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:

Rob,

I can show you plenty of successful buy, hold and rebalance outcomes, yet you can’t show one successful VII example. Your own example shows a failure with VII! Yet you can’t show one failure from buy, hold and rebalance.

I k ow it is painful for you and you are embarrassed of the situation. That is why you keep posting your lies trying to convince yourself and others that you are not a failure. In the end, we can all see the factual results.

I can show you peer-reviewed research showing that Valuation-Informed Indexing has beat Buy-and-Hold soundly for 145 years running.

When you talk about successful Buy-and-Hold outcomes, you are talking about portfolio balances that exist today that you did not divide by two. Stocks are today priced at two times their real value. Why don’t you divide by two?

The answer is obvious. You don’t like the numbers that show up for Buy-and-Holders when you divide by two.

It’s a scam, Sammy. It’s a money-making thing. Bernie Madoff’s investors were “successful” too until the bottom fell out of his Ponzi scheme. Ponzi schemes benefit only the people pushing them, not the people buying into the scam.

If Buy-and-Hold were a legitimate strategy, we would not see the sort of behavior that we have seen from you for 14 years running now. Not ever, not once. People advocating real strategies don’t ever behave like that because people advocating real strategies see no need to behave like that and would be ashamed to engage in such behavior.

All of this would be 100 percent obvious if it were not for the mountain of money that has been made by the Buy-and-Holders. We are all from time to time tempted by the lure of the easy buck. It’s only when we all feel free to cite the peer-reviewed research in this field that we will be able to help each other to avoid those temptations.

My sincere take.

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:

The flaw in the Buy-and-Hold Model is the idea that investors are 100 percent rational. Investors are humans. And humans are not 100 percent rational. All novelists know this. All marketers know this. All psychologists know this.

The core Buy-and-Hold idea is crazy. When people hear me say that, their first reaction is to think “that’s rude.” But is it? People employ the Buy-and-Hold strategy to determine how to invest their retirement money. It’s important that they get that right. And if the premise of a model is wrong, everything that that model produces is wrong. And of course it gets more and more wrong over time. Little errors become big errors. Innocent mistakes or misunderstandings become economic crises.

I started out as a Buy-and-Holder. So I fell into the trap of believing that the way that you make a persuasive argument in this field is with data. I was surprised when I produced peer-reviewed research showing that Buy-and-Hold is in error and the Buy-and-Holders shrugged. Now I see that that reaction makes a certain amount of sense. The error is to ignore emotion, to not even make an effort to rein in the Get Rich Quick emotions that have been hurting stock investors since the first market opened for business. So of course the people who have fallen prey to the error block out knowledge of it with emotion — they tell themselves that what the peer-reviewed research tells us doesn’t matter, that the millions who believe in Buy-and-Hold cannot be wrong regardless of what the peer-reviewed research says.

The more persuasive argument is to point to the behavior of the people who “defend” Buy-and-Hold with all sorts of abusiveness. I don’t mean just you Goons, Sammy. There are Goons in all fields of human endeavor. The thing that is remarkable in the investing advice field is the power possessed by the Goons. Why do people like Bogle not speak up when they see this sort of thing playing out in front of them? Why do web sites not enforce the rules they have that were put in place to protect us all from the trickery and ugliness of internet Goons?

It hurts too much, that’s why. When you have ignored the most important piece of the puzzle for 35 years, you have done great harm to millions of people. To acknowledge that is painful. There’s no getting around it.

The painful story must be told. The alternative is to let 35 years become 36 years and to cause even more pain. So there is no charity whatsoever in keeping our heads firmly buried in the sand.

We will get there. I have spoken to too many people who want the investing field to operate under the same rules as those that govern every other field of human endeavor to believe that we will not get there. It’s a big wall we have to break through. We come to feel defeated when we think of how hard the job is. I think we need to take it the other way, we need to focus on the encouraging reality that exposing a 35-year cover-up means making 35 years’ worth of powerful insights available to millions of investors in the space of a few weeks or months of time. A truly astounding opportunity!

Anyway, those are my sincere thoughts re this terribly important matter, Sammy.

I wish you the best of luck in all your future life endeavors.

Rob

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

Here’s an interesting article: https://www.washingtonpost.com/business/get-there/what-history-tells-us-about-your-investments-in-2017/2016/12/30/1e4c5714-cc4d-11e6-a87f-b917067331bb_story.html

Juicy excerpt: “Since 1990, the S&P 500 has traded above the average CAPE ratio in 307 of 324 months — that’s 95 percent of the time. If you abandoned U.S. equities when the CAPE ratio was overvalued (like Rob) you would have missed gains of more than a 1,000 percent over that time (like Rob.) In fact, had you only invested when the CAPE was 25 percent overvalued — i.e., when stocks were simply “expensive” — your total returns since 1990 would have been 650 percent. This is one of many reasons it is ill-advised to use valuation as a timing mechanism.”

Let me anticipate your brilliantly insightful response: “I obviously disagree.”

This is another one of those cases in which you have done us all a service by bringing a relevant and helpful article to our attention, Anonymous. I was not able to read the entire article because I have hit my limit on Post articles for the month. But I will read the rest when I am able and consider this one as fodder for a possible future column. My comments below are based only on the excerpt that you have provided.

Yes, I do indeed “disagree” if the point of the column (when read in its entirety) is to suggest that long-term timing is a bad idea. The phrase “if you abandoned U.S. equities” jumps out at one. You see that to abandon equities is an extreme position, right? Why would one test the value of exercising price discipline by looking at what happens when one takes the most extreme position possible?

Aiming to pay a fair price for a car is a good idea, right? If you determine that a particular year and make of a car is properly priced at $30,000, you might make a decision not to pay more than $30,000 for that car. You have a number of options open to you in the event that the dealer quotes a price of $35,000. You could come back with an offer of $25,000, hoping to meet in the middle. Or you could make an offer of $30,000, saying that you know that that is the true value of the car and saying that you just are going to refuse to pay more than that figure no matter what. Or you could walk out saying that you are insulted by the offer and vowing never to come back.

The last option is a poor strategic choice. It is common for dealers to quote prices in excess of the price at which they are willing to sell a car. Walking out every time this happens makes it likely that you are never going to own a car and forsaking cars is a bad idea. Extreme acts often bring bad consequences. It does not follow that potential car purchasers should accept every price ever requested by a dealer. What follows is that potential car purchases should avoid extremism.

So it is with stock buyers. Exercising price discipline is always a good idea. Never once in 145 years of stock market history has it not produced good long-term results. But, no, extremism in the exercise of price discipline is not a good idea. Engage in extreme behavior when exercising price discipline and you can mess up even the great concept of price discipline.

The flaw in the article is that in the real world no one would choose to exercise price discipline in the crazy way examined in this article. How about checking to see whether price discipline exercised in a more reasonable way works or not? That always works. Is there some reason why you are not open to doing it that way? Is there some reason why the article does not explore what happens to investors who do it that way?

It is a horrible, horrible idea to fail to exercise price discipline (to fail to, in the words used in the article, “use valuation as a timing mechanism.) So, yes, I disagree. The words you use in your comment — “Let me anticipate your brilliantly insightful response” — convey sarcasm and hostility. This is where things become goonish.

Say that you disagree with me 100 percent. Say that you are highly confident that it is a bad idea to exercise price discipline when buying stocks. Okay. That would mean that we have a difference of opinion. A common occurrence in this world, right? Is hostility the usual response to the evidencing of a difference of opinion? It is not. Outside of the investing realm, people have differences of opinion all the time and they do not feel hostile toward each other. In the investing realm, people go freakin’ nuts when someone expresses a different point of view.

But only followers of one particular strategy do that. Buy-and-Holders do that. I have never in our 14 years of discussion seen a time when a Valuation-Informed Indexer became hostile solely because a Buy-and-Holder expressed a different point of view. But I have seen it from Buy-and-Hold Goons hundreds of thousands of times. Why? What is it about the Buy-and-Hold strategy that makes you Goons go so freakin’ nuts every time your ideas are challenged?

I think the problem is that the core Buy-and-Hold idea (that it is not necessary to exercise price discipline when buying stocks) defies common sense. Exercising price discipline works in every other market that exists and there is now 35 years of peer-reviewed research showing that it works in the stock market as well. That simple and obvious reality drives you Buy-and-Holders out of your freakin’ minds.

You see one one level of consciousness that Buy-and-Hold just does not make sense and you cannot bear to entertain the possibility that you have for a long time been mistaken in your investing beliefs. And so you lose it. You jump for all sorts of means to block out the knowledge that is causing you pain. You give in to feelings of hostility toward those bringing reports of what the last 35 years of peer-reviewed research says because you want them to shut the hell up before their comments cause you to experience any more anguish.

I believe that you are better off feeling that anguish now. The anguish is going to be more painful if you put it off until after the next price crash.

And I believe that that is not your choice to make re the millions of middle-class investors who have a desire to learn today what the research says. If you choose to ignore the last 35 years of peer-reviewed research, so be it, it’s your life. You do not have the right to make that decision for millions of others. When you engage in behavior contrary to U.S. law to block those millions from gaining access to the information that they need to gain access to to protect themselves from feeling great anguish following the next crash, you place yourself outside the laws of this country. That’s bad news.

And that bad news tells us something bad about Buy-and-Hold. It tells us that it is pure emotion, that it is a very, very, very bad strategy.

Please note that I did not say that the article is bad. The article examines an important question. I don’t know everything. I could be wrong. People need to read articles like this to appreciate how I might be going wrong.

But people also need to see articles like this challenged by people like me. People need to see Buy-and-Hold CRITICIZED on a daily basis, as often as it is promoted. You Goons intimidate people into either not criticizing Buy-and-Hold at all or into holding back their punches when they criticize Buy-and-Hold. That’s bad news. That’s why I call you “Goons.” You have hindered our debate in a very serious way by engaging in this sort of behavior. You need to knock it the heck off. You need to do that by the close of business today.

I am not a Buy-and-Holder. I am the most severe critic of Buy-and-Hold alive on Planet Earth today. I am a gift to those who possess confidence in the Buy-and-Hold strategy. That’s not you. People who possess confidence in a strategy are happy to see it criticized. Criticism helps us strengthen our beliefs as part of the process in which we develop responses to the criticism. You lack confidence in your investing strategy. That’s not good.

Does ANYONE possess confidence in Buy-and-Hold?

It appears that just about no one possesses confidence in this strategy. Not all Buy-and-Holders are Goons. Most are not. But the Buy-and-Holders who do not personally engage in Goon behavior would criticize the Goon behavior when they saw it if they possessed confidence in the strategy. And just about no one does this. For so long as prices remain high, most non-Goon Buy-and-Holders TOLERATE the hostile or even abusive or even criminal behavior of Goons like you. What the h?

Buy-and-Hold is messed up, Anonymous. That’s my sincere take re this terribly important matter in any event.

Once again, I do appreciate that you took time out of your day to bring the article to my attention. Considered by itself, that was the action of friend. If I am wrong about investing, I want to find that out as soon as possible. By bringing the article to my attention, you did something that could potentially help me to learn something important that as of this morning I had not learned.

But then you crossed the line and included that hostile language. That is the part that I wish you could knock off. Leave out that part and we (and millions of others) have a great debate that we all learn from. Include that part of some of us end up in prison cells following the next price crash. Yucko Deluxe!

No?

Please take good care, my dear friend.

Rob

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 if you are 70 years old and then a crash still doesn’t happen when another 10 years go by?

The money gets left to your heirs and they receive the benefit.

You continue to focus on how long it takes for the crash to occur. My response is always that it doesn’t matter. Overvaluation is the product of fantasy. Reality-based strategies are always better than fantasy-based strategies. It is not even possible for it to ever be otherwise (when measuring results on a risk-adjusted basis).

We cannot tell how long it is going to be before a crash takes place, only that one is certainly coming. And it doesn’t matter. That is always my two-part answer to questions along these lines. If the crash comes quickly, you are ahead. If the crash comes slowly, you are ahead. You are ALWAYS ahead. So you shouldn’t fret so much about when the crash will come. It doesn’t matter in the long run.

It SEEMS like it matters in the short run. You look at your portfolio statement and you say “Gee, I am ahead of where I would have been had I followed a reality-based strategy.” And on paper, it really is so. But the numbers on the piece of paper are rooted in fantasy. The numbers on the piece of paper do not control the long-term result. It is reality that controls the long-term result. You want to try to tune out the short-term fantasy stuff and focus on the long-term reality stuff.

Valuation-Informed Indexing ALWAYS works, Anonymous. We have 145 years of historical return data available to us and there has never been an exception. Something like that doesn’t happen by accident. It plays out that way over and over and over again because it MUST play out that way.

If I said that it is better to brush your teeth than not to brush your teeth, you wouldn’t argue. You would accept that it is better to have clean teeth and not feel any need to push back. If someone for some reason felt that he wanted to make a case for not brushing your teeth, he could point to people who have not brushed their teeth for a few days or even a few weeks and who have not suffered terrible consequences. He could argue that it is much better not to brush your teeth because you save the time you would have devoted to the task and you don’t necessarily suffer negative consequences for doing so. In the long run, though, you do always suffer negative consequences for not brushing your teeth. It is a foolish way to proceed. We are lucky that there is no industry in place that generates billions in revenue by advising people not to waste time brushing their teeth.

Unfortunately, we do have an industry that generates billions in revenue advising people not to practice price discipline when buying stocks. The foolish advice this industry pumps out has destroyed millions of lives and is in the process of destroying millions more. Not one person benefits from their lies. The investors would all benefit from knowing the realities. The millions who are now unemployed as a result of the Buy-and-Hold Crisis would be benefit from people knowing the realities. The industry would benefit from being free to tell the realities; more people would feel comfortable buying stocks if there were no price crashes. But we cannot get from the horrible place where we are today to the wonderful place where we all want to be tomorrow without working up the courage to stand up to you Goons. That’s been the rub for 14 years now.

You should brush your teeth, Anonymous. I am sure. And you should practice price discipline when buying stocks. Again, I am sure. You can come up with all sorts of crazy scenarios in which it might appear that in the short term the failure to do so might not produce horrible results. In the long term, the results of Buy-and-Hold are always horrible. The crazy scenario is going to come to an end and the realities are going to come to dominate in the long run. There is no other way it can play out. There are no exceptions. It is not possible to imagine any.

Please brush your teeth. Please practice price discipline when buying stocks.

Or don’t.

It’s your call.

But if you elect not to practice price discipline when buying stocks, please don’t ask me to go along with your lies, to encourage or tolerate them. I can tolerate them to the point of letting you say them; everyone has a right to offer their take, in my view. But I cannot tolerate them to the point of not pointing out the 35 years of peer-reviewed research revealing the error that you are making in going with a pure Get Rich Quick approach. I believe strongly that my friends need to know about that 35 years of peer-reviewed research whenever some Buy-and-Holder tries to con them. So, when I see you conning my friends and when I have the ability to do something about it, I am going to do that something. It’s not personal. It is a matter of conscience. I don’t approve of cons. I don’t approve of financial fraud. I don’t approve of Get Rich Quick. I don’t approve of Buy-and-Hold.

I hope that helps a bit.

Rob