A Rich Life

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

Valuation-Informed Indexing #281: Twelve Claims Made in Irrational Exuberance That Should Be Explored in Book-Length Examinations — Part One

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I’ve posted Entry #281 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Twelve Claims Made in Irrational Exuberance That Should Be Explored in Book-Length Examinations — Part One.

Juicy Excerpt: “It is a serious mistake for public figures to acquiesce in the stock market valuations we have seen recently, to remain silent about the implications of such high valuations, and to leave all commentary to the market analysts…. The valuation of the stock market is an important national — indeed international — issue. All of our plans for the future, as individuals and as a society, hinge on our perceived wealth, and plans can be thrown into disarray if much of that wealth evaporates tomorrow.” (Page 204)

If millions of retirements fail, we will be facing the biggest social catastrophe in our nation’s history. We all need to know whether it is the Fama model (Buy-and-Hold) or the Shiller model (Valuation-Informed Indexing) that gets it right.

“Shiller Did Something Huge. He Changed the History of Investing Analysis. But, If I May Say So, I Think That I Am in the Process of Doing Something Equally Huge. Shiller’s Findings Don’t Really Do Us Any Good If We Don’t Know How to Change Our Stock Allocations As a Result of What He Found. Someone Has to Get the Ball Rolling. That’s My Aim.”

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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:

What you are doing is not “work”. It is just way of avoiding work by creating some imaginary world. You then come up with unrelated examples and try to use the to justify your position when they have zero relatability to what you are doing. all of this is in an effort to try and convince your family and others that you haven’t been wasting your time and that there is some big payoff coming down the road. What you really have become is an internet troll, speeding hours on end making up stories about people and events.

I think that what I am doing is important work, Sammy.

I wish that someone had done what I am doing years before I came on the scene. Shiller published his “revolutionary” (his word) findings in 1981. Say that someone had done what I am doing today at that time. If that had happened, we would all be free today to post about the hundreds of amazing insights that we had developed together over the past 34 years. We would all be better off.

I’ve talked about how many sites have banned me even though I have never once violated any posting rule. The site owners that have done this often feel a need to justify their behavior. They sometimes say that my posts are “Disruptive.” That’s true in a way. Buy-and-Holders get upset by what I have to say. That’s a stone cold fact. It is disruptive for people to learn that the investing strategies they have been using to finance their retirements are in fact not supported by the last 34 years of peer-reviewed research.

I have a catch-phrase that I use in response to this argument. I say: “Let’s Disrupt!” People think of disruption as a bad thing. That’s why some sites use that word to justify bannings in cases where no posting rules have been violated. Disruption certainly can be a bad thing. Behavior that violates the common posting rules certainly is disruptive and certainly should be banned. If you engage in personal attacks or something like that, that is the form of disruption that is bad and that properly should be banned.

But what if you tell people about the implications of the last 34 years of peer-reviewed research in this field? That’s hugely disruptive. But in a powerfully positive way. That’s a learning experience. All learning experiences are disruptive. Good for learning experiences! Good for disruption!

The Wright Brothers were disruptive when they invented the airplane. Steve Jobs was disruptive when he created the IPhone. The Beatles were disruptive when they released “I Want to Hold Your Hand.” Rosa Parks was disruptive when she refused to move to the back of the bus. Good for the Wright Brothers and for Steve Jobs and for the Beatles and for Rosa Parks! Good for Disruption! Let’s Disrupt!

We are working our way through a process. I wish that it could be done in a different way. Obviously. I don’t like having to serve as a punching bag for you Goons. Who would?

But I want everyone to feel free to post honestly about the implications of Shiller’s research findings without feeling any sense of hesitation whatsoever. I have learned a huge amount from my friend Jack Bogle. I want to learn more from him. I will be learning more from him once he comes to feel free to acknowledge that he got some things wrong and that there might be better strategies than the ones he endorsed in the days before Shiller published his revolutionary research findings.

No one can do good work when he feels intimidated. Not one person in this field is doing his best work today. Because we are all afraid to hurt the feelings of the Buy-and-Holders by saying exactly what we believe about how stock investing works in the real world. We are hurting ourselves by letting the intimidation tactics of the Buy-and-Holders cause us to engage in self-censorship. We have an obligation to ourselves and to our friends and to our professions and to our country to shoot 100 percent straight re every question that comes up. I am 100 percent sure that that is so.

Shiller did something huge. He changed the history of investing analysis. But, if I may say so, I think that I am in the process of doing something equally huge. Shiller’s findings have done only 10 percent of the good that they will do once they are being openly explored at every investing board and blog on the internet. There is HUGE leverage in opening the internet up to honest posting on the implications of Shiller’s findings. In days to come, we are going to learn and then learn some more and then learn some more. It is going to be amazing.

Someone has to get the ball rolling. That’s my aim. I want to get everyone posting his or her honest beliefs. Is achieving that end not every bit as important as what Shiller did? He advanced the ball intellectually. I am seeking to advance it in a practical sense. Shiller’s findings don’t really do us any good if we don’t know how to change our stock allocations as a result of what he found. If we gain recognition of our right to post honestly, we will come to know that. Each day, we will gain more and more knowledge. What’s the downside?

I love the work that I am doing. Re the content side, I couldn’t be happier. Re the process side, this has been an ugly path. I obviously don’t like the abusive stuff that I have seen. But that side of things is just a reality that we all have to cope with, in my assessment. I wish that it weren’t there. But it is there. We can ignore it and remain in ignorance. Or we can struggle to overcome it and in time bring on a second Independence Day for U.S. investors.

I am proud to be leading the effort to help us all achieve a second Independence Day. You don’t approve as of today. I venture to guess that you will have a different opinion of things following the next price crash, when you will be able to see in stark terms just how important Shiller’s findings have turned out to be. The 1981 finding that valuations affect long-term returns is the biggest advance in our understanding of how stock investing works ever achieved in our history. We all need to be exploring these matters on a daily basis. We all will be living better lives once we make it together to the other side of The Big Black Mountain.

That’s my sincere take re these terribly important matters, in any event. I could be wrong. I don’t say different. But I am not able to see how I could not try my hardest to help us all out given how important an advance I believe this will turn out to be. I certainly want to give it my best shot. I can do no more and I can do no less, you know?

I hope that helps a bit, my good friend.

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

Rob

“I Watched a Movie Monday Night (‘Compliance’) That Shows How Such ‘Conspiracies’ Really Do Happen in This World When Authority Figures Say Something And Ordinary People Feel Intimidated Into Not Speaking Up About the Absurdity of What the Authority Figures Are Saying. The Strange and Unfortunate Events That Transpire in the Movie Came to an End When One Man Took a Stand and Said That He Just Wouldn’t Go Along With the Insanity. Most People Are Scared. I Am Scared. But I Am Even More Scared of What We Are Going to See If No One Stands Up.”

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

It is a simple question Rob. If you lack sufficient funds to last through your entire retirement, why don’t you get a job?

The answer is that the work that I am doing is important work. The fact that I am not able to make money today doing this work is trivial given how important it is that this story be told. I am confident that I will make plenty of money on the other side, after we all reach agreement that the implications of Shiller’s “revolutionary” (his word) findings must be explored in great depth by the many thousands of people who work in this field.

The big problem that I have, Sammy, is my claim that the story has been covered up for 34 years. That claim can easily be verified by anyone who cares to check it out. But it sounds implausible. We live in a free society and there is a mountain of money to be made by anyone who offers a better approach to stock investing. So it is just not believable that something like this could be covered up for so long. The way that you Goons often put it is that people would have to believe in a massive “conspiracy” to accept what I say.

I watched a movie Monday night that shows how such “conspiracies” really do happen in this world when authority figures say something and ordinary people feel intimidated into not speaking up about the absurdity of what the authority figures are saying. The story told in this movie is every bit as crazy as the story I tell about how the implications of Shiller’s Nobel-prize-winning research have been ignored for 34 years. The movie is titled “Compliance.”

Set forth below is a link to an article on the movie that calls it “the most disturbing movie ever made.” I agree with that assessment. I came within an inch of turning the movie off halfway through because the events that transpire are so insanely implausible. I rented the movie because it is “inspired” by true events. But it was obvious to me that the people making the movie took great liberties with their “inspiration.” At least I thought that until I checked it out. There was a 20/20 episode made about the events that are the focus of the movie. The events took place in a McDonalds and everything portrayed in the movie was captured in a surveillance video. One of the characters in the movie in real life was sentenced to prison for five years because of the role he played (he had zero intent to commit a crime when he was asked to drive to that McDonalds that night to assist in a law enforcement action). Every one of the many shocking events portrayed in the movie happened in real life.

http://www.huffingtonpost.com/…

The humans are strange creatures, Sammy. We are NOT 100 percent rational beings, as Buy-and-Hiold presumes. We are not. We get ourselves into a lot of trouble when we try to flatter ourselves by pretending that we are. We need to start telling the truth about what we have learned in the past 34 years about how stock investing works in the real world. That’s my sincere belief, in any event.

The strange and unfortunate events that transpire in the movie came to an end when one man took a stand and said that he just wouldn’t go along with the insanity. His sanity caused the manager of the McDonalds to place the phone call that revealed the entire pretend police investigation as a sham. Someone has to take a stand to bring these sorts of things to an end. Most people don’t want to be the one. Most people are scared. I am scared. I get it why other people are scared. But I am even more scared of what we are going to see if no one stands up. So I work up my courage each day and do what I can do. I can do no more and I can do no less.

I hope that helps a bit.

My best wishes to you and yours.

Rob

“The Thing That I Loved About Buy-and-Hold In the Days When I Carried Around a Membership Card in My Wallet Was That Buy-and-Hold Was the Only Strategy Rooted in the Scientific Method and the Scientific Method Is All About Skepticism and About Rooting One’s Beliefs in Evidence Rather Than Just Going By What Feels Right or What Sounds Plausible. The Buy-and-Holders Lost Me When They Became Too Dogmatic Even to Consider the Possibility That They Might Have Somewhere Along the Line Made a Mistake. Valuation-Informed Indexing Is What Buy-and-Hold Used to Be, What Buy-and-Hold Was Meant to Be, What Buy-and-Hold Should Be.”

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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:

Does the 15 yr old realize how strange you are yet?

Timothy is 16.

Robert is 13.

I was expressing skepticism about something at lunch the other day (it might have been a claim that someone made on an Amazon review about the battery life for a laptop computer) and Robert said: “Dad, you have trust issues.” That made me laugh. That has relevance to our investing saga, in my assessment.

The thing I loved about Buy-and-Hold in the days when I carried around a membership card in my wallet was that Buy-and-Hold was the only strategy rooted in the scientific method and the scientific method is all about skepticism and about rooting one’s beliefs in evidence rather than just going by what feels right or what sounds plausible. The Buy-and-Holders lost me when they became too dogmatic even to consider the possibility that they might have somewhere along the line made a mistake.

Valuation-Informed Indexing is what Buy-and-Hold used to be, what Buy-and-Hold was meant to be, what Buy-and-Hold should be. There will come a day when some young whippersnapper will put up a post that will become famous on the internet for showing where I went off the track. That’s just the way of the world. I pray that I own up to the mistake instead of dragging everyone through 13 years of muck pretending that the obvious (once it is uncovered!) mistake really isn’t a mistake for those willing to stand on one leg and dance to the beat and twist their mind into a pretzel shape.

But, heaven help us all, I may well behave as poorly as Bogle has and as poorly as Greaney has and as poorly as Lindauer has. How often do we become the very thing we fight? Great novels have explored this tragic aspect of human nature.

Yowsa!

Rob

“If Michael Kitces Tried Being Fully Honest, I Would Back Him Up. And, If Michael and I Were Both Fully Honest, Wade Pfau Would Join Us. Then Rob Arnott Would Sign Up. Then Shiller. Then Bogle. And On and On. There’s Safety in Numbers. And There Will Be Even More Money to Be Made Promoting Valuation-Informed Indexing As There Is Promoting Buy-and-Hold Today Once This Massive Act of Financial Fraud Has Been Widely Exposed. All of Us Who Long to Do Honest Work in This Field Need to Stick Together to Make Our Little Dream Come True.”

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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:

“Michael is a super-smart guy and a super-nice guy ”

So, is Michael Kitces going to jail, Rob?

I don’t think that Michael will be going to jail.

But it’s not me who decides the matter, Anonymous. It’s the millions of middle-class investors whose lives are in the process of being destroyed who will decide the matter.

If I were in Michael’s shoes, I would not play it in the way that he has played it. I would speak out a lot straighter and a lot stronger. Those millions of people are going to be very angry when they realize how they have been lied to. I wouldn’t be taking any chances. I would be calling the Buy-and-Holders out on their b.s. if I were in Michael’s shows.

Michael wants to tell the truth. That’s as clear as clear can be. He says a lot of things that others don’t say. I have a quote from him at the slider at the top of every page of this site. In that quote, he says; “There are time-periods where stocks are a terrible addition to that portfolio. Yet inexplicably we as planners STILL tend to suggest that it is risky not to own stocks when in reality the only risk is to our business.” That’s a pretty darn clear statement. It’s to Michael’s great credit that he has been willing to state things that clearly. Few in this field are willing to do so. In relative terms, Michael is an amazing straight-shooter.

To anyone paying attention, that statement does the job of warning people about the dangers of Buy-and-Hold. But you and I and Michael and Bogle and Shiller and everyone else know that for most of us, that doesn’t do the job. We all have a Get Rich Quick urge residing within us. We all want to live in a fantasy world where this might be the first time in history when a Buy-and-Hold strategy actually worked for one or two long-term investors in a galaxy far, far away from this one.

The phenomenon that Michael is pointing to in his statement is not so inexplicable as he suggests. There is a mountain of money to be made in this field by anyone willing to tell the Buy-and-Hold lies. Michael has seen lots of others raking in that easy money and naturally he wants to grab some of it himself. But he has a conscience. What to do, what to do? He shoots straight with that wonderful comment and thereby satisfies his conscience. And then he rationalizes not calling out Bogle and the other Wall Street Con Men on all the other lies that they put out on daily basis. So he makes good money and still is able to live with himself.

Not this boy, you know?

I don’t want to tell the Buy-and-Hold Lies. I don’t want to destroy the lives of the people who listen to what I have to say about stock investing. I don’t think I should have to. I don’t think Michael should have to either. Nor do I think that Shiller should have to do that. Or Bogle. Or you. Or anyone.

We are on the one-yard line, Anonymous. We have 34 years of peer-reviewed research showing that Buy-and-Hold is the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind. I think that Michael Kitces could get away with being more honest than he has been a lot more often than he has been even somewhat honest. He could do more. If Michael Kitces tried being fully honest, I would back him up. And if Michael and I were both fully honest, Wade Pfau would join us. And then Rob Arnott would sign up. Then Shiller. Then Bogle. And on and on and on. There’s safety in numbers. And there will be even more money to be made promoting Valuation-Informed Indexing as there is promoting Buy-and-Hold today once this massive act of financial fraud has been widely exposed. All of us who long to do honest work in this field need to stick together to make our little  dream come true.

I am going to tell people after the next crash that Michael tried very hard to be honest. I am going to explain how he was willing to put his neck on the line to help out millions of middle-class investors like them. And I am going to tell them that Michael had good reason to be hesitant to be fully honest, that his fears that you Goons would destroy his career if he dared to take it one step further than he has were well-founded, that he had every reason to believe that you would follow through on your threats and that you have demonstrated in real life over and over again that you will stop at nothing to block people from learning the truth about this massive act of financial fraud. And that Bogle and lots of other big names in this field have made clear that they are 100 percent behind you in every criminal act in which you engage.

Will that get Michael off the hook?

I think so. Probably.

But also possibly not. I don’t know for certain. There has never before in U.S. history been an act of financial fraud this big. We are in uncharted territory.

It’s possible that some people will say that Michael is more to blame for this economic crisis than you Goons. He hasn’t done the evil things that you Goons have done. But you Goons are just internet Goons. People don’t expect much of you. Michael does this for a living. People have a right to expect more from him. His small and subtle dishonesties are arguably more damaging than your big and obvious ones. I am going to make a case for him. I am going to work it hard. I love Michael. But I cannot say with absolute certainty how things are going to go for him. It’s not for me to say. We are talking about a massive case of financial fraud here. There are going to be millions of people who are going to be very, very angry.

I am not Michael’s keeper. He is a grown-up. He is a professional. He has to take care of himself. I have urged him not to engage in any dishonesties whatsoever. He has elected to play it this other way. I am sure as heck not ever going to play it the way he has elected to play it. No way, no how. No can do. I can’t go for that. But Michael is his own person and he gets to decide how he plays it. That is as it should be, in my assessment.

Do you want to know what my bottom line on this is?

My bottom line is that Michael has been a fool to put himself in circumstances where these sorts of questions even need to be asked.

No one will be looking at any of Rob Bennett’s statements following the crash and wondering whether he will end up in a prison cell or not. I have been very clear how I feel about the massive act of financial fraud. I have THOUSANDS of statements in opposition to the criminal acts in the Post Archives. I hope to have lots more in the record before the crash comes. I am covered, Anonymous. If only one person on Planet Earth is covered, it’s me.

Good for me, you know?

I hope that Michael ends up being sufficiently covered. He’s a great guy, he’s a smart guy, he tries to be honest, I have learned a lot from him. I love the guy. But I can’t say that I don’t think that he had made a mistake by leaving himself at least somewhat open to charges that he participated in this massive act of financial fraud. I don’t think that will get him sent to prison. I am certain that it will do harm to his reputation.

Was it worth it?

In my mind, it wasn’t worth it. When I started writing about investing, I considered it 100 percent impossible that I would ever engage in deliberate deception on a matter relating to people’s retirements. I am 100 percent certain that the same was once true of Michael Kitces and Wade Pfau and Robert Shiller and Jack Bogle. Yet here we are. They let themselves be sucked in and here we are asking whether Michael Kitces — a great guy and a smart guy — will be going to prison following the next crash.

I sure hope not, you know? But it sure makes me sad that we even have to discuss the matter. And it sure makes me think that Micheal messed up in a big way somewhere down the line when he got on a pat that over time led him to being in circumstances where I cannot honestly give a definitive answer to the question.

We’ll see how it all turns out, Anonymous. I will be doing everything in my power to insure that as few of my Buy-and-Hold friends as possible end up in prison cells and that the prison terms of those who do are as short as possible given the circumstances that apply. Re that you have my pledge.

The rest is out of my hands.

My best and warmest wishes to you and yours, my old Goon friend.

Rob

Valuation-Informed Indexing #280: It’s Not Possible for a New Understanding of How Stock Investing Works to Become Popular Until People Lose Confidence in the Old Understanding

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I’ve posted Entry #280 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called It’s Not Possible for a New Understanding of How Stock Investing Works to Become Popular Until People Lose Confidence in the Old Understanding.

Juicy Excerpt:  There’s no way to know for certain that Shiller is right. The historical data supports him. But data from earlier times can be dismissed on the grounds that the economic conditions under which that data was produced no longer apply. And the data from the time of Shiller’s finding until today is inconclusive. From 1981 forward, Buy-and-Hold has performed slightly better than Valuation-Informed Indexing. Valuation-Informed Indexers say that that’s because stock prices are high today; Valuation-Informed Indexing will be revealed as the superior strategy with the next price crash, which is inevitable according to the Shiller model. But that way of thinking about things begs the question — to say that Valuation-Informed Indexing will prove superior because today’s valuations will produce another crash is to say that Valuation-Informed Indexing will prove superior once again because Valuation-Informed Indexing has always been superior. The crash hasn’t come yet. So we don’t know for certain.

To be fair, the Buy-and-Holders are begging the question too. They say that we cannot know that another crash is coming soon because the market is efficient and returns are thus not predictable. All of the beliefs of those following both strategies follow from their core premises. If the market is efficient, Buy-and-Hold is the ideal strategy. If valuations affect long-term returns, Buy-and-Hold is dangerous.

I believe that I need to point that out to my Buy-and-Hold friends. I don’t want to hurt their feelings. I want them to consider what might happen to their retirement portfolios if it turns out that Shiller is right. I criticize their strategy not to upset them but to alert them to a new way of thinking about how stock investing works that I strongly believe we all need to know about.

Goon Poster Quoting Rob in 2013 and 2015: “Then (2013) — ‘The Entire Historical Record Indicates That We Should See the Crash by the End of 2015.’ Now — ‘The Data Says That We Should See It By the End of 2018. But That’s the Farthest-Out Date.’ Nothing But Your Own Quotes. If That’s Goonish, Doesn’t That Make You the Goon?”

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

Then (2013): “I can give the reasons why I view the end of 2015 as being an outside date…But the entire historical record indicates we should see the crash by the end of 2015.”

Now: “I never said that it was certain that we would see a crash by the end of 2015…The data says that we should see it by the end of 2018. But that’s the farthest-out date…”

“But it’s not a blown call.”

Nothing but your own quotes. If that’s goonish, doesn’t that make you the goon?

Do you think that Shiller was wrong when he said near the end of 1996 that investors who were heavily invested in stocks would come to regret it within the next 10 years?

We didn’t see the crash until near the end of 2008. Shiller was off by two years.

He was technically wrong. But he got something very important very right. We were headed toward an economic crisis. He saw it coming. Few others did. Jack Bogle certainly was not saying what Shiller was saying.

Had we listened more carefully to what Shiller was saying in 1996, we could have avoided the economic crisis that began in 2008. Millions of people who are unemployed today would not be unemployed today. Millions of entrepreneurs who have seen their businesses fail would not have seen their businesses fail. Millions of people on both the left and the right who have begun to lose confidence in our political system would not have begun to lose confidence in our political system. Millions of people who are on their way to suffering failed retirements would not be on their way to suffering failed retirements.

I think we should have listened more carefully to what Shiller said in 1996. That’s my sincere take, Anonymous.

If you want to say “Nyeh, nyeh, nyeh, Shiller was off by two years.” I guess you can do that. I cannot stop you. But it is my view that you are focusing on the small error contained in Shiller’s words and ignoring the huge breakthrough insight also contained in Shiller’s words. He got something wrong. That’s so. But he also got a much bigger thing right. That’s part of the story too. Both things are realities and both realities need to be taken into consideration by every investor alive today.

If you follow me around and press me to make short-term predictions about how the market is going to perform in future days, I am going to get some of them wrong. You shouldn’t be surprised by that. The entire historical record shows that anyone trying to predict the future turns of the market is going to get some of them wrong. I have no better ability than anyone else to get them all right. So I am certainly going to get some of them wrong.

If I want to maintain a perfect record, I am just going to have to refuse to make predictions. But I don’t intend to play it that way. You ask me to make predictions because you want to be able to hold me accountable. I think it is healthy for me to be held accountable. So there are circumstances in which I will agree to make predictions. And in some cases I will get them wrong. There’s nothing that I can do about it. That’s just the way it works.

Now –

If you were fair-minded, you would put the wrong prediction in its proper context.

I said on the morning of May 13, 2002, that Greaney got the numbers wildly wrong in his retirement study. You Goons pretended to believe that I was the one in the wrong. Ten years later, the Wall Street Journal ran a story saying that the 4 percent rule is a big pile of garbage. So did the Economist magazine. So did Smart Money magazine. So did the Financial Mentor site. So did about 30 other leading publications in this field. Greaney ruined thousands of lives with his false claims about the safe withdrawal rate. I told the world about his mistake. That’s a big deal. I would have saved millions of people from suffering failed retirements had my May 13, 2002, post been given the publicity it merited and would have received had it not been for the insanely abusive and indeed criminal behavior of you Goons.

Is my exposure of the errors in the Old School safe-withdrawal-rate studies more important or less important than my wrong prediction? It is 500 times more important. The prediction of when the next crash will come is a parlor trick. It means nothing. The crash is going to do us all bone-crusing damage regardless of whether it comes by the end of 2015 or by the end of 2016 or by the end of 2017. I got the year wrong but I did not get the bigger point wrong — We are headed for a massive price crash that will deepen the economic crisis and may even land us in the Second Great Depression and we all should be working 24/7 to lessen its impact. That’s what matters, not knowing the precise day and hour that the crash is going to come.

We can know some things and we cannot know some things. We know that practicing price discipline when buying stocks is 80 percent of the game. There has never in 145 years of stock market history been an investor who practiced price discipline and who achieved a poor long-term result. And there has never in 145 years of stock market history been an investor who failed to practice price discipline who achieved a good long-term result.

Buy-and-Hold always dramatically increases risk while also dramatically reducing return. Buy-and-Hold is the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind. Valuation-Informed Indexing, in contrast, is the first true research-based investing strategy. Valuation-Informed Indexing is the strategy that Bogle thought he was developing when he developed Buy-and-Hold plus a whole lot more than he did not even imagine as within the realm of possibility. Buy-and-Hold is the past, Valuation-Informed Indexing is the future.

Perhaps there will come a day when we will know more about how stock investing works than we do today and when it will be possible not only to make effective long-term predictions but also to make effective short-term predictions. I have my doubts, but you never know, perhaps that day will come. So my advice is that you take any short-term predictions that I or anyone else puts forward with a huge grain of sale.

The same mountain of peer-reviewed research that shows why you should not place too much confidence in short-term predictions shows why you MUST pay very close attention to long-term predictions rooted in consideration of price levels. Those predictions ALWAYS work. It is not possible for the rational human mind to imagine some alternate universe where price would not play a huge role in determining the merit of a stock purchase and of course the entire historical record confirms that what common sense tells us must be so really is so. The Buy-and-Holders have destroyed millions of lives by telling lies re this matter and they destroy thousands more with each day they continue doing so. They should knock off the funny business. Now. Today.

I am going to continue posting honestly re safe withdrawal rates and scores of other critically important investment-related topics, Anonymous. I have never given two seconds of consideration to playing it any other way, and, if I am true to myself, I never will.

I intend to say a few words at your trial aimed at getting your prison sentence reduced a bit. I ask nothing in return from you for doing so. I think it is the right thing to do given the circumstances that apply, so that is the way that I am going to play it. But I will of course testify honestly. Going to prison is not high on my bucket list. So that one is 100 percent non-negotiable.

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

Rob

“I Didn’t Know About the Cover-Up of the Error in the Buy-and-Hold Strategy That Shiller Revealed in His Research from 1981 (the Error Is the Idea that Long-Term Timing [Price Discipline] Is Not Required). The Cover-Up Had Already Been Going On for 22 Years at that Time. I Didn’t Know, Just As Most People Today Don’t Know. I Had No Idea What I Was Getting Into. I Was Just Trying to Help Out My Board Community. Then the Roof Fell In on Me.”

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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:

In reading your own words, you have stated that you have banked your future on getting a settlement statement. Do you need to be reminded again of your own words? You have stated that you do not have a back up plan and you do not have enough money to fund your remaining years in retirement.

As to the thousands of people you speak of, they are all part of your imagination and are just as made up as your fantasy of getting some kind of settlement payment. You have been caught time and again telling us about people who you say have made certain comments and then we see they actually said something else. These have been documented time and again. Take the example of Mike Piper. Anyone can google that.

As for Wade, he wrote to you in an email he thought would be private stating that you had caused him much more harm than any “goon”.

Not a good track record, Rob.

Don’t you think it is time to live in a state of reality versus a fantasy world?

I don’t have a back-up plan because I cannot imagine posting dishonesty. I view the idea as 100 percent crazy. I have always posted honestly on every other subject that I have written about and that has always worked out just fine. I cannot post dishonestly, Sammy. It’s not in me. It’s not a “plan.” It’s just a reality that cannot be changed no matter how much pressure is applied to me.

I don’t have enough money to fund the remaining years of my retirement. I won’t be running out of money anytime soon. But there will come a time when I will run out unless this cover-up comes to an end. I believe it is going to come to an end. So I think it is all going to work out well for me.

But that’s not a plan! You keep suggesting that this is some kind of plan on my end. Posting honestly is a practice that I believe in, not a plan.

I didn’t say on the morning of May 13, 2002, “oh, I have this great plan, I will post honestly and then these Goons will make it their life project to destroy me and then I will get a settlement and be rich.” That’s crazy. I never expected that anything like this would happen.

I obviously knew that Greaney was an abusive poster. I knew that he had a Goon Squad. I knew that they would cause trouble. I presumed that the trouble would last about two days. Then Motley Fool would ban him and that would be the end of it and the rest of us would live happily ever after.

I didn’t know about the cover-up of the error in the Buy-and-Hold strategy that Shiller revealed in his research from 1981 (the error is the idea that long-term timing [price discipline] is not required). The cover-up had already been going on for 22 years at that time. I didn’t know, just as most people today don’t know. I had no idea what I was getting into. I was just trying to help out my board community. Then the roof fell in on me.

There was no plan and I don’t really feel that there is a plan today. There is a BELIEF that I must continue to post honestly. And there is a BELIEF that that will pay off big-time down the road a bit. I don’t think it is right to call it a plan because I have never had any other options presented to me. If I post honestly, you Goons are going to do your best to destroy me. That’s a reality. There’s nothing that I can do about it, so there is no “plan.” I certainly am not going to agree to post dishonestly. Asking me to do that is like asking me to flap my arms and fly to the moon. It can never happen. So, this is a road that I will continue to walk. But not because I planned it, just because I have no other options.

I do believe that things will work out well. I have talked to too many people who are excited about the huge breakthroughs that we have achieved together over the past 13 years not to believe that. I have seen how so many people love hearing about those breakthroughs until they are intimidated into silence. So, yes, I believe that we are as a society on the threshold of making some amazing advances.

But I don’t feel that what I am doing is the product of planning. I am doing the only thing that I can do given the cards that I have been dealt. I will just keep doing that and hoping for the best and expecting good things down the road a piece.

I hope that helps a bit.

Rob

“I Believe That This Story Is Going to Lead to Legislative Changes That Will Limit the Ability of You Goons to Ruin Sites and to Ruin People’s Reputations and to Intimidate Good People Into Not Posting Their Sincere Views at Web Sites.”

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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:

” I also acknowledge that I have been wrong before and that it could be that it is happening again.”

Yes you are wrong. Wade Pfau pointed that out to you a long time ago (as did many others), but you have chosen to ignore it.

Because you decided to ignore it, you have suffered substantially for a very long time. You somewhat acknowledge that in a recent post at your blog in which you say the following:

“I’m not making any money, Reality. You got that one right. I haven’t made a dime in 13 years. That makes me very, very, very sad. It makes my wife even sadder!”

Instead, you have banked your future on some kind of windfall coming from what you describe as “settlement payments” (all part of a fantasy).

It’s true that I haven’t made a dime in 13 years.

I believe that I will be seeing settlement payments. But it’s not right to say that I have “banked my future” on that belief. I say what I say about investing because that’s what I believe about investing. I believe that everyone should be saying what they believe. That’s how we handle things in every other field of human endeavor. That’s what would work in the investing realm too, in my assessment. When we all say what we believe, the people listening in get to hear all sides and eventually people figure things out.

That brings us to Wade Pfau. Yes, Wade has said that I am wrong. But he said that after working with me for 16 months and saying that I was right over and over again and praising me to the skies and saying that he couldn’t sleep at night because he was so excited about the stuff he was learning from me and saying that he was going to submit the research paper that we co-authored to the leading journal in the field. And it so happens that he said that he thinks I am wrong only after a group of you Goons threatened to destroy his career. And I am supposed to believe that he was shooting straight the one time he said I was wrong and not shooting straight the hundreds of times he said the opposite? No, Sammy. I don’t believe that. Not for two seconds.

Wade isn’t the only one who has behaved that way. I have had numerous investment advisors call me on the telephone after reading material at my site and pick my brain about all sorts of questions. I have spoken to several of these people for hours at a time. And then at the end of the call several of them have said to me “please don’t tell anyone that I spoke to you, okay?” Huh?

And I have had numerous site owners ban me from their sites after telling me that they think that my stuff has huge value. I ask them why and they say that hearing what I have to say upsets their readers too much, their readers want to believe in Buy-and-Hold and seeing my research-based arguments just causes them too much pain. Huh?

And I have talked to academics who have told me that lots of researchers in this field want to do research showing how dangerous Buy-and-Hold is in the long term but that they have been taken aside and warned that it would be a career-limiting move to publish such research. Rob Arnott is one of the ones who told me that and Rob served for several years as the editor of the Financial Analysts Journal. He is no dummy. He has a well-deserved reputation as a straight shooter. Huh?

And I have had thousands of my fellow community members put up posts expressing a desire that you Goons knock off the funny business. They are not the majority. There are lots of Buy-and-Holders who hate my stuff. But a lot of the people who express a desire that honest posting re the last 34 years of peer-reviewed research be permitted are among the smartest and most popular posters at the various boards. They get quiet once they see that the site owners are not willing to take action against you Goons. But they often say what they believe before it becomes clear that they will be punished for standing up to you Goons. Huh?

Buy-and-Hold was once a wonderful thing. It stopped being a wonderful thing when Shiller published his “revolutionary” (his word) research and the Buy-and-Holders failed to update their strategy to reflect the new findings. The result is that, 34 years later, the Buy-and-Holders are too ashamed to come clean re the mistake they made and most of us have been intimidated into not demanding that they do so. That’s too sad, in my opinion. I think we need to stand up to them and that they need to come clean. I think that’s best for everyone.

I could be wrong. That’s always a possibility. But I haven’t been dishonest. I say what I truly believe. That’s important to me. You say that I have “suffered substantially for a very long time.” I’ve suffered financially. I’ve suffered lots and lots of hits to my reputation. I’ve been defamed tens of thousands of times. I’ve lost contact with lots of good friends when I was banned from discussion boards where I played a leadership role for years (I was once banned from a board that I founded — beat that!). But I can go to sleep at night knowing that I have insisted on my right to post honestly for 13 years running and that I’ve been able to develop hundreds of amazing insights as a result and that lots of good and smart people have praised my work product to the skies because they appreciate how important it is that we explore the implications of Shiller’s revolutionary findings in great depth.

All of that matters to me. I see myself as a huge winner re this matter despite the financial and reputational hit. I would do it all again, you know? Despite all that I have been through, I would do it all again because the good side of this story is 50 times more good than the bad side of this story is bad. We have seen more advances in our understanding of how stock investing works over the past 34 years than we have seen advances in computer technology over that time-period. By a factor of 20! And I have played a leading role in developing many of the insights and in spreading the word about them. That’s pretty heady stuff for a guy who never went to investing school and who never managed a big fund. I have achieved things on the content side many, many times beyond anything that I ever thought it might be possible for me to achieve in the days before May 13, 2002.

I believe that I will see those settlement payments. I don’t think that’s a fantasy at all. I believe that everyone in this field wants this nasty stuff to go away. I think thats true of Jack Bogle, who is the lead Buy-and-Holder. I got started on this journey because of things I learned from reading Jack’s book. That tells me that deep down he wants to help people. So I believe that following the next price crash, he is going to look deep down and decide that he needs to come clean about the doubts that he feels about his claim that it is not necessary for investors to exercise price discipline when buying stocks.

And I believe that this story is going to lead to legislative changes that will limit the ability of you Goons to ruin sites and to ruin people’s reputations and to intimidate good people into not posting their sincere views at web sites. I believe that this new communications medium is going to be freed to achieve its full potential as a result of how many lives you Goons have damaged over the course of your 13-year Campaign of Terror against our board and blog communities.

I talk to people at the annual personal-finance bloggers convention (FInCon) each year and I can tell you that lots of people would like to see these matters addressed in a responsible way. There’s lots of money to be made giving people accurate and honest and research-based investing advice and lots of people would like to be earning good money while helping people out if only they do not have to go up against you Goons to do so.

We’ll see how it all turns out, Sammy. I believe that we are going to see some exciting developments following the next price crash. I believe that most people are basically good. And so I am not able to imagine how things could ultimately go down any other way. There is too much potential for good here and the nasty stuff has caused too much human misery.

I naturally wish you all the best that this life has to offer a person, in any event.

Rob

“The Answer Is for Advocates of Both Models to Tell People That There Are Two Models and That the Numbers They Favor Are the Ones Supported By Their Model and That Their Readers Need to Know That There Is Another Model That Generates Very Different Numbers. When You Do It That Way, You Are Leaving It to the Reader to Make the Decision as to Which Model to Follow. You Are Providing Information That You Personally Believe Is Accurate But You Are Not Trying to Hide Anything From the Reader That He Needs to Know.”

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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 bad behavior when you hijack other people’s threads. It is bad behavior when you repeat the same thing over and over again despite people asking you to move on as they have heard your tired lines eat too many times. It is bad behavior when you post repeated lies (like you just did). It is bad behavior to make up things like death threats and job threats and refuse to back them up with proof when confronted. It is bad behavior to avoid answering questions, despite board owners asking you to support your claims. It is bad behavior to make slanderous comments about well respected financial experts, such as Jack Bogle and Wade Pfau.

If someone says “the safe withdrawal rate is 4 percent” and the peer-reviewed research of the past 34 years shows that it is really 1.6 percent at the time because of the valuation level that applies, Buy-and-Holders view it as “hijacking the thread” to tell people that. But the people who are trying to determine the safe withdrawal rate for purposes of planning their retirement need to know that, Sammy. They need to know the right numbers.

The Buy-and-Holders say that the safe withdrawal rate is 4 percent “over and over.” If we are required in conscience to let people know that that number is wrong, then we are required in conscience to let people know that that number is wrong as often as the Buy-and-Holders put forward the number. That is, we need to say that “over and over.”

The root problem here is that there are two schools of academic thought as to how stock investing works, the model based on Fama’s research (Buy-and-Hold) and the model based on Shiller’s research (Valuation-Informed Indexing). Both of these men were awarded the Nobel Prize for their research, so it can be said that both models are legitimate. But both cannot possibly be right. The two models are rooted in opposite premises.

The answer is for advocates of both models to tell people that there are two models and that the numbers they favor are the ones supported by their model and that their readers need to know that there is another model that generates very different numbers. When you do it that way, you are leaving it to the reader to make the decision as to which model to follow. You are providing information that you personally believe is accurate but you are not trying to hide anything from the reader that he needs to know. That solves the problem.

I think it would be fair to say that the Buy-and-Holders don’t do this because they feel that it would hurt their marketing efforts. They want to be perceived as “experts” and letting people know that there is another model that generates very different numbers undermines the claim that they are true experts. We all should want to undermine that claim. The reality is that no one in this field is a true expert today. The science is just too new. We are still in the early stages of learning how stock investing works. We have made important progress in recent decades. But we do not today know enough for sure to say in full honesty that we are certain of what we are saying, that we possess true expertise.

I believe that Valuation-Informed Indexing is the answer, Sammy. I believe that strongly. I also acknowledge that I have been wrong before and that it could be that it is happening again.

Can you say the same?

Can Jack Bogle say the same?

Bogle needs to say that. When Bogle and the other Buy-and-Holders get in the habit of saying that, all those who feel doubts about Buy-and-Hold will begin speaking up. We will see lots of articles questioning the root premises of Buy-and-Hold. We will see new types of calculators being developed. We will be hearing hundreds of podcasts describing strategies that we have never heard about before.

Perhaps Buy-and-Hold will prevail in the marketplace of ideas. Perhaps Valuation-Informed Indexing will prevail. There’s only one way to find out. We need to launch a national debate re these questions.

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

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

Rob