A Rich Life

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

Jaime Tardy to Rob: “I Would Challenge You to Forget the Past on All This. Because Everything Comes Back to the Negativity and Talking About Your Story. I Don’t Think We Should Focus on That at All. They Need to Know, Like and Trust YOU Before You Can Throw the Information at Them. Otherwise, They Distrust YOU Because Your View Is So Contrarian.”

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Set forth below is the text of an e-mail sent to me by Jaime Tardy, owner of the EventualMillionaire.com site, on November 4, 2013:

This does provide a summary for sure 🙂 Though most of them are from years ago – are the same goons still around doing things? Or have you given up going to other sites now since you are banned at others?

I would challenge you to forget the past on all of this.

Because everything comes back to the negativity and talking about your story.

I don’t think we should focus on that at all.

I would first really hone in on your target market (one that doesn’t include the goons of course!)
If it’s a general average guy- maybe you do guest posts where you do a generic post on a site like GetRichSlowly and then compel them to come to your site.

I would go through your site- and redo it (which I know you are already working on!) make sure it would be as transparent as possible. Get more video content on your site, and have people identify with YOU as a person.

THEN I would bring out the info.

They need to know, like and trust YOU before you can throw the information at them.

Otherwise they distrust YOU, since your view is so contrarian.

So I’d walk you through that process:
1. target exactly WHO (and figure out where they are)
2. Set the foundation on your site to get people to trust YOU
3. Soft sell off your site to get people to come in
4. Then slowly introduce the concepts that are contrarian.

Does all that make sense?

🙂

“The Lead Goons Meet Here Each Day. They Are Supported (Implicitly) By Jack Bogle and Many Other Big Names in the Field. They Have Never Been Banned From Any Major Site No Matter How Abusive Their Tactics. What They Say Is at Odds With the Academic Research but Popular (They Are Telling People That Their Retirement Portfolios Are Bigger Than They Are).”

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Set forth below is the text of an e-mail that I sent to Jaime Tardy, owner of the EventualMillionaie.com site, on October 30, 2013:

Jaime:

This is a small addendum to the response I sent earlier today.

I reread your message to me. On second read, it sounded like you were seeking examples of the haters engaging in their hating. For that, I would refer you to this site:

http://www.s152957355.onlinehome.us/cgi-bin/yabb2/YaBB.pl

This site is owned by the fellow who got the numbers wrong in his retirement study. The lead
Goons meet here each day. They attack blogs that permit me to run Guest Blogs or discussion
boards that permit me or supporters of me to post. They are supported (implicitly) by Jack
Bogle and many other big names in the field, They have never been banned from any
major site no matter how abusive their tactics. What they say is at odds with the academic
research but popular (they are telling people that their retirement portfolios are bigger than
they are).

This is an article at my site where I set forth 101 comments of my fellow community members
expressing a desire that honest posting be permitted:

http://www.passionsaving.com/investing-discussion-boards.html

I hope that helps a bit.

Rob

“The Main Goal Is To Remove the Social Stigma That Stops People From Talking About the Implications of Shiller’s Findings. I Will Know That I Have Won When I Can Wake Up in the Morning and Post at Any Site on the Internet With No Fear That I Will Be Attacked for Anything I Say About Investing That I Truly Believe. I of Course Don’t Want That Just for Me, I Want It for Everyone. When We Get There, the Money Will Naturally Follow Because There Is a Huge Market for These Ideas.”

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Set forth below is the text of an e-mail that I sent to Jaime Tardy, owner of the EventualMillionaire.com site, on October 30, 2013:

Jaime:

It’s good to hear about the cast. When the crutches are gone, there will be a few days when ordinary walking will be exciting!

I of course understand that my story is “out there.” That’s why I think I am going to win in the end. It’s so crazy that it just cannot continue. The other side of the story is that I have been saying that for 11 years now.

I am always trying to come up with analogies to help people understand the craziness at the heart of this. The best that I have come up with is shocking but I think it helps point to the core realities. Prior to the 1960s, people with black skin could not drink out of the same water fountains as people with white skin in many Southern towns. Taken in isolation, that’s a pretty darn hard-to-believe reality, is it not? But it really is true. How did this happen? Were all the people who lived in Southern towns racist? They were not. LOTS of people opposed the reality of the time. The reality had been in place so long that they didn’t think it could be changed. So the practical thing was to keep your mouth shut. That of course made the problem worse! A society cannot fix a problem until there are a large number willing to say out loud that it is indeed a problem.

That’s the issue here. The entire financial industry was built around the research that was once thought to support the Buy-and-Hold concept. Thousands of books are rooted in these ideas. Thousands of careers have been built around these ideas. The idea of changing the core idea on which all investing knowledge has been built is unthinkable to most people. Yet the evidence that that core idea is wrong
is now a mountain. If we challenge the idea, it will fall quickly. That would be a wonderful thing. The ideas that work would make us all a much richer and freer people. But we cannot get from where we are to where we all want to be without saying that lots of powerful and wealthy and smart and good and hard-working people got an important point wrong. So we have adopted a Social Stigma against speaking
such truths out loud. I have violated that Social Stigma. Many, many times. For good or for ill, that’s the Rob Bennett story. I violate the Social Stigma WITHOUT APOLOGY.

The haters don’t have legitimate grounds to sue. But the bottom-line reality is that anyone can sue anyone for anything and the person with more money often wins. The haters of course have zero power on their own. But they are supported by people with LOTS of money and power and influence. The fear that the site owner has is that he will be sued and his business will be destroyed even though he is
in the right. These fears are not entirely off base. When the haters vowed to get me banned from the Motley Fool site, I thought there was zero chance they could pull that off. The owner of the site had written one of the blurbs that is on the back cover of my book on saving strategies. But they pulled if off. It took a year. But ultimately I was banned. And the editors at Motley Fool nominated the fellow who threatened to kill my wife and children for their Poster of the Year award.

You’re asking a great question about women and data. That question gets to the heart of things. There’s a quote from Shiller in which he says something to the effect of: “Lots of people in this field don’t take behavioral finance seriously because it is rooted in subjective stuff that they consider embarrassing and not worthy of consideration by serious professionals.” I agree with the Buy-and-Holders on every point but one. I say valuations matter, they say they don’t. Mispricing (overvaluation and undervaluation) is ALWAYS the produce of emotion. Fama (the researcher who started Buy-and-Hold) says that investors always act in their best interest. This is 100 percent logical. It is also 100 percent false. Investors always act in their best interest SO LONG AS THEY ARE NOT INFLUENCED BY EMOTION.

Shiller created a metric (P/E10) that tells us how emotional the market is at any given moment in time. It is emotion (overvaluation) that makes stock investing risky. So Shiller gave us a tool to eliminate investing risk. This is the most important advance ever. The problem is that all knowledge in this field outside of Shiller is built on a premise that investors are ALWAYS 100 percent rational in their investing choices.  To let in the good stuff, you would have to admit that everything else is rooted in error. They cannot bear to do it. They see the contradictions. They rationalize them. They have too much invested in the old ideas to even discuss whether Shiller might be right.

They DO acknowledge Shiller’s greatness. No one disputes that. But they patronize his ideas. They say “oh, that’s good stuff” and then go right back to urging strategies that are in total conflict with what Shiller says. My idea was to explore the IMPLICATIONS of Shiller’s ideas. I go one small step beyond what Shiller says in actual words. No one else has ever done that. Even Shiller doesn’t do this. Shiller makes it a point to bury his most amazing findings. He hints at them. But he presents them in a way that permits most readers to miss the most important point. Shiller tries to stay out of trouble. I SEEK OUT trouble. Not in any negative way. But I am always  trying to point to new implications of Shiller’s work because I want knowledge to expand and I believe that we can add to our knowledge only by talking these things over.

Women investors like safety more than men investors. Men are more into taking the chances necessary to prove themselves. So my stuff should have great appeal to women. There are search terms like “safe investing” that get huge traffic. I should own those words. I am offering a simple and safe approach that is supported by academic research. It is a dream come true for millions of investors. But the sorts of people who are looking for safety do not want to take investing advice from some guy on the internet. They want to see that the experts endorse my work. They want to see that lots of other people see value in my work. This is why the Goons want to cut me off from all sources of authority. Their standard response to me is: “We will leave you alone if you agree to post only at your own site.” So long as I post only at my
own site, I get nowhere. As soon as I go off my site, I pose a threat to them.

Todd is taking a middle ground. He agrees with me on the substantive points. He of course doesn’t post only at his own site. But he does avoid saying things that pose a threat to those promoting Buy-and-Hold strategies. He appeals to sophisticated investors who don’t take Buy-and-Hold seriously. I do not write for sophisticated investors. I write for average middle-class people. Buy-and-Hold is all they have ever heard. I am saying that those people have a right to the same good advice that is available to people with more money and sophistication. I am aiming for a much larger readership than Todd’s but one that is harder to win because they don’t have the knowledge base to see the merit of my points quickly. If I were permitted to post at large boards unmolested, I would win all these people over in time as they got to know me and to see how the different points fit together. This is why I represent such a big threat. I am destroying the marketing claim that the Buy-and-Holders have used to great advantage for a long time (that their strategy is rooted in the findings of peer-reviewed academic research).

I agree that most women are not driven by data. But they ARE driven by a desire for safety and for following common-sense ideas.  My stuff IS backed by data. But is it backed by ALL the data, including the data rooted in non-emotional factors AND the data rooted in emotional factors (P/E10). My approach is holistic. It COMBINES the two types of data. The Buy-and-Holders HATE emotion. I too
am saying that is is a bad idea to let emotion control you. Our approaches to the problem are very different. They say that emotion is so awful that we must never discuss it. I say that this leads to ruin in time. Ignoring emotion makes it stronger. I say that the way to cope with negative investing emotions is to CONFRONT them, to get things out in the open. Considering the P/E10 factor lets us get emotions under control so they don’t hurt us. By talking about emotion we make it inconsequential. Women understand this point better than men as a rule.

The main goal is not to generate revenue. That is an important secondary goal. The main goal is to remove the Social Stigma that stops people from talking about the implications of Shiller’s findings. I will know that I have won when I can wake up in the morning and post at any site on the internet with no fear that I will be attacked for anything I say about investing that I truly believe. I of course don’t want that just for me, I want it for everyone. When we get there, the money will naturally follow because there
is a huge market for these ideas (I know this from the reactions I have generated for 11 years now) and my site explores these ideas in far more depth than any other site on the internet.

I don’t object to rebranding and I don’t get too excited about it. I am not good at marketing. So I have zero doubt that I have done things wrong in that department. That said, I was AMAZINGLY popular in the days when I wrote about saving strategies. So I was able to be successful despite any marketing weaknesses. Better marketing may well be part of the answer. But the Social Stigma is my paramount concern.

Dealing with a Social Stigma could be viewed as a marketing concern. But it is a  uniquely difficult and complicated one. I am trying to sell people something that they very much want but cannot just yet
acknowledge that they want. There should be Google search terms like “What’s Wrong with Buy-and-Hold?” I should rule those terms. But most of the people who are my potential customers are today searching for excessively vague terms like “safe investing” or “how to invest” or something like that. People don’t know what they don’t know. They don’t know that the people who seem to be trying to help them are really hurting them. And the people who are hurting them don’t know that they are hurting them either. This is an idea that is close to taking off that has not quite taken off yet.

I am all for doing video. Anything that forms an emotional connection is good. I want to have articles as my support for the step-by=step exploration of the ideas. But I don’t believe that too many people care about words anymore. So I am 100 percent okay with focusing on audio or video or Twitter or whatever to get the ideas out. I personally love words. But I don’t think they always get the job done in today’s world.

Thanks for asking intelligent questions. I regret that the answers are so long.

Here’s a Guest Post that I did at the Free From Broke Site:

http://freefrombroke.com/value-informed-indexing-less-risky-way-to-invest-in-stocks-buy-and-hold-investing/

There are no Goon posts on this thread. They must have been sleeping in that day! (or perhaps Glen took care of them). The questions and comments are intelligent. I think these comments show the potential of the idea.

No one really ran with it as a result of this Guest Blog Entry. But I think that we would see people running with it if a number of threads as intelligent as this appeared in the Blogosphere. The comments that appear here suggest that there are people who think this is worth talking about.

This is the article that I wrote about how the Goons compromised an academic researcher who spent 16
months working with me on research that we had published in a peer-reviewed journal:

http://arichlife.passionsaving.com/the-buy-and-hold-crisis/academic-researcher-silenced-by-threats-to-get-him-fired-from-his-job-after-showing-dangers-of-buy-and-hold-investing-strategies/

I have had a number of long-time Buy-and-Holders tell me that this research caused them to question their beliefs. So I believe that getting this research written up in the New York Times or the Wall Street Journal is the key to making things  happen. The Goons wanted to silence Wade so that that would not happen. Wade has more pull with the New York Times because he has a Ph.D. in Economics from Princeton and because he makes his living writing research in this field and because he has won awards and all this sort of thing.

Please look at the quotes from Wade at the bottom. He says “Yes, Virginia, Valuation-Informed Indexing works!” and “the market timer enjoys a far less risky strategy!” and “the findings for market timing are so robust that it hardly matters how we do it!!” Those are amazing comments for something with a Ph.D. in Economics from Princeton to be putting forward. Wade should have been taught this stuff as part of his Ph.D. program. He obviously wasn’t. That reality points both to the huge potential (we are changing the history of investing analysis) and to the huge threat that this represents to those promoting the old ideas.

This is the text of my correspondence with Rob Arnott, who is one of the biggest names in the field:

Former Financial Analysts Journal Editor Rob Arnott to Rob Bennett: “I’ve Had Similar Experiences to Those You Describe. My Work Has Often Triggered Overt Hostility from the Guardians of the Status Quo. I’ve Also Had Difficulties Getting Some of My More Controversial Ideas Published. And the Journals That Published Some of My More Controversial Papers Did Get Hate Mail.”

Rob Bennett to Former Financial Analysts Journal Editor Rob Arnott: “The Illustrations You Offer of the Problem of Buy-and-Hold Dogmatism Are Shocking. I Know From My Discussions With Financial Planners and Bloggers That Many Others Have Had Similar Experiences. This Must Stop. I Feel More of a Sense of Urgency re This Matter. My Focus Is On the Public Policy Implications. We Are Living Through A Public Tragedy of Epic Proportions.”

Former Financial Analysts Journal Editor Rob Arnott to Rob Bennett: “I’m Too Embroiled in My Own Controversies to Magnify Them Further With Collaboration. Your Ideas [About Valuation-Informed Indexing] Are Sound.”

 

Arnott says that he has experienced “hostility” from “guardians of the status quo.” People who were doing research on his ideas were told that they would be doing harm to their careers to do this sort of work. The difference between Arnott and me is that I do my work on the internet and the internet is so new a medium that there is no police force. The same basic phenomenon applies both in the real world and on the internet. If things reach a point where honest discussion is permitted on the internet, that will create the pressure we need to see for honest posting to be permitted in the real world as well. Then it’s over. Then we (all — including the Buy-and-Holders!) win!

Enough!

Thanks much for your kind interest in this strange (but compelling!) saga.

Rob

Jaime Tardy to Rob: “I Think There Is a Disconnect Between Your Site and YOU. You are Very Friendly and Approachable and Almost Unbiased (Even Though You May Have a Bent of Course!) But I Don’t Get That From the Site. I’ve Seen Haters But Not This Much As You Say.”

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Set forth below is the text of an e-mail sent to me by Jaime Tardy, owner of the EventualMillionaire.com site, on October 29, 2013:

So on what grounds can the haters sue a site for publishing a post of yours? Also why the aim on women? Just curious since it’s a very data driven point that you are trying to make and many women aren’t driven by data (I am, but most are not!)

I think there is a disconnect (as I think you know!) between your site, and YOU. You are very friendly and approachable, and almost unbiased (even though you have a bent of course!) but I don’t get that from the site.

Can you send me some of the specific guest posts you have had so I can see an example?
I mean, I’ve seen haters, but not this much as you say, I’d love to wrap my head around it a bit more!

I think rebranding, and maybe even using video to portray you more is extremely important.
And the traffic and conversion strategy might be different because of the haters, but maybe not! I’d have to see some examples to really know for certain.

Does that make sense?

I’d also love to figure out what the main goals are – if it’s to generate revenue, like I said before you don’t need a TON of people if you want to coach a handful of them. (and if Todd is saying similar things and not having this level of hate, that’s good to know too!!)

Cast is off! Walking cast is on, even though I’m not actually walking without crutches yet!
A pain still, but getting better!

Warmest,
-Jaime

“I Am Informal But I Am Hard-Working. I See Myself As an Advocate of the Average Middle-Class Person. My Writing Certainly Conveys Idealism. I Very Much Want to Convey Friendliness, Which Is Naturally a Part of My Persona. I Worry That the Conflict That Surrounds Discussions of Valuation-Informed Indexing Subtracts From the Feeling of Friendliness. But I See Myself As a Friendly REPORTER and I Feel That Reporters Cannot Be ONLY Friendly — They Must Also Be Fighters and Have the Courage to Stand Up to Power.”

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Set forth below is the text of an e-mail that I sent to Jaime Tardy, owner of the EventualMillionaire.com site, on October 25, 2013:

Jaime:

It’s nice to hear from you. Yes, that makes sense.

The average person believes that valuations matter. Almost everyone agrees with me on the principle. But the average person does not think it is even remotely possible that valuations matter as much
as I say they do. My belief is that the reason why is that they have never run the numbers. I didn’t believe that valuations could matter that much either before I did the math.

When I wrote my May 13, 2002, post questioning the safe withdrawal rate number, the Buy-and-Holders were saying that the SWR is 4 percent. I said I thought that valuations would have pushed it lower but I did not know how low. Someone asked me to guess and I said that I thought it was perhaps 3 percent. Then I joined up with John Walter Russell (an engineer with statistics training). He showed that the SWR in January 2000 was 1.6 percent. This is a shocking number. An asset class that provided zero growth would provide an SWR of 3.3 percent. I think that the problem is that Buy-and-Hold taught us not to pay attention to valuations, so the problem just kept getting worse and worse. It is similar to what happens to people who don’t have a budget. They end up deep in debt and cannot understand why. You need to keep track or things get out of hand over time.

Yes, I have been able to convince others and that goes back to the very first day. Hundreds of people at Motley Fool said in 2002 that the discussion I started was the best we ever had there. And that
remains true today when I do guest blog entries at large sites — I usually get a number of people who say highly positive things. I have never lacked for positive feedback. The problem is that the
intensity of the Haters is 50 times greater than that of the Normals. The Normals would like to participate in or hear the discussion. But they have close to zero tolerance for the angry, nasty stuff. And
I have never found a site administrator willing to take effective action against the Haters. So the Haters always win. The most extreme case was when I had a guest blog for a site where the owner said
I was exactly what he was looking for — he liked controversial stuff. The Haters threatened to sue him and he folded.

The site is going through a redesign. The logo that I have at the top of the page on the left-hand side is intended to reflect my view of the positioning/branding of the site. The colors are a bit on the
feminine side. I believe that I appeal more to women than to men. The color and design are certainly not stuffy (in contrast to many personal finance sites). I am trying to convey an impression that “this place is informal and non-intimidating,” that I don’t use jargon and that I keep things simple. The slogan used (and the tons of material provided) is intended to convey intensity. I am informal but I am hard-working. I see myself as an advocate of the average middle-class person. My writing certainly conveys idealism. I very much want to convey friendliness, which is naturally a part of my persona. I worry that the conflict that surrounds discussions of Valuation-Informed Indexing subtracts from the feeling of friendliness. But I see myself as a friendly REPORTER and I feel that reporters cannot be ONLY friendly — they must also be fighters and have the courage to stand up to power. So I have regretfully accepted that the site does not have as much of a friendly feeling as I very much want it to have. The writing is heavy on consideration of emotional factors.

I am a believer in Behavioral Finance. That is the innovation here. Even the stuff that discusses negative (non-friendly) factors discuss EMOTIONS. One of the problems in personal finance is that people try
to reduce it to numbers and leave out emotions. I take it in the other direction in a big way. Emotional stuff is common in many other fields (discussion of movies or politics or health). The intensely emotional
stuff that I discuss is Taboo in the personal finance field today.

Please just reply when there is time. Good luck with the cast removal!

Rob

Jaime Tardy to Rob: “What Is the Number One Objection From the Average Person – Not One of the Haters?”

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Set forth below is the text of an e-mail that I sent to Jaime Hardy, owner of the EventualMillionaire.com site, on October 24, 2013, followed by her response:

Jaime:

This is Rob Bennett, at “A Rich Life.” We spoke at FinCon13 re the possibility of me hiring you as a coach. I hope the rest of the conference was successful for you. I much enjoyed giving the talk I gave at the Ignite sessions. That was a trip. And I think I did a good job of getting the essence of my story down to five minutes!

My recollection is that there were three questions you wanted to ask of me before deciding whether it made sense to proceed. Please send the three questions when you get a chance. I don’t know whether this idea makes sense or not. But I would like to explore the possibility a bit more in an effort to find out.

My warmest wishes to you.

Rob

 

Hi Rob!

So great to connect online.

Here are some questions to answer and then I’ll give you some actions to try. Then we can chat in later November when I have a spot for coaching open up. Make sense?

What is the number one objection from the average person – not one of the haters?

Have you been able to convince others to see your side? When?

What do you think your positioning/branding is currently on your current site?

Thanks Rob! Can’t wait to hear your answers.

My email inbox is a bit too full right now – so I’ll do my best for a speedy reply. Answering this email from the doctors office about to get my cast off!

Have an amazing day!
Warmest,
Jaime

“Price Discipline is the Key to Success in Every Market That Has Ever Existed. It Is the Buy-and-Holders Who Are Making the Extraordinary (and Frankly, Preposterous) Claim That the Stock Market Is the One Exception to the Otherwise Universal Rule. The Burden of Proof Is on Those Making the Extraordinary and Preposterous Claim, Not on Those Suggesting That What Common Sense Says Must Be So and What the Entire Historical Record Confirms Is So Just Might in Fact Really Be So.”

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

Rob, you are the one claiming to have a superior system. The onus is on you to prove that, not on me to disprove it. “Take price into consideration” using “common sense” is not an actionable strategy. It’s “buy low sell high” by gut feel. I see now that VII’s vagueness is its key feature, not a bug. If it can’t be defined, it can’t be proven wrong.

I am not the one saying that Valuation-Informed Indexing is superior to Buy-and-Hold. It is the entire historical record that says that. The record shows that for 145 years running VII has provided FAR higher returns at GREATLY reduced risk. I just tell people what the data shows, nothing more and nothing less.

There is no onus on me. Price discipline is the key to success in every market that has ever existed. It is the Buy-and-Holders who are making the extraordinary (and frankly, preposterous) claim that the stock market is the one exception to the otherwise universal rule. The burden of proof is on those making the extraordinary and preposterous claim, not on those suggesting that what common sense says must be so and what the entire historical record confirms is so just might in fact really be so.

When I refuse to provide a “system” by which to exercise price discipline, I am merely doing what the peer-reviewed research shows must be done for price discipline to work in the real world. Jack Bogle is the lead advocate of Buy-and-Hold. He has never set forth a “system” that applies with perfect precision to every investor. Bogle says that investors should take their risk tolerance into consideration when setting their stock allocations. He is right to say that. That’s what common sense says must be done. I do the same.

There is no one stock allocation that will work for every investor in a Buy-and-Hold world and there is one stock allocation that will work for every investor in a Valuation-Informed Indexing world. Those who demand precise “systems” that apply in exactly the same way in every possible circumstance are revealing their disdain for the peer-reviewed research when they do so. I like the idea of using the peer-reviewed research for guidance (I am grateful to my friend Jack Bogle for persuading me of the merit of this idea). I reject the idea that investors should adopt “systems” that the research shows cannot possibly work solely because a group of abusive internet goons demand this of them. Call me madcap.

Wade Pfau and I co-authored peer-reviewed research showing that VII has been far superior to BH for 145 years running now. The response of you Goons was to threaten to send defamatory e-mails to Wade’s employer in an effort to get him fired from his job unless he agreed to stop spreading the word about this research. That tells the tale about the level of confidence you hold for the Buy-and-Hold “strategy.”

The VII strategy has never been proven wrong by any fair-minded person. You Goons have pretended to have proven it wrong by applying the ideas in absurd ways that everyone who has ever endorsed the idea have rejected since the first time they endorsed it. Any idea can be “proven” wrong by a mind determined to prove it wrong. Every test that has been done by a reasonably fair-minded person (including many who were once ardent Buy-and-Holders, like myself) has shown VII to be far superior. That’s good enough for me.

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

Rob

Buy-and-Hold Goon to Rob: “What Circumstance Would Finally Lead You to Conclude That You in Fact Are Wrong?”

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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:

Then under what circumstance would finally lead you to conclude that you, in fact, are wrong? If (as I suspect) you can’t answer that, then saying “it’s possible that I am wrong” is nothing but false humility.

I would need to see peer-reviewed research supporting the idea that there is no need for investors to practice price discipline when buying stocks. That is, research showing that staying at the same stock allocation at all times can work in the long term.

It never has. Not once in 145 years. I find it impossible to believe that that’s a coincidence. In a theoretical sense, anything is possible. It might be that the moon really is made of green cheese. But that seems so remote a possibility that I cannot imagine putting my name to a statement saying that that is so. I would need to see some sort of scientific evidence to believe that the moon is truly made of green cheese. There’s a lot of intellectual resistance to overcome there. That’s how I feel about Buy-and-Hold. I find the idea that price discipline is not required to be preposterous, insanely far-fetched. But if I saw scientific evidence, that could bring me around.

When I say that I could be wrong, it’s not false humility, it’s a position that I have come to as the result of life experience. There was a thing that happened a number of months back with my boy Timothy. We were playing a card game (Dominion) and a question re the application of an obscure rule came up. Neither of us wanted to stop in the middle of the game to check the rulebook but we both were sure of our positions. He agreed to go with what I believed and then we checked the rulebook after the game. It turned out that his understanding of the rule was the proper one. I was amazed. I had been sure that I was right. But I wasn’t. That left an impression on me.

That sort of thing of course happens all the time with all of us. Humans are vulnerable creatures. We are inclined to have too much confidence in our beliefs because it is scary to not be sure about things that are more important to us than the rules for card games. How many people get divorced? They build their entire lives around their love for this one particular person. They bring children into the world with that person. They move to a different part of the country to make that person happy. They take on financial obligations that they would never dream of taking on but for their love of that person. And then they wake up one day to conclude that the person was not the person they thought he or she was. How could they be proven wrong about a matter so important to them, about a matter re which they were so sure?

It happens. Humans get things wrong all the time. Our political system and our economic system were built with an understanding of this reality in mind. Our systems are built so that mistakes can in time be discovered and corrected. This is why our systems are so dynamic, it is why our way of life is in many ways superior to the ways of life delivered by less open and less flexible systems. I love my country. I love the dynamism of our political and economic systems.

It’s important that we get our understanding of how stock investing works right. A lot is riding on it. Paradoxically, it is because these matters are so important that the Buy-and-Holders are so reluctant to acknowledge the mistake that the peer-reviewed research in this field revealed 35 years ago. The Buy-and-Holders cannot bear to acknowledge that the mistake that they made 50 years ago has destroyed millions of lives. They intended to help people and instead they destroyed millions of lives. They just cannot accept this reality.

I feel that as a friend of the Buy-and-Holders it is my job to help them accept that they made a mistake, or at the very bare minimum to at least accept the POSSIBILITY that they made a mistake. Once they accept the possibility, we are back to normal business and over time things will become clearer and Buy-and-Hold will either be affirmed or rejected. That’s the way things are supposed to work in our country.

Because these matters are of such great importance, we have as a society not permitted the process by which mistakes are corrected over time to proceed in this particular case. People don’t point out the contradictions in the Buy-and-Hold concept because they know that their careers will be destroyed if they do so in an effective manner. So this awful cover-up that is killing us all continues.

Deep in their hearts that not what the Buy-and-Holders want. Deep in their hearts the Buy-and-Holders want what we all want. We all just need to work up the courage and love that we need to evidence to get past this obstacle standing in our path to the future and thereby put everything on a better track. We need to persuade Jack Bogle to give a speech in which he says “I Was Wrong” (or at the very bare minimum “I’m Not Sure”) and then everything changes. No one would feel intimidated into silence from that day forward. Everyone will be saying what he or she truly believes from that day forward and working together in pursuit of a common purpose we will be able to take things to a better place.

I believe that I could be wrong, Sammy. I don’t believe that I am wrong. But I believe that I could be. Experience has taught me that lesson. There have been occasions when I was as sure as sure can be about something and later it turned out that I was wrong. I need to keep that in mind when I put forward statements re what I BELIEVE about how stock investing works.

So does Jack Bogle.

When Jack realizes that he is human just like all the rest of us and capable of making mistakes just like all the rest of us, we all start moving forward at an amazing pace. That’s when things start changing for the better in a very big way.

I look forward to the day when we are all working together to make that happen. We have achieved huge advances over the past 35 years. We should be celebrating them, not trying to intimidate the thousands of good people who want to share what they have learned about an important subject into silence.

My take.

Rob

Buy-and-Hold Goon to Rob: “When You Are Commonly Banned on the Boards, It Should Be a Wake-Up Call That You Are Doing Something Wrong.”

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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:

When you are commonly banned on the boards, it should be a wake up call that you are doing something wrong.

Well, I’ve been banned at many places, Sammy. That one is beyond dispute.

And this reality signifies something. We are in complete agreement re that one too.

We differ on what it means.

You say that it signifies that I am doing something wrong.

I say that it signifies that there’s something seriously wrong with Buy-and-Hold.

Time will tell the tale.

Rob

Valuation-Informed Indexing #302: It Can Take 20 Years for Sound Long-Term Investing Strategies to Pay Off

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I’ve posted Entry #302 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called It Can Take 20 Years for Sound Long-Term Investing Strategies to Pay Off.

Juicy Excerpt: In short, the Buy-and-Hold investor has a small chance of being ahead by a small amount at the end of 30 years while also having a large chance of being behind by a large amount at the end of 30 years. I think it is fair to say that on a risk-adjusted basis, practicing price discipline when buying stocks is always the superior choice.