy is satisfied with his circumstances and so he continues on down that path. Only the next drink matters. Everything else is irrelevant.

It’s not a good long-term strategy, Laugh. The world continues to exist whether this drunk fellow deems it irrelevant or not. And the peer-reviewed research continues to exist for you and for all Buy-and-Holders, whether you deem it irrelevant or not. The peer-reviewed research describes REALITY. You want no part of it because reality imposes on your Buy-and-Hold fantasy world, the world where price matters for everything you buy except stocks, stocks are the one big exception to the otherwise universal rule. I think that reality is going to intrude on your fantasy world, Laugh. The peer-reviewed research shows that this is what has been happening for 145 years running now, the entire history of the stock market available to us, and I believe that it is going to continue happening on a going-forward basis. I believe that the peer-reviewed research is trying to tell us something important and so I am not willing to disregard it for whatever temporary pleasures I could attain from living in the Buy-and-Hold fantasy world.

We will see what happens, okay? It is all going to play out before us.

I am on your side. When the Normals turn on you, I am going to put forward words aimed at getting your prison sentence reduced a bit. I am going to say that you suffered from cognitive dissonance, which is what I believe. I am going to say that you followed the strategies that you urged others to follow, suggesting that you were not fully engaged in a scam as the word is generally understood. I am going to say that you got caught up in something a lot bigger than you realized at the beginning of your involvement and felt trapped and couldn’t find a way out of your predicament. I am going to do what I can. I don’t ask for anything in return. I am going to do it because I believe that it is the right thing to do.

I am not going to say that I believe that Greaney included a valuations adjustment in his study. I am not going to deny that there is 36 years of peer-reviewed research showing that a valuations adjustment is required. There are things that I cannot say and remain on the right side of the law. I love my country. So there are lines that I am not willing to cross. Caring for you does not mean not caring for myself. I am going to continue to respect the laws of our nation while doing everything in my power to help you out while remaining within the confines of those laws, which I believe to be good and necessary laws.

I was your friend on May 13, 2002, I am your friend today and I will be your friend on the day that I am called to testify at your trial. That one is non-negotiable. I hope that works for you.

So we will see. And then we will pick up our bags and move forward to our next exciting adventure having learned whatever is it that we were supposed to learn from this crazy saga and a half.

Please take good care, my old friend.

Rob

“We Are All Suffering From Our Collective Addiction to the Buy-and-Hold Investing Strategy.”

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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:

“No one has ever complained about it.”

I absolutely guarantee that someone has complained. As you did with so many message boards and blogs, you’re putting Al-Anon’s “all are welcome” policy to the ultimate test.

Your comment here illustrates the addiction problem, Anonymous.

We cannot overcome the addiction until we acknowledge it. The very first step to recovery is being able to say “I have hit bottom and I need help.”

We hit bottom as a community of investors on the day that John Greaney put forward his first death threat. That should never have happened. The Wall Street Con Men pretend that there is peer-reviewed research supporting the Buy-and-Hold “strategy.” If that were so, we never would have seen any death threats. If Buy-and-Hold were a legitimate strategy, the Buy-and-Holders would just point to the research supporting it, they would never dream of advancing death threats or of encouraging the advancement of death threats. But here we are.

My favorite saying that I have learned from reading the literature of the 12-step programs is: “You are only as sick as your secrets.” The fact that the Buy-and-Hold retirement studies get the numbers wildly wrong is one of our most carefully guarded secrets, no? We must keep that secret to keep the addiction from being exposed. You could see how important it was to the Buy-and-Holders to keep that secret when our board community exploded following my post from the morning of November 23, 2002, urging Greaney’s removal from the board community. I think it would be fair to describe the follow-up discussion to that post as the hottest moment in the history of this new communications medium. Why did our board community explode at that time? Because I had publicly exposed the sickest of our Buy-and-Hold secrets.

When I used that phrase “Stock Drunk” as the name of one of the sections of the site a number of years back. I was really just making a joke. I was sincere about it. But it was not my intent to say that Buy-and-Hold is literally an addiction. But I thought about it more over time and I came to believe that there really is at least a small literal truth to the idea that Buy-and-Hold investing is an addiction. I cannot refer to anything said at meetings because of the anonymity rules. But much of the literature is available on Amazon.com; there are no anonymity rules that apply to much of the literature. So it is fair for me to report how the observation that “you are only as sick as your secrets” applies to the Buy-and-Hold phenomenon. And of course there are lots of other observations developed by those trying to help others escape the pain of addictions that very, very, very much apply in the Buy-and-Hold context.

We are not dealing with a rational phenomenon, Anonymous. Not when we see death threats. Not when we see demands for unjustified board bannings. Not when we see tens of thousands of acts of defamation. Not when we see threats to get academic researchers fired from their jobs. And of course the behavior of you Goons is only a small part of what we are up against. There are Goons everywhere on the internet. Responsible people stand up to them and they are overcome. We don’t see that in the investing realm. Freakin’ Jack Bogle has ENDORSED Mel Lindauer’s freakin’ book! What the h? How does something like that happen?

Crazy things happen when addictions enter the picture. That’s the story here. It’s my job to tell this story as completely and charitably and honestly as I possibly can. I cannot tell the story effectively without addressing the addiction side of it. So that’s what I am going to do.

Please understand that the 12-step literature is a literature rooted in love. I have often noted how I intend to do what I can to get your prison sentence reduced a wee bit. This is part of that. The 12-step literature refers to addictions as a “disease.” If your jury members become convinced that you Goons are suffering from a disease, I could see them seeing fit to reduce your prison sentence a bit. That’s fine by me. I want to see your jury do what is right. I believe that you are indeed suffering from a disease. So I have no problem accepting that my words re these matters may cause your jury to give you a shorter prison sentence. I believe in our system of justice. If a shorter prison sentence is the result of my efforts in this direction, then so be it. So long as that shorter prison sentence is a result of the proper functioning of our system of justice, I see it as a good thing.

Addiction are real things. Addictions hurt us. They don’t just hurt the addicted. They hurt the people who live with the addictions and who are seen by the addicts as threats to their addictions. We are all suffering from our collective addiction to the Buy-and-Hold investing strategy. We need as a nation to find our way to recovery. I offer no apologies for doing what I can to take us to a good place.

You are an addict, Anonymous. That is why you are headed to prison. Your first step to recovery is acknowledging that you have hit bottom. It’s my job as your friend to say that to you. I know that the odds that you will take the message to heart are very small. But I need to say the words to be able to live with myself and to avoid getting caught up in the craziness that you bring to the world. I hope that in days to come that we will be able to be friends again. It will certainly be my intent to do everything in my power to make that possible.

My best and warmest wishes to you, my long-time Buy-and-Hold addicted friend.

Rob

Buy-and-Hold Goon to Rob: “Your Entire 15-Year Jihad of Futility Is Based on ‘NO!!! THAT’S NOT THE QUESTION!!!!'” Rob’s Response: “I Believe That the Question That a Safe Withdrawal Rate Study Is Supposed to Answer Is: ‘What Is the Safe Withdrawal Rate?'”

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Set forth below is the text of a comment that I recently posted to the discussion thread for one of my column entries at the Value Walk site:

It doesn’t require a valuations adjustment because it’s not relevant to the question, which is “What rate of inflation-adjusted withdrawal has lasted at least 30 years in all time periods to date?” The answer was 4 percent. No (credible) person has ever disputed that answer, because it’s simple, provable math.

This has been explained to you hundreds of times, but you reject it. Your entire 15 year jihad of futility is based on “NO!!! THAT’S NOT THE QUESTION!!!!”

I do reject what you are saying, Dan.

I believe that the question that a safe withdrawal rate study is supposed to answer is: “What is the safe withdrawal rate?” I know that that is what my fellow community members believed when they were using Greaney’s study to plan their retirements.

If Greaney had told them that all that his study revealed was “what rate of inflation-adjusted withdrawal has lasted at least 30 years in all time-periods to date” and that that number was nowhere close to the safe withdrawal rate (it was nowhere close at the time these discussions were going on), not one person would have been using his study to plan his or her retirement. But lots of people used it.

I of course always acknowledged that Greaney’s study reveals “what rate of inflation-adjusted withdrawal has lasted at least 30 years in all time-periods to date.” So that question has never been in any dispute. My claim has been that the Greaney study does not reveal the safe withdrawal rate. And Greaney’s behavior shows that he understands what I was saying and why it mattered. He never would have threatened to kill my wife and children if all he was telling people was “what rate of inflation-adjusted withdrawal has lasted at least 30 years in all time-periods to date.” He was telling people (falsely) what the safe withdrawal rate was.

Anyway, I think it would be fair to say that your response to my question is that Greaney did not include a valuations adjustment in his study. You did not state that directly even in this comment. But it is implied in what you said. And it is indeed the case that there is no valuations adjustment in the study. When the safe withdrawal rate is calculated accurately and honestly, the number obtained for retirements that began at the top of the bubble is 1.6 percent, not the 4.0 percent that Greaney claimed. So this is no small matter. The odds of a retirement that began at that time and that called for a 4 percent withdrawal working out are 30 percent. Those retirements are not “100 percent safe,” as Greaney claimed.

I would like to see all the Buy-and-Hold retirement studies corrected. I believe that we will see it happen in the days following the next price crash, when we all pull together to bring an end to this economic crisis and to the Buy-and-Hold investing strategy that served as the primary cause of it.

I wish you all good things.

Rob

“I Have Not Come Across a Single Buy-and-Holder Who Is Willing to Acknowledge Publicly the Need to Include a Valuations Adjustment in a Retirement Study. I Have Known a Good Number Who Are Willing to Say This Privately. And I Have Known a Larger Number Who Are Willing to Say it Publicly One or Two Times and Then Retreat When They Face the Wrath of Their Buy-and-Hold Friends. And I Have Known a Very Large Number Who Are Willing to HINT That a Valuations Adjustment Is Needed. But It Is an Exceedingly Rare Thing to Find a Buy-and-Holder Who Will Openly Declare in a Public Place That All Retirement Studies That Lack a Valuations Adjustment Are in Error.”

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Set forth below is the text of a comment that I recently posted to the discussion thread for one of my columns at the Value Walk site:

Just stating facts, Rob. Ty it sometime.

It’s a fact that the retirement study posed at John Greaney’s web site does not contain an adjustment for the valuation level that applies at the time the retirement begins, Sammy. Thousands of people have looked at the study and not one has been able to find a valuations adjustment in it. This despite 36 years of peer-reviewed research showing that valuations affect long-term returns.

It causes my Buy-and-Hold friends a great deal of pain to acknowledge this fact. But it remains a fact all the same. A related fact is that all of the other Buy-and-Hold retirement studies are designed in manner similar to that employed for the Greaney study; they don’t contain valuations adjustments either. The retirement calculator at my web site contains a valuations adjustment. But I don’t consider that a Buy-and-Hold calculator; I consider it a Valuation-Informed Indexing calculator.

I have not come across a single Buy-and-Holder who is willing to acknowledge publicly the need to include a valuations adjustment in a retirement study. I have known a good number who are willing to say this privately. And I have known a larger number who are willing to say it publicly one or two times and then retreat when they face the wrath of their Biy-and-Hold friends. And I have known a very large number who are willing to HINT that a valuations adjustment is needed. Even Jack Bogle, the King of Buy-and-Hold, does this. But it is an exceedingly rare thing to find a Buy-and-Holder who will openly declare in a public place that all retirement studies that lack a valuations adjustment are in error and are dangerous because of how they mislead the investors making use of them.

Why do you think that is?

Rob

“The Growing Desperation of You Goons Comes Across in Each Additional Abusive Post That You Advance.”

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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:

Given that you are around 60 years old, don’t you think time is now running short for your plan to come together and that you should be looking for a “plan B”?

No. I love my country. That runs deep. I don’t think that that is something that changes because one finds a few obstacles placed in one’s path.

I am honored to be leading the effort to open up every web site on the internet to honest posting on safe withdrawal rates and scores of other critically important investment-related topics. This is the most important work that anyone in the United States is doing at this time in the history of our nation, in my assessment.

And we are of course very close to success. The growing desperation of you Goons comes across in each additional abusive post that you advance. So it would be foolish in the extreme to retreat even an inch at this point in the proceedings. Or at least so Rob Bennett sincerely believes on the morning of July 4, 2017.

We will of course have to see how things play out to know for certain. I of course see things from my perspective and you Goons of course at least to pretend to see things differently. The truth of the matter will be revealed to all of us as we watch how our nation responds to the next price crash and the economic and political turmoil that is sure to follow the loss of trillions of dollars of additional middle-class wealth.

I naturally wish you all the best that this life has to offer a person in any event, my long-time Goon friend.

Rob