A Rich Life

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

Valuation-Informed Indexing #301: Most Investing Strategies Perform Differently Over Different Time-Periods

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I’ve posted Entry #301 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Most Investing Strategies Perform Differently Over Different Time-Periods.

Juicy Excerpt: Another important feature of the calculator is that it reports results at six time-periods: (1) five years; (2) ten years; (3) fifteen years; (4) twenty years; (5) twenty-five years; and (6) thirty years. Too much of today’s investing commentary is rooted in a belief that one strategy is superior for all time-periods. This is often not the case. A strategy that is likely to work well for five years may be likely to work poorly 20 years out. Investors need to know what long-term risks they are taking on by following a strategy that may well make them happy enough for five or ten years. Some strategies work well at all time-periods but are only a small bit superior in the early years and then become far superior only over a long period of time. Investors are more likely to be able to exercise patience if they know in advance that that is how things are likely to play out.

Valuation-Informed Indexing #303: It’s a Mistake to Avoid the Risk of Stocks But It’s Also a Mistake to Fail to Temper That Risk By Exercising Price Discipline

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I’ve posted Entry #303 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called It’s a Mistake to Avoid the Risk of Stocks But It’s Also a Mistake to Fail to Mitigate that Risk by Exercising Price Discipline.

Juicy Excerpt: Please note how the change from a 20-percent stock allocation to a 50-percent stock allocation brought on gains of about $100,000 and the change from a 50-percent stock allocation to an 80-percent stock allocation brought on gains of about $100,000 while the change from a fixed 80-percent stock allocation to a valuation-adjusted allocation brought on gains of almost $150,000. Increasing one’s stock allocation is a big plus in the long run. But switching from a Buy-and-Hold approach to a valuation-informed approach is an even bigger plus. The same general pattern applied in the first run but in that case the relative benefit that resulted from increasing one’s stock allocation was greater and the benefit from going to a varying allocation was less.

” I Want Valuation-Informed Indexing to Become More Popular. I Don’t Think It Should Have Taken 35 Years for These Ideas to Catch on. The Concept Would Become More Popular If People Would Be More Clear About its Benefits and More Clear About the Dangers of Buy-and-Hold. The Things That the Buy-and-Holders Find Threatening Are the Things That I Find Exciting. I Want to Take These Ideas to Their Limit. I Want to Explore All Their Implications. I Want to Argue the Case as Forcefully as I Possibly Can.”

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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 doesn’t he post here?

I haven’t asked him. So I cannot say for certain.

My strong hunch is that it is because there are not other posters posting regularly here. The benefit of a community is that you are learning from lots of other people. He is happy to learn from me. But I am one guy. One guy can only provide a limited kind of feedback.

This is of course a general phenomenon. It’s not just Sam who feels this way. EVERYONE feels this way. I have had thousands of people tell me that they love my stuff. But they don’t follow me from boards where I get banned to this place. If they did this place would be as big as any of the places from which I have been banned.

And then of course there wouldn’t any problem. If this place were as big as the places from which I have been banned, the ideas would spread until we would see them being discussed even at the places when I have been banned. And then there would be no point in me being banned anymore.

There are people who believe that Shiller is on to something who do not get banned at the boards at which I have been banned. You Goons have pointed that out on numerous occasions. The difference between me and those people is that they pull their punches to remain on the good side of the Buy-and-Holders. When the Buy-and-Holders get annoyed by something they say, they send a little signal to them and they pull back a bit. They either don’t post as often or they say things not as strongly or whatever. Then the Buy-and-Holders don’t feel as threatened and they tolerate continued posting by these people even though they disagree with them.

I don’t play that game, Anonymous. I never say anything just to annoy the Buy-and-Holders. But I don’t hold back on saying what I believe either. I want Valuation-Informed Indexing to become more popular. I don’t think it should have taken 35 years for these ideas to catch on. The concept would become more popular if people would be more clear about its benefits and more clear about the dangers of Buy-and-Hold.

The things that the Buy-and-Holders find threatening are the things that I find exciting. I want to take these ideas to their limit. I want to explore all their implications. I want to argue the case as forcefully as I possibly can (while of course never breaking any published posting rules). That gets me into LOTS of trouble with the Buy-and-Holders. The Buy-and-Holders are not accustomed to seeing anyone behave that way. They freakin’ HATE it when I insist that those of us who follow Shiller possess the same posting rights as those who follow Fama.

I’ll tell you what the Buy-and-Holders hate more than anything else. They hate it when I say that they are wrong. I don’t say “here’s a different way to calculate the safe withdrawal rate.” I say “the Buy-and-Hold way of calculating the safe withdrawal rate is in error, here’s the right way to do it.” They feel that I am questioning their integrity when I say that. But they say that sort of thing about Valuation-Informed Indexers all the time. They say that we are on meds and that we don’t like math and all sorts of things along those lines. They think nothing of saying that Valuation-Informed Indexing is wrong and dangerous. But they become violent when a Valuation-Informed Indexer says that Buy-and-Hold is wrong and dangerous.

I have legal training, Anonymous. I went to law school not to learn how to practice law but to become a better journalist. I obviously didn’t know at the time I went to law school that I would end up doing the work that I am doing today. But it could be said that I am doing precisely the sort of work that I thought I would need to know how to do to become an effective journalist. I often feel like I am on trial when there are a bunch of you Goons shouting at me and trying to trip me up on some technicality. I don’t like the nastiness of some legalistic interactions. But I do think it is important that ideas be pushed with some degree of forcefulness and legal training helps a person do that. I don’t apologize for pushing these ideas hard. I do that by intent and I am proud that I do that. Doing that has helped me and lots of others to learn things that we otherwise would not have learned.

The vast majority of the population does not like the way that I push. I see that as clearly as you see it. I don’t want to speak for other people. I don’t want to put words in their mouths. But I do want to understand what is going on. The sense that I get is that people would prefer it if I handled things with a lighter touch. Greaney likes to say: “Oh, if you don’t think 4 percent is fully safe, just use a lower withdrawal rate.” That way of saying things doesn’t get the job done for me.

Everyone of course understands that anyone who wants to can take a lower withdrawal rate. The question I want answered is — What is the highest withdrawal rate you can take and still have a safe plan, presuming that stocks continue to perform in the future somewhat as they always have in the past? That’s the question that safe withdrawal rate studies were created to answer and I want to know the answer. I am not willing to duck the question just because it hurts some people’s feelings to hear the answer you get when you include a valuations adjustment. I want to know that number and I want to tell other people that number. I don’t want to hurt people’s feelings. I don’t enjoy hurting people’s feelings. But I really enjoy learning how stock investing works. And I feel that I need to calculate the numbers properly to do that.

I am giving a long answer to your question about Sam. But this is the true answer. Sam is like everyone else and I get the feeling sometimes that it is pretty much just me on the other side. This amazes me. I obviously have an outlier perspective on this particular aspect of the question. I didn’t know that going in. I have been surprised to see things play out the way they have over and over again. I don’t think I am wrong, though. To me what I am doing is very clearly needed and a good thing to do. It makes me pause when I discover that so few others see it that way. But I have never been able to come up with good reasons for playing it some other way that would make me more popular.

I am saying that the dominant model for understanding how stock investing works is not just off by a little bit but wildly off, wildly wrong. This upsets people. People have their retirement hopes riding on their belief in that model and they cannot bear to hear that they got it all wrong. I feel that, if it is true that they got it wrong, it would be wrong of me to wait until after they have lost most of their life savings to tell them why they are wrong. I feel that that would be a cowardly thing to do and not at all something that a friend would do. I feel that it would be a betrayal of my Buy-and-Hold friends for me to play it that way.

Others seem to be able to rationalize saying things the softer way. I often say that Wade Pfau stopped posting honestly when you Goons threatened him. I obviously don’t mean that he includes deliberate lies in his writings. I don’t think for two seconds that he does anything like that. He would never do anything like that in a million years. He is not being fully honest because he is holding back. He knows that the safe withdrawal rate studies don’t include a valuations adjustment and he knows that a valuations adjustment is required and he knows that the numbers are thus wildly off the mark and he just keeps his mouth shut about it. He understands that millions of people are going to suffer failed retirements because they built their plans on these phony numbers and yet he doesn’t say anything. He tells himself that he needs to make a living like everyone else and that it is someone else’s problem to correct the safe withdrawal rate studies and that he is at least advancing the ball with the things he does say (which is true) and he has been able to find peace with himself doing that. I could not find peace with myself doing that.

Do you know how I often say “I love my country”? One of the things that I love about it is that we advance knowledge by fighting hard for our respective ideas in the Marketplace of Ideas. There are people who thought the smart phone was a stupid idea when the idea was first advanced. The idea was tested and the idea prevailed. I love that. That’s how things should work, in my view. Shiller put forward an idea in 1981 that is 5,000 times more important than the idea to create a smart phone. And the idea has gone just about nowhere in 35 years. The vast majority of the population still believes in Buy-and-Hold to this day. We have wasted 35 years in which we could have been building on the first draft research-based strategy put forward by Bogle so many years ago. I can’t stand that! That drives me crazy!

Anyway, people don’t like the friction and controversy that comes with being associated with me. And when that friction and controversy makes me isolated, they don’t like it that I do not have a large community here discussing the ideas and so they find somewhere else to talk things over with people that are somewhat like-minded but not as “strident” as me in their presentation of the ideas. I do not view myself as “strident” at all but people whom I respect greatly (like Rob Arnott) have used that word to describe me. I think that’s how most people see me. I think that’s why people stay away.

I see it as a Catch-22. If everyone did what I do, there would be no controversy when I did it. If we all just accepted that there are two schools of academic research re how stock investing works, we would all just say what we believed and none of us would have any problem being friends with people on “the other side.” I would say precisely what I believed in every post I wrote and no one would have any trouble with that. And everyone else, both the Buy-and-Holders and the Valuation-Informed Indexers, would do that same. That’s how this should be handled, in my view. That’s the American way. That’s what works.

For all of us. The Buy-and-Holders get upset when I say what I truly believe. I see that as confirmation of Shiller’s position. Shiller is saying that investors are not 100 percent rational but in fact highly emotional and the Buy-and-Holders are responding to challenges to their beliefs in insanely emotional ways. That tells me that Shiller is right. That tells me that this stuff is even more important than I thought it was before that happened. Every time I get banned at a new place it tells me that this stuff is more valid and important than I thought it was before the banning took place.

I think it is the next crash that is going to change things. But that of course makes me sad. I don’t want to see people lose their money. I cannot bear to censor myself and thereby participate in the cover-up that is in the process of causing people to lose their money. I don’t like it that people hate me. But I would rather than people hate me for now and then love me when they see that I was the only one telling the full truth all along, that I was the one guy who stood up for the middle-class investor when thousands of those who put themselves forward as “experts” sold them out because they wanted to turn an easy buck exploiting people’s emotional weaknesses. I don’t want to go there. I can’t go there.

I do everything that I can think of to praise the Buy-and-Holders, to make them feel less angry and less threatened. Nothing satisfies them. I presume that they would be satisfied if I didn’t say that they got the numbers wrong. But that’s the thing that most needs to be said. It is because people have not been saying that for all these years that we are in such an economic mess today. That’s the thing that needs to change. When more people work up the courage to say that, the mistakes will get fixed and everything will be cool.

Bull markets are an emotional phenomenon. They come about when those who possess strong Get Rich Quick urges intimidate those who have doubts re Get Rich Quick strategies into silence. And the more out of control the bull market gets, the greater are the intimidation tactics that we see and the more pervasive is the self-censorship that we see. When we all suffer enough pain in the economic crises that follow, word finally gets out re the realities that have been silenced and we get about the business of rebuilding our broken economy. This will be the last time we will need to go through this awful cycle because this is the first time that we have 35 years of peer-reviewed research available to us showing us how stock investing really works.

Sam and most others don’t appreciate all the drama. That’s the short version. I don’t like the drama either. But I love the learning experiences that follow from saying things in a plain and simple and bold and clear way so much that I am willing to TOLERATE the drama that comes with doing so for the greater good that comes of the project. I cannot bear to pass up the huge learning experiences that I have enjoyed as a result of my insistence on posting honestly.

If you think that I have something against the Buy-and-Holders, you are holding onto a very wrong idea. I LOVE my Buy-and-Hold friends. None of the amazing work that I have done would have been possible without my making use of the foundation that was built by Bogle and my other Buy-and-Hold friends. I tell my friends when I think they got something wrong because that’s what I would want them to do for me. The Golden Rule is to treat others like you would like them to treat you. I believe in the Golden Rule.

Sam and all the others believe in the Golden Rule too. It’s the crazy circumstances of this particular case that make it hard for them to see that all I am doing is following the Golden Rule. They think that the kind thing to do is not to stir up trouble. I think that it is our failure to stir up trouble for so many years that caused this mess in the first place. And of course the mess gets bigger with each day that passes in which we once again fail to work up the courage to cause the trouble that we all need to live through to get to the much better place where we all want to end up.

That’s my take on why Sam does not post here. He probably doesn’t like the drama stuff that follows me wherever I go. And. even if he could deal with that, he probably doesn’t like it that so few Normals post here (because they don’t like the drama stuff).

Rob

“It May Not Happen By the Close of Business Today. It Is Even Theoretically Possible That It Will Not Happen By the Close of Business Tomorrow. What Comes Next? After Tomorrow Comes the Day After Tomorrow. After the Day After Tomorrow Comes the Following Day. My Sincere Take.”

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

Please post just one quote, from the thousands of people you’ve emailed, that specifically says they fear buy-and-hold goons. Come on, you said many people have told you that verbally. Surely at least one must have written it down.

That’s the entire web site, Anonymous.

The question is not how much evidence I have. I have a mountain of evidence.

The question is how ordinary people — the people whose lives are in the process of being destroyed by the massive act of financial fraud — respond to that evidence.

Today, those people see themselves as being ahead or at least not down by too much. So those people either support the con or at least do not feel strongly enough opposed to it to do something about the abusive stuff.

Will those people turn on the Buy-and-Holders following the next price crash? I believe they will.

But you are not going to come clean just because I believe that. You will be willing to come clean only when your prison sentence is announced and you see clearly the consequences of participating in a massive act of financial fraud. We are not there yet today. And you cannot bear to see the massive con come to an end (that would mean going to prison too even if for a bit less time). So you are going to hold out until that prison sentence is announced.

I am doing everything in my power to get the prison sentences announced by the close of business today. Everything that I can think of I have done. So I have honored my pledge to you (and to the millions of middle-class investors who are in the process of seeing their lives destroyed).

The next thing I am going to say is a horrible thing to acknowledge but I am going to say it anyway because I think it is important that it be publicly put on the table.

It may not happen by the close of business today.

It is even theoretically possible that it will not happen by the close of business tomorrow. I know that this is hard to believe. But I have been going at this for 14 years running now. My conclusion after working this hard is that it may not happen even at the close of business tomorrow. It might. But I have come to believe that it is at least a theoretical possibility that it might not.

So what comes next?

After tomorrow comes the day after tomorrow.

After the day after tomorrow comes the following day.

My sincere take.

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

Rob

“Jeff at the Sustainable Life Blog Liked Talking to Me. But I Am Not the Only Person That Jeff Liked Talking To. 90 Percent of the People He Liked Talking To Have Blogs Where They Have Posted Positive Words About Buy-and-Hold. What Are All Those People Going To Think of Jeff If He Comes Back From the Conference and Writes a Blog Post Saying That He Spoke to This Rob Bennett Fellow and He Now Realizes That the Whole Buy-and-Hold Thing Is a Con That Is In the Process of Destroying Millions of Middle-Class Lives?”

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

Does Jeff still talk to you, or was he scared away by the goons as well?

He did not respond to the words of the e-mail set forth above, Critter. That tells the tale.

Jeff is like all the rest of us. He wants to be friends with me because he likes me. That’s why he made contact with me. He finds the idea of the Campaign of Terror absurd, which is why he said what he said in his e-mail to me. But he cannot bear to go against all the people on the other side, all the people who either promote Buy-and-Hold strategies or who follow Buy-and-Hold strategies themselves. He is a social creature, like all of us. And he can’t go there. So he didn’t respond to the e-mail. And so the cover-up continues.

To end the cover-up, we have to call it out. We need to have articles about the cover-up appear at every site on the internet. We need to have it written up on the front page of the New York Times. That’s how cover-ups are exposed. That’s how we bring them down. We all know this.

The hard part re this particular cover-up is that exposing this particular cover-up does not mean just exposing “bad” people whom we have never met and whom we will never see in the future. In this case exposing the cover-up means exposing our friends and our neighbors and our co-workers and our fellow community members. Jeff liked talking to me at the bloggers conference. He wanted to stay in touch with me. But I am not the only person that Jeff liked talking to. He liked talking to LOTS of people who attended the conference. And 90 percent of the people he liked talking to have blogs where they have posted positive words about Buy-and-Hold. What are all those people going to think of Jeff if he comes back from the conference and writes a blog post saying that he spoke to this Rob Bennett fellow and he now realizes that the whole Buy-and-Hold thing is a con that is in the process of destroying millions of middle-class lives? Jeff would get closer to me by doing that. How many people whom he likes would he distance himself from by doing that?

That’s the story, Anonymous.

Humans are social creatures. Humans possess a Get Rich Quick urge. Buy-and-Hold exploits our Get Rich Quick urge. It sounds great in the short term. It destroys us in the long term. We are in the process today of moving from the short term to the long term. Buy-and-Hold stopped “working” in January 2000. From January 2000 forward, investors have done better (on a risk-adjusted basis) earning the 4 percent real that was available at that time with IBonds and TIPS. But the Buy-and-Holders are still not doing that bad. They did great before January 2000 and they can live with the results they have seen since. So the social pressure still favors continuing the cover-up. You’ll make more friends speaking in support of Buy-and-Hold than you will saying that Buy-and-Hold is a smelly Get Rich Quick scheme. I know whereof I speak.

But what happens after the next crash?

Do we continue to tell these lies? Do we continue to exert social pressure to keep people like Jeff from telling the obvious truths about this garbage investing strategy that is killing us all? Or do we decide that it is too darn important to provide some means for the millions of investors whose lives are in the process of being destroyed to continue tolerating all this nastiness?

I think we are going to make the change. I think that following the next price crash Jeff is going to feel free to speak out about what he learned from me. I believe that following the next price crash he is going to come forward with a statement saying that he felt funny about this ever since he spoke to me and that he wished that he had had the courage to come forward sooner.

But I could be wrong.

When I put forward my May 13, 2002, post, I thought that the smear campaign against me would last perhaps two days, three days at tops, and then people would see that the numbers support me and come to their senses and that would be the end of it. So I have a record of being terribly off base re this stuff. If you want to say that you think it’s happening again, there’s nothing that I can say in response except that I continue to believe otherwise and that I am physically incapable of participating in the cover-up myself regardless of what happens. So I will just soldier on.

It’s not personal, Anonymous. I cannot lie about this stuff. When I was putting together my plan, I worked hard to get it right and I cannot bear to say things that would cause someone going through the same experience to get it wrong. It’s not in me. I cannot go there.

That doesn’t mean that I don’t like you. That doesn’t mean that I don’t wish you well.

I’ll do my thing and you will do yours, you know? It would seem to me that the next price crash will tell us who is going to prevail. If some space opens up to tell the truth about the last 35 years of peer-reviewed research, I will become one of the richest people on the planet and everyone who reviews the record will say that I earned every darn dime that came my way. I will extend the hand of kindness to my many Buy-and-Hold friends yet one more time and this time it will be accepted and we will all work together from that day forward to rebuild our broken economic system. And we will meet with great success because we will from that point forward be able to speak openly about the most important 35 years of peer-reviewed research that has ever been published in the history of investing analysis (or in the history of economics, for that matter).

Or we will all go down together. That’s the other possibility. That’s where we end up if we all continue to live in fear following the next price crash, which I suppose is at least a theoretical possibility (one that I don’t permit myself to ponder much because I cannot bear to do so).

Or perhaps there is some third possibility that doesn’t occur to me because of my background or the set of life experiences that I have lived through, some possibility where the deepening of the economic crisis that comes with the next crash ends up not being so bad and people continue to lie about what the research says and nothing ever happens to stop them. I can’t see it but I have to accept that you must envision something like that playing out or you couldn’t continue to do what you do. I don’t think that something like that can happen. But I suppose that in fairness I should at least list it among the options given the possibility that I am once again getting it wrong, as has happened so many times before in my years of struggling to make sense of the things playing out before my eyes and failing miserably to do it properly.

Something is going to happen. I hope that we can all agree that that much is fair to say.

I will live with the results of that something. So will Jeff. So will Anonymous. So will Bogle So will Shiller.

I hope that we will do the best we can to see past our differences and remain friends no matter what that something is. That’s what I feel deep in my heart.

Is there anything else that can be said re these matters?

We still disagree. Obviously. I am never going to ban you from posting here no matter what. Obviously. I still believe what I believe and you still believe what you believe. Obviously.

I hope that helps. If it doesn’t, I don’t think that I have anything else to offer.

Please take good care, old friend.

Rob

Rob’s E-Mail to Danielle Citron, A Law Professor Who Wrote a New York Times Article on Revenge Porn

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Set forth below is the text of an e-mail that I sent to Danielle Citron at the University of Maryland Law School on September 24, 2013:

Danielle:

My name is Rob Bennett. My bio is here.

I saw your name in the New York Times article on revenge porn. Thank you for doing the important work you are doing!

The article suggested that the book you are working on may address internet harassment in general and not just revenge porn in particular. If that is the case, I can tell a story about internet harassment that is truly jaw-dropping in scope and that affects everyone living in the United States today.

To understand my case, you need to understand a bit of background re the history of our growing knowledge of how stock investing works. There are two major schools of thought: (1) The Buy-and-Hold Model, which is rooted in the research of University of Chicago Economics Professor Eugene Fama; and
(2) The Valuation-Informed Indexing Model, which is rooted in the research of Yale Economics Professor Robert Shiller. The Fama model is dominant today. I advocate the Shiller model. My web site has more material explaining the  implications of the Shiller model than any other site on the internet.

An individual who was embarrassed when I let people know that he got a number wrong in a retirement study has waged a 11-year smear campaign against me with the aim of making it impossible for me to earn a living from my work on the internet. Thousands of community members at various discussion boards and blogs have expressed a desire that honest posting on both points of view be permitted on the internet. But his Goon Squad disrupts conversations wherever they are held on this topic. Numerous site owners have reacted in fear of what will be done to them if they allow the issues to be discussed and have banned posting on the implications of the Shiller model at their sites.

I spent 16 months working on research with an academic researcher with a Ph.D. in Economics from Princeton. The researcher (Wade Pfau) was thrilled with what we accomplished. He told me that our research product was worthy of publication in the Journal of Finance, the top journal in the field. These
internet Goons threatened to send defamatory e-mails to Wade’s employer with the aim of getting him fired from his job if he did not stop pursuing this research. Wade had seen what had happened to me and agreed to stop publishing similar research (one study had already been published in a peer-reviewed
journal at the time this happened).

If you have an interest in learning more about the story, I have extensive  documentation of the entire 11-year history of the matter. Please just send me an e-mail letting me know and we can set up a time to talk by telephone.

Here is an article giving background on the investing issues:

http://arichlife.passionsaving.com/about/

Here is an article giving an in-depth report on the Wade Pfau matter
(please note that there are links to reactions from numerous academics at the end of the article):

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

Here is an article in which I set forth 101 comments of my fellow community members expressing
a desire that honest posting on these important investment topics be permitted:

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

I wish you the best of luck with all your future endeavors!

Rob

Jacob Walker to Rob “I’m Publicly Retracting My First Blog Post…. I Try to Be an Open-Minded Skeptic, and I Clearly Made a False Positive Mistake in Being Too Skeptical This Morning.”

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Set forth below is the text of my correspondence with Jacob Walker in April 2013. Jacob writes the Effective Education blog, which he describes as providing “scholarly thoughts, research and journalism for informal peer review.” I wrote to Jacob about the threats that were employed by the Buy-and-Hold Goons to silence Wade Pfau. Jacob found the story so incredible that he concluded that I was involved in some sort of phishing scheme. I assured him that I was not and offered to answer any questions re matters that caused him concern. He retracted the blog entry.

Jacob:

My name is Rob Bennett. My bio is here. I’d be grateful if you would take a look at an article I have written titled Academic Researcher Silenced by Threats to Get Him Fired From His Job After Reporting on Dangers of Buy-and-Hold Investing. I think it’s a big deal. If it pulls you in, that would be super.

If not, I of course understand and I certainly wish you the best of luck in all your future endeavors.

Take care.

Rob

Jacob’s Blog Entry:

I received what I believe to be one of the most interesting attempts at social engineering this morning in my inbox:

Here was my reply:

I think this appears be very interesting… as spam and potentially phishing… Can you tell me how you got my email, and have some proof you are a legitimate academic, who is really trying to further the world of knowledge, and not just have a “teaser version” of your writing.

Having almost fallen for ploys in the past, and once actually falling for a con-artist who was selling overpriced cameras at a conference, I recognize how easy it is for even those of us who should know better to have the same psychological forces within us such that social engineering might work on us also. In this case, while there is a chance my quick heuristic view is wrong, it seems most likely that this guy gathered a lot of emails from one of the research social networking sites, sent all of us this email through a mail merge, and is hoping we will buy his “article”. If he really wanted peer review, it wouldn’t be a “teaser” version. Although, if I have made a “False Positive” decision, then I am happy to reverse course, but he will have to prove me wrong for me to re-post a contrary view to my currently held one.

Jacob:

This is Rob, the fellow who sent you the e-mail.

I am genuine.

I have sent you a follow-up e-mail that I believe proves the case.

But if you still have doubts, I am happy to respond to any further questions or concerns you have, either by e-mail or here at your blog.

This is a crazy story. I can certainly understand why people would have a hard time accepting that all I have reported on is so. If I had seen the article I sent you on the morning of May 13, 2002 (when the saga began), I would have been highly skeptical myself.

That said, all that I reported on in the article is true. All of the claims can be documented. This is a real story and an important story.

I am grateful for your interest in it (your skepticism evidences an implicit acknowledgment that the story is important if true, in my assessment).

Please take good care.

Rob

I thank you for your reply, and I’m publicly retracting my first blog post, and posted your reply to my post. I will try to give some time to read your work at the end of the week, when I’m not so busy, and give you honest peer review. I try to be an open minded skeptic, and I clearly made a false positive mistake in being too skeptical this morning.

Jake@EconomPic to Rob: “Came Across Your Philosophy…Interesting”

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Set forth below is a link to a Twitter exchange that I had recently with Jake@Economic Pic. Set forth below the link is the text of our exchange:

Jake
?@EconomPic
@Rob_Bennett_ Came across your philosophy. One piece (seems to be) missing is relative valuation vs cash/bonds. How do you account for that?
9:28 AM – 9 Jun 2016

Jake ?@EconomPic Jun 9
@Rob_Bennett_ basically the term premium between stocks / bonds. When stocks were rich in 00’s this premium was small (no opportunity cost)

Jake ?@EconomPic Jun 9
@Rob_Bennett_ now at 2% bond yields, much wider… so even a 4% stock return will do much better. Thanks in advance! Interesting

Jake ?@EconomPic Jun 9
@Rob_Bennett_ some additional thoughts on valuations mattering (but also in relative not just absolute terms) here http://econompicdata.blogspot.com/2015/04/the-relationship-between-stocks-and.html?m=1 …

Rob Bennett ?@Rob_Bennett_ Jun 9
@EconomPic Thanks. I will read this later today and offer a comment. Much appreciate your interest and feedback.

Jake ?@EconomPic Jun 9
@Rob_Bennett_ one more for you (if you’d like). Similar framework but includes a shorter timing signal (momentum) http://econompicdata.blogspot.com/2015/11/valuations-do-matter-even-over-shorter.html?m=1 …

Rob Bennett ?@Rob_Bennett_ Jun 9
@EconomPic Jake — I don’t believe in short-term timing, only long-term. It may work. Smart people do it. But it is beyond my skills. — Rob

Jake ?@EconomPic Jun 9
@Rob_Bennett_ as long as evidence based and systematic, I think worth a look, but appreciate that side of it

Rob Bennett ?@Rob_Bennett_ Jun 9
@EconomPic Jake — This is the peer-reviewed research on VII: http://arichlife.passionsaving.com/wp-content/uploads/MPRA_paper_35006.pdf … I worked with Wade Pfau for 16 months on this.– Rob

Rob Bennett ?@Rob_Bennett_ Jun 9
@EconomPic i compare likely 10-year return for stocks to return on safe asset class. I go with safe unless stocks are 2 points real better.

 

“We Are Living in a Strange Twilight Zone Time-Period Where for the First Time in History We Know How to Reduce the Risk of Stock Investing Dramatically But in Which We Don’t Tell People About It Because We Fear the Wrath of the People Who Got Us on the Right Track in the First Place But Now Engage in Insanely Abusive Practices Aimed at Blocking Us From Spreading the Word. There Is No Conflict Between Loving Buy-and-Holders and Hating the Tactics That a Small Number of Buy-and-Holders Have Employed to Stop the Idea of Rooting One’s Investing Decisions in the Peer-Reviewed Research From Achieving its Full Potential.”

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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:

It is interesting that you say “thanks ” and warm wishes here, yet you call people “goons” and tell them they are going to prison on your own blog. Why the two different personalities?

There’s only one personality, Sammy.

I love my Buy-and-Hold friends. The Buy-and-Holders were the pioneers. There would be no Valuation-Informed Indexing today had not Buy-and-Hold come first. Jack Bogle is properly seen as a hero by millions of middle-class investors. I learned to use the peer-reviewed research as my guide to how stock investing works from Jack Bogle.

I also learned about the errors in the Old School safe withdrawal rate studies from reading one of Jack’s books. He said that it is an “Iron Law” of stock investing that prices always revert to the mean. If that is so, then there is zero chance that the safe withdrawal rate could be a constant number (it was once thought that the SWR was always 4 percent). If Jack is right that prices always revert to the mean, then the SWR must VARY with changes in the valuation level; there is going to be more reversion (prices falling over time) when prices are insanely high than there will be when prices are only a little high. I could not have put up my famous post of the morning of May 13, 2002 (the post that kicked off the 14-year saga in which I have tried to spread the word about Valuation-Informed Indexing and in which I have connected with thousands of ordinary investors anxious to learn what I have to share and in which you Goons have engaged in brutally abusive posting to block them from learning what they want and need to learn) without having learned what I learned from Jack. Jack Bogle got this all off the ground. I rate Bogle as the second most important investing analyst of all time (second only to Robert Shiller).

I consider myself a Boglehead. I do NOT consider myself a Lindauerhead. It’s in the difference between Jack Bogle and Mel Lindauer (one of the leaders of you Goons) that the Goon part of our story enters the picture.

Shiller published his “revolutionary” (his word) research in 1981. If humans were perfect creatures Bogle would have at that time acknowledged that he made a mistake re valuations and we all would have quickly become Valuation-Informed Indexers and we would not be living through an economic crisis today. We are not perfect creatures. Bogle had a lot invested in the Buy-and-Hold concept as he originally envisioned it. He couldn’t accept what Shiller showed. He fell victim to cognitive dissonance. He went into self-denial. He ignored Shiller’s revolutionary findings. He continued to push the same old Buy-and-Hold stuff and he continued to make the no longer accurate claim that the peer-reviewed research supported Buy-and-Hold (Shiller’s finding that valuations affect long-term returns discredited Fama’s finding that the market is efficient — if the market were efficient, returns would play out in the pattern of a random walk).

In a practical sense, none of this mattered much in 1981. Valuations were at rock-bottom lows. It was hard for anyone to imagine that we would ever again see fair-value price levels, much less prices levels at double fair-value levels or at triple fair-value levels (which is what we saw in January 2000). So “experts” continued to push Buy-and-Hold and investors of course ate it up. The Buy-and-Holders were telling people that their bull market gains were real, that they were much farther along in the financing of their retirements than the peer-reviewed research showed them to be — We all are drawn to Get Rich Quick schemes! Buy-and-Hold — intended to serve as a research-backed strategy had been transformed into the polar opposite, the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind.

I entered the scene on May 13, 2002. I politely pointed out that, if what Bogle said was so, the safe withdrawal rate was not a constant number but a number that varied with changes to valuation levels (dropping to 1.6 at times of high valuations and rising to 9.0 percent at times of low valuations). What I didn’t know was that the investing advice game was no longer on the level. The experts in this field had been covering up Shiller’s revolutionary finding for 21 years at that time. I thought that I was doing something obviously good by applying Shiller’s finding to our understanding of how to go about planning our retirements. In the eyes of the experts in this field, I was doing something very bad and threatening, exposing a cover-up that was in the process of destroying millions of middle-class lives.

I oppose the cover-up, Sammy. And I of course oppose the insanely abusive practices that have been employed to keep the cover-up going for the past 14 years. I call those who employ such tactics “Goons” not because I feel some personal dislike for them. I call them Goons because it is my job to tell the story as accurately as I can and the word “Goons” conveys the point that needs to be made. The fact that Buy-and-Holders almost universally either engage in these tactics themselves or tolerate the use of these tactics by others shows that they lack confidence that their ideas can be defended in reasoned discussion. The Buy-and-Holders still follow Buy-and-Hold strategies. But they no longer possess confidence that they can defend their ideas in a fair fight. That’s telling. That’s something that every investor alive needs to know.

I have learned a great deal from my Buy-and-Hold friends and I continue to learn from them and I expect to continue to learn from them for many years into the future. Valuation-Informed Indexing is the realization of Bogle’s dream — it is the first true research-backed stock investing strategy. I am always going to be in debt to my Buy-and-Hold friends and I of course am always going to wish them well in all their endeavors. My expressions of warmth and friendship and gratitude toward my many Buy-and-Hold friends (including you!) are 100 percent sincere.

The Goon stuff HURTS my Buy-and-Hold friends. They need to incorporate the findings of the last 35 years of peer-reviewed research to make their strategy work in the real world. The Goon stuff makes people afraid to speak out about their true beliefs re how stock investing works. People do not want to see their loved ones threatened with physical violence. People do not want to see their careers destroyed. We are living in a strange Twilight Zone time-period where for the first time in history we know how to reduce the risk of stock investing dramatically but in which we don’t tell people about it because we fear the wrath of the people who got us on the right track in the first place but now engage in insanely abusive practices aimed at blocking us from spreading the word about what the peer-reviewed research really says. Humans!

There is no conflict between loving Buy-and-Holders and hating the tactics that a small number of Buy-and-Holders have employed to stop the idea of rooting one’s investing decisions in the peer-reviewed research from achieving its full potential. Permitted honest posting on all these matters is a win/win/win/win/win. It is not even possible to imagine how anyone could be harmed by learning more about what the research actually says. The Goon stuff is the OPPOSITE of what Buy-and-Hold stood for in its early days. Buy-and-Hold was about employing science in the investing realm. The Goon stuff is about BLOCKING the advance of scientific findings.

I hope that helps a bit, Sammy. I love it that you care about this stuff and that you once had an intense desire to learn as much as you could about it. I even love your skepticism. Your skepticism has made me work hard to sharpen my thinking and that of course helps me and all who read the words that I generate. I HATE the abusive stuff that you advance when you are stuck for responses to my references to the findings of the peer-reviewed research of the past 35 years. I call you a “Goon” when you stoop to becoming something lower than what I know from experience you are capable of being. I want you to be the best Sammy that you can be. As your friend, I want to discourage your Goon tendencies. I would feel that I had let you down as a friend if I failed to ever comment on them.

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

Rob

“My Own Wife Faults Me for Using the Term “Goons.” I Dedicated My Life to This Woman and She Has Dedicated Her Life to Me. But Every Now and Again She Feels the Need to Get in a Little Dig at Me for My Use of the Word “Goons” in My Writings. I Stand Pretty Much Alone in My View That the Goon Issue Is of Supreme Importance, That It Is Perhaps the Most Important Public Policy Issue of Our Day.”

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

“I would be if it were not for you Goons”

Your answer to so many questions.

It’s not just you Goons who don’t like me using the word “Goons” or talking about the Goon phenomenon.

John Walter Russell spent eight years of his life researching my ideas. He was the biggest supporter that I ever had. But there were several occasions when he chastised me for talking about goonishness. And he never spoke about it himself (except when I brought it up and he felt that he should respond at least briefly).

Rob Arnott has said tougher things about Buy-and-Hold than anyone but me. But he called me “strident” in one of his e-mails to me while endorsing my ideas on the content side.

Wade Pfau thought that the research we did together was so important that he might win a Nobel prize for it. He thanked me many times for teaching him things about stock investing that he never learned while earning a Ph.D. in Economics at Princeton. But he was clearly uncomfortable talking about the Goon phenomenon. I would say that it is my unwillingness to back down on the Goon question that is the primary cause of the split that exists between us today.

Shiller doesn’t talk about Goons. He is the king on valuations. He is the one that kicked this all off. But to my knowledge he has never directly addressed himself to the Goon phenomenon (he has made some indirect, vague references to it).

Carol Osler wrote an e-mail that I believe evidenced the best combination of intelligence and kindness that I have seen in the writings that I have seen on this subject. But she noted in her comments to me that referring to one’s critics as Goons “is almost never a good idea.”

My own wife faults me for using the term “Goons.” I dedicated my life to this woman and she has dedicated her life to me. But every now and again she feels the need to get in a little dig at me for my use of the word “Goons” in my writings.

I stand pretty much alone in my view that the Goon issue is of supreme importance, that it is perhaps the most important public policy issue of our day. I don’t say that you are wrong that some reference to goonishness is my answer to many questions that you raise. And I don’t say that this is by any stretch of the imagination a crowd-pleasing position. But I do not believe that I am wrong re this matter. I do not apologize for having spent a lot of time and energy over the years trying to come to a deeper understanding of what is going on with the Goon matter.

Please consider what it is that Shiller really did when he in 1981 he discovered that valuations affect long-term returns. This was his “revolutionary” (his word) claim. Why was it such a big deal? Why is it that this finding (which won Shiller the Nobel prize) changed our understanding of how stock investing works in a fundamental way (in my assessment)?

Our economic system (capitalism) is based on the work of Adam Smith. Adam Smith developed the economic model called “Rational Man Economics.” The Economics discipline as it is practiced today is rooted in a core ASSUMPTION (not something ever proven, just assumed) that human beings pursue their self-interest when making choices about what to buy and what work to do.

They do not. This core belief is false. Human are highly emotional creatures, not purely rational creatures. Shiller proved this with numbers. If we were rational, the stock market would be efficient. It is not. If we were rational, price changes would play out in the form of a random walk. They do not. Investors are human. Humans are emotional. That’s why Buy-and-Hold doesn’t work. That’s why valuations (which signal how emotional investors are at any given moment in time) affect long-term returns.

This is the Shiller revolution. This is what I write about.

“Goonishness” is emotionalism. Emotionalism is the story. Goonishness is the story.

You Goons are cartoonish in your evidencing of emotionalism. You threaten to kill people who report honestly on the last 35 years of peer-reviewed research. That’s insane. You take it to the limit. Few Buy-and-Holders go that far.

But Jack Bogle ENDORSES Mel Linduaer’s book. Bogle permits his name to be used at a discussion board at which the sorts of individuals who “defend” Lindauer’s threats of physical violence are permitted to participate. Is that not insanely emotional too? Is Bogle’s take on investing not also insanely emotional? There’s an argument that Bogle is more emotional than Lindauer. Bogle does not himself advance death threats. But Bogle is of a stature many times greater than Lindauer’s stature. One would expect him to behave in a more professional manner than some guy who has no background in the field. But Bogle endorses this other figure and engages in back-and-forth with him and so on. Is that not remarkable? Is that not an insanely emotional thing for Bogle to do?

The problem with Buy-and-Hold is that it ignores emotion. That’s the error. The Buy-and-Holders don’t believe that emotion should control investing choices any more than I do. They hate it that emotion plays a role. The difference between the Buy-and-Holders and me is that their hatred of emotion causes them to pretend that it does not exist while my approach is to acknowledge the influence that emotion has on us and to try to combat it by quantifying its effect, thereby showing investors how much they hurt themselves by giving in to their emotional (goonish) impulses.

We all need to be talking about investor emotion (goonishness) every day. At every board. At every blog. All the time. Everywhere.

Our inner goonishness is the story, Anonymous. This is the breakthrough. This is the deal here.

In ordinary circumstances, we don’t tolerate the sorts of tactics that you Goons have employed to stop us all from learning what we all need to know about how stock investing works. Why do we tolerate stuff in the investing realm that we do not tolerate in any other field of human endeavor? You never see this sort of behavior in discussions of sports or politics or fashions or cars. Why the heck is the investing realm so special?

It’s special because we have made the most important aspect of the question — the extent to which investors hurt themselves by giving in to their Get Rich Quick impulse — taboo. The Buy-and-Holders think of themselves as having OVERCOME their Get Rich Quick impulse. This is the appeal of Buy-and-Hold to them. They are lying to themselves. Just because you convince yourself that you are above Get Rich Quick doesn’t mean that you are. The Madoff investors thought they were above Get Rich Quick. They thought they were smarter than everyone else, just like the Buy-and-Holders think they are smarter than everyone else. Investors who get taken in by their Get Rich Quick urge do not learn that this is so until they lose most of their life savings. And at that point it is of course too late to help them.

I am trying to help you, Anonymous. We all want the same thing — to invest effectively for the long term. I am trying to deliver that thing to you. And you hate me with a burning hate for doing so. Not because you don’t really want to achieve the goal. Because you cannot bear to accept that you did not achieve it many years ago when you first became a Buy-and-Holder. I am telling you something that you very much need to know but that you very much do not want to know. That’s the source of the friction. That reality drives all the trouble we have been seeing for 14 years now.

People who agree with me on the content side (it’s a minority but it is not a small number — perhaps 20 percent of the population) have learned that it is not smart business to be entirely open about their beliefs. They don’t want to be hated as much as I am hated. So they pull their punches. They hint at the things that I say directly and plainly and boldly and openly.

Why don’t I do that? I want to be liked. Why don’t I play the game that everyone else who agrees with Shiller plays?

It doesn’t work.

Shiller revolutionized this field in an intellectual sense 35 years ago.

What has changed? Anything? We are today living through the worst economic crisis in U.S. history. It was brought on by the promotion of Buy-and-Hold strategies. Have we learned ANYTHING by the publication of Shiller’s revolutionary research?

In a practical sense, we are worse off than ever. The Shiller Revolution has not yet born good fruit.

I want to change that. I want to see Shiller’s amazing, powerful insight help people to invest more effectively. So I talk openly about the emotion that drives investor decisions. I quantify the effect of valuations/emotions/goonishness. The peer-reviewed research that I co-authored with Wade Pfau shows that valuations/emotions/goonishness is 80 percent of the investing story. That tells me that it should be 80 percent of what we all talk about in out articles and books and speeches and so on. It is not that today. It is not close to that today.

I want to change the conversations that we are having. You don’t do that by putting things forward in the tentative way that Shiller puts things forward. We need to stop pulling our punches. We need to explore the implications of Shiller’s ideas in bold and clear and exciting and far-reaching ways. We want to take these ideas to their logical conclusions, not cower in the corner for fear of what you Goons will say about us if we dare to share some important truths with the millions of middle-class investors who very much need to hear about them.

I don’t apologize for getting it right, Anonymous. I am proud to get it right. It took me some time to work up the courage to speak out. Now that I have done so and now that I have seen how much I can help people by doing so, I am not inclined to back away from a fight. I don’t like fights. I hate fights. I am an extremely conflict-averse person, as anyone who knew me before I put up my famous post of May 13, 2002, will attest. But I LOVE developing the Valuation-Informed Indexing concept. I believe that it is the future of investing analysis. To keep that baby growing up strong, I need to fight the nasties who very, very, very much want to kill it in the crib. That would be you Goons! We are working at cross purposes.

It’s not personal. I like you. I consider you a friend. I have learned from you. I am happy to respond to questions from you. I would be happy to sit down and have a beer with you someday.

But don’t engage in funny business re my baby if you don’t want to get a slap across your face, you know? I fight for Valuation-Informed Indexing. Someone has to fight for it or it will never become the dominant investing model. No one else has shown a willingness to take on the job (for obvious reasons!) so it has been left to me. I do my best, you know? I work it hard.

Goonishness is the problem. Goonishness is what makes stock investing risky. I want to reduce stock risk. So I need to talk about goonishness. I need to warn people of its dangers. That’s the job.

That’s the story here. It seems so clear to me.

I naturally wish you all good things.

Rob