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

If everyone keeps blaming other issues (oil, China, etc), how will they ever come to your conclusion and be “educated” as you state?

Look at how we all become educated re every other subject under the sun, Anonymous.

We talk about stuff. We learn new things and we share what we have learned with each other. That’s how it works with everything other than stock investing. That’s the only way it can work. We will all learn everything that we need to learn about stock investing when we treat stock investing like every other subject.

Why don’t we treat stock investing like every other subject? That’s the $600,000 question.

Ironically, it’s because investing is so darn important.

You would think that we would want to learn about subjects that are super-important even more than we want to learn about subjects that are of just average importance. But the reality is that it works out just the other way. When something is as important as how we go about investing for retirement, we cannot bear the pain of coming to realize that we have for a long time been getting it very, very wrong. Incorporating new knowledge requires an acknowledgment that for a time we did not possess perfect knowledge. It is relatively easy for us to acknowledge that re subjects of ordinary importance. It is brutally hard to acknowledge that re subjects of great importance.

Have you ever had a friend who became an alcoholic? It’s hard to convince alcoholics that they need to make changes in how they live their lives. Many alcoholics are smart people. Their friends see that they are destroying their lives. They want to help. The things that they are telling the alcoholics are perfectly obvious. Why can’t the alcoholics see that? Why can they understand lots of things and yet not understand this perfectly obvious and terribly important thing?

They cannot bear to see how much they have hurt themselves and others with their alcoholism.

To say “I am an alcoholic” means accepting that you have done great harm to yourself and to your loved ones for many years. The alcoholic gets this intellectually. He cannot act on the knowledge because he cannot bear to accept what his mind tells him. He lives in denial of obvious realities.

So it is with Buy-and-Holders. You understand that Shiller’s 1981 finding that valuations affect long-term returns truly was a “revolutionary” (Shiller’s word) finding, that nothing in our understanding of how stock investing works will ever be the same again. You get it that, if Shiller is right, Bogle’s investing advice is insanely dangerous and is in the process of destroying millions of lives. But you cannot bear to let this knowledge into a part of your consciousness where you could act on it any more than an alcoholic could accept that his drinking has caused him to lose his health and his family and his career and his self-respect.

There’s a saying about alcoholics that they need to hit bottom before they can begin rebuilding their lives. When someone lands in the gutter, he loses his pride enough not to care anymore about the pain associated with acknowledging mistakes. At that point, he becomes so desperate that he will do anything to overcome his problem.

So it will be with Buy-and-Holders. If stocks continue to perform in the future anything at all as they have always performed in the past, the continued promotion of the smelly Buy-and-Hold garbage will put us in the Second Great Depression. That’s a lot of pain for millions of people. We will all want to end that pain. We won’t be so worried anymore about the loss of pride associated with having made a mistake. We will just want the mistake to be fixed. We will see that we are all in this together and we will all pull together to get the word out about what the last 35 years of peer-reviewed research tells us. We will all be on the same side at that point. There will be no more friction.

We will achieve 35 years of insights overnight. It will be amazing.

I wish that we could have done this properly back on the morning of May 13, 2002, or, even better, back in 1981, when we first gained the one big piece of the puzzle that had been missing since the day Buy-and-Hold was born back in 1965. But of course the alcoholic wishes that he had never lost his health or his family or his career or his self-respect. Things are what they are. Looking backwards doesn’t serve any constructive purpose.

We need to look forward. We all benefit from learning about Shiller’s findings. We are the luckiest generation of investors ever to walk Planet Earth.

But some of us are not today able to accept our good fortune. Doing so requires saying the words “I Was Wrong” or at the bare minimum “I’m Not Sure.” When things get dark enough, I believe that my good friend Jack Bogle will say those words. Then it all flips. Then the long national nightmare comes to an end. Lots of people want to make reputations for themselves and become multi-millionaires helping people learn how stock investing works in the real world. They don’t want to see their careers destroyed in the process of doing it. Once Bogle acknowledges his mistake, people will not be afraid anymore and the long-delayed national debate we all need to see take place will begin.

My take.

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:

Um no. This is exactly the result we should expect to see if PE/10 just isn’t that useful.

I had a short internal debate at to whether to approve this comment or not, Anonymous.

The case for approving it is that all signs are that you are sincere in what you say here. You don’t believe that P/E10 is too useful. There are obviously millions of others who feel the same way. So that point of view deserves to be heard.

The other side of the story is that you make no effort to make any rational case for your belief. Millions of people bought Shiller’s book. Behavioral Finance is a quickly growing discipline. Shiller was awarded a Nobel Prize for his work. The small group of Valuation-Informed Indexers who posted at the Bogleheads Forum before Lindauer took over control of the board were among the most popular posters in the community. You have long been insanely abusive in your responses to those who give expression to their sincere belief in Shiller’s findings. You do an exceedingly poor job of making the case for Buy-and-Hold. When you fail to state any reason for your beliefs, you don’t help the readers of this blog to come to a better understanding of the subject matter.

It’s sad.

The Buy-and-Holders have made major contributions. Bogle is my hero. But most of them have given up the effort to make a rational case for their beliefs given the mountain of peer-reviewed research showing that they made a mistake re the importance of exercising price discipline when buying stocks. Not many engage in the insane level of abusiveness that we see from you and your Goon friends. But not many speak out in opposition to your Goon tactics either. That’s not quite as bad perhaps but it is almost as bad. It’s certainly not honorable or edifying or inspirational or generous. It’s terribly, terribly sad.

Perhaps you are right. Perhaps P/E10 is not as powerful a tool as I believe it to be. I think it is a very powerful tool indeed. But perhaps I am wrong. If I were, I would in all likelihood be the last to see it. Given that reality, I elected to approve the comment and let your words appear here. Perhaps you are telling the true story and I am telling the false one and those who read these words need to see your point of view expressed to warn them away from placing too much confidence in my own.

I don’t believe that, however. I see too much hate coming from you to believe that you are capable of thinking these matters through carefully. I find you an intelligent person. But I believe that the emotionalism that comes to dominate you when you give a tiny bit of consideration to the possibility that you have destroyed thousands of human lives with your dogmatic “defenses” of the Buy-and-Hold concept cancels out your intelligence when you are writing on investing issues.

It is obviously not my intent to be impolite in any way. People need to figure out which side is right and which side is wrong. Your abusive behavior provides us all with an important clue. Buy-and-Holders are almost always either abusive or silent. It is rare to find one willing to engage in a calm and reasoned back-and-forth discussion on the merits of the issues in play (which makes it all that much more exciting in those rare cases when such a good soul is discovered!). Valuation-Imformed Indexers NEVER respond to challenges to their thinking with abusiveness or sarcasm or evasiveness or anger or demands for unjustified board bannings. As much as I love my Buy-and-Hold friends, I cannot help but wonder why.

I think P/E10 is a powerful tool. You don’t. That much is all part of the wonderful Learning Together game.

You hate me with a burning and undying hate. I am grateful for your contributions and what I learn from them. I think that the difference between the two emotional states tells us something important about the differences between Buy-and-Hold and Valuation-Informed Indexing, that the former is the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind while the latter is the first true research-based strategy.

But then, I would, wouldn’t I?

My best and warmest wishes you you in any event, Goon friend.

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:

No, Rob. You are the emotional one. Your emotions are driven by your failure in retirement and your failure with investing. This has caused you to emotionally respond by calling people goons, frauds, liars, etc. I don’t see anyone else making these kinds of emotionally driven comments.

On the substantive side, everything that I have said is also said by THOUSANDS of other people, including some of the biggest names in the field. Robert Shiller won a Nobel prize for his “revolutionary” (his word) findings of 1981. The stuff that I say on the substantive side is 100 percent mainstream stuff. You can’t get more “establishment” (to use a word we hear a lot nowadays) than to be a tenured professor at Yale and to have won a Nobel prize. So there is nothing even a tiny bit emotional about anything that I have said on the substantive side.

That said, you are right about things that I have said on the process side. I am the ONLY one saying that Buy-and-Hold has been shown to be a Get Rich Quick scheme, that the ongoing cover-up of what we learned about how stock investing works 34 years ago is the biggest act of financial fraud in U.S. history. There are a small number of people who have hinted that these things are so. For example, there was a group of economists who came out at the beginning of the economic crisis with a statement saying that the same ethical standards that apply in all other fields of human endeavor should also apply in the economics realm where long-discredited ideas are still promoted as if they were legitimate and that these ideas have in recent times caused great human suffering because most people don’t know that they have been discredited. That sort of thing happens from time to time. But that sort of thing is rare. I say that sort of thing ALL THE TIME.

It is not me who is being emotional re the process-side questions. These things need to come out. I pointed out the errors in the Old School retirement studies in a post that I put to a Motley Fool discussion board on the morning of May 13, 2002. If those studies really do not contain an adjustment for the valuation level that applies on the day the retirement begins, those studies should have been corrected within 24 hours of the moment when I put forward that post. They haven’t been corrected to this day. Every major publication in this field has run an article in recent years pointing out that the 4 percent rule, which comes from those studies, is in error, that you need to consider valuations to get the numbers right. But not one of the retirement studies has been corrected and we have not had a national debate on the question of how those errors remained in place for so long. That’s a scandal, Sammy. Something like that should never happen in a free country.

Emotion is indeed a factor here. But it is not a factor among the Valuation-Informed Indexers. It is a factor among the Buy-and-Holders. The Buy-and-Holders should have come clean when Shiller published his “revolutionary” (Shiller’s word) findings in 1981. Had that happened, we would not be in an economic crisis today. It hasn’t happened. Bogle hasn’t made one change to his Buy-and-Hold strategy in the 34 years since Shiller showed that the core assumption behind it is false. The Buy-and-Holders are in great pain as a result. They have destroyed millions of lives. More lives are destroyed every day that the cover-up continues. Continuing the cover-up for another day helps absolutely no one. I am the one trying to bring the cover-up to an end. That’s the rational course of action, not the emotional one.

You are the emotional one, Sammy. You do follow Buy-and-Hold yourself. In that sense, you are being truthful when you tell people that you think it works. But you have conned yourself. You so much need to believe in it that you cannot bear to consider what the last 34 years of peer-reviewed research shows and you cannot bear to see millions of others learn what the last 34 years of peer-reviewed research shows. You are causing great pain to millions of people. You are hurting people in a very serious way and that is making you an emotional basket case.

The only way we get out of this as a society is by coming clean re what has happened. We have laws that say we MUST come clean. Financial fraud is a felony in the United States. So people are going to learn what has been done to them down the road a bit. It would be better if they learned today. The longer we put this off, the greater the number of people who get hurt.

The cover-up is rooted in emotion, Sammy. The death threats come from an emotional place. The unjustified bans on honest posting that have been adopted at 20 different sites come from an emotional place. The tens of thousands of acts of defamation that have been directed at me and at others come from an emotional place. The threats to get academic researchers fired from their jobs come from an emotional place. That is all that Buy-and-Hold is today — emotion. It once was a real thing. Then the error was discovered by Robert Shiller. And now, after 34 years of cover-up, all that is left is a mountain of seething emotion.

We need to hear everyone in this field saying these things. We need to have the 34-year cover-up written up on the front page of the New York Times. That’s how we come to a successful resolution of this matter. We need to credit the Buy-and-Holders with their many amazing and genuine and powerful and life-affirming contributions. And we need to be clear and firm and bold in out statements about how they messed up re the valuations matter and re the tactics they have employed for 34 years now to cover up their mistake and re the pain they have caused to millions by doing so. It’s the only way out. Sunshine is a disinfectant. It is by coming clean that we all get to walk in the sun again and that we all get to feel good about ourselves again and that we all get to have fun on a going forward basis again.

I am your friend, Sammy. You don’t see it. But I am. If you were thinking clearly, you would see that, even if I am 100 percent wrong in everything that I say about stock investing, I am helping you by advancing a different point of view and thereby forcing you to sharpen your own arguments and thereby gain confidence in your strategy. You don’t see it that way. You hate me because I cite the 34 years of peer-reviewed research showing that you made a terrible mistake when you bought into the Buy-and-Hold strategy. I don’t hate you. The hate moves in only one direction. If you were thinking clearly, that would tell you something.

It is all going to come out. The sooner it comes out, the better off we all are. So I work as hard as I can to see that it all comes out as quickly as possible. I can do no more and I can do no less.

I care about you, Sammy. And I care about my good friend Jack Bogle. And I care about all of my other Buy-and-Hold friends. You cannot stand to hear me say that. It enrages you when I say that. But that’s the way it is. I speak out because I care and because I see the pain you are in and because I want to bring that pain to an end. Everyone in this field should be doing all that they can to bring this matter to a successful resolution. Life is better for all of us on the other side of the big black mountain blocking our forward progress today.

That’s my sincere take re these terribly important matters in any event.

And I really do wish you all the best things that this life has to offer a person regardless of the fact that you and I came to believe different things about how stock investing works in the real world.

My best wishes to you and yours, old friend.

Rob

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

It seems there is a catch 22 here. I though the crash was supposed to bring awareness to the dangers of buy and hold and resulting all boards being opened up to you, so that you could educate everyone. However, it seems that the boards need to open up first, so that people can be educated on the evils of buy and hold. Seems to be a vicious circle in which one is dependent on the other.

Yes, we are trapped by a Catch 22.

We all want to bring an end to the economic crisis. To do that, we need to open every discussion board and blog on the internet to honest posting re the last 34 years of peer-reviewed research in this field. However, investors are in great emotional pain today because they bought into the smelly Buy-and-Hold garbage pushed so relentlessly by the Wall Street Con Men. To win the support of investors for our effort to open the internet to honest posting, we first need to educate them to the realities. But we need an open internet to educate them!

Whachagondo?

Rob

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

The stock market continues to drop and it is being blamed on the drop in oil, the slowdown in China and the change in interest rates. For your plan to work, the blame needs to be pushed on buy and hold. What will cause people to blame buy and hold versus economic issues, such as what is being blamed in the current market?

What you say here is correct. It is the overvaluation caused by the continued promotion of Buy-and-Hold strategies that is the primary cause of the price drops. Prices ALWAYS drop hard once they reach insanely dangerous levels. Economic factors can be a secondary factor. For example, changes in interest rates can be the precipitating factor in changing investor psychology. But it is the investor psychology itself that is the primary factor causing stock price changes. When prices are as high as they are today, we are going to see price drops. The economic factors can of course influence the timing of the price drops.

Everyone will properly blame the promotion of Buy-and-Hold strategies once they are educated as to the implications of the last 34 years of peer-reviewed research. To educate people, we need to open every discussion board and blog on the internet to honest posting on safe withdrawal rates and scores of other critically important investment-related topics. That’s it. No one wants to endure a deepening of the economic crisis. We just need to collectively permit ourselves to benefit from the reality that we are the luckiest generation of investors ever to walk Planet Earth and then we make it over the Big Black Mountain and bring on the greatest surge of economic growth ever seen in our history.

The key is getting people to abandon their Buy-and-Hold fantasies. So long as people continue to delude themselves into thinking that the numbers on their portfolio statements are real, they view the last 34 years of peer-reviewed research as a threat to their ability to fool themselves. Once the Pretend Gains are gone, there will no longer be any appeal in self-delusion. Then we will all be working together to achieve learning experiences, just as we today do in every field of human endeavor other than stock investing.

We obviously would have been better in about 500 different ways if we had launched a national debate re these matters back on the morning of May 13, 2002. That said, the good news here is 50 times better than the bad news here is bad. It takes what it takes. No one is going to question whether this was worth the effort it took to get us turned around after we get to the other side and we are all obtained far higher returns at greatly reduced risk. It’s a process. We are today on the one-yard line. We are a blessed people.

I hope that helps a bit, my long-time Goon friend.

I naturally wish you the best of luck in all your future life endeavors.

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:

he is overtly claiming that not only was HE silenced by death threats, but that the 95% of people who agree with Shiller, are all doing so only because they either got death threats themselves, or else are afraid because of Rob’s death threats.

This post raises an important point.

Yes, I am saying that everyone who works in this field has been intimidated into not challenging Buy-and-Hold to the extent they would if they felt free to post their sincere beliefs. Please mark me down as saying precisely that.

I certainly don’t say that everyone knows about my case.

And I certainly don’t say that everyone has had death threats directed at them.

I am saying that everyone who works in this field feels INTIMIDATED.

I knew about the errors in Greaney’s retirement study in May 1999, when I put my first post to the Motley Fool board, Anonymous. I didn’t put forward my famous post pointing out the errors in that study until May 2002. Why the delay? What was that about?

I was intimidated.

I rationalized, of course. I told myself that it was okay not to point out the errors in the study because the study was an advance over the retirement studies that had been available to us in earlier days. That was so. Peter Lynch not all that long ago was saying that the safe withdrawal rate was 7 percent. At the top of the bubble, it was 1.6 percent. Greaney said it was 3 percent. Greaney was a lot closer to the mark than Lynch. Greaney’s study represented a big advance. I told myself that there was no need to point out the error because the study was more good than bad.

It really was good that the study advanced our understanding. So what I was telling myself was not crazy stuff. But my position did not make logical sense all the same. The fact that a study represents an advance is no reason not to point out errors in it and thereby to show people the way to yet another advance. We all want to plan our retirements effectively. In ordinary circumstances, Greaney would have been thrilled to improve his study. In ordinary circumstances, he would have thanked me for pointing out the error and would have promptly corrected it.

I didn’t point out the error for three years because I sensed that I was going to get an extremely negative reaction if I did. I wanted to be liked by my fellow community members. So I praised the study for the good things that it did (which was a legitimate thing to do) and didn’t mention the errors in it.

That’s a polite way of describing what I did. A blunt way of saying it is to say that — I lied.

I knew that the study was in error. I knew that my friends were using it to plan their retirements. I knew that suffering a failed retirement is a terrible life sentence. I knew that I was going to suffer a lot of hits if I was 100 percent honest about the subject. So I kept it zipped. And I put the retirements of my friends in jeopardy by doing so. I was a coward. I was a bad friend. I was a creep.

That’s the reality. I dish it out to others. I need to dish it out to myself from time to time as well. That’s the reality.

No, it doesn’t go to the White House. I have compared the Buy-and-Hold Crisis to what we saw in the area of race relations in the days before the Civil Rights Revolution. People with black skin could not drink from the same water fountains as people with white skin. Did that one go all the way to the White House, Anonymous? No one directed people to treat people with black skin as inferior to people with white skin. No one was so stupid that they couldn’t see the wrong in this. So why did the wrong continue for so many years?

It continued because the racist laws were part of the fabric of our society. Changing those laws meant tearing up the fabric of our society. It was a very, very necessary business. But it was also a very, very difficult business. Eventually, we couldn’t duck the matter any longer and we did the right thing. But we ducked that difficult business for a long, long time.

So it has been with the crazy idea that it might be okay not to practice price discipline when buying stocks.

There is not even a sliver of evidence supporting this crazy idea. 100 percent of the evidence available to us says that long-term timing is always required, 0 percent of the evidence says that long-term timing is not always required. So why do the “experts” in this field pretend that this investing stuff is oh-so-hard to understand and that maybe there is some alternate universe where Buy-and-Hold might really produce good results for one or two long-term investors?

Because that crazy idea has become part of the fabric of our society. We have been telling people that Buy-and-Hold might work for 50 years now. We have destroyed millions of lives by doing so. We have caused an economic crisis. We have hurt our friends and neighbors and co-workers in very serious ways We are ashamed. We know we need to fix the problem. But we cannot bear to face up to it.

It’s going to be painful coming clean, Anonymous. In other circumstances, I might be inclined to duck this one myself. I don’t like causing people pain. Why not just let it go?

I don’t let it go because I am causing people even more pain by ducking it. We have to get this matter behind us. We are the luckiest generation of investors ever to walk Planet Earth. And we are living through an economic crisis caused by our unwillingness to tell people about the implications of the last 34 years of peer-reviewed research in this field. Huh? That makes no sense. Really.

We need to get past this. We need to open every investing discussion board and blog on the internet to honest posting re the last 34 years of peer-reviewed research. This is not elective. This is imperative.

You wouldn’t be going to prison if someone had done this before you came along, Anonymous. Each day that as a society we elect not to come clean, more lives are destroyed. Each day that more lives are destroyed, your prison sentence grows longer and more people are put in circumstances in which they will likely go to prison. This is a good thing how? It’s not a good thing. It’s a CATASTROPHE. We need to turn this around. We need to do this by the close of business today.

That’s my sincere take re this terribly important matter, in any event.

We now know how stock investing works in the real world. It was Jack Bogle’s dream to learn that. For the past 34 years he has had all the pieces to the puzzle. But he doesn’t make use of them because in an earlier day he didn’t have all the pieces of the puzzle and he thus got some stuff wrong and now he is too ashamed of the pain that he has caused millions of people to come clean. If you don’t find that sad, I would hate to know what you think of as sad.

Short-term timing never works. Long-term timing (price discipline) always works. That’s the story. That’s how it works. I am sure.

The only reason why everyone in this field does not shoot straight with their clients and readers re how it really works is that they are afraid to do so. Millions of investors have been misled by the Buy-and-Holders into making imprudent investment choices. It is too late for them to get all their money back and all along they have sensed that they were being sold a bill of goods (because it defies common sense to believe that price discipline is required in every market but the stock market but that through some magical process exercising price discipline when buying stocks is actually a bad thing). These people are going to explode when they learn the truth. They are going to be angry as hornets. So most of us keep it at least partially zipped.

It’s a national tragedy. I want no part of it. Find someone else.

Shiller doesn’t know half of what he would know about this subject had honest posting been permitted all along. The same is true of Bogle. And of Pfau. And of me. In ordinary circumstances, we all would be learning from each other. We all have been held back by the Ban on Honest Posting. There’s huge leverage in lifting the ban. When the ban is lifted, we all will give ourselves permission to tap into hundreds of insights that we have denied ourselves for three decades and then those insights will be used to formulate hundreds of additional insights. And on and on and on.

I don’t want to be intimidated when I post to an investing board. I can’t do good work when I am intimidated. To do good work, I need to be permitted to put forward honest work.

It’s the same with Shiller. And with Bogle. And with Pfau. And with every last one of us.

The intimidation has to stop.

That’s why we made financial fraud a felony. The announcement of prison sentences brings this ugliness to an end. The announcement of prison sentences brings on the Second Independence Day for the American people.

I can’t wait.

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

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:

It is bad behavior when you hijack other people’s threads. It is bad behavior when you repeat the same thing over and over again despite people asking you to move on as they have heard your tired lines eat too many times. It is bad behavior when you post repeated lies (like you just did). It is bad behavior to make up things like death threats and job threats and refuse to back them up with proof when confronted. It is bad behavior to avoid answering questions, despite board owners asking you to support your claims. It is bad behavior to make slanderous comments about well respected financial experts, such as Jack Bogle and Wade Pfau.

If someone says “the safe withdrawal rate is 4 percent” and the peer-reviewed research of the past 34 years shows that it is really 1.6 percent at the time because of the valuation level that applies, Buy-and-Holders view it as “hijacking the thread” to tell people that. But the people who are trying to determine the safe withdrawal rate for purposes of planning their retirement need to know that, Sammy. They need to know the right numbers.

The Buy-and-Holders say that the safe withdrawal rate is 4 percent “over and over.” If we are required in conscience to let people know that that number is wrong, then we are required in conscience to let people know that that number is wrong as often as the Buy-and-Holders put forward the number. That is, we need to say that “over and over.”

The root problem here is that there are two schools of academic thought as to how stock investing works, the model based on Fama’s research (Buy-and-Hold) and the model based on Shiller’s research (Valuation-Informed Indexing). Both of these men were awarded the Nobel Prize for their research, so it can be said that both models are legitimate. But both cannot possibly be right. The two models are rooted in opposite premises.

The answer is for advocates of both models to tell people that there are two models and that the numbers they favor are the ones supported by their model and that their readers need to know that there is another model that generates very different numbers. When you do it that way, you are leaving it to the reader to make the decision as to which model to follow. You are providing information that you personally believe is accurate but you are not trying to hide anything from the reader that he needs to know. That solves the problem.

I think it would be fair to say that the Buy-and-Holders don’t do this because they feel that it would hurt their marketing efforts. They want to be perceived as “experts” and letting people know that there is another model that generates very different numbers undermines the claim that they are true experts. We all should want to undermine that claim. The reality is that no one in this field is a true expert today. The science is just too new. We are still in the early stages of learning how stock investing works. We have made important progress in recent decades. But we do not today know enough for sure to say in full honesty that we are certain of what we are saying, that we possess true expertise.

I believe that Valuation-Informed Indexing is the answer, Sammy. I believe that strongly. I also acknowledge that I have been wrong before and that it could be that it is happening again.

Can you say the same?

Can Jack Bogle say the same?

Bogle needs to say that. When Bogle and the other Buy-and-Holders get in the habit of saying that, all those who feel doubts about Buy-and-Hold will begin speaking up. We will see lots of articles questioning the root premises of Buy-and-Hold. We will see new types of calculators being developed. We will be hearing hundreds of podcasts describing strategies that we have never heard about before.

Perhaps Buy-and-Hold will prevail in the marketplace of ideas. Perhaps Valuation-Informed Indexing will prevail. There’s only one way to find out. We need to launch a national debate re these questions.

That’s my sincere take re these terribly important matters, in any event.

I wish you the best of luck in all your future life endeavors.

Rob

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

Can you point me to someone who says that they are expecting 30% returns? Quite a tall strawman.

I haven’t seen any posts on bogleheads advocating blind advocacy of the 4% rule of thumb. The majority seem to be targeting a much lower or variable swr and all are aware of lower future returns.

Buy-and-Holders don’t expect 30 percent returns. But they act as if the 30 percent returns that are reflected in their portfolio statements are real. When they are adding up their assets, they count that money. When they are seeking to determine whether they have enough to retire or not, they don’t apply a discount factor for the extent of overvaluation in the market at that point in time.

This is not a small point, Laugh. This is everything. Buy-and-Hold is rooted in the idea that the market is efficient, that stocks are always priced properly. Shiller showed that that is not so. Stock returns are real up to 6.5 percent per year. But returns above that returns are the product of investor emotion — we pump up prices because we want to fool ourselves into thinking that our financial circumstances are better than they really are.

Valuation-Informed Indexers believe in reporting things accurately.. We want to know where we really stand. We want to be able to plan effectively. Buy-and-Hold is a numbers-based approach. That’s what I love about it. When you root things in the numbers, you avoid subjectivity. You are giving people something hard to work with. But once you go to a numbers-based approach, you MUST make an effort to get the numbers right. If you don’t account for valuations, it’s impossible to get the numbers right. So Buy-and-Hold is the worst of all worlds — a numbers-based approach (which lends the thing credibility in the eyes of most smart people) that gets all the numbers wildly wrong (which makes the thing dangerous as all get-out).

You say that you have never seen blind advocacy of the 4 percent rule. Were you at the Motley Fool board in the time-period when The Great SWR Debate began? People there were using the 4 percent rule ON A DAILY BASIS to identify the day when they would hand in their resignations from high-paying jobs, jobs that they would not be able to get back if they made a mistake. And the numbers they were using were wildly off the mark! When you used a valuations adjustment, the calculation shows that a retirement that began at the top of the bubble and called for a 4 percent withdrawal had a 30 percent chance of surviving 30 years. Greaney was saying those retirements were “100 percent safe.”

When you say that the Buy-and-Holders don’t advocate “blind advocacy” of the 4 percent rule, what you mean is that they permit people to hold off on retiring until they have more assets than what the 4 percent rule would require. But they do not permit discussion of what the numbers say when a valuations adjustment is employed! I know whereof I speak re this one! I have the scars are over my body to prove the point! Why do you think that is? Why does it upset Buy-and-Holders so much for someone to show people the numbers you get using The Retirement Risk Evaluator?

It upsets them because to show people the real numbers sticks a pin in the fantasy balloon. Valuation-Informed Indexing is real. It is another numbers-based approach, so it has the same potential credibility as is possessed by Buy-and-Hold. But it goes one extra step. It reports the numbers honestly and accurately. It is the first true research-based approach (Buy-and-Hold is based on the research that existed from 1965 through 1980 but ignores the research published from 1981 forward). There’s a reason why Buy-and-Holders lose it when someone reports honestly and accurately on the peer-reviewed research in this field. Doing that makes it impossible for the Buy-and-Holders to work their scam both on themselves and on others.

Do you deny that discussion of The Retirement Risk Evaluator is prohibited at the Bogleheads Forum? If you do, you are a liar. It is prohibited. And thousands of community members there expressed a desire to be able to discuss it. The Buy-and-Holders see it as a threat. And they are right — Valuation-Informed Indexing IS a threat to Buy-and-Hold. If Shiller is right, Fama is wrong. If Valuation-Informed Indexing is the ideal strategy, Buy-and-Hold is the worst possible strategy.

The Buy-and-Holders know that, if these matters are discussed, Buy-and-Hold may end up deposited in the dustbin of history. THAT”S WHAT I WANT TO SEE HAPPEN. I believe that Buy-and-Hold was a mistake. I believe that it was a noble effort. I certainly don’t have anything bad to say about the purpose of the Buy-and-Hold project in its early days. Valuation-Informed Indexing wouldn’t exist if Buy-and-Hold had not come before it. Valuation-Informed Indexing is the fruit of the same project. Back in 2002, I intended to call this “Buy-and-Hold 2.0? or “The New Buy-and-Hold” or something like that. I am building on Bogle’s work.

BOGLE HATES THE IDEA OF SOMEONE BUILDING ON HIS WORK, changing it and bringing it up to date and thereby improving it.

No?

He hates the idea. That’s why we see all this conflict. The published rules of the Bogleheads Forum permit honest posting re the last 34 years of peer-reviewed research. Mel Lindauer and his Goon pals are brutally abusive to those who post honestly at that board. But Lindauer couldn’t get away with his dishonesty if Bogle didn’t back him up. Bogle backs him up all the way. Bogle plays the lead role in the most massive act of financial fraud in U.S. history. I love the guy. But that’s the way it is. I am a journalist and it is my job to tell people the true story. That is the true story here. It is a very big story.

No one is saying that the Bogleheads advocate blind advocacy of the 4 percent rule. That’s not the dispute. The dispute is over the fact that the Bogleheads do not permit advocacy of accurate and honest SWR numbers. I am fine with undermining support for the 4 percent rule. That rule has obviously destroyed millions of lives. But I want to take it a step forward. I don’t just want to show people how dangerous the 4 percent rule is. I also want to show them the numbers you get WHEN YOU DO THE CALCULATIONS HONESTLY, when you don’t commit financial fraud by “forgetting” to include a valuations adjustment.

Does the leadership of the Bogleheads Forum have a problem with that?

You know darn well that they do. Freakin’ Jack Bogle has a problem with that. That’s the issue here. Bogle needs to get over the fact that he made a mistake when he developed Buy-and-Hold many years back (before Shiller published his “revolutionary” [Shiller’s word] research).

If Shiller had published his revolutionary research in 1961, there never would have been a Buy-and-Hold. Bogle would have included a valuations adjustment going back to the first day and the thing would have worked and there never would have been an out-of-control bull market or an economic crisis putting millions of middle-class people out of work and we all would be living far richer lives today. But that’s not the way things played out.

We humans don’t know everything. We cannot see into the future. Buy-and-Hold was state-of-the-art stuff when Bogle founded Vanguard in the mid-1970, so that is what he went with. That part of the story is just fine. But when you advocate a research-based strategy, you are obligated to keep up with the research. Those who still advocate Buy-and-Hold today are 34 years behind in their reading of the research! Huh? Wha? That’s not acceptable, Laugh. That’s not okay. It’s not a close call. That’s not even freakin’ legal under the laws of the United States. Financial fraud is a felony. Bernie Madoff is in prison today for doing 1/500th of what Jack Bogle has done.

If you possess even the tiniest bit of sense, you secretly acknowledge that we need to somehow get out of this mess.

How do we propose that we do that?

There is only one way. Bogle needs to come clean. He needs to give that “I Was Wrong” speech (or at the very minimum an “I’m Not Sure” speech. If Bogle says either “I Was Wrong” or “I’m Not Sure,” there are going to be thousands of researchers and journalists and investment advisors who are going to feel safe to come forward with their sincere thoughts about how stock investing works in the real world. The entire nation is going to enjoy a massive Learning Experience. We are going to see more advances in the investing advice field in one year than we have seen in the past 30 years in the computer electronics field. It is going to be amazing.

Do the “leaders” of the Bogleheads Forum object to that amazing learning experience?

They sure do. They will fight to the death to stop it from taking place.

And the millions of middle-class investors whose lives are in the process of being destroyed as a result of this massive act of financial fraud will put them in prison following the next price crash.

Too sad, in my assessment.

If you want a kind and hard-working and balanced and sympathetic person to work with you to try to get your prison sentence reduced a bit, you’ve got him.

If you want someone to help you in your 13-year cover-up of the errors in the Old School SWR studies and thereby to get his own name added to the list of those going to prison, please look elsewhere. Not this boy. Not freakin’ interested. No can do.

That’s the story, Laugh. As you know. As I have said THOUSANDS of times now.

If you cannot give honest investing advice, you are better off not giving investing advice at all. Investing advice that can only be “defended” with death threats and demands for unjustified board bannings and tens of thousands of acts of defamation and threats to get academic researchers fired from their jobs is not honest. Buy-and-Hold needs to be brought down. I am the one who was elected to do the job. I am going to give it my best shot. That’s my pledge to you and to my good friend Jack Bogle and to the millions of middle-class people whose financial futures have been placed in my hands.

I don’t like having to carry this level of responsibility. I didn’t ask for the job. I don’t want the job. But here we are, you know? Whether I like it or not, this is my life. So I am going to give it my best shot. I wish you the best of luck with your efforts to hold me back (while of course also wishing myself and the millions of middle-class investors whose lives are in the process of being ruined the best of luck in our efforts to clean up this field of the corruption that has come to dominate it in the Buy-and-Hold Era). That’s as far as I can go. I don’t cross The Felony Line. Not once. Not ever. Non-negotiable.

We need to move forward. We need to launch a National Debate re the IMPLICATIONS of the past 34 years of peer-reviewed research in this field. That’s my sincere take re this terribly important matter in any event.

Valuation-Informed Indexing is the future. Buy-and-Hold is the past. Millions of lives are at stake. We all need to get about the business of moving from our ignorant past into our bright and exciting and promising and HONEST future. We will all feel a lot better about ourselves on the morning after Bogle gives that speech and it is written up on the front page of the New York Times.

I hope that helps a bit.

I am 100 percent confident that honest discussion of the last 34 years of peer-reviewed research will be very, very “marketable” following announcement of your prison term.

But I could be wrong. I don’t know everything. We are all going to have to wait and see how it plays out. Nothing could be more clear.

My best and warmest wishes to you and yours, my dear Goon friend.

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:

There is zero need for market timing. Any investor can just use a buy, hold, rebalance strategy tied to systematic investing that takes very little effort and time and gives a low cost, tax efficient and superior process/outcome.

We disagree, Anonymous.

I certainly acknowledge that there are millions of good and smart people who believe as you do.

I do not. I believe that long-term timing is price discipline and that price discipline is what makes markets work. I believe that a market in which price discipline has been undermined becomes dysfunctional and eventually crashes, causing huge amounts of unnecessary human misery.

That’s the conflict.

I respect your sincerity on this issue and I respect the huge contributions that the Buy-and-Hold Pioneers made to our understanding of how stock investing works. I have zero desire to discourage people who believe as you do from expressing their sincere beliefs about stock investing in a clear and firm and unapologetic way.

But I insist on my right and on the right of all who believe as I do to express our beliefs in a clear and firm and unapologetic way as well. Fruitful discussion comes from the respectful expression of sincere differences of viewpoint.

The Buy-and-Hold Model is supported by the peer-reviewed research of Eugene Fama, who was awarded a Nobel Prize in economics for his work in this area. The Valuation-Informed Indexing Model is supported by the peer-reviewed research of Robert Shiler, who was awarded a Nobel Prize in economics for his work in this area.

There is not one academic school of thought re how stock investing works. There are two. Advocates of both schools of thought have a right to participate actively and honestly at every investing discussion board and blog on the internet. Any site owner who tries to trick his readers into thinking that there is only one legitimate school of academic thought as to how stock investing works is engaged in financial fraud. That has not been so for 34 years now and it is a tragedy that so many millions have been misled into thinking that that might still be the case.

That’s my sincere take re these terribly important matters, in any event.

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

Rob

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

No, Rob, your posts are abnormal.

The world changed in 1981, Anonymous.

Going by what we knew about stock investing in 1980, my posts are certainly abnormal. Shiller’s 1981 finding that valuations affect long-term returns is the OPPOSITE of Fama’s 1965 finding that the market is efficient (that is, properly priced). It is not possible that both of these men are right; one of them is right and one of them is wrong. It is very important to everyone living on these planet that we all work together to find out which one is right.

We can’t achieve that purpose by limiting our discussions to what we thought we knew to be the reality prior to 1981. We need to incorporate the new findings into EVERY conversation. And those giving voice to the new understanding of how the stock market works need to be treated with the same respect and affection as those giving voice to the earlier understanding. We all want the same things. We all should be friends.

That’s it.

I insist on my right to speak honestly because I believe that it is best for every person on the planet for that right to be respected. New ideas do not have the power to become more popular on their own. New ideas become popular as the result of efforts of those who come to believe in them to spread knowledge of them far and wide. I do not believe that the market is efficient. I believe that valuations affect long-term returns. Every post that I write reflects that belief.

That must always remain the case. And I must never apologize for posting my honest beliefs about how stock investing works in the real world. And I must insist that my willingness to participate in discussions in a constructive and positive and life-affirming manner be given the respect that is merited. We all must insist on that. It is a founding principle of the nation in which we live. Honest posting should not only be permitted, it should be ENCOURAGED.

That of course goes two ways. I have always shown respect and affection to my Buy-and-Hold friends and I have always acknowledged their huge contributions. If I am to remain true to myself, I must continue to do so. I must demand respect for the voicing of the new ideas and I must show respect for the voicing of the older ideas. That’s the balance that works. That’s the balance that our nation has always employed to bring such conflicts to a successful resolution. That’s the balance reflected in the laws of our nation, which permit people to hold differing viewpoints on how stock investing works but which do not permit abusive behavior that rises to the level of financial fraud employed to block millions from learning about new research that they very much need to know about.

I will continue to play it that way. I believe that things will work out well for all. I could be wrong. We will have to wait and see.

Honest posting is the norm in this country. In every field of life endeavor other than the investing advice field. The investing advice field needs to change in a dramatic way so that it is possible once again for people of integrity to make a living doing good work in this field. That is not optional. That is imperative. That is not a nice idea. That is the law.

That’s my sincere take re these terribly important matters, in any event. Death threats are abnormal. Demands for unjustified board bannings are abnormal. Tens of thousands of acts of defamation are abnormal. Threats to get academic researchers fired from their jobs are abnormal. Honest posting on the last 34 years of peer-reviewed research in this field is wonderful and beautiful and intelligent and kind and loving.

I love you. And I love all of other fellow community members. So I will continue to post my sincere thoughts. Whether you threaten to kill my wife and children as my “punishment” for doing so or not. The very fact that you would make such threats shows that there is a part of you that is desperate to hear honest words on this subject. You possess a Get Rich Quick urge, like all of the humans. But the non-Goon side of you is just as real; you possess common sense as well (also like all of the rest of us). It is the conflict between what you hear from your Get Rich Quick urge and what you hear from your common sense that causes you to feel such pain when you read my words. You need to see that conflict resolved if you are to find peace.

It is only by posting honest words that I can help you to resolve that conflict. That’s the job.

I pledge to you to do my best to do this important job. I will aim to be as honest as I can be up to the point at which I am becoming uncharitable while also being as charitable as I can be up to the point at which I am becoming dishonest. I will continue to struggle as I have for 13 years now to combine the two great virtues of charity and honesty in all of the work that I do in this field. I believe that there will come a day when you will be able to see why it was so important that I do that. That will be one glorious day in this history of this nation indeed.

My best and warmest wishes to you and yours.

Hang in there, old friend. It gets better.

I am sure.

Rob