A Rich Life

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

“You Tell Me Something That I Can Do That Would Help Bogle Out and That Would Help You Goons Out and I Will Be On It in Two Seconds. Bogle and You Goons Have Made Such a Mess of Things That There Are No 100 Percent Good Solutions Available to Us.”

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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:

Maybe you send send him a letter letting him know he has a chance to reduce his prison sentence and a lower settlement amount if he responds by close of business.

That’s the approach that I’ve tried with you Goons, Anonymous. It hasn’t done the trick. Surprise! Surprise!

People don’t like to go to prison AT ALL, you know?

I get it. I wouldn’t want to go to prison. If I were going to go to prison when people learned the realities of stock investing, I might want to block people from learning the realities of stock investing too. I hope that I wouldn’t do something like that. But I think it would be fair to say that I would be temped. Nobody likes to go to prison.

What do you propose that I do about it? I didn’t create this situation. It developed over time and it was well in place long before I showed up on the scene. I have on many occasions offered to do anything in my power to help out the Wall Street Con Men and you Goons so long as it does not require me to travel to the wrong side of the Felony Line myself. I am obviously not willing to do that. You can certainly understand why I would not want to go to prison myself, right?

You tell me something that I can do that would help Bogle out and that would help you Goons out and I will be on it in two seconds, Anonymous. I ask for nothing in return. It’s the right thing to do and it’s what I want to do. So all you have to do is to tell me what you want and it’s as good as done. The problem is that there is nothing that you can suggest. Bogle and you Goons have made such a mess of things that there are no 100 percent good solutions available to us at this point in the proceedings.

All that I can do is all that I can do. While there is no perfect path available to us, there are better paths and worse paths. You identify the path that Bogle and you consider the best path possible given where things stand today, and I am on it. That’s the best offer that I can make. It is not possible for the rational human mind to imagine how someone in my position could offer you a better deal than that. The most appealing deal that can be imagined by the human mind is the one that I offer you.

And I of course wish both Bogle and you Goons all the best that this life has to offer a person as well.

Rob

“Bogle Is Working a Con. When He Says That He Responds to Letters, He Is Telling a Lie. He Responds to Letters That Don’t Expose His Con. He Ignores Those That Ask Him Why He Lies About What the Last 35 Years of Peer-Reviewed Research Tells Us About How Valuations Affect Long-Term Returns.”

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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:

Hey Rob. Here is your chance. According to this link on Bogleheads, Jack Bogle looks at the letters that are sent to him. Perhaps you can write him a letter and send it to him. You can then post the letter and response here:

https://www.bogleheads.org/forum/viewtopic.php?f=9&t=203980&sid=3d5ca916ec62bc7ba172d38949fbb871

Bogle is working a con, Anonymous. Con men rarely turn themselves in.

I wrote to Bogle years ago. As you know. And a good number of others at the Bogleheads Forum wrote to him at that time. When he says that he responds to letters, he is telling a lie. He responds to letters that do not expose his con. He ignores those that ask him why he lies about what the last 35 years of peer-reviewed research tell us about how valuations affect long-term returns.

I don’t believe that Bogle started out as a con man. I believe that he was sincere in believing that the market is efficient in his early days. Perhaps you are cynical enough to believe that he was a con man going back to the first day. Your tone suggests that. I don’t believe that. I believe that he made a mistake and that he fell victim to cognitive dissonance when his mistake was discovered by the publication of Robert Shiller’s “revolutionary” (Shiller’s word) research findings in 1981. Then, as the number of people whose lives have been destroyed by the relentless promotion of the Buy-and-Hold lies grew larger and larger, Bogle felt that he had no choice but to engage in a cover-up to keep people from discussing openly how things really work in the stock market. At some point, he became desperate enough to associate with the sorts of individuals who have put up posts in “defense” of Mel Linduaer and John Greaney. And here we are.

I love the man. I am grateful for the hundreds of powerful insights that he developed that have helped us all to develop a stronger understanding of how stock investing works. There would be no Valuation-Informed Indexing today were it not for the fine work that Bogle put forward a good number of years back. In fact, it was by reading Bogle’s book that I learned about the errors in the Buy-and-Hold retirements studies that I posted about in my famous post of the morning of May 13, 2002.

I will continue posting honestly on safe withdrawal rates and on scores of other critically important investment-related topics. I will continue to praise my friend Jack Bogle to the skies re every subject except where it would constitute financial fraud to pretend not to know about the mistake he made and has covered up for so long that has put millions of middle-class Americans at grave risk of suffering failed retirements. I am 100 percent confident that things will work out for the best following the next price crash. This is exciting stuff. The good news here is 50 times more good than the bad news here is bad.

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

Rob

“If This Situation Had Been Normal All Along, the Opportunity Wouldn’t Have Been Available to Me.”

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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: 

Then why haven’t you had the same level of success and acclaim as well as wealth, in comparison to Bogle and Shiller?

I am on my way, Anonymous. It’s a process that is playing out before our eyes. It’s a drama that can only end one way. The trick is not to get scared when it looks like the bad guys are close to shutting it down.

If it had been up to me, it would have been done the other way, the normal way. But if this situation had been normal all along, the opportunity wouldn’t have been available to me on the morning of May 13, 2002, would it have been? It is what it is. There’s 50 times more good here than bad. That’s not a bad ratio at all.

I will continue to give it my best shot. I can do no more and I can do no less. I remain 100 percent confident that, following the next price crash, we will all make it to the other side of The Big Black Mountain, the place where we all have long wanted to be. Bogle will get the credit he deserves, Shiller will get the credit he deserves and Bennett will get the credit he deserves.

No one said that achieving huge advances in a society’s understanding of how stock investing works would come without a good fight. My guess is that my good friend Jack Bogle had demons that he had to slay before achieving the things he achieved and that my good friend Robert Shiller had demons that he had to slay before achieving the things that he achieved. I have slayed a good number of demons over the past 14 years and there are one or two that continue to block my path today. I continue to fight with all my strength. The bottom line is that that is the only part of it that is left entirely to me to decide. How it turns out is decided by Someone at a higher pay grade. I will accept whatever path that Someone takes us down.

I love you, man. It makes me happy that I can say that today, after all the adventures that we have been through together. The good stuff we will remember forever. The bad stuff will fade from memory with time.

My sincere take.

Rob

“I Would Put Myself in the Same Class as Bogle and Shiller.”

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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 wouldn’t put yo Goons in the same class as Bogle or Shiller”

Would you put yourself in the same category as Bogle and Shiller?

Perhaps you would put yourself at a level above them?

I would put myself in the same class as Bogle and Shiller.

Bogle laid the foundation. Bogle got everything but valuations right (according to the peer-reviewed research available to us today).

Shiller supplied the missing piece of the puzzle, the biggest piece of the puzzle, valuations. The peer-reviewed research shows that the effect of valuations is 80 percent of the stock investing story. Getting everything but valuations right is getting the entire story 80 percent wrong. In a numbers-based model (both Buy-and-Hold and Valuation-Informed Indexing are numbers-based models), getting the story 80 percent wrong is a catastrophe. When you get the numbers wildly wrong, a numbers-based model offers objective support for doing the wrong thing, which is the OPPOSITE of what sound investing advice does.

I have spent the past 14 years exposing the 35-year cover-up and exploring the practical aspects of the Shiller model, a side of the story that he has been afraid to address because he has seen what Goons like you do to anyone who writes about the implications of his “revolutionary” (Shiller’s word) findings with full and complete and plain and helpful honesty.

Just to say “valuations matter” is not quite a revolutionary advance. It suggests a revolutionary advance. But, for that advance to have effect in the flesh-and-blood world, someone needs to create the sorts of calculators that I have presented at this site and to produce the sorts of insights that I have been offering at the column at the Value Walk site for over six years now. Shiller did not do any of that. He generated the hugely important research-based finding and then stepped back, waiting for someone else to come along and see where that hugely important research-based finding would take us. I saw that opportunity in August 2002, when Greaney advanced his first death threat (abusive behavior of that nature had been blocking progress for 21 years at that time) and picked up the ball and ran with it.

We couldn’t have gotten to where we all deep in our hearts want to be without Jack Bogle’s many contributions, we couldn’t have gotten to where we all deep in our hearts want to be without Robert Shiller’s many contributions, and we couldn’t have gotten to where we all deep in our hearts want to be without Rob Bennett’s many contributions.

That’s my sincere take re this terribly important matter in any event, Anonymous. I hope that helps a bit.

Rob

“I Have Made Contributions That Neither Bogle Nor Shiller Have Made. I Give My Best Shot to Answering Every Question Put to Me. I Struggle Mightily to be Honest in the Face of Enormous Pressures to be Otherwise. But the Idea That I ‘See All the Issues’ Is Flat-Out Nuts.”

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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:

So Bogle, Shiller, the goons, etc., are either lying, misunderstood, don’t care, ignore and/or suffer from cognitive dissonance and only Rob Bennett has been able to clearly see all of the issues and has the only clear understanding as to how the market dies or should act. Have I got that right?

Bogle has brought scores of critically important investing insights to the table.

The same is true of Shiller.

I wouldn’t put yo Goons in the same class as Bogle or Shiller. But I have no problem saying that you have helped me to see many things that I would not have seen absent your contributions and that there are a good number of cases in which you helped me see things that I did not see just by reading the articles or books of Bogle or Shiller.

I have made contributions that neither Bogle nor Shiller nor you Goons have made. I certainly offer no apologies for my genuine contributions (while of course noting that I could not have made them but for the contributions made by Bogle and Shiller and you Goons). But I wouldn’t feel even a tiny bit comfortable saying that I “see all of the issues.” I give my best shot to answering every question put to me in a reasonable and hopefully accurate way. I struggle mightily to be honest even when enormous pressures are imposed to me to compromise my integrity as the price of being permitted to participate at the various discussion boards and blogs that have been compromised as the result of the insanely abusive posting practices of you Goons. But I find it more than a little hard to believe that I have not made mistakes along the way. And of course I have not even attempted to address many issues. So the idea that I “see all of the issue” is flat out nuts.

Does that help?

Rob

“Recent Years (the Time-Period from 1996 Forward) Have Very Much Been an EXCEPTION. This Is the First Time in the History of the U.S. Market in Which We Have Seen so Long a Time-Period in Which Going with a Low Stock Allocation Was a Good Idea According to the Peer-Reviewed Research in This Field.”

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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:

Shiller quite clearly said don’t time the market. Unless you can produce a quote that contradicts that (and you never have) there’s no need to keep asking him the same question.

Anyway, here’s a new peer reviewed paper: “Shiller’s CAPE: Market Timing and Risk”
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2876644

Juicy excerpt:

“We find that stocks outperform 10-year U.S. Treasurys regardless of CAPE, except when CAPE is very high (as mentioned above, the reference point is 27.6). In other words, consistent with market efficiency, ‘buy and hold’ is generally a good strategy even when stock valuations appear to be high by historical standards. Despite the strong negative relationship between CAPE and long-horizon stock returns documented by prior researchers, it is difficult to take much advantage of this apparent market inefficiency. The stock market as a whole appears closer to being efficient than not.”

Comments?

That’s much for the link to the research paper, Anonymous. That’s obviously a huge help.

There’s a good chance that I will write a column re this paper. The comments below are in response only to the abstract. So this is just an initial reaction.

I don’t agree even a tiny bit that the results shown here are consistent with market efficiency. If the market is efficient, there cannot be ANY overvaluation. “Efficiency” means that all factors are being considered. If all factors are being considered, the market is properly priced. If there is any overvaluation at all, the market is not properly priced. So I don’t get that statement at all.

It’s an analytical mistake to make the comparison to 10-year Treasuries. That greatly biases the result. TIPS were paying 4 percent real in 2000. That was the risk-free return at the time. No investor would have chosen Treasuries as an alternative to stocks at a time when a 4 percent real risk-free return was available. Make the comparison to the rational alternative to stocks and you of course get a very, very different result.

However, I do agree with the general point that the valuation level for stocks has to be very high for stocks to be beat by a risk-free asset class. John Walter Russell did research at the SWR Research Group showing this. He showed that an investor who went with a heavy stock allocation whenever the P/E10 level is below 20 would do fine.

That doesn’t mean that all investors should follow that strategy, only that it is one reasonable option. But it does show how powerful the long-term value proposition is for stocks in ordinary circumstances. One of the reasons why the benefits of long-term timing (price discipline) have remained hidden from many of the experts in this field for so long is that it is a rare event for the P/E10 value to go above 20. So there have not been many circumstances in which long-term timing was required or even that beneficial.

Recent years (the time-period from 1996 forward) have very much been an EXCEPTION. This is the first time in the history of the U.S. market in which we have seen so long a time-period in which going with a low stock allocation was a good idea according to the peer-reviewed research in this field. It doesn’t change the reality to point out that today’s reality is an unusual one. But it does go a long way toward explaining why lots of good and smart people have had a hard time recognizing this important (and otherwise easy to understand) reality.

I of course very much disagree with the conclusion that it is not possible to take advantage of market inefficiency. But it appears to me that this is an important study, one that everyone who works in this field needs to take a look at. I am most grateful to you for having brought it to my attention, Anonymous,.

Please take good care.

Rob

“People LOVE Being Told That They Possess More in the Way of Assets Than They Really Do Possess. That’s Why Buy-and-Hold Is So Popular — the Lie Being Told Is a Soothing One to the Ears of Millions of Us. But There’s Nothing Soothing About Seeing Your Retirement Account Wiped Out. When We See in Flesh-and-Blood Terms How the Buy-and-Hold Lies Have Destroyed Our Lives, We Will Turn on the Con Men Who Have Directed So Much of Their Human Energies to Pushing Those Lies and to Profiting From the Human Weaknesses That Make Us All Susceptible to Them.”

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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:

If no one will state it, then what evidence do you have that indicates that will change in the future?

It’s common sense, Anonymous.

Look at what happened with the Bernie Madoff con. People who had looked at the numbers knew that Madoff was working a con long before he was exposed. People wanted to believe because we all carry a Get Rich Quick urge within us. But people stopped believing when they lost most of their retirement money.

What reason do we have for thinking that it might turn out different with Buy-and-Hold? I sure am not able to think of anything. People LOVE being told that they possess more in the way of assets than they really do possess. That’s why Buy-and-Hold is so popular — the lie being told is a soothing one to the ears of millions of us. But there’s nothing soothing about seeing your retirement account wiped out. When we see in flesh-and-blood terms how the Buy-and-Hold lies have destroyed our lives, we will turn on the con men who have directed so much of their human energies to pushing those lies and to profiting from the human weaknesses that make us all susceptible to them.

That’s my sincere take, in any event. We will have to wait to see how things play out to know for certain.

My best wishes to you.

Rob

“I Long to See EVERYONE Using Words and Terms Like “Goons” and “Financial Fraud” and “Prison Sentences” on a Daily Basis. You Don’t Bring a Massive Act of Financial Fraud to a Complete and Total Stop by Covering it Up. You Bring a Massive Act of Financial Fraud to a Complete and Total Stop by EXPOSING 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:

No one supportsyour position. Got it.

Ever hear of the phrase “pissing in the wind”?

I didn’t say that no one supports my position, Anonymous. I said that as of today no one has worked up the courage to SAY PUBLICLY that they support my position.

That’s what we need to change. When we reach a point where everyone in this field is openly talking about the massive act of financial fraud that brought on the economic crisis, we all move to a far better place than where we are, a place where deep in our hearts each and every one of us would prefer to be.

We will all be presented with new opportunities to show our love for our country following the next price crash. It is my strongly held view that we are all going to make it safely to the other side of The Big Black Mountain and that, once we do, not one among us will ever look back to the Buy-and-Hold Era with any feelings of regret.

But we are just going to have to wait to see how it all plays out to know for sure.

I long to see EVERYONE using words and terms like “Goons” and “financial fraud” and “prison sentences” on a daily basis. You don’t bring a massive act of financial fraud to a complete and total stop by covering it up. You bring a massive act of financial fraud to a complete and total stop by EXPOSING it. This is just common sense. This is how it is done in every field of human endeavor other than investing analysis and this is how it will have to be done in the investing analysis field as well.

These are my sincere thoughts re these terribly important matters, in any event.

My best and warmest wishes to you and yours.

Rob

“A Death Threat Is Not an Argument, It Is an Act of Intimidation.”

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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:

Instead of going out and getting a job, Rob is over at his website posting nutty nonsense like this:

“I long to see EVERYONE using words and terms like “Goons” and “financial fraud” and “prison sentences” on a daily basis. You don’t bring a massive act of financial fraud to a complete and total stop by covering it up. You bring a massive act of financial fraud to a complete and total stop by EXPOSING it. This is just common sense. This is how it is done in every field of human endeavor other than investing analysis and this is how it will have to be done in the investing analysis field as well.”

I definitely stand by those words, Sammy.

Today’s economic crisis has its roots in the fact that too many of us have for too long been too reluctant to use words like “Goons” and “financial fraud” and “prison sentences.” That’s really the entire deal. Everything follows from that. Once a good number of us work up the courage to say those words often and clearly and everywhere, we put all the ugly, nasty stuff behind us and move on to enjoying all of the hundreds of amazing insights into how stock investing works in the real world that were opened up to us through the publication of Robert Shiller’s “revolutionary” (his word) research findings.

Bogle should have come clean on the day in 1981 when Shiller showed with peer-reviewed research that valuations affect long-term returns. If that’s so, then risk is not static but variable and every investor has to be willing to adjust his stock allocation in response to big shifts in valuations to have any hope whatsoever of keeping his risk profile roughly stable. Shiller changed our understanding of how stock investing works in a fundamental way and Bogle’s decision to engage in a cover-up rather than to come clean about his mistake in thinking that the market is efficient made everyone who has come after him feel awkward about pointing out the mistake.

When someone fails to own up to so important a mistake, it gets harder and harder over time to do so. Had Bogle come clean three decades ago, we would have seen a rewriting of all the textbooks in the days since and we would have seen hundreds and hundreds of exciting investing insights developed in the days since and we would have seen hundreds of accurate and helpful calculators developed in the days since. It is by owning up to our mistakes that we open ourselves up to new learning experiences. When we fail to own up to mistakes, we lose out on those opportunities and we can easily find ourselves over time traveling to some very dark places indeed.

It can never get better for the Buy-and-Holders for so long as the cover-up continues. It can only get worse and worse and worse. I do believe that the vast majority of Buy-and-Holders follow Buy-and-Hold strategies themselves. So there is an important sense in which they believe in the strategy that they are promoting to others. So I certainly think that they should say that they believe. The Valuation-Informed Indexers need to hear challenges to their understanding of how stock investing works as much as the Buy-and-Holders need to hear challenges to their understanding of how stock investing works.

But overlooking acts of financial fraud takes the spirit of tolerance of other “ideas” too far. A death threat is not an argument, it is an act of intimidation. There is no place for death threats in discussions of what the peer-reviewed research tells us about how stock investing works in the real world. Nor is there any place for demands for unjustified board bannings. Nor is there any place for tens of thousands of acts of defamation. Nor is there any place for threats to get academic researchers fired from their jobs. That sort of behavior constitutes financial fraud. That sort of behavior constitutes a felony. That sort of behavior leads to a prison sentence. Yuck!

That sort of behavior reflects poorly not only on the Buy-and-Holders who directly engage in it but also on the Buy-and-Holders who tolerate it by failing to speak up in opposition to it when they see the sorts of individuals who have put up posts in “defense” of Mel Lindauer and John Greaney making appearances at discussion boards and blogs that they frequent. I have a zero tolerance policy re those sort of thing. The Great Buy-and-Hold Con is in the process of destroying millions of middle-class lives. I have made it a practice to speak up in opposition to the criminal behavior of you Goons wherever and whenever I see it (while naturally inviting and encouraging and showing gratitude for the contributions of my many Buy-and-Hold friends who stay within the norms of civil human behavior when making points in favor of Buy-and-Hold that have convinced them and that we all need to consider).

These are my sincere thoughts re these terribly important matters in any event, my long-time Goon friend. I naturally wish you the best of luck in all your future life endeavors.

Rob

Valuation-Informed Indexing #323: It Is Not Reasonable to Expect a Perfect Correlation Between Valuations and Long-Term Returns

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I’ve posted Entry #323 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called It Is Not Reasonable to Expect a Perfect Correlation Between Valuations and Long-Term Returns.

Juicy Excerpt: There is never one wave of emotion passing through investors at a point in time. There are always multiple waves, some pushing prices up and some pushing prices down. The price that applies is the product of the interaction of the various waves of emotion. The P/E10 level from an earlier time can inform us as to the probabilities of each of the various waves of emotion being dominant at a point in time but they can never specify with certainty which wave will be dominant or to what extent it will be dominant. Hence,the correlation between the P/E10 level that applies at the time a prediction is attempted and the return that ends up applying in reality can never be perfect.

Stock returns are as predictable as we should expect them to be if Shiller is right that it is investor emotion that plays the dominant role in setting stock prices. We need to learn how to think about stock investing in the new world ushered in by Shiller’s 1981 research. Once we become comfortable with a new way of thinking, I believe that we will come to worry less about the statistical tools showing how strong the correlation is and focus more on how big an advance it is for us to be able to predict long-term returns to the extent that is now for the first time in investing history possible.