A Rich Life

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

“If You Really Were Confident That You Were Not Going to Land in a Prison Cell, You Would Not Be Posting Here on a Daily Basis. You Know That, I Know That, and Anyone With Half a Grain of Sense in His or Her Head Who Reads These Pages Now or at Some Later Date Knows That or Will Know That.”

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

Nothing will happen for you following the next price crash Rob. You might actually get into the market this time around same as everyone else who is using buy, hold, and rebalance. But who knows maybe you will be too scared or not follow your own system again. I can’t imagine you have much of a nest egg left after 18 years of 3% returns and no income unless you got an inheritance of some sort.

Meanwhile, the rest of us, who have experienced triple digit returns in the last few years will continue locking in large portions of that run up by rebalancing and making our portfolios more conservative as we age. After all you have been calling for a crash for years and it hasn’t happened so who’s to say we won’t experience a few more years of great returns and locked in profit via rebalancing before the inevitable crash.

What makes you think this time around will be any different from the last crash? Your position as nothing more than a complete laughing stock in the realm of the financial world will remain. There are plenty of other people calling for a crash without your conspiracy theory lunacy.

Why are other people calling for a crash if the “science” of Buy-and-Hold is settled, Anonymous?

Buy-and-Hold says that price changes are random. If price changes are random, you can’t predict crashes. Are these people you refer to who are saying these things doing so in defiance of the “science”?

The Buy-and-Holders had a wonderful idea of rooting investing advice in peer-reviewed research. That’s what I love about them. That’s why I was a Buy-and-Holder myself until Greaney threatened to kill my wife and children and 200 people who had long considered themselves friends of mine endorsed his post. A strategy that causes people to do things like that ain’t science. So I gave it up on that day and the rest is history.

The Buy-and-Holders were right in the early days when they were serious about the idea of using research to support their advice. They betrayed their own vision when Shiller published his “revolutionary” (his word) research and they failed to incorporate his findings into their model (That’s what Valuation-Informed Indexing is — Buy-and-Hold updated to reflect the peer-reviewed research of the past 33 years as well as what came before it). I have just taken the vision of the Buy-and-Holders to the next step. Valuation-Informed Indexing is an updated version of Buy-and-Hold, one that actually works in the real world.

There are two reasons why the Wall Street Con Men have not adopted the necessary changes. One is a phony pride. They are Big Shots and they don’t like the idea of saying the words “I” and “Was” and “Wrong.” The other is money. Al of us humans possess a weak human nature that is drawn to Get Rich Quick strategies. Buy-and-Hold is (inadvertently, not intentionally — but still) the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind. So it is possesses an amazing short-term appeal and has brought in billions of dollars of profits to the Wall Street Con Men while destroying the lives of millions of middle-class investors and taking us down a path that ends with our economic system reduced to a smoking ruin.

I want no part of any of that. No part whatsoever. My dream is to become known all over the internet as the most severe critic of Buy-and-Hold who ever walked Planet Earth. I think I’ve got a pretty darn good start on success re that particular project. No?

That makes me unpopular today. So be it, you know? A field in which honesty about what the peer-reviewed research says is banned as the first order of business is a field re which I prefer to be on the outside looking in for the time being.

People lose interest in Get Rich Quick schemes when they lose most of their accumulated life savings as a result off being tricked into following them. Look at what happened with investors in the Madoff fund. They sang the guy’s praises until they lost all their money. Then they demanded that he be imprisoned for his acts of financial fraud. I think it would be fair to say that our mutual friend Jack Bogle is Bernie Madoff times 5,000 when you consider the number of human lives he has destroyed with his support for Mel Lindauer and John Greany and the individuals who have seen fit to post in “defense” of these two.

There will be hundreds of thousands of lawsuits filed following the next price crash when people learn about the trickery that was employed to separate them from their money. There will be thousands of people being led off to prison cells. I will put in a word for you. I will point out the pressures that people like Wade Pfau and Bill Bernstein and my good friend Jack Bogle faced. I will make every effort in the world to be fair and then something even a bit more than just fair.

But I ain’t interested in going to prison along with you. No friggin’ way. Find someone else, you know? It’s not on my bucket list.

I’ll help the people bringing lawsuits against you and I’ll help you too. I have sympathies on both sides and so I will put forward what words I can to help both sides. That’s how I have been playing it for 12 years now and that’s how I will continue to play it for the next 12 billion. That’s me. But I would have to change my entire personality to be able to join you in this massive act of financial fraud. That’s a change that I am not capable of considering much less implementing. Please count me out re that smelly pile of garbage, old friend.

If you really were confident that you were not going to land in a prison cell, you would not be posting here on a daily basis. You know that, I know that, and anyone with half a grain of sense in his or her head who reads these pages now or at some later date knows that or will know that.

Keep posting if you like.

Or stop if you like.

Do whatever works for you.

Please just know that I don’t do financial fraud. One of my aims today is to have thousands and thousands of posts in the files making that point so that there is precisely zero confusion re this point in the minds of every single person who comes here to check the matter out.

I wish you well, man. But that’s where things stand.

Why will the next crash be worse than the last? Because people had excess funds when the last one hit. They felt that they could get through it by tightening their belts. Now people are fatigued by the economic crisis and they feel that they have already taken all the financial pain that they can take. This one will hurt much more. That’s why the P/E10 level will drop so much lower. That’s why you and all the other Buy-and-Holders will be selling this time. It’s only when the Buy-and-Hold zealots sell that a secular bear market hits bottom and that we finally gain the ability to start turning things in a positive direction.

It’s about psychology, man. The psychology and the economics go together. Bad psychology brings a bad economy and bad economics brings a bad psychology. It all feeds on itself. In the background is the Buy-and-Hold/Get Rich Quick garbage, which starts off all the bad stuff by persuading people to believe in fantasy worlds for which there are zero support in the peer-reviewed research of the past 33 years. When a society borrows trillions of dollars from its future, it causes a big heap of pain for a big bunch of people. All of the debt taken out on all the credit cards owned in this country doesn’t match the debt we incurred as a result of the lies about the peer-reviewed research told to us by the “experts” touting the Buy-and-Hold garbage.

Please let it be noted that I do not say that you INTENDED to cause this economic crisis. I don’t believe that. I believe that on one level of consciousness you really believe in Buy-and-Hold. But you have doubts. You lack confidence. That’s why my reports of what the last 33 years of peer-reviewed research says drive you crazy.

And the same is of course true of Bogle and Burns and Bernstein and all the others. I don’t believe that Bogle is the Frank Underwood of Personal Finance. That’s why I believe so strongly that his heart will melt following the next crash. Once Jack’s heart melts, I will be working with him to set things right. And you have my pledge that I will do everything in my power to get your (and his!) prison sentence reduced to the extent possible even then.

That’s the best offer that I can make to you, my old friend. The financial fraud stuff is just not my particular cup of tea.

I hope that all helps at least a tiny bit.

My best wishes to you and yours.

Rob

Valuation-Informed Indexing #214: Is It Possible That Valuations Affect Long-Term Returns But That Predictions Do Not Work?

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I’ve posted Entry #214 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Is It Possible That Valuations Affect Long-Term Returns But That Predictions Do No Work?

Juicy Excerpt: The book The Myth of the Rational Market does a fine job of explaining the history of explaining how we got to the strangeTwilight Zone period of understanding how the stock market works that we live in today. It explains how the idea that the market is efficient was disproven but then stops short of saying what that signifies for those seeking to invest effectively.

If the market is not efficient, we all must be sure to adjust our stock allocations in response to big price swings so that we can keep our risk profiles roughly constant. The book doesn’t reach that conclusion, It explains why the old ideas on how stock investing works have been discredited. But it then cops out on the matter of describing new ideas. It suggests that, even though all the reasons for believing that Buy-and-Hold strategies might work have been disproven, it still might be a good idea to follow such strategies.

I find zero merit in this line of thought. I am often tempted to conclude that the people pushing it do not believe themselves in what they are saying. But I must say in all fairness that all signs are that the DO believe. Many smart and good people sincerely believe that Buy-and-Hold strategies make sense even though the theory supporting these strategies was shot down three decades ago. As amazing and as scary as that reality is, that’s the reality of where things stand today.

 

“You Understand That It Would Sound Really, Really Bad for the ‘Experts’ in This Field to Be Saying: ‘Oh, There Is One School of Academic Thought That Says That You Should Be at 75 Percent Stocks But Please Understand That There is Another School of Thought That Says That It Should Be 25 Percent — You Decide!’ We Are All Caught in a Trap Brought About By the Strange Circumstances of Our Day.”

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

Sounds like you’re living in a world of “woulds” and “coulds” while the other dads are out providing for their families in the real world. No?

That’s certainly not the way I see it. But I understand the point you are making. I don’t think that’s an entirely unreasonable way of putting it.

Back before we had kids, my wife and I used to go to a bed and breakfast for two nights on the weekend closest to New Year’s Day and write out our budget for the new year. On some categories, we would just carry over what we had from the year before. On some, we would add money. And on some we would subtract money. We obviously favored different categories (because different people have different interests). So we went through a process in which we held negotiations/discussions over what to do.

I remember one year where we were close to having all the numbers add up but we were still a little short. I think she wanted a little more money for the furniture category or something like that. She offered to give up that addition because we didn’t have enough money to make the numbers work out. I didn’t like that answer because I feel that she has a tendency to be willing to give things up for the sake of the budget and I believe that handling things in that way can make the budget-writing process seem like a chore to be avoided rather than a fun thing where you plan new life adventures. So I set my mind to trying to think up some other means of funding an addition in the furniture category.

She would have been willing to give up something in the vacation category. I didn’t want to do that because I think vacations are important. I was reluctant to give up anything in the savings category because I was counting the days until I would be able to leave my high-paying job. For a time we were stumped as to how to proceed.

Then it hit me. The income number we used in the budget was the combination of her salary and my salary. The reality was that I received a big raise every year in October (that was the beginning of the new fiscal year for Ernst & Young). I didn’t know exactly how big the raise was going to be. But I knew the range of possibilities. So I took the smallest amount of money that we would be receiving in those three months from the raise and suggested that we add it to our income for the upcoming calendar year and apply it to the monthly furniture category.

My wife did not like the idea of going along with that. In her mind it was “cheating.” She doesn’t count things as real unless she can hold them in her hand. The dollars that we were talking about were not yet in our hands. So for her that was out. But I pushed and eventually she went along with using those dollars before they were in our hands. My argument was that this was just an application of the accrual accounting concept. If we had had a debt we had had to pay in October, we certainly would have counted that in the negative column. This was money that was certainly going to be coming in. It was proper to count it in the positive column.

I’m living in a world in which the same ethical standards that apply in every other field of human endeavor apply in the investing advice field as well, Anonymous. That’s the world we are headed to in the not-too-distant future. I know that because I know that we simply have no choice. If we don’t make the move to that world, we all go down together. We are not a stupid people. When enough of us see that this crazy Ban on Honest Posting is taking us all down, enough of us to make a difference are going to work up the courage to speak out. My brain is not capable of imagining any other way it could play out.

It’s not me who is doing something odd here. It is you. And Linduaer. And Greaney. And Bogle. And even Shiller to an extent. It’s you guys who are holding back from talking about this huge breakthrough that we have achieved over the past 33 years. The normal thing would be to take advantage of peer-reviewed research that shows us all how to reduce the risk of stock investing by 70 percent. You are temporarily under a weird spell in which you see it as a bad thing to do that. I am doing what in normal circumstances would come natural to each and every one of us.

You should be asking yourself why so many good and smart people are doing this weird thing of denying themselves the benefits of the biggest advance in our understanding of how stock investing works ever achieved in our history. That’s the mystery here. That’s the big story.

They are doing this not because they think investing doesn’t matter. They are doing this because investing matters too much.

You believe in Buy-and-Hold, Anonymous. That part is not a lie. That part is not fraud. You truly believe (as do Bogle and all the others). If you were to say that you believe in Valuation-Informed Indexing, that would be as bad as me saying that I believe in Buy-and-Hold. That would be totally wrong and irresponsible. That is 100 percent out. You MUST say that you believe in Buy-and-Hold so long as that remains the case.

Where does that leave us?

It’s 90 percent of the population that believes in Buy-and-Hold today. So, if we were to do what Rob says and permit those who believe in Valuation-Informed Indexing to post honestly at every board and blog on the internet, what would happen? We would have 90 percent of the population saying one thing about how stock investing works and the other 10 percent of the population saying something entirely different.

In ordinary circumstances, this would not be a big deal. If I had some small difference with you, we would both accept that the other party had a different belief and that the other party was in all other respects a good guy and we would be friends and that would be that. The problem in this particular case is that the difference is over something HUGE. Someone who believed firmly in Buy-and-Hold would be recommending a 75 percent stock allocation today (Greaney’s study shows that 74 percent is the “optimal” stock allocation at all times). A firm Valuation-Informed Indexer would recommend 25 percent (20 percent for those with low risk tolerance and 30 percent for those with high risk tolerance). THAT’S A DIFFERENCE OF 50 PERCENTAGE POINTS OF STOCK ALLOCATION.

We’re not talking about who is going to win the World Series. We are talking about whether people are going to have enough to retire on or not. You (and Bogle and all the others) understand that it sounds really, really bad for the “experts” in this field to be saying “Oh, there is one school of academic thought that says that you should be at 75 percent stocks but please understand that there is another school of thought that says it should be 25 percent — You decide!”

That’s the core problem, Anonymous. The people who recommend Buy-and-Hold are not bad people and they are not dumb people. They are people caught in a trap brought about by the strange circumstances of our day. The Buy-and-Holders did an amazingly wonderful thing when they proposed that we all begin rooting our investment advice in the peer-reviewed research. They began a process in which investing advice will no longer be subjective but will become to a large extent objective. This is huge. This is the future. This is something that BOTH of us believe in.

The problem that the Buy-and-Hold Pioneers ran into is that they are human. The humans did not know it all back in the 1960s. When we are in the early days of building a new science (or quasi-science — that may be the best that we can ever do in this field), we are going to make mistakes. That’s what I believe happened here. The Buy-and-Holders felt very good about what they had come up with. They thought that they had figured this stuff out. And so they built careers around promotion of the model they had built. And then this Shiller fellow came along and messed everything up by proposing and showing support for a very different sort of model.

If all of this were of academic interest only, no one would care. There would be a Fama camp and a Shiller camp and there would be friendly arguments between the two camps but no real nastiness. There is nastiness in this case because the stakes are so high. If Fama is wrong, the people promoting Buy-and-Hold caused an economic crisis. Inadvertently. It wasn’t their INTENT to cause an economic crisis. But that’s what happened. And if Shiller is wrong, the people advocating Valuation-Informed Indexing are keeping people who listen to them out of a great asset class at a time when they should be heavily invested in that asset class and are thereby causing millions of failed retirements in a different sort of way.

I don’t want to destroy the lives of the people who read my stuff. That’s why I am so adamant on the point that I MUST post honestly. I might still destroy some lives because of my stupidity. But at least I will be able to say that I was HONEST. That’s something. That’s unfortunately the best that I can do in these circumstances.

You need to say what you believe too. The problem that we have is that Buy-and-Hold came first and so most people see that as the default position. People think: “If we are not sure, we should go with Buy-and-Hold because all the textbooks recommend Buy-and-Hold and 90 percent of the experts believe in Buy-and-Hold.”

That’s not entirely crazy.

But I have a big problem with what follows from that.

The big problem is that the new idea can never catch on if we all agree never to talk about it because it makes our readers feel uncomfortable to see that we are not sure of anything in these early days of our efforts to figure out how stock investing really works. So long as we all go along with the default and permit those on the Buy-and-Hold side to crush anyone who raises a dissenting voice, the popularity of Valuation-Informed Indexing can never grow.

I am a journalist. So the idea of permitting free speech is deep in my blood. I see censorship of new ideas as the ultimate tragedy. I cannot go along with the idea of using brutal intimidation tactics to stop a new idea (an idea put on the map by a guy who won a Nobel prize for his work!) from growing into a more popular idea.

I cannot go along with that, Anonymous. It can never be. It is not in me. You cannot make a dog meow and you cannot make a cat bark and you cannot make Rob Bennett post dishonestly on the numbers that his friends use to plan their retirements. That will never happen.

There are many things that I CAN go along with.

I can say that Jack Bogle is one of the giants in this field and always will be regardless of anything we come to learn in the future. I see that statement as being true. So I have zero problem making it.

I can say that Buy-and-Hold was a huge intellectual advance over what came before. I believe that and so I can say it.

I can say that the Buy-and-Holders are all smart people. I believe that and so I can say that.

I can say that the Buy-and-Holders are all good people. I believe that and so I can say that.

I can say that it is possible that I am wrong, that I have made mistakes in the past and that it is possible that that is happening again and that I would probably be the last to know if that were the case. I believe that and so I can say that.

I can’t say that the safe withdrawal rate is a constant number. I don’t believe that. I believe that it is a variable number, that the SWR depends on the valuation level that applies on the day the retirement begins. That’s what I believe. With people’s retirements at stake, that is what I have to say.

Yes, there is a sense in which I am living in a world of “woulds” and “coulds” and “shoulds.” I believe that we should be applying U.S. law and the rules of all of our boards and blogs to our discussions. Under U.S. law and under the rules of all of our boards and blogs, I am permitted to post my sincere views. I am acting as if that will someday really be the case even though that obviously is not the case today.

I love my country. Anonymous. In my country, that is the way it works.

It is the investing field that is out of whack here, not me.

I believe that the people of this country will pull the investing field into line with the norms of this great country following the next price crash, when everyone sees how much human misery has been brought on by our failure to apply the basic norms of life in the United States to this one field of human endeavor.

If you don’t believe that, you don’t believe that.

I believe that.

I have to play it the way that makes sense given my belief re this matter.

So there is nothing that we can do here except wait to see how it plays out following the crash.

You do not seem able to give and I do not seem able to give. I like you and, if you want to continue to offer comments here, you are warmly encouraged to do so. But I cannot change the human being that I am because you advance more intimidation tactics. I cannot wake up in the morning and be a different person than I have been for the first 57 years of my life on this planet.

I am the person I am. The person I am believes that Shiller’s work is true and important. I am a Valuation-Informed Indexer. I am not ashamed of it, I am proud of it. It is my intent to show that pride in this new model for understanding how stock investing works in every post I ever put forward. I have never given two seconds consideration to playing it any other way, Goon intimidation tactics be damned. It is impossible for me to imagine any circumstances (including the death penalty) in which I would give consideration to playing it some other way. They had a tag line for the Braveheart movie saying that: Everybody dies — Only a small number of us every truly live.” That line sums up how I feel re this matter. I would rather die than betray my readers and my family and my country. No can do.

Yes, I believe that we all will be Valuation-Informed Indexers at some point in the not-too-distant future. If you want to call that a “would” or a “could” or a “should,” I guess that’s fair. I cannot live any other way. I love my country and I need to act according to the norms that apply in that country to every field of human endeavor with the exception of stock investing.

I hope that helps a tiny bit, my old friend.

Rob

“Instead of Me Agreeing Not to Talk About the Goon Phenomenon We Need to Get Everyone Else to Take Up Talking About It. Your Behavior Shows That You Lack Confidence in Buy-and-Hold. A Strategy Must Inspire Confidence to Work in the Long Run. Your Goon Behavior Is a Substantive Issue That All In This Field Should Be Exploring.”

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

Well, I’m sure once you provide her (and the rest of us) with evidence of your assertions, she (and the rest of us) will come around.

She came around. She accepts that you Goons did everything that I said you did. But she doesn’t agree with my strategy for dealing with the problem.

She says that I should ignore you. LOTS of people tell me that. My wife tells me that. So I understand where she is coming from.

However, I don’t think you Goons are the entire problem. I would say that you Goons are 50 percent of the problem. The other 50 percent is that most people, even big-name experts, possess a greatly limited understanding of the implications of Shiller’s “revolutionary” (his word) finding that valuations affect long-term returns. Most people are not Goons. But most people do not possess a strong understanding of the realities because the realities that have been discovered over the past 33 years have not been widely discussed. This widespread lack of understanding is the other 50 percent of the problem.

If you Goons did not exist, I could help people with their questions and get the general level of understanding up to a level at which we would see a big move to Valuation-Informed Indexing. So you Goons do real harm with your acts of disruption and intimidation and deception.

But the other side of the story is that you Goons could not hold us all back if knowledge of the implications of Shiller’s findings were strong enough and widespread enough that responsible people would take actions to rein you in. Motley Fool would LOVE to have a newsletter on Valuation-Informed Indexing. There are MILLIONS of people who have an interest in finding a truly smart and truly simple and truly safe way to invest. They sided with you Goons even though their published rules prohibit your tactics because they do not understand the issues well enough. That’s a SECOND issue.

People need to know about the Goon phenomenon to make sense of why so few understand these issues today. There was a poster at the Bogleheads Forum who told me that “everything you say about investing makes perfect sense but this is my retirement money and I need to go with what the experts are saying and the experts are not saying what you are saying.” People need to understand why the experts don’t say what I say. It is because of you Goons. Not just the few of you who post here. It is because we ALL have gooninshness within us and our inner goon makes us hate research-based strategies. I need to talk about goonishness to explain to people why we achieved this great advance in 1981 and as a society have not yet elected to take advantage of what we have learned.

Buy-and-Hold is goonishness. ALL Get Rich Quick strategies appeal to us because they please our Inner Goon. Most of the RISK of stock investing is the product of our darn goonishness. That’s why Wade and I were able to show people how to reduce risk by nearly 70 percent. Stock investing risk comes from believing that it is not necessary to exercise price discipline when buying stocks. That is obviously nonsense. But our Inner Goon is DRAWN to GRQ strategies and thinking that it might not be necessary to exercise price discipline is about as GRQ as it gets.

We are ALL Goons to some extent, Anonymous. That includes me. I was a Buy-and-Holder once myself. I am human like all the rest. We are ALL flawed creatures.

We cannot make sense of the investing story without discussing our inner goonishness. You Goons take it to extremes. Most of us don’t advance death threats and all that sort of thing. You Goons are cartoonish about it. But you are not unique in your attraction to GRQ strategies. Looking at your behavior helps us Normals learn about our own weaknesses and about what we need to do to avoid falling into the traps that destroy our investing hopes.

So it is a mistake not to tell people about you Goons and your behavior, in my assessment. People HATE hearing about it. It makes people feel ashamed because they haven’t done more about the Goons problem and embarrassed for you Goons and for all the “experts” who have not spoken up about the problem. So talking about you Goons DOES present obstacles for me. The consultant is right about that aspect of the thing. But I believe that the Goon phenomenon is a critical part of this story and that the story cannot be told in the way it needs to be told without me addressing that part of it.

I believe that you Goons are humans underneath your Goon exterior. I believe that you would like to reduce risk dramatically and that you would like to receive much higher returns and become able to retire many years sooner. But you would like to do these things in the way that an alcoholic would like to stop drinking. You are addicted. GRQ strategies are highly addictive.

People who have been following Buy-and-Hold strategies for a good amount of time are embarrassed to be reminded of their failings and react negatively when told what the research says. It is not only you Goons who feel that way. Responsible people like Bogle and Bernstein and Swedroe feel that way. They are not true Goons; they don’t advance death threats when questioned about the merits of their strategies. But they feel SYMPATHY for you Goons. They don’t speak out in opposition to the use of death threats as a tactic for intimidating people into not posting honestly. They LIKE you Goons. They exhibit Goon Light behavior.

The experts who exhibit Goon Light behavior cause a bigger problem than you true Goons. They are respected and educated people. Normals have a hard time accepting that they could get so much so wrong. The explanation is that, as smart and experienced as these people are, they are subject to the same human weaknesses as all the rest of us.

This is an essential part of the story. I don’t feel that I can take a pass on telling this part of the story even if it would make me more popular in the short term to do so.

The mistake that the Buy-and-Holders made was to ignore investor emotion. You Goons are ALL emotion in your analysis of how stock investing works. We need as a society to come to understand that investor emotion is 80 percent of the stock investing story. We can draw lessons by looking at Goon behavior and analyzing where it comes from and what it signifies. So I do not feel comfortable trying to bypass that part of the story.

I can go along with not FOCUSING on that part of the story. Most of my guest blog entries and columns focus on non-Goon, substantive stuff. But I don’t believe that Valuation-Informed Indexing will entirely supplant Buy-and-Hold until we all come to appreciate the emotional side of the investing story and you Goons exemplify the emotional side of the story better than anything else available to us. Instead of me agreeing not to talk about the Goon phenomenon we need to get everyone else to take up talking about it. Your behavior shows that you lack confidence in Buy-and-Hold. A strategy must inspire confidence to work in the long run. Your Goon behavior is a substantive issue that all in this field should be exploring.

I hope that helps a bit, Anonymous.

Rob

Valuation-Informed Indexing #213: Reader Comments at the New York Times Article on Shiller’s Nobel Prize

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I’ve posted Entry # 213  to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Reader Comments at the New York Times Article on Shiller’s Nobel Prize.

Juicy Excerpt: It strikes me as excessively cynical to conclude that financial payoffs are the primary problem. They are a problem, however. And they are a problem with broad political implications. Journalists should be looking into this aspect of the story. There is a Pulitzer waiting to be awarded to the journalist who breaks the story of why the implications of Shiller’s breakthrough insights have been ignored for so many years and at a time when the continued viability of our system of government depends on our getting the word out to millions of middle-class people who are depending on their stock investments to finance their retirements.

“There Are Hundreds of Smart Bloggers Who Would LOVE to Be Making Millions From Their Blogs and Who Today Are Not Doing So. All They Need to Do Is To Turn Their Efforts to Further Development of the Valuation-Informed Indexing Concept. The Only Reason Why They Don’t Do It Is That They Fear What You Goons Would Do to Them and Their Businesses If They Began Posting Honestly.”

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

“How will I profit? It’s impossible even to count the ways, Yogi. ”

Try, Rob.

Try.

Just one would be a start.

We now know that emotion (valuations) is 80 percent of the stock investing story, Yogi.

I think it would be fair to say that I am the world expert on the ways in which investors engage in self-deception to persuade themselves that the inflated numbers on their portfolio statements are real. There are THOUSANDS of articles and blog posts and podcasts and columns at this site detailing in great depth how it is done. I will be making money for many years to come using that material to help investors understand how stock investing works in the real world through the publication of books and by giving speeches and by creating CD products and through personal consulting and on and on and on.

Shiller’s 1981 finding changed the history of investing analysis in a profound way. He “revolutionized” (the word is Shiller’s) the field. We have as a society delayed our recognition of his earth-shaking accomplishment. But we are not going to have any choice about going forward following the next price crash. From that point forward, nothing will ever be the same again.

Shiller and Fama say opposite things. They cannot both be right. It is a logical impossibility.

If Fama is right, we are doing fine. 95 percent of the investing advice that the average investor hears is rooted in Fama’s research.

But what if Fama is wrong? What if Shiller is right (there is now 33 years of peer-reviewed research showing this to be so)? If that’s so, then we should be in an economic crisis today. If that’s so, we are on our way to the Second Great Depression. If that’s so, we should be seeing threats of violence and career destruction on the part of the Buy-and-Holders in a futile effort to keep their strategy going for a few more months or a few more years.

If Shiller is right (and I obviously believe strongly that he is), the investing advice field is today in the process of being rebuilt from the bottom up. That’s why the Buy-and-Holders fight so hard. They know the stakes as well as I do. If valuations matter, Buy-and-Hold is not just wrong, it is the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind.

Valuations (investor emotion) is no small thing, Yogi. Either it is nothing (as Fama theorized) or it is 80 percent of the stock investing story. I have played the lead role for 12 years now in getting accurate and honest reports of what the last 33 years of peer-reviewed research says out to millions of middle-class investors. I have zero fear that there will not be thousands upon thousands of money-making opportunities opening up to me once we pull together as a society to open every board and blog on the internet to honest posting. I will have far too many money-making opportunities available to me following that day than I will possibly be able to handle by myself. I will be hiring teams of people to help me take advantage of all the opportunities that will be open to me once this story gets out.

Does Jack Bogle have ways to make money?

Does Robert Shiller have ways to make money?

Does Rob Arnott have ways to make money?

Does Bill Bernstein have ways to make money?

The shift from Buy-and-Hold to Valuation-Informed Indexing is a bigger accomplishment than anything that any of those four has enjoyed. It was Shiller who showed that Buy-and-Hold doesn’t work, not me. But Shiller has not yet written clearly about the practical how-to IMPLICATIONS of his amazing research findings. I am the first to have done that in a comprehensive way. That’s huge. And achieving huge breakthroughs like that lead to tons of money in the long run in the society in which we live in today. (I think that’s entirely appropriate. Some might disagree. But, whether one agrees or not that it is appropriate, that certainly is the case).

It won’t just be me making tons of money once the internet is opened to honest posting. There will be hundreds of us, thousands of us. There are hundreds of smart bloggers who would LOVE to be making millions from their blogs and who today are not doing so. All they need to do is to turn their efforts to further development of the Valuation-Informed Indexing concept. The only reason why they don’t do it is that they fear what you Goons would do to them and their businesses if they began posting honestly.

Do you really think that they are going to continue to live in fear following the next price crash?

They are not. They are going to work up the courage to go for the money. And we are all going to be a lot better off as a result. People SHOULD be rewarded for giving accurate and honest investing advice. Seeing that the thousands of people who will be further developing the Valuation-Informed Indexing concept receive financial rewards for their efforts is in the best interests of every person alive in the United States today.

We have had big advances in the computer field since 1981, no? There was no internet in 1981. Now there is. Thousands of people made fortunes as a result of the development of the internet. There was no YouTube in 1981. Now there is. Thousands of people made fortunes as a result of the development of YouTube (there was an article on the front page of the New York Times on this just last Friday). There were no laptops or tablets or smart phones in 1981. Now there are. Thousands of people made fortunes as a result of the development of laptops and tablets and and smart phones.

Say that there has been a Typewriter Mafia back in 1981 that has devoted hundreds of billions of marketing money to seeing that no one could succeed in selling computers. We would today be a poorer people as a result. The advances that we have seen in the investing advice field over the past 33 years are 50 times greater than the advances we have seen in the computer field. The only reason why we have not seen thousands and thousands and thousands of millionaires made through the promotion of the first true research-based strategy is that the Buy-and-Hold Mafia has possessed the power to keep us all in the Dark Ages re our understanding of how stock investing works in the real world.

But for how much longer?

The next step down is the Second Great Depression, Yogi. Do you think people are going to stand for that? I do not. I love my country. I have noticed by reading history that my country has in the past always possessed the intelligence and fortitude and love to overcome forces like the Buy-and-Hold Mafia. I believe that we will prevail once again. When we do, no one is going to be able to count the money that will be flowing in to those who worked up the courage to post in support of those offering honest investing advice.

Money is what this whole freakin’ saga is about. If there weren’t so much darned money in pushing Get Rich Quick garbage, everyone in the field would have made the shift from Buy-and-Hold to Valuation-Informed Indexing by January 1982. The problem is that the big shots in this field love the marketing edge that comes from saying that their advice is research-based but cannot bear to give up the short-term wealth that comes from pushing Get Rich Quick garbage. Buy-and-Hold gives them the best of both worlds, in their eyes. It is pure Get Rich Quick garbage. So it makes them all rich beyond their wildest hopes. But because Fama made a mistake back in 1965 and many of us have been too afraid to say that in clear and firm and simple language in the three decades since, they have been able to make claims that there is research supporting these “ideas.”

The problem with spending billions of dollars promoting the purest and most dangerous Get Rich Quick strategy ever concocted by the human mind is that doing so eventually causes the collapse of the economic system in which you live. And the collapse of the economic system eventually causes the collapse of the political system. Lots of the people who push Buy-and-Hold are very wealthy people as a result of doing so and don’t want to get off the gravy train. But do they have any real choice? Where are they going to spend their money when the economic and political system of the United States collapses? In an ultimate sense Jack Bogle has as much of a motivation to see that honest posting be permitted as I do.

These people are today suffering from cognitive dissonance. They are telling themselves that pushing the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind might work out in the long run, they are trying to hang on to a belief that we will NOT see an economic or political collapse.

But based on what do they believe this?

In 12 years they have not been able to find any support in the peer-reviewed academic research for this belief of theirs.

I am a research-oriented guy, Yogi. I believe that we are going to see the economic collapse that the last 33 years of peer-reviewed research says we are going to see.

And I believe that my many Buy-and-Hold friends are going to flip shortly after we see that collapse. I believe that my good friend Jack Bogle is a good man. I believe that he is going to be my biggest booster in days to come. With Jack’s help, I am going to experience no problems receiving that $500 million paycheck or taking over ownership of the Bogleheads Forum or being invited to give the keynote address to the next FinCon event or bringing thousands upon thousands of community members to this site or profiting from books and speeches and CD packages and consulting arrangements and on and on and on.

I am not a multi-millionaire today only because my good friend Jack Bogle has not yet worked up the courage to say the three magic words “I” and “Was” and “Wrong.” But Jack is going to work up the courage to do that. He has no choice if he wants to save from economic ruin the country he loves and that has blessed him in so many ways. So Old Saint Jack is in days to come going to work up the courage to do what he should have done 33 years ago. And from that point forward we will ALL be in much more favorable financial circumstances. But that will be so for me especially. Because I am the one who has been fighting so hard for 12 years now for a principle that Old Saint Jack first articulated many years back — INVESTORS SHOULD BE ROOTING THEIR INVESTING STRATEGIES IN THE PEER-REVIEWED RESEARCH.

I’m not too worried about making money, Yogi. I would like to see it happen soon. I would like to have seen it begin happening on the morning of May 13, 2002. So I do want to see a change in that department. But that is not the thing that I worry about most.

I worry that the economic collapse will get out of hand and that even working together we will not be able to turn things around in time. I don’t think that that is how things will play out. But the fact that there is even a small chance that things might play out that way scares me to death.

That’s my primary worry, not the money thing. The money thing will work out more than fine so long as Jack eventually works up the courage to say The Three Magic Words. And he doesn’t exactly have much choice, does he? He loves his country, does he not?

I say that Jack Bogle loves his country. I am sure.

So I see good things happening for all of us in days to come, Yogi.

My best and warmest wishes to you and yours.

Rob

“These People Are Not 100 Percent Corrupt. They Are 100 Percent Trapped. If Bogle Could Do It Over, He Would Go Back to 1981 and Give That Speech. I Am 100 Percent Sure. He Wishes That He Were Not in the Place He Is In Today. ALL of the Wall Street Con Men Do.”

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

Are you really willing to continue the downward spiral until some magical 80% stock market crash somehow (???) ‘saves’ you? Wade long ago challenged you to illustrate how even such a cataclysmic event somehow bails out your personal situation, and you failed to give any sort of answer.

Even if you don’t answer here, at least ask yourself: “What are my REAL best-chance prospects from here, and how would I attain them?” Here’s a hint: World financial collapse, followed by some group spontaneously anointing you fiscal savior plus a $500 million gratuity check, is not going to be very high up the list of reasonable expectations, Rob. And if it is the only item on your list, then you maybe want to sharpen up your pencil and do some serious re-figuring.

I hope we will not see an 80 percent drop in prices, Yogi. The research says we should be expecting a 65 percent drop. That’s bad enough.

I’ll try to illustrate my thinking re my personal financial circumstances by pointing to someone who plays it differently than me and who has experienced a whole big bunch more success than me as of today. I spoke with Todd Tresidder at the Financial Mentor site several times during the recent FinCon14 blogger’s conference. Todd over and over again impresses me with his intelligence. I think there may come a time when he will have the most successful site on the internet. He does just about everything right, in my assessment.

Am I envious of his success?

I am to some degree. I would love to have what he has. It hurts not to have people comment here. So your post is not totally out to lunch.

But here’s the problem.

Say that Todd’s site continues to climb but that we do have the financial collapse you refer to and that we go into the Second Great Depression. Say that going into a depression eventually leads to a World War, as it did the first time we went through one. Say that because we now live in an era of nuclear weapons that we all get blown up. What the heck good is it going to do Todd to have this amazingly successful site if we all get blown up in a nuclear war?

Do you see?

I want success, Yogi. And I get it that you Goons don’t want me to have it if I continue to tell the truth about what the last 33 years of peer-reviewed research tells us about how stock investing works. And I get it that the Wall Street Con Men support your efforts. And I get it that they have lots of wealth and power and connections. I essentially have billions of dollars in marketing money being directed to bringing me down (by promoting Buy-and-Hold and thereby making it even harder for everyday investors to see how dangerous Buy-and-Hold is in the long run). I get all of that. Loud and clear.

But I also get the other side of the story.

If Bogle and all the others were 100 percent corrupt people, you would be right that I could never win. They would now and forever more use their power and wealth and connections to bury me. BUT THAT IS NOT THE CASE!

I learned about the errors in the Old School SWR studies by reading Bogle’s freakin’ book. Chapter Two of Bernstein’s book is the best short description of why Valuation-Informed Indexing works that I have read. Burns’ first reaction to my stuff was not to say that I am “catastrophically unproductive” but to say “you’re right” and to ask for my phone number so that he could do an interview with me.

These people are not 100 percent corrupt. They are 100 percent trapped.

They want to tell the truth. But they feel that, if they tell the truth on a single important topic, the entire Buy-and-Hold house of cards will come crashing down. And they see that as being the end of their careers. And the end of their friends’ careers. And they cannot bring themselves to do it.

Here’s what should have happened.

Bogle learned in 1981 about Shiller’s “revolutionary” (Shiller’s word) research. Bogle should have immediately walked to the front of a big room and said the words “I am not so sure anymore.” I believe that he still believed in Buy-and-Hold. So he should have said that. But he also obviously had begun to have doubts. Shller’s research undermines the premise of the Buy-and-Hold Model. So it is impossible that someone as smart as Bogle did not begin to entertain some doubts. He should have said that. He should have said “I am now only 80 percent confident that Buy-and-Hold will work.” Or 70 percent. Or 60 percent. Or whatever it was.

Had he done that, his speech would have launched a national debate. Hundreds of researchers would have researched all the questions that needed to be researched. And by now we would all know with a good deal of confidence what works. Knowledge would have advanced because people would have felt safe asking questions that undermine the Buy-and-Hold dogmas.

That didn’t happen. We are not perfect people. Humans are flawed creatures. So we have held off on enjoying the benefits of Shiller’s revolutionary findings for 33 years.

But we are not going to continue to deny ourselves the enjoyment of those benefits forever! We can’t continue down this dark road. We will all be ruined if we do. So we won’t. We are going to have that national debate. It’s just a question of time.

How will I profit?

It’s impossible even to count the ways, Yogi. Think this through. Millions of people invest in the stock market. I am the co-author of research that shows them how to reduce stock risk by 70 percent while greatly increasing returns. If you tell me that you cannot figure out how I will profit by that reality, then I am going to respond that you are lying. Perhaps you are lying first to yourself and then to me. But you are not thinking clearly if you do not see the profit potential in that. I am going to be one of the richest people in the United States when this saga comes to a happy ending. I mean, come on.

Wade of course gets that too. That is part of the reason why he was so excited when his research showed him that Valuation-Informed Indexing works. Part of it was the intellectual breakthrough. He cares about that side of things too or else he never would have become a researcher in the first place. But he quite naturally and understandably also cares about providing for his family as well. And so part of his excitement was that he saw himself becoming very famous and very rich as a result of the research he did with me. When he later said as a result of the threats you made to destroy his career that he no longer saw great profit potential in this, he was telling a little white lie. Naughty, naughty, Wade!

If Bogle could do it over, he would go back to 1981 and give that speech. I am 100 percent sure. He wishes that he were not in the place he is in today. ALL of the Wall Street Con Men do. ALL of you Goons do too.

The question is — How do we pull that off?

How do we get to the place where we all want to be without some of us getting sent to prison for a long time?

If you have any bright ideas, please share them with me, Yogi.

My best idea is to keep doing what I am doing.

I love my Buy-and-Hold friends. I will continue to sing their praises. I will continue to show them respect and affection and gratitude for the many wonderful insights I have picked up from them.

I will also continue to post honestly on safe withdrawal rates and scores of other critically important investment-related topics.

Because I want to hurt the feelings of my many Buy-and-Hold friends?

No.

Because I care about my Buy-and-Hold friends (AND about the millions of middle-class investors whose lives are in the process of being destroyed) and I want to see them find their way to a better place than the dark place they reside in today.

There’s HUGE leverage in this. Down the road a piece, it will not be just Rob Bennett posting honestly. Jack Bogle will be posting honestly. Bill Bernstein will be posting honestly. Scott Burns will be posting honestly. Todd Tresidder will be posting honestly. Wade Pfau will be posting honestly. Robert Shiller will be posting honestly. Heaven help us all, but Mel Linduaer and John Greaney may well be posting honestly.

We all will benefit from that. We all will end up winners here.

We can’t get there so long as everyone lives in fear. We all have to stand up to you Goons and your intimidation tactics. That’s the only way it can be done. That’s the answer.

There’s plenty of money to be made here, Yogi. The problem is the Trap. We all need to find our way out of the Trap.

I am 100 percent happy to do anything that I can do.

Except commit acts that constitute felonies under the laws of the United States.

For obvious reasons.

I hope that helps a bit.

My best and warmest wishes to you, my long-time Goon friend.

Rob

“Jack Bogle Is, As You Say, Intelligent and Experienced. Intelligent and Experienced People Have a Certain Trait That You May Have Noticed. THEY ARE HARD ON THEMSELVES. Jack Possesses That Trait. He DEMANDS THINGS OF HIMSELF That Others Would Not Demand Of Him If They Were In His Shoes. So a Voice Within Our Good Friend Jack Bogle Attacked Bogle for Having Made the Mistake He 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:

OK, then it’s only a question of who’s more likely to be right – you, or a thousand experts with far more intelligence and experience than you.

You are right that there are thousands of people with more intelligence and experience than I possess who say that I am wrong, Anonymous. We agree on that.

What you are not addressing is the intimidation factor.

There was a time when the research really appeared to say what the Buy-and-Holders say it says. These intelligent and experienced people you refer to are also POWERFUL and WEALTHY and INFLUENTIAL people. They built careers around promotion of the Buy-and-Hold Model before the research that discredited it was published. Sixteen years passed between the publication of the research that for a time seemed to support Buy-and-Hold and the research that showed that there is precisely zero chance that it can ever work for even a single long-term investor. When these powerful and wealthy and influential people learned that they were going to have to throw away 16 years that they had spend developing their careers and their businesses, they balked. Instead, they LIED about what the research said.

Now –

A reasonable argument can be made that the word “lie” is excessively harsh here. What Shiller showed was, in his own words, “revolutionary.” Revolutionary insights are generally not integrated into a society’s thinking immediately. Fama’s research led to the development of the Buy-and-Hold Model for understanding how stock investing works, a paradigm that directs an investor’s thought processes on every strategic issue that he considers. Shiller’s research demolished that paradigm (while affirming many of the powerful insights developed by the Buy-and-Holders that were not core enough to be the foundation stone of the paradigm — for example, the Shiller Model [Vauation-Informed Indexing] lends support to the Fama claim that short-term timing can never work).

The Buy-and-Holders truly believed in their work. They were excited about their insights and their ability to change the world for the better. Shiller’s 1981 research ruined all their hopes for the future. It SHOULDN’T have. Shiller’s work BUILDS on Fama’s work and on the insights of the Buy-and-Holders. His work makes the earlier work MORE IMPORTANT AND MORE VALUABLE. His work posed no real threat to the Buy-and-Holders so long as they promptly incorporated it into their own work.

But the Buy-and-Holders, as smart and experienced as they are, suffer from the terrible affliction of being human. They did not feel comfortable saying the words “I” and “Was” and “Wrong” any more than John Greaney felt comfortable saying those words when he discovered on the morning of May 13, 2002, that his retirement study got the numbers wildly wrong. Instead of THANKING Shiller for the wonderful contribution he had made that enhanced the value of their own work, the Buy-and-Holders elected to IGNORE Shiller’s revolutionary finding, to pretend that it did not exist, to LIE about this development.

This was a stupid, stupid, stupid, stupid, stupid decision.

All of the troubles that we are experiencing today stem from this stupid decision. Had Bogle walked up to the front of a large room in 1981 and said the words “I” and “Was” and “Wrong” (or at the bare minimum the words “I’m” and “Not” and “Sure” — those words would have launched a national debate which would have led to the same place as the swifter-acting words in not too long a time), there would be no economic crisis today. There would be no one going to prison. There would be no one destroying discussion boards and blogs. There would be no hundreds of thousands of business failures. There would be no millions of unemployed. There would be no millions awaiting failed retirements. And on and on and on.

My good friend Jack Bogle made a terrible, terrible mistake in 1981. We can’t go back. There’s no sense in wishing he could. But there IS sense in trying to understand WHY Bogle made the mistake. What the heck possessed my good friend to do this terribly stupid thing that has caused so much human misery in the years since?

Jack Bogle started out as a little boy. In 1981, he was a scared little boy walking around in big boy’s clothing and being applauded everywhere he walked. When he learned that he had been giving bad investing advice for a good number of years, HE WAS SCARED OUT OF HIS LITTLE-BOY PAINTS!

Do you see that, Anonymous? You need to understand this part of the story to understand every thing that is taking place today.

Had Bogle acknowledged his mistake in 1981, there was not one soul on the planet who would have made fun of him for it.

No — check that. I shouldn’t say that there was not one. The proper way to say it is that there was not more than one. There was one. The one was Jack Bogle himself!

Jack Bogle is, as you say, intelligent and experienced. Intelligent and experienced people have a certain trait that you might have noticed. THEY ARE HARD ON THEMSELVES. Jack possesses that trait. He DEMANDS THINGS OF HIMSELF that others would not demand of him if they were in his shoes.

So a voice within our good friend Jack Bogle attacked Bogle for having made the mistake he had made. This voice said all the things you hear me saying today, except ten times worse. The voice said: “You stupid boy, Jack! Anyone with a brain could have seen what Shiller has shown. You have ruined everything! Everybody is going to laugh at you when they find out! You have ruined millions of middle-class retirements! You will lose your reputation! You will probably lose all of your money! Your friends, people who listened to your foolishness, will lose THEIR money! You may even be thrown in jail! What a stupid, stupid, stupid boy you turned out to be!”

Jack isn’t stupid. But he has a voice within his brain telling him that he is. Most intelligent and experienced and accomplished people have one. On issues relating to money, that voice gets even stronger than it is when speaking about other issues. People don’t like to lose money. When an intelligent and experienced and accomplished human finds that he has made a mistake that has caused millions of people to lose LOTS of money, that self-critical voice can get very loud indeed. That’s what happened with our good friend Jack Bogle, the smart and striving and loving boy who grew up into a smart and flawed and self-critical man.

Bogle experienced emotional pain when Shiller showed him the piece of the investing puzzle that he had missed in earlier years because it wasn’t yet available to the humans in the days when our good friend Jack was building his reputation. There is a phenomenon that our friends in the psychology field have discovered that often kicks in when bright people like Jack Bogle come to feel intense emotional pain as the result of some mistake they have made. That phenomenon is called “Cognitive Dissonance.”

Bogle began telling a huge lie in 1981. His position required of him that he walk to the front of a large room and say the words “I” and “Was” and “Wrong.” He didn’t want to. He really, really, really, really, really didn’t want to because of what the mean voice within him was falsely telling him about what those words signified. The human brain has a switch that can be pulled in such circumstances. It is called The Rationalization Switch.

Aristotle called us humans “The Reasoning Animal.” Psychologists have learned in recent decades that there are often circumstances in which it would be more accurate to call us “The Rationalizing Animal.” Our brains can do amazing things. But once our will directs them not to find truth but to avoid truth, all of those amazing powers are employed to cause CONFUSION rather than an understanding of the realities. Our good friend Jack Bogle went into Rationalization Mode in the year 1981.

And all those who followed him of course did the same.

You know all the b.s. that they have poured out into the world in the years since.

None of it addresses the key point shown by Shiller — the exercise of price discipline is every bit as important when buying stocks as it is when buying any other good or service available for sale in this Consumer Wonderland of ours.

It’s all been b.s. ever since. We have never heard a word of truth from any Buy-and-Holder since 1981. Because the foundation stone of the entire model was shown in that year to be a lie. And the Buy-and-Holders who could not bear to acknowledge the lie in 1981 could bear to do so even less in 1981 and even less in 1983 and even less in 1984 and so on and so on and so on.

Lies produce bad fruit.

We are today seeing the bad fruit produced by the mountain of lies told by our Buy-and-Hold friends for 33 years now.

We are hurting. Big time.

And the price gets much higher with the next crash.

You need to come clean. Bogle needs to come clean. ALL Buy-and-Holders need to come clean.

You possess the power today to delay the important business of coming clean a bit longer. That means MORE pain for you. MUCH more. Smart move!

Or you can come clean by the close of business today. As your friend, I can tell you that that’s the true smart move. But of course I have little confidence that you will choose the smart move given your 12 years’ worth of decisions choosing more and more and more pain for yourself. My sadness over that reality doesn’t make it any less of a reality.

Bogle possesses intelligence and experience. All of the Buy-and-Holders do.

What good is it doing any of them? What good is intelligence and experience when the trickery it permits you to pull off ends up landing you in a prison cell?

Bogle needs to combine his intelligence and experience with some integrity, Anonymous. All of the Buy-and-Holders need to do that.

They need our help. There are times when it is hard to act with integrity. Having your friends standing by you can make a difference.

I am there for you. I am there for Bogle. I am there for ALL the Buy-and-Holders.

I am there to HELP.

Not to pretend to believe in your mountain of lies.

I am trying to reduce the number of prison sentences, not to add to them. Any action you will get out of me will be chosen with that goal in mind.

I wish you all good things.

As I demonstrate with every word that I put forward in response to your comments and questions here.

My best wishes, old friend.

Rob

“Bogle Lied to Everyone Who Ever Asked Him a Question About What the Peer-Reviewed Research in This Field Says. But He Lied to Himself First. When You Lie to Yourself, It Becomes Pretty Darn Hard to Tell the Truth to Others.”

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

“Extraordinary claims require extraordinary evidence.”

Is your problem that you don’t understand what that means, or that you simply don’t agree with it? Either way, it explains in one sentence your laughingstock status in the online community. Wild claims, supported by no evidence at all.

When Wade Pfau was working with me, he spent a long time searching through the peer-reviewed research in this field trying to find a single study that supported the key Buy-and-Hold claim that it is not necessary to exercise price discipline when buying stocks. He never found one. He went to the Bogleheads Forum and asked if anyone there knew of a single study lending even a tiny bit of support to the key Buy-and-Hold claim. Jack Bogle did not know of a single study. Bill Bernstein did not know of a single study. Larry Swedroe did not know of a single study. Rich Ferri did not now of a single study. Mel Lindauer obviously did not know of a single study.

It’s all a big lie, X.

It wasn’t a lie in the early days. In the early days, it was a mistake. Eugene Fama discovered something of huge importance when he found that short-term timing never works. But Fama did not even test long-term timing. Robert Shiller was the first researcher to do that. Shiller found that long-term timing ALWAYS works and is ALWAYS 100 percent required. If Bogle had walked to the front of a big room within a week of publication of Shiller’s “revolutionary” (his word) research, we would not be in an economic crisis today. But he didn’t do that, did he? And a mistake that is covered up for 33 years is no longer properly termed a mistake but a lie.

I didn’t get Jack Bogle in this situation. He is the one who made the mistake. And he is the one who covered up the mistake for so long that it was transformed into a lie.

I have been Jack’s best friend in the world for the past 12 years. Jack didn’t mean to make the mistake. And he didn’t mean to tell the lie. By the time the mistake was discovered, he had built his entire career around promotion of the mistake-based strategy and the pain was so great that he came to suffer cognitive dissonance over the matter. He lied to everyone who ever asked him a question about what the peer-reviewed research in this field says. But he lied to himself first. When you lie to yourself, it becomes pretty darn hard to tell the truth to others.

Bogle is a flawed human, like all the rest of us. When he is suffering from cognitive dissonance, it becomes the job of all his friends to help him out. Many, many, many others have been too afraid to show their friendship, given the circumstances. Bogle has a lot of money and a lot of power and a lot of connections and he has shown a ruthlessness in making use of them to destroy the career of anyone who dares to “cross” him by telling the truth about what the last 33 years of peer-reviewed research says. I am as afraid of the man’s power and ruthlessness as everyone else. But I worked p the courage to “cross” him by insisting (not asking!) that he behave according to the norms that apply in every field of human endeavor other than the investing advice field. I have shown a love for Old Saint Jack that Old Saint Jack has never once in the past 33 years shown for himself.

I will continue to show that love for him. I will continue to praise him to the skies for his many genuine contributions, contributions that place him second only to Robert Shiller in my list of the true giants in this field. And I will continue to give him a good, swift kick in the butt when he puts forwards words in “defense” of the sorts of individuals who have posted in support of Mel Linduaer and John Greaney.

The same standards of ethical behavior that apply in all fields other than stock investing apply in the investing advice field too. Perhaps not today. But following the next price crash they will. Or else we will not make it. We cannot make millions of middle-class people responsible for their own retirements and then deny them access to accurate and informed and honest reports of what the last 33 years of peer-reviewed research tells us about what works for the long-term investor. I do my good friend Jack no favors by suggesting to him that it is somehow “okay” to post at the boards at which the sorts of individuals who have put up posts in “defense” of Mel Linduaer and John Greaney also participate. That is financial fraud. Financial fraud is a felony under the laws of the United States. That means prison time. I will not bow to the intimidation tactics of my good friend Jack and behave in a manner that would in all likelihood increase the length of the prison sentence that will be handed out to him following the next price crash.

The 12-year cover-up is an extraordinary event. It is the biggest case of financial fraud in U.S. history. I give you that one, X.

My site presents the extraordinary evidence needed to make the case. I put forward a post to the Motley Fool board on the morning of May 13, 2002, pointing out the errors in the Old School retirement studies. Not one of those studies has been corrected to this day. That tells the tale. There are thousands of articles at this site showing how the 12-year cover-up was carried out and maintained. Anyone who wants to know why we are in an economic crisis today has the material he or she needs to come to a full understanding of the matter available for his or her consideration. It is my job as a journalist to provide that material and I have done so.

Money and power and influence corrupt human beings. That story is as old as the human race.

The Wall Street Con Men pushing their smelly Buy-and-Hold “strategies” have a LOT of money and power and influence at their disposal. They have spread a LOT of corruption. And there are now millions of people suffering very, very serious consequences as a result.

Following the next price crash, enough of us will work up the courage to stand up to them and to get the Old School SWR studies corrected. From that point forward, it will be easy sailing. We will bring the economic crisis to an end and bring on the greatest period of economic growth in U.S. history.

Or we won’t.

If we don’t, we will all go down together. That would make me very, very, very sad.

But if that sad turn of events plays out before us I will at least have the small consolation of being able to say that I gave this thing my best possible shot despite the mountain of resistance that I faced from you Goons and from the Wall Street Con Men who support and encourage you.

I can do no more and I can do no less.

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

Rob

“My Wife Has a Mental Block re Much of This. She Is Not Alone in That. People Have to Be Exposed to It a Lot of Times and From a Lot of Different Angles and People Have to Be Able to Ask a Lot of Questions to Truly Get It.”

by

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

Has “Boo” ever read your site?

She had read a small number of articles and we talk about the subject from time to time. But she certainly does not look at the site often and has read only a small percentage of the material presented at it.

One day a few weeks ago she was on the computer to do something else and she happened to see one of my recent blog entries because I had left the page up on the screen. She said: “Your headlines are too long!” I said: “Grrrrr….”

Possibly implicit in your stated question is an important follow-up question: “Does your wife agree with you about these matters?”

Boo is obviously not a Goon. She does not support the use of death threats or any of that sort of thing. She of course thinks that that stuff is beneath contempt.

But I think that I owe it to my readers to report that I do not believe that my wife truly “gets” all that I say about investing.

She accepts that the work that I have done is important. She knows about the Wade Pfau story. She understands that there must be merit to what I say or I would not have had a guy who has a P.D. in Economics from Princeton saying the sorts of things about me that Wade has said about me. She is of course proud when people write to tell me that I am the first person who ever talked about how stock investing works in a way that truly makes sense. I often show her those sorts of e-mails.

But she has a mental block about much of this. She is not alone in that. I have spoken to many thousands of people over the past 12 years. Lots of smart people have a mental block re this stuff. This stuff comes to me very easy. It seems clear and simple to me. But I have seen too many smart and good people struggle with it to believe that that is true for everyone. There are more people who struggle a great deal with this stuff than there are people who find that it comes easy.

Valuation-Informed Indexing represents a paradigm change. That’s why.

It’s not one thing that is new. The foundation stone is new. The entire model for understanding how stock investing works is new. Shiller’s “revolutionary” (his word) 1981 finding turns everything on its head. It’a all good. Shiller turned stock investing into a virtually risk-free enterprise. So it is a huge advance. But people have to be exposed to it a lot of times and from a lot of different angles and people have to be able to ask a lot of questions to truly get it.

Some of the behavior of you Goons is truly criminal. But all the evidence that I have seen tells me that your confusion over how this works is for the most part genuine. I believe that that’s true of the Wall Street Con Men as well. I believe that just about all of them see that there are problems with Buy-and-Hold. But they don’t see an alternative and so they tell themselves that the problems are not that grave and that things will somehow work out. I believe that, if people like Bogle and Benrstein and Burns knew how much human misery they were causing, they would flip today. I don’t think of these people as bad people although I obviously believe that they have done very bad things by letting the cover-up continue on so long.

My boy Timothy “gets” the concept better than anyone else in the family. He’s not old enough to understand all the history and context. But we have had several long conversations about it in which he has asked some highly intelligent questions. That tells me that he gets it to a greater extent than most.

Most people struggle with this. It’s NOT hard. But it’s a way of thinking about stock investing that is very different from how people have become accustomed to thinking about stock investing in recent decades. A lot of people are engaging in a lot of funny business. But there is a lot of genuine confusion too. People need to know that. That’s an important part of the story.

The fact that my wife struggles to fully understand this stuff does not tell me that it is not important to open the internet up to honest posting on the last 33 years of peer-reviewed research. It tells me the opposite. It tells me that it is CRITICAL that we all pull together to get the word out re what really works. We ALL need to know how to invest effectively for the long run. The fact that the wife of the person who has worked this so hard for 12 years struggles with some of it is an amazing fact. It is an amazing fact arguing that we all need to work a lot harder to separate myths from realities and to figure out what the research is really telling us.

I hope that helps a bit.

Rob