A Rich Life

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

“Our Economic System Is Built Around the Idea of Fantasies Coming True Every Now and Again and Making Us All Richer As a Result. Keep Everything the Way It Has Always Been, Never Permit a New Idea to Develop Before Our Eyes, and You Lose That 6.5 Percent Annual Growth That Permits Us All to Retire and Live Off Our Savings Some Day.”

by

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

I would like to be able to fly like superman, have more money than Bill Gates and be able to look like I am 25 for the rest of my life, but we all can’t expect our fantasies to be reality, right?

This comment goes to what I mean when I say in response to all of your intimidation tactics that I am going to continue posting honestly because I love my country.

We clicked in the last piece of the puzzle re how stock investing works in 1981. Computer technology was around in 1981 but was not nearly as advanced as it is today. The most advanced game at the time was probably that Pong thing that bounced a ball from one end of the screen to another.

If you had told people that in 34 years we would be able to talk to our cell phones while we walked to the street and ask them to tell us the location of a restaurant that we wanted to eat it, people would have said what you say here: “I would like to be able to fly like Superman, have more money than Bill Gates and be able to look like I am 25 for the rest of my life but we can’t all expect our fantasies to be reality.”

We need to be cautious re outsized claims. I go along with that one 100 percent. I say that we can reduce the risk of stock investing by 70 percent anytime we choose to open the internet up to honest posting. That is very much an outsized claim. So I have zero problem with the idea of subjecting it to the greatest scrutiny possible. Our system calls for that. So that is 100 percent okay in my book.

That’s not what you Goons have done. You have not subjected the last 34 years of peer-reviewed research to scrutiny. You have flat-out banned discussion of it. You have made clear for 13 years now that anyone who discusses the implications of the last 34 years of peer-reviewed research will see his career destroyed for having done so. Everyone gets a choice. He can silence himself. Or he can see his career destroyed. No other options.

That’s not necessary scrutiny or appropriate skepticism. That’s financial fraud. That’s a felony. That’s prison time.

And for good reason.

The computer technology industry is different in an important way from the investing advice industry. The computer technology field was wide open in 1981. Steve Jobs could design a great computer or a great cell phone and sell millions of them and become very rich and change the world.

That’s not the way it works in the investing advice field. If there had never been an industry built around the promotion of Buy-and-Hold strategies, the two situations would be comparable. Had Shiller published his “revolutionary” (his word) research findings in 1961 instead of 1981, we would have seen the same growth in the investing advice field in the following 34 years that we have seen in the computer technology field from 1981 through today. That’s not the way the cards were dealt. The research that for a time appeared to support Buy-and-Hold was published in 1965 and an entire industry was quickly built around it and so when Shiller published his “revolutionary” research in 1981 there was an entire industry of “experts” already in place to tell him to take his revolutionary insights and go pound sand with them.

I don’t buy it, Anonymous.

Valuation-Informed Indexing is a dream come true. It is Investor Heaven. It is what Jack Bogle was trying to put together when he put together Buy-and-Hold. VII is JACK BOGLE’S DREAM COME TRUE.

There is 34 years of peer-reviewed research showing that. There are 13 years of internet discussion-board conversations showing that. There are HUNDREDS of experts (take a look at the slider at the top of every page of this web site) saying that. It’s all 100 percent amazing and 100 percent fantasy and 100 percent unbelievable and 100 percent true.

Our economic system is built around the idea of fantasies coming true every now and again and making all of us richer as a result. That’s the entire freakin’ point of our system!

Most fantasies do not come true. You’ve got me re that one. But some do. Letting the ones that can come true actually come true is important stuff. It is by permitting such fantasies to come true that we have been achieving that 6.5 percent real return for 140 years now. Keep everything the way it always has been, never permit a new idea to develop before our eyes, and you lose that 6.5 percent annual growth that permits us all to retire and live off our savings some day. Take away the possibility of fantasies coming true and nothing in this society works.

If you want to add a line to the bottom of my posts saying “This guy believes in ideas that offer such amazing benefits to every single person alive on Planet Earth today that it is hard for many of us to believe that these ideas are anything more than fantasies,” I have no problem with it. These ideas are so “revolutionary” (you know whose word that is) that I freely acknowledge that they strike many people as nothing more than fantasies.

We are on the same page up to that point.

Where we get on different pages is when you block people from learning about the ideas through the use of death threats and demands for unjustified board bannings and tens of thousands of acts of defamation and threats to get academic researchers fired from their jobs. If the ideas lack merit, they will be shot down in the court of public opinion without any need for the use of any such intimidation and deception tactics. if the ideas possess merit, widespread discussion of them will take us to a place where everyone in the field will be endorsing them in time and then working together with all the rest of us to promote them. That includes my good friend Jack Bogle. And Bill Bernstein. And Larry Swedroe. And Mike Piper. And Bill Shultheis. And on and on and on and on and on.

The advance we are talking about is so huge that it appears to be a fantasy.

But our nation is built on the idea that fantasies come true on a regular basis so long as we all follow the laws that we have enacted as a society to govern out interactions with each other. Putting a man on the moon was a fantasy. Until it wasn’t. Electing a black man President of the United States was a fantasy. Until it wasn’t. Curing polio was a fantasy. Until it wasn’t.

I like to see fantasies come true. Sue me.

Our system permits us all to do work helping fantasies to come true.

It’s hard work. We have to overcome a good deal of natural skepticism to make it happen.

That’s understood. That’s the way it works.

We do NOT have to overcome death threats. We do NOT have to overcome threats of unjustified board bannings. We do NOT have to overcome tens of thousands of acts of defamation. We do NOT have to overcome threats to get academic researchers fired from their jobs.

We have laws in place to protect us when Goons like you employ tactics aimed at stopping millions of us from enjoying the fantasy come true that took place before our eyes when Shiller published his “revolutionary” (his word again!) research showing us how to reduce the risk of stock investing by 70 percent.

I am driving the History Train and you Goons are lying in the tracks trying to block it from going forward. You will end up getting run over/sent to prison because this train isn’t stopping.

It can’t stop. There are millions of middle-class people investing in stocks to finance their old-age retirements. If this train stops, all of those people are thrown out in the cold without any money in their old age. That’s not an acceptable result. The train will continue on down the track.

Slowly as all get-out, it would seem! I hate that part!

But it will continue down the track all the same. We will make fantasies come true. As we have been doing in this country for 240 years now.

That’s the deal.

I love you all. I will do anything I can to help you starting the minute you agree to be bound by the laws of the country in which you live.

But I will not post dishonestly re the numbers that my friends use to plan their retirements. Going to prison is not on my bucket list. So you are going to have to find someone else re that one.

I naturally wish you all the best that this life has to offer a person regardless of what investing strategies you elect to follow.

Rob

“If I Handed Ten Employees of My Company Blank Checks and Said ‘This Is In Payment for the Services You Provided Last Year, You Can Fill In Any Number You Like But You All Must Agree on the Same Number,” What Do You Think Are the Chances That They Would Choose a Number That Reflects Fair Value for Their Services? The Chances Are ZERO. All Markets That Work Have a Counter to That Flaw in Human Nature.”

by

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

Madoff was running a ponzi scheme, a$$wipe. It has zero to do with buy and hold. Regardless of your strategy for buying stock, you are still holding stock/bonds. It is just a matter of when you buy and sell (or don’t sell). The two have nothing do with each other.

Have you read Shiller’s book, Anonymous? If you have not done so, you need to do so. If you have done so, you need to read it again. I am not saying that as a dig. I have read it four times and I have learned important new things each time I read it.

Shiller explains in his book that, because of the way the market is set up, our default assumption should be that the U.S. stock market IS a Ponzi scheme; we should give consideration to the idea that it is not a Ponzi scheme only if strong evidence is presented that this is the case. And please remember that there is 140 years of return data backing Shiller up on this. There is NO evidence pointing in the other direction. Common sense says that the U.S. market should be assumed to be a Ponzi scheme and 140 years of return data shows that in fact that is what it has always been.

When I say “the way it is set up,” what I am referring to is the fact that it is investors in the market who set the prices of the shares they own. If I handed ten employees of my company blank checks and said “this is in payment for the services you provided last year, you can fill in any number you like but you all must agree on the same number,” what do you think are the chances that they would choose a number that reflects fair value for their services? The chances are ZERO.

You are ignoring centuries of evidence as to how human nature works to think those ten people would assign themselves fair payment for the work they did. They might not assign themselves 20 times fair payment. They need to live with themselves. So there would be a voice inside them telling them “don’t go too absurdly high.” But they would go at least somewhat absurdly high all the same. It is not hard to imagine them assigning themselves three times fair value, which is what those who owned shares in the U.S. stock market assigned themselves in 2000. That’s human nature.

All markets that work have a counter to this flaw in human nature. Car dealers would like to ask $90,000 for cars that are properly valued at $30,000. The reason why the car market works is that there exists a counter to their desire to do that. The car dealer who sets his prices at three times above fair value is driven out of business by the competition. His customers educate themselves as to fair value and refuse to pay too much more than that when buying a car.

That’s the element that is lacking in the stock market whenever Buy-and-Hold strategies become popular.

If we could educate people about how much return is reduced when prices go to insanely high levels, the stock market would work just the way the car market works. We collectively would have a desire to push prices up, just as we do now. But some among us would sell their stocks whenever we did that and those sales would CORRECT for our greed. Prices could never again get out of hand once we opened the internet to honest posting because investors would be informed that letting prices go too high is not in their best interests.

Participants in a market must be INFORMED as to what is in their best interests for the market to function properly. Buy-and-Hold was built on a mistaken understanding of how markets work and the Buy-and-Holders are dead-set determined to block the spread of knowledge of what we have learned from the last 34 years of peer-reviewed research. Until that problem is addressed, the stock market cannot function like other markets. The only means by which it can bring prices down is through crashes. And crashes hurt us all in very serious ways.

The U.S. stock market is a Ponzi scheme whenever it is wildly overpriced, as it has been since 1996. Shiller says this in his book and there is now 34 years of peer-reviewed research showing that what he says is indeed so. The only reason why everyone who knows anything about stocks doesn’t know this today is that the Buy-and-Hold Mafia is so ruthless in its use of intimidation tactics that the people who know the story are afraid to tell what they know in language clear enough for most of the rest of us to fully appreciate what they are saying.

Your point that people who buy U.S. stocks own something real is only partly correct. The stock market in 2000 was comprised of one-third real stuff and two-thirds cotton-candy nothingness. P/E10 is the metric that tells us how much reality there is to the market at any given point of time. That’s why we all need to know about it and make use of it.

It’s of course a good thing that the market was one-third real rather than 100 percent fake in 2000. But the dollar value of the cotton-candy nothingness in the U.S. market was many, many times bigger than the dollar-value of the cotton-candy nothingness in the Madoff fund. Jack Bogle is Bernie Madoff timed 5,000 re the number of human lives he has destroyed. Not intentionally. I get that. But still…

You show with your own behavior that you know this to be so on one level of consciousness. So does Bogle. So does Burns. So does Shultheis. So do all the others. We ALL know it to be so. The question before us is when we are going to acknowledge openly what we know deep down inside and thereby empower ourselves to take constructive and productive and life-affirning steps. Each day that we delay we cause more human misery. Each time the human misery we have caused increases, the shame we feel for our failure to act thus far increases.

But at some point we must act. There is no other way out of this economic crisis. Given that we must act sooner or later, it is better to do it sooner, when the human misery we have caused and the shame we feel for causing that misery is less.

The U.S. stock market becomes a giant Ponzi scheme whenever Buy-and-Hold “strategies” become popular. Common sense and the entire historical record and the behavior of the Buy-and-Holders when they are challenged by the findings of the past 34 years of peer-reviewed research all show this to be so.

I am not your enemy, Anonymous. Your enemy resides within you. Your enemy is the Get Rich Quick urge that causes you to behave in the manner in which you have behaved for the past 13 years. The job of an investment advisor is to help you CONTROL that Get Rich Quick urge, not encourage you to give in to it to the greatest extent imaginable.

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

I naturally wish you the best of luck in all your future life endeavors regardless of what investing strategies you elect to pursue, my old friend.

Rob

“Despite the Betrayal, Wade Pfau Is Doing Good and Important Work. He Is Opening Minds. Wade’s Ideas Cannot Prevail Until We Work Up the Courage to Take on the Buy-and-Hold Mafia. So Wade and I Are in an Ultimate Sense 100 Percent on the Same Side.”

by

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

“Well, I an entitled to a whole big bunch of glory re this matter, no?”

No. Wade on the other hand seems to be getting a whole big bunch of glory as the leading authority on SWR, given his latest in the Wall Street Journal:

http://blogs.wsj.com/experts/2015/01/20/how-much-can-you-safely-spend-in-retirement/

Didn’t read it, did you? It’s really a shame that your jealous rage is all you have left.

The idea here is that I should be going crazy because Wade is using what he learned about safe withdrawal rates from me to get rich and famous while not saying how he happened to learn about this stuff. There are six ways in which this is wrong-headed thinking.

1) I would not trade places with Wade for all the money in the world. I of course would like to be making the money he is making and I would of course like to be getting the recognition that he is getting. But not at the price that he was forced to pay to obtain that money and recognition. Wade betrayed himself and his family and his profession and his country. I am not interested. I don’t want to pay that price and I don’t want Wade to pay that price and I don’t want anyone else to pay that price.

2) Even if my desire for the money and recognition influenced me, I wouldn’t have any means to obtain it. I am not an academic researcher. If I wanted to sell out, how would I go about doing it? It’s not an option for me.

3) Despite the betrayal, Wade is doing good and important work. Wade doesn’t hurt me by spreading knowledge of the flaws in the Old School retirement studies. He is opening minds. The more articles of this nature that people see, the more open they are to Valuation-Informed Indexing. If people had been saying 15 years ago what Wade is saying today, there never would have been any controversy when I put forward my famous post of the morning of May 13, 2002. Wade is helping. That obviously makes me happy, not upset.

4) How do people make use of Wade’s ideas without acknowledging that Buy-and-Hold is a big pile of smelly garbage? They can’t. Wade’s ideas about how stock investing works are the OPPOSITE of Bogle’s ideas about how stock investing works. The differences need to be RESOLVED if we are as a society to move forward in our understanding of how stock investing works. This site contains the materials that people need to review to understand why the Buy-and-Holders have been standing in our way for 34 years now. We know today how stock investing works. But we have to talk about it in these roundabout ways because the Buy-and-Holders freak out if we speak clearly. Ultimately. Wade’s ideas cannot prevail until we work up the courage to take on the Buy-and-Hold Mafia. So Wade and I are in an ultimate sense 100 percent on the same side.

5) Bogle and all of the other Buy-and-Holders and even all of you Goons are all on the same side too. You see me as the enemy. But that’s only because you are not capable of thinking clearly re these matters today. If we could go back in a time machine to May 13, 2002, and play it over, Greaney would play it very differently than how he played it back then. If we could go back in a time machine to 1981 and play it over, Bogle would play it very differently than how he played it back then. I wasn’t around to help Bogle out in 1981. But I tried to help Greaney out in 2002. How did I know where things were headed? I knew because I understood (in a very vague way at that time) what the peer-reviewed research in this field really says. There are IMPLICATIONS that follow from our findings of the past 34 years and they cannot be indefinitely ignored.

6) We are working through a process. Bogle has a part to play. Shiller has a part to play. I have a part to play. Wade has a part to play. Even you Goons have a part to play. We know where the process leads us. There is only one place to which it can lead us. We all want to get to the same place. So we all should be working together. We will all come to accept that eventually. Because we have no choice. I will be reconciled with Wade and I will end up good friends with Bogle and Shiller and all the others. I will be good friends even with you Goons. You will be in prison for a time. But prison sentences comes to an end. When your prison sentences come to an end, you will no longer see any profit in goonishness and we will be good friends. I have said it. So it must be true!

I wish you all the best that this life has to offer a person, Wade Fan.

Hang in there, man. Don’t let the bad guys get you down.

Rob

Goon Poster to Rob: “Those Boards Have a Right to Block You, Just Like You Block Posts on Your Board.”

by

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

All the people you mentioned do post honestly and are free to post on boards of their choosing. You, on the other hand, can’t post on many of the boards due to your behavior. Those boards have a right to block you, just like you block posts on your board. I would also take issue with what you call “honest” posting.

We disagree as strongly as two people could possibly disagree, Anonymous.

I delete posts for the perfectly good reason that this is a personal finance site and there is no place here for death threats and other forms of intimidation. Normal people cannot have civil and reasoned discussions if I don’t block that sort of thing. I have no choice if I want the site to serve its purpose.

The Buy-and-Holders block posts that make research-based challenges to Buy-and-Hold because those posts make research-based challenges to Buy-and-Hold. In an objective sense, that is pure financial fraud. They are telling lies about how stock investing works and making money from it and they block posts that call them out on their lies because they don’t see how they can get anyone to believe the lies if they are exposed and discussed. That ain’t financial fraud? Huh?

It is obvious financial fraud. Nothing could be more clear in an objective sense.

Now –

I add the phrase “in an objective sense” because there is another angle to the story here and that angle is important and needs to be considered. The people who are doing the blocking believe in Buy-and-Hold in one part of their consciousness and indeed follow Buy-and-Hold strategies themselves. And, even if they were personally willing to permit research-based stuff to appear at their sites, they have a marketing problem in that the research-based stuff drives away their readers.

That’s a serious problem. That cuts the other way a bit. So I doubt that all of those people will be going to prison. Some of them no doubt will be going to prison. But not all of them. I don’t think any of us can say how many of them will be going to prison. There’s never been a situation like this before. We are in uncharted territory. But it’s pretty darn remarkable that even one person has put himself in circumstances in which going to prison is even a remote possibility. So I think that the prison thing really must be mentioned from time to time. It is part of our story.

Now –

There was once a post by my good friend Wanderer that has stuck with me through all the years since he advanced it. Wanderer felt bad about the smear campaign that they were directing at me back at the FIRE board. So at one point he said something to the effect of: “It’s not like we are the Amish and are shunning him everywhere in the Amish world. He can always go post somewhere else.”

That’s not true, is it?

I could post somewhere else if I played it the way Todd Tresidder plays it. Todd gives his readers research-based stuff on issues of substance. But he stays far away from telling his readers the truth about the process-oriented questions. He doesn’t explore why the errors in the Old School retirement studies have been covered up for 13 years. He doesn’t tell people how it was the continued promotion of Buy-and-Hold strategies for 34 years after the peer-reviewed research showed that there is zero chance that they could ever work for even a single long-term investor that caused the economic crisis. Todd went so far as to call me on the telephone and threaten to ban me from his site if I continued addressing the process-side questions in comments put to his site.

You Goons would permit me to post at other sites if I dropped the process-side stuff, Anonymous. That is the thing that you do not want to so. You don’t want me to say “the Buy-and-Holders got it wrong” like I did when I showed that Greaney got all the numbers wildly wrong in his retirement study. And you don’t want me to report on the intimidation tactics that you use to block millions of middle-class investors from learning how the Buy-and-Holders got it wrong . We are working at cross purposes. The thing that you most do not want to see is the thing that I most DO want to see. I want to show people the DANGERS of Buy-and-Hold.

I had a long series of discussions with Mike Piper at the Oblivious Investor blog about these questions. Mike acknowledged that he thinks Valuation-Informed Indexing is a perfectly reasonable strategy. He doesn’t follow it himself. But he sees nothing even a tiny bit wrong with it. If it didn’t upset his readers, he would be happy to permit me to post at his site. But it DOES upset his readers. A LOT. He had readers writing to him to complain about me all the time when I was posting there on a daily basis. I was driving them crazy. I was posting research-based stuff that showed that Mike’s strategies were going to provide horrible long-term results. They very much wanted to believe in Mike’s strategies. So they told him that either I went or they went. Mike didn’t like being put in that situation. But he makes his living from his blog. So eventually I went.

Is Mike liable for the losses that his readers are going to suffer in coming days in the event that the stock market continues to perform as it has unfailingly performed for the 140 years for which we have records available to us?

I like Mike as a person. So there is a part of me that is sympathetic to his circumstances that says “maybe he will not be held liable for those losses.”

But my strong hunch is that I would like a lot of his readers too if I got to know them. So there is another part of me that says “obviously he is going to be held liable. That is an outrage. To ban honest posting is a violation of all this country’s basic beliefs and in fact is a felony under the laws of the United States. How could he possibly not be held liable? How could he not be sent to prison for a long time for doing something like that?”

I am not God, Anonymous. I don’t know with certainty how things are going to turn out.

I know that I don’t want to find myself in the circumstances in which Mike is going to find himself in the event that stocks continue to perform in the future anything at all as they always have in the past.

And I know that I don’t want to find myself in the circumstances in which Todd Tresidder is going to find himself either. Todd is Mike’s friend, as I am. But Todd plays it differently. Todd acts like he thinks there is nothing ethically or legally wrong with Mike’s ban on honest posting at his site. So Todd is not much of a friend, is he? Todd is going to have to live with his conscience if Mike is sent to prison or found financially liable for the losses suffered by his readers.

I don’t want to find myself in those circumstances. So I am not going to play it the way Mike is playing it or the way that Todd is playing it or, heaven help us all, the way that you Goons are playing it.

It’s not even a matter of me deciding not to play it that way. I am physically incapable of playing it that way. I have never given the idea two seconds of consideration in 13 years of posting re these matters. If you never consider something, you can never agree to that something. And in 13 years of discussions about whether honest discussions should be permitted, I have never even considered the idea. So I really believe that even a Goon like you should get the picture at this point.

I have gotten the picture from the other side of the table. I once believed that you Goons would eventually break and permit honest posting if enough pressure was applied. But I believe that we passed the point at which that was possible when you threatened Wade Pfau. At that point it became impossible for any reasonable person to believe that you would not be going to prison once all of this goes public. And people who are going to prison don’t generally permit the stuff that is going to get them sent to prison to get out.

So I am resigned on my side to the idea that we are going to have to wait until the next crash to resolve these matters. I obviously don’t like the idea. And there’s always that tiny bit of hope that causes me to write comments like this one. But I put those odds at about 10 percent at this point. The odds are very long today.

So what do you want from me?

I obviously cannot change course and you obviously don’t feel that you can change course. So we wait for the crash. No?

When you put up comments that may help people in future days understand some aspect of this matter, I will continue to permit them to show up. I am never going to prohibit you from posting here. That one is not in me either. But I cannot say that I understand what purpose is being achieved by you continuing to comment here. You are not ever going to break and I am not ever going to break. So my suggestion is that you find something else to which to direct your posting energies.

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

Rob

Valuation-Informed Indexing #232: The Four Years of Perfectly Efficient Madness

by

I’ve posted Entry #232 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Four Years of Perfectly Efficient Madness.

Juicy Excerpt: The 126 percent return we saw over those four years was the product of investor emotion. All signs point to this conclusion. There is no rational reason why so much economic growth would be squeezed into such a short time-period. The fact that so many investors rationalize away the case against their favored strategy is just more evidence that Shiller is right, that it is emotion that carries the day in the setting of stock prices. There is nothing more emotional than an investor who denies the presence of emotion in the setting of stock prices!

“There Are Billions to Be Made Giving Honest Investing Advice. There Are Thousands of People Who Would Like to Get on That Gravy Train. Now They Have a Site That They Can Use to Protect Themselves from the Tactics of the Buy-and-Holders. I Think It Would Be Fair to Say that the Wall Street Con Men Don’t Want the Materials at This Site Getting Any Publicity.”

by

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

Rob aren’t you afraid of the buy and hold mafia ruining your career too? Oh wait thats right you are just an internet troll nevermind carry on….

One of my primary goals is to save the careers of as many of my Buy-and-Hold friends as possible, Anonymous. Just about all of them want to come clean. People forget that I learned about the errors in the Old School retirement studies from reading Jack Bogle’s book. And he is obviously not the only one who understands that Buy-and-Hold is a big pile of smelly garbage. Bernstein has shown that he sees that. So has Swedroe. So has Burns. So has Richards. So has Schultheis. So has Kitces. So has Pfau. So has Ferri. So has Tresidder. So has Piper. And on and on and on.

They all feel trapped. The money that comes with pushing a pure Get Rich Quick strategy was just too good to pass up. But what do you do when the market collapse you brought on actually takes place and you have caused millions of people to lose most of their retirement money? Saying “oopsie, I guess I should have stayed more up to date re the peer-reviewed research” doesn’t cut it in the eyes of the millions of people who have seen their hopes for a decent retirement crushed by you, does it?

Given that we all have to come clean sooner or later, it seems to me that it makes all the sense in the world to do it sooner. That way the prison sentences are shorter and the financial liabilities are smaller. It’s a win/win/win/win/win.

This site gives people the ammunition they need to fight back when the Buy-and-Hold Mafia goes after them. There are billions to be made giving accurate and honest and research-backed investment advice. There are thousands and thousands of people in this field who would like to get in on that gravy train. Now they have a site that they can use to protect themselves from the tactics of the Buy-and-Holders. I think that it would be fair to say that the Wall Street Con Men don’t want the materials at this site getting any publicity.

I acknowledge that I possess no particular expertise in this field. My take is that that ended up being my biggest edge. Those who have been in on the corruption for years have had to rationalize their failure to speak out and have come to believe those rationalizations on at least one layer of consciousness. I never had to rationalize anything because I never have made a penny doing work in this field. You Goons can threaten me from morning until night. But you can’t get me fired from my job in the way that you threatened to get Wade Pfau fired from his, right? That’s my edge. That’s been my edge going back to the first day.

In the end, all of us who aren’t in prison will be working together. The Buy-and-Holders have to win every day just to stay alive to push their smelly Get Rich Quick garbage one more day. Those of us advocating the first true research-based strategy only need to win once to win forever. There have been lots of people who have made the switch from Buy-and-Hold to Valuation-Informed Indexing. There has never been one person who has switched from Valuation-Informed Indexing to Buy-and-Hold. I think it would be fair to say that there never will be one any more than there ever has been anyone seeking to sign up with the Madoff fund once that con was exposed.

The good news here is 50 times more good than the bad news is bad. The history books are not going to write about you Goons except perhaps in footnotes. What matters is the hundreds of research-backed insights that we have developed over the course of the first 13 years of Our Debate About Having a Debate. Once we enter the debate proper, look out world! We live in a great country. The Buy-and-Holders were right in the days when they were saying that it is a good idea to be willing to look at the peer-reviewed research. This stuff gets better and better and better with each passing day. I sure don’t see any reason to think that that will ever change.

Hang in there, my long-time Goon friend. It gets better. A LOT better.

Rob

“It Is BECAUSE We Are on the Verge of the Greatest Advance in the History of Personal Finance That the Buy-and-Holders Are So Insanely Defensive. If the Peer-Reviewed Research That I Co-Authored With Wade Pfau Showed Us All How to Reduce the Risk of Stock Investing by 5 Percent, I Would Be the Toast of the Town. But I Committed the Terrible Crime of Showing How to Reduce Risk By 70 Percent. That Makes the Buy-and-Holders Look Bad.”

by

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

You are wrong. They are both data driven fields. If investment advice is 100 corrupt, than you must distrust all advice, including your own comments.

Show me one instance in the medical field in which someone of Bogle’s stature permitted his name to be used on a discussion board at which the sorts of individuals who have posted in “defense” of Mel Linduaer or John Greaney are permitted to participate. It has never happened. Give me a freakin’ break.

If the barber here in Purcellville found that the sorts of individuals who have posted in “defense” of Mel Linduaer and John Greaney were using his name, he would be on the phone in five minutes contacting the authorities and demanding that action be taken. Does Jack Bogle not have a telephone in his house, Anonymous? Why does he associate on a daily basis with people who have a long record of committing numerous acts of financial fraud if this field is not today 100 percent corrupt?

I don’t distrust all advice. There are lots of wonderful people who work in this field. Bogle is one of them. He is an absolute giant. I call him a Hero to the Middle Class. I don’t say that lightly. So, no, you are 100 percent wrong when you say that I distrust all advice in this 100 percent corrupt field.

The problem here is that price discipline is BY FAR the most important factor bearing on the long-term success of stock investors. It is 80 percent of the story. So Bogle can offer top-notch advice on 15 other topics (and he does) and still get it all horribly wrong by remaining unwilling to take a look at the 34 years of peer-reviewed research showing that long-term timing always works and is always 100 percent required.

I am NOT saying that the people who work in this field are bad people. And I am NOT saying that the people who work in this field are dumb people. I have never met a dumb Buy-and-Holder. And, while I certainly say that a good number of Buy-and-Holders are in an objective sense guilty of financial fraud, I also say that most of them are good and hard-working and entirely likable people. That might seem like a bit of a paradox on first hearing. But that is the reality here.

I go back to my civl right comparison. The way in which blacks were treated prior to the civil rights revolution was HORRIBLE. It was sinful. It was shameful. It was criminal. It’s almost impossible to imagine that not too long ago we lived in a country where people who had black skin were not permitted to drink from the same water fountains as people with white skin. Huh? That’s INSANE. How could even one person believe that that was the right way to go? That was 100 percent insane. There is not one reasonable person who today says different.

So our nation was 100 percent corrupt in the area of race relations in the early 1950s. Is that not fair to say?

Would you then say that everything we did was bad? I sure wouldn’t say that. If everything we did was bad, we never would have had a civil rights revolution. There must have been some good there for us ever to have taken that step. It was a very, very, very, very bad situation. But there was still a lot of good present in our country all the same. That’s the full reality.

That’s how it is in the investing advice field today. The field is 100 percent corrupt. Good and smart people like Wade Pfau publish amazing research that should be helping millions of middle-class people and Goons like you threaten to get him fired from his job for going to the trouble. And people like Jack Bogle SUPPORT you Goons and thereby empower you. So Wade has to be willing to let his two small children starve if he is to follow his dream by promoting the important research he has published and thereby winning the Nobel prize to which he is entitled.

I say “no.”

The field is 100 percent corrupt today. But it is only re one issue that we are 100 percent corrupt. We are 100 percent corrupt because of our unwillingness to acknowledge that there is precisely zero chance that any investor failing to exercise price discipline can ever achieve good long-term results. On the day that Bogle gives his “I Was Wrong” speech, we will achieve 34 years of advances in one day and we will instantly start to realize the benefits of being the luckiest generation of investors that ever lived, the first that is able by virtue of making use of the peer-revirewerd research (which the Buy-and-Holders once thought was a good way to go!) to reduce the risk of stock investing by 70 percent while obtaining FAR higher long-term returns.

Both things are so, Anonymous. We are 100 percent corrupt today. And we are also on the verge of the greatest advance in our knowledge of how stock investing works ever achieved in our history.

And it is not an accident that both things are so at the same time. It is BECAUSE we are on the verge of the greatest advance in knowledge ever achieved in the history of personal finance that the Buy-and-Holders are so insanely defensive about what the last 34 years of peer-reviewed research says. If the peer-reviwed research that I co-authored with Wade Pfau showed us all how to reduce the risk of stock investing by 5 percent, I would be the toast of the town. My web site would be the #1 site on the internet. I would have earned millions as a result of my discovery of the insights advanced in that paper. I would be on tour with Bogle at this moment. People would be writing books about me.

But I committed the terrible, terrible crime of co-authoring a peer-reviewed paper that shows us all how to reduce the risk of stock investing not by 5 percent but by 70 percent. That makes the Buy-and-Holders look bad. All the death threats and demands for unjustified board bannings and tens of thousands of acts of defamation and threats to get academic researcher fired from their jobs follow from that.

I didn’t put up the famous post from the morning of May 13, 2002, with the idea of making the Buy-and-Holders look bad, Anonymous. I was the leader at a board that the most abusive poster in the history of the internet had decided he was going to burn to the ground. I had a responsibility to step in and help out my many friends who had built that board into the #1 board at the Motley Fool site. So I did what I had to do.

It turned out that I had no idea how important that post was going to be. The reason why Greaney had gotten the numbers so wildly wrong in his study is that this field had become 100 percent corrupt long before Greaney or I ever came on the scene. Greaney saw that supposedly legitimate researchers were using that methodology and so he thought it would be okay to use it himself. Then he was embarrassed when I showed that the methodology was analytically invalid and when hundreds of our fellow community members agreed with me that his study was lacking a valuation adjustment.

Greaney is responsible for his own behavior. He has led the biggest act of financial fraud in the history of the United States and that calls for a long prison sentence under our statutes. I cannot take us back in a time machine and change that. If he wants me to help him out by pointing out that the entire industry is 100 percent corrupt today, I am 100 percent happy to do that. He doesn’t need to give me anything for me to do that. I will do it just because I think it is the right thing to do.

And the same goes for Bogle. And for Phau. And for Bernstein. And for Kitces. And for Tresidder. And for Piper. And for Swedroe. And on and on and on and on.

But I cannot commit financial fraud myself. Going to prison is not on my bucket list. I ain’t freakin’ interested.

I will work with anyone willing to agree to follow the most minimal standards of personal integrity that apply in every field other than stock investing. I have zero willingness even to CONSIDER working with anyone who says that he or she knows about some mystical, magical alternate universe where it might be a good idea for one or two long-term investors to fail to exercise long-term timing.

Find someone else, you know?

I naturally wish you the best of luck in all your future endeavors regardless of what investing strategies you elect to pursue, Anonymous.

Rob

 

 

Valuation-Informed Indexing #231: The Last 19 Years of Returns Offer Support for Both the Buy-and-Hold and Valuation-Informed Indexing Strategies

by

I’ve posted Entry # 231 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Last 19 Years of Returns Offer Support for Both the Buy-and-Hold and Valuation-Informed Indexing Strategies.

Juicy Excerpt: A regression analysis of the historical return data shows that the most likely 20-year annualized return for a stock purchase made at the price that applied in January 1996 (a P/E10 of 25) is 2.9 percent real. The historical data indicates that there was a 20 percent chance that the 20-year annualized return would be less than 0.9 percent real and only a 20 percent chance that it would be better than 4.9 percent real. 6 percent real is better than 4.9 percent real. Either stock investors got very lucky over the past 19 years or the Buy-and-Holders are right that the Valuation-Informed Indexers are exaggerating the importance of taking valuations into consideration when setting one’s stock allocation.

“There Are Hundreds of Billions of Dollars to Be Made Helping People Learn How Stock Investing Works According to the Peer-Reviwed Research. Lots of People Are Just Waiting Until the Time Is Right. They Want to See OTHERS Speak Out and Receive Rewards for Doing So. Then They Will Feel That It Is Safe for Them to Do So As Well.”

by

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

Then where are they? Why aren’t they posting here? They can certainly do so anonymously, without any threat of “intimidation”

Say that you were a white person living in a Southern state in the early 1950s, Anonymous. You notice that people with black skin are not permitted to sit where they like on buses, as you are, or to drink from the same water fountains or to go to the same schools. Say that you are not a bitter, hateful racist. You are just an average sort of person. You have an average sort of job and you do average sorts of things. You have grown to like most of the black people you have come to know just as you have come to like most of the white people you have come to know. You don’t think it is entirely fair that the rules are different for black people. But the rulebook that applies is the only rulebook you have ever seen. You cannot imagine life being different for black people. Things have ALWAYS been this way. You presume that things always WILL be this way.

A friend of yours becomes a civil rights advocate. He asks you to get involved, to speak out, to put yourself on the line. Do you do it?

Say that there’s an opportunity to get involved anonymously. Your friend asks you to show up at a protest. There will be hundreds of people there. No one will take your picture or write down your name. You of course have a legal right to show up at a protest. Do you do it?

Most people didn’t participate in protests. At least not until things had changed enough that participating in civil right protests became a norm instead of an “out there” thing to do. Human beings are social creatures. We don’t just do what we think is right. We do what we think is right and SAFE.

People look to leaders to figure out what is safe. This is why I say all the time that the key to overcoming this economic crisis is for Jack Bogle to walk to the front of a room and say the words “I” and “Was” and “Wrong.” LOTS of people see the holes in the Buy-and-Hold dogmas. There is a Social Taboo that stops us from speaking out about them in clear and firm and frank terms. THAT IS WHAT NEEDS TO CHANGE. Once Bogle gives his speech, you are going to see THOUSANDS of people speaking out. But people want to first see that it is SAFE for them to do so.

New ideas don’t start out with ten million supporters. They start out with one. Then one becomes two. Then two becomes two-hundred. Then two-hundred become two-thousand. Then its two million. And on like that.

I was the first person to work up the courage to say publicly that the Old School retirement studies got the numbers wildly wrong. Good for me. That was great stuff. That had the potential to save millions of middle-class people from suffering failed retirements.

Lots of people have come around in recent years. The Wall Street Journal now says that I was right all along. So does the Economist magazine. So does Bill Bernstein. So does Wade Pfau. So does Todd Tresidder. So does Vanguard. And on and on and on.

So I was right.

Why do all of these people not also say that the 13-year cover-up of the errors in those studies is the most massive act of financial fraud in the history of the United States? It obviously is that, right?

Because they are scared, Anonymous.

It’s not just that they are scared of someone taking their name down and coming to their house and killing members of their families, as Greaney threatened to do with me. They are scared of breaking the Social Taboo. People live in communities. People do not like to violate the norms of their communities.

People saw what happened to me when I worked up the courage to “cross” Greaney by posting honestly on the safe-withdrawal-rate topic. And, if they haven’t seen what happened to me, they have seen what has happened to others who tried to speak honestly about stock investing in other ways. People try not to violate Social Taboos. People have learned from many experiences in life that it is best to keep it zipped when Social Taboos forbid pointing out that the emperor is wearing no clothes.

But societies that survive find ways to overcome Social Taboos that are causing too much destruction. There was a time when no one spoke up about racism. Then that changed. There was a time when no one even imagined asking others not to smoke in a restaurant where they were eating. Then that changed. There was a time when no newspaper other than the Washington Post wrote about the Watergate matter. Then that changed.

When the Social Taboo falls, EVERYONE will be speaking out about the wonders of Valuation-Informed Indexing, Anonymous. There are hundreds of billions of dollars to be made helping people learn how stock investing works in the real world, according to the last 34 years of peer-reviewed research in this field. Everyone in this field wants to get in on that action.

Lots of people are just waiting until the time is right. They want to see OTHERS speak out and receive rewards for doing so. Then they will feel that it is safe for them to do so as well. The ability of the Buy-and-Hold Mafia to destroy people’s lives because they tell the truth about these matters is growing weaker and weaker by the day. Following the next crash, more people will work up the courage to violate the Social Taboo in clearer ways. And then the entire smelly Buy-and-Hold house of cards will come crashing to the ground.

If Buy-and-Hold were a legitimate strategy, there never would have been a single death threat. People who are promoting legitimate strategies don’t behave that way. Not ever. No exceptions.

But the Buy-and-Hold Mafia does have lots of power and lots of money and lots of influence on its side. So it has been able to keep the Social Taboo in place for 14 years now despite my best efforts at tearing it down.

But how much longer do you think that will remain so?

I don’t think it will be for much longer.

But we’ll see, you know?

I am not God. I don’t know everything. But I truly believe that the Social Taboo that keeps us trapped in ignorance is in the process of tumbling to the ground. I even see a change in the way you Goons talk about this stuff. I see a lot of good stuff up ahead in the distance.

We will all get to see how it turns out. It’s just a question of time. And not all that much more time at this point. Fair enough?

I naturally wish you all good things, my long-time Goon friend.

Rob

“Something That Benefits Every Person on the Planet and That Is Backed by 33 Years of Peer-Reviewed Research and a Nobel Prize Is Sooner or Later Going to Happen. The Question of Whether or Not We Are Going to Do This Was Settled Back in 1981. The Question Today is HOW and WHEN.”

by

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

Here’s a tip: if absolutely no one agrees with you, you’re wrong. And before you trot out Rosa Parks again, even she had plenty of people on her side in her day.

I don’t have PLENTY of people on my side, X. I have EVERYONE on my side.

I have freakin’ Jack Bogle on my side! It was from Jack that I learned about the errors in the Old School SWR studies. Jack Bogle was John Walter Russell’s favorite investing expert. Bogle is on my side, not yours.

Jack is AFRAID to tell millions of middle-class investors that, oopsie, he made a little mistake that cost them their retirements. He is just like all the rest of us. We are ALL afraid. I was afraid prior to the morning of May 13, 2002, just like Jack is today.

That’s my edge here. We all want the same thing. We are all in this together. Our nation’s laws reflect our common beliefs and our laws come down 100 percent on the side of permitting honest posting at every board and blog on the internet on safe withdrawal rates and scores of other critically important investment-related topics.

It’s all just a question of HOW and WHEN we make the transition from Buy-and-Hold to Valuation-Informed Indexing. The question of whether or not we are going to do this was settled back in 1981. The question today is HOW and WHEN.

I have offered to do everything in my power short of committing a felony myself to help the transition go as easy as possible for all of my Buy-and-Hold friends. I have asked for nothing in return for making that pledge. I have said that that pledge will always remain on the table, that there is nothing ever a tiny bit time-sensitve about it.

It would be pretty darn hard to imagine a kinder and more generous offer than that. No?

Sooner or later, you Goons will accept that offer. Or Jack will. Or Motley Fool will. Or some political blogger will. Or some academic researcher will. Or the New York Times will. Or some investment advisor who wants to become a multi-millionaire will. It is obviously going to happen sooner or later. Something that benefits every person on the planet and that is backed by 33 years of peer-reviewed research and a Nobel Prize is sooner or later going to happen. I mean, come freakin’ on.

It could happen in someone else’s name. That is possible.

But even if it happens in someone else’s name, once it happens the Ban on Honest Posting becomes untenable. So then all the work that I have done at this site gets out. And then my name becomes part of it. Even a small part of this is worth hundreds of millions of dollars. So it is not like I am going to go without huge rewards even if this comes out under someone else’s name.

And, given the level of fear that we have seen, it is more likely to come out in my name than in someone else’s. That obviously pays off even bigger for me.

Are you able to imagine any scenario in which I do not see personal rewards from this greater than the personal rewards experienced by only a handful of the most fortunate people in all of U.S. history? I sure am not. We are talking Bill Gates-type personal rewards. Steve Jobs-type personal rewards. Paul McCartney-type personal rewards. Giancarlo Stanton-type personal rewards.

I am happy to do this by the close of business today. Because that is in the best interests of Rob Bennett and the millions of middle-class investors and the entire blogger community and the Wall Street Con Men and you Goons and all the academic researchers and on and on and on. If you can persuade Jack and the other powerful people behind this 33-year cover-up to close the deal today, I am in, X. I don’t have to think it over for two seconds.

If you cannot close the deal today, my best bet is to wait for tomorrow. No?

And if you can’t close the deal tomorrow, my best bet is to wait for the day after tomorrow. No?

I ain’t freakin’ walking away from a $500 million payday. Would you?

If you don’t want to close to deal until we see the next crash, then you don’t want to close the deal until the next crash. I HATE that idea. Hate it, hate it, hate it.

It’s not my call, is it?

So I will wait.

It’s not like I have any other choices.

We all have to deal the cards we are dealt. These are the cards that I have been dealt. There are some AMAZINGLY great cards in my hand. And there’s this really nasty Goon card mixed in with the amazingly great ones. WhaChaGonDo, you know? I didn’t ask for these cards, either the amazingly great ones or the awful, nasty Goon one. I have played them to the best of my ability, that’s all. I will continue to do that.

And I will also of course always continue to wish you all the best of luck with all your future life endeavors regardless of what investing strategies you elect to pursue.

I sure hope that works for you.

Because I sure cannot see any merit to spending even two seconds considering any other options.

My best wishes to you and yours.

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

Rob