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

Why would Wall St make much less money on folks buying bonds then they do stocks?

I don’t think that Wall Street has anything against bonds, Laugh.

It’s the super-safe asset classes that Wall Street doesn’t like. They undersell TIPS, they undersell IBonds, they undersell CDs.

Even there, I don’t think the underselling is motivated primarily by financial considerations. I think there may be some financial considerations. But I don’t see them as the driver.

To make sense of this, you have to understand the history.

The Buy-and-Hold Pioneers are heroes of mine. I’ve said that so many times now that I am getting sick of hearing myself say it. They came up with the idea of rooting one’s investing strategy in the findings of the peer-reviewed academic research. That was a profound advance, a magical advance. It is that advance that makes me love the Buy-and-Holders, that makes me feel that I am one of them.

They made a mistake. It was a perfectly understandable mistake but it was a mistake all the same. They came to believe that “Staying the Course” means staying at the same stock allocation rather than staying at the same risk level. For various reasons, the mistake remained uncorrected for a long period of time. Now people feel that it can never be changed! The feeling is — this mistake we made was so terrible that no one may ever talk about it, all discussion of it must be silenced, we won’t look like Big Shot experts if people learn that we once made a mistake. It’s the failure to correct the mistake that I criticize, not the mistake itself.

Now move forward to today.

Stocks are priced for a 65 percent price crash. The typical middle-class person should have something in the neighborhood of 30 percent of his or her money in stocks. The Buy-and-Holders say that something in the neighborhood of 75 percent stocks is “optimal.” So their numbers are wildly off.

You are asking what the financial incentive is for favoring stocks.

One, there is a financial incentive for selling stocks over things like TIPS or IBonds or CDs. The commissions are generally bigger in stocks. Again, I don’t see this as the driver. But it is a reality that applies.

Two, the experts would need to acknowledge their mistake to advocate bigger non-stock allocations. Their pride is at stake. They don’t want to go there. They are afraid of lawsuits if they acknowledge that they have been giving bad advice for many years now. They worry that they will be drummed out of the field if they offer straight talk when so many others are trying to keep the cover-up going. There is all sorts of nasty stuff going on.

Three, Get Rich Quick sells! This is probably the biggest factor. The way to get your clients to do business with you is to get them to like you. Tell them that their phony bull market gains are real and they fall in love with you. Nothing gains you as many brownie points as telling your clients that Buy-and-Hold really can work. It never does. But it sure sounds good to a lot of people to say that it might this time. Telling people that there is one asset class that is always a good choice for the long term is like telling people that there is some system that will always let you win the lottery. It’s pure b.s. There is zero support in the research for such a claim. But it sells like hotcakes.

Four, please don’t forget the obvious — MOST OF THE EXPERTS PROMOTING BUY-AND-HOLD STRATEGIES ARE DOING SO BECAUSE THEY BELIEVE IN THEM. A lot of people would continue to push stocks even if the commissions were LOWER. Stock salesmen are not pure revenue-focused creatures any more than any of the rest of us are pure revenue-focused creatures. Most of us are creatures of habit highly influenced by inertia. Buy-and-Hold has been the dominant strategy in the academic world for a long time. That alone is enough to give it lots of points over strategies that have only been shown to work better by the research of the past three decades.

Wall Street could do JUST FINE promoting Valuation-Informed Indexing. I think in the long run it would do better because we would not see any more financial crises. Financial crises HURT this industry big time.

The move to Valuation-Informed Indexing is in everyone’s interest. It creates all winners and no losers. It shouldn’t be even a tiny bit hard to sell. Logically, promoting a strategy that greatly increases returns while also greatly diminishing risk should be the easiest sell in the world. The problem is that today people who have a long history of promoting Buy-and-Hold are on the defensive. I want to change that. I try to praise the Buy-and-Holders every chance I get to make them less defensive. But the defensiveness is hair-trigger stuff. It is VERY hard to come up with ways to say things that point us to a better future that don’t make the Buy-and-Holders go stark raving nutso.

To a large extent, the industry is doing what it thinks its customers want it to do. If you took a survey, I am sure that most investors would describe Buy-and-Hold as the most responsible strategy. The industry doesn’t want to step in and say: “No, you’re wrong, it’s actually Get Rich Quick garbage, it’s very dangerous stuff we have been pushing so hard all these years.”

I tell that in a funny way to make a point. I don’t dislike the people who work in this industry. I like them. My take is that they are destroying themselves. Yes, their customers like Buy-and-Hold today. But what are they going to think following a 65 percent price crash? The time to deal with that problem is NOW, not after the crash has taken place. People who call themselves “experts” have responsibilities. People who give investing advice should be aware of the last 32 years of peer-reviewed research in their field and should be at least a bit curious about the implications of that research. They make themselves look very bad to the millions of investors who will be looking for someone to hang from a tree by pretending that they are not aware that valuations affect returns and that therefore there is zero chance that a retirement study that does not contain a valuations adjustment could ever get the numbers right. That’s basic stuff, Laugh, and the industry “leaders” in this field have placed themselves very much on the wrong side of the line re that one.

Lots of people in this field understand where things are heading and are making efforts to position themselves for the post-crash period. Kitces is doing that. Bernstein is doing that. Swedroe is doing that. Pfau is doing that. Even Bogle has come out with a good number of statements showing that he understands the dangers of Buy-and-Hold. The trouble is that he doesn’t want to give up all the applause he wins by telling people that their Get Rich Quick fantasies might really some true. So he includes one GRQ statement for every research-based statement and the Get Rich Quickers eat up the GRQ garbage with a fork and spoon while pretending that he never said the research-based stuff. Responsible behavior? Not nearly. But good salesmanship in the short term? The very best!

I hope that helps a bit. The question is a good one.

Rob

 

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

But you expect people to somehow anoint you as a sage when all you’ve done is repeat something that far more capable and far more schooled and far more successful people have said for decades if not centuries.And if THEY could not develop a magic timing scheme that works in today’s (and tomorrow’s) world, what gives you the hubris to think you, and you alone, could do so?

I don’t care if people anoint me as a sage or not. What I care about is that the words that appear next to my name express my sincere beliefs, that they not be lies. If I say that the Old School safe withdrawal rate studies report the SWR accurately, I am telling a lie. So I am not going to say it, no matter how much in the way of intimidation tactics you apply to me.

How is it that I have done something that smarter people who have worked in this field before me have not been able to do?

Many of those people did their work prior to 1981. Shiller’s “revolutionary” findings changed everything.

Many of the people who did work in this field after 1981 had already done work in this field prior to 1981 and had associated themselves with Buy-and-Hold beliefs. Those people were compromised by their pride in discredited belief and by the friendships they formed at times when the research they needed to put the puzzle together had not been available to them.

Many of the people who did work in this field after 1981 and who were not compromised by taking a false pride in earlier, discredited work were intimidated by the brutal intimidation tactics of those who had.

That leaves me, Anonymous.

I never did any work in this field prior to 1981. So I was not compromised by earlier, now-discredited work. I have done my work post-1981, so I have had access to Shiller’s research. And I have refused to be intimidated by the Buy-and-Hold Mafia. I think a big factor there is that I formed personal friendships with many of the people whose lives were destroyed by Greaney’s refusal to correct the errors in his study. None of this is purely theoretical to me. It is a story of human lives being destroyed by the lowest of the low on the internet.

You make it sound as if no one else has been smart enough to see that Buy-and-Hold is a big pile of smelly garbage. There is of course nothing that could be farther from the truth. The very reason why we have seen such abusive behavior from you Goons is that JUST ABOUT EVERYONE sees. Freakin’ Jack Bogle sees it! Bogle is the king of Buy-and-Hold. If the King of Buy-and-Hold sees that Buy-and-Hold is a big pile of smelly garbage, who the heck DOESN’T see it? You Goons obviously see it or you wouldn’t behave the way you do.

The others can be bought off or intimidated into silence. I cannot. Why not? One very obvious factor here is that I am not employed in this field. With Wade Pfau, you can threaten to get him fired from his job and he has to think about what will happen to his two small children if he insists on his right to post honestly. I have never received a penny of income in this field. So there is nothing you can take away from me. So I continue to post honestly despite the threats.

You can threaten bloggers that link to me and try to destroy my efforts to earn a living on the internet. That COULD work. But I’ve got 11 years worth of Post Archives that would ruin me if I were to agree to post dishonestly and 11 years worth of Post Archives that stand to make me a huge sum of money following the next price crash if I resist your demands that I agree to post dishonestly. I don’t think you need an I.Q. of 140 to figure out what is the better play for me in these circumstances.

If Buy-and-Hold hadn’t already been ready to collapse when I came on the scene, I couldn’t have done this. I wouldn’t have been able to find honest comments from people like Bogle and Bernstein and Swedroe and Burns and Kitces and Pfau and on and on and on if people had not already begun positioning themselves for the post-crash years at the time I put forward that famous post of the morning of May 13, 2002. I was born at the right time, you know? I didn’t plan this, I fell into it.

What matters is where we stand. Behind Door Number One is Valuation-Informed Indexing and the greatest period of economic growth ever known in our history. Behind Door Number Two is a continuation of the Campaign of Terror and the onset of the Second Great Depression.

I choose Door Number One. Call me madcap. I have a funny feeling that many millions will be joining me following the next price crash, regardless of your intimidation tactics.

The deal here is that you can join in on all the fun or you can stretch your prison sentence out to the longest possible period of time. Those are the two live options available to you today. I beat you a long, long, long, long time ago. The proper way to put it is that the peer-reviewed academic research beat you, I just reported on it accurately and thereby got picked up by the biggest wave ever seen in the personal finance world. Bogle and the others have given you what you need to stretch out the pain. But no one can stop the first true research-based strategy from burying the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind 30 feet in the ground, where it can do no further harm to humans and other living things.

You want my help, you’ve got it.

You demand as a condition that I post dishonestly on safe withdrawal rates, please look up someone else, I am not the right fellow for the job.

I wish you all good things.

Rob

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

Rob: “Tell the truth of why people with black skin were once not permitted to drink from the same water fountains as people with white skin in 10 words. It cannot be done.”

A: Racism.

(Only needed one word to get the job done, so you can have the other nine budgeted words back, since you love to use words so promiscuously)

Then how did the situation change?

If racism was the only reality, we would still have those laws on the books today.

There was more going on that just racism.

So it is in InvestoWorld today.

Get Rich Quick was always a money-maker for the Wall Street Con Men.

So I could just say “the Wall Street Con Men saw an opportunity to make a buck and that’s why we are in an economic crisis today.”

But that’s not the full truth. It was the Wall Street Con Men who served as the Buy-and-Hold pioneers. It was the Buy-and-Holders who came up with the idea of rooting one’s investing strategies in the peer-reviewed academic research. There wouldn’t be any Valuation-Informed Indexing today if it weren’t for the good work done by the Buy-and-Hold pioneers yesterday. VII is Jack Bogle’s dream-come-true every bit as much as it is Rob Bennett’s dream-come-true.

So, no, ten words is not enough.

If I lie about safe withdrawal rates, we all go down. If I make the Buy-and-Hold pioneers out to be all bad, we will see such social unrest following the next price crash that we will all go down.

My job is to pull us together so that we do NOT all down. I will post honestly on safe withdrawal rates. But I will also point out that it was by reading Jack Bogle’s book that I learned about the errors in the Old School studies. So there must be SOME good buried at the bottom of all this smelly Buy-and-Hold garbage. No?

I will take more than 10 words to tell the story because it takes more than 10 words to tell the story honestly.

My best wishes.

Rob

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

Do you talk to your wife about the future Congressional hearings, civil and criminal trials, and jail sentences for the Goons? If so, what does she say about all of this?

She certainly knows about the Goon phenomenon in a general sense. Rarely do we discuss specifics. She knows that the police came to our house when I called them about the death threats. That gives her the general idea that there are going to be trials at which I will need to testify when this is over, right? But we don’t sit around discussing how much time I will need to spend testifying or whether it was a good idea for me to come forward with a suggestion that I would be willing to settle for $500 million or that sort of thing.

I always tell her about what went on at the Financial Bloggers Conferences when I come back. So she of course knows about my talk this year on “How to Become the Most Hated Blogger on the Internet” and how that was received. I told her about the woman who told me that people sitting near her said that I was “bitter.” When something like that happens, we talk about the human psychology elements of this. On the way back from Midnight Mass, we were talking in the car about my feeling that the best one-word summary of the emotional problem here is “shame,”that people have a hard time standing up to the Goons because on some deep level of consciousness they feel complicit in what has happened, they realize that they have a Goon side to their own personalities and understand that they played a role in causing all of the human misery that has come with the economic crisis and that that makes them not want to think about the implications of Shiller’s research.

The other day at lunch we were talking about something entirely different and my boy Timothy said: “Maybe you really ARE the product of an artificial intelligence project, Dad!” Then he followed that up by observing: “Or maybe you really are on the way to becoming a Saint!” He had read some of the quotes at the “People Are Talking” section of the site and someone at the Early Retirement Forum once said that about my ability never to give in to feelings of anger no matter what tricks you Goons pull. Timothy is interested in programming, so I think that quote tickled him a bit. I thought that incident was very funny.

Does that answer your question, Pink? We certainly talk about the Goon phenomenon. But we certainly do not talk about it to the level of detail at which you and I talk about it here or at Goon Central.

I think it would be fair to say that there is a suggestion in your question that this is all just a little bit too crazy to be true. I certainly agree. But history plays out the way history plays out, you know? Was it not a little too crazy to be true that Nixon kept tapes of his conversations in the Oval Office? Recall that nobody knew that at one time. People were trying to figure out how they would prove the case and they couldn’t come up with anything and then one day out of the blue they learned that he kept tapes of all his conversations, tapes that would obviously offer evidence of conspiracy and obstruction of justice. Do you not think that both sides saw that element of the story as just too crazy to be true?

It was the same with the Clinton/Lewinsky matter. There was a semen stain (which could be tested for DNA) and she saved the dress without having it dry-cleaned. How crazy was that?

History is filled with crazy stuff. That’s just the way it is.

I didn’t come into this thinking that I would be testifying in civil and criminal trials and congressional hearings and receiving settlements of $500 million and seeing my old friends from the Motley Fool board taken off to serve prison sentences and all this sort of thing. It all seems crazy to me too. But there’s nothing more crazy than thinking that I am someday going to agree to post dishonestly re the numbers that my friends use to plan their retirements. Of all the craziness that we have witnessed or will witness in days to come, it is that Goon hope that is the craziest element of the entire saga. So, if you are amazed at the craziness, please take a good long look in the mirror, Sensible. You brought a lot of the craziness on us with your belief that someday you might come up with some act of intimidation that would be scary enough to persuade me to agree to post dishonestly. There was never more than a zero chance of that happening and every post I ever put forward evidenced that reality. But that crazy thought has remained stuck in your head for 11 years now. Now THAT’S crazy.

The obvious reality here is that this thing was waiting to explode before I ever came on the scene. The Buy-and-Hold Mafia was intimidating people who showed an interest in reporting honestly on what the academic research says for 21 years before I put forward the fateful May 13, 2002, post. I didn’t know that. I cannot testify to details of what happened in those earlier years because I was not around. But it is what happened in those earlier years that made all that has happened for the past 11 years so crazy. The Big Shots in this field had been covering up the realities before the internet had been invented. People in the field could be kept in line because this is a high-paying field and the threat of losing their jobs caused a lot of people to engage in a lot of rationalizing of their decisions to keep it zipped about the obvious dangers of Buy-and-Hold strategies.

I wasn’t part of any of that. I wasn’t employed in The Stock-Selling Industry. I was a poster on an internet discussion board, nothing more and nothing less. So I saw nothing even a tiny bit “wrong” about posting honestly. THe hundreds of my fellow community members who told me that I started the most exciting discussion in the history of the Retire Early board saw nothing wrong with it either. But it freaked you Goons out entirely. You knew. Perhaps only on some buried level of consciousness. But you clearly recognized a big-time threat when it appeared before you. So we were off to the races.

Blame it on the internet, you know? The internet discussion board is a powerful new communications medium. The Wall Street Con Men didn’t factor in the power of the internet when they elected to cover up the findings of the last 32 years of peer-reviewed academic research. There was a major hole in their strategy that they didn’t see at the time because it didn’t exist at the time. The internet changed everything.

Anyway, we are where we are.

You can call it crazy that you will be going to prison because you didn’t want people to be able to learn about the implications of Shiller’s ideas when they arrived at internet discussion boards and blogs. It IS crazy. I certainly don’t say different. But you knew that there were laws against financial fraud. You knew that the crime you were committing was a felony. You knew that you were leaving permanent evidence of it in the Post Archives. You contributed to the crazy when you did that. I presume that you persuaded yourself that you would get away with it.

That’s crazy. But that’s an element of crazy that appears in MOST cases of financial fraud. When Madoff created those false documents, he must have believed on some level of consciousness that he would get away with it. No? It was a crazy thing to do. He could have made a lot of money setting up legitimate funds. There was no need for him to do things that stood a good chance of landing him in prison. And he was a smart enough man to know that. But he did the crazy thing anyway. Whachagondo?

I ain’t posting dishionestly on the nunbers my friends use to plan their retirements. Zero chance. Not in 11 years, not in 11 billion years.

That’s not crazy. That’s 100 percent sensible. I signed up at the Retire Early board to HELP people seeking early retirements, not to ruin their lives.

So I didn’t bring the crazy to the table here. I see it play out before me every day and I just do normal, healthy things in response. If people choose to engage in financial fraud on a massive scale, the normal thing to do is to testify honestly in the congressional hearings and civil trials and criminal trials that follow. Don’t put any of that on me, Sensible. I’m not the one who threatened to kill family members of any poster who posted honestly on the SWR topic. That was the other guy. His name is: John Greaney. He’s going to prison too. Perhaps you will be in a cell not too far away from his and you will be able to talk about funny stuff that happened in the old days from behind the bars.

I acknowledge the craziness of the situation. ButI think it would be fair to say that the thing that distinguishes me is that I am the person who has been working his backside off for 11 years now to see that the prison sentences are as limited as possible. My wife knows that. That’s the part that she needs to know and she certainly knows that much.

Guess what?

My good friend Jack Bogle knows too.

And my good friend Bill Bernstein.

And my good friend Larry Swedroe.

And my good friend Scott Burns.

And all my friends at Motley Fool and Early Retirement Forum and Morningstar and Bogleheads Forum and at the Financial Blogger Conferences and on and on and on.

They all want our economic system to survive. They all want our political system to survive.

Yes, they are scared of you and your brutality and your lack of conscience. And, yes, they are even more scared when they see people of great money and power and influence like Old Saint Jack saying things that shouldn’t be said or failing to say things that should be said and thereby empowering you Goons to deceive even more middle-class investors and cause even more financial devastation.

Will they work up the courage to do what their consciences have been telling them for 11 years now they must do following the next price crash, which will likely put us in the Second Great Depression?

You know what I think.

That obviously means a long prison term for you.

Given that reality, what would you say would be the more strange thing for me to do? Would it be more strange for me to keep it zipped and see my friend put in prison without me ever having made an effort to see his prison sentence reduced a bit? Or would it be more strange for me to do the best I could day after day after day even though my efforts to help my old friend out were rejected over and over and over again?

There’s lots of strange stuff going on here, Sensible. But it ain’t me bringing the strange stuff to the table. It is strange of you to feel so burning a hate for the findings of the past 32 years of peer-reviewed academic research that you are willing to go to prison to serve the “cause” of keeping discussion of the implications of that research off the internet. You Goons own the strangeness here.

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

I am confident that my wife would wish you the same if I were to ask her. And most of the millions of middle-class investors whose lives have been destroyed by this massive act of financial fraud would probably do the same. We are the Normals. We don’t think like you Goons. We aim to build up rather than to tear down. That’s why you are the ones who are headed to prison and we are the ones who will be reaping the benefits of the 32 years of peer-reviewed academic research for many, many, many, many years to come following the resolution of the crazy, unfortunate, Goon-inspired segment of the otherwise wonderful and positive and healing and life-affirming saga.

Hang in there, man. There are people who care about what happens to you even when your head is so filled with confusion and anger and envy and shame and regret that you are no longer capable of doing so.

Rob

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

Why do you focus so much on the “Buy and Hold Mafia” here at your own blog? It seems you choose to post about the “goons” pretty much every day rather than using your own blog to post about your own theories.

I focus on the Buy-and-Hold Mafia and our failure as a society to shut it down because that story is the biggest political and economic story of any of our lifetimes, Sensible.

We are the luckiest generation of investors that ever lived. We are the first generation of investors that has available to it the opportunity to reduce the risk of stock investing by 70 percent while increasing returns enough to be able to retire five to ten years earlier than we ever imagined possible in the Buy-and-Hold years.

Have you ever heard more wonderful news?

That news is wonderful for Democrats as well as Republicans. It is wonderful for women as well as men. It is wonderful for Christians as well as atheists. It is wonderful for blacks as well as whites. It is wonderful for lovers or jazz as well as for lover of rock. It is wonderful for the young as well as for the old. It is wonderful for Buy-and-Holders as well as for Valuation-Informed Indexers. It is wonderful for Goons as well as for humans. It is wonderful for haters as well as for lovers.

So the job is to get this wonderful news out before people.

One thing stands in our way.

The Buy-and-Hold Mafia. There are a number of people who made names for themselves promoting the pure Get Rich Quick approach and now that they have ruined millions of middle-class lives by doing so they want us all to agree to go along with their 11-year cover-up. It’s a terrible mistake to do so. Those who commit acts of financial fraud in support of the cover-up will be going to prison following the next price crash. Huh? When you find yourself promoting a strategy with so little support in the academic research that the only way it’s defenders can think of to “defend” it is to engage in criminal acts, I think it is fair to say that it is time to question the merit of that particular strategy.

And so thousands and thousands of people have done. We had hundreds expressing a desire for honest posting at Motley Fool. We had hundreds more expressing a desire for honest posting at Early Retirement Forum. We had hundreds more expressing a desire for honest posting at Morningstar. We have had academic researchers express a desire to be permitted to publish honest research. Even big-name Buy-and-Holders have mixed in honest words along with the smelly Get Rich Quick garbage that has made them so rich at the expense of the millions of middle-class investors who have assumed that these “experts” might be sharing their honest beliefs about how stock investing works with us all.

Bogle was honest enough in his book for me to learn that the Old School safe withdrawal rate studies got the numbers wildly wrong. Bernstein was honest when he said that anyone using one of the Old School studies to plan a real-world retirement would have to be out of his or her mind. Swedroe was honest when he put forward words that caused Lindauer to expel him from the Bogleheads Forum. Burns was honest when he said that I was right about safe withdrawal rates. Pfau was honest when he wrote to the authors of the Trinity study saying that they should correct the errors in their study before it caused even more failed retirements.

But all of these people want to continue making a buck by pretending to be investing “experts.” And all of these people know what the Buy-and-Hold Mafia will do to them if they dare to offer honest investing advice, advice consistent with the 32 years of peer-reviewed academic research showing that there is precisely zero chance that a Buy-and-Hold “strategy” could ever work for a single long-term investor.

What to do, what to do?

I could focus on the intellectual case, which every person even slightly knowledgeable in this field already understands on at least one level of consciousness.

Or I could focus on the Buy-and-Hold Mafia, which is the force that stops Wade Pfau and Larry Swedroe and Bill Bernstein and Jack Bogle and Scott Burns and all the others from sharing with us what they truly believe and thereby helping us all to become more effective investors rather than encouraging our most sick and twisted Get Rich Quick/Buy-and-Hold fantasies.

I think I’ll continue to focus on the role played by the Buy-and-Hold Mafia, Sensible.

I think that might be where the leverage is.

I think we might be able to bring this economic crisis to an end within six months of the day that Jack Bogle gives his “I Was Wrong” speech, thereby opening the way for thousands of “experts” to start posting their honest views rather than the smelly Get Rich Quick garbage that has come to pass for “expert investing advice” during the Buy-and-Hold Era.

Just another one of those crazy hunches that I have been known to experience from time to time.

Please take good care.

Rob