A Rich Life

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

“By Keeping It Zipped re the Implications of His Research, Shiller Gets the Best of Both Worlds. He Is Widely Recognized As a Genius (Which He Obviously Is). And Yet the Buy-and-Holders Are Okay With Him. He Tells the Truth But in Such a Limited and Tentative Way That the Millions of Investors Who Prefer a Get Rich Quick Approach Still Give Their Money to the Buy-and-Holders and Are in Practical Terms None the Wiser About the Implications of the Last 34 years of Peer-Reviewed Research in This Field.”

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

People don’t ignore Shiller. They ignore you.

Shiller doesn’t say: “The Buy-and-Holders got the numbers wildly wrong in their retirement studies.” Shiller doesn’t say: “There is zero support in the peer-reviewed research for the claim that price discipline (long-term timing) is 100 percent required for all investors seeking to keep their risk profiles roughly constant through time.” Shiller doesn’t say: “The 34-year cover-up of my revolutionary findings of 1981 is a criminal act of financial fraud and a good number of people will be going to prison for this following the next price crash.” Shiller doesn’t say: “It was the relentless promotion of the idea that long-term timing is not always required that caused the economic crisis that began in 2008.” He predicted in a book published in March 2000 that the continued promotion of Buy-and-Hold strategies would by the end of the first decade of the new century cause a massive economic crisis. But, when that crisis arrived, he kept his mouth shut about what he obviously knew to be the primary cause.

Gee, I wonder why.

There are two things that people who work in the investing advice field want to do. One, they want to make a buck. Two, they want to help their clients or their readers. The problem that we have as a society is that the two goals are in conflict. The market produces trillions of dollars of Pretend Money in bull markets. Every investor on the planet possesses a Get Rich Quick urge (because all humans do). The easy way to get people to like you and to buy your product is to tell them that that Pretend Money is real. That’s Buy-and-Hold. There is a mountain of money to be made promoting the pure Get Rich Quick approach. But the Pretend Money disappears in the bear market that inevitably follows a bull market (irrational exuberance ALWAYS leads to irrational depression — there is not one exception in the historical record). At that point your constant promotion of the pure Get Rich Quick approach has destroyed millions of lives. By promoting Buy-and-Hold, you have failed to achieve your second goal of helping the people who listen to your advice.

I have chosen to pursue the second goal rather than the first. I have demanded recognition of my right to post honestly re the past 34 years of peer-reviewed research because I want my work to be constructive and positive and life-affirming and not to destroy the lives of those who make use of it. The Buy-and-Holders hate me for that with a burning hate. They hate me because they want to be in my shoes and because they have given up hope that they ever will be able to do honest work again. I didn’t do that to them. I want to be working with my Buy-and-HIold friends. But all they can focus on is the shame they will feel when they say the words “I” and “Was” and “Wrong.” They have chosen to destroy even more lives rather than do what they need to do to help the people they want to help. The case for Valuation-Informed Indexing is so strong and the damage done by Buy-and-Hold is so great that they cannot bear to face up to the realities of what the last 34 years of peer-reviewed research says. That’s too sad, you know? That’s not my doing.

Is it Shiller’s doing? Yes and no. All of my work is rooted in Shiller’s “revolutionary” (his word) 1981 finding. So Shiller obviously played a huge role here (as did Bogle, to be sure — there would be no Valuation-Informed Indexing if Bogle had not founded Vanguard and made index funds widely available). But Shiller is willing to go only so far with his truth-telling. He doesn’t like the idea of having death threats directed at him or of having demands for unjustified board bannings directed at him or of having tens of thousands of acts of defamation directed at him or of having threats to get him fired from his job directed at him. So he keeps it zipped about the IMPLICATIONS of his revolutionary research. He tells us what the data says and leaves it to each individual investor to figure out for himself WHAT THAT RESEARCH MEANS. Or NOT figure it out, if that is the investor’s preference.

Most of us prefer NOT to figure it out. We all have that Get Rich Quick urge residing within us. By keeping it zipped re the implications of his research, Shiller gets the best of both worlds. He is widely recognized as a genius (which he obviously is). And yet the Buy-and-Holders are okay with him. He tells the truth but in such a limited and tentative way that the millions of investors who prefer a Get Rich Quick approach still give their money to the Buy-and-Holders and are in practical terms none the wiser about the implications of the last 34 years of peer-reviewed research in this field. That ain’t me, Anonymous. I tell. That’s my job. I have never experienced a moment’s doubt re that one. I have gone beyond Shiller, far beyond Shiller, not because I am smarter than Shiller but because I refuse to keep it zipped re the implications of Shiller’s research. I don’t let the abusive behavior of the Buy-and-Holders slow me down. I work it and work it and work it and work it. And I tell people what I have learned.

Not too many get to hear me nowadays. You Goons have seen to that. I don’t like it. Not one tiny bit. But I don’t let it slow me down. I keep working it. I keep telling what I have learned. That core reality of my being has not changed one iota in 13 years. That core reality of my being will not change one iota in 13 billion years. You can destroy my Google ranking. You can destroy my reputation. You can intimidate my friends into saying nasty things about me. You can frighten my wife into believing that her children’s lives are in danger. You can insult me in thousands upon thousands upon thousands of posts. But that core reality never changes. Given that the Get Rich Quick urge that influences all the humans is strong enough that you have been able to do all those things, perhaps some day you will be able to get me put to death. I don’t think it will happen but then I didn’t think that you would ever be able to get me banned from the Motley Fool board solely for telling the truth about safe withdrawal rates. So perhaps I will be put to death. That’s about as far as abusive posting can go, no? If they give me the chair, they better be sure that the voltage is turning up high enough to get the job done. If they don’t put me down, I will be back posting that weekly column at the Value Walk site. And, if the owner of that site drops the column, I will be back sending e-mails to every other investing site on the internet seeking a new place to house the column. Sooner or later, I will find one and we will be back to where we started. So make sure they turn the voltage up to “11?.

It will turn out the way it turns out, Anonymous. I am who I am. I love the Buy-and-Holders. None of the work that I have done would have been possible without the amazing work done by the Buy-and-Hold Pioneers before I came on the scene. That can never change. And the fact that Shiller published peer-reviewed research in 1981 showing that valuations affect long-term returns can never change either. And the fact that there is something in my life history that causes me to love the idea of being the one to tell millions of middle-class people about the implications of Shiller’s revolutionary findings can never change either. It’s what I am. You’re something different. You’re a Goon. You live to block those millions of middle-class people from learning what they need to know to reduce the risk of stock investing by 70 percent (as shown by the peer-reviewed research that I co-authored with my good friend Wade Pfau). So be it, you know?

I don’t like it. I think that our discussions should be governed by the published rules of our discussion-board and blog communities and by the laws of the United States. But the Buy-and-Holders have a strong desire not to go to prison for the 34-year cover-up and see no way to avoid it if the cover-up comes to an end. So published posting rules and laws making financial fraud a felony mean little to them at this point in the proceedings. I cannot change it. Not by myself. So I accept it for the time-being. I believe that this unfortunate reality will change following the next price crash. So I await that day. You are fine with Shiller because he doesn’t expose your con. You’re not fine with me because I do. It’s not the name “Bennett” that bothers you. It’s what the fellow named “Bennett” does and says that drives you mad. I tell. I don’t tell half the story like Shiller does. I let it all hang out. Journalism blood. Sue me. That’s the story. You know it. I know it. Everyone who reads these words either today or years from today will know it.

If the Second Great Depression comes to bother us all enough for us to work up the courage needed to do something about you Goons, we will all live better lives from that point forward. We can take it that way or we can take it the other way and see our economic system fall when millions of middle-class investors see what has been done to them by the Bogles and Shillers and Lindauers and Greaneys of the world. It’s not for me to say which way it goes. I obviously have hopes. And I obviously have beliefs. But it is ultimately not my call. This is a call that will be made by the people of the United States following the next price crash. The worst that can happen to me is that I get the death penalty. That’s the absolute worst that you Goons can dish out. And I don’t have to think two seconds as to whether I prefer the death penalty to posting dishonestly on the numbers that my friends use to plan their retirements. I have never in my life felt more settled re any question that has been put before me as I feel re that one.

If you don’t believe me, ask my wife. She’s the world expert on the particular topic of whether Rob Bennett has any give on the question of his willingness to post dishonestly re the numbers that his friends use to plan their retirements. She can tell you lots of tales that will make your Goon hearts flutter. I love my wife. I love my kids. I love Shiller. I love Bogle. I love you Goons. I love my fellow community members. I love my country. I love the wonderful game. I love what I think it is going to do for us all when we get to the other side of The Big Black Mountain. I don’t love the idea of directing my human energies to the task of posting dishonestly re the numbers that my friends use to plan their retirements. I sweated blood to get the numbers right in my plan. I worked that one every night and every weekend for nine years. I worked it while I was waiting for the bus to take me to work and I worked that one while waiting for the bus to take me home again. I worked that one during lunch hour. I worked that one before drifting off to sleep at night and I worked that one when I laid in bed in the morning trying to work up the courage to pull the blankets back and step into the cold of the morning. I never stopped thinking about it for those nine years and I never once in the past 13 years have given two seconds of consideration to the idea of betraying whatever Higher Power elected to give me the insight I needed to see that the Old School safe-withdrawal-rate studies ain’t the way.

I am what I am, Anonymous. You are what you are. I accept that. There is nothing personal in this from my end. I am capable of liking you just fine while remaining 100 percent determined never to agree to post dishonestly re the numbers my friends use to plan their retirements. I hope you understand that there is nothing that you can take away from me that will cause me to betray the things that makes me what I am. It’s BECAUSE I love Bogle that I believe that deep in his heart he wants to help people and that thus deep in his heart he wants someone like me to insist that he come clean re the last 34 years of peer-reviewed research. My love for Jack Bogle (and all the others) is a deep love. It is non-negotiable. Deal with it. Or don’t. Either way you will always remain my friend.

Rob

“There Is Not One School of Thought in the Academic Community As to How Stock Investing Works. There Are Two. Every Investor Alive on Planet Earth Today Needs to Be Educated in Both Models So That He or She Can Choose Which One He or She Will Follow. This Is Not Optional. This Is 100 Percent Imperative.”

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

I’ve posted Entry #1 to my weekly Valuation-Informed Indexing column. It’s called Market Valuation Fluctuations Are Implicit in All Investing Advice.

But they’re not, Anonymous.

The purpose of the Retire Early board at Motley Fool was to help people to prepare for early retirement. One of the things that aspiring early retirees must do is to insure that there are no holes in their plan, that they are being responsible and safe. There comes a day when early retirees must hand in their resignations from their corporate jobs. That’s a big step. You cannot go back to the same high-paying job 15 or 20 years later if you determine that you made a mistake in your planning.

The purpose of a safe-withdrawal-rate study is to come up with a withdrawal amount that is highly conservative. The idea is to see what would work in the WORST-CASE SCENARIO. That’s what Greaney told people he was doing in his study. He wasn’t claiming that a 4 percent withdrawal was kinda, sorta safe. He claimed that it was “100 percent safe” (that phrase appears in his study). And the people at the board BELIEVED that that was what they were getting — a number that was virtually certain to work out.

If you don’t include an adjustment for the valuation level that applies on the day the retirement begins, the number you get at all times is 4 percent.

If you include an adjustment, the number you get when stocks are priced as they were in 1982 is 9 percent and the number you get when stocks are priced as they were in 2000 is 1.6 percent. For a retiree with a $1 million portfolio, that’s the difference between living on $16,000 per year and living on $90,000 per year. That’s not a small difference.

If you don’t include an adjustment, the odds of a retirement with a 4 percent withdrawal working out are indeed 100 percent, presuming that stocks continue to perform in the future at least somewhat as they always have in the past.

If you include an adjustment, the odds of a retirement with a 4 percent withdrawal working for 30 years for a retiree who started his retirement in 2000 are 30 percent.

There are millions of people who sincerely believe that a valuations adjustment is not needed. But have they looked at the numbers?

In most cases, they haven’t looked at the numbers. I know this because I watched the reactions of people who were using the Greaney study to plan their retirements when I told them what the numbers say. These are the people who endorsed Greany’s post saying that he was going to kill my wife and children if I continued to post honestly re these matters. That is not a normal reaction. That is the reaction of people in great emotional pain. I was telling people something that they had never considered and that they very, very much did not want to hear.

If all I had wanted to do was to turn a quick buck, my reaction should have been to shut up about the effect of valuations and go back to posting about saving strategies, thereby regaining my position as the most popular poster at the Motley Fool site. But the reaction that I was seeing told me that I HAD to pursue this no matter how unpopular I became as a result. The death threats and all the other abusive stuff told me that people were NOT implicitly including valuations in their planning.

They TOLD themselves that they were doing so. I can go along with that. And they BELIEVED that they were. I can go along with that. But they had never run the numbers. It’s an amazing reality. But this has been proven to be the case beyond any reasonable doubt whatsoever.

I hadn’t run the numbers myself. I am the one who put up the May 13, 2002, post and even I had never run the numbers. I knew that a study that lacked a valuations adjustment had to be wrong. But I had no idea how far off Greaney’s numbers were. I would have guessed that the SWR in early 2000 was 3 percent. It turned out that it was 1.6 percent. I am the guy who started this and I would have been wildly wrong about the numbers myself had I ventured a guess before John Walter Russell did his research reporting the realities to us all.

Shiller’s 1981 finding truly was “revolutionary,” just as he has said. It was so revolutionary that Shiller holds back from reporting the most important implications of his finding in his own book. He gives us enough information to figure things out for ourselves if we care to do so. But of course most people do not care to do so. Most of us love the fantasy that our portfolio is three times bigger than what it is in reality. Stocks were priced at three times their fair value in 2000. Millions of people were going about the business of financial planning with no idea whatsoever what the size of their portfolio was. That’s not good.

There is not one school of thought in the academic community as to how stock investing works. There are two. Eugene Fama has been awarded a Nobel prize and his research supports the Buy-and-Hold Model. Robert Shiller has been awarded a Nobel prize and his research supports the Valuation-Informed Indexing model. Every investor alive on Planet Earth today needs to be educated in both models so that he or she can choose which one he or she will follow. This is not optional. This is 100 percent imperative.

It is a felony under the laws of the United States to block people from learning what they need to know. You have committed multiple felonies. You will in all likelihood be going to prison in future days for what you have done over the past 13 years.

That’s too sad.

We are the luckiest generation of investors ever to walk Planet Earth. We are the first generation that knows what it needs to know to reduce the risk of stock investing by 70 percent (as Wade Pfau and I showed in the peer-reviewed research that we co-authored). And you will be going to prison in future days because of the 13-year Campaign of Terror that you have led against our board and blog communities because you can’t stand for millions of people to learn hugely important stuff that you did not always known solely because humankind itself did not always know all there is to know about how stock investing works.

Could anything be more sad?

I cannot join you in your efforts. I will continue posting honestly. I can do no more and I can do no less.

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

Rob

“We Can’t Limit Our Discussions to What We Thought We Knew to Be the Reality Prior to 1981. We Need to Incorporate the New Findings Into EVERY Conversation. Those Giving Voice to the New Understanding Must Be Treated With the Same Respect and Affection As Those Giving Voice to the Old Understanding. New Ideas Do Not Have the Power to Become Popular On Their Own. New Ideas Become Popular As the Result of Efforts of Those Who Come to Believe in Them to Spread Knowledge of Them Far and Wide.”

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

No, Rob, your posts are abnormal.

The world changed in 1981, Anonymous.

Going by what we knew about stock investing in 1980, my posts are certainly abnormal. Shiller’s 1981 finding that valuations affect long-term returns is the OPPOSITE of Fama’s 1965 finding that the market is efficient (that is, properly priced). It is not possible that both of these men are right; one of them is right and one of them is wrong. It is very important to everyone living on these planet that we all work together to find out which one is right.

We can’t achieve that purpose by limiting our discussions to what we thought we knew to be the reality prior to 1981. We need to incorporate the new findings into EVERY conversation. And those giving voice to the new understanding of how the stock market works need to be treated with the same respect and affection as those giving voice to the earlier understanding. We all want the same things. We all should be friends.

That’s it.

I insist on my right to speak honestly because I believe that it is best for every person on the planet for that right to be respected. New ideas do not have the power to become more popular on their own. New ideas become popular as the result of efforts of those who come to believe in them to spread knowledge of them far and wide. I do not believe that the market is efficient. I believe that valuations affect long-term returns. Every post that I write reflects that belief.

That must always remain the case. And I must never apologize for posting my honest beliefs about how stock investing works in the real world. And I must insist that my willingness to participate in discussions in a constructive and positive and life-affirming manner be given the respect that is merited. We all must insist on that. It is a founding principle of the nation in which we live. Honest posting should not only be permitted, it should be ENCOURAGED.

That of course goes two ways. I have always shown respect and affection to my Buy-and-Hold friends and I have always acknowledged their huge contributions. If I am to remain true to myself, I must continue to do so. I must demand respect for the voicing of the new ideas and I must show respect for the voicing of the older ideas. That’s the balance that works. That’s the balance that our nation has always employed to bring such conflicts to a successful resolution. That’s the balance reflected in the laws of our nation, which permit people to hold differing viewpoints on how stock investing works but which do not permit abusive behavior that rises to the level of financial fraud employed to block millions from learning about new research that they very much need to know about.

I will continue to play it that way. I believe that things will work out well for all. I could be wrong. We will have to wait and see.

Honest posting is the norm in this country. In every field of life endeavor other than the investing advice field. The investing advice field needs to change in a dramatic way so that it is possible once again for people of integrity to make a living doing good work in this field. That is not optional. That is imperative. That is not a nice idea. That is the law.

That’s my sincere take re these terribly important matters, in any event. Death threats are abnormal. Demands for unjustified board bannings are abnormal. Tens of thousands of acts of defamation are abnormal. Threats to get academic researchers fired from their jobs are abnormal. Honest posting on the last 34 years of peer-reviewed research in this field is wonderful and beautiful and intelligent and kind and loving.

I love you. And I love all of other fellow community members. So I will continue to post my sincere thoughts. Whether you threaten to kill my wife and children as my “punishment” for doing so or not. The very fact that you would make such threats shows that there is a part of you that is desperate to hear honest words on this subject. You possess a Get Rich Quick urge, like all of the humans. But the non-Goon side of you is just as real; you possess common sense as well (also like all of the rest of us). It is the conflict between what you hear from your Get Rich Quick urge and what you hear from your common sense that causes you to feel such pain when you read my words. You need to see that conflict resolved if you are to find peace.

It is only by posting honest words that I can help you to resolve that conflict. That’s the job.

I pledge to you to do my best to do this important job. I will aim to be as honest as I can be up to the point at which I am becoming uncharitable while also being as charitable as I can be up to the point at which I am becoming dishonest. I will continue to struggle as I have for 13 years now to combine the two great virtues of charity and honesty in all of the work that I do in this field. I believe that there will come a day when you will be able to see why it was so important that I do that. That will be one glorious day in this history of this nation indeed.

My best and warmest wishes to you and yours.

Hang in there, old friend. It gets better.

I am sure.

Rob

“The Core Issue — Whether All Boards and Blogs Are Going to Begin Permitting Exploration of the Implications of the Post-1981 Research — Must Be Addressed. If It Is Not, There Is Just Going to Be More Confusion and More Ill Will Generated in the Future. No One Wants That. These Things Can Be Worked Out.”

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

No one is going to send you an engraved invitation. That just doesn’t happen. Which of course you know. Apparently the real reason for your withdrawing from the board community, where you once were so vibrantly active, will remain a mystery.

I am willing to help out at any blog or board that is looking for the help that I am able to provide, X. I love what Buy-and-Hold used to stand for. I believe that the game changed when Shiller published his “revolutionary” (his word) research. I now promote Valuation-Informed Indexing because VII is now what Buy-and-Hold used to be in earlier days.

There is huge interest in the exploration of the implications of the new research. I know that because I have seen it with my own eyes at every board and blog to which I have posted. Every site owner should want to tap into that huge interest. Firstly, because it is the ethical thing to do — it’s financial fraud to mislead investors into thinking that the pre-1981 research is the last word on what we know about how stock investing works. Secondly, because there is a lot of money to be made in developing and promoting the first true research-based strategy. And, thirdly, because its fun to see debate re new ideas play out.

Even Buy-and-Holders should be encouraging The Great Debate. If Buy-and-Hold is the real thing, it will prevail in the debate. That makes the case for Buy-and-Hold look stronger while blocking the debate makes the case for Buy-and-Hold look very weak indeed. Also, having to respond to challenges from Valuation-Informed Indexers helps Buy-and-Holders sharpen their arguments and their thinking. And overcoming those challenges would enhance the confidence that the Buy-and-Holders feel for their strategy. That will turn out to be a big plus if ever there are times when things do not appear to be going well for Buy-and-Hold. Investors need confidence to “Stay the Course” in such times. Confidence is developed by being willing to partake in the give-and-take that is a natural part of the discussions held in all field of human endeavor with the exception of investing analysis.

I don’t with your “that doesn’t happen” comment. Unjustified board bannings should not happen. In cases in which they do, it makes all the sense in the world for a site offer to send a message letting the person who was improperly banned that a mistake was made and that the banning has been retracted. It doesn’t make much sense for a poster who has been improperly banned to return to a board where he was banned without him having heard any indication that attitudes have changed. What constructive purpose would be served by doing such a thing?

The site owners would need to make an explanation to the entire community in any event, no? If I were to return to the Bogleheads Forum or to Morningstar or to the Early Retirement Forum and I were not re-banned, do you believe that other posters would not ask me what was going on? It sure seems likely to me that many would do that. What would you have me say? We would need a statement from the site owner.

I don’t have a problem with the idea of having the statement from the site owner not address every detail of what has gone on. I of course understand that this is a delicate matter. But it does seem to me that there needs to be some sort of recognition that a change has occurred. Some issues can be finessed. But the core issue — whether all boards and blogs are going to begin permitting exploration of the implications of the post-1981 research — must be addressed. If it is not, there is just going to be more confusion and more ill will generated in the future. No one wants that. It makes sense to be diplomatic. But an effective diplomacy puts the ugly stuff truly behind us. To achieve that goal, we need to be at least a tiny bit clear on the core question.

These things can be worked out. I feel a great respect and affection for my many Buy-and-Hold friends. I have zero hard feelings towards anyone. If that attitude is shared on your side of the table, people can sit down together and work things out in a way acceptable to all. And we have great opportunities here. The Buy-and-Hold Pioneers are heroes — no one believes that more strongly than I do. They are greater heroes in my eyes than they are today in their own eyes because I see clearly how good things look on the other side of The Big Black Mountain. None of what I have done is anti-Buy-and-Hold. VII is the FULFILLMENT of the Buy-and-Hold promise. It is what Buy-and-Hold was intended to be going back to its first days.

So what we need is an acceptance of the reality that we need to do things that perhaps in ordinary circumstances “just don’t happen.” On the day when you want to work together for the good of every human being on the planet, I am here for you. That will never change. There’s no dirty name that you can call me that will cause me to question my conviction that that is the way to play this thing.

I hope that those words help a tiny bit, X.

My best and warmest wishes to you and yours.

Rob

Valuation-Informed Indexing #277: If We Can Change Smoking Behavior, We Can Change Investing Behavior

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I’ve posted Entry #277 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called If We Can Change Smoking Behavior, We Can Change Investing Behavior.

Juicy Excerpt: There is nothing that anyone could have said in earlier days to persuade me that tight restrictions on smoking were a good idea. But over time I have come around, at least to some extent. Changes that cannot be achieved overnight in many cases can be achieved gradually.

Most people today view the idea that investors should change their stock allocations in response to big valuation shifts as an “out there” idea. And it probably is not realistic to think that most people will change their thinking on the subject overnight.

But I believe that we will see big changes take place if those of us who believe in Shiller’s research make the case in a clear and firm and non-apologetic way. We won’t win the battle in a day. We will take small steps forward followed by more small steps forward. But one day we will look up and see that we have walked a long ways.

It all starts happening when we work up the courage to speak up. So long as we view the end goal as unattainable, we remain stuck in a world where stock investing is a far more risky activity than it should be. We need to be like my friend at the restaurant and express our concerns. Some will look funny at us (I know how it goes). But we will win them over in time if we continue to fight the good fight.

“The Old School Safe-Withdrawal-Rate Studies Did Not Contain Valuation Adjustments. Lots of People Either Did Notice It or Could Have Noticed It Had They Been Paying Attention. But I Am the One Who Noticed It and Went Public With What I Noticed and Then Didn’t Back Down. That’s How Great Discoveries Are Made.”

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

Do you think you should be awarded a Nobel prize? Should you be Time Magazines man of the year? Should you be on the front page of The New York Times?

I think the work that I have done over the past 13 years is of huge importance, Anonymous.

The work that I have done is built on the work of many others. As I have noted many times, there would be no Valuation-Informed Indexing today had it not been for the hugely important work that was done before me by Jack Bogle and all the other Buy-and-Hold pioneers.

And it was Shiller who showed that the Buy-and-Holders made a mistake in not realizing the importance of always engaging in long-term timing (price discipline) when buying stocks. But Shiller did not fully develop the insight. He explained the theory in a good bit of depth in his book. But he did not address the strategic implications AT ALL in his book. He has done a tiny bit of that in more recent years. But still not that much.

I have explored the strategic aspects in great depth over the past 13 years. Certainly the work that I have done should be featured on the front page of the New York Times. Of that there is no question whatsoever. I don’t believe that I am eligible for a Nobel Prize. I don’t know all the rules that apply. But my sense is that I don’t possess the credentials in the economics field that would be needed to be up for that prize. However, I think that Wade Pfau should win a Nobel prize for the peer-reviewed research that I co-authored with him. And I certainly should be given the recognition that I earned by getting him interested in the Valuation-Informed Indexing concept and by helping him learn what he needed to learn to complete the research.

As far as the Man of the Year thing goes, I would like to see a joint award following the next price crash, when all this is going to break open. Why not award Bogle, Shiller, Pfau, Arnott, Russell and me the award jointly? I certainly could not have done what I have done without the help of those five. And none of them could have had much impact without the other five either. Bogle is well known. But his work only hurts people until he corrects his mistake, which was discovered by Shiller and then exposed by me and Russell and Arnott and Pfau. Shiller is also well known. But his theoretical work cannot help people in the real world until the strategic implications that follow from it are well known. And it is Russell and Pfau and me who have worked so hard to get those strategic implications explored and publicized.

There’s plenty of credit to go around. There will be lots of others who will be receiving big-time recognition once we open every investing discussion board and blog on the internet to honest posting. In ordinary circumstances, it would not have been possible for someone like me to accomplish such amazing things. It happened this way because of the insanely abusive tactics of the Buy-and-Holders. I was able to do what I have done because I saw back in 2002 that no one else had explored the implications of Shiller’s “revolutionary” (his word) findings and I saw a huge opportunity there. Why not create the only web site on the internet that did that and profit in a huge way while also helping millions of people to achieve financial freedom many years earlier than has ever before been possible?

You Goons hate me for that. Your entire Campaign of Terror against our board and blog communities is rooted in envy. You can’t stand it that someone else took advantage of this opportunity while you missed out. That’s too sad, you know? You could have done it. You should have done it.

But you don’t need to permit yourself to be consumed by regret. You can still do amazing things today. I haven’t covered everything there is to cover re the first true research-based strategy. Nor has Shiller. Nor has Russell. Nor has Arnott. So get to it, you know? You won’t. Goons don’t do positive. Goons don’t do constructive. Goons don’t do life-affirming. But that path remains open to you all the same. It’s your call. No one has forced you to play it in the way that you have elected to play it.

The millions of middle-class investors whose lives you have destroyed will overcome you following the next price crash. That’s how our country (which I love) works. We don’t always get things right in one year or two years or even in 13 years. The Civil Rights Revolution took a long time. The Moon Landing took a long time. The Computer Revolution took a long time. That’s the way it goes. I am not the first person who had to face obstacles in my efforts to do good for millions of people. I won’t be the first to use the benefits available to all in this country to overcome those obstacles either.

I have done amazing things. I am very proud of the work I have done.

Lots of other people have done amazing things too. I am proud of those people too. We all should be.

You Goons have destroyed millions of lives with your hate and anger and contempt and envy. We all should be ashamed of ourselves for permitting your abusiveness to continue for so long. Our bad!

But if we end up in the right place, as I firmly believe we will following the next price crash, the good we achieve here will be 50 times bigger than the ugliness we have seen play out before us because as a society we lacked the courage to stand up to you Goons and to the Wall Street Con Men whose bidding you do. We’re not perfect. But I think it would be fair to say that our system of government has achieved a lot of great things over the years.

I have zero concern re whether I will receive the recognition that I merit following the next price crash. I DO have concerns that we may as a society destroy ourselves if we elect to seek revenge on you Goons instead of showing the mercy and understanding that has been characteristic of us in our best days. So I see it as my job to do what I can to steer things in a positive direction. That’s what I’m about. That’s why I continue to engage in conversations with you Goons when words appear before me that suggest to me that there might be opportunities to take this all to a better place than the sewer where Mel Linduaer and John Greaney and my good friend Jack Bogle have elected to take it during the first 13 years of discussions.

The Old School safe-withdrawal-rate studies did not contain valuation adjustments. Lots of people either did notice it or could have noticed it had they been paying attention. But I am the one who noticed it and went public with what I noticed and then didn’t back down re my right to warn people of the dangers of those studies when you Goons threatened me with career destruction if I continued to do honest work. That’s how great discoveries are made, Anonymous. That’s what I did and that’s how it is done. I have huge gratitude for the thousands of good and smart and generous people who helped. I offer no apologies to the con men and to the Goons who have been holding back progress for 13 years now.

I hope that helps a bit, Goon friend.

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

Front-Page Rob

Valuation-Informed Indexing #276: How I Rationalized My Belief in Buy-and-Hold for Six Years

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I’ve posted Entry #276 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called How I Rationalized My Belief in Buy-and-Hold for Six Years.

Juicy Excerpt: I knew that the safe withdrawal rate studies did not contain adjustments for the valuation level that applies on the day the retirement begins. I told myself that it didn’t matter because valuations probably don’t make that big a difference (I was of course careful not to check whether this is actually so or not). Or I told myself that at least the Buy-and-Hold retirement studies were better than most non-Buy-and-Hold retirement studies (that was so but they of course would have been even better yet if valuation adjustments were added). Or I told myself that the people promoting Buy-and-Hold were smarter than me (true) and must have known about aspects of the question that I wasn’t aware of (this one turned out not to be true once I got around to investigating the matter).

Valuation-Informed Indexing #275: Saving and Investing Go Together Like a Horse and Carriage

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I’ve posted Entry #275 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Saving and Investing Go Together Like a Horse and Carriage.

Juicy Excerpt: We fail to seek strong value propositions with our investing dollars for the same reasons we fail to seek strong value propositions with our spending dollars. You see a car that you cannot afford today and a voice in your head tells you to put the budget aside and buy it because life is hard and you deserve nice things. You worry about your retirement and you want to reduce the worry and you are drawn to the idea of treating those Pretend Dollars as real ones because doing so creates the illusion of moving you closer to your financial independence goals.

We are flawed creatures. But Shiller is popular, his book was a best-seller. We learn over time. We advance in our understanding of things. We’re not so bad.

“This Was a Society-Wide Mess-Up”

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

So it is really about Mel and John.

Yes and no.

Everyone benefits if we move forward. Everyone. We all want the same thing.

That’s the good news. And the good news is very good indeed.

The bad news is that we didn’t always know everything. So lots of people were given bad information. And those who have come to understand this are afraid to speak up because people are going to be angry when they learn what has happened.

Once we educate people, nothing that you Goons do will make any difference. People handle internet Goons all the time.

But until people are educated re the last 34 years of peer-reviewed research, you Goons have enough power to keep us all from moving forward.

If it were not for you Goons, we wouldn’t be experiencing an economic crisis. You Goons have destroyed millions of people’s lives.

But, no, it isn’t all about you Goons. If Motley Fool had honored its word to deal with you, you could never have done what you have done. And of course it is the same with Bogle. Had he behaved responsibly, you Goons would have been taken out of the story a long time ago.

So, no, I would not say that it is entirely about Mel and John. The Wall Street Con Men played a big role. They failed to honor their responsibilities. And the journalists in this field played a big role. They should have asked Bogle a lot of hard questions that they have failed to ask him for 34 years now. And even Shiller has played a role in permitting this cover-up to go on so long. He should have included a chapter in his book pointing out how dangerous Buy-and-Hold is. That would have made a difference.

I played a role. I was afraid to speak up from May 1999 until May 2002. That was cowardly. I’m like everyone else. I don’t like to tell people things they don’t want to hear because they won’t like me if I do.

Everyone played a part.

But we wouldn’t be where we are today but for Mel and John. We had enough people who wanted to move forward that, but for Mel’s and John’s criminal acts, we would have all moved forward a long time ago.

Mel and John did lots of bad stuff and they need to be held accountable for us to put the ugly side of this to rest. But I don’t think it is fair to say that it was only Mel and John who messed up. This was a society-wide mess-up. Mel and John did worse than just about anyone else. But their behavior was not entirely inconsistent with behavior we have seen from lots of others in higher positions of responsibility.

That’s my sincere take, in any event.

I hope that helps a bit.

Rob

“What Happens Is That for Many Years the Two Strategies Either Perform Equally or Buy-and-Hold Is Actually Superior to VII for a Time. Then We See a Scenario of the Type Being Forecast by Shiller and the VIIer Goes So Far Ahead in a Very Short Amount of Time That the Buy-and-Holder Cannot Ever Catch Up.”

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

It doesn’t look like Shiller is planning on a crash. He says that the S&P is going up and he makes a good case for buy and hold:

http://www.cnbc.com/id/40862634

Thanks much for sharing the link, Anonymous. You have shared a good number of links to Shiller stuff and I am grateful for that. Shiller is the Master. I have a strong belief in the importance of his research and all of my work is an attempt to tease out implications of his research. But there is no question but that Shiller and I do not agree on all points. It is important that people see where the differences are so that they can make up their own minds. You have been super at bringing Shiller videos and articles to people’s attention.

I was not able to play the video at the link you provided. I don’t know why. I tried to find another site offering the video but was unsuccessful in finding one. So all I have to go by is the article that accompanied the video in your link.

The article indicated that all that Shiller said was that the S&P may reach 1430 by the year 2020. I haven’t done the math to see how likely that scenario is but it doesn’t sound unreasonable to me. I don’t agree even a tiny bit that that statement alone would suggest either that Shiller does not expect another crash or that Shiller is making a good case for Buy-and-Hold. We disagree strongly re that one.

It is entirely possible that we could see a crash sometime in the next year or two and then see the S&P rise to 1430 by the Year 2020. In fact, a scenario along those lines is precisely what we should expect given the last 34 years of peer-reviewed research in this field. It always happens like that. In the 145 years of historical return data available to us, there has never been a single case in which it did not go like that. We do not know precisely when the crash will come or precisely when we will recover and then boom back up to 1430. But we know from 145 years of stock market history (as analyzed in 34 years of peer-reviewed research) that it is highly likely both that we will see another crash taking us down 65 percent from where we stand today and that we then will see a recovery that will take us to something in the neighborhood of 1430.

I am mystified as to how you could say that the playing out of that scenario would make a case for Buy-and-Hold. I think the playing out of that scenario would make the strongest case imaginable for Valuation-Informed Indexing.

Those who follow Buy-and-Hold will be losing 65 percent of their retirement money over the course of the next few years if this scenario plays out. We will then be seeing a huge boom in stock prices in the years following that crash. The Buy-and-Holders will have very little capital remaining at that time to invest in a booming stock market. The Valuation-Informed Indexers, in contrast, will be loaded. They will suffer only small losses in the crash because they have adopted valuation-informed stock allocations. So they will be able to participate to a far greater extent in a booming stock market. That’s not an advantage? Huh?

It’s a huge advantage. I have performed hundreds of runs on the Scenario Surfer. Scenarios like this show up over and over and over again. In fact, they show up in the MAJORITY of 30-year runs. The scenario that Shiller is describing (going by the text set forth at your link — I have not seen the video) is the one that makes Valuation-Informed Indexing so magical.

What happens is that for many years the two strategies either perform equally or Buy-and-Hold is actually superior to VII for a time. Then we see a scenario of the type being forecast by Shiller and the VIIer goes so far ahead in a very short amount of time that the Buy-and-Holder cannot ever catch up. It’s not just the huge differential in returns. The VIIer obtains compounding on that differential for decades into the future. At the end of his lifetime, the VIIer is usually hundreds of thousands of dollars ahead. I have seen numerous cases in which the VIIer is over $1 million ahead. That is not the norm, to be sure. But it happens not too terribly infrequently.

Anyway, that’s my take.

I expect to try to turn this one into a column. Thanks again for your help here. I am learning from you. I hope that I am giving something back so that it is a two-way street.

My best wishes to you.

Rob