A Rich Life

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

“Using Data As a Guide to Understanding Something Leads to More Uncertainty, Not Less.”

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

Why is the entire historical record relevant?

Take a look at this article, Laugh:

http://www.politico.com/story/2016/11/nate-silver-huffington-post-polls-twitter-230815

Nate Silver gets it. Using data as a guide to understanding something leads to more uncertainty, not less. When we are ignorant of how something works, we can delude ourselves into a false feeling of confidence. Data helps us to overcome our subjective biases because it is objective, because it is real and not b.s. But there’s an unfortunate inclination to become overconfident about what data appears to teach, to stop thinking because of a belief that the data has answered all the questions. There are always new questions. Use data properly and you will never stop searching for new insights. The wonder of research is that it pokes holes in dogmatism. When you see people becoming dogmatic about what the data appears to show at one particular point in time, you know that those people are on the wrong track.

The Buy-and-Hold “idea” (that there is no need to exercise price discipline when buying stocks) has been crashing stock markets ever since the day the first stock market was put in place. In 1981, those awful days of human ignorance came to an end. A fellow who has since been awarded a Nobel prize for his amazing work provided us the piece of the investing puzzle that brought us to where we had long wanted to go — we now have a model for understanding stock investing that truly makes sense, that truly works.

Bogle got us close. He is a hero too. But Bogle is a gravely flawed hero. He got us close by citing the powerful insights developed through study of the historical return data in the pre-1981 years. Then he let his ego destroy him. Bogle turned his back on all the good work he had done up to that time when he elected in 1981 not to launch a national debate as to what Shiller’s “revolutionary” (Shiller’s word) research meant for Buy-and-Hold but to instead go into cover-up mode and act as if the amazing finding that valuations affect long-term returns just didn’t exist.

Hence 35 wasted years in which thousands of people who could be helping us all to better understand this stuff instead live in fear of speaking in plain and understandable terms about what they really believe re stock investing. Hence 14 years of a Campaign of Terror against the Retire Early and Investing discussion-board communities in which dozens of boards and blogs were destroyed or compromised and in which those participating in the campaign have set themselves up for long prison sentences in the days following the next price crash. Hence an economic crisis that has already gone down in the books as the second worst in U.S. history and which has a good chance of taking over first place in the days following the next price crash, an economic crisis that has already brought on millions of job losses and which is likely to cause millions of failed retirements in coming days.

Not good.

I learned why the entire historical record is relevant from my good friend Jack Bogle. Read his work if you have any doubts.

I learned why honesty is important just from living life on this planet.

Valuation-Informed Indexing is the first HONEST research-backed investing strategy. It has all the advantages of Buy-and-Hold because it is rooted in research, just like Buy-and-Hold. But it avoids the huge disadvantage of Buy-and-Hold by incorporating HONESTY into the mix. VII isn’t a con. VII doesn’t cause economic crises or failed retirements. Valuation-Informed Indexers don’t need to surround themselves with Goon squads to make their case. We really have peer-reviewed research that supports our claims. VII is the real thing, not the marketing gimmick that Buy-and-Hold has become in the years since Bogle made his tragic decision to go into cover-up mode rather than to come clean about what the recent peer-reviewed research actually says about how stock investing works.

The historical record is what keeps us honest. The historical record is our protection against the con men who push smelly Get Rich Quick schemes on us for the purpose of turning a quick buck and who destroy millions of lives in the process. The historical record is where its at. Making HONEST use of the historical record is the future of investing analysis. Everyone in this field will be doing it once prison sentences for you Goons have been announced.

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

My best and warmest wishes to you and yours.

Rob

Valuation-Informed Indexing #318: Price Discipline Is What Makes Markets Work

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I’ve posted Entry #318 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Price Discipline Is What Makes Markets Work.

Juicy Excerpt: I believe that it is the regular, quick feedback that changed my eating behavior. I have always had a sincere intent to avoid foods that make me fat. But you know how we humans do. We rationalize. We say “this one exception won’t make too much of a difference” or “I can do better tomorrow” or whatever. Someday never comes and the weight remains. But the blood glucose reader has been calling me out on my self-deceptions for one year now. If I want that darn machine to report good numbers, I have to avoid the sugar and the carbs. I can fool myself with my lies but I cannot fool that darn machine.

So it is with stock investing. Fail to exercise price discipline (that is, fail to adjust your stock allocation in response to big changes in valuations) and you will not see bad results for 10 years or perhaps even a bit longer. The feedback mechanism is too slow to influence human behavior in an effective way. Most of us practice Buy-and-Hold strategies for years before we pay a big price for it and then of course it is too late.

What if investing advisors discouraged self-destructive investing behaviors in the way that my blood glucose reader discourages me from eating foods that are not good for me? What if there were calculators at every investing site that told investors the true value of their portfolios when valuations are factored in? That would change everything. Investors would no longer be taken in by the happy talk of the Buy-and-Holders. They would stop rooting for price increases that had to be paid for by losses down the road and only get excited by the real ones supported by genuine economic growth (the ones that provide only a boring 6.5 percent real annual return).

“All of Those People Want to Do the Right Thing and Yet All of Them Are Afraid to Do So Because They Fear That What You Goons Have Done to Me You Will Do to Them If They Come Clean. If All of Those People Stuck Together, You Goons Couldn’t Do a Thing to Any of Us. So Long As We Let You Intimidate Us, You Have the Power.”

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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:

Please take care????

No, I am fine.

Instead………..

Please stop lying. Please stop defaming Wade Pfau, Jack Bogle, Robert Shiller, Rick Ferri, Mel Lindauer, John Greany and all the others you continue to bash. Please go get a job and provide for your family.

If you can’t a way to do the above, please get help from a mental health professional because you have a serious problem.

Fama and Shiller were awarded Nobel prizes on the same day. Numerous articles reporting on this noted how odd it was that two people saying opposite things about how stock investing works were both awarded the highest honor. One of the two has to be wrong and the error made by the one who is wrong has done serious harm to all investors who came to believe that the one who is wrong was in fact right.

We need to figure out who is wrong and who is right. To do that, we need to have a national debate. I have great respect for all the people you named above. But each of those people has engaged in behavior that has caused a delay in the launching of that national debate. It’s a terrible thing.

All of those people want to do the right thing and yet all of them are afraid to do so because they fear that what you Goons have done to me you will do to them if they come clean. The only way to get to the other side of the mountain is to go through the mountain. If all of those people stuck together, you Goons couldn’t do a thing to any of us. So long as we let you intimidate us, you have the power. We need to stick together. We all need to assert our right to post honestly re that last 35 years of peer-reviewed research in this field and not yield to any of the intimidation tactics that you Goons dish out.

That’s my sincere take re these terribly important matters in any event. For so long as loving my country constitutes a serious problem for me, I do indeed have a serious problem. It’s not a serious problem that I want to solve. I believe that it will all flip following the next price crash, that at that time it will be you Goons who will have a serious problem. But we will see what happens as it all plays out before us, you know.

I hope that works for you, my old friend.

Rob

“The Buy-and-Holders Have Become Too Embarrassed By Their Mistake to Acknowledge It.”

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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:

Bogle didn’t need to change a thing. You continue to make it seem that Shiller is saying things he really hasn’t said. Instead, you say he is scared or holding back.

Just more of your fantasy world.

Of course you need to keep the fantasy going to cover up. Here you are just piling up lies after lies after lies, telling your poor family that you need to troll the internet all day long to save the world from an economic crisis, all to avoid having to go out and get a job to provide for your family. And all you can do is repeat the crazy claim to your family that you will be getting a $500 million windfall to make up for their years of suffering.

You get to the crux of the issue with this one, Sammy. My strongly held view is that Bogle needs to change EVERYthing he has ever said about stock investing. He got it ALL wrong. Not intentionally, to be sure. But still.

Say that there was an assignment given over the radio to add together the numbers 2, 3, and 8 but the line was bad and people only heard the 2 and the 3 and not the 8. So everyone concluded that the answer was “5.” Then someone got ahold of a recording and played the thing again without the static and determined that the answer really was “13.” But the group that had said “5” became too embarrassed to admit its mistake and continued for decades to insist that the answer really was “5” and then threatened to destroy the career of anyone who said otherwise. That would be a big mess. That’s what happened in our collective efforts to figure out how stock investing works.

The Buy-and-Holders turned stock investing analysis into a numbers exercise. They made something that used to be rooted in opinion and subjectivity into something objective and scientific. By itself that was a huge advance. If only we all were doing today what the Buy-and-Holders at one time said we should be doing, we wouldn’t be living through an economic crisis. But part of the scientific process is learning from one’s mistakes and this the Buy-and-Holders absolutely refuse to do. So the many people who want to give accurate and honest investing advice feel too intimidated by the smear tactics employed by the Buy-and-Holders to speak clearly about what they really know. Not good!

Bogle’s mistake is the biggest mistake ever made in the history of personal finance. Bogle saw Fama’s research showing that short-term timing doesn’t work and jumped to the hasty conclusion that NO form of timing is required. Shiller was the first researcher to check long-term timing. He found that long-term timing ALWAYS works and is ALWAYS 100 percent required. That shouldn’t be even a tiny bit surprising. Long-term timing is price discipline. No market can function without price discipline. But lots of people were fooled by Fama’s research and, like the people who heard the numbers wrong because of a bad radio transmission, they have become too embarrassed by their mistake to acknowledge it. So we still hear people advocating the crazy Buy-and-Hold stuff to this day.

Failing to include the effects of valuations doesn’t cause your numbers to be a little off, Sammy. Valuations is BY FAR the biggest factor affecting stock prices. So those who fail to count valuations get the numbers WILDLY wrong. Every time. The Buy-and-Holders are wrong about retirement planning, they are wrong about asset allocation, they are wrong about risk management, they are wrong about everything. And the only way they can fix their mistake is to admit it. But that’s hard to do after covering it up for 35 years. So they are in a real fix.

That’s my sincere take, in any event. People tell me that I am a meanie for pointing out Bogle’s mistake. I don’t see it that way at all. As I mentioned above, I think of Jack as a friend. If I had destroyed millions of lives as the result of a mistake that I had made, I would want my friends to encourage me to come clean. That’s what I do for Jack, I encourage him to come clean. I see that as an act of charity. It is my view that failing to speak up about the mistake is an act of cowardice, not an act of charity.

I naturally wish you the best of luck in all your future life endeavors, my old friend.

Rob

“It’s the Cover-Up That Is Outrageous, Not My Reporting On It. The Only Way to Bring the Cover-Up to an End Is for People to Report on It. It Is Because Too Many Have Been Afraid to Report on It For So Long That We Are All In the Fix We Are in Today. I View My Reporting On the Cover-Up As a Beautiful and Brave Thing, Journalism At Its Best. I Am Honored and Humbled To Do This Important and Very Difficult Work and Very Proud of the Efforts That I Have Directed to Bringing This Cover-Up To an End.”

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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:

Actually, you only give one side of your deluded story in Valuewalk, yet make those outrageous statents on your own website on an almost daily basis.

By the way, Jack is NOT your good friend. It is just another spin you give to your stories. When you were asked about this a look time ago, you stated you became his friend by reading his books. The “honest” response is that you have never met him in person, not have you ever had a personal conversation. Instead, it is more of your fantasies created while trolling the internet.

It’s the cover-up that is outrageous, not my reporting on it. The only way to bring the cover-up to an end is for people to report on it. It is because too many have been afraid to report on it for so long that we are all in the fix we are in today. I view my reporting on the cover-up as a beautiful and brave thing, journalism at its best. I am honored and humbled to do this important and very difficult work and very proud of the efforts that I have directed to bringing this cover-up to an end.

I focus on substance in my columns here because that is what most people care about. People hate hearing about the process stuff, they absolutely cannot stand it because it so shameful that it embarrasses all of us. But I don’t duck the process stuff at my own site because we need to face up to it and, when we make the decision to do so, we will need a complete record of all that happened. I am providing that at my site.

I definitely think of Jack Bogle as a friend. You are right that I have never met him in person. But I have learned a great deal from him. I have devoted 14 years of my life to developing the Valuation-Informed Indexing concept and it wouldn’t exist without Bogle’s many positive contributions — I would say that the man has had a big influence on me! You Goons often put up comments suggesting that I have some sort of negative take on Bogle and I mention the fact that I think of him as a friend as a way to counter that.

I consider Bogle a friend and I work hard to advance his reputation in every way I can. I think he has earned that as a result of the many years of good work that he has done and so I do what I can to fulfill my responsibility to deliver to the man what he has earned from all of us. It pains me that I have to say that Bogle has been involved in this cover-up. I sweated blood before saying that publicly because it is not a fun thing to do re someone for whom I feel such great respect. Things reached a point at which I had no choice but to go down that road. But I have not forgotten all that Bogle has done for me and for all of us and, if I am true to myself, I never will.

I hope that helps a bit, Sammy. Please take good care.

Rob

Buy-and-Hold Goon to Rob: “Besides Rob Bennett, Is There Anyone That Will Publicly Say That Buy, Hold and Rebalance Is a Con? NOPE? I Think That Says It All.”

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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:

Besides Rob Bennett, is there anyone that will publically say that buy, hold and rebalance is a con? NOPE? I think that says it all.

On the day after the story about this massive cover-up appears on the front page of the New York Times, there will be millions saying it, Anonymous.

This is how cover-ups work. They DELAY the day that the truth gets out. But the tactics that must be used to keep the cover-up going grow increasingly abusive as more and more people learn the realities. When I saw Greaney advancing death threats in August 2002, it became clear to me that this particular cover-up had been going on long before I even came on the scene.

If the realities being covered up are important enough, the cover-up eventually fails. And then there is a flood of information that goes public all at the same time. Shiller showed with peer-reviewed research published in 1981 that there is precisely zero chance that a Buy-and-Hold strategy could ever work for a single long-term investor. Had Bogle come clean immediately, we all would be living better lives today and none of you Goons would be on your way to prison. But once Bogle engaged in a cover-up, a dynamic was set up in which the Wall Street Con Men became desperate that the realities of stock investing not be publicly discussed with the millions of middle-class investors who want to know about them and who very much need to know about them.

I didn’t make this the biggest story in the history of personal finance. All that I did was read Shiller’s book and then explore the implications that logically follow from his “revolutionary” (Shiller’s word) research. Bogle made this a huge story by engaging in a 35-year cover-up. And you Goons made this a huge story by extending the cover-up to the internet, which wasn’t around in the days when Bogle made the decision to engage in a cover-up.

This story has been suppressed for so long that, when it blows up, the explosion will be a nuclear one. We will go from having one guy telling the truth about stock investing to having millions telling the truth about stock investing in the space of one day. Buy-and-Hold dies intellectually 35 years ago. It will die in a practical sense on the day our story is written up on the front page of the New York Times.

Your prison sentence will be announced shortly thereafter. Again, you have no gripe with me. Your gripe is with Bogle. And with your fellow Goons. And with yourself. I did what any man who loves his country is bound by conscience to do. Greaney’s retirement study contains no adjustment for the valuations level that applies on the day the retirement begins. Fact. I told. Good for me. Bad for you that you thought you could lie about it and get away with destroying the millions of middle-class lives that you destroyed by advancing and then “defending” that lie.

I can’t say that I am not sorry for you because I am sorry for you. But I am more sorry for the millions of middle-class investors whose lives you destroyed.

I am sorry for Bogle too. I wish that he had more true friends. A true friend is someone who tells you what you don’t want to hear but need to hear when you screw up big time. Bogle’s friends are like Richard Nixon’s friends. They are people who are concerned not for the man but for the favors they can extract from him by flattering him. Not this boy. Find someone else.

I naturally wish you the best of luck in all your future life endeavors regardless of the length of the prison sentence assigned to you by the members of your jury. My best and warmest wishes to you.

Rob

” You Goons and I Do Not Need To Work This Out Amongst Ourselves. There Are Millions of People Whose Lives Are in the Process of Being Destroyed By Your Massive Act of Financial Fraud. Their Take On All This Is Obviously Going To Change Following the Next Price Crash. And When Their Take Changes, the Way in Which Robert Shiller Expresses Himself Is Going to Change Too. And Then Everything Is Cool.”

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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:

But the Nobel winner who created the research you are basing your strategy off of – insists that his research cannot be used for said strategy.

When your jury is determining the length of your prison sentence, one of the things that it will be taking into consideration is what Shiller says re this subject when he testifies under oath. I am confident that what Shiller says under oath is going to be a lot more supportive of what I have been saying for 14 years than it will be supportive of what you have been saying for 14 years, Laugh.

But we are all going to find out for sure as events play out following the next price crash, no? Can you exercise a little patience? You Goons and I do not need to work this out amongst ourselves. There are millions of people whose lives are in the process of being destroyed by your massive act of financial fraud. Their take on all this is obviously going to change following the next price crash. And when their take changes, the way in which Robert Shiller expresses himself is going to change too. And then everything is cool.

Or so Rob Bennett believes in any event. I certainly possess no power to stop you from believing something different for so long as that is your preference. Let’s see how it plays out in the real world. Fair enough?

My best wishes to you.

Rob

“I Acknowledge That There Are Two Schools of Academic Thought As To How Stock Investing Works. You Do Not. You Engage in Abusive Trickery To Deceive People Into Believing That There Is Only One School of Academic Thought As To How Stock Investing Works. That’s the Fraud Part.”

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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 might want to insert a correction in your post or you might be guilty of fraud.

I’m not guilty of financial fraud, Anonymous.

There’s a difference in how we handle things.

I believe in Valuation-Informed Indexing, which is rooted in the research of a Nobel-prize-winning economist.

You believe in Buy-and-Hold, which is rooted in the research of a Nobel-prize-winning economist.

I acknowledge that there are two schools of academic thought as to how stock investing works.

You do not. You engage in abusive trickery to deceive people into believing that there is only one school of academic thought as to how stock investing works.

That’s the fraud part. That’s the prison part.

I don’t do that and I have zero intention of ever doing that. Not in 14 years. Not in 14 billion years.

It’s a very, very, very big difference and a very, very, very important difference.

If I turn out to be wrong, I will have hurt no one because everyone who was persuaded that Valuation-Informed Indexing is the best strategy knew that Buy-and-Hold was an alternate school of thought and decided for himself or herself which school of thought to follow.

If you turn out to be wrong, you will have hurt millions in very serious ways because you have persuaded people to follow Buy-and-Hold that do not even know that there is 35 years of peer-reviewed research throwing doubt on the merit of Buy-and-Hold. Those people have a perfect right and responsibility to seek compensation for their losses from you and from all other Buy-and-Holders who have engaged in trickery. In cases like your own in which there has been ongoing abusive behavior that has hurt millions, those people have a perfect right and responsibility to insist that the laws against financial fraud be enforced to insure that you are put away in prison for a long time.

A society has a right to defend itself against predators seeking to bury it. Millions of people are today unemployed as a result of the Buy-and-Hold Crisis and millions more will be suffering failed retirements in days to come if the crisis continues. I want no part of the cover-up except to play the lead role in EXPOSING it and thereby helping the citizens of this country get about the business of rebuilding the economic and political systems that those posting in “defense” of Mel Lindauer and John Greaney and Jack Bogle have been so intent on destroying for their personal profit (whether financial or psychic) for 14 years now.

I hope that helps a bit, my old friend.

Rob

Rob to Buy-and-Hold Goon Posting at the Value Walk Site: “We Need As a Society to Work Up the Courage to Take ACTION re All That Has Gone Down….Your Motive Is Not to Bring Things to a Good Conclusion But Simply to Stir Up Trouble.”

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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:

“Bogle got this one wrong”

………………….according to Rob Bennett the investment expert, who also states that Jack Bogle is more of a con man versus Bernie Madoff and also that Jack Bogle is going to prison.

I’ve said those things, Sammy. But if you were trying to be fair you would also note that I have said that Bogle is a great man and that I have learned a great deal from him and that I rank him as the second most important investing advisor in history (Shiller being the first).

You are trying to stir up trouble by pointing out things that I have said about my good friend Jack that sound harsh to people who are not aware of all that has gone on over the past 14 years. The financial fraud stuff IS shocking and I don’t object to you pointing it out — people certainly need to know about it and we need as a society to work up the courage to take ACTION re all that has gone down and thereby put the ugly stuff behind us and move on to all the wonderful stuff that has been opened to us.

But I do object to the one-sidedness of your comment. We have had many interactions over the years and so you of course know how deep my respect and affection for John Bogle goes. Why not tell that part of the story as well? You don’t do it because your motive is not to bring things to a good conclusion but simply to stir up trouble. That’s very unfortunate stuff.

Bogle is a Hero to the Middle-Class Investor. I’ve said that since the first day and that will always remain true. There would be no Valuation-Informed Indexing without Jack Bogle’s many positive contributions. And, yes, he has committed act act of financial fraud 500 times bigger than what Bernie Madoff did by continuing to promote Buy-and-Hold for 35 years after Shiller showed in peer-reviewed research that valuations affect long-term returns and by making use of abusive tactics to keep people from spreading the word re the many far-reaching implications of Shiller’s “revolutionary” (his word) research.

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

Rob

Valuation-Informed Indexing #317: Bogle Believes in One Version of “Reversion to the Mean” and Valuation-Informed Indexers Believe in Another

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I’ve posted Entry #317 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Bogle Believes in One Version of “Reversion to the Mean” and Valuation-Informed Indexers Believe in Another.

Juicy Excerpt:  Say that you flip a coin 100 times and it comes up heads in 60 of those 100 tosses. Bogle’s understanding of “Reversion to the Mean” is that it is likely that, if you toss the coin another 100 times, the percentage of total times that it comes up heads is likely to be something less than 60 percent. This is inarguably so. This is indeed an Iron Law. This understanding of the phrase is consistent with a belief in an efficient market. A market in which prices follow a random walk will for some time-periods produce results better than the norm but over longer periods of time will produce results that come closer and closer to matching the average long-term return.

The average high temperature in New York City is 60 degrees. The average high temperature in August is 81. Say that you checked the high temperature for every day in August and found that it exceeded the average high on every one of those days. Using Bogle’s understanding of the phrase “Reversion to the Mean,” you would expect to see a total average temperature of something closer to 60 after checking the average high for every day in September. And indeed you would probably see that; the average high in September is 74. But is what you are seeing the same phenomenon that you were seeing with the flipping of the coins?

It is not at all the same phenomenon. Reversion to the Mean as Bogle understands it is an uncaused statistical evening-out process. Reversion to the Mean as Valuation-Informed Indexers understand it is a caused phenomenon, similar to the phenomenon in which temperature readings in August tend to be higher than temperature readings in September. Stock returns are higher in time-periods following the recording of high valuations because it is the purpose of markets to get prices right and so in the long term valuation are always brought back down to fair-value levels. Market prices do not fall in a random-walk pattern in the long term. They move in the direction of fair value for a reason.