A Rich Life

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

“Everyone Who Works in This Field Has Been Intimidated Into Not Challenging Buy-and-Hold to the Extent They Would If They Felt Free to Post Their Sincere Beliefs. I Don’t Want to Be Intimidated. I Can’t Do Good Work When I Am Intimidated. It’s the Same With Shiller. And With Bogle. And With Pfau. And With Every Last One of Us. The Intimidation Has to Stop.”

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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:

he is overtly claiming that not only was HE silenced by death threats, but that the 95% of people who agree with Shiller, are all doing so only because they either got death threats themselves, or else are afraid because of Rob’s death threats.

This post raises an important point.

Yes, I am saying that everyone who works in this field has been intimidated into not challenging Buy-and-Hold to the extent they would if they felt free to post their sincere beliefs. Please mark me down as saying precisely that.

I certainly don’t say that everyone knows about my case.

And I certainly don’t say that everyone has had death threats directed at them.

I am saying that everyone who works in this field feels INTIMIDATED.

I knew about the errors in Greaney’s retirement study in May 1999, when I put my first post to the Motley Fool board, Anonymous. I didn’t put forward my famous post pointing out the errors in that study until May 2002. Why the delay? What was that about?

I was intimidated.

I rationalized, of course. I told myself that it was okay not to point out the errors in the study because the study was an advance over the retirement studies that had been available to us in earlier days. That was so. Peter Lynch not all that long ago was saying that the safe withdrawal rate was 7 percent. At the top of the bubble, it was 1.6 percent. Greaney said it was 3 percent. Greaney was a lot closer to the mark than Lynch. Greaney’s study represented a big advance. I told myself that there was no need to point out the error because the study was more good than bad.

It really was good that the study advanced our understanding. So what I was telling myself was not crazy stuff. But my position did not make logical sense all the same. The fact that a study represents an advance is no reason not to point out errors in it and thereby to show people the way to yet another advance. We all want to plan our retirements effectively. In ordinary circumstances, Greaney would have been thrilled to improve his study. In ordinary circumstances, he would have thanked me for pointing out the error and would have promptly corrected it.

I didn’t point out the error for three years because I sensed that I was going to get an extremely negative reaction if I did. I wanted to be liked by my fellow community members. So I praised the study for the good things that it did (which was a legitimate thing to do) and didn’t mention the errors in it.

That’s a polite way of describing what I did. A blunt way of saying it is to say that — I lied.

I knew that the study was in error. I knew that my friends were using it to plan their retirements. I knew that suffering a failed retirement is a terrible life sentence. I knew that I was going to suffer a lot of hits if I was 100 percent honest about the subject. So I kept it zipped. And I put the retirements of my friends in jeopardy by doing so. I was a coward. I was a bad friend. I was a creep.

That’s the reality. I dish it out to others. I need to dish it out to myself from time to time as well. That’s the reality.

No, it doesn’t go to the White House. I have compared the Buy-and-Hold Crisis to what we saw in the area of race relations in the days before the Civil Rights Revolution. People with black skin could not drink from the same water fountains as people with white skin. Did that one go all the way to the White House, Anonymous? No one directed people to treat people with black skin as inferior to people with white skin. No one was so stupid that they couldn’t see the wrong in this. So why did the wrong continue for so many years?

It continued because the racist laws were part of the fabric of our society. Changing those laws meant tearing up the fabric of our society. It was a very, very necessary business. But it was also a very, very difficult business. Eventually, we couldn’t duck the matter any longer and we did the right thing. But we ducked that difficult business for a long, long time.

So it has been with the crazy idea that it might be okay not to practice price discipline when buying stocks.

There is not even a sliver of evidence supporting this crazy idea. 100 percent of the evidence available to us says that long-term timing is always required, 0 percent of the evidence says that long-term timing is not always required. So why do the “experts” in this field pretend that this investing stuff is oh-so-hard to understand and that maybe there is some alternate universe where Buy-and-Hold might really produce good results for one or two long-term investors?

Because that crazy idea has become part of the fabric of our society. We have been telling people that Buy-and-Hold might work for 50 years now. We have destroyed millions of lives by doing so. We have caused an economic crisis. We have hurt our friends and neighbors and co-workers in very serious ways We are ashamed. We know we need to fix the problem. But we cannot bear to face up to it.

It’s going to be painful coming clean, Anonymous. In other circumstances, I might be inclined to duck this one myself. I don’t like causing people pain. Why not just let it go?

I don’t let it go because I am causing people even more pain by ducking it. We have to get this matter behind us. We are the luckiest generation of investors ever to walk Planet Earth. And we are living through an economic crisis caused by our unwillingness to tell people about the implications of the last 34 years of peer-reviewed research in this field. Huh? That makes no sense. Really.

We need to get past this. We need to open every investing discussion board and blog on the internet to honest posting re the last 34 years of peer-reviewed research. This is not elective. This is imperative.

You wouldn’t be going to prison if someone had done this before you came along, Anonymous. Each day that as a society we elect not to come clean, more lives are destroyed. Each day that more lives are destroyed, your prison sentence grows longer and more people are put in circumstances in which they will likely go to prison. This is a good thing how? It’s not a good thing. It’s a CATASTROPHE. We need to turn this around. We need to do this by the close of business today.

That’s my sincere take re this terribly important matter, in any event.

We now know how stock investing works in the real world. It was Jack Bogle’s dream to learn that. For the past 34 years he has had all the pieces to the puzzle. But he doesn’t make use of them because in an earlier day he didn’t have all the pieces of the puzzle and he thus got some stuff wrong and now he is too ashamed of the pain that he has caused millions of people to come clean. If you don’t find that sad, I would hate to know what you think of as sad.

Short-term timing never works. Long-term timing (price discipline) always works. That’s the story. That’s how it works. I am sure.

The only reason why everyone in this field does not shoot straight with their clients and readers re how it really works is that they are afraid to do so. Millions of investors have been misled by the Buy-and-Holders into making imprudent investment choices. It is too late for them to get all their money back and all along they have sensed that they were being sold a bill of goods (because it defies common sense to believe that price discipline is required in every market but the stock market but that through some magical process exercising price discipline when buying stocks is actually a bad thing). These people are going to explode when they learn the truth. They are going to be angry as hornets. So most of us keep it at least partially zipped.

It’s a national tragedy. I want no part of it. Find someone else.

Shiller doesn’t know half of what he would know about this subject had honest posting been permitted all along. The same is true of Bogle. And of Pfau. And of me. In ordinary circumstances, we all would be learning from each other. We all have been held back by the Ban on Honest Posting. There’s huge leverage in lifting the ban. When the ban is lifted, we all will give ourselves permission to tap into hundreds of insights that we have denied ourselves for three decades and then those insights will be used to formulate hundreds of additional insights. And on and on and on.

I don’t want to be intimidated when I post to an investing board. I can’t do good work when I am intimidated. To do good work, I need to be permitted to put forward honest work.

It’s the same with Shiller. And with Bogle. And with Pfau. And with every last one of us.

The intimidation has to stop.

That’s why we made financial fraud a felony. The announcement of prison sentences brings this ugliness to an end. The announcement of prison sentences brings on the Second Independence Day for the American people.

I can’t wait.

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

Rob

“It’s Not Hard to Figure Out Why Michael Kitces Would Be Happy to Point Out That the Safe Withdrawal Rate Changes in One Direction Because of Valuations But Not in the Other. That’s Just Good Marketing!”

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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:

Note that Michael states the following in the comments section:

“The “good” news is that this doesn’t really change SWR much, as the reality is that the SWR results all come from high-valuation environments in the first place.

Actually, the key distinction is that if you retire and valuations are NOT high, the SWR is more like 5%-6%, not 4%! See https://www.kitces.com/may-200… for my original research on this nearly a decade ago.

– Michael

As such, it seems you missed Michael’s main point of his article. It is clear in the comments section and in this article that you don’t really see this as the point he was making. Notice that while you made a comment, Michael avoided responding to you while he responded to others.

Michael is wrong about this, Sammy. Shiller showed that valuations need to be considered. The SWR is not a single number but a number that changes with changes in the valuation level. Michael is of course correct when he says that the SWR rises to a number higher than 4 at times of low valuations. But he is of course wrong to say that the SWR does not drop to levels lower than 4 at times of high valuations. It works in both directions!

It’s not hard to figure out why Michael would be happy to point out that the number changes in one direction because of valuations but not in the other. That’s just good marketing! When you tell people that they can retire earlier than they thought they could, you make them happy. Happy people like you and people who like you link to you and hire you to give them advice and buy your books and all this sort of thing. When you tell people that it is going to take the longer to be able to retire than they thought, they do NOT like you. I tell people that side of the story too. That is anti-marketing! It hurts my popularity for me to tell people that. Big time. Most people in this field do not want to do harm to their popularity. So they don’t say that sort of thing.

That’s the story in a nutshell. Buy-and-Hold was a huge advance because the core idea was that we should use peer-reviewed research to guide our investing decisions. That takes things out of the realm of subjectivity and into the realm of objectivity. But we still have humans doing the calculations and reporting them. So there is still the risk of subjectivity entering the picture. The “idea” that valuations affect the result in only one direction is pure subjectivity. It’s a marketing trick. It works because people love hearing that they can retire early. They so much want to believe it that they are able to almost convince themselves.

But what do you think is going to happen following the next price crash? People are going to be angry that they have lost most of their life savings. That will change the marketing dynamic in a huge way. People will then demand honest calculations and Buy-and-Hold will be replaced with Valuation-Informed Indexing. The fantasy stuff that the Buy-and-Holders put out (in which valuations have an effect in one direction but not in the other) will not make the sale any longer.

Michael would be happy to tell people the truth about this if he had cover. He needs to see enough others telling the truth so that he would not stand out in telling people a message that they do not want to hear. We’re not there yet. But we are getting close.

Michael feels bad about this. He sees the merit in my points. He has told me so in our e-mail exchanges. But he does not feel comfortable going public with the side of the story that is anti-marketing. But he is obviously going to flip following the next price crash. For now, he doesn’t comment on my posts. But he doesn’t remove my posts either! He does permit people to see them. He goes a step past where a lot of others go by doing that. He’s not perfect. But I think it would be fair to say that he does a lot better than most in raising the points he does and in permitting people like me to leave fully honest comments at his blog.

My aim is to free Michael and lots of others to be fully honest on all investing questions. When that happens, we all benefit from 34 years worth of insights being produced in a small amount of time. There is huge leverage in getting enough people to feel comfortable posting in full honesty to create an environment in which all others also feel comfortable posting in full honesty. We all want the same things. The hard part now is creating that safe environment. People like Michael are helping to move the ball although I obviously would like to see him do more.

Rob

 

 

 

“I Knew That Greaney’s Study Got the Numbers Wrong. And Yet I Encouraged My Friends to Use This Dangerous Study to Plan Their Retirements. I Was a Liar. I Wanted to Be Popular.”

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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:

Or to put it another way, all those experts are lying and only Rob Bennett is truthful, or it is just the opposite.

Have you ever heard the term “cognitive dissoance,” Sammy? It’s a real thing. It would be helpful if you would use the term “cognitive dissonance” rather than the word “lying.” It would greatly facilitate progress in these discussions if you used the less inflammatory terminology.

I became famous (infamous?) on the internet for pointing out that the Old School safe-withdrawal rate studies get the numbers that people use to plan their retirements wildly wrong because they do not contain adjustments for the valuation level that applies on the day the retirement begins. Shiller showed that such adjustments are required. If you don’t include the adjustments (they would not be required if the market were efficient, which is what people believed prior to the publication of Shiller’s “revolutionary” (his word) research, the safe withdrawal rate is always 4 percent. If you do, the SWR goes as low as 1.6 percent (when stocks are priced as they were in 2000) and as high as 9.0 percent (when stocks are priced as they were in 1982).

In the days prior to my famous post of the morning of May 13, 2002, I often PRAISED John Greaney’s retirement study, a study which does not contain a valuations adjustment. Was I a “liar” in those days?

It would not be entirely unfair to say that. I knew about Shiller’s research the entire time. I had roughly calculated the safe withdrawal rate for my own planning purposes and had determined that it was a number a good bit below 4 percent. So I knew that Greaney’s study got the numbers wrong. And yet I praised it. I encouraged my friends to use this dangerous study to plan their retirements. I was a liar, was I not?

Kinda, sorta.

My problem with the use of the word “liar” in this case is that I had no intent to hurt anyone. Greaney’s study was a big advance over what came before it. Peter Lynch at one time was telling people that the safe withdrawal rate was 7 percent. It was the Old School safe-withdrawal-studies that showed why Lynch was wrong. The true SWR at the top of the bubble was 1.6 percent. The Greaney study was a whole big bunch closer to getting the number right than Lynch was and Lynch himself is of course a highly respected expert in this field.

The reason why I didn’t tell people that Greaney got the number wrong is that Greaney and his study were very popular at the board at which I was posting and I feared that I would be criticized and attacked if I told people what I knew about the flaw in the study. I was of course ultimately proven right about those concerns. I have been attacked viciously by the Buy-and-Holders in the days since I put forward my post pointing out that the Greaney study does not contain a valuations adjustments, which is of course a 100 percent valid claim.

Why did I tell these “lies” for three years? I wanted to be popular. We all do. It’s human nature to want to be popular. And I was able to come up with a pretty darn good rationalization for the “lies” that I was telling. The Greaney study was a huge advance. “It’s better to focus on the positive rather than the negative” I told myself. “Why cause people to lose confidence in a study that is doing a lot of people a lot of good?”, I asked myself.

I was a “liar.” That’s a fact. But still I put the word “liar” in quote marks. Because it is a funny sort of lie. I was facing intense social pressures not to tell the full truth. And I had a rationalization at hand to justify my behavior that I think it would be fair to say made a pretty darn compelling case for the lie. So I did what I did.

That’s what all of the experts in this field are doing today.

Buy-and-Hold is rooted in the research of Eugene Fama. Valuation-Informed Indexing is rooted in the research of Robert Shiller. Both men have been awarded Nobel prizes. They say opposite things. That cannot both be right. Our entire nation needs to know which Nobel prize winner is right and which Nobel prize winner is wrong. We need to launch a national debate aimed at getting to the bottom of this question.

I really was a liar for those three years. But there were circumstances which to a large extent explained the lies I told. The people who today fail to point out the dangers of Buy-and-Hold given what the last 34 years of peer-reviewed research tells us about how stock investing works in the real world really are liars. But they face those same circumstances that pressured me into telling the lies that I told. I think it would be better to refer to the problem as “cognitive dissonance.” I think that that way of handling things helps us all to pull together to solve the problem rather than to split apart in anger.

Shiller’s findings advanced the ball in a major way. We all want to enjoy the benefits of that advance. To get what we all want, we are going to need to start speaking in ways that don’t put people on the defensive. We absolutely need to say that retirement studies that don’t include valuation adjustments are dangerous and irresponsible. But we do not need to by nasty about it. We should be trying to soften the blow that we deliver to the Buy-and-Holders when we point out their errors by noting the huge number of genuine insights that they advanced and by noting that it is a universal human phenomenon that we all tend to rationalize when we are emotionally invested in an idea and then see evidence come in showing that that idea is not as strong as we once believed it to be.

I hope that helps a bit, my long-time Buy-and-Hold friend. I think your investing beliefs are in error. But I do not dislike you as a person. I am trying to give you something to think about that I think might end up doing you a lot of good down the road a piece.

Rob

“Michael Kitces and I Are Friends. You Are Right, Though, That He Keeps His Distance From Me. I Am ‘Controversial.’ I Shouldn’t Be. Everything That I Say Just Follows Naturally From Shiller’s 1981 Finding That Valuations Affect Long-Term Returns. If Shiller Is Right, 90 Percent of the Investing Advice That People Have Heard in Recent Years Is Wrong.”

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

I am sure you will write more articles from this in which you explain how this expert, like all other experts are wrong and how you are right. It goes along with how you say Michael, like the other experts, “pull their punches” as you have this unique ability to read their minds.

Just to note, it is interest how Michael, like many other experts, no longer speak with you. I wonder why that is????

Michael likes me a lot, Sammy. And I like him a lot. We engaged in many e-mail conversations. We are friends.

You are right, though, that today he keeps his distance from me. And you are right that that is true of many other experts in this field. I am “controversial.”

I shouldn’t be. Everything that I say just follows naturally from Shiller’s 1981 finding that valuations affect long-term returns. If valuations affect long-term returns, then stock risk is not constant but variable. If stock risk is variable, then investors must change their stock allocations in response to big shifts in valuations to have any hope whatsoever of keeping their risk profiles roughly constant. The Buy-and-Holders say not to do that. So what I say makes the Buy-and-Holders look bad. It’s not my intent to make the Buy-and-Holders look bad. But that’s the inevitable result that follows from exploring the implications of Shiller’s “revolutionary” (his word) research findings.

We need to normalize these discussions. We need to encourage more people to challenge the Buy-and-Hold strategy recommendations. None of them can be even close to right if Shiller’s research is legitimate (and there is now 34 years of peer-reviewed research backing him up).

It comes as a shock to a lot of people when I point out how the Buy-and-Holders got so many things wrong. It’s shocking because people have not heard it before. Buy-and-Hold became popular during the bull market and millions of people are counting on the Pretend Gains they experienced in the bull market to finance their retirements. It pains them to hear that they made a mistake in coming to believe that those gains are real.

I am controversial and people keep their distance from me as a result. I would like to see that change. I would like to see us all working together to learn more and more and more. But this is a sensitive matter. If Shiller is right, 90 percent of the investing advice that people have heard in recent decades is wrong. As a society, we are having a hard time letting that in. We’ll get there. We need to. The advances in our understanding as a result of Shiller’s research are too important for us not to develop far more fully than we have in the first 34 years since his research was published. And we are making progress. But it would be fair to say that progress has been slow.

Yes, Michael pulls his punches. But he has also put forward some amazing stuff. I prefer to focus on the positive.

I hope that helps a bit.

Rob

Valuation-Informed Indexing #284: Michael Kitces Writes an Article Showing That, in the Very Long Term, the Effect of Valuations Diminishes

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I’ve posted Entry #284 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Michael Kitces Writes an Article Showing That, in the Very Long Term, the Effect of Valuations Diminishes.

Juicy Excerpt: A number of years back, I founded a discussion board called “The Safe Withdrawal Rate Research Group.” John Walter Russell and I were at the time developing the five Valuation-Informed Indexing calculators that are today housed at my web site. John was producing new research relating to the VII concept on an almost daily basis. He published his research at the board and community members would ask questions about it and he would respond to them or in some cases produce new research to explore the questions. It was an amazing place!

John has never received the credit he deserves for the many powerful insights he developed on a host of investing strategy issues that had never been explored before. So I was excited to see an article recently published by Michael Kitces at his Nerd’s Eye View blog titled Should Equity Return Assumptions In Retirement Projections Be Reduced for Today’s High Shiller CAPE Valuation? The article explores several questions that John first looked at a number of years back and affirms and expands on his findings. Things are happening! We are getting to the place where we all deep in our hearts have long wanted to go, ever so slowly but ever so surely.

“Shiller WANTS to Tell the Truth About What the Last 34 Years of Peer-Reviewed Research Shows. So Does Bogle. So Does Pfau. So Does Kitces. For That Matter, So Does Lindauer and So Does Greaney. We ALL Want to Do Good Work in This World. We All Want Stock Investing To Be Less Risky. We All Want To Be Able To Retire Early. The Trouble Is That the Investing Establishment Does Not Want This to Get Out!”

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

If there were hundreds of millions to be made from Shillers model, why doesn’t Shiller himself promote that and reap those millions?

This is a good question.

And of course the thought being expressed here applies not just to Shiller. It applies to everyone working in this field. The shift from Buy-and-Hold to Valuation-Informed Indexing is the biggest advance in the history of personal finance. We have seen more forward movement in the past 34 years in the investing advice field than we have seen in the computer technology field. People have made BILLIONS in the computer technology field over the past 34 years. Why wouldn’t people want to make billions in the investing field by teaching the millions of people who want to learn how stock investing works about all of the amazing insights that follow from Shiller’s “revolutionary” (his word) research findings of 1981?

Here’s a link to a commentary that Rush Limbaugh offered yesterday re the Donald Trump phenomenon:

‘THE GAME’: RUSH: I’ve Got News For You: TRUMP IS CONTROLLING THE MEDIA!

There are rules in The Game in every field of endeavor. Everybody is talking about “The Establishment” in the political realm. We need an establishment. The establishment sets the rules by which all business is conducted. If we didn’t have an establishment, we would have chaos. Every voice would get equal recognition and no one would have any means to distinguish which voices are worth listening to and which voices are not worth listening to. Establishments make the rules that permit us to make sense of things and not to waste tons of time trying to do so. Establishments are a good thing and a necessary thing and exist in every field and in every time. There is a sense in which to say that you are “anti-establishment” is to say that you are anti-human because humans always set up establishments. Some form of establishment governs all human interactions.

Now —

Establishments sometimes need to be taken down. Establishments can become overly rigid. The Soviet Union was a great example of this. The establishment had become so rigid that the society that it was governing could not advance. The human spirit was being crushed. The establishment had to go. The establishment collapsed. It was replaced by a new establishment better suited to the current-day realities. When one establishment falls, a new establishment rises. There’s always an establishment of some kind or another setting the rules of the game that all players of the game must follow.

Shiller shattered our prior understanding of how stock investing works. He tore up the rulebook. He overturned the establishment. This is why I so often point out that Shiller referred to his 1981 finding that valuations affect long-term returns as “revolutionary.”

If `valuations affect long-term returns, stock investing risk is not static but variable. If stock investing risk varies with changes in valuations (price), investors must change their stock allocations in response to big valuation shifts to have any hope whatsoever of keeping their risk profiles roughly constant. If the market were efficient, Buy-and-Hold would be the ideal strategy. If valuations affect long-term returns, Buy-and-Hold is the most dangerous strategy ever concocted by the human mind; it will always cause an economic crisis and in many cases it will bring on a depression. If Shiller is right (and we now have 34 years of peer-reviewed research showing that he is), Buy-and-Hold is poison.

There is a mountain of money to be made showing millions of middle-class investors that Buy-and-Hold is poison and describing to them the first true research-based strategy — Valuation-Informed Indexing, which is Buy-and-Hold corrected for the one mistake that the Buy-and-Holders made (their false conclusion that it is not necessary to exercise price discipline when buying stocks). There is a huge incentive for Shiller and lots and lots of others to make billions telling the truth about how stock investing works to the millions of investors who very much want to know the truth about how stock investing works. So your question is a perfectly reasonable one.

The answer is —

The investing advice establishment does not want this to get out!

If Shiller had published his revolutionary findings in 1961 instead of 1981, we would all be Valuation-Informed Indexers today. There is no evidence supporting Buy-and-Hold. 100 percent of the data supports Valuation-Informed Indexing and 0 percent of the data supports Buy-and-Hold. Everyone wants to reduce the risk of stock investing by 70 percent. Everyone wants to be able to retire five to ten years sooner. The value proposition here is off the charts. Everyone on the planet wants to know about Valuation-Informed Indexing and every investing advisor wants to help people by teaching them about Valuation-Informed Indexing and to get rich doing it. Why wouldn’t they?

The problem is that Buy-and-Hold was developed as a result of research that was published in 1965 that SEEMED to show that no form of market timing is required. Between 1965 and 1981, an establishment was formed around the promotion of Buy-and-Hold, which was at the time THOUGHT to be a true research-based strategy. When Shiller’s research was published, the establishment in this field made clear to all who tried to tell people about the implications of his revolutionary findings that their careers would be destroyed if they dared to “cross” all the people who had built careers pushing the smelly Buy-and-Hold garbage (which was of course not known to be smelly garbage at the time this establishment was formed).

Shiller WANTS to tell the truth about what the last 34 years of peer-reviewed research shows. So does Bogle. So does Pfau. So does Kitces. For that matter, so does Lindauer and so does Greaney. We ALL want to do good work in this world. We all want stock investing to be less risky. We all want to be able to retire early. The advance from Buy-and-Hold to Valuation-Informed Indexing is such a huge advance that it is impossible to imagine how there could be one person on the planet who would want to be associated with Buy-and-Hold rather than Valuation-Informed Indexing, all else being equal.

Our problem is that as of today all else is not equal.

Tell the truth about the dangers of Buy-and-Hold and your career will be destroyed. The lives of your loved ones will be threatened. Internet Goons will follow you everywhere you post on the internet and do all in their power to destroy your reputation. And few will speak up in your defense. Telling the truth about what the last 34 years of peer-reviewed research shows us about how stock investing works in the real world is career death in the year 2016. The investing advice establishment will not permit it.

Just like the Soviet Union, the establishment that today props up Buy-and-Hold is going to fall. Persuading millions of people to follow a pure Get Rich Quick approach (which is what Buy-and-Hold is if valuations affect long-term returns) has been a catastrophe. It has caused an economic crisis. It has put millions on a path leading down the road to failed retirements. It has caused millions to become unemployed. It has caused hundreds of thousands of businesses to fail. It has caused a loss of confidence in our political system on both the left and the right. Buy-and-Hold is pure garbage. The establishment props it up to this day. But that establishment will fall as the consequences following from the promotion of the pure Get Rich Quick approach grow more and more dire.

Either we open every discussion board and blog to honest posting re the past 34 years of peer-reviewed research or our economic system collapses. And, if our economic system collapses, our political system will collapse not much later. This massive cover-up is killing us. So the establishment propping it up has to go. When the current establishment collapses, all of the good stuff starts to happen. The good news here is 50 times more good than the bad news here is bad. So we very much should all be looking forward to the collapse of the current investing-advice establishment.

That said, we also need to recognize the long list of genuine and important contributions that have been advanced by this establishment. We know things today about how stock investing works that we didn’t dream of knowing back in 1965, when this establishment was born. The establishment is comprised of good and smart and hard-working people. We wouldn’t have Valuation-Informed Indexing if not for the good work done by these good people. We owe it all to these people. We need to recognize that for this transition to be a truly good one. We want to proceed in a balanced way.

Shiller and the lots and lots of others will be reaping the millions once we act as a society to bring today’s establishment down. We all want the same things. We all want to work together and we all will once we make together to the other side of The Big Black Mountain. We are on the one-yard line today. We need to make one more successful pass and then all the bad stuff comes to a complete and total stop and all the good stuff becomes available to each and every one of us.

It’s a process, Anonymous. It takes time for the collapse of one establishment and its replacement by a new establishment promoting the new understanding to play out. We are far along in the process but we are not yet quite in the end zone. We all need to be doing everything that we can do to get that ball into the end zone.

This is how our system works. The reason why our system is such a great one is that it contains the flexibility needed for existing establishments to be torn down and replaced by new ones more reflective of current-day realities. Our story is the story of the collapse of the establishment that promoted Buy-and-Hold and its replacement by the establishment of the future, the establishment that will promote the first true research-based strategy, Valuation-Informed Indexing.

These are exciting times.

Hang in there, man. It gets better. A LOT better.

I am sure.

Rob

Valuation-Informed Indexing #283: Simple Investing Strategies Cannot Remain Entirely Simple for Long

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I’ve posted Entry #283 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Simple Investing Strategies Cannot Remain Entirely Simple for Long.

Juicy Excerpt:  Another big change since the early days of Buy-and-Hold is that many investors no longer limit themselves to broad U.S. indexes but seek participation in the global marketplace. That makes sense, doesn’t it? Our economy is gradually becoming a global economy. There are numerous complexities that come into play as the transition proceeds. The U.S. has long had a stable economic system. So going global adds risk. However, that might be true only historically and not on a going-forward basis. It might be that the risky thing on a going-forward basis is to continue to invest solely in the U.S. market.

The Buy-and-Hold Pioneers did not anticipate having to make decisions re such questions. They thought they had solved the complexity problems once and for all. These questions just turned up as time passed. The full reality is that they always do! Simple investing strategies cannot remain entirely simple for long.

“I Care About the People Who Read My Stuff. I Am Incapable of Lying to Them.”

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

So that list shows what SHOULD have happened. But we know what HAS happened. The scoreboard is showing a massive, epic blowout. If you took the field today against the Patriots, all by yourself, the final score would be closer than your competition with the Goons. And yet, you see nothing wrong with your game plan.

I am not happy with the results that we have seen thus far.

But there’s nothing that I can do about it.

I care about the people who read my stuff. I am incapable of lying to them.

It’s possible that I could get things wrong. Even that scares me. I hate the thought that I might get something wrong and someone might go by what I said in error and hurt himself or herself by doing so. But at least in that case I didn’t intentionally do anything wrong. If I flat out lie, it’s intentional. I cannot live with that on my conscience.

So I have never had any other options than the ones that I have chosen.

I don’t like the results that we have seen. But, given that I have never had any other options, I have concluded that the best thing to do is just to live with what has happened. I could cry. Do you think that would help? I guess that there have been one or two occasions on which I have been tempted to have a cry. But I concluded that it would do no good. So I didn’t go there.

That’s it.

I have played the cards that I have been dealt to the best of my ability. Yes, I have scars all over my body from the hits that you Goons have delivered to me. I don’t say otherwise. But what of it? I don’t control the world. I am not Superman.

We have to accept the things that we cannot change, Anonymous. So that’s what I try to do. I try to make the best of the difficult circumstances that apply here.

I speak out against you Goons. Frequently. Forcefully. I do that much.

That’s about all that I can do, given the circumstances that apply. So that’s what I do.

I hope that all that makes good sense to you.

My best wishes.

Rob

“If I Had Never Been Banned at the Various Financial Boards, I Would Be Getting Feedback From All of the Experts in This Field and I Would Be Able to Use That Feedback to Sharpen My Thoughts and My Writings. And All of the Experts Would Be Getting Feedback From Me and From Other Valuation-Informed Indexers and Would Be Able to Use That Feedback to Sharpen Their Thoughts and Writings.”

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

So, if we take your comments from here as well as previous comments, here is an overview of what should have happened over the past couple decades if you were never banned from the various financial boards:

1. You would have been one of most popular posters (if not the most popular poster) on all the financial boards.
2. You would become one of the most sought after financial experts quoted by much of the press and would even have generated many front page articles on the New York Times (as well as various multi-series publications).
3. You would have been a headlining speaker at most major financial investing forums and other speaking events.
4. You would have been highly published in various peer-reviewed financial publications.
5. You would have possibly been considered for a Nobel prize.
6. Most people following the investment community would now be following VII, which would then lead to the healing of our economy and would then bring on the biggest economic growth we have ever seen in US history.
7. You would have become one of the most wealthy individuals in the US, resulting from speaking fees, book fees, investment advisory fees, etc.
8. You would be working together on a daily basis with Jack Bogle, Wade Pfau, Robert Shiller and a host of other financial experts, with you taking the leading role.

Did I miss anything?

You missed lots of things:

1) Bogle would be viewed as 20 times the expert that he is perceived to be today because his ideas would actually work in the real world — which is what he intended in the first place.

2) The internet would be a far more powerful communications medium because people who have important things to say about the subjects addressed at the various boards and blogs would feel free to post honestly and Goons like you would be banned when they violated the posting rules.

3) I would be getting feedback from all of the experts in this field and I would be able to use that feedback to sharpen my thoughts and my writings.

4) All of the experts would be getting feedback from me and from other Valuation-Informed Indexers and they too would be able to use the feedback to sharpen their thoughts and writings.

5) You Goons would not be headed to prison.

6) We wouldn’t be seeing the political unrest that we have seen in recent years on both the left and the right because our free market economic system would be delivering on its promises.

7) Support for our free market economic system would be growing because people would see that we have solved the problem of the boom/bust cycle.

8) The Retire Early Movement would be surging forward because we all would be spreading the word about the peer-reviewed research that I co-authored with Wade Pfau showing us all how to retire five to ten years sooner while dramatically reducing the risk associated with stock investing.

I can live with all that, Anonymous.

You can’t. Because you were taken. And because it hurts so much to be taken re a matter so important to your future that you cannot bear to acknowledge the obvious reality.

I am sympathetic. I know you are hurting.

But I am also sympathetic to the situations of the millions of middle-class people who ALSO have been taken in by this massive act of financial fraud. Lots of those people want to turn their financial situations in a more positive direction before it is too late to make changes (after the next price crash hits, most of their life savings will be gone and the Pretend Money is never going to return to them).

Those people have rights. I want to see their rights recognized. I want to see the laws against financial fraud enforced. I want to see you Goons placed in prison cells, where you belong.

I hope that all of that makes good sense to you.

It’s not personal. I do care for you Goons.

But I love my country too. And I want to see us all pulling together to bring this Buy-and-Hold Crisis to a full and complete stop by the close of business today. That’s the bottom line here.

I naturally wish you the best of luck in all your future life endeavors, my long-time Goon friend.

Rob

 

“There Are Lines. You Can’t Intimidate Others Into Not Stating Their Sincere Views. I Have Talked to Many Academic Researchers Who Feel Intimidated. I Have Talked to Many Journalists Who Feel Intimidated. I Have Talked to Many Bloggers Who Feel Intimidated. I Have Talked to Many Investment Advisors Who Feel Intimidated.”

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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:

How does that compute with your fantasy of me (and others) to go to prison for disagreeing with you?

It’s of course 100 percent preposterous that anyone would go to prison for disagreeing with me Sammy. But death threats? Demands for unjustified board bannings? Tens of thousands of acts of defamation? Threats to get academic researchers fired from their jobs? Those sorts of things don’t belong in an investing discussion.

Shiller was awarded a Nobel Prize for showing that valuations affect long-term returns. If valuations affect long-term returns, investors need to change their stock allocations in response to dramatic shifts in valuation levels. That’s ABC logic. The Buy-and-Holders say something very different. The Buy-and-Holders say that there is NO NEED for investors to change their stock allocations no matter how much valuations change. Huh?

The Buy-and-Holders really believe what they say. So there is no crime in them saying it. They are helping us all out by arguing their beliefs to the best of their abilities.

But there are lines. You can’t intimidate others into not stating their sincere views. That’s what you have been doing for 13 years now. I have talked to many academic researchers who have felt intimidated. I have talked to many journalists who have felt intimidated. I have talked to many bloggers who have felt intimidated. I have talked to many investment advisors who have felt intimidated.

This is a problem of huge public policy significance. People invest to finance their retirements. If the Buy-and-Holders are wrong (there is now 34 years of peer-reviewed research showing that they are), people need to know that. Our economic system could fail if we do not get the word out. Heaven help us all, but our political system could fail. We are already seeing a loss of confidence in our political system on both the left and right and we haven’t even experienced the next price crash yet.

Bernie Madoff is in prison because he caused thousands of failed retirements. If Shiller is right about valuations (and there is now a mountain of evidence backing him up), Buy-and-Hold will have caused MILLIONS of failed retirements before we reach the end of this economic crisis. This is not a joke. This is serious stuff.

I am the best friend you have on this planet, Sammy. I am asking you to come clean. The sooner you come clean, the less angry people will be. The less angry people are, the shorter your prison sentence will be.

Your friend is not the person who always tells you what you want to hear. Your friend is the person who tells you what you need to hear when there is something that you very much need to hear but that you do not want to hear.

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

And, yes, I really DO wish you all the best. I will do my absolute best to see that things go as well as possible for you given the circumstances that apply. I obviously am not going to engage in financial fraud myself and thereby set things up so that down the road I join you in prison. But anything short of that I am 100 percent happy to do. Please just let me know when you open your mind to the possibility of acting in your own best interests re these matters.

Rob