A Rich Life

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

Valuation-Informed Indexing #201: Shiller Doesn’t Dare Say What He Believes Is the True Cause of the Economic Crisis

by

I’ve posted Entry #201 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Shiller Doesn’t Dare Say What He Believes Is the True Cause of the Economic Crisis.

Juicy Excerpts: Samuelson hints at the true cause of the crisis without quite becoming so bold as to identify it bluntly.

He tells us: “We were victims of success. The crisis originated from 25 years of prosperity, from roughly the end of 1982 to the end of 2007. This conditioned people — bankers, regulators, economists, almost everyone — to take stable growth for granted. The longer the prosperity continued, the more it inspired the risky behaviors that ultimately wrecked the economy. These included over-borrowing by consumers and financial institutions, housing speculation and loose regulation. The ‘causes’ cited by left and right were usually the consequences of a delusional mind-set: a belief that once-risky practices were prudent in a world of near-perpetual prosperity.”??It all began in 1982, huh? I wonder if there was anything relating to the stock market that began in 1982? I have a feeling that that might be the case. The words are on the tip of my tongue. I just cannot quite bring the thought to mind.

That phrase “delusional mind-set” might be a clue. It reminds me of a similar phrase. Irrational Something or Other. Again, I just don’t seem to be able to pin it down. Some sort of unease about saying the words out loud is holding me back.

“I Point Out to My Boys How These Losers (Greaney Once Told Me That Every Person Who Has Ever Gotten to Know Him Well Has Come to the Conclusion That He Is the Biggest Asshole Who Ever Walked Planet Earth) Have Learned How to Use Intimidation Tactics to Frighten People Like Jack Bogle and Bill Bernstein and Scott Burns and Larry Swedroe and Mike Piper and Todd Tresidder and Wade Pfau Into Silence About What They Know About the Great Buy-and-Hold Scam.”

by

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

I see. So when your kids ask what you do for a living, and how you support them, you reply “Daddy sits back and waits for good things to happen!” You’re really instilling some good values there, Rob.

I tell them the whole story, Anonymous.

I explain that there once was a time when we knew very little about how stock investing works. Then some smart and good people came up with the wonderful, liberating idea of rooting one’s strategies in the peer-reviewed academic research. Those people were the Buy-and-Hold Pioneers. I love them and respect them and admire them because of all the breakthrough insights they provided to us. I start by telling them that because it’s not possible to make sense of the rest without first knowing the basics.

Then I note how humans are not perfect creatures and how we sometimes make mistakes. I tell them how Yale Economics Professor (and Nobel Prize Winner) Robert Shiller discovered the one big mistake that the Buy-and-Hold Pioneers made in 1981 and thereby provided us the insights we need to reduce to stock investing risk by 70 percent and to achieve financial freedom five to ten years sooner than we ever before dreamed was possible. I point out to them how Shiller’s “revolutionary” (his word) insight has far-reaching implications, implications that show us that just about everything we thought about stock investing before he came along is in fact wrong and needs to be corrected. I point out how Shiller made the Buy-and-Hold dream (creating a simple, smart and safe way for millions of middle-class people to invest in stocks) come true in the real world.

Then I explain why the Buy-and-Holders were reluctant to take advantage of Shiller’s insights, why they resisted these wonderful ideas that will someday free millions and millions of people to live richer (in every sense of the word) lives. The Buy-and-Holders believed in what they had done. They were proud of what they had done. They had built careers around their ideas. They had staked their lives on these ideas. That had made lots of money on these ideas. They had shared these ideas with friends and neighbors and co-workers and fellow community members. They felt great embarrassment when these ideas were brought to their attention. They elected (not entirely consciously — cognitive dissonance played a big role here) to COVER UP the breakthrough ideas rather than to promote them.

And Buy-and-Hold (which Shiller’s peer-reviewed research reveals to be the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind) caused the most out-of-control bull market in U.S.. history, sentencing millions of middle-class people who were fortunate enough to be born at the best time in history to be a stock investor to failed retirements and impoverished golden years. And the insanity of those Get Rich Quick years made Buy-and-Hold more popular than ever. Now it was not only Wall Street Con Men making a buck from the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind. Ordinary people could get in on the Get Rich Quick fun too! They could strut around proudly, mocking all those who followed more prudent strategies, laughing at any who thought that stocks might continue to perform in the future at least somewhat as they always had in the past and that the reckless and irresponsible and ruthless promotion of these “strategies” might produce yet another economic crisis, this one perhaps worse than all those that similar strategies had caused every time they had been employed in the past.

Then I tell them about the internet and how the invention of this amazing new communications medium made it far more difficult for the Wall Street Con Men to push their smelly Get Rich Quick garbage. Before the internet, the Con Men could threaten figures who tried to tell the truth with career destruction and keep everyone more or less in line. With the invention of the internet, ordinary people like their dad could expose the lies and give the millions of middle-class people who very, very much need access to honest and accurate reports on what the last 33 years of peer-reviewed research says what they require. And he could make the case absolutely air-tight by working with academic researchers and getting new peer-reviewed research published that explored the Shiller ideas in greater depth and thereby provided more and more and more powerful insights for the benefit of the entire country.

Then I explain how the internet also permits social misfits like those of you who have put up posts in “defense” of Mel Lindauer and John Greaney a power that they could never come to possess in pre-internet times. I point out to them how these losers (Greaney once told me that every person who has ever gotten to know him well has come to the conclusion that he is the biggest asshole who ever walked Planet Earth) have learned how to use intimidation tactics to frighten people like Jack Bogle and Bill Bernstein and Scott Burns and Larry Swedroe and Mike Piper and Todd Tresidder and Wade Pfau into silence about what they know about The Great Buy-and-Hold Scam. 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, they have managed to keep the greatest act of financial fraud in the history of the United States (the cover-up of the errors in the Old School safe-withdrawal-rate studies) covered up for 12 years.

I naturally point out to them how sad this is. And I point out that it is not the Goons alone who are to blame. I explain that we ALL have responsibilities to stand up and be counted when our country is under attack. If you love something, you fight for it. The Buy-and-Holders are now so full of self-loathing that they are willing to see our economic system collapse rather than to acknowledge the vast amount of human misery they have caused with their deceptions and acts of intimidation. And that is partly the fault of people like Robert Shiller. Shiller should be speaking up more strongly. ALL Valuation-Informed Indexers should be speaking up more strongly. Every last one of us has failed our country in some way (I was afraid to point out the errors in Greaney’s retirement study for the first three years that I posted to the Motley Fool site).

I tell my boys that their dad has spoken up more strongly re this matter than anyone else alive on Planet Earth today. I suggest that they check the Post Archives in the event that they have any doubts whatsoever re this point. I share with them the files in which I keep the 30,000 e-mails I sent on The Silencing of Wade Pfau to every academic researcher listed in the Social Science Researcher Network database. And I share with them the hundreds of kind and intelligent responses I received from people who spent their lives training to do important work and now cannot do it honestly because to do so would hurt the feelings of my good friend Jack Bogle and all of the thousands of Buy-and-Holders who have aided him in this 33-year cover-up of the realities.

I explain to them that I have expressed a willingness to settle my lawsuits against those who have put up posts in “defense” of Mel Linduaer and John Greaney for $500 million and how I have offered to do what I can to spin things in a way that the prison sentences for those who have done so might be reduced a bit. I make the point that love is the answer here and that those of us trying to bring things to a successful conclusion need to keep love in our hearts at all times if we are to do so. I share with them the motto I have used to guide my actions going back to the morning of May 13, 2002 — “Be as honest as it is possible to be without crossing the line and becoming uncharitable while also being as charitable as it is possible to be without crossing the line and becoming dishonest.”

You tell yourself that the same old intimidation tactics that you have employed for the past 12 years will continue to work following the next price crash, Anonymous. I think you are wrong. I know from my conversations with thousands and thousands of interested parties that there are a lot of people who love their country who are going to take effective action following the next price crash, when it will become obvious to every last one of us that we simply have no other choice. With the end of defined benefit pensions, we have left the responsibility of financing millions of middle-class retirements to the millions of middle-class people themselves. That means that we MUST provide them access to honest and accurate reports of what the last 33 years of peer-reviewed research says. It’s imperative.

And, following the onset of the next price crash and the announcement of your prison sentence, we will. I am sure. My good friend Jack Bogle is going to be looking for a way to keep himself out of prison following the next price crash. He knows that his only hope of doing that is to come clean and to hope that memories of his many genuine accomplishments will soften the hearts of the millions of middle-class people whose lives he has destroyed. It’s the same with Bill Bernstein. It’s the same with Larry Swedroe. It’s the same with Scott Burns. It’s the same with Wade Pfau. It’s the same with Mike Piper. And on and on and on and on and on.

Your Campaign of Terror against our board and blog communities has brought on the biggest economic crisis in U.S. history, Anonymous, You have destroyed millions of middle-class lives with your deceptions and your acts of intimidation and your word games. You have demonstrated a great power to cause widespread human misery.

So the heck what?

80 percent of the members of our communities have expressed a desire that honest posting be permitted at every board and blog on the internet. Those people put laws in place to protect them from people like you long before you came on the scene. When those people realize what has been done to them, they will demand enforcement of those laws and you will be put inside a prison cell for a long, long, time to come. Once we are safe from you and the other Goons, there is nothing to stop us all from learning together what the last 33 years of peer-reviewed research says. It gets better and better and better and better.

I end up one of the richest men in the United States. And properly so. I do it not by conning people out of their retirement money but by sharing with them the benefits of the biggest advance in our understanding of how investing works ever achieved in our history. I can live with that, you know? I didn’t choose the rocky road we have travelled. I argued for a brighter, softer, higher road. But I am confident that we will all get to the desired destination regardless of what road we use to get there. And my boys and their children will benefit from the $500 million payout for many, many, many years to come.

That’s a pretty darn heartwarming story. That’s how our system works. And it’s a pretty darn good system, no matter how much you hate it. I tell my boys that story and I hope they learn from it. It’s an amazing, positive story. It’s a story of the triumph of love over hate. Those are the stories that matter most. Those are the stories that my boys need to hear. I am proud that they are able to hear one that has their dad playing the lead role.

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

Rob the Storyteller

Question Asked at the Quora Forum: “Why Is Rob Bennett Opposed to the Buy-and-Hold Strategy for Investing in Equities?”

by

Set forth below is the text of the response that I offered at the Quora forum to the question “Why Is Rob Bennett Opposed to the Buy-and-Hold Strategy for Investing in Equities?”:

Finally a question re which I can feel confident that I possess the expertise needed to rise to the task of venturing forward with a response!

The backstory here is that I was a Buy-and-Holder myself until the evening of August 27, 2002. The Buy-and-Holders did something very important that had never been done before — they developed a long-term investing strategy suitable for use by ordinary people (non-experts) that was rooted in the peer-reviewed academic research in this field. The idea of doing that was a hugely liberating idea for all of us. We all owe the Buy-and-Holders a huge debt of gratitude.

I came into the story on the morning of May 13, 2002. I had been posting on saving strategies at the Motley Fool site for several years and had become the most popular poster at the site as a result of those posts. I posted at a board at which a fellow who had published a retirement study also posted. I noticed that his study did not include an adjustment for the valuation level that applied on the day the retirement begins. There was at that time 20 years of peer-reviewed research showing that such an adjustment is needed. I put up a post pointing out that there appeared to be some problems with the study.

The discussion that followed has over the years become the most controversial debate on a personal finance topic ever held on the internet. There have been MILLIONS of posts advanced on both sides. If Nobel Prize Winner Robert Shiller is right that valuations affect long-term returns, just about everything we hear about how stock investing works on the internet and in books and in speeches and in calculators is wrong. Shiller’s breakthrough findings turn the world of investing analysis on its head. On the other hand, if Nobel Prize Winner Eugene Fama is right, then Buy-and-Hold is the ideal strategy and there is no problem. But which is it?

We saw scores and scores of amazing threads back at the old Motley Fool board. It was the greatest learning experience that any of us at that board had ever enjoyed. At some point, the Buy-and-Hold camp decided that they couldn’t bear being challenged any more. On the night of August 27, 2002, the author of the study that I questioned threatened to kill my wife and children if I continued to “cross” him by posting about the Shiller research. 200 community members (people who had been friends of mine) endorsed his post. I found this very, very, very, sad. I concluded on that night that Buy-and-Hold is the most emotional investing strategy ever concocted by the human mind (unintentionally so, but still….).

I believe that Shiller is right. I believe that investors need to take valuations into consideration in every strategic choice they make. I don’t believe that it is possible to invest effectively in the long term if you don’t do this. I am now the co-author of peer-reviewed research showing this to be so in a most compelling way. Wade Pfau (Wade has a Ph.D. in Economics from Princeton) and I spent 16 months together developing research showing that investors who are willing to take valuations into consideration when setting their stock allocations are thereby able to reduce the risk of stock investing by nearly 70 percent while also dramatically increasing returns. That’s the fountain of youth for stock investors! That’s investor heaven!

A good percentage of the Buy-and-Holders who see that research end up converting to Valuation-Informed Indexing as a result. The abusive Buy-and-Holders were so upset by how people reacted to it that they threatened to send defamatory e-mails to Wade’s employer in an effort to get him fired from his job. Wade agreed to stop promoting the research in an effort to appease these people.

All bull markets are the result of investor emotion. People naturally want to see their portfolio values rise and so most applaud during times of rapidly rising prices. But the entire 140 years of stock market history shows that we always pay back any gains experienced beyond those justified by the economic realities (the economic realities support a gain of 6.5 percent real per year). So all that we are doing in bull markets is borrowing from our future selves.

When we borrow too much from our future selves, we bring on an economic crisis by putting such a payback burden on our future selves. There has never been a single exception in the 140-year history of the U.S. market. In 2000, stocks were overpriced by $12 trillion. As that money disappeared from our portfolios (it usually takes about 10 years for this process to complete itself), we became less and less able to spend on goods and services and thousands of businesses failed and millions of workers lost their jobs. Bull-market fantasies hurt lots of people in very, very serious ways.

Lots of people know this, at least in part. Shiller was awarded the Nobel Prize in Economics for his work. But most people who have tried to tell the story have found that the Buy-and-Holders become very, very upset to hear what the last 33 years of peer-reviewed research says. So most tell the story in tentative ways that don’t persuade too many people. We need to make those who believe in Shiller’s version of the story to feel every bit as comfortable expressing their sincere views as we make those who believe in Fama’s version of the story.

It is fair to characterize me as the most severe critic of Buy-and-Hold alive on Planet Earth today. But the totally fair way to tell the story is to say that the reason why I am so opposed to the version of Buy-and-Hold promoted today is that it conflicts so sharply with the original aim of the Buy-and-Hold Project. The initial idea was to root one’s strategies in the peer-reviewed research. When the research findings changed, the strategy should have been updated to reflect the new findings. John Bogle still recommends the same strategies he recommended in 1980, the year before Shiller published his “revolutionary” (Shiller’s word) research.

I oppose Buy-and-Hold as it is promoted today because Buy-and-Hold as it is promoted today is anti-research. Valuation-Informed Indexing incorporates every aspect of the Buy-ad-Hold strategy but one, the one that has now been discredited by 33 years of peer-reviewed research. I promote Valuation-Informed Indexing, the NEW Buy-and-Hold, Buy-and-Hold 2.0.

It’s not possible to believe in both the old Buy-and-Hold and the new Buy-and-Hold because they are opposites. Whether you take valuations into consideration when setting your stock allocation or not makes a HUGE difference. Sticking with the strategies that have now been discredited by 33 years of peer-reviewed research will cause you to delay your retirement by many years while taking on far more risk than is necessary, according to the peer-reviewed research of the past 33 years.

I of course believe that we all should feel gratitude to our Buy-and-Hold friends for the many wonderful insights they have developed and shared with us. But I very strongly believe that we need to move forward. I believe that deep in their hearts that’s what our Buy-and-Hold friends want us to do. I believe that it was a belief that the peer-reviewed research can help us that got them started on their journey. So I believe that moving forward by correcting the perfectly understandable errors that were made in earlier days helps us all.

Rob

Owner of Joe Taxpayer Blog: “It Takes Decades for Rob’s Thesis to Be Proven Correct (I Don’t Mean the Analysis, But the Actual Results). He Is Correct That the Assumptions Most Planners Use Are In Fact Dangerous.”

by

Set forth below is the text of a comment that I recently posted to the Joe Taxpayer blog:

Rob is passionate on his beliefs. The market is very strange, and it takes decades for Rob’s thesis to be proven correct. (I don’t mean the analysis, but the actual results.) He is correct that the assumptions most planners use are in fact, dangerous.

Lots of people say this and I suppose that it is generally true. But there is one way in which it is not 100 percent true and I always feel that I should try to help people understand that so that they have the full story.

I don’t think of myself as a passionate person. I just think of myself as me. But enough people have used this word to describe me that I have come to accept that it applies. There once was a girl whom I had a crush on for years and we were friends and I couldn’t understand why she wouldn’t go on a romantic date with me. It drove me crazy! Finally she broke down and told me that I was too “intense.” This explanation of the problem had never crossed my mind! Other people pick up on this but for me it is just what I am so I don’t really see it.

But I am not particularly passionate about investing or about Shiller. I think Shiller is right. I think Valuation-Informed Indexing is the future. But by itself that is not a big deal for me. I started posting at Motley Fool in May 1999 and I never even mentioned Valuation-Informed Indexing until May 2002. For three years I wrote only about saving stuff. Investing is way down the list of topics re which I care about.

However, I AM passionate about the people in the internet communities to which I have posted. The thing that makes me feel intense feelings is people and their stories. When you post at a board regularly, you get to know people as people. From that point forward, you cannot not care. At least I don’t see how that could be possible.

There was a strange set of circumstances that caused me to become known as the lead proponent of Valuation-Informed Indexing on the internet. The truth that few newcomers know is that I dropped out of the debate on Day Five because of the abusiveness of the Goons. But after I left, hundreds of my fellow community members at Motley Fool picked up the ball and started talking about all the wonderful insights we had developed together in just those five days. That pulled me back in. At that point, I would have felt like a creep not to get involved just because of a few nasty personal attacks.

Then it just grew and grew. The mountain of evidence supporting Valuation-Informed Indexing got higher and higher and the Goons got more and more desperate in their tactics. I have ALWAYS said that we should have shut them down when Greaney advanced his first death threat. All that we have done is hurt them by failing to take effective action. Greaney and I had a lot of good times together and it causes me great pain to see what he has done to himself. I HATE it that as a community we have let these terrible events transpire. But I don’t control it and I have to accept the realities whether I like them or not.

The two things that I am passionate about are our country’s economic system and our country’s political system. It is a core principle that we permit both sides to speak and that we even encourage the expression of different ideas and new ideas. My cause is to make that general rule applicable in the field of investing analysis just as it is in every other field of human endeavor in our society. I couldn’t possibly feel stronger re that one. Please feel free to label me as “intense” and “passionate” re that one all over the internet.

If we permit people to post their sincere beliefs, I am confident that things will work out well. I don’t have any worries once we pull together to open the internet to honest posting in the investing realm.

I DO believe that people will go to prison over this. I of course HATE that reality and I of course acknowledge that it is a 100 percent crazy reality. But I have seen how people react when they learn that they have been lied to and have suffered huge financial losses as a result. It’s not a pretty scene to behold. Today we see all this emotion on the side of Buy-and-Hold. When things flip (I believe this will happen following the next crash), I believe that all that emotion is going to be on the other side. I will then be the guy saying “Hey, the Buy-and-Holders are good and smart people, let’s not get carried away here.” I LOVE the Buy-and-Holders. I only wish they loved themselves as much as I love them.

Anyway, the point here is that I fight for Valuation-Informed Indexing more because I want to see the boards and blogs run honestly than because I care so much about stock investing. Perhaps that’s part of the reason why I see things from a different perspective than most. The more intense you are about investing, the less able you are to acknowledge the evidence showing that you have been following long- discredited ideas. I don’t have that hang-up. I am able to just look at what the research shows because none of the investing stuff is a big huge deal to me. I am not personally invested in it. Whichever way it goes is okay by me. If the Buy-and-Holders are proven right in the end, that’s fine by me, so long as it happens as part of an honest process in which all “sides” feel free to express their sincere views.

If you had told me on the evening of May 12, 2002, that I would spend the next 12 years of my life leading the most controversial debate on stock investing ever held on the internet, I would have told you that you were out of your mind. I would have put the odds at zero. But here we are. Life has a way of playing funny tricks on all of us. You either develop a sense of humor or you don’t last long in this valley of tears. That’s been my experience, in any event.

It’s always nice to hear your voice up close and personal, Joe. Keep fighting re that fees things. When people become passionate about something, there is a reason for it, even if some others cannot see it immediately.

Hang in there, man.

Rob

Goon Poster to Rob: “Rob, Does Anyone Read This Blog Beside the Goons Who Like to Poke Fun at You? I’ve Never Seen a Comment by Anyone Else.”

by

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

Rob, does anyone read this blog besides the goons who like to poke fun at you? I’ve never seen a comment by anyone else.

Comments by non-Goons are rare, Anonymous. There have been some here and there. But we often go a long time before seeing a fresh one.

That’s evidence of the core problem, no?

LOTS of people engage me in discussion when I post at a large board or blog. So many that you Goons complain that to let me post at a large board or blog is to create a “Rob Bennett Show.” When I posted at Bogleheads, my posts where the star attraction nearly every day for months on end. There were times when there were four or five separate ongoing threads relating to the Valuation-Informed Indexing concept.

You would think that some of the people who are so interested in the concept would follow me to my own site and ask their questions there, would you not? But they don’t. Huh? How come?

Humans are social creatures, Anonymous. That’s the thing that the Buy-and-Holders missed. It’s a very, very, very big deal. People do not like to engage in taboo conversations. Posting at a board owned by a fellow that has been banned from 15 different sites is engaging in taboo conversation. People don’t feel comfortable with it.

People’s minds tell them that there must be something wrong with the message of a fellow who has been banned at 15 different sites. Perhaps it is not clear what is wrong , perhaps people cannot put their finger on the problem. But there is something within them that tells them that they don’t want to be involved with the taboo. And being banned at 15 different boards is a signal of taboo behavior. Saying that the Old School SWR studies get the numbers wildly wrong is taboo. Saying that Buy-and-Hold caused the economic crisis is taboo. Saying that Jack Bogle is at risk of going to prison for financial fraud is taboo.

The fear of the taboo is the driver of all this. At the heart of our economic system is a belief that humans are rational actors. It’s not Jack Bogle who came up with that one. It’s freakin’ Adam Smith! That one has been around a long time. And that one is the one that was disproved by freakin’ Robert Shiller, Nobel Prize Winner.

Shiller changed everything. And it’s a very, very, very good thing that he did so. Our children and their children will live far richer lives than we lived because of the blessings that will be bestowed on us as a result of Shiller’s “revolutionary” (his word) findings. It’s good stuff piled on top of good stuff piled on top of good stuff piled on top of good stuff. It never ends (as least not as far as today’s eye can see). So lucky us!

But when we achieve that big an advance, there are a lot of people who get their feathers ruffled. All of the people who believed in Jack Bogle get their feathers ruffled. Heck, all the people who believed in Adam Smith get their feathers ruffled a bit! When you improve everything, you change everything. When you change everything, you ruffle a lot of feathers.

We have taboos against doing that sort of thing. Big Shots don’t like having their feathers ruffled. So they fight and they fight and they fight and they fight.

To no purpose. We HAVE to ruffle their feathers because our economy is bigger today than it was the last three times that Buy-and-Hold caused an economic crisis and so this economic crisis is likely going to be a lot worse than any of those before it is over unless we work up the courage to ruffle a few feathers. And one of those three put us in a Great Depression! So the cost of avoiding feather ruffling is getting pretty darn high.

Still, the humans are social creatures and the humans don’t like violating taboos and telling the truth about what the last 33 years of peer-reviewed research tells us about how stock investing works is the biggest taboo of all. So I am doomed, right?

I don’t think so, Anonymous.

I think we are as a society going to work up the courage to violate that taboo following the next price crash. Then I don’t just get average traffic here. I get off-the-wall insane traffic, traffic big enough to make me one of the richest men in the United States. Why? Because I have no competition! Everyone else is playing it the other way. Everyone else is saying “Why fight the taboo?” I violated the taboo 12 years ago and have been fighting it harder and harder every day since. On the day the taboo comes crashing down, I have a 12-year (or bigger) edge on everyone else.

I want the traffic. I want it bad. But I am not intimidated by anything you do to limit my traffic or to point out to me how small my traffic is. I am writing for the post-taboo days. They are not here yet, but they are getting close. I’d say that we are one price crash away. That’s the path I chose on the morning of May 13, 2002, and that’s the path I intend to stay on for at least another 12 billion years. Just so you know.

I get precious little non-Goon traffic here. I don’t dispute what you are saying.

I am going to continue posting honestly re SWRs and scores of other critically important investment-related topics all the same. I am never even going to flinch.

I think it’s the right thing to do. And I think it will make me very rich and very famous to take this path.

So the intimidation tactics don’t work on me. They hurt. I am not saying different re that. I am saying that they do not achieve their aim, getting me to stop violating the taboo. I think this taboo has caused huge human misery for millions of middle-class people and I want to see it torn down and I am proud of the efforts that I have put forward to tear it down and humbled that I was chosen by God or Evolution or the Fates or Whatever to be the one to bury it 30 feet in the ground, where it can do no further harm to humans and other living things.

I intend to lead a Celebration of the Death of the Buy-and-Hold Taboo when this is over. I intend to do a jig and sing a song and laugh.

And it won’t be one of those empty, cynical laughs that you Goons are famous for either. It will be a laugh of joy. You Goons will be joining me in the laugh. My good friend Jack Bogle will be joining me in the laugh. We all will be laughing together.

Because there are no sides. We all want to know how to invest effectively. There is not one true exception, no matter how fearful many of us are re violating big taboos.

I hope that helps a bit, old friend.

Rob

“Once the First Prison Sentences Are Announced, We Will See a Total Reversal. There Are Billions of Dollars to Be Made Providing Millions of Middle-Class Investors With Tools That Are Consistent With What We Have Learned From the Peer-Reviewed Research Over the Past Three Decades.”

by

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

Maybe a better question is this: Which specific financial experts will NOT be going to prison in your opinion?

There’s a concept that is referred to in the law books as “industry practice” or “industry standard” or something like that. The idea is that one indicator of fraud is engaging in behavior outside the norm of the field in which you work.

That concept won’t do the job in the investing advice field. The entire industry is corrupt. We have known for 33 years that there is zero chance that a Buy-and-Hold strategy can ever work for even a single long-term investor. But people in the field noticed that the pure Get Rich Quick approach brings in the bucks just fine, peer-reviewed research be danged.

The standard here has to be broader. We certainly don’t permit 12-year cover-ups of errors in studies that people use for an important purpose in any other field. And we obviously adopted the laws against financial fraud for a reason. If we are going to send Bernie Madoff to prison, it’s more than a little hard to justify not doing the same for the sorts of individuals who have put forward posts in “defense” of Mel Linduaer and John Greaney, who obviously have caused 500 times the human misery.

We can’t send everyone in the field to prison. It’s not practical.

But I think it’s fair to say that the millions of people whose lives have been destroyed are not going to be in a terribly forgiving mood when they learn about the 12-year cover-up. So we are going to need to see action that insures beyond any doubt whatsoever that a message will be sent strong enough to insure that nothing like this will ever happen again.

My guess is that, soon after the next price crash, a number of people will come forward. They will say that their consciences just will not permit them to keep quiet any longer. Then there will be a deluge of truth-telling. . Lots of people will be hoping that by coming forward early, they will either be able to avoid prison or limit their sentences significantly. And it will be clear that the Buy-and-Hold Mafia just does not have the power to maintain the cover-up any longer.

We will see a media frenzy. That will lead to congressional hearings.

My guess is that there will be responsible people who will come forward with the aim of bringing the nasty side of things to a quick end so that we can all get about the business of taking advantage of the wonderful research findings that the Buy-and-Hold Mafia has been denying us for 33 years now. It wouldn’t surprise me if Congress adopted some form of amnesty for advisors who recommended Buy-and-Hold strategies but who did not show any evidence of bad intent.

I believe that the prison sentences will largely be limited to those who advanced threats of physical violence or who made demands for unjustified board bannings or who advanced hundreds of acts of defamation or who participated in or covered up threats of physical violence against academic researchers. I don’t think that we will be hearing any objections to long prison sentences for those sorts of individuals. It might be that there are other sorts of insanely abusive behavior that has been going on behind the scenes and that that will come out when people are coming forward with honest accounts in an effort to save their skins. But it would be the same general sort of behavior we would be talking about. People don’t care about people making mistakes. People get angry when people are dishonest and when they engage in a cover-up. It’s the people who have engaged in clear acts of dishonesty or cover-ups who should be most concerned about their futures, in my assessment. That means you, Anonymous!

Once the first prison sentences are announced, I believe that all the ugly stuff will come to a quick end. We will see a total reversal. We live in the most exciting time to be an investor in the history of the planet. There are billions of dollars to be made providing millions of middle-class investors with tools that are consistent with what we have learned from the peer-reviewed research over the past three decades. Once there is an announcement of ANY prison sentences, we will be seeing good stuff piled on top of good stuff piled on top of good stuff.

It may take decades for all the criminal and civil cases to work their way through the system. Does it really matter all that much? The good stuff here is 50 times more good than the bad stuff is bad. I think that will be the focus for all except those personally involved in the criminal and civil cases. I obviously cannot say how each case will be resolved. It is going to depend on the behavior of the individuals involved. There will be testimony taken at trials. That’s how the system works, no?

I ain’t going to prison! I know that much! There is no one else alive who has done as much to rein in you Goons as I have. There is no one in a close second place.

Fair enough, Anonymous?

Take care, man.

Rob

Valuation-Informed Indexing #200: Moving Stock Returns From One Time-Period to Another Reduces Economic Productivity

by

I”ve posted Entry #200 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Moving Stock Returns From One Time-Period to Another Reduces Economic Productivity.

Juicy Excerpt: People complain all the time about our low savings rate. Bull markets contribute to that. Buy-and-Hold contributes to that.

 

People save when they are motivated to save. During a bull market, people look at the 30 percent gains they are seeing on their stock portfolios and determine that they don’t really need to buckle down just yet. It’s not irrational behavior. Stocks were priced at three times fair value in 2000. So an investor who had $200,000 of real value in his stock portfolio was led to believe that he had $600,000 of real value in his stock portfolio. It should shock no one that someone who thinks he is $400,000 farther along in his effort to finance his retirement would ease up on saving efforts for a time.

 

“Soon After the Next Crash, A Number of People Will Say That Their Consciences Will Just Not Permit Them to Keep Quiet Any Longer. Then There Will Be a Deluge of Truth-Telling. Lots of People Will Be Hoping That By Coming Forward Early, They Will Be Able to Avoid Prison. We Will See a Media Frenzy. That Will Lead to Congressional Hearings.”

by

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

Maybe a better question is this: Which specific financial experts will NOT be going to prison in your opinion?

There’s a concept that is referred to in the law books as “industry practice” or “industry standard” or something like that. The idea is that one indicator of fraud is engaging in behavior outside the norm of the field in which you work.

That concept won’t do the job in the investing advice field. The entire industry is corrupt. We have known for 33 years that there is zero chance that a Buy-and-Hold strategy can ever work for even a single long-term investor. But people in the field noticed that the pure Get Rich Quick approach brings in the bucks just fine, peer-reviewed research be danged.

The standard here has to be broader. We certainly don’t permit 12-year cover-ups of errors in studies that people use for an important purpose in any other field. And we obviously adopted the laws against financial fraud for a reason. If we are going to send Bernie Madoff to prison, it’s more than a little hard to justify not doing the same for the sorts of individuals who have put forward posts in “defense” of Mel Linduaer and John Greaney, who obviously have caused 500 times the human misery.

We can’t send everyone in the field to prison. It’s not practical.

But I think it’s fair to say that the millions of people whose lives have been destroyed are not going to be in a terribly forgiving mood when they learn about the 12-year cover-up. So we are going to need to see action that insures beyond any doubt whatsoever that a message will be sent strong enough to insure that nothing like this will ever happen again.

My guess is that, soon after the next price crash, a number of people will come forward. They will say that their consciences just will not permit them to keep quiet any longer. Then there will be a deluge of truth-telling. . Lots of people will be hoping that by coming forward early, they will either be able to avoid prison or limit their sentences significantly. And It Will Be Clear That the Buy-and-Hold Mafia Just Does Not Have the Power to Maintain the Cover-Up Any Longer.

We will see a media frenzy. That will lead to congressional hearings.

My guess is that there will be responsible people who will come forward with the aim of bringing the nasty side of things to a quick end so that we can all get about the business of taking advantage of the wonderful research findings that the Buy-and-Hold Mafia has been denying us for 33 years now. It wouldn’t surprise me if Congress adopted some form of amnesty for advisors who recommended Buy-and-Hold strategies but who did not show any evidence of bad intent.

I believe that the prison sentences will largely be limited to those who advanced threats of physical violence or who made demands for unjustified board bannings or who advanced hundreds of acts of defamation or who participated in or covered up threats of physical violence against academic researchers. I don’t think that we will be hearing any objections to long prison sentences for those sorts of individuals. It might be that there are other sorts of insanely abusive behavior that has been going on behind the scenes and that that will come out when people are coming forward with honest accounts in an effort to save their skins. But it would be the same general sort of behavior we would be talking about. People don’t care about people making mistakes. People get angry when people are dishonest and when they engage in a cover-up. It’s the people who have engaged in clear acts of dishonesty or cover-ups who should be most concerned about their futures, in my assessment. That means you, Anonymous!

Once the first prison sentences are announced, I believe that all the ugly stuff will come to a quick end. We will see a total reversal. We live in the most exciting time to be an investor in the history of the planet. There are billions of dollars to be made providing millions of middle-class investors with tools that are consistent with what we have learned from the peer-reviewed research over the past three decades. Once there is an announcement of ANY prison sentences, we will be seeing good stuff piled on top of good stuff piled on top of good stuff.

It may take decades for all the criminal and civil cases to work their way through the system. Does it really matter all that much? The good stuff here is 50 times more good than the bad stuff is bad. I think that will be the focus for all except those personally involved in the criminal and civil cases. I obviously cannot say how each case will be resolved. It is going to depend on the behavior of the individuals involved. There will be testimony taken at trials. That’s how the system works, no?

I ain’t going to prison! I know that much! There is no one else alive who has done as much to rein in you Goons as I have. There is no one in a close second place.

Fair enough, Anonymous?

Take care, man.

Rob

“Wade Pfau May Be in Prison Then. I Am Going to Tell People About His Great Research. But I Am Also Going to Tell People That He Committed Financial Fraud Because of the Threats That Were Made to Destroy His Career. I Wouldn’t Be Willing to Trade Places With Him for All the Money in the World.”

by

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

Rob,

They quoted Wade in this article:

http://www.usatoday.com/story/money/columnist/tompor/2014/06/15/boomers-cant-spend-too-much-too-quickly/10520085/

Why didn’t they quote you? I thought you were the SWR expert.

They didn’t quote me because I am the person who discovered the errors in the Old School SWR studies, Anonymous. I put up the post pointing out those errors on the morning of May 13, 2002. The Wall Street Journal didn’t report on them until nearly 10 years later. So I am Enemy #1 for the Buy-and-Hold Mafia.

I am still telling the truth re these matters. The Buy-and-Hold Mafia has directed everything it has got against me and they haven’t stopped me. I think it’s fair to say that the 12-year cover-up will be exposed following the next price crash. Who will be in better shape then?

Wade may be in prison then. I am going to tell people about his great research. I am going to say that he merits the Nobel Prize for the work he did with me. But I also am going to tell people that he committed financial fraud because of the threats that were made to destroy his career.

Is he better off being quoted in all these places now and getting all these big job promotions now and going to prison then or would be be better off taking his story to the New York Times today and avoiding the years of financial fraud? I think he would have been better just playing it straight. I told him so. In one of my e-mails to him I told Wade that I thought he was “insane’ to get involved in any way, shape or form with you Goons.

Wade is a grown man and he took the path he took. I still love the guy. I always will. But I wouldn’t be willing to trade places with him today for all the money in the world.

My contributions have been recognized by thousands and thousands of people (including Wade Pfau, to be sure). People fear you Goons because you have the backing of Jack Bogle and others of the Wall Street Con Men, But the whole corrupt industry will be doing down when millions of middle-class people find out what has been done to them. I am not going down. I have never posted in “defense” of Mel Lindauer or John Greaney or Jack Bogle. I am clean, Anonymous. So I will be getting a lot more recognition following the next price crash, when you are sent to prison.

It’s obviously not the way I wanted to see things play out. But there is no one on Planet Earth who has done more to rein in you Goons. So I have whatever satisfaction comes from knowing that I have put my very best efforts into this. And I will of course continue to do so.

I hope that helps a bit, Anonymous.

Rob

“You Are Right That the Bogleheads Take a Number of Factors Into Consideration When Setting Their Allocations and You Are Right That I Do the Same. But There Is Obviously SOMETHING That Distinguishes Us. That Something Is the Last 33 Years of Peer-Reviewed Research. Everything That I Say Is Rooted in Shiller’s ‘Revolutionary’ Findings of 1981. And Bogle Hasn’t Changed His Investing Advice One Iota in Those 33 Years. He Is Saying the Same Thing Today As He Was Saying in 1980!”

by

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

Ok, so like everyone over at Bogleheads, you make allocation decisions based on a number of factors. And yet, you’re “VII” and they’re “get rich quick”. What exactly is the difference between you and them, in practice?

The difference is that I don’t advance death threats or demands for unjustified board bannings or tens of thousands of acts of defamation or threats to get academic researchers fired from their jobs. The difference is that I want to LEARN from the peer-reviewed academic research and the Buy-and-Holders want to BLOCK Learning of what the last 33 years of peer-reviewed academic research says.

That’s the only difference, Anonymous. You are right that the Bogleheads take a number of factors into consideration when setting their allocations and you are right that I do the same. But there is obviously SOMETHING that distinguishes us. That something is the last 33 years of peer-reviewed research. Everything that I say is rooted in Shiller’s “revolutionary” findings of 1981. And Bogle hasn’t changed his investing advice one iota in those 33 years. He is saying the same thing today as he was saying in 1980!

I am saying that we should move out of the Dark Ages of investing analysis and get the word out to every investor alive about what the last 33 years of peer-reviewed research says. There is not one person alive on Planet Earth who doesn’t want to see that happen, including Bogle.

The trouble is that Bogle (and lots and lots of others, to be sure) has committed financial fraud by covering up the findings of the peer-reviewed research for 33 years. So he worries that permitting honest posting at the Bogleheads Forum will land him in a prison cell.

What do you want me to do about that?

I BEGGED the man to come clean before the economic crisis hit. Had he come clean back them, I don’t think he would be going to prison AT ALL. So I did right by him, no?

And I came up with this thing where we attribute his behavior to cognitive dissonance rather than evil intent. I think it would be fair to say that no one else has come up with a better way to get him off the hook for his obstinate behavior. So I CONTINUE to do right by him, no?

What else can I do?

You tell me the difference between us. I considered myself a Buy-and-Holder on the morning of May 13, 2002. It never entered my head that there would be anyone other than Greaney who would consider it a bad thing that I discovered a major error in the Old School retirement studies and corrected it. Would you say that Bogle and the other Buy-and-Holders have been appreciative of my efforts? It sure doesn’t seem that way to me.

There is only one type of poster banned at the Bogleheads Forum — those of us who tell the truth about the last 33 years of peer-reviewed research. Why do you think that is? It cannot possibly just be coincidence that the same type of poster is banned over and over and over and over again.

It is that the Bogleheads CLAIM to believe that investors should be following the peer-reviewed research but have not updated their investing strategy to reflect the research from 1981 forward. That’s the entire problem.

Update your strategy and we are all on the same side. Update your strategy and we can bring the economic criss to an end and enter the greatest period of economic growth in U.S. history. Update your strategy and you will no longer see any need to advance 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. Update your strategy and there will no longer be any need for you to tell The Big Buy-and-Hold Lie (that there is some mystical, magical research somewhere showing that it might not be 100 percent necessary for ALL investors to ALWAYS practice price discipline when buying stocks).

This lie is in the process of destroying our country.

Do you care?

I do.

So I am telling.

But that’s it. There are no other differences. The Buy-and-Holders started out doing something wonderful and then they made a perfectly understandable mistake and then they elected to cover it up rather than acknowledge it and now we are seeing the cover-up of a cover-up of a cover-up of a cover-up.

Everything works if you fix Buy-and-Hold to reflect the last 33 years of peer-reviewed research.

If you don’t, you end up in a prison cell. And the rest of us end up in a Second Great Depression.

Is that clear enough? Am I stating things plainly enough for you to get the general idea at long last?

Following the peer-reviewed research is a good idea. But you must be willing to be honest about what the research shows or you turn a good idea into a very, very, very, very BAD idea.

Buy-and-Hold AS IT IS PROMOTED TODAY BY PEOPLE LIKE JACK BOGLE is a very, very, very, very bad idea.

I love Jack and all my other Buy-and-Hold friends. So I naturally want to do everything I can to persuade them to leave this dark, dark path they entered on the morning of May 13, 2002, and get back to where they once belonged.

The difference is lies versus truth. The difference is darkness versus light. The difference is Get Rich Quick versus research-based. The difference is short-term versus long-term. The difference is hate versus love.

Do you see?

Rob