I had lunch at FinCon 2014 (the a conference for financial bloggers) with two bloggers, Crystal (owner of the Budgeting in the Fun Stuff blog and Jackie (owner of the The Debt Myth blog). We discussed the problem of the Goons invading blogs at which I posted guest blog entries in an effort to get the word out about Valuation-Informed Indexing. We agreed that I would write guest blog entries for each of their sites and that one would go up under my name and the other under an assumed name and then we would discuss the matter to determine how to handle any problems caused by Goon posters. Set forth below is the text of an e-mail sent by Crystal to Jackie and me, followed by my response:

Hi you two,

I received one comment on the post over at my site, and I know the commenter (definitely not a troll). How about you, Jackie?

Thanks,
Crystal

Crystal:

The comment was a good one.

Here is what Evan said:

“Most people would agree that buying low and selling high is the way to go -it’s telling when high and low are actually happening that is the trick. It’s hard to capture all the highs if you’re too busy trying to market time out the lows. You’re advice is sound but if it was easy to implement stock investing would be a piece of cake.”

He’s not saying that this is a bad thing. He is saying that it is a WONDERFUL thing. The only thing that is holding him back from following a Valuation-Informed Indexing strategy himself is that he finds it too good to be true (he says that, if this was easy to implement, stock investing would be a piece of cask and the peer-reviewed research that I co-authored with Wade Pfau shows that this is VERY easy to implement).

How do we get enough people talking about this so that people like Evan come aboard?

I’ve been getting these sorts of reactions going back to the first day (May 13, 2002). About 20 percent of the people exposed to the new ideas respond as Evan did — with interest, but not sufficiently convinced by one exposure to change how they invest their retirement money. How do we change things so that people like Evan can get all of their questions answered and come aboard? One exposure doesn’t do the
job. We need people talking about the last 33 years of peer-reviewed research at every investing board and blog on the internet. And it’s when the owner of a board or blog shows enough interest in the ideas to give them continuing exposure that the 20 percent of the population comprised of diehard Buy-and-Holders gets involved with their abusive stuff and ruins it for the 20 percent like Evan and the 60 percent in the middle.

I want to get these ideas out to EVERYONE. I obviously don’t have any problem with those who CHOOSE to go with Buy-and-Hold after being exposed to the new ideas (relatively new but supported now by 33 years of research). I want everyone to be informed about both sides and therefore able to make an INFORMED choice one way or the other.

I want to RESPOND to people like Evan, to show him why implementation is as easy as easy can be. No, he’s not a troll. But, though no fault of his own, he has never heard the other side of the story, he has never heard how easy this is to implement. I want to tell him. I see that as the entire point of our blogs. When new ideas come along that reduce the risk of stock investing by 70 percent while greatly increasing
long-term returns, I want to help people learn about those ideas.

That’s where I am coming from, in any event. My purpose in contacting you was to see if you could help me in my efforts to persuade more bloggers to help spread the word. I of course understand if you elect not to get involved. But that was my aim.

I have never said that the only problem is the Goons. It is not. There would be no problem if it were not for the Goons. I would have been able to spread the word myself 12 years ago if it had not been for the Goons. But I could OVERCOME the Goons if only people like Evan were aware of the research showing how easy it is to implement this and take away most of the risk of stock investing. It is the COMBINATION of the lack of understanding of how the new ideas work AND the role that the Goons play in keeping knowledge from spreading that has created the problem.

I am going to continue to try to help people by trying to overcome the Goons and get the ideas out to people like Evan. If you run into other bloggers who have an interest in joining in the effort, I hope you will let me know. I am always happy to answer any questions whatsoever or to address any concerns whatsoever. The advances are 100 percent good. There will come a day when everyone will recognize that, including the Buy-and-Holders and including the Goons. So I don’t feel that I am doing anyone even the tiniest bit of harm by trying to get the investing ideas that won Shiller a Nobel prize out to more people (even though some obviously FEEL that I am hurting them by showing that they made a mistake a good number of years ago and that that mistake needs to be fixed if we are all to move forward together).

I am grateful to you both for the efforts you put into this. Perhaps one of your readers will contact me and end up helping in a  big way. It may not happen. But that sort of thing has happened before and none of us can know when it is going to happen again. We just need to keep trying and thereby to keep creating opportunities for good things to happen.

Please take good care and I wish you both the best of luck in all your future life endeavors. It will be fun to meet up with you at FinCon15 and trade notes re the developments that take place over the next year. I HOPE I will have achieved my big breakthrough by then. Of course I held similar hopes last October!

Rob

Set forth below is the text of an e-mail that I sent to Ken Evoy, owner of the SiteSell.com web hosting company, on April 16, 2014:

Ken:

I work full-time on my site. The long-term success of the site is my top priority. But I don’t have an employer that I need to answer to. So it would be my decision alone as to how much time to direct to a new project.

Yes, I e-mailed 30,000. I am a bit of a bulldog on issues re which I develop a  passion. Two of the academics to whom I wrote told me that they have developed course materials on the Valuation-Informed Indexing concept that they are now using to teach their students!

I don’t have an ongoing relationship with Wade today. I am happy to e-mail him. But my preference would be to have a good bit of detail to send him re his precise role before contacting him. He’s a fairly high profile guy today. He is quoted in the Wall Street Journal and the New York Times. So I don’t know whether this is something he would want to be involved in or not. It might depend on the extent of the time commitment. It might be that his employer would not even permit outside work, I just don’t know. I know that his focus today is retirement planning research and teaching.

Please take good care.

Rob

Set forth below is the text of excerpts of an e-mail sent to me by Ken Evoy, owner of the SiteSell.com web hosting company, on April 16, 2004:

Hey Rob,

I can see you’re excited about potential business in this!

 

First, thanks for jumping in with those posts. They’ve been excellent!!

I believe, like you, that there is an opportunity here.

Not in stock investing, there’s just too much out there.

ETFs provide thinner air, but still pretty competitive.

Focusing on showing folks how to allocate resources optimally is not a bad (free) place to start. Lots of room for great discussions and folks should be able to establish strong passive portfolios just doing that.

I think, though, that the bigger business opportunity goes beyond that..

With investing, it could/should be possible to provide “the answers” to the test. And, with some low-level understanding of the why and how, to deliver ONE “active” approach that works (perhaps do-able to various levels of risk or areas — Europe, USA, Canada).

 

It needs differentiating and fleshing out, but when I have an idea for anything, I don’t push it until I see the idea sticking and growing by itself, while I find out more info that confirms the need/viability.

We’d need to establish a one-year track record, something that I’ll be doing when I actually start investing (there were times when that horizon got farther and farther away, but now getting closer).

In a nutshell…

I’m toying with the idea of this being a new product. It depends on where I end up at.

We’d need an academic to help with what I’ve been doing, and to stress-test what I’ve been doing.

And we’d need one person, perhaps you(?), to drive content and marketing, to be “the guy.”

The actual concept needs to find its unique niche — that should reveal itself over the next couple of months.

Your thoughts?

Thanks again for all that you’ve contributed!

All the best,
Ken

Set forth below is the text of an e-mail that I sent on April 12, 2004, to Ken Evoy, owner of the SiteSell.com web hosting company:

Ken:

Thanks much for all the work you have put into the investing project.

I am responding here to your suggestion that I forward product ideas directly to you. I posted a comment at the Active thread putting forward some general, philosophical ideas re the types of business opportunities that I believe exist here. My aim with this e-mail is to supply some specifics.

The need and opportunity that I see is for something that helps people understand the realities of stock investing on an ONGOING basis. You’ve made the comparison between the internet business issue and
the investing issue. I think that that comparison is apt. One of the most important things that SiteSell offers is the discussion boards. It’s not enough for people to learn what works and then implement on their own what they learn. They need ONGOING FEEDBACK.

That’s how we all learn. We come up with some idea as to what works, perhaps through reading. But we
don’t really have confidence in what we have learned until we test it in the real world. And there are always confusing experiences that turn up. We need to run those past other people to gain a deeper confidence in what we are doing. I believe that there is a great need for people to have some sort of mechanism for ongoing feedback and support re their implementation of the Permanent Portfolio concept.

One way to provide this would be to set up a section of the SiteSell forum for investing discussions. The forum could offer help with five sorts of matters:

1) A place for people following the unconventional investing ideas to bat around ideas with others of like mind;

2) A place to alert others to developments of interest to people following these ideas. For example, new research could be noted. Or people could report problems they experienced and others could offer suggestions for dealing with them. Or people could ask about the practical details of purchasing the right ETFs and so on;

3) People could seek help in setting up their own sites dealing with different issues in this field. I believe that we are living through a revolution in our understanding of how investing works. The subtitle of
Shiller’s book even describes his findings as “revolutionary.” Yet the investing advice offered today is precisely what it was before Shiller published his research. The revolutionary advances have so far not been reflected in the practical world. We need to rewrite all the rules. There could be hundreds of successful web sites doing this on an ongoing basis (there are thousands now in place that advocate the discredited, conventional advice);

4) Products could be developed. For example, there could be lots of ebooks addressing lots of particular questions in great depth. CD sets could be produced. Consulting could be offered. The possibilities are pretty much unlimited. There are HUGE amounts of money at stake here. And the ideas we are talking about have rock-solid support in the data and in the research. There are millions of people who need this
material. And it is almost impossible to find it today. That’s a powerful combination of realities!

5) A place for people to explore the Active side of this. I am not so excited about the Active side. But others are. And it could be that those exploring Active ideas will come up with good stuff. A discussion board would provide a place to capture and examine good ideas.

Anyway, those are my thoughts. I am grateful for your willingness to give them a listen.

Take care.

Rob

Set forth below is the text of an e-mail that I sent to Jaime Tardy, owner of the EventualMillionaire.com site, on October 30, 2013:

Jaime:

It’s good to hear about the cast. When the crutches are gone, there will be a few days when ordinary walking will be exciting!

I of course understand that my story is “out there.” That’s why I think I am going to win in the end. It’s so crazy that it just cannot continue. The other side of the story is that I have been saying that for 11 years now.

I am always trying to come up with analogies to help people understand the craziness at the heart of this. The best that I have come up with is shocking but I think it helps point to the core realities. Prior to the 1960s, people with black skin could not drink out of the same water fountains as people with white skin in many Southern towns. Taken in isolation, that’s a pretty darn hard-to-believe reality, is it not? But it really is true. How did this happen? Were all the people who lived in Southern towns racist? They were not. LOTS of people opposed the reality of the time. The reality had been in place so long that they didn’t think it could be changed. So the practical thing was to keep your mouth shut. That of course made the problem worse! A society cannot fix a problem until there are a large number willing to say out loud that it is indeed a problem.

That’s the issue here. The entire financial industry was built around the research that was once thought to support the Buy-and-Hold concept. Thousands of books are rooted in these ideas. Thousands of careers have been built around these ideas. The idea of changing the core idea on which all investing knowledge has been built is unthinkable to most people. Yet the evidence that that core idea is wrong
is now a mountain. If we challenge the idea, it will fall quickly. That would be a wonderful thing. The ideas that work would make us all a much richer and freer people. But we cannot get from where we are to where we all want to be without saying that lots of powerful and wealthy and smart and good and hard-working people got an important point wrong. So we have adopted a Social Stigma against speaking
such truths out loud. I have violated that Social Stigma. Many, many times. For good or for ill, that’s the Rob Bennett story. I violate the Social Stigma WITHOUT APOLOGY.

The haters don’t have legitimate grounds to sue. But the bottom-line reality is that anyone can sue anyone for anything and the person with more money often wins. The haters of course have zero power on their own. But they are supported by people with LOTS of money and power and influence. The fear that the site owner has is that he will be sued and his business will be destroyed even though he is
in the right. These fears are not entirely off base. When the haters vowed to get me banned from the Motley Fool site, I thought there was zero chance they could pull that off. The owner of the site had written one of the blurbs that is on the back cover of my book on saving strategies. But they pulled if off. It took a year. But ultimately I was banned. And the editors at Motley Fool nominated the fellow who threatened to kill my wife and children for their Poster of the Year award.

You’re asking a great question about women and data. That question gets to the heart of things. There’s a quote from Shiller in which he says something to the effect of: “Lots of people in this field don’t take behavioral finance seriously because it is rooted in subjective stuff that they consider embarrassing and not worthy of consideration by serious professionals.” I agree with the Buy-and-Holders on every point but one. I say valuations matter, they say they don’t. Mispricing (overvaluation and undervaluation) is ALWAYS the produce of emotion. Fama (the researcher who started Buy-and-Hold) says that investors always act in their best interest. This is 100 percent logical. It is also 100 percent false. Investors always act in their best interest SO LONG AS THEY ARE NOT INFLUENCED BY EMOTION.

Shiller created a metric (P/E10) that tells us how emotional the market is at any given moment in time. It is emotion (overvaluation) that makes stock investing risky. So Shiller gave us a tool to eliminate investing risk. This is the most important advance ever. The problem is that all knowledge in this field outside of Shiller is built on a premise that investors are ALWAYS 100 percent rational in their investing choices.  To let in the good stuff, you would have to admit that everything else is rooted in error. They cannot bear to do it. They see the contradictions. They rationalize them. They have too much invested in the old ideas to even discuss whether Shiller might be right.

They DO acknowledge Shiller’s greatness. No one disputes that. But they patronize his ideas. They say “oh, that’s good stuff” and then go right back to urging strategies that are in total conflict with what Shiller says. My idea was to explore the IMPLICATIONS of Shiller’s ideas. I go one small step beyond what Shiller says in actual words. No one else has ever done that. Even Shiller doesn’t do this. Shiller makes it a point to bury his most amazing findings. He hints at them. But he presents them in a way that permits most readers to miss the most important point. Shiller tries to stay out of trouble. I SEEK OUT trouble. Not in any negative way. But I am always  trying to point to new implications of Shiller’s work because I want knowledge to expand and I believe that we can add to our knowledge only by talking these things over.

Women investors like safety more than men investors. Men are more into taking the chances necessary to prove themselves. So my stuff should have great appeal to women. There are search terms like “safe investing” that get huge traffic. I should own those words. I am offering a simple and safe approach that is supported by academic research. It is a dream come true for millions of investors. But the sorts of people who are looking for safety do not want to take investing advice from some guy on the internet. They want to see that the experts endorse my work. They want to see that lots of other people see value in my work. This is why the Goons want to cut me off from all sources of authority. Their standard response to me is: “We will leave you alone if you agree to post only at your own site.” So long as I post only at my
own site, I get nowhere. As soon as I go off my site, I pose a threat to them.

Todd is taking a middle ground. He agrees with me on the substantive points. He of course doesn’t post only at his own site. But he does avoid saying things that pose a threat to those promoting Buy-and-Hold strategies. He appeals to sophisticated investors who don’t take Buy-and-Hold seriously. I do not write for sophisticated investors. I write for average middle-class people. Buy-and-Hold is all they have ever heard. I am saying that those people have a right to the same good advice that is available to people with more money and sophistication. I am aiming for a much larger readership than Todd’s but one that is harder to win because they don’t have the knowledge base to see the merit of my points quickly. If I were permitted to post at large boards unmolested, I would win all these people over in time as they got to know me and to see how the different points fit together. This is why I represent such a big threat. I am destroying the marketing claim that the Buy-and-Holders have used to great advantage for a long time (that their strategy is rooted in the findings of peer-reviewed academic research).

I agree that most women are not driven by data. But they ARE driven by a desire for safety and for following common-sense ideas.  My stuff IS backed by data. But is it backed by ALL the data, including the data rooted in non-emotional factors AND the data rooted in emotional factors (P/E10). My approach is holistic. It COMBINES the two types of data. The Buy-and-Holders HATE emotion. I too
am saying that is is a bad idea to let emotion control you. Our approaches to the problem are very different. They say that emotion is so awful that we must never discuss it. I say that this leads to ruin in time. Ignoring emotion makes it stronger. I say that the way to cope with negative investing emotions is to CONFRONT them, to get things out in the open. Considering the P/E10 factor lets us get emotions under control so they don’t hurt us. By talking about emotion we make it inconsequential. Women understand this point better than men as a rule.

The main goal is not to generate revenue. That is an important secondary goal. The main goal is to remove the Social Stigma that stops people from talking about the implications of Shiller’s findings. I will know that I have won when I can wake up in the morning and post at any site on the internet with no fear that I will be attacked for anything I say about investing that I truly believe. I of course don’t want that just for me, I want it for everyone. When we get there, the money will naturally follow because there
is a huge market for these ideas (I know this from the reactions I have generated for 11 years now) and my site explores these ideas in far more depth than any other site on the internet.

I don’t object to rebranding and I don’t get too excited about it. I am not good at marketing. So I have zero doubt that I have done things wrong in that department. That said, I was AMAZINGLY popular in the days when I wrote about saving strategies. So I was able to be successful despite any marketing weaknesses. Better marketing may well be part of the answer. But the Social Stigma is my paramount concern.

Dealing with a Social Stigma could be viewed as a marketing concern. But it is a  uniquely difficult and complicated one. I am trying to sell people something that they very much want but cannot just yet
acknowledge that they want. There should be Google search terms like “What’s Wrong with Buy-and-Hold?” I should rule those terms. But most of the people who are my potential customers are today searching for excessively vague terms like “safe investing” or “how to invest” or something like that. People don’t know what they don’t know. They don’t know that the people who seem to be trying to help them are really hurting them. And the people who are hurting them don’t know that they are hurting them either. This is an idea that is close to taking off that has not quite taken off yet.

I am all for doing video. Anything that forms an emotional connection is good. I want to have articles as my support for the step-by=step exploration of the ideas. But I don’t believe that too many people care about words anymore. So I am 100 percent okay with focusing on audio or video or Twitter or whatever to get the ideas out. I personally love words. But I don’t think they always get the job done in today’s world.

Thanks for asking intelligent questions. I regret that the answers are so long.

Here’s a Guest Post that I did at the Free From Broke Site:

http://freefrombroke.com/value-informed-indexing-less-risky-way-to-invest-in-stocks-buy-and-hold-investing/

There are no Goon posts on this thread. They must have been sleeping in that day! (or perhaps Glen took care of them). The questions and comments are intelligent. I think these comments show the potential of the idea.

No one really ran with it as a result of this Guest Blog Entry. But I think that we would see people running with it if a number of threads as intelligent as this appeared in the Blogosphere. The comments that appear here suggest that there are people who think this is worth talking about.

This is the article that I wrote about how the Goons compromised an academic researcher who spent 16
months working with me on research that we had published in a peer-reviewed journal:

http://arichlife.passionsaving.com/the-buy-and-hold-crisis/academic-researcher-silenced-by-threats-to-get-him-fired-from-his-job-after-showing-dangers-of-buy-and-hold-investing-strategies/

I have had a number of long-time Buy-and-Holders tell me that this research caused them to question their beliefs. So I believe that getting this research written up in the New York Times or the Wall Street Journal is the key to making things  happen. The Goons wanted to silence Wade so that that would not happen. Wade has more pull with the New York Times because he has a Ph.D. in Economics from Princeton and because he makes his living writing research in this field and because he has won awards and all this sort of thing.

Please look at the quotes from Wade at the bottom. He says “Yes, Virginia, Valuation-Informed Indexing works!” and “the market timer enjoys a far less risky strategy!” and “the findings for market timing are so robust that it hardly matters how we do it!!” Those are amazing comments for something with a Ph.D. in Economics from Princeton to be putting forward. Wade should have been taught this stuff as part of his Ph.D. program. He obviously wasn’t. That reality points both to the huge potential (we are changing the history of investing analysis) and to the huge threat that this represents to those promoting the old ideas.

This is the text of my correspondence with Rob Arnott, who is one of the biggest names in the field:

Former Financial Analysts Journal Editor Rob Arnott to Rob Bennett: “I’ve Had Similar Experiences to Those You Describe. My Work Has Often Triggered Overt Hostility from the Guardians of the Status Quo. I’ve Also Had Difficulties Getting Some of My More Controversial Ideas Published. And the Journals That Published Some of My More Controversial Papers Did Get Hate Mail.”

Rob Bennett to Former Financial Analysts Journal Editor Rob Arnott: “The Illustrations You Offer of the Problem of Buy-and-Hold Dogmatism Are Shocking. I Know From My Discussions With Financial Planners and Bloggers That Many Others Have Had Similar Experiences. This Must Stop. I Feel More of a Sense of Urgency re This Matter. My Focus Is On the Public Policy Implications. We Are Living Through A Public Tragedy of Epic Proportions.”

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.”

 

Arnott says that he has experienced “hostility” from “guardians of the status quo.” People who were doing research on his ideas were told that they would be doing harm to their careers to do this sort of work. The difference between Arnott and me is that I do my work on the internet and the internet is so new a medium that there is no police force. The same basic phenomenon applies both in the real world and on the internet. If things reach a point where honest discussion is permitted on the internet, that will create the pressure we need to see for honest posting to be permitted in the real world as well. Then it’s over. Then we (all — including the Buy-and-Holders!) win!

Enough!

Thanks much for your kind interest in this strange (but compelling!) saga.

Rob

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

Please post just one quote, from the thousands of people you’ve emailed, that specifically says they fear buy-and-hold goons. Come on, you said many people have told you that verbally. Surely at least one must have written it down.

That’s the entire web site, Anonymous.

The question is not how much evidence I have. I have a mountain of evidence.

The question is how ordinary people — the people whose lives are in the process of being destroyed by the massive act of financial fraud — respond to that evidence.

Today, those people see themselves as being ahead or at least not down by too much. So those people either support the con or at least do not feel strongly enough opposed to it to do something about the abusive stuff.

Will those people turn on the Buy-and-Holders following the next price crash? I believe they will.

But you are not going to come clean just because I believe that. You will be willing to come clean only when your prison sentence is announced and you see clearly the consequences of participating in a massive act of financial fraud. We are not there yet today. And you cannot bear to see the massive con come to an end (that would mean going to prison too even if for a bit less time). So you are going to hold out until that prison sentence is announced.

I am doing everything in my power to get the prison sentences announced by the close of business today. Everything that I can think of I have done. So I have honored my pledge to you (and to the millions of middle-class investors who are in the process of seeing their lives destroyed).

The next thing I am going to say is a horrible thing to acknowledge but I am going to say it anyway because I think it is important that it be publicly put on the table.

It may not happen by the close of business today.

It is even theoretically possible that it will not happen by the close of business tomorrow. I know that this is hard to believe. But I have been going at this for 14 years running now. My conclusion after working this hard is that it may not happen even at the close of business tomorrow. It might. But I have come to believe that it is at least a theoretical possibility that it might not.

So what comes next?

After tomorrow comes the day after tomorrow.

After the day after tomorrow comes the following day.

My sincere take.

I naturally wish you all the best things that this life has to offer a person, my good friend.

Rob

Set forth below is the text of an e-mail sent to me on November 4, 2013, by Sam Parler, the co-developer of the Returns Sequence Reality Checker, following by my response to him:

Hey Rob,

I hope you are well and are having a good year. Hard to believe the holidays are nigh upon us.

I planted the seeds of your ideas at the discussion group of one of my investment newsletters [subscription, private unfortunately http://profitableinvesting.investorplace.com/forum ] a couple of months ago when the p/e10 hit 24-ish. At first I got a lot of dogmatic “timing cannot work” nonsense and was shouted down, but eventually, after I meekly posted links to your site, and to Wade Pfau’s studies, a few of the more thoughtful leaders at the forum came around from shouting me down to embracing the VII strategy. Now they have forgotten about me and my initial posts and are trying to take credit themselves. Kinda funny. One has posted additional links to passionsaving and another posted this link tonight:

http://www.marketwatch.com/story/you-really-can-time-the-stock-market-2013-11-04?pagenumber=1

For the most part, they are not being naive about this. They understand that the market could go another 20% or so higher, and that just because crashes have always occurred at this valuation level, it might not happen this time. For the first time, I am witnessing in a non-bear discussion group, the idea of pulling in the reins and lightening up on stock allocation.

Thought you would find this interesting; and hopefully, gratifying.

Take care,

Sam

Sam:

I find it VERY interesting and gratifying. Thanks much both for you efforts and for letting me know about them.

I don’t know about the traffic. I don’t think I check things carefully enough to know.

But that is not the important thing to me. The exciting news is that you are seeing people at a non-bear board respond to the message. I have seen similar signs. And the publication of that Market Watch article is also a sign.

Human psychology is strange. People often tell me that I am crazy to think that things are going to change  in the future. Their argument is that they never have before. My strongly held view is that that misses the point. All that it shows is that, when views do change, they will change very hard and very fast.

The doubts are INSIDE people. It’s not that people don’t have doubts. It is that they deny them. But seeing others not deny them breaks down their denial. So the change comes hard and fast when it comes.

It’s shameful that they are trying to take credit themselves. But I have seen this sort of thing myself. So it doesn’t shock me.

I recently gave a talk to a financial bloggers conference (FinCon13) titled “How to Become the Most Hated Blogger on the Internet.” It focused on the emotional side of all this. People weren’t jumping up and down. But they were listening. It gave me a scary sort of feeling that people are starting to take the message a bit more seriously.

Please let me know of any further development along these lines.

Rob

Set forth below is the text of a comment that I recently posted to the discussion thread for one of my columns at the Value Walk site:

Your first sentence is the only accurate thing you have posted. You seem to be like OJ Simpson. OJ talks about searching for the “real killers” and you are telling us all your stories about the nasty “goons” and the “buy and holders” that are causing an economic disaster. Maybe you and OJ can join forces to solve the world’s problems.

There really are Goons, Sammy. And there is really only one question that a person needs to ask himself to prove to himself that there are.

Everyone agrees that Shiller’s 1981 finding that valuations affect long-term returns is of huge importance. Shiller was awarded a Nobel prize for his work. Giving the man a Nobel prize is our way as a society of saying “this is huge.” So that point is locked-in certain.

Another point is locked-in certain. John Bogle made zero changes to his Buy-and-Hold strategy as a result of the hugely important Shiller findings. Anyone can look up what Bogle was saying prior to 1981 and what he says today and see that he is saying exactly the same thing. So Bogle ignores this hugely important finding. Again, there’s zero legitimate controversy re this matter.

The only possible explanation of these two locked-in certainties is that there has been a 35-year cover-up. The rational human mind cannot come to any other conclusion.

Now —

People have a big problem with this conclusion. The Buy-and-Holders are good and smart people. All fair-minded people see this. And they follow Buy-and-Hold themselves. This is beyond dispute. If they were pushing a bad strategy to make money, you sure wouldn’t think they would be following the bad strategy themselves. But there is no question but that they follow it — that’s also a lock-down certainty. And there are thousands and thousands of independent agents involved here. What are we going to believe, that they are all involved in some grand conspiracy. To say that is akin to saying that the moon landing was faked. It’s a pretty darn far out-there proposition.

So we are left with a number of locked-in certainties that cannot all be so! It’s a conundrum! It’s very hard to figure out how all of these locked-in certainties can all be so. But it is also a logical impossibility for them not to be so. This is tough stuff. I sweated blood trying to figure it out.

The answer is — cognitive dissonance.

You have to understand cognitive dissonance to make sense of investing today. If you get cognitive dissonance, all the pieces of the puzzle click. That’s the solution to the riddle.

The Buy-and-Holders really are good and smart people. I am certain of this. They really do believe in Buy-and-Hold. They could pass lie detector tests. They are not engaged in a conspiracy in the way that the word is normally used. They are not trying to trick people. They are trying to help people.

But they ARE aware that they are ignoring Shiller’s 1981 finding! It hurts them that this is so. They try to ignore this. They push the reality out of their minds. It causes them to doubt their belief in Buy-and-Hold. And they cannot bear to entertain doubts! It would mean that they messed up for many years. It would mean that they hurt millions of people. They cannot stand to think that that might be so. So they push the idea out of their minds. This is what is going on.

I LOVE the Buy-and-Holders. You think of me as their enemy. That’s not what I am. I am trying to show how the Buy-and-Holders got all but one point right and changed investing in a very powerful and positive way by doing so. They missed one point — valuations. They missed it for a perfectly understandable reason. Indexing was not available at the time they developed the strategy and long-term timing (price discipline) does not work without indexing. So it was not even possible for them to get it all right at the time they were developing their strategy. They did the best they could given what was available at the time.

Our problem is that as a society we have to fix the mistake they made. Our economic system will collapse if we don’t do this. So this is not optional. It is 100 percent imperative. The Buy-and-Holders have always wanted to get it right. So we are all on the same side. The only rub here is that we have to fix the mistake 35 years down the road from when it was made and lots of people have been misled re the realities over the course of those 35 years. That’s why this matter has become so “controversial.” It’s hard to acknowledge a mistake that has been doing damage to millions for 35 years.

As a society we need to do everything we can to make the Buy-and-Holders feel okay about acknowledging the mistake. We owe them that because they have made very important contributions. But we also owe them a correction of the mistake. They don’t want to make mistakes! The mistake is hurting them as much as it is hurting all the rest of us. So we cannot give on that point. We need to insist that there be open debate re these matters and that, once there is widespread acceptance of the idea that valuations must always be considered when making asset allocation decisions, the mistake will be corrected in all of the literature in this field.

That’s the story. The Buy-and-Holders are good people. But they really did make a mistake. And it really does need to be corrected. They didn’t kill anyone with malicious intent, like O.J. did. But they did make a mistake that has hurt millions of people and that needs to be corrected. We all need to be working together to get this done. We need to be 100 percent honest but we also need to be 100 percent charitable. Both things are imperative given the circumstances that apply here.

I hope that helps a bit.

I naturally wish you all good things. It has never been my intent to cause you to feel any discomfort or pain or anguish or upset. I am just trying to help you see that there is another way of thinking about how stock investing works and that it is exciting stuff that I truly believe represents the future in this field.

Rob

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

It’s not entirely clear to me who you are referring to when you make reference to “those folks.” Do you mean Shiller and Pfau and Arnott? Anyway, I will give the best response that I am able to provide given my uncertainty as to precisely who it is that you are making reference to here.

You are certainly right that we need to work with the data we have and draw the best conclusions we can given what we have to work with. That’s a sensible way to go. Frankly, that’s probably the only sensible way to go.

Still, the reality mentioned above is an important one. We have a limited data set. How does that reality influence this conclusion-drawing process? It means that we should draw tentative conclusions only, not dogmatic ones.

Jack Bogle is a very smart man. Eugene Fama is a very smart man. You Goons are plenty smart enough. So we are dealing with smart people.

But people who don’t know everything. People who don’t always get it all right. Bogle can make mistakes. Fama can. You can.

And we only have 145 years of return data. And we have only been studying that data in a systematic manner since the 1960s. That’s not a very long time for the development of a new field of science. We are in the very early days of this discipline of studying how to invest in a systematic and research-backed way.

So we have to be tentative in how we state things. Greaney shouldn’t have said “4 percent is safe.” He should have said “I think 4 percent is safe.” Or he could have said “there is some reason to believe that 4 percent is safe.” Or he could have said “there is one school of thought that 4 percent is safe.” Or he could have said “there is one school of thought that says that 4 percent is safe and there is another school of thought that says that 4 percent is very risky at today’s valuations — I personally belong to the former school.”

That’s how it has to be done, Laugh. That’s how it is done in every other field of human endeavor.

Buy-and-Hold is one school of thought re how stock investing works, the school that is rooted in the research of Nobel Prize Winner Eugene Fama. Valuation-Informed Indexing is another school of thought re how stock investing works, the school rooted in the research of Nobel Prize Winner Robert Shiller. Both schools are legitimate. I believe strongly in VII and you believe strongly in BH. Neither of us today can say with absolute certainly that we are right. The field is not sufficiently developed today to permit such claims. We can only express tentative conclusions, not dogmatic ones.

If you want to add language to the bottom of every post that I write saying “this guy acknowledges that it is possible that he is wrong about everything he believes about stock investing,” I have no problem with that. I think it is healthy for the people reading my stuff to be reminded of that as often as possible. But I think that in fairness we should also add that language to the posts put forward by Bogle and Lindauer and Greaney. They are flawed humans too. They are working with a limited data set too. The can get things wrong too.

That’s the answer, Laugh.

One of the guys on one of the peer-review committees that rejected the research that I co-authored with Wade Pfau said (I am paraphrasing): “It would be nice if we knew which of the two schools of thought is the right one.” Wouldn’t it indeed!

That guy was mentioning the uncertainty that every honest person in this field experiences as a reason to NOT publish the research that Wade and I prepared. His observation is a reason TO publish it, not to elect not to publish it! We get over this uncertainty by publishing stuff that addresses it, not by putting our heads in the sand.

Yes, we all need to work with the data we have and draw conclusions from it. But we all need to understand that all the others doing this are not going to draw the SAME conclusions. Different people are going to look at the same data and come to DIFFERENT conclusions. We all need to respect that. We all need to ENCOURAGE each and every person looking at this stuff to say exactly what he or she believes. No one who is not being candid is helping. We help by contributing our own perspectives and if we pretend to believe things we don’t we are not doing that.

I don’t believe what you do about stock investing. It shouldn’t follow that I cannot be your good friend. You should be able to respect what I say even while not sharing the beliefs behind what I say. And of course the same goes the other way around.

Perhaps some day we will all agree. I think that will happen. But we are not there today. That is obvious. And the way to resolve matters is not to silence those holding the minority view. We need to encourage those holding the minority view to speak up and not to censor themselves one tiny bit and to speak with full confidence that those in the majority will extend to them the same respect and affection that they extend to those on “their side.”

That’s it. That’s the answer. That’s the ONLY answer.

I am your friend and I try to show it with all my words. You need to do the same. EVERYONE needs to feel free to post their honest views. There is not one legitimate school of thought here. There are two. That’s where things stand in this field of scientific inquiry today.

Please take good care.

Rob