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 are all ashamed of their behavior.”

How do you know this? Do you read minds?

I observe behavior.

People don’t put forward death threats when they believe that there is peer-reviewed research supporting what they are saying. Have you ever seen a Valuation-Informed Indexer put forward a death threat? It has never happened. We really have peer-reviewed research on our side. So we feel that it is beneath us to engage in such behavior.

The Buy-and-Holders really do believe in Buy-and-Hold to the extent that they follow the strategy themselves. The fact that they follow the strategy is legitimate evidence that they believe in it. But they lack confidence. It defies common sense to think that there could be a market where it is not necessary to practice price discipline. So every Buy-and-Holder has doubts about the merit of his strategy. Those doubts evidence themselves in defensiveness. The Buy-and-Holders lash out when they are questioned because they cannot bear to hear challenges to a strategy in which they are desperately trying to maintain a belief.

Just ask yourself generally why people make threats of violence. Are there any cases where it is not done out of weakness? People make threats of violence when they are desperate, when they feel that acceptable means of making their point will not work. I cannot think of any exceptions to that rule. You don’t need to be able to read minds to know that the Buy-and-Holders feel shame re their behavior.

This is the sort of thing that should be talked about on investing boards and blogs on a daily basis. The core idea of Buy-and-Hold is that investing is a rational behavior. Because the Buy-and-Hold paradigm today reigns supreme, almost all discussion relates in some way to rational behavior. Investing is treated as if it were a science. We see numbers and graphics and arguments with logic chains and all this sort of thing. This stuff is impressive. This stuff takes a lot of people in. It took me in for a long time.

But that stuff misses a big part of the story. We don’t talk about the fury that the Buy-and-Holders feel when their ideas are challenged. That’s a critical part of the story. That’s emotion, not logic. That shouldn’t be there if Fama is right that investing is a 100 percent rational endeavor. That’s the sort of thing that you should only see if Shiller is right that investing is largely an emotional endeavor. We see behavior on our boards and blogs on a daily basis that supports Shiller’s research and people do not comment on it. They are blind to it because of their desperate need to believe in Buy-and-Hold because their retirements are riding on its legitimacy.

All of this stuff is tangled together. This is what makes it so difficult to achieve the progress that deep in our hearts we all want to achieve. The Buy-and-Holders want to be able to reduce the risk of stock investing by 70 percent just as much as the Valuation-Informed Indexers want to. Why the heck wouldn’t they? But to acknowledge the research showing the merit of Valuation-Informed Indexing would be to acknowledge the cover-up. The Buy-and-Holders cannot bear to acknowledge having been part of a cover-up. Cover-ups are not rational and the Buy-and-Holders like to think of themselves as perfectly rational creatures. They are trapped in webs spun by the contradictions of their own flawed logical premises.

Look at the hate you spew in every post you advance here, Anonymous. That’s shame talking. I didn’t do anything to bring that out in you, it was there before I came on the scene. All that I did on the morning of May 13, 2002, was to ask a question. I didn’t even say “valuations should be counted.” I said: “SHOULD valuations be counted?” I asked a question and lots of community members responded very positively to the question. That’s what you want to see on a discussion board. That’s how you launch a learning experience for everyone.

The Buy-and-Holders responded with rage. Why? It’s not because there is something wrong with asking that question. It’s because the question is a good one. The Buy-and-Holders were smart enough to see that the question was a good one and they felt anger at themselves for not having explored it at an earlier time when they could have saved themselves years of travel down the wrong investing path. So they exploded. They weren’t really angry at me, they were angry at themselves. They directed their anger at me because they were too afraid to examine their own mistakes. They ACTED as if they were angry at me. That’s what shame makes us do. When we feel ashamed, we strike out at friends who happen to say things that make us uncomfortable because we fear that their questions are going to expose our secrets.

All of this needs to get out. Not to hurt the Buy-and-Holders. That’s how you always frame it. You always suggest that Rob is out to get the Buy-and-Holders because he points out bad stuff that they have done. The reality is just the opposite. I see the Buy-and-Holders as my friends. I admire the work that they have done, I feel that they are trying to do the same thing that I am trying to do — develop more effective investing strategies. So I say things aimed at helping my Buy-and-Hold friends get out of the trap in which they find themselves caught.

My problem is that the Buy-and-Holders were in the trap for a long time before I even came on the scene. Greaney knew perfectly well that his study did not contain a valuations adjustment long before the morning of May 13, 2002. That’s why he lashed out. Lots of community members were fascinated by the question. They had never considered it before and getting the safe withdrawal rate right was important to them. So they loved the discussion that they saw developing. But Greaney understood that the discussion would lead to criticism of his study if it continued. So he lashed out. And the ones who had enjoyed the discussion stopped asking for it. They wanted to have a discussion but they did not care nearly as strongly about having it as Greaney and his friends felt about blocking it. For the people who wanted to have the discussion, exploring the realities was a nice idea. For the people who felt shame about the cover-up, it was a matter of life and death to stop it from going forward.

This is the reality of investing analysis in the year 2017. The Buy-and-Holders are good and smart people. But because they are flawed humans like all the rest of us, they made a mistake a good number of years back that put them on the wrong track. In normal circumstances, it would be no biggie. In normal circumstances, someone would point out the error, they would say “sorry about that” and we would all move on. But in this case the thing discovered was truly “revolutionary.” Shiller’s 1981 findings turn everything we once thought we knew about stock investing on its head. The hardest mistakes to acknowledge are the really big ones because they cause the greatest feelings of shame.

The Buy-and-Holders could not bear to admit this particular mistake and so the negative effects of it have been compounding and compounding for decades now. Now the shame is so great that we cannot even get people to point out that death threats should not be permitted on investing discussion boards. The hate on the part of the Buy-and-Holders toward the idea of permitting honest discussion is so great that we cannot cope with it. So most of us just throw our hands up and say “oh, it will work out somehow.”

Will it?

That’s not an evidence-based statement. The one time we got to a P/E10 of 33 we experienced a Great Depression. This time we got to 44. This is a serious matter. We f’d up big time.

But of course the good news here is 50 times more good than the bad news here is bad. If we could have the discussion, the Buy-and-Holders would no longer feel shame because all of the good stuff they genuinely were trying to achieve would suddenly become a reality if they could only retrace their steps, admit their one mistake, and then begin moving forward again. But how the heck do we get them do that? How do we get them to admit the mistake when we cannot even have a civil conversation about the evidence showing that they made a mistake?

Every negative interaction we have had for 15 years now is the product of the shame you feel, Anonymous. There is no other possible explanation for the behavior we have seen on your part. If you were 100 percent sure that I am wrong about investing, that would be fine. If that were how you felt, you would permit me to speak wherever I wanted to speak, confident that the discussion that followed would once again show to interested observers the merit of Buy-and-Hold..

But you don’t feel the confidence in your investing strategy needed for you to be able to tolerate honest and civil discussion of its merits. Your behavior shows that you lack confidence, that you follow the strategy but that you are ashamed of yourself for not having questioned its core premise long before I ever came on the scene. You ask yourself: “What made me get on this track, why oh why did I do it?”

I cannot change your past. You bring it with you to every conversation between us. All that I can do is to reassure you that civil discussion of the peer-reviewed research can never hurt you, that the only reason why you perceive a threat in things that I say is that you were holding and suppressing doubts about the Buy-and-Hold project before I ever came on the scene. My job is to get those doubts out into the open, to have every investor on the planet exploring those doubts so that they can all make informed choices as to whether to continue down the Buy-and-Hold path or to make a mid-course correction given what the peer-reviewed research of the past 36 years tells us about the true realities of stock investing.

I see shame in every thread in which you and your Goon friends participate, Anonymous. You are blind to it because you cannot bear to look at it, it is too painful. You see me as a threat but I am trying to help. I am trying to build up that voice of common sense within you that tells you “I really should be willing to listen to the other side of the story, what possible harm could it do?” That’s how discussions are handled in this country in every field of human endeavor other than stock investing. That’s what I believe would work best in the investing advice field as well.

Rob

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 for a little comic relief to anyone that might be reading these comments, here is a little tid-bit Rob posted over at his website:

“I would rate Bogle and me as roughly equal in importance. . . Just as I am nothing without Bogle, Bogle is nothing without me.”

In case you are wondering, it appears Rob was serious when he posted that.

I love Bogle. I learned about the errors in the retirement studies by reading Bogle’s book (he says that “Reversion to the Mean is an Iron Law of stock investing” — the safe withdrawal rate cannot be the same number at all valuations levels if Reversion to the Mean is an Iron Law). I rank Bogle second only to Shiller.

But I believe that Bogle is wrong about valuations. The market is not efficient, valuations affect long-term returns. And the valuations effect is huge. It is about 80 percent of the story for most investors. Most factors that affect stock investing we have no control over. But each investor decides for himself or herself whether or not he or she is going to adjust his stock allocation in response to big valuation shifts. So there is no factor that it is more important to get right than valuations.

And Bogle gets it wrong. That one mistake ruins his other work in a practical sense. Buy-and-Hold is a numbers-based strategy. When you get the numbers wrong, none of it works. And you cannot get the numbers right without taking valuations into effect.

Valuation-Informed Indexing is Buy-and-Hold with a valuations adjustment added. That’s it. That shows how much I love Bogle, that I would spend 15 years developing a strategy that incorporates all of his ideas except for the one big thing that he got terribly wrong. So, yes, Bogle needs to incorporate my work on how incorporating valuations into the mix changes Buy-and-Hold in a hugely positive way just as I incorporated all of Bogle’s ideas into Valuation-Informed Indexing (because they are genius!).

I never had any intent of saying anything negative about Bogle. When I started out talking about this stuff, I called the strategy not Valuation-Informed Indexing but Buy-and-Hold 2.0 or The New Buy-and-Hold. VII is really just Buy-and-Hold updated to reflect the last 36 years of peer-reviewed research. It was because of the negative reaction of my Goon friends that I changed the name. They don’t like VII being called “Buy-and-Hold 2.0” and Bogle made clear that he is with them, so I changed the name so as not to offend.

I still believe that I will be working closely with Bogle following the next price crash. I think he is a great man who has done great things and that the human misery that he sees following the next crash is going to cause him to come clean re his one big mistake and then we are all off to the races. Regardless of what happens, I will always sing the man’s praises. No one has done more to help the average investor by promoting simple and yet effective ideas with a long-term focus. But I have never felt even a tiny bit comfortable saying that valuations can be ignored. I learned from the peer-reviewed research (which Bogle taught me to use as my guide!) that valuations ALWAYS matter big time.

I love the man, Sammy. But, yes, I do believe that he is capable of making a mistake. As am I. As are you. As are we all. I only wish that all of his friends had helped him out by insisting that he deal with the mistake when he first learned about it. I think it would be fair to say that Bogle would feel about 100 times better about himself today had he played it that way back in 1981.

Rob