A Rich Life

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

“Those in the Behavioral Finance School Need to Know About How the Human Mind Deceives Itself. For 12 Years Now We Have Been Generating Thousands of Illustrations of the Self-Deception Phenomenon. I Could Add to Shiller’s Knowledge A GREAT DEAL By Pointing Him to the Materials in Our Post Archives.”

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

Rob, why not reach out to Shiller and form some kind of partnership with him? I mean, he’s not operating at your level, but maybe you could teach him something.

I understand that you are being sarcastic with this comment, Anonymous. But the point you are making is entirely legitimate.

There are certainly many things that I can teach Shiller, just as there are many things that I can teach Bogle (and of course just as there are many things that Bogle and Shiller have taught me). We humans learn by talking things over amongst ourselves. Shiller is like everybody else. When he fails to take opportunities presented him to talk things over with interested parties, he misses out on learning experiences that would otherwise be available to him.

Shiller has indicated that he believes in short-term timing. He has said that there are “indicators” that he will be looking at to know when to get out of stocks before the price crash that he has predicted for this year takes place. I don’t believe that short-term timing works. If Shiller would engage in a discussion of that question with me, I would put forward my best effort to persuade him not to place so much trust in his “indicators.”

It is of course possible that it would be Shiller who would be persuading me rather than me persuading Shiller. I don’t say that that couldn’t happen. But even that would be a learning experience for him. If I did the best to persuade him that short-term timing doesn’t work and he got the better of the argument, that would increase his confidence in short-term timing a bit. And for good reason.

So Shiller should be putting himself out there and engaging in discussions of all sorts of questions relating to his belief in the Valuation-Informed Indexing model. That would be a win/win/win/win/win.

I would like to trade stories with Shiller about the tactics of you Goons. My sense from a number of things he has said is that he has had many vicious attacks directed at him since he published his revolutionary 1981 findings. I would encourage him to report on those attacks in a new book. Many hold back from talking about the ugly stuff. It is viewed as “unprofessional.” What people are missing is that Shiller and others in the Behavioral Finance School must know about how the human mind deceives itself to do their best work. For 12 years now we have been generating thousands upon thousands of illustrations of the self-deception phenomenon. I could add to Shiller’s knowledge A GREAT DEAL by pointing him to materials in our Post Archives. And he could add to mine by telling me stories about how other academics have attacked him and his ideas through underhanded and nasty means.

This stuff needs to get out. When we fail to publicize the attacks, we create an environment in which we see more of them. I absolutely believe that I could add to Shiller’s understanding of the issues by talking these matters over with him in great depth.

And I could add to his knowledge of the how-to side of things a great deal by talking over with him what I have learned from the five calculators. That is Shiller’s great weakness. It is an amazing reality that he wrote the most important book ever published on investing theory and included only two paragraphs addressing the how-to aspects of the investing experience. That’s the aspect of the question that people care about the most. I believe that Shiller knows a lot more about the how-to aspect than he lets on. But I believe that he would deepen his knowledge considerably by talking things over with other interested parties.

Most importantly of all, I would like to talk over with him the role that Buy-and-Hold played in bringing on the economic crisis. Shiller predicted the crisis in his book. But when the crisis came, he kept it zipped about the role played by the relentless and reckless and ruthless promotion of Buy-and-Hold strategies for decades after the peer-reviewed research in this field showed that there is precisely zero chance that a Buy-and-Hold strategy could ever work for even a single long-term investor. I would very much like to ask him why. It could be that Shiller himself is suffering from cognitive dissonance, at least on this particular question. The best way to find out is to talk things over.

I have reached out to Shiller, Anonymous. I sent him an e-mail a good bit of time back. I’ll send him another one following the next crash (as I will send Bogle another one following the next crash).

Why doesn’t Shiller respond?

Why doesn’t every responsible person alive on Planet Earth respond when they learn about what we have done to ourselves as a society by failing to teach every investor what we have learned about how the stock market works over the past 33 years?

He is ashamed, Anonymous.

He has done more than anyone else but he is still ashamed that he has not done more.

I hope that that changes following the next crash and that Shiller and I will be working together for many years to come after the crisis is brought to an end (just as I hope that my good friend Jack Bogle and I will be working together for many years to come following the end of the crisis).

The full truth here is that your sarcasm holds you back. You should want to see me and Shiller (and me and Bogle) working together. The more we work together, the more we learn and the more you learn. You fear the idea. Because you fear what you would learn. That’s sad.

That’s something that I very much want to change. Not just for you but for millions.

And I believe strongly that my good friend Robert Shiller very much wants to change that too.

I believe that someday we will be working to make it all happen.

I sure hope so.

Please take good care, Goon friend.

Rob

“Truth Prevails Over Ignorance in Time, But Not Instantly. It is a PROCESS. This Is Not 1981 or Even 1991. It Is Time to Move Forward. That Mean Explaining to People the DANGERS of Buy-and-Hold Strategies.”

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

Given the vast conspiracy of silence regarding valuations, isn’t it incredible such articles in the New York Times could occur Rob?

Do you think that the entire world went from believing that the sun revolves around the earth to believing that the earth revolves around the sun five minutes after the discovery was made, Anonymous?

Truth prevails over ignorance in time, but not instantly. It is a PROCESS.

We are living today mid-way through that process. Jack Bogle is the biggest advocate of Buy-and-Hold alive on Planet Earth. And even Jack includes research-based stuff in his books and speeches ALL THE TIME. I learned about the errors in the Old School safe-withdrawal-rate studies by reading Jack’s book. Jack gave a speech to the Vanguard Diehards back at the time when I was posting there that contained paragraph after paragraph of legitimate, helpful stuff. Then it concluded with gibberish, saying “so just be sure to Stay the Course” without pointing out that to Stay the Course in a meaningful way you must be CERTAIN to lower your stock allocation when prices reach insanely dangerous levels. Huh?

The NYT article you linked to would have been a good article to publish in 1985 or 1990. We should be a good ways past that today.

Where is the New York Times article reporting on the 12-year cover-up of the errors in the Old School SWR studies and on the felonies that have been employed to keep millions of middle-class investors from learning about those errors?

Where is the New York Times article reporting on the Bennett/Pfau research showing millions of middle-class investors how to reduce the risk of stock investing by 70 percent while letting them retire five to ten years sooner than they imagined possible in the Buy-and-Hold days?

Where is the New York Times article reporting on how Bogle hasn’t changed his investing advice one iota in the 33 years since Shiller’s research showed that there is precisely zero chance that a Buy-and-Hold strategy could ever work for even a single long-term investor?

Where is the New York Times article reporting on how Bogle continues to associate with the sorts of individuals who have put up posts in “defense” of Mel Linduaer and John Greaney after hearing hundreds of community members at the Bogleheads Forum express a desire that honest posting be permitted?

Where is the New York Times article reporting that it was the continued promotion of Buy-and-Hold strategies for 33 years after they were discredited by the peer-reviewed research in this field that was the primary cause of the economic crisis?

THOSE are the sorts of articles we need to be seeing today, Anonymous. This is not 1981 or even 1991. This is 2014. It is time to MOVE FORWARD.

Moving forward means telling people what Shiller’s findings means in practical, how-to investing terms. It means explaining to people the DANGERS of Buy-and-Hold strategies.

There is no magic in saying the words “Valuations Matter.” That’s a starting point. But the magic comes when we tell people in clear and firm and bold language WHAT THAT MEANS. What it mean is that valuations must be taken into consideration in EVERY STRATEGIC CHOICE MADE BY AN INVESTOR.

The Buy-and-Holders are still arguing the opposite to this day. The Buy-and-Holders are still arguing that long-term timing is not absolutely required for all investors, or heaven help us all, in some cases might not even be a good thing.

That’s not good, Anonymous. That needs to change. To make it change, we all need to make it a practice to call the Buy-and-Holders out on their b.s. when we see them engage in it.

The article does not go nearly far enough in making the case for Valuation-Informed Indexing over Buy-and-Hold. It is not a close call.

Rob

Valuation-Informed Indexing #194 — Price Volatility Is Optional

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I have posted Entry #194 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Price Volatility Is Optional.

Juicy Excerpt: The graphic shows results from 1996 for an investor going with a 100 percent stock allocation and for an investor going with Treasury bills for that entire time period. The former investor was obviously taking on FAR more risk since he was invested in stocks rather than Treasury bills. And the former investor experienced FAR more volatility — the blue line dramatically goes up and then dramatically down and then dramatically up and then dramatically down while the red line in great contrast slopes gently upward for the entire time-period.

The results at the end of the day are precisely the same! Investors can obtain the same results without the craziness. Volatility is optional.

It is not only in this one 12-year time-period that this has been so. It has always been so. Here is a graphic making the same comparison for the entire time-period from 1871 forward.

“Even People Who Are Super-Educated About These Matters Do Not Appreciate the Effect of Valuations Today. Wade Pfau Holds a Ph.D. in Economics. So He Should Have Known All This. His E-Mails Show That He Did Not. That Lets the Buy-and-Holders Largely Off the Hook. They Were Not Lying When They Said That They Didn’t Believe That VII Works. They Hadn’t Yet Enjoyed Their Epiphany Experience.”

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

If you wouldn’t respond to an opinion your children have in that manner, it’s bullying. Like “Chocolate ice cream is smelly garbage” wouldn’t work.

If Shiller is right that valuations affect long-term returns, the 12-year Campaign of Terror against our board and blog communities caused the biggest economic crisis in U.S. history, Anonymous. Millions of people have lost their jobs in this economic crisis.

If terrorists caused this much human misery, not one person would have any problem with their “ideas” being characterized as “smelly garbage.”

I don’t say that the Buy-and-Holders intended these results.

So I guess that if you want to refer to all of the wreckage we see before us as “unintentional smelly garbage,” I am okay with that.

The wreckage is real.

Numerous discussion board communities have been burned to the ground. Millions of people are in the process of suffering failed retirements.

This stuff is not a joke. Very serious harm has been done to many people.

How do we get from where we are to where we all want to be? That’s what we all need to be thinking about.

I am sincere when I say that the hand of kindness is extended. I view the Buy-and-Holders as my friends. I don’t like referring to the work product of my friends as “smelly garbage.” But then I didn’t use that phrase on the morning of May 13, 2002. I began using that phrase only after I saw a lot of damage done to a lot of people. It is with that human misery in mind that I refer to Buy-and-Hold as “smelly garbage.” Buy-and-Hold became smelly garbage in my mind when I saw with my own eyes how much harm a dogmatic belief in Buy-and-Hold principles could bring about.

I truly believe that Buy-and-Hold was a big intellectual advance over what came before it. I truly believe that the Buy-and-Holders are good and smart people who have contributed many genuine and powerful insights. I truly think of these people as my friends. I truly want to reduce frictions and heal wounds.

But we are not going to be able to act as if the last 12 years did not happen.

We can spin things in a positive direction. We can set things up so that the bad stuff is to a large extent buried and the good stuff highlighted. It makes all the sense in the world to do that. But please try to think of realistic solutions to our problems.

I’ll give you something concrete.

Wade Pfau raved about Valuation-Informed Indexing when he did the research showing how superior it is to the old understanding of Buy-and-Hold (one way of highlighting the positive is calling VII “the new Buy-and-Hold” or “Buy-and-Hold 2.0,” which is what it really is). His excitement shows us two things.

One, it shows us that even people who are super-educated about these matters do not appreciate the effect of valuations today. Wade was not faking. He holds a Ph.D. in Economics. So he should have known all this. But his e-mails to me show that he did NOT know all this until he explored it in depth. That’s wonderful. That lets the Buy-and-Holders largely off the hook. They were not lying when they said they didn’t believe that VII works. They hadn’t yet enjoyed their epiphany experience. Letting the Buy-and-Holders off the hook in that way is a 100 percent positive and constructive and life-affirming way to go.

But, two, it shows that this advance is a big deal. A guy with a Ph.D. in Economics did not know about this until he was exposed to our discussions. Now he knows. VII is a very, very, very big deal.

You clearly have a lot of worries about me obtaining too much wealth and fame as a result of the discovery of these powerful insights. Those worries are silly.

I AM going to obtain a lot of wealth and fame. As you say above, good for me. I have developed something wonderful beyond belief. I earned a lot of wealth and fame. Let’s all be grateful that our system insures that I will get what I deserve.

But let’s not stop there. LOTS of people are going to enjoy a lot of added wealth and fame as a result of these breakthroughs. We are already seeing this with Wade. He holds back on what he says because of the threats made by you Goons. But he is still doing wonderful work. And he is becoming well known in this field for the work he is doing. That’s helps us all! That’s is how it is supposed to play out.

I want that for everyone.

I want it for Bogle and Bernstein and Swedroe and Burns and on and on and on.

THAT’S the way to play it.

I will get the wealth and fame coming to me. And lots of other people will get the wealth and fame coming to them. There is plenty of wealth and fame to go around here. This is the biggest advance in our understanding of how stock investing works ever achieved in history. So let’s not focus on small, petty stuff, okay?

The more wealth and fame we see being handed out, the better is it for those of you who have engaged in Goon-type behavior. What you need is for the millions of middle-class investors not to be too angry about the 12-year cover-up. The more exciting the story we tell, the less angry and the more excited they are. Being honest about this stuff is a win/win/win/win.

What we all need to do is to do everything in our power to unleash all these powerful and mind-blowing insights. FORGET about who gets the credit. People will figure out who to give credit to when they hear about all that went down. People will be fair. I played a huge role. But lots of others played important roles too. And lots of others will be playing important roles in days to come. So there are going to be lots of people obtaining lots of wealth and fame. It’s not a problem.

A rising tide lifts all boats. The spreading of the word re VII is going to bring on the biggest rising of the tide that any of us has ever seen. Can we all make an effort to stop worrying about Rob Bennett becoming rich and famous and just enjoy that?

Rob

“We Don’t Have the Option of Putting Off Making Decisions on Investing Questions Until the Scientific Community Achieves a Consensus on All These Matters. We Have Money That Must Be Invested TODAY. Each and Every One of Us Must Choose Path A or Path B Regardless of Any Doubts We Entertain As to the Ultimate Merit of the Choice. This Is the Biggest Reason Why Discussions of These Issues Are So Sensitive.”

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

People simply point out the facts – that valuations affect around 40% of the variability in out of sample returns in historical data sets, but that the future is a very unknown place. You can’t go beyond the facts – that would just be making up stories.

I am not in full agreement with what you are saying here, Anonymous. But I like it that you are talking in a real way. You are doing a decent job with these words of articulating the beliefs of many smart and good people. That’s obviously a positive thing to do.

The 40 percent number comes from the Vanguard study. I am not willing to sign on to it without giving the matter more study. But I don’t have a big problem with it. I am fine with accepting that number as a reasonable number. So we can call ourselves being close to agreement re that one.

I agree that the future is an unknown place. I wouldn’t go quite so far as to say “very unknown.” I think we know important things about how stocks are likely to perform in the future. But there certainly are big gaps in our knowledge and it certainly is better to be modest in one’s claims than it is to be dogmatic in them. So, again, I think it is fair to say that we are close to agreement.

Where I see a significant difference emerging is when you say: “You can’t go beyond the facts — that would just be making up stories.”

The problem we BOTH face is that we MUST go beyond facts.

We don’t have the option of putting off making decisions on investing questions until the scientific community achieves a consensus on all these matters. We have money that must be invested TODAY. Each and every one of us must choose Path A or Path B regardless of any doubts we entertain as to the ultimate merit of the choice. This is the biggest reason why discussions of these issues are so sensitive. People on both sides have a great deal riding on being right. And they MUST make a call based on limited information. We live in the present and we won’t know all the answers until sometime in the future.

You say: “You can’t go beyond the facts — That would just be making up stories.”

The Old School safe-withdrawal-rate studies go beyond the facts. They organize and interpret the facts in a manner that leads readers of those studies to the conclusion that a 4 percent withdrawal rate is safe at all times.

I organized and interpreted the same facts (the historical return data) in a very different manner and came to a very different conclusion when I built The Retirement Risk Evaluator.

Was John Greaney making up stories when he published his SWR study at his web site?

Was I making up stories when I published The Retirement Risk Evaluator at my web site?

Were we BOTH making up stories?

Were we both just reporting facts?

That’s the question you need to answer for the point you are advancing here to convey any message of significance in the real world.

If I say that the numbers in the Old School SWR studies are right, I am saying that the numbers in my SWR calculator are wrong. It obviously would be dishonest of me to say that. I believe that the numbers in my SWR calculator are accurate.

If Greaney says that the numbers in my SWR calculator are right, he is saying that the numbers in his SWR study are wrong. Perhaps he feels that it would be dishonest of him to say that.

So what do we do?

You say that going beyond the facts is “making up stories.” But one must go beyond the facts to offer investing advice. How the facts are organized makes a huge difference. Greaney and I organize the facts in very different ways.

Do I have the right to organize the facts in the manner in which I believe they should be organized and report on the conclusions that follow from that method of organization at every discussion board and blog on the internet or do I not possess that right, in your assessment?

I say that I possess that right. I’ll go further. I say that I possess a DUTY to INSIST on recognition of that right.

What say you?

Rob

“Bogle Plants the Idea in People’s Heads That He Is a Research-Based Guy. But When It Comes Time to Give Advice on the Most Important and Practical Investing Question of Them All, He Pulls a Number Out of His Backside. The 15% Number Is the Number Used By a Person Who Has Acknowledged Internally That a Pure Buy-and-Hold Belief Cannot Be Justified But Who Is Not Yet Willing to Travel the Distance One Needs to Travel to Believe in Valuation-Informed Indexing.”

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

Another lesson in basic, civilized behavior: Others’ opinions about asset allocation or the future are not errors.

There are responsibilities that come with being a person of Bogle’s stature, Anonymous. I have had people tell me that they find everything that I say about stock investing to be 100 percent sensible and compelling. Yet they say that there is one reason why they are not going to become Valuation-Informed Indexers. It is their retirement money at stake; they need to be careful. And they do not hear the people widely recognized as experts in this field saying the same things that I am saying. Investing experts have influence on people’s behavior!

Bogle says that there is never a need for an investor to lower his stock allocation by more than 15 percent no matter how high valuations go. The data says that a change of 60 percentage points is required to keep one’s risk profile roughly constant. The two numbers are nowhere even remotely in the same neighborhood. They cannot possibly both be right. One is right and one is wrong. We need to know which number is right and which number is wrong.

I looked at research and data to get my number.

Did Bogle?

All signs are that he did not.

Yes, you are right that an opinion is not an error. We agree. But Bogle is playing an irresponsible and dangerous game here. Bogle fills his books and speeches and articles with references to data. He promotes Buy-and-Hold as a research-based strategy. People have come to believe that, when Bogle speaks, they are being exposed to a viewpoint formed by making reference to research and data. If Bogle is not basing his statement re the 15 percent number on research and data, he is misleading millions of people about a very important matter in a very big way.

This must stop.

These sorts of misleading statements are what caused the economic crisis. People have common sense. Our common sense tells us that the sorts of gains we saw during the out-of-control bull market are not real. So people intuitively know to lower their stock allocations as valuations rise. People intuitively know to follow Valuation-Informed Indexing strategies and not Buy-and-Hold strategies.

But there are two problems.

One, while we do all have common sense, we ALSO all possess a Get Rich Quick urge. We WANT to believe that those bull-market gains are real. So we are vulnerable to any con man who comes along and tries to plant the idea in our heads that this might be the first time in history when lowering our stock allocation by only 15 percentage points during a wild bull might work out in the long run.

And, two, the Buy-and-Holders don’t distinguish when they are using data and when they are just pulling numbers out of their backsides. Bogle plants the idea in people’s heads that he is a research-based guy by citing data and research over and over and over again. But when it comes time to give advice on the most important and most practical investing question of them all — What should my stock allocation be? — all the research and the data goes out the window and he pulls a number nowhere even remotely in the same neighborhood as the research-based number out of his backside.

Is that financial fraud? Is that 500 times worse than anything Bernie Madoff ever did?

I’ll say this much for sure. Millions of middle-class investors are going to have a very different reaction to that question following the next price crash than they have today. Today, they see themselves as winners for using the number pulled out of Bogle’s backside. Following the crash, they are going to see that they destroyed their lives by thinking that loony tunes number was reasonable and they are going to be looking for someone to hang from a tree for having encouraged them to use it.

Who is Jack’s true friend? The fellow imploring him to come clean today? Or the people telling him to continue marching down the dark path he got on the first time he failed to take action re the Lindauer matter?

That 15 percent number had to come from somewhere, Anonymous. Bogle didn’t have a dream in which some Martian held up a sign with the number “15? written on it. Where the heck did that crazy number come from?

I’ll tell you what I think.

I think that Bogle once really believed in Buy-and-Hold. Before Shiller published his “revolutionary” (his word) research in 1981, there was good reason to do so. So be believed.

Then Shiller published the revolutionary research. If people were angels, Bogle would have dropped the Buy-and-Hold nonsense then. But people are not angels. People have a hard time accepting big changes. So Bogle dismissed Shiller’s breakthrough findings. He told himself that those findings didn’t really matter that much, that Buy-and-Hold worked just fine So he continued advocating it.

The long bull market encouraged him to continue living in that world of illusion. There weren’t too many people demanding changes in Buy-and-Hold. It wasn’t just in Bogle’s dream world that Buy-and-Hold was working just fine. For all appearances, Buy-and-Hold was working just fine in the real world too.

But Bogle’s conscience nagged him. It didn’t add up. We all consider price with every purchase of every other good and service we buy. It seemed so odd that with stocks it worked in just the opposite way! Bogle’s doubts caused a deep defensiveness to kick in. He didn’t like the feelings he experienced when he entertained doubts. So he made sure to associate only with True Believers. He stopped reading articles and books that cast doubt on all his wonderful insights. He grew to enjoy the abusive tactics employed by the sorts of individuals who have put up posts in “defense” of Mel Lindauer and John Greaney. Hate was good! It was through hate that you persuaded people to ignore the awful findings of the last 33 years of peer-reviewed research and persuaded them to continue following that great, proven Buy-and-Hold strategy, the one used by the truly successful people!

That’s where we are today, Anonymous.

Bogle made a mistake. There was no dishonor in that. LOTS of good and smart people made that mistake.

But now he has gone way past making a mistake. Now he is COVERING UP the mistake.

That is a dangerous business. When the tactics that have been used by the Buy-and-Holder for the past 12 years are employed, we are talking about financial fraud. Perhaps Jack will not be charged with this crime. We don’t know all the circumstances involved in his decision to work with you Goons. He will be asked questions under oath and perhaps there will be charges and perhaps there will not be charges. I think it is fair to say that as an objective matter the elements of the felony are all at least arguably present. That alone is pretty darn sick stuff. Bogle is a hero to a lot of people (Rob Bennett first among them!). To learn that there is even a hint of criminal activity associated with his name is to learn a profoundly sad reality. Yet here we are.

Why does he do this? Why does our mutual friend Jack Bogle continue to use that loony tunes 15 percent number when he knows that the research-based number is a number nowhere even remotely in the same neighborhood?

Because he is a human.

Because he hurts. Because his ego is invested in Buy-and-Hold. Because he cannot bear to think that his mistakes have caused millions of failed retirements. Because he cannot bear to accept that it was his continued promotion of the purest Get Rich Quick strategy ever concocted by the human mind that was the primary cause of our economic crisis. Because he hurt so many of his friends in so serious way.

He hurts, Anonymous. And the only way he can stop the hurting is by coming clean. And you encourage him NOT to come clean with your behavior. So you EXTEND Jack’s pain. Some friend, huh?

Everybody is entitled to an opinion. If Jack were to say “I don’t know why, I just have this funny feeling that no one should ever change his stock allocation by more than 15 percent,” that would of course be fine. But he doesn’t present the case in that way. He talks data, data, data, research, research, research and then he puts forward this loony tunes 15 percent number. And the millions of people hearing it and putting their trust in him and forming their retirement plans in accord with what Jack says are thinking that there is some sort of data or research that supports this 15 percent number. And that’s a lie. A lie that is in the process of destroying millions of middle-class lives.

This is not a joke, Anonymous. The destruction of millions of middle-class lives is a serious business.

You say that no one is a pure believer in Buy-and-Hold and that everyone accepts the reality that valuations matter. That’s to a large extent true. If Bogle had a pure belief in Buy-and-Hold, his number would be 0 percent, not 15 percent. Fama would say 0 percent. The 0 percent number at least makes sense. If the market were efficient, there would never be any need to change one’s stock allocation AT ALL. So you are right that Bogle is not a pure believer and that his advice reflects a belief that valuations matter at least a little.

But where the heck does that 15 percent number come from? Why didn’t he look at the data? Why didn’t he look at the research? Why does he just make things up?

He is trying to combine two beliefs that are impossible to reconcile. Yes, he accepts that valuations matter. He feels that he would sound like a crazy person to say otherwise. So he acknowledges that much . But he doesn’t want to give up on Buy-and-Hold. He is fighting hard to hold on to most of something he has long loved. So he gives up a little bit of his Buy-and-Hold beliefs while retaining a belief for the most part. The 15 percent number is the number used by a person who has acknowledged internally that a pure Buy-and-Hold belief cannot be justified but who is not yet willing to travel the distance one needs to travel to believe in Valuation-Informed Indexing, the model rooted in a belief in Shiller’s revolutionary findings of 1981.

It’s obviously not just Bogle that I am talking about here. I am talking about you. And I am talking about Mike Piper. And I am talking about Scott Burns. And I am talking about Wade Pfau. And on and on and on and on.

That’s where we are today as a society. Valuations matter. Pretty much all of us sign on to that one. But they don’t matter nearly as much as Rob Bennett says they do. That’s ALSO part of the currently prevailing belief. The prevailing belief is not dogmatic in saying that valuations have no effect. But it is dogmatic in saying that the effect is not as great as the data and research indicates. So we must stop people from exploring the data and the research.

That’s where things stand, Anonymous. My aim is to change things. I think change is needed. For reasons that should be obvious to any halfway reasonable person.

It hurts the feelings of Buy-and-Holders for them to hear the arguments for why they have made a terrible mistake. I get that loud and clear.

That is not an argument for not permitting discussion of the research findings of the past 33 years. It is an argument that goes in the other direction. We should all want to relieve the pain of the Buy-and-Holders. We do that not by ignoring the research but by exploring its implications in great depth.

Bogle has a right to his opinion.

He also has a RESPONSIBILITY to tell us all what that opinion is based on.

And all of his friends have a responsibility as friends of his to INSIST that he recognize that responsibility before he gets himself in even deeper trouble.

That’s my sincere take re these terribly important matters, Anonymous.

I wish you all good things.

Rob

“We Have Seen Huge Advances in Computer Technology Over the Past 33 Years. If the Computer Technology Field Were As Resistant to Change As the Investing Advice Field, We Would All Still Be Using Typewriters and Buying Huge Quantities of White-Out. The Wall Street Con Men Want to Protect Their Turf.”

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

Rob, Rephrased another way, many of us do not agree with your statements and have given you the reason why. However, you are not banned because of this disagreements. Instead, you are banned because of your behavior. Many have told you time after time as to your behavior issues and you just ignore it. You feel as if you should be able to act any way you want on a board, despite the negative impact to the community. A board is a place to have a discussion and not to be there for the sole purpose of carrying out the Rob Bennett agenda.

The Rob Bennett Agenda is the future of investing analysis, Anonymous.Valuation-Informed Indexing reduces the risk of stock investing by 70 percent while letting the investors who employ the strategy retire five to ten years sooner than they ever imagined possible back in the days in which they believed in Buy-and-Hold. VII is the first true research-based investing strategy. It puts an end to economic crises (every economic crises we have suffered in 140 years followed a time of insane overvaluation, which is not possible in a world in which most investors follow VII strategies). VII is smart, safe, simple investing. We know from the positive reactions we have seen from thousands of posters during the first 12 years of our discussions that there are millions of middle-class people who want to learn more about the concept. I am going to see to it that they are able to do so.I am not asking your permission. I am telling you how it is going to be.

We have seen amazing advances in computer technology over the past 33 years. If the computer technology field were as resistant to change as the investing advice field, we would all still be using typewriters and buying huge quantities of white-out. The Wall Street Con Men don’t want us to move forward. They want to protect their turf. They have power and money and connections. So they have grown accustomed to bullying people into letting them have their way. When the internet came on the scene, they saw that their ability to block investors from learning what they need to learn was threatened and so they turned to Internet Goon Squads to do their dirty work.

Sorry, you lose.

No sale.

Find some other country in which to peddle your Get Rich Quick garbage.

In this country, my country, we are moving on.

Every investor in this country is going to learn what the last 33 years of peer-reviewed research says about what works in stock investing. Count it. I am going to see to it. The decision has been made and it is not going to be reversed. No apologies whatsoever.

You can stand in the way. You can try to stop me. I cannot force you to go along.

But please understand that those who stand in the path of the History Train will be run over.

It’s nothing personal.

But we are not a Goon nation. And we are not going to permit you Goons to determine what we can talk about on the internet.

Put forward b.s. and you will be called out on your b.s.

Cause people to lose money and you will be sued for financial damages.

Engage in financial fraud and you will go to prison.

Like that.

We adopted the civil and criminal laws of this nation to protect ourselves from people like you and those laws will be enforced. The way it is.

We have an educational task that needs to be completed before we can persuade prosecutors to file the papers that they need to file. That will be addressed. Things will speed up considerably following the next price crash. I am sure.

That’s where things stand.

You are right that I have behavior issues. I am honest. And Buy-and-Hold is the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind. So honestly is a not a behavioral trait that can be tolerated by either the Wall Street Con Men or by the Internet Goons Squads who do their dirty work.

So be it.

The difference is that my behavior is supported by the laws of the United States of America and yours is not.

So we will see as time passes who has fell and who’s been left behind.

I naturally wish you the best of luck in all your future endeavors in any event, my old friend.

Rob

“The Problem Today Is That the Buy-and-Holders Will Not Permit the Effect of Valuation To Be Quantified. Most People Have NO IDEA How Big the Valuations Effect Is. The Perfect Illustration of This Is Bogle’s Claim That There Is No Need for Investors to Lower Their Stock Allocations By More Than 15 Percentage Points Even When Valuation Are Insanely High. That’s Not Even Close to Being Right.”

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

You don’t get to force people to change studies they may have done, even if you feel a variable could be included that wasn’t.

That’s not how it works in any field of endeavor other than stock investing, Anonymous.

If the tobacco companies tried putting out a study showing that smoking four packs of cigarettes a day adds ten years to life expectancy, you would see an uproar that would force them to acknowledge that the study is pure b.s.

In future days, that’s how it will work in the investing advice field too. Humans possess a deep need to evidence ethical behavior. That’s true of people working in this field as much as it is of people working in other fields.

In fact, I believe that one of the reasons why the reactions we have seen from you Goons are so intense is that it causes you pain NOT to act ethically. You don’t want to abandon Buy-and-Hold. And you have no effective response to the 33 years of peer-reviewed research showing that there is zero chance that it could ever work for even a single investor. So you feel that you have no choice but to behave unethically. But you don’t like the idea of people seeing that. So you demand that honest posting on the last three decades of research be banned. I obviously don’t approve of this “solution” to your problem. But I think in fairness it should be said that it shows that there is a desire somewhere deep within you to be seen as ethical. That reality will help us all bring this to a resolution somewhere down the road a bit.

I cannot force anybody to do anything, Anonymous. We certainly agree on that limited point. But I can expose the corruption in a field in which errors in retirement studies become public knowledge and those studies remain uncorrected for 12 years, no? That’s not me, Rob Bennett, forcing something by myself. It is an entire society taking action to demand that one field of human endeavor — the investing advice field — adhere to the same ethical standards as every other field in our society.

That’s a big deal. Once we have investing advisors adhering to the same ethical standards as people who work in every other field, Buy-and-Hold is finished. It’s been hanging on only because the Wall Street Con Men have had enough money and power and influence to make this field an exception to the usual rules for a time. I think it would be fair to say that those days are coming to an end. The house of cards is in the process of toppling to the ground. We are going to see reasonable ethical standards apply in this field.

And you know what? It’s going to be people WITHIN the field who are going to end up leading the effort. I have seen LOTS of evidence of that during the first 12 years. MOST people in this field want to feel free to honor minimal ethical standards. And so that’s how it is going to be.

I hope that, when as a society we bring about that change, you won’t feel that you are being “forced” to correct those darn Old School SWR studies.

And you’ve already agreed with my statement that most folks are just like you – informed about Valuations, and making personal decisions about whether or not to modify their allocations based on them.

I don’t AT ALL agree that people are adequately informed. For people to become informed, we need to permit honest posting on every board and blog on the internet.

I agree that people accept that valuations matter.

The problem today is that the Buy-and-Holders will not permit the effect of valuations to be quantified. Most people have NO IDEA how big the valuations effect is.

The perfect illustration of this is Bogle’s claim that there is no need for investors to lower their stock allocations by more than 15 percentage points even when valuations are insanely high. That’s not even close to being right. There’s never been a more dangerous statement put forward in the history of personal finance. That statement is in the process of causing MILLIONS of people to suffer failed retirements. It has caused a mountain of human misery.

Why don’t journalists call out Old Saint Jack on that statement on a daily basis?

Why don’t policymakers give speeches demanding that he either offer research-based support for a statement that is destroying our economic system or stop making the foolish and irresponsible statement?

Why don’t academic researchers declare their freedom from the dictates of the Buy-and-Hold Mafia by publishing peer-reviewed study after peer-reviewed study showing the reality that a percentage change of 60 percent is needed when prices reach insanely dangerous levels?

They are all afraid.

That’s all.

And they are ashamed of being afraid.

So they tell themselves that this is not such a big deal, that we will somehow struggle along with Big Shots like Bogle offering loony tune numbers that he pulled out of his backside.

But we won’t. Bogle HURTS people by offering loony tune numbers that he pulled out of his backside.

And he hurts HIMSELF too.

We will work up the courage to react appropriately to such dangerous claims. Because as a society we have no other realistic options.

And then you will see Rob Bennett doing everything in his power to help people understand WHY my good friend Jack behaved so poorly for so long a time. Because we must have healing to get to all the exciting stuff on the other side of The Big Black Mountain.

Before the healing comes the truth telling. That’s the priority today. But healing will be a priority in Stage Two of this process.

At any rate, people are NOT informed. People are afraid. People are ashamed. And they are afraid and ashamed because they are NOT informed. Their common sense tells them that valuations MUST matter. But they have for 33 years not been able to bring their intellects into alignment with their common sense because the Buy-and-Holders have been so brutal in their use of intimidation tactics to keep the findings of the last 33 years of peer-reviewed research covered up.

People WILL become informed. That’s my “agenda,” as you call it.

It’s going to happen. It is well on its way to happening. We have done amazing things over the first 12 years of our discussions. But it is not time to declare victory just yet. Not every battle has been won as of this morning.

Give it time.

My best wishes to you, old friend.

Rob

“Whenever There Is a Huge Advance in Human Knowledge, We Have Lots of People Believing in the Same WRONG Thing. There Is Not One Way in Which Buy-and-Hold Changed As a Result of Shiller’s “Revolutionary” (His Word) Findings.”

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

So basically the difference is that he doesn’t believe in a global conspiracy that somehow subconsciously acts in a coordinated way

If you can put forward a better explanation of the realities that have appeared before us, I would sure like to hear it, Laugh.

Greaney’s retirement study does not contain a valuations adjustment. That’s a stone cold fact. So the study obviously gets the SWR number wildly wrong.

Why did no one point this out until the morning of May 13, 2002? And why do so few object that the study has not been corrected to this day?

We should all want to know the answers to these questions.

There are millions of people affected by this. So we ought to be able to agree that it would in ordinary circumstances be impossible to keep the errors in the Old School SWR studies covered up this long. Yet the reality remains that they have not been corrected to this day.

How do you explain this?

Yes, there is a sort of conspiracy. All people who have either advocated Buy-and-Hold strategies or followed Buy-and-Hold strategies feel emotional pain in coming to terms with the mistake they made. They have delayed their retirements by many years. They have hurt their friends. They have been taken for fools. It hurts to accept these realities. So they rationalize away what the research says and try desperately to hang on to their long-discredited beliefs about how stock investing works.

That’s a conspiracy in the sense that lots of people with similar interests are acting in the same way. But it is not a conspiracy in the way that the word is usually used. No one met in a smoke-fiilled room and arranged for people to act in concert.

And the people who are engaging in deceptions and making use of intimidation tactics follow Buy-and-Hold strategies themselves. They are hurting others. BUT THEY ARE ALSO HURTING THEMSELVES. That’s not the way that we generally think of conspiracies playing out. We usually think of conspirators as people acting in their self-interest. This is a case where the conspirators are hurting themselves financially because they cannot bear the emotional pain that follows from learning what the last 33 years of peer-reviewed research tells us about how stock investing works.

That’s “a global conspiracy that somehow acts in a coordinated way.”

You try to make it sound as if this is an incredible event. It IS strange stuff. But it is by no means unprecedented stuff.

I have heard that Galileo was put under house arrest for saying that the earth revolves around the sun rather than the other way around. Would it be fair to say that he lived at a time when there was a global conspiracy to tell people that the sun revolves around the earth that somehow acted in a coordinated way?

It’s easy to get lots of people to act in a coordinated way when lots of people believe the same thing.

And, whenever there is a huge advance in human knowledge, we have lots of people believing in the same WRONG thing.

That’s what we have here. People really believed in Buy-and-Hold for a long time. Many staked their retirements on it. Many staked their careers on it. Many devoted years of their lives writing books about it or developing calculators rooted in a belief in it.

Then this Shiller fellow came along and published peer-reviewed research showing them that they were wrong. Not by a little bit. Shiller showed that the Buy-and-Hold concept is the OPPOSITE of what works. His research implies that exercising price discipline is the key to long-term investing success. Practicing long-term timing is 80 percent of the game. Shiller showed something very, very important. The implications of his insight are so far-reaching that he caused a lot of good and smart people to feel an intense emotional pain.

So, yes, they looked the other way. They patted him on the head and said “Shiller is great” and then returned to what they were doing before he came along as if his research didn’t exist. There is not one way in which Buy-and-Hold changed as a result of Shiller’s “revolutionary” (his word) findings.

The huge bull market aided those who looked the other way. No one was mad at them for doing so because everyone was enjoying the Pretend Gains of the runaway bull. To recognize the import of Shiller’s findings would be to acknowledge that those gains were Pretend. Who needed that? Everyone was “successful.” Everyone was rich. Everyone was having a ball. The Buy-and-Holders had figured it all out and were not to be questioned.

Now we are in the early years of paying the price for looking the other way.

We have intellectually achieved the greatest advance in the history of personal finance over the past 30 years. But anyone who either advocated Buy-and-Hold or followed a Buy-and-Hold strategy does not want the word getting out. They feel shame because of how they have hurt themselves and millions of others. Looking the other way caused an economic crisis. Buy-and-Hold is the lie so huge that it cannot be acknowledged.

Humans don’t like to think that they have been responsible for so much human misery. So they tell themselves stories. They rationalize. They say “Sure, valuations matter, but it is impossible to take advantage of this reality.” It’s a claim that makes zero sense in the logical sphere and that enjoys zero support in the historical data but one that offers some temporary emotional relief to those who have been looking the other way for so long now that they cannot bear the thought of ever acknowledging the obvious (and highly encouraging once you accept them!) truths.

Most of us are engaged in a “global conspiracy that somehow unconsciously acts in a coordinated way.” That’s because most of us are ignorant of the realities. That’s because most of us continue to look the other way. That’s because most of us DON’T WANT TO KNOW how stock investing works in the real world.

None of that is criminal behavior. It’s sad. But human beings have been ignorant of lots of important truths at earlier times in history. It happens. It’s one of those things.

Fortunately, we have means to overcome our ignorance over time. We have discussion boards. We have blogs. We have newspapers. We have magazines. We have studies. We have calculators.

This is where the criminal stuff — my focus nowadays because it must be addressed before we can all enjoy the wonderful blessings that have been bestowed on us as a result of the last 33 years of peer-reviewed research in this field — comes in.

Those who want to continue looking the other way have seen what happens when the truths are spoken in clear and firm and direct and understandable ways. PEOPLE OVERCOME THEIR IGNORANCE. The horror! Something must be done.

That’s where you Goons come in.

Punish people who dare to “cross” the Buy-and-Holders by reporting honestly and accurately what the last 33 years of peer-reviewed research says severely enough and you can stop them from continuing to do so. You can stop others who have similar ideas as well. As the holes in the Buy-and-Hold concept get more and more noticeable, it takes harsher and harsher pubishments to keep the house of cards from collapsing to the ground. But the Wall Street Con Men have lots of money and power and influence and the majority of middle-class investors remain largely ignorant of the realities today. So this remains a viable strategy for keeping people in the dark. Less and less so all the time. But still at least barely viable as of this morning.

I am not playing this stupid game, Laugh.

I am telling.

That’s my job.

That’s what I am going to do.

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

Rob