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

Maybe a better question is this: Which specific financial experts will NOT be going to prison in your opinion?

There’s a concept that is referred to in the law books as “industry practice” or “industry standard” or something like that. The idea is that one indicator of fraud is engaging in behavior outside the norm of the field in which you work.

That concept won’t do the job in the investing advice field. The entire industry is corrupt. We have known for 33 years that there is zero chance that a Buy-and-Hold strategy can ever work for even a single long-term investor. But people in the field noticed that the pure Get Rich Quick approach brings in the bucks just fine, peer-reviewed research be danged.

The standard here has to be broader. We certainly don’t permit 12-year cover-ups of errors in studies that people use for an important purpose in any other field. And we obviously adopted the laws against financial fraud for a reason. If we are going to send Bernie Madoff to prison, it’s more than a little hard to justify not doing the same for the sorts of individuals who have put forward posts in “defense” of Mel Linduaer and John Greaney, who obviously have caused 500 times the human misery.

We can’t send everyone in the field to prison. It’s not practical.

But I think it’s fair to say that the millions of people whose lives have been destroyed are not going to be in a terribly forgiving mood when they learn about the 12-year cover-up. So we are going to need to see action that insures beyond any doubt whatsoever that a message will be sent strong enough to insure that nothing like this will ever happen again.

My guess is that, soon after the next price crash, a number of people will come forward. They will say that their consciences just will not permit them to keep quiet any longer. Then there will be a deluge of truth-telling. . Lots of people will be hoping that by coming forward early, they will either be able to avoid prison or limit their sentences significantly. And it will be clear that the Buy-and-Hold Mafia just does not have the power to maintain the cover-up any longer.

We will see a media frenzy. That will lead to congressional hearings.

My guess is that there will be responsible people who will come forward with the aim of bringing the nasty side of things to a quick end so that we can all get about the business of taking advantage of the wonderful research findings that the Buy-and-Hold Mafia has been denying us for 33 years now. It wouldn’t surprise me if Congress adopted some form of amnesty for advisors who recommended Buy-and-Hold strategies but who did not show any evidence of bad intent.

I believe that the prison sentences will largely be limited to those who advanced threats of physical violence or who made demands for unjustified board bannings or who advanced hundreds of acts of defamation or who participated in or covered up threats of physical violence against academic researchers. I don’t think that we will be hearing any objections to long prison sentences for those sorts of individuals. It might be that there are other sorts of insanely abusive behavior that has been going on behind the scenes and that that will come out when people are coming forward with honest accounts in an effort to save their skins. But it would be the same general sort of behavior we would be talking about. People don’t care about people making mistakes. People get angry when people are dishonest and when they engage in a cover-up. It’s the people who have engaged in clear acts of dishonesty or cover-ups who should be most concerned about their futures, in my assessment. That means you, Anonymous!

Once the first prison sentences are announced, I believe that all the ugly stuff will come to a quick end. We will see a total reversal. We live in the most exciting time to be an investor in the history of the planet. There are billions of dollars to be made providing millions of middle-class investors with tools that are consistent with what we have learned from the peer-reviewed research over the past three decades. Once there is an announcement of ANY prison sentences, we will be seeing good stuff piled on top of good stuff piled on top of good stuff.

It may take decades for all the criminal and civil cases to work their way through the system. Does it really matter all that much? The good stuff here is 50 times more good than the bad stuff is bad. I think that will be the focus for all except those personally involved in the criminal and civil cases. I obviously cannot say how each case will be resolved. It is going to depend on the behavior of the individuals involved. There will be testimony taken at trials. That’s how the system works, no?

I ain’t going to prison! I know that much! There is no one else alive who has done as much to rein in you Goons as I have. There is no one in a close second place.

Fair enough, Anonymous?

Take care, man.

Rob

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

Rob,

You know that most don’t agree with your comments, but let’s put that aside. Bottom line, what is it you want? Is it simply for people to suck it up and bear with your posts and allow you back on the boards?

The fact that the majority of today’s investors do not follow Valuation-Informed Indexing strategies does not have to be viewed as a bad thing. From one way of looking at it, it can even be viewed as a very, very good thing.

Valuation-Informed Indexing is the first true research-based strategy. It is backed by 33 years of peer-reviewed research. It reduces risk by 70 percent. It increases returns by enough to permit those investors who follow it to retire five to ten years sooner. It puts an end to the economic crises that are caused by the boom/bust cycle that inevitably follows from promotion of Buy-and-Hold strategies. So the transition from Buy-and-Hold to Valuation-Informed Indexing is the biggest advance that we have seen in the history of personal finance. It will make us all much richer (in every sense of the word) people.

If there were only a few people who did not know about Valuation-Informed Indexing today, we would want to spread the word for the benefit of those few. But, given that most of today’s investors do NOT understand the implications of the peer-reviewed research of the past 33 years presents us with a huge opportunity. We will not be helping out 10 percent or 20 percent of the population when we open the internet to honest posting on SWRs and scores of other critically important investment-related topics. We will be helping out 80 percent or 90 percent of the population. The opportunity presented here is off-the-charts exciting.

There are some who will indeed have to “suck it up and bear with my posts,” as you put it. That’s certainly true of you Goons. It is also true of some others who feel pain when they see evidence presented that they have made mistakes in choosing their investing strategies. It’s a small percentage of the board population that feels that way, but there are indeed people in this category. Yes, those people have to suck it up. They agreed to tolerate the expression of a variety of viewpoints when they were granted the ability to post at our boards and blogs. They are going to have to honor the promises they made when they were granted posting privileges or find some other internet to which to direct their posts. We have rules on this one and we need to insist that those rules be respected.

The majority of community members are in a middle ground. They don’t fully understand or believe in Valuation-Informed Indexing. So they are not willing to fight for the right to hear about it. But they have zero problem with the idea of permitting people who want to hear about it to do so. The majority of our community members are NOT Goons. They are not Valuation-Informed Indexers. But they have no problem with the idea of others learning about it and in many cases they have a small interest in learning about it themselves so long as the threads in which they do so are moderated in a reasonable manner and they don’t see the death threats and the demands for unjustified board bannings and the tens of the thousands of acts of defamation and the threats to get academic researchers fired from their jobs that you Goons have been using to poison those threads for 12 years now.

Getting back on the boards with my right to post honestly re the last 33 years of peer-reviewed research respected is the first step on the path forward, not the last, Anonymous. Yes, of course I want that. And of course I demand that. And of course I insist on that. But please don’t think that that is the end goal. That is what we need to see for progress on all the other follow-up goals to be achieved.

I am happy to list follow-up goals if that helps. My guess is that you could imagine what they are. Or you could listen to the RobCast (#193 — My Vision) that I recorded on this topic:

http://www.passionsaving.com/personal-finance-podcasts-page-twenty-five.html

What I want is what I call “Normalcy.” I don’t want to see any invective from any poster, regardless of which “side” he or she is on. I put the word in quotes because I do not believe that there are any “sides” in a final, true sense. We all want the same thing — to learn how to invest effectively. The Buy-and-Holders need what the Valuation-Informed Indexers bring to the table and the Valuation-Informed Indexers need what the Buy-and-Holders bring to the table. We should be enjoying our good fortune in having been born the luckiest generation of stock investors ever to walk Planet Earth rather than quarreling over whether honest posting on what the peer-reviewed research says should be permitted on our boards or not. We should be going up, up, up, up, up rather than down, down, down, down, down.

What I most want to see is a change in attitude among the Buy-and-Holders. For the first 12 years, the attitude has been: “We have got to make the Valuation-Informed Indexer as uncomfortable as possible, we want them to leave the premises before they win converts and their new ideas begin to catch on in a big way.”

Yuck.

I WANT the new ideas to win converts. I WANT the new ideas to catch on. This is why I say that, for the first 12 years, you Goons and I have been working at cross purposes. I think that is unfortunate. I think it is unnecessary. And I don’t believe that we will have successful interactions until that basic attitude conflict changes.

Are you open to learning new things about how stock investing works?

If you are, I cannot imagine that we will not be able to work together to make everyone happy about the new arrangements.

If you are not, I cannot imagine that will will be able to work together to make everyone happy about the new arrangements.

We have to have that attitude change. We do NOT want anyone to say they believe in things they don’t really believe in. If you believe that the odds of a Valuation-Informed Indexing strategy producing good results are zero, you not only have a right to say so but a duty to say so. But even if you think the odds are zero, you should be happy that there are people in our community willing to argue the case for VII as effectively as they can. Those people add something important to the community discussions and those people must be respected and admired for their contributions. In the event that Buy-and-Hold really is the cat’s pajamas, those people help community members to see that by putting so much effort into making the case for the other side (and failing — which is what they will do in the event that Buy-and-Hold really is the cat’s pajamas and is not just imagined to be so by many of today’s investors).

My ultimate goals are very, very, very ambitious, Anonymous. I want to convert the entire world to Valuation-Informed Indexing. I want to get all the textbooks rewritten. I want to see a Nobel prize awarded to Wade Pfau and I want to see hundreds of academic researchers follow in his footsteps. I want to restore people’s confidence in our economic and political systems. I want to make Jack Bogle and Robert Shiller more famous and more loved and more wealthy than they have ever been before and make myself a good bit famous and loved and wealthy in the process.

But none of that is terribly important at this stage of the proceedings, in my assessment. What matters today is that I want to add to the value of every investing discussion board and blog on the internet in a big way by working WITH my Buy-and-Hold friends to enhance the world’s knowledge of how investing works.

Do you see?

I cannot contribute by arguing for Buy-and-Hold because I do not believe in Buy-and-Hold. If your idea of the purpose of the boards is to spread support for Buy-and-Hold, I don’t belong.

I don’t see that as the purpose. I see the purpose as spreading KNOWLEDGE whether the knowledge that is spread happens to count in favor of Buy-and-Hold or against it. Telling people about the implications of the last 33 years of peer-reviewed research obviously spreads knowledge in an important way. So that’s the direction to which I want to direct my energies.

I want to see us all Learning Together. That’s the short version of the story.

I believe that our wonderful Learning Together project will ultimately take us all to some amazing places. But talking about those places is better put off for later. Once we all see how wonderful the change is when we make the change we need to make, we will ALL be looking forward to our journeys to those amazing places. Today, we need to work up the courage to take the first magic step. The first magic step is adopting an ATTITUDE that is conducive to learning experiences.

That first step has proven difficult for us. The follow-up steps will prove a lot less so. I am sure.

I hope that helps a bit, old friend.

Rob

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

Rob,

You need to correct your mistakes. Start with your “I was wrong” speech and then we can go from there. After you give the speech, I will give you your list of mistakes to correct.

Again with the sarcasm.

I say that Bogle needs to give an “I Was Wrong” speech. So I presume that what you are suggesting here is that I have not been clear re what errors Bogle has made.

His error (one that LOTS of good and smart people made) was in believing that the research showing that short-term timing does not work showed that timing IN GENERAL does not work.

There has NEVER been even the slightest indication in any study that long-term timing might ever not work or might ever not be 100 percent required. That was a MISTAKE.

It was an understandable mistake at the time. No one had ever tested long-term timing at the time when Buy-and-Hold was being developed. But Shiller published the first research showing that long-term timing (price discipline) is ALWAYS 100 percent required in 1981. That’s 33 years ago. You cannot say that the mistake remains understandable today. For at least 12 years now (and almost surely longer than that, although I cannot personally testify to things that happened prior to May 13, 2002), the 1981 finding that long-term timing (price discipline) is always 100 percent required has been COVERED UP.

Do you now understand what the mistake is that I am asking my good friend Jack Bogle to own up to, Anonymous?

When Jack comes out and says publicly in clear and firm and understandable words that there is precisely ZERO support for Buy-and-Hold strategies in the academic research, we will never again see a retirement study published that does not contain an adjustment for the valuations level that applies on the day the retirement begins. We will never again hear anyone say that a 15 percentage point change in one’s stock allocation might be sufficient at a time when valuations have reached insanely dangerous levels. We will never again see a bull market. We will never again see an economic crisis. We will never again see discussions of investing marred with death threats or demands for unjustified board bannings or tens of thousands of acts of defamation or threats to get academic researchers fired from their jobs.

Such garbage will no longer serve any purpose once everyone knows about the mistake and about how much damage it has done to millions of middle-class people and even to the confidence that millions of people hold re our free-market economic system and re our political system. This mistake is the biggest mistake ever made in the history of personal finance. It caused our economic crisis. There are now millions of people unemployed because of our unwillingness as a society to acknowledge this mistake and fix it.

Once we fix the mistake, stocks will be transformed into a virtually risk-free asset class. The Bennett/Pfau research shows that it is the belief that there is some mystical, magical world in which Buy-and-Hold strategies might work for one or two long-term investors that is responsible for 70 percent of the risk of stock investing. There is no such magical, mystical world. Stocks are just like anything else you can buy in this Consumer Wonderland. You MUST consider price when making purchases. If too many people fail to do so, the entire market collapses because it is price discipline that permits markets to work their magic.

Bogle is of course just one guy. But he is the lead proponent of Buy-and-Hold. When he gives his “I Was Wrong” speech, it will be written up on the cover of the Wall Street Journal and the New York Times. That will launch a national debate. Every blog on the internet will be writing about the mistake and how it nearly brought down our economic system and about how all of our financial futures will be looking so much better once we all gain the power to talk openly about the first true research-based strategy (Valuation-Informed Indexing, or Buy-and-Hold 2.0).

It was all a mistake, Anonymous. There was never a grain of truth to any of it. Getting the mistake fixed promptly is the most important economic/political item on our nation’s agenda today.

All of the ugliness comes to an end on the day that Bogle gives that speech. Because the ugliness serves no purpose once the mistake has been acknowledged and fixed. We ALL should be working together to persuade Old Saint Jack to give that speech by the close of business today.

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

Thanks for asking an important question (albeit in a backhanded sort of way).

And please know that I extend my best and warmest wishes to you and yours.

Rob

 

 

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

Given the vast conspiracy of silence regarding valuations, isn’t it incredible such articles in the New York Times could occur Rob?

Do you think that the entire world went from believing that the sun revolves around the earth to believing that the earth revolves around the sun five minutes after the discovery was made, Anonymous?

Truth prevails over ignorance in time, but not instantly. It is a PROCESS.

We are living today mid-way through that process. Jack Bogle is the biggest advocate of Buy-and-Hold alive on Planet Earth. And even Jack includes research-based stuff in his books and speeches ALL THE TIME. I learned about the errors in the Old School safe-withdrawal-rate studies by reading Jack’s book. Jack gave a speech to the Vanguard Diehards back at the time when I was posting there that contained paragraph after paragraph of legitimate, helpful stuff. Then it concluded with gibberish, saying “so just be sure to Stay the Course” without pointing out that to Stay the Course in a meaningful way you must be CERTAIN to lower your stock allocation when prices reach insanely dangerous levels. Huh?

The NYT article you linked to would have been a good article to publish in 1985 or 1990. We should be a good ways past that today.

Where is the New York Times article reporting on the 12-year cover-up of the errors in the Old School SWR studies and on the felonies that have been employed to keep millions of middle-class investors from learning about those errors?

Where is the New York Times article reporting on the Bennett/Pfau research showing millions of middle-class investors how to reduce the risk of stock investing by 70 percent while letting them retire five to ten years sooner than they imagined possible in the Buy-and-Hold days?

Where is the New York Times article reporting on how Bogle hasn’t changed his investing advice one iota in the 33 years since Shiller’s research showed that there is precisely zero chance that a Buy-and-Hold strategy could ever work for even a single long-term investor?

Where is the New York Times article reporting on how Bogle continues to associate with the sorts of individuals who have put up posts in “defense” of Mel Linduaer and John Greaney after hearing hundreds of community members at the Bogleheads Forum express a desire that honest posting be permitted?

Where is the New York Times article reporting that it was the continued promotion of Buy-and-Hold strategies for 33 years after they were discredited by the peer-reviewed research in this field that was the primary cause of the economic crisis?

THOSE are the sorts of articles we need to be seeing today, Anonymous. This is not 1981 or even 1991. This is 2014. It is time to MOVE FORWARD.

Moving forward means telling people what Shiller’s findings means in practical, how-to investing terms. It means explaining to people the DANGERS of Buy-and-Hold strategies.

There is no magic in saying the words “Valuations Matter.” That’s a starting point. But the magic comes when we tell people in clear and firm and bold language WHAT THAT MEANS. What it mean is that valuations must be taken into consideration in EVERY STRATEGIC CHOICE MADE BY AN INVESTOR.

The Buy-and-Holders are still arguing the opposite to this day. The Buy-and-Holders are still arguing that long-term timing is not absolutely required for all investors, or heaven help us all, in some cases might not even be a good thing.

That’s not good, Anonymous. That needs to change. To make it change, we all need to make it a practice to call the Buy-and-Holders out on their b.s. when we see them engage in it.

The article does not go nearly far enough in making the case for Valuation-Informed Indexing over Buy-and-Hold. It is not a close call.

Rob

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

If you wouldn’t respond to an opinion your children have in that manner, it’s bullying. Like “Chocolate ice cream is smelly garbage” wouldn’t work.

If Shiller is right that valuations affect long-term returns, the 12-year Campaign of Terror against our board and blog communities caused the biggest economic crisis in U.S. history, Anonymous. Millions of people have lost their jobs in this economic crisis.

If terrorists caused this much human misery, not one person would have any problem with their “ideas” being characterized as “smelly garbage.”

I don’t say that the Buy-and-Holders intended these results.

So I guess that if you want to refer to all of the wreckage we see before us as “unintentional smelly garbage,” I am okay with that.

The wreckage is real.

Numerous discussion board communities have been burned to the ground. Millions of people are in the process of suffering failed retirements.

This stuff is not a joke. Very serious harm has been done to many people.

How do we get from where we are to where we all want to be? That’s what we all need to be thinking about.

I am sincere when I say that the hand of kindness is extended. I view the Buy-and-Holders as my friends. I don’t like referring to the work product of my friends as “smelly garbage.” But then I didn’t use that phrase on the morning of May 13, 2002. I began using that phrase only after I saw a lot of damage done to a lot of people. It is with that human misery in mind that I refer to Buy-and-Hold as “smelly garbage.” Buy-and-Hold became smelly garbage in my mind when I saw with my own eyes how much harm a dogmatic belief in Buy-and-Hold principles could bring about.

I truly believe that Buy-and-Hold was a big intellectual advance over what came before it. I truly believe that the Buy-and-Holders are good and smart people who have contributed many genuine and powerful insights. I truly think of these people as my friends. I truly want to reduce frictions and heal wounds.

But we are not going to be able to act as if the last 12 years did not happen.

We can spin things in a positive direction. We can set things up so that the bad stuff is to a large extent buried and the good stuff highlighted. It makes all the sense in the world to do that. But please try to think of realistic solutions to our problems.

I’ll give you something concrete.

Wade Pfau raved about Valuation-Informed Indexing when he did the research showing how superior it is to the old understanding of Buy-and-Hold (one way of highlighting the positive is calling VII “the new Buy-and-Hold” or “Buy-and-Hold 2.0,” which is what it really is). His excitement shows us two things.

One, it shows us that even people who are super-educated about these matters do not appreciate the effect of valuations today. Wade was not faking. He holds a Ph.D. in Economics. So he should have known all this. But his e-mails to me show that he did NOT know all this until he explored it in depth. That’s wonderful. That lets the Buy-and-Holders largely off the hook. They were not lying when they said they didn’t believe that VII works. They hadn’t yet enjoyed their epiphany experience. Letting the Buy-and-Holders off the hook in that way is a 100 percent positive and constructive and life-affirming way to go.

But, two, it shows that this advance is a big deal. A guy with a Ph.D. in Economics did not know about this until he was exposed to our discussions. Now he knows. VII is a very, very, very big deal.

You clearly have a lot of worries about me obtaining too much wealth and fame as a result of the discovery of these powerful insights. Those worries are silly.

I AM going to obtain a lot of wealth and fame. As you say above, good for me. I have developed something wonderful beyond belief. I earned a lot of wealth and fame. Let’s all be grateful that our system insures that I will get what I deserve.

But let’s not stop there. LOTS of people are going to enjoy a lot of added wealth and fame as a result of these breakthroughs. We are already seeing this with Wade. He holds back on what he says because of the threats made by you Goons. But he is still doing wonderful work. And he is becoming well known in this field for the work he is doing. That’s helps us all! That’s is how it is supposed to play out.

I want that for everyone.

I want it for Bogle and Bernstein and Swedroe and Burns and on and on and on.

THAT’S the way to play it.

I will get the wealth and fame coming to me. And lots of other people will get the wealth and fame coming to them. There is plenty of wealth and fame to go around here. This is the biggest advance in our understanding of how stock investing works ever achieved in history. So let’s not focus on small, petty stuff, okay?

The more wealth and fame we see being handed out, the better is it for those of you who have engaged in Goon-type behavior. What you need is for the millions of middle-class investors not to be too angry about the 12-year cover-up. The more exciting the story we tell, the less angry and the more excited they are. Being honest about this stuff is a win/win/win/win.

What we all need to do is to do everything in our power to unleash all these powerful and mind-blowing insights. FORGET about who gets the credit. People will figure out who to give credit to when they hear about all that went down. People will be fair. I played a huge role. But lots of others played important roles too. And lots of others will be playing important roles in days to come. So there are going to be lots of people obtaining lots of wealth and fame. It’s not a problem.

A rising tide lifts all boats. The spreading of the word re VII is going to bring on the biggest rising of the tide that any of us has ever seen. Can we all make an effort to stop worrying about Rob Bennett becoming rich and famous and just enjoy that?

Rob

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

People simply point out the facts – that valuations affect around 40% of the variability in out of sample returns in historical data sets, but that the future is a very unknown place. You can’t go beyond the facts – that would just be making up stories.

I am not in full agreement with what you are saying here, Anonymous. But I like it that you are talking in a real way. You are doing a decent job with these words of articulating the beliefs of many smart and good people. That’s obviously a positive thing to do.

The 40 percent number comes from the Vanguard study. I am not willing to sign on to it without giving the matter more study. But I don’t have a big problem with it. I am fine with accepting that number as a reasonable number. So we can call ourselves being close to agreement re that one.

I agree that the future is an unknown place. I wouldn’t go quite so far as to say “very unknown.” I think we know important things about how stocks are likely to perform in the future. But there certainly are big gaps in our knowledge and it certainly is better to be modest in one’s claims than it is to be dogmatic in them. So, again, I think it is fair to say that we are close to agreement.

Where I see a significant difference emerging is when you say: “You can’t go beyond the facts — that would just be making up stories.”

The problem we BOTH face is that we MUST go beyond facts.

We don’t have the option of putting off making decisions on investing questions until the scientific community achieves a consensus on all these matters. We have money that must be invested TODAY. Each and every one of us must choose Path A or Path B regardless of any doubts we entertain as to the ultimate merit of the choice. This is the biggest reason why discussions of these issues are so sensitive. People on both sides have a great deal riding on being right. And they MUST make a call based on limited information. We live in the present and we won’t know all the answers until sometime in the future.

You say: “You can’t go beyond the facts — That would just be making up stories.”

The Old School safe-withdrawal-rate studies go beyond the facts. They organize and interpret the facts in a manner that leads readers of those studies to the conclusion that a 4 percent withdrawal rate is safe at all times.

I organized and interpreted the same facts (the historical return data) in a very different manner and came to a very different conclusion when I built The Retirement Risk Evaluator.

Was John Greaney making up stories when he published his SWR study at his web site?

Was I making up stories when I published The Retirement Risk Evaluator at my web site?

Were we BOTH making up stories?

Were we both just reporting facts?

That’s the question you need to answer for the point you are advancing here to convey any message of significance in the real world.

If I say that the numbers in the Old School SWR studies are right, I am saying that the numbers in my SWR calculator are wrong. It obviously would be dishonest of me to say that. I believe that the numbers in my SWR calculator are accurate.

If Greaney says that the numbers in my SWR calculator are right, he is saying that the numbers in his SWR study are wrong. Perhaps he feels that it would be dishonest of him to say that.

So what do we do?

You say that going beyond the facts is “making up stories.” But one must go beyond the facts to offer investing advice. How the facts are organized makes a huge difference. Greaney and I organize the facts in very different ways.

Do I have the right to organize the facts in the manner in which I believe they should be organized and report on the conclusions that follow from that method of organization at every discussion board and blog on the internet or do I not possess that right, in your assessment?

I say that I possess that right. I’ll go further. I say that I possess a DUTY to INSIST on recognition of that right.

What say you?

Rob

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

Which then means that not a single expert has the full combination of being honest, avoiding conspiracies and is knowledgeable……..and that you alone, Rob, is the only one that has all three of those attributes.

I don’t think that what you say here is too terribly far off the mark, Anonymous.

We all have different strong points and different weak points.

There are areas where Bogle’s knowledge base is so far greater than mine that it would be silly to compare the two.

That’s true with Shiller too. And of course with lots of others.

But if you limit the discussion to valuations, I far surpass Bogle. He is not in my league. Not because he is dumb. He is very smart. But he has elected not to learn about valuations. He has deliberately stunted his own growth in this area. So I have been able to race ahead of him. It may be that someday he will start devoting his energies to coming to a better understanding of the effect of valuations and then he will surpass me in that area too. He has chosen until today not to do that.

Valuations happens to be the most important subject matter for the majority of middle-class investors. This is the are where we had a huge advance a number of years back that most experts in the field have elected (not with full intent, but still…) not to pursue. So I have been able to go to the head of the class on an overall basis without going to investing school or managing a huge fund.

It’s been easy for me to avoid conspiracies. I never advocated Buy-and-Hold. So I never had any vested interest in it. I never experienced any psychic pain reading Shiller’s work or exploring the implications of it.

And, yes, I try to be honest. I think these other people do too. I believe that one of the big problems we have is that they feel that I am calling them dishonest when I say that they got the SWR wrong and they become defensive about it because they view it as important to be honest. So I do believe that they try to be honest. I often say that they are “smart and good people.” But their cognitive dissonance does not permit them to be fully honest.

Please remember that I was not fully honest in the days prior to May 13, 2002. I rationalized not speaking up about the errors in the Old School SWR studies for a time. I do not say that I am better than other people. Part of the reason why I have had to play it so honest is that I have had you Goons on my back for 12 years and, if I engage in one tiny bit of dishonesty, I am sure to be burned at the stake for it. My personal circumstances are more than a bit unusual.

The bottom line is pretty much as you say. The work that I present here is the product of a combination of a reasonable amount of intelligence and a reasonable amount of integrity. That happen to be a rarely found combination in InvestoWorld in the year 2014. So, yes, I believe that the investing advice offered here is superior to what is available just about anywhere else.

I wish it weren’t so. Anonymous. I would like to see all my blogger friends offering top-notch investing advice. I would like to see Jack Bogle offering top-notch investing advice. I would like to see Index Universe and Bogleheads Forum and Motley Fool and Early Retirement Forum offering top-notch investing advice.

You know what it takes, right?

We need to hear Bogle give his “I Was Wrong” speech.

That will clear the air for everything. That will launch the national debate we all need to hear.

Then EVERYONE will be offering advice that shows millions of middle-class investors how to reduce the risk of stock investing by 70 percent while increasing returns enough to permit them to retire five to ten years sooner than they ever imagined possible.

You know what, Anonymous? You should stop worrying about me getting the credit for all the wonderful material at this site. If you spent one-tenth of the energy learning from that material and spreading the word, you wouldn’t have to sweat it so much that I will be getting the credit for all this amazing stuff.

I am going to get plenty of credit. I deserve it. I sweated blood getting all this stuff right. I had to fight you Goons with two arms tied behind my back every step of the way. And I never flinched. I never quit. I never even slowed down. I am about as proud of my performance here as you would be proud of yours if the tables were turned.

But I am not going to be the only person getting lots of credit. This is so huge that there is plenty of credit to go around. LOTS of people will be getting lots of credit.

Here’s a tip: The early adapters are going to get the MOST credit.

Do you see what I am hinting at here?

My best wishes to you, old friend.

Rob

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

Ok, that’s reasonable. But that’s very different from:

I don’t see the big difference between Form A and Form B.

I do not feel bound in conscience to use Form B.

If the Buy-and-Holders were to tell me that they prefer that I use Form A to make this point, I would be happy to give up Form B.

I have suggested elsewhere that someone offer particulars of things that I say that Buy-and-Holders find objectionable. I would happy to let them know whether I can go along with the suggested phrasing or not.

In the case at issue here, I would have no problem going along with the suggested phrasing.

If it were suggested that I say “the Old School SWR studies are analytically valid,” I could not go along.

But even in that case, there are lots of things that I would be okay with saying. I am happy to say that the Old School SWR studies constituted a big advance from what we had before they came along. I am happy to say that the people who prepared the Old School studies possessed a sincere desire to help people. I am happy to say that the Old School SWR studies accurately report the Historical Surviving Withdrawal Rate (HSWR). I am happy to say that there is always a chance that a 4 percent withdrawal will work and that, except when valuations are very high, the odds that 4 percent will work are very high. I am happy to say that none of this is pure science and that we are still at a stage where we are learning lots of new things and that thus all of us should try to avoid dogmatism. I am happy to say that the authors of the Old School SWR studies are good and smart people.

There’s one scenario in which I could even see myself saying that it is okay for an Old School SWR study to remain up at a site in Old School form. If the author of the study included language in the study explaining that there is a New School of thought that maintains that an adjustment for the valuation level that applies on the day the retirement begins must be included in the calculations and linked to places where more background on that school of thought could be obtained, that would show good faith and put the readers of the Old School study on notice that there are good and smart people who have issues with the way the retirement study they are reading was set up.

In that case, I think it could be argued that the burden has been moved to the reader to decide whether a valuation adjustment is required or not. In those circumstances, I think it could be argued that the author of the Old School SWR study has placed himself on the right side of the ethical divide.

I acknowledge the sensitivity of these discussions. If there are things that can be done to reduce the friction, I am all for us working together to see that those things are done. The words above suggest that in this particular case, an acceptable change in wording would help. In those sorts of circumstances, I am of course happy to agree to state things in the acceptable way.

Rob

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

if you make a wild causal claim like this, you must back it up with evidence. Can you point to any academic studies showing, or even trying to show this is true?

There is no direct evidence one way or the other. We cannot ask the market to sit down on the coach and respond to our questions.

The Buy-and-Holders BELIEVE that bad economic news caused low stock prices. They do not KNOW this. There is no study that SHOWS this. They arrive at this conclusion by following the logic of their theory, which is exactly what I do. Different theories lead to different beliefs about all sorts of questions.

If the Buy-and-Hold theory were correct, price changes would be random. They are not. So I throw the ideas that follow from Buy-and-Hold out and go looking for ideas that make sense given what the last 33 years of research tells us.

The research shows that the primary cause of price changes is changes in investor emotion. If that’s so, the best time to buy stocks is when investor emotion can only move in an upward direction. That’s when prices are low. When prices are low, there is zero risk because there is only one direction in which emotion (and prices) can move.

Do you not agree that, when prices fall hard, trillions of dollars of spending power leave the economy? Is there some doubt about this point?

If trillions of dollars of spending power leave the economy, would you not expect the economy to collapse? What else could it possibly do?

The point that I am making here is self-evident, Anonymous.

It is not self-evident to someone who believes in Buy-and-Hold. Buy-and-Hold posits that it is economic developments that cause price changes. But to someone who has given up on that idea because the last 33 years of research discredits it, what I am saying here is self-evident.

It’s as clear as clear can be. We once thought that things worked one way. Now we know that we were wrong. We are in the process of determining how things REALLY work. All of the work that I do at this site is part of an effort to explore the IMPLICATIONS of Shiller’s revolutionary finding of 1981.

The amazing thing is that no one had done this work before I came on the scene. Is that my fault? I am trying to get more people involved. I think it would be fair to say that, if you Goons stopped the attack stuff, I would be more successful doing that. It is very, very important work. And once Buy-and-Hold falls, it is going to be very, very financially rewarding work. My personal thought is that anyone who possesses the qualifications to do the job and who holds off on taking advantage of the opportunity is a fool.

Anyway — I certainly have as much proof to offer in support of what I say as the Buy-and-Holders have to offer in support of what they say. Please show me the study showing that it is economic developments that cause stock prices to drop. You believe it. I can give you that one. But you cannot provide a URL for a study because no such study exists.

I face this problem in lots of different areas. Buy-and-Holders act as if they are 100 percent sure of everything they say. But rarely do they have any evidence to point to in support of what they say. They just argue that “Everyone agrees about this” or some such thing. If what everyone thought was right, you wouldn’t see “revolutionary” findings like what we saw in 1981 from Shiller and in 2012 from Bennett/Pfau.

Mark Twain said that it is not the things you don’t know that hurt you the most but the things that you know for certain that just ain’t so!

Rob

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

I think we need a label for what everyone on Bogleheads does — let’s call it Strategy B. Strategy B says: “Historical data shows valuations explain some of the variability in future stock returns. If I choose to, and it makes sense for my circumstances, I may vary my asset allocation based on them.”

What do you think of Strategy B? Since it sounds like what you employ personally, and what most other investors (including myself) use, isn’t this a general system we can all agree on? If now, how is it flawed?

I agree that Strategy B is what most people follow today, Anonymous.

I certainly have no objection if people follow it. People should follow what they believe in. Lots of people believe in what you call “Strategy B.” They are right to follow it.

I don’t follow Strategy B. And it’s not true that all Buy-and-Holders follow Strategy B. I agree with you that most do. But I don’t believe that John Greaney follows Strategy B. I don’t believe that Eugene Fama follows Strategy B. Greaney and Fama are Buy-and-Hold purists. I am a Valuation-Informed Indexing purist.

The only problem I would have with Strategy B being “a general system we can all agree on” is if making that the general system means that the Buy-and-Hold purists and the Valuation-Informed Indexing purists cannot speak their minds.

We do not today know all there is to know about how stock investing works. Perhaps the Valuation-Informed Indexing purists are right. Perhaps the Buy-and-Hold purists are right. Perhaps the Strategy B people are right. Members of all three groups should express their sincere views and members of the other groups should show them respect when they are speaking. In time, one of the three groups will win the day. But we are just not there yet.

You are saying something important when you say that Strategy B is the most popular belief system today. That really is so. The problem for me as a Valuation-Informed Indexer is that most people view Strategy B as an offshoot of Buy-and-Hold and view both Strategy B and Buy-and-Hold as “acceptable” strategies. Valuation-Informed Indexing, in contrast, is viewed as “out there” and hard to accept.

Valuation-Informed Indexing will not become more popular over time unless people hear about it and are able to ask questions about it. So I need to open up space for debate over Valuation-Informed Indexing at every board and blog. I have no intention of closing up space for Buy-and-Hold or for Strategy B when doing that. My intent is a positive one, not a negative one. I am trying to add something, not to put an end to something (except to the extent that that something tries to put an end to Valuation-Informed Indexing before it even has a chance to grow into something big).

I view this as an encouraging post. If you are checking with me as to whether I am okay with the idea of all “sides” taking a less dogmatic position re what they believe in, I support that effort 100 percent and want to do anything in my power to see that it is successful.

I don’t personally believe that Strategy B is the right answer in an ultimate sense. But it IS more popular than either of the two purist approaches and it is also less dogmatic than either of the two purist approaches, which is a plus from a process standard. If there is ever going to be a time when large numbers of people are going to become Valuation-Informed Indexers, there probably is first going to need to be a time when there is widespread support for Strategy B.

It is a lot easier to make the shift from Buy-and-Hold to Strategy B than it is to make the shift from Buy-and-Hold to Valuation-Informed Indexing. And it is a lot easier to make the shift from Strategy B to Valuation-Informed Indexing than it is to make the shift from Buy-and-Hold to Valuation-Informed Indexing.

Helpful post. I hope we can work together to use it to take us all to good places.

Rob