A Rich Life

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

“Bogle Would Love to Be Able to Start Over and to Advocate Valuation-Informed Indexing Rather Than Buy-and-Hold”

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Set forth below are some words that I posted in a comment to the Goon Central board last Thursday:

Do you think I’m in it for the money? OR the other ‘Goons”

I certainly don’t think you are in it for the money, Drip Guy. I don’t think Greaney is. I don’t think Lindauer is.

I don’t think Bogle advocates Buy-and-Hold for money reasons. I think he advocates it because he believes in it.

But I certainly think that money considerations have played a big role in the 30-year cover-up of the academic research showing that Buy-and-Hold can never work in the long term.

I think Bogle and lots of others would love to be able to start over and to advocate Valuation-Informed Indexing rather than Buy-and-Hold. But they are afraid of the trillions of dollars in legal liabilities they have taken on by continuing to advocate Buy-and-Hold for 30 years after research was published showing that it can never work. I believe that they painted themselves into a corner and are now feeling desperately trapped.

I see it as my job to help them and to help us all achieve the transition we need to make. The biggest obstacle I face is the lack of support I get from people like Bogle. Bogle could turn this thing around with one speech that he arranged to have written up on the front page of the New York Times. Putting it off doesn’t make it easier. Putting it off makes it harder.

Money is a big part of the problem there. Money considerations are one of the primary things holding us back. Another is pride. Another is genuine ignorance. Another is complacency. There’s more than one thing holding us back. But, yes, I am certain that money is a big factor here.

Rob

Evan at My Journey to Millions Blog: “I Still Don’t Understand Why You Fight. Who Cares?”

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Here”s a link to the full Twitter conversation that I had on Wednesday with Evan at the My Journey to Millions blog:

http://twitter.theinfo.org/250602431191347200#id250604338748211200

Juicy Excerpt #1: Years later and I still don’t understand why you fight. Who cares?

Juicy Excerpt #2: I don’t have any clients. I am a journalist.

Juicy Excerpt #3: This will get to clients eventually. Many advisors have endorsed me. They need word to get out so clients will believe what they say.

 

Economist Gary North: “You May Be Good. Your Site Is A Disaster.”

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Gary North is an economist who runs the Specific Answers web site. Yesterday I sent him the following words by e-mail:

Gary:

My name is Rob Bennett. My bio is here.

I’d be grateful if you would take a look at an article that I have written titled Academic Researcher Silenced by Threats to Get Him Fired From His Job After Reporting on Dangers of Buy-and-Hold Investing.

I think it’s a big deal. If it pulls you in, that would be super.

If not, I of course understand and I certainly wish you the best of luck in all your future endeavors.

Take care.

Rob

Gary sent me the following response:

I tried to navigate your site. I gave up. It is a combination of promotionals, long, rambling articles by you, and articles unrelated to the site (front page). The site is jumbled, at best. There is a reason why you are below 700,000 on Alexa,

The first two are dead: (“I write three weekly columns on these issues: (1) Investing: The New Rules at the Death by 1,000 Papercuts site; (2) Valuation-Informed Indexing, at the Value Walk site; and (3) Beyond Buy-and-Hold, at the Out of Your Rut site. You might want to review some of the columns (which address the many issues in bite-sized chunks of argument) if I have sparked a little interest but you remain skeptical.”)

You may be good. Your site is a disaster.

I sent Gary the following words in response:

Gary:

Thanks for taking a look.

Rob

VII #112 — Predicting the Past

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I’ve posted Entry #112 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s titled Predicting the Past.

Juicy Excerpt: The predictions cannot be wrong. In the event that we see very different returns than those “predicted,” the caveat that always applies to the work product of the calculator comes into effect. If we see things we have never seen before, the calculator isn’t supposed to work. And it won’t. So don’t look for me ever to say that there’s anything wrong with it!

Beyond Buy-and-Hold #108 — How Bad Will the Next Stock Crash Be and When Will It Arrive?

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I’ve posted Entry #108 to my weekly Beyond Buy-and-Hold column at the Out of Your Rut site. It’s titled How Bad Will the Next Stock Crash Be and When Will it Arrive?

Juicy Excerpt: Trying to guess precisely when the next price crash will come or how deep it will be is a stupid parlor game that smart investors should avoid playing. Still, for purposes of this column… I am going to play the stupid parlor game!

Beyond Buy-and-Hold #107 — Time Is the Forgotten Factor in Stock Investing

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I’ve posted Entry #107 to my weekly Beyond Buy-and-Hold column at the Out of Your Rut site. It’s called Time Is the Forgotten Factor in Stock Investing.

Juicy Excerpt: Say that you retired in 1996 and used a 4 percent withdrawal (the withdrawal rate identified as “safe” in the discredited studies). Stocks were insanely overpriced in 1996. So your retirement was by no mean safe. Under many returns sequences, your retirement would fail before you reached age 95. But, if we did not see a price crash until the end of 2006 (and we didn’t — the price crash came in late 2008), your retirement became safe despite your reliance on gravely flawed research. The secret here is that those 11 years give the portfolio time to grow enough so that subsequent price crashes are not enough to destroy it entirely. Over time, the magic of compounding can grow such portfolios to very large amounts.

Beyond Buy-and-Hold #106 — When Is It Better to Have a $100,000 Portfolio Than a $300,000 Portfolio?

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I’ve posted Entry #106 to my weekly Beyond Buy-and-Hold column at the Out of Your Rut site. It’s called When Is It Better to Have a $100,000 Portfolio Than a $300,000 Portfolio?

Juicy Excerpt: Please look at that graphic again. It tells an important story. The graphic is telling us something crazy. It is telling us that we are investing in crazy ways and that our crazy investing practices are making the market go so haywire that things can reach a point where a $100,000 portfolio offers the promise of more lasting wealth than a $300,000 portfolio. It doesn’t have to be like this. Sane investing is possible. We all need to begin looking at price when we set our stock allocations. Once we do that, we will make stock investing sane again and $300,000 portfolios will once again be better than $100,000 portfolios.

Valuation-Informed Indexing #111 — Is the Long-Term Average Return of 6.5 Percent Real a Lock for the Future?

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I’ve posted Entry #111 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Is the Long-Term Average Return of 6.5 Percent Real a Lock for the Future?

Juicy Excerpt: The principles that underly the Valuation-Informed Indexing strategy provide great benefits for those who adjust the historical numbers. The benefit is that the process of making adjustments makes the investor aware of how far off current prices are from the long-term norm. When you see how far off current prices are from the norm, you might be inclined not to make as large an adjustment as you initially planned. The long-term realities pull you in the direction of acceptance of long-term realities. That’s a very good thing.

Financial Highway #13 — How Our Ideas on Investing Got on the Wrong Track

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I’ve posted my 13th entry in my series of articles on Valuation-Informed Indexing for the Financial Highway site. It’s called How Our Ideas on Investing Got on the Wrong Track.

Juicy Excerpt: The full reality is that our understanding of all areas of life endeavor is achieved in building-block style. We learned a great deal when the Buy-and-Holders showed us that short-term timing doesn’t work. Shiller would probably never have achieved his advances had the Buy-and-Holders not laid the foundation for them with their own breakthroughs.

The Buy-and-Holders think that acknowledging their mistake will cause them to lose “credit” for explaining how stock investing works. I don’t think that’s right. I think that that acknowledgement of the mistake will permit us to take the genuine insights of the Buy-and-Holders to places we have never been able to take them before. I believe that we will someday look back at the day when the Buy-and-Holders acknowledge their error as one of the most important and exciting days in the history of the core Buy-and-Hold project — to learn the truth about how stock investing works.