A Rich Life

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

“I Put Up a Post Reporting on the Errors in the Old School Safe Withdrawal Rate Studies Many Years Before Any of the ‘Experts’ in This Field Had Discovered Them”

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Set forth below is the text of a comment that I put to an article that my friend Academic Researcher Wade Pfau posted to the Market Watch site:

I am the person who discovered the errors in John Greaney’s safe withdrawal rate study. I put up a post reporting on them at a Motley Fool board that we posted at together on the morning of May 13, 2002, many years before any of the experts in this field were saying that it is not possible to calculate the safe withdrawal rate accurately without taking into account the valuation level that applies on the day the retirement begins.

A fantastic discussion followed in which hundreds of us learned some amazing things about how stock investing works. Unfortunately, John and some others did not want the learning experience to continue and engaged in abusive posting tactics to destroy the board. The comments of hundreds of our fellow community members who wanted this learning experience to continue are detailed in this article:

http://www.passionsaving.com/investing-discussion-boards.html

Wade is familier with this history. I have discussed different aspects of it with him in great depth on numerous occasions.

Stock investing is an intensely emotional endeavor. It is not possible to make sense of any element of the stock investing project without taking the effect of investor emotions on stock prices into account. The P/E10 metric has been shown in research to be the best tool for doing this. There was a time when we didn’t know this but that was 30 years ago. Shiller showed in research published in 1981 that valuations (emotions) must always be considered.

We will not get the SWR (or retirement planning in general) right until we work up the courage to acknowledge that investing is not strictly a numbers game. This is a numbers plus emotions game. P/E10 is the metric that permits us to take valuations into account. It is my strongly held belief that valuation-informed retirement planning strategies are the future.

Rob

“There Is an Unspoken Code in the Finance Industry That You Don’t Call Out a Fellow Investing Advisor Who Is Talking Nonsense”

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Set forth below is the text of an answer that I posted to the Quora site to the question “Why do so many people trust stock analysts, investment banks or big audit firms when their conflicts of interest are obvious and they’re involved in fruad scandals all the time?”:

Twelve reasons:

1) Even the worst of these people mix in lots of true stuff with the false stuff and people are fooled by the true stuff into thinking they are dealing straight with them;

2) The best of these people (a not small number — there are many good and smart people working in this field) offer truly wonderful advice without charge and properly inspire confidence in the entire industry by doing so.

3) People are intimidated by investing. They believe they cannot possibly understand it (they are wrong, but this is what many believe). So they feel they have no choice but to place their trust in “experts”;

4) The stuff that these people say that is most dangerous is generally stuff that appeals to our Get RIch Quick impulse (we all have one). Our emotions override the voice of common sense telling us to be wary;

5) We are still in the early days of our discovery of what really works in stock investing. So there is no one who today can with a high level of confidence offer truly sound advice. So long as that remains the case, the stuff that the bad guys put out will sound at least plausible;

6) Stock market prices correct only over long periods of time. Stocks have been dangerous since early 1996. But the market performed amazingly well in 1996, 1997, 1998 and 1999. People who stuck with high stock allocations at a time when that was a very bad idea received lots of short-term positive feedback for doing so;

7) The checks and balances that help us in many other areas of life endeavor do not work well in this area. In politics, we count on the Democrats to tell us when the Republicans are playing games and on the Republicans to tell us when the Democrats are playing games. In stock investing, there is no other side. Bull markets last for years and during those years everybody profits from pretending that the bull market gains are real. So we hear all one side of the story for many years and then all the other side of the story for many years (after the bull becomes a bear);

8) Journalists don’t do a good job in this area. Journalists who cover politics are skeptical. Journalists who cover investing are intimidated by the subject (journalists tend not to be good with numbers). So they become excessively indebted to their “sources”:

9) Academics don’t do a good job in this area. I have spoken to numerous academics who have told me that they don’t have confidence in the conventional investing advice but that they are too afraid of what would happen to their careers to be willing to speak out or to do “controversial” research. Bull markets create so much imaginary money that they compromise even academics, who are of course supposed to remain independent;

10) Economists don’t do a good job in this area. The conventional investing advice is rooted in long-discredited economic theories that have hung around because lots of rich and powerful people have built careers rooted in a widespread belief in those theories. These people oppose advances that would benefit millions for self-interested reasons (of which they are probably not fully self-aware);

11) Cognitive dissonance is a powerful force and an exceedingly counter-intuitive force. Does an alcoholic know that he is ruining his life? He does or else he would not be so defensive when asked if he has a problem. But he also doesn’t or else he would take action. Humans are rationalizers. We LOVE investing experts who support our most self-destructive choices because we want to believe in those choices and we are desperate to hear seemingly logical defenses of them; and

12) The industry sticks together. There is an unspoken code in this field that you don’t call out a fellow investing advisor who is talking nonsense. The payoff of course is that no one calls you out either. The result for the investor is that he sees people talking what seems to be nonsense and no one calling them out and he concludes that he must be the one who doesn’t fully understand things. We don’t rely on our b.s. meters in the investing field because the normal rules of checking things out generally do not work.

“People Fear What a John Bogle, With All His Connections and Influence and Money, Can Do to Them If They ‘Cross’ Him…Only Jack Himself Can Change the Public Perception That Has Grown Over the Past 10 Years That He Is Ethically Compromised.”

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Set forth below is the text of a post that I recently put to the Goon Central board:

do you really think any reputable university would pay any heed to anything anonymous individuals we’re saying about one of their employees? Wade didn’t say that he thought that the officials at his University would necessarily believe everything that you Goons said. He said that he was concerned that his career would be done harm all the same because they just wouldn’t like the controversy and they wouldn’t like having to deal with the crazy situation. Since it was his work creating the problem, he would be punished.Yes, I find that believable. I once compared Greaney’s behavior threatening a woman at Motley Fool to the behavior of a rapist. The others at the board wanted to help their friend but they didn’t want to report Greaney. Why? It was for the same reason that many women don’t want to report rapes. There are intense social pressures not to do so. Rape is such a horrible crime that all in society affected by it are ashamed about what happened. So we look to blame the victim — she must have done something to bring this on. Wade was afraid that he would be blamed for having brought on the smear campaigns against him. There are Buy-and-Holders (and perhaps even some Valuation-Informed Indexers) who would have said: “Wade must have done something.” I don’t think Wade is entirely wrong about that.

It was not solely the threats made by the Goons that caused Wade to flip. Six other factors are: (1) the lack of a positive reaction to his research by the majority of posters at Bogleheads; (2) the charges by Mel Linduaer that he had engaged in unethical research practices and the failure of other community members to stand up to Mel; (3) the feelings of envy that Wade knew he would inspire in his peers if he were put up for a Nobel prize at his age; (4) the failure of Bogle to speak up about Mel’s attacks and about the threats made by the Greaney Goons; (5) Wade’s experiences seeing what had happened to other Valuation-Informed Indexers, including myself, and the intense, burning hate that had been directed at them by Buy-and-Holders; and (6) Wade’s lack of understanding of many aspects of the Valuation-Informed Indexing model.

It was the combined effect of all these factors that caused the flip. The threats were the trigger and the threats tell the most compelling story. It is amazing to hear that such threats were made in public and that Wade did not call the police when they were made. It is a compelling part of the story and the threat element of the story suggests the other elements because Wade’s failure to call the police informs the listener that something exceedingly odd is going on.

You ask whether what the Goons did could have mattered. He flipped, didn’t he? And Shiller to this day holds back on telling us all he knows about stock investing, doesn’t he? And the bans at the 15 boards and blogs remain in place to this day, don’t they? And Mel Lindauer and John Greaney retain posting rights to this day, don’t they? And the economic crisis continues to this day, doesn’t it? And there are still people to this day who recommend Buy-and-Hold strategies, are there not? And the Old School safe withdrawal rate studies remain uncorrected, do they not? And Wade now buries the valuation question in the research he publishes so that it will not attract too much attention or controversy, does he not?

Yes, what the Goons do matters.

Not because of the inherent power of the Goons. The Goons have little inherent power. If Bogle spoke up about Lindauer when I sent my first e-mail to him, there obviously would never have been any threats made against Wade. But Bogle didn’t speak up, did he? That’s the story here.

When Bogle speaks up, it is over. For so long as Bogle fails to speak up, his silence is interpreted by millions of people as an implicit endorsement of the Goon behavior. People trust Bogle and the other experts in this field. They need to see Bogle and the other experts take action to feel confident that what their common sense tells them is so really is so. They need to see Bogle take action against the Goons to understand and accept that the rules of social intercourse that apply in every other area of human endeavor apply in the investing realm as well.

Bogle doesn’t make death threats himself. But Bogle associates with people who make death threats and fails to speak up about it. That’s the problem. That’s what needs to change. That’s what gives the Goons the power they possess today. When Bogle speaks up, all the rest of us will feel comfortable speaking up. When Bogle speaks up, the fever will break and we will all make it together to the other side of The Big Black Mountain and a thing that has brought us a lot of bad over the course of 10 years will begin very quickly bringing us a lot of good and will continue doing so for a long, long time.

Bogle needs to call out Mel Linduaer and John Greaney in the way that I have called out Mel Linduaer and John Greaney. It doesn’t matter much what Bogle says about Valuation-Informed Indexing. He needs to behave re the Lindauer/Greaney matter in the manner in which Arnott said he has always behaved in the presence of Arnott. He can disagree on substance. He must act like a gentleman on process questions. He must come out strongly in opposition to death threats and defamation and board bannings and threats to get academic researchers fired from their jobs. When he does that, the substance questions will take care of themselves.

We can handle the substance questions so long as normal process rules apply. We cannot handle Jack Bogle attending functions with people who have put up posts in “defense” of Mel Linduaer and John Greaney and saying nothing about their behavior. That failure to speak up sends a signal that imprisons us all. It is so far outside of our social norms that we cannot process it. People fear what a John Bogle, with all his connections and influence and money, can do to them if they “cross” him. People need to know in no uncertain terms that Bogle is on the side of those who want the sorts of individuals who have put up posts in “defense” of Lindauer and Greaney serving prison terms rather than posting on our boards. Only Jack himself can change the public perception that has grown over the past 10 years that he is ethically compromised re this matter because of his own feelings of personal pride over having developed the Buy-and-Hold concept.

Yes, the Goons matter. They shouldn’t, that’s certainly fair to say. But today they do. Because people who do matter have failed to disassociate themselves from the Goons in the matter in which they would if we were talking about any subject other than the errors that were made in the development of the Buy-and-Hold concept (because all the research needed to get it 100 percent right was not available at the time the concept was initially formulated).

Rob

“If You Run Into Someone Who You Think Might Have an Interest in Valuation-Informed Indexing, Share the E-Mail With Him. You Don’t Even Need to Endorse It, Just Pass the Information Along. That’s How We Will Turn This Thing Around.”

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I’ve been sending e-mails to various people letting them know about my article describing the intimidation tactics used by Buy-and-Holders to stop Academic Research Wade Pfau from publishing further research showing the superiority of Valuation-Informed Indexing investing strategies over Buy-and-Hold strategies. University of New Hampshire Law Professor Tom Field responded: “You seem to be a class act, Rob, but I’m not sure of the sense in which you want to pull me in.” The text of my reply is set forth below:

Tom:

Thanks for your exceedingly kind words.

There is no particular way in which I am trying to pull you in. It’s perfectly fine with me if you just take in the information, conclude that it is “interesting” in some way, and move on with your life. That’s how the vast majority of the people who receive the e-mail are responding. In fact, the vast majority do not go to the trouble to send such kind words my way. So you have provided help by lifting my spirits a bit. That’s real. That counts.

The entire situation is so “out there” that almost no one can believe the plainly stated facts. The Buy-and-Holders did a wonderful thing. They turned investing analysis from guesswork into a scientific enterprise. Our free market economic system (and all those of us trying to make a living within it!) is going to benefit in huge ways in days to come as a result of what people like John Bogle and Eugene Fama and Burton Malkiel and all these others did. That’s the good news. It’s important that everyone keep the good news foremost in mind when trying to make sense of all this.

The bad news is that the people who developed Buy-and-Hold made a  mistake. They made it for perfectly understandable reasons. The research they needed to get everything right was not available to them at the time they did the development work. So they got one important thing wrong while getting lots of other important things right for the first time anyone got these things right. Then Shiller published his research filling us in on the important thing they got wrong.

If only he had done this 10 years earlier we would all be living in an economic Garden of Paradise today!  Unfortunately, lots of people had already staked their careers on the accuracy of the Buy-and-Hold Model and millions of dollars had been spent promoting it. So a decision was made (not formally and never publicly articulated) to pay lip service to Shiller’s findings, to acknowledge that he had done something but to pretend that what he had done was not a big deal and could be ignored for practical purposes.

In 2008 that unfortunate call caught up with us. We now are in an economic crisis as a result and, in the event that Shiller is right (there is today a mountain of evidence showing that he is), the crisis will become the Second Great Depression over the course of the next few years. There is obviously not one person alive who wants to see that happen. But there are also very few who dare to give voice to the truth of the matter in clear and firm and bold and understandable and uncompromising terms. So we keep drifting downward even though there is not one soul alive who wants to see that happen.

My blog entry from yesterday reporting on Rob Arnott’s reaction to the e-mail tells the story well:

http://arichlife.passionsaving.com/2012/12/11/former-financial-analysts-review-editor-rob-arnott-to-rob-bennett-ive-had-similar-experiences-to-those-you-describe-my-work-has-often-triggered-overt-hostility-from-the-guardians-of-the-status-q/

Rob is a highly influential thought leader in the field. He served as the editor of the Financial Analysts Journal for four years. He reports that he cannot get an article that he co-authored with a Nobel Laureate published in a journal because it discredits the Buy-and-Hold orthodoxy. Even with my ten years of experience with similar realities, I find that one hard to accept. He reports that he knows of young professors who wanted to do honest research on important new ideas and who were warned that their careers would be derailed if they did so. Yikes!

I’ve tried all the normal ways of getting the message out. I built a discussion board that in 2000 was the most important board in the personal finance area available on the internet. We had hundreds of people at that board who wanted to explore these issues. But the Buy-and-Holders just would not permit it. They burned the entire board to the ground. The level of emotional pain that they are experiencing is just off the charts. There’s never been anything like this. The closest analogy I have been able to make is to the way people felt about segregation in the early 1960s. Every single person knew in his or her heart that it was wrong. But few dared to speak out because “that’s just the way it is.” The feeling was — There is nothing that can be done, so why try? And so the problem continued to eat our society alive.

We eventually overcame segregation and we eventually are going to overcome the Get Rich Quick aspect of the Buy-and-Hold concept. It’s going to be people who are going to make the difference. There is going to come a time when the human misery will become so great that people are just going to work up the courage to speak out. Once a number of us do, there will be a tipping point and then we all will speak out and share what we know and there will never be one person who will ever want to return to the dark economic times we are living through today.

Here’s what I ask. Keep this in the back of your mind as you go about your daily affairs. If at some point in your travels, you run into someone who you think might have an interest in this, share the e-mail or a link to my site with him. It might be a journalist. It might be a policymaker. It might be an economist. It might be an investing expert. It might just be an ordinary middle-class person trying to plan for a decent old-age retirement. Just pass the information along. You don’t even need to endorse it, just let the person know that you saw this and that you think that perhaps he or she would want to see it too.

That’s how I believe we will turn this around. We cannot count on the experts re this matter because they are compromised. They are not compromised because they want to be be. They just are caught up in circumstances beyond their control. People have families to feed. People feel that they cannot afford to destroy their careers by being too honest. Everyone is on the same side. There are no two sides to this. So we just need to find some means to gradually spread the word over time and then one day the ones who are holding things back will just wake up in the morning wanting to help move things forward. Then it’s all over! The good stuff is so good that it will make the bad stuff seem insignificant in comparison in not too long a time. This is a positive story!

Anyway, that’s where I am coming from. Please help in whatever way you can and please don’t worry about it at all if there is nothing that occurs to you at this moment. I have confidence that something will occur to enough of us somewhere down the line to get things back on the right track. We will collectively figure out a way to make all of our lives better and to live up to the ideals we all struggle to follow to the best of our abilities.

Thanks also for giving me a reason to structure these thoughts in a way that I hope makes at least a tiny but of sense.

And please enjoy a safe and warm and loving holiday season!

Rob

Programming Note: The blog will return on Wednesday, January 2, 2013. I wish all my internet friends (both the Valuation-Informed Indexers and the Buy-and-Holders!) a peaceful, happy and friend-filled Christmas.

“People Make the Point Made by Rob Arnott About My “Stridency” All the Time. The Majority of People Who Hear My Case Do NOT LIke the Way I Present It.”

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One of the Goons recently characterized Rob Arnott’s observation (directed at me) that “your stridency is unhelpful to your cause,” as “the understatment of the year.” He asked: “From how many sources have you heard some variation of this advice and have chosen to ignore it?” My response, initially set forth in the comments section of a blog entry from last week, is set forth below (my aim in posting the words as a separate blog entry is to highlight them so that they reach the attention of readers who do not review the comments section of the blog entries):

I’m not able to estimate the number, Trebor. It is a big number.

I’ll give you an example that I think makes the case in compelling fashion. John Walter Russell devoted eight years of his life to researching Valuation-Informed Indexing without receiving a dime of compensation in return. John was a personal friend and he thought this stuff was very important. He obviously possessed zero bias against me. Yet I recall a thread at the FIRE board at which he commented (this is a paraphrase): “The Goons like to hold up a red flag to Rob because they know he will never fail to charge.”

John was saying something along the same lines as Rob Arnott, no? John was my partner in the development of the calculators at this site. He was never once banned from a site and I was banned at 15 different places. That’s what Rob was getting at.

I’ll give one more example. Before I was banned from the Early Retirement Forum, there was a community debate on whether I should be banned or not. There was one fellow there who generally agreed with my thinking on investing issues and he made a case that I should not be banned. A post by me responding to a comment made by someone else followed his and, after he read it, he said something to the effect of: “I take it back.”

I get this reaction over and over and over again. Even the Goons say all the time “it’s not what you say, it’s how you say it.” There was a fellow who used to post a lot of comments here — Arty. Arty loved my stuff. But, when I posted the articles about the Wade Pfau matter, Arty said that he was leaving and would not be back. And indeed he has not been back.

I do not agree with what Rob Arnott said. But I acknowledge that there are many people, including a good number of people who see value in my work in this area, who share his view of the matter. People make the general point made by Rob all the time. The majority of people who hear my case do NOT like the way I present it. This has been established beyond any reasonable doubt at this point, in my assessment.

Thanks for taking time out of your day to post this helpful question.

Rob

“Since There Is Only One Person Taking in the Idea When I Send an E-Mail Describing Valuation-Informed Indexing, There Is None of the Negative Group Dynamics That Has Poisoned Discussions So Many Times in the Past”

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I’ve been sending e-mails to various people letting them know about my article on the tactics used by Buy-and-Holders to intimidate Academic Researcher Wade Pfau into not publishing further research showing the superiority of Valuation-Informed Indexing investing strategies over Buy-and-Hold investing strategies. I recently received a response from Brad Borden, a law professor at Brooklyn Law School, saying: “This is interesting. I’m curious, however, to know why you chose to contact me.” My response is set forth below:

Brad:

Thanks for your response.
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There is no particular reason why I contacted you in particular.
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The entire story is very strange. I have been working on this for 10 years. I have had mixed reactions to the work I have done.
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Those who “get it” (a small number in percentage terms) view this as the most important advance ever achieved in the investing field. There are numerous smart and good people who see the implications as being very positive and very far- reaching. Those reactions naturally make it impossible for me to give this up. I want this work to be recognized and to help people live better lives.
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Those who do NOT get it (a high percentage of the population, perhaps 90 percent, and a group that also includes many very smart and very good people) see only limited value here or (in not a small number of  cases) react with hostility.
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The high percentage of indifferent and (especially) hostile reactions has made it impossible for me to spread the word effectively. For example, I built a very large Retire Early discussion-board community at the Motley Fool site. The board was destroyed by arguments over the merits of these ideas. A small group thought these ideas generated the best discussions ever held at the board. A large group preferred to see the entire board destroyed rather than to permit the discussions to continue.
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The short version of all this is — These ideas generate intensely emotional reactions. To spread the ideas, I need to find a way to work around this problem.
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My current effort is to contact all sorts of people by e-mail and to answer any questions they have and to try to gain support that way. Since it is only one person taking in  the idea, there is none of the negative group dynamics that has poisoned discussions so many times in the past. If the people who I win over are as intense in their enthusiasm as some of those I have won over in the past, even a small number of supporters might make a huge difference.
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I am not focusing on one type of person because I have not found any one type of person that is particularly open to hearing about the ideas. Some investing experts love this stuff and some hate it. Some journalists love this stuff and some hate it. Some economists love this stuff and some hate it.
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I fully understand that my explanation sounds odd. This entire matter is very odd. I have never seen anything remotely like it. If the ideas are sound (there is a mountain of evidence that they are, at least in my assessment), it is imperative that I spread the word before more damage is done to our economy through the promotion of the discredited conventional investing ideas. But the normal ways of building support for personal finance ideas (getting experts on board, writing articles, going to blogs, etc.) just do not work for this particular concept. I am trying something different just to see whether the effort bears good fruit or not.
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You don’t possess any particular characteristics that make you a good person to contact other than that you obviously possess a strong intellect and are involved in at least a tangential way with some matters that relate in some way to public policy. If you end up feeling that you learned something, I will of course be 100 percent happy. If you  prefer that I not contact you again, I am of course okay with that. If you ask questions, I will do what I can to respond effectively. If somewhere down the line you become a supporter, I will be thrilled about anything you can do to move the ball forward. I of course understand that that’s an extreme long-shot. My belief is that I only need a  small number of those extreme long-shot bets to come through to make a big positive difference. And I think that in time I will see a small number of these “bets” come through for me.
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Sorry for the long explanation. I feel that you merit as clear an answer as I am able to provide. Please don’t feel any obligation at all to do anything further. The vast majority of those I contact do not respond in any way. You have already made me feel good by saying “this is interesting.” If by any chance you feel a desire to explore any aspect of this in greater depth, certainly feel free to shoot me back a follow-up e-mail with more questions or concerns or reactions or whatever.
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And thanks for giving me an opportunity to work that all out on paper!
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Rob

“I’ve Essentially Promoted Valuation-Informed Indexing in My Work Over the Years, Although I’ve Never Called It That.”

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I’ve been sending e-mails to various people letting them know about the threats used by Buy-and-Holders to intimidate Academic Researcher Wade Pfau into not publishing further research showing the superiority of Valuation-Informed Indexing strategies over Buy-and-Hold strategies. I report below on some of the responses I have received.

1) Dave Landry of www.DaveLandry.com: “Thanks for the article. I think you’re preaching to the choir. A lot of my work centers around the fact that Buy-and-Hold does not work. Keep up the good fight!”

2) Tom Brakke, CFA: I appreciate you tracking me down and sending me those links. I’ll take a look at them. I’ve essentially promoted Valuation-Informed Indexing in my work over the years, although I’ve never called it that. You can see it thematically in an early blog post of mine, from that fateful Fall of 2008 — The Famous Nine Percent.

3) Bob Krumm at www.BobKrumm.com said:” It’s not something I know a lot about, but interesting nonetheless.”

4) Michael Harr, Founder of Walden Advisors, said: “That was a good read. Keep it going.”

5) Catherine McCauliff, a law professor at Seton Hall, said: “I’m afraid I don’t know anyone in my life who plans to retire early. If you meet such a one, send him my way so he can send me some of his extra dollars! Best of luck in rounding up the dreamers.” I responded: “Will do! Thanks for your response, Catherine.”

“My Parents Gave Me My Inheritance With Certain Unspoken Expectations. They Had Values They Instilled In Me As a Boy That They Hoped I Would Follow As An Adult: Honesty, Caring About Others, and Doing Solid Work. If I Were to Post Dishonesty on Safe Withdrawal Rates, I Would Be Dishonoring My Parents.”

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Set forth below are the texts of three comments that I recently posted to the Goon Central board:

Not true, since most of what you have you inherited.
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My father and mother worked very hard for a long number of years for the money I inherited from them, GW. My mother had to leave school after eighth grade to work in a factory so that her family had enough to eat in the Depression. They lived in the row-house they bought (mostly with checks he sent back to her while he was in the service) when he got back from the war until the day they died. They were insanely generous when it came to helping me or my brothers finance our educations (leaving school after eighth grade left a scar on my mother that she addressed by pushing her boys to go much farther — education spending was in a different category than any other kind). The only thing that I would call luxury spending that they ever directed to themselves is the money they used in their old age to play the slots at Atlantic City. I remember as a boy listening to my father negotiate the price of our week-long stay at the Emandee motel in the beach town of Wildwood, N.J. (he would walk if the weekly price wasn’t brought down to $100).

That money meant something to them. They gave that money to me and my brothers as an expression of their love.

They gave that money with certain unspoken expectations. The had values that they instilled in me as a boy that they hoped I would follow as an adult.

One of those values was honesty. Another was caring about your friends and neighbors and co-workers. Another was doing solid work.

If I were to post dishonestly on safe withdrawal rates, I would be dishonoring my parents as much as I would be dishonoring myself and as much as I would be dishonoring the Buy-and-Hold pioneers who laid the groundwork for the huge advances we have achieved over the past 10 years with Valuation-Informed Indexing.

Given the abuse that I have taken from you Goons, I think it would be fair to say that I earned the money I obtained via an unspoken promise not to shame my parents to a far greater extent than I ever earned the hundreds of thousands I saved in the nine years prior to my early retirement (when I did not know that I would be receiving a penny in inheritance).

Either way, I possess zero willingness to dishonor them today by joining forces with you Goons. I’ll take the electric chair before I will do that. I might cry about it if it comes to that. But I’ll never look back at regret on the decision. If I agree to post dishonestly on safe withdrawal rates, I’m not the same person that I have been in the process of becoming for 56 years. If I agree to post dishonestly on the numbers my friends use to plan their retirements, that person is dead. Taking the electric chair instead lets the person who is called “Rob Bennett” live at least a wee bit longer.

I will continue to post honestly on the numbers that my friends use to plan their retirements.

And I will continue to wish you and all the other Goons the best possible luck in all of your future endeavors.

There’s zero give on either one of those two.

My best wishes to you, my good man.

Rob

I’ll add here that one of the reasons why I am so effusive in my praise of John Bogle is that, whenever I challenge the wisdom of Buy-and-Hold or of the Bogleheads, I can see my father looking down at me with a skeptical eye. My father is one of those people who referred to Bogle as “Saint Jack.” There’s only one discussion that I can recall us having about investing. He basically took me aside and said that “the one rule that matters is that you only invest in Vanguard funds.” He liked those low loads!
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So for a number of years whatever savings I had went into the Wellington Fund and the Windsor Fund. Then I started planning my Retire Early escape. I looked into the safe withdrawal rate concept and liked the general idea but something about the way it was being done didn’t sit quite right with me. In the course of my investigations, I borrowed Bogle’s book from the library and learned that “Reversion to the Mean is an Iron Law of stock investing.” Ah-ha! That was it! The old SWR studies did not adjust for the valuation level that applies on the day the retirement begins. Noting that the SWR that applied at the time was obviously a whole big bunch less than 4 percent and that a 4 percent real return was available at the time from Certificates of Deposit, I moved my money out of stocks in the Summer of 1996. The rest is internet history.

It’s all Bogle’s fault!

And my dad’s!

Heaven help us all!

Rob

What does he troll against?  The exact firm (Vanguard), person (Bogle), and investing philosophy (buy and hold) that his dad favored*.  
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You couldn’t possibly be more wrong, GW. Valuation-Informed Indexing is what Bogle was trying to develop when he entered this field. The idea was to get it right, not to get it wrong.

He got it wrong on his first draft because his thinking was limited by the research available at the time. The essential piece provided by Shiller in 1981 was not available when Bogle founded Vanguard in 1976.

Now the piece is there and now it all works.

I love my dad and I love John Bogle.

The difference between me and you is that I love John Bogle enough to know that deep in his heart he wants to help people by getting it right and not to destroy millions of middle-class lives by remaining too proud to acknowledge a mistake. You insult the man by assuming that, because he has associated with the sorts of individuals who have posted in “defense” of Mel Lindauer and John Greaney, that he himself is a Goon through and through.

Bogle is not a Goon through and through. He is a human. He has goonish inclinations that at times hold him back. But he is not a Goon through and through. He needs his friends to lend him a hand helping him to overcome his goonish inclinations from time to time.

I’ll let you in on a little secret, GW. You need the same from your friends from time to time. So does Mel. So does John. So does Rob.

Talk about your powerful, mind-blowing investing insights!

Take good care, man.

Rob

 

“How Could Someone Who Holds a Ph.D. in Economics from Princeton Come to Believe That There are Zero Peer-Reviewed Studies Showing that Long-Term Timing Is Not Required for Long-Term Investing Success?”

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Reality bites, don’t it hocus!?
 
Reality bites in both directions, Yip.

Wade said those things. You have quoted him accurately.

He also advanced the 45 quotes that I reported on in the article linked to above.

He still believes those 45 things. Even if he didn’t,  the fact that he once believed those 45 things would be news with major public policy significance. He held a Ph.D. in Economics from Princeton when he said those things. He is in a position to know the truth of these matters. And yet he believed that there has never been a single study showing that long-term timing doesn’t work or isn’t required for long-term success. A Ph.D. in Economics from Princeton researched this question and that is what he discovered. Even if he changed his mind at a later date (he hasn’t), that would be big news. It would raise the question — How could this be? How could someone who holds a Ph.D. in Economics from Princeton come to believe that there are zero peer-reviewed studies on the record showing that long-term timing does not work or is not required for long-term success?

We all need to know the answer to that one, Yip. Buy-and-Holders and Valuation-Informed Indexers alike. And we will not ever come to know the answer until we give ourselves permission to discuss the question. It is through discussion that we learn. So we MUST permit (and encourage!) civil and reasoned discussion of these matters. There is no other path from the horrible place where we all are today to the wonderful place where deep down in our hearts each and every one of us wants to be tomorrow.

If I win, we all win.

If you win, we all lose.

It doesn’t take me too long to figure out who to root for re this one, my old friend.

Rob

This game can be played the other way around.I promote myself as the most severe critic of Buy-and-Hold alive on Planet Earth today.Yet on the morning of May 13, 2002, if you had asked me what investing strategy I follow, I would have said “Buy-and-Hold” and I would have said it proudly.What gives? Am I the genius who discovered the horrible flaw in the Buy-and-Hold strategy? Or am I the dunderhead who at a time in his life when he held a Masters in Tax Law from George Washington University and had rose to the level of Director at the Ernst & Young consulting firm and who had written the #1 best-selling report in the history of the Soapbox.com site and who had transformed himself into a sufficiently effective saver to be able to start from zero and yet in 10 years save what he needed for his family of four to live off his savings for many, many years to come still believed in this oh-so-horrible and oh-so-obviously-flawed Buy-and-Hold strategy?
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I am that genius, Yip. And I am that dunderhead. I possess two, two, two characteristics of the Human in one! We are all human. We all have the potential of genius within us. And we all have the potential of dunderheadedness within us.

John Bogle is one of the darn humans. So is Robert Shiller. So is Wade Pfau. So is Bill Bernsteinzz. So is John Greaney. So is Rob Bennett. So is Rob Arnott. So is Albert Sanchez Graells. So is Scott Burnszzz. So is Mel Linduaer. So is Microlepsis. So is John D. Craig. So is Ed Easterling. So is Larry Swedroe. So is J.D. Roth. So is Mike Piper. And on and on and on and on and on.

We are stuck together on this planet, Yip. We all possess access to some pieces of the puzzle and have been denied access to other pieces of the puzzle. We have a system in this country that permits us to share with each other the pieces that we each hold in our hands so that the collective entity we call “the United States of America” can come to possess as many of the pieces as possible and we can all thrive together. We need to play it that way in the investing area just as we do in all the other areas. Our decision to play it very, very differently in the investing area is in the process of killing us.

We need to figure out why Wade Pfau believed the things he did when he was being a dunderhead (regardless of whether you think it is Wade 1.0 who is the dunderhead or Wade 2.0 who is the dunderhead). And we need to figure out why Rob Bennett believed the things he believed when he was being a dunderhead (regardless of whether you think it was the pre-May 13, 2002, version of Rob who was the dunderhead or the post-May 13, 2002, version of Rob who is the dunderhead). And we need to figure out whether Old Saint Jack is being a dunderhead when he says things in his speeches that support what Rob believes or when he says things in his speeches that support what Mel believes.

We’re all dunderheads here, Yip. Each and every one of us.

And we are all geniuses too. So we are all entitled to the respect and affection and gratitude of all the other dunderheads when we venture to put forward our genius posts on the discussion boards and blogs that we have built together for that purpose.

I am telling you the way it is going to be, my old friend. I am not asking, I am telling. There is a difference. Please try very hard to understand. It is critical that you understand that I am telling and not asking so that you will know how to proceed after reading these words.

My best wishes to you and yours.

Rob

Former Financial Analysts Journal Editor Rob Arnott to Rob Bennett: “I’m Too Embroiled in My Own Controversies to Magnify Them Further With Collaboration. Your Ideas [About Valuation-Informed Indexing] Are Sound.”

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My last two blog entries reported on e-mail correspondence between Former Financial Analysts Journal Editor Rob Arnott and I in which we discussed the brutal (my word) intimidation tactics that have been employed by Buy-and-Holders in recent years to block the publication of academic research revealing the deficiencies of the “status quo” (Arnott’s phrase) thinking on how the stock market works. He reported that he has had difficulty finding journals to publish his more controversial work and that articles of his that challenged the conventional thinking of today have generated hate mail. In fact, he has not yet been able to find a journal to publish an article on an important topic that he co-authored with Nobel Laureate Harry Markowitz! (I checked his e-mail three times when writing these words to be sure that I did not just imagine this part while experiencing a fever.) I expressed my shock at this report and noted that I believe that the reason why I feel a greater sense of urgency re solving the problem is that  my perspective is that of a journalist rather than that of an investing expert and I thus tend to focus on the public policy implications of the 30-year cover-up of Yale Economics Professor Robert Shiller’s “revolutionary” (Shiller’s word) findings showing how stock investing really works (not at all how the Buy-and-Holders have been for many years now telling millions of middle-class investors it works).

Late in the afternoon of December 6, 2012, Arnott replied to my e-mail of that morning. He wrote: “I am very pleased that you were not offended at my frank advice.  I’m too embroiled in my own controversies to magnify them further with collaboration.  Your ideas are sound.  Your stridency is unhelpful to your cause.  Anyway, all the best.”

I immediately sent back the following words: “I understand. I hope that I am not guilty of stridency. You are certainly not the only person who has said that I am. So I am going to need to work harder to examine my own behavior. I wish you all the best as well.”

I then sent an e-mail to Vanguard Founder John Bogle, Four Pillars of Investing Author William Bernstein, and Academic Researcher Wade Pfau saying: “Since the three of you were copied on the e-mail that I sent to Rob Arnott this morning, I wanted you to see the resolution of our conversation as set forth in his e-mail to me this afternoon and then my response to him. And I of course wish the three of you all the best that this life has to offer as well. Please take good care.”

The following afternoon I received a final e-mail from Rob Arnott containing the following warm message: “Have a wonderful holiday season!”