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

You may be surprised to hear this from me but yes valuations do matter. There are a number of indexers who believe that the reason you shouldn’t invest in individual stocks is because it’s straight-up gambling and even Warren Buffett himself is nothing more than a lucky gambler. Buffett of course has repeatedly mocked these true believers in the Efficient Markets Hypothesis in his letters. He doesn’t mind them because he figures if his competition isn’t even trying, it’s easier for Berkshire. But indexing is a different beast than individual stocks. You’ve probably heard of Bogle’s phrase “the majesty of simplicity”. Simplicity is what truly makes indexing special. Any idiot can do it and be a success. Market timing, while possible, is much harder than many people including you seem to think it is. If market timing was so easy then I’m sure you wouldn’t have missed the 2009 buying opportunity. Thing is as hopeless as you (and I, and many others) are with this stuff all is not lost. Over time buying and holding the index has yielded very good results, results superior to those of most who either pick their own stocks or buy managed funds. Buffett can beat the index, one of my favorite bloggers a young Buffett wannabe Joshua Kennon can beat the index. These people are the exception, not the norm. Buffett (and Kennon) both realize this and that’s why, even though they reject some of the core beliefs of indexers, they recommend indexing for almost everyone else. Bottom line is your approach to investing takes something that works and that is simple and makes it needlessly complicated. The end result of VII is the opposite of what you intend it to be. Just look at your own performance over the past 18 years and compare it to any diligent indexer’s performance. We are in complete agreement re the need for simplicity, Sensible. That’s what I love about Bogle. He is the only major figure who cares enough about the little guy to devote his efforts to promoting a simple approach. If I thought that VII were more complex than Buy-and-Hold, I would not advocate it. VII is more simple. Buy-and-Hold is an emotional roller coaster. One day you are riding high, the next day your retirement account is wiped out. That’s not simple. That’s panic-inducing. For a strategy to work long-term, it has to take human emotions into account. Ignore human emotions and you make the thing 10 times more complicated than it needs to be. The research that Wade and I co-authored shows that the biggest portfolio loss ever suffered by a Valuation-Informed Indexer is 21 percent. For the Buy-and-Holder it is 61 percent. The strategy where you see 61 percent of your life savings wiped out is the more complex strategy. Even Bogle acknowledges that investor should aim to Stay the Course. Investors who are permitting their risk profiles to jump around wildly are not Staying the Course in any meaningful way. But say that an angel came down from heaven and told us you were right. You should STILL be in favor of permitting honest posting. If you are right, people will see that and have even more confidence in Buy-and-Hold after hearing both sides of the story. Your opposition to the idea of permitting honest posting shows that you lack confidence in Buy-and-Hold. If those who advocate Buy-and-Hold lack confidence in it, how should those who are critics of it feel about it? If you were making an argument against short-term timing on simplicity grounds, I would agree strongly. There’s no place for it for the average investor. Long-term timing is not even a tiny bit complicated. You have to spend five minutes per year checking the P/E10 level. Then once every 10 years or so, you need to make an allocation change. For the peace of mind that comes from knowing you will never see a portfolio drop of more than 20 percent, those five minutes per year are the best five minutes you will ever spend on investing stuff. There is nothing even a tiny bit complicated about long-term timing. What is complicated are the convoluted arguments that Buy-and-Holders try to come up with to persuade people that it is not necessary. And this goes beyond just giving advice for ordinary investors. Greaney was pushing his SWR study to early retirees. There were people at the Motley Fool board who believed that study was accurate. Those people are today well down the path to suffering failed retirements. No desire for simplicity can justify something like that. If there are investors who find Buy-and-Hold more simple, it is certainly their business. They should go with what sounds good to them. But no desire to market something as simple can justify deception on a fundamental issue. We need to be honest with people. That is 100 percent imperative. There never should have even been any question about that. VII is perfectly simple. The only reason you are being stubborn about it is that your pride is hurt. If those of us who believe in research-based strategies had warned people of the dangers of high valuations back when valuations first went to insanely dangerous levels, we would not be in an economic crisis today. We all would be 50 times better off. People don’t find it complicated to consider price when they buy a car or a sweater or a banana. There’s no reason why they should find it complicated to consider price when buying stocks either. Rob

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

Rob, don’t you think the comparing VII to segregation to be quite a bit extreme? No one but yourself has stopped you from practicing VII. Furthermore, you are free to spread the VII gospel not only on your own web site but on numerous other web sites (so long as you otherwise follow their terms of use).

This is a good question.

No, I don’t think it is extreme. I think it is a good comparison.

I am not saying that the two cases of ignorance are equally evil. Segregation directly affected people (not their money). Segregation was far more evil.

The similarity lies in the manner in which the ignorance manifests itself.

No one stops me from talking about Valuation-Informed Indexing at lots of web sites. That is so. You’re not right that I can continue doing so so long as I follow the terms of use. I always follow the terms of use. But you are right that I could continue so long as the owner of the site enforced the rules in a reasonable manner. When you Goons engage in trickery, the owner can certainly see what is going on.

And you would think that the site owner would want to enforce the rules in a reasonable manner. First of all, they are his own rules. He obviously believes in them. Second, all of the site owners invest themselves. So they need to learn how to invest effectively themselves. And, third, the site owners benefit if they give to the people who follow the site a good learning experience. Valuation-Informed Indexing is new and research-based and holds tons of promise and potential, that sure seems to fit the bill. So it should not be hard to spread the word re this.

It should have been easy to spread the word re the dangers of segregation too. What was it really about? We were holding people back. Blacks were about 10 percent of the population. We were taking 10 percent of the population and saying that that group was not going to get the same education or the same opportunities, so they were not going to get the same chance to develop their human potential.

What’s the downside? The downside is that we miss out on lots of great doctors and policemen and nurses and accountants and lawyers and politicians and athletes and musicians and artists and store clerks and factory workers and on and on and on. And friends. Segregation meant that white people did not interact with black people as often. So they missed out on making friendships that would bring comfort to their lives.

It wasn’t any harder to see how that bad situation could be changed than it is to see how the bad situation we are dealing with today can be changed. Why didn’t those Southern states just take a vote and end those dumb laws without having to be pressed to do it? Why did we need all that drama? The freedom buses and the speeches and the protests and the yelling — Why was any of it even a tiny bit necessary? Every reasonable person knew this had to be done. Why was it so hard to pull it off?

There’s a great story about Rosa Parks. She’s the black woman who refused to go to the back of the bus and generated a big commotion by refusing to do so. The story is that she did the same damn thing ten or twelve years earlier. The first time, she was just arrested and nobody ever heard anything more about it. Rosa Parks was not SuperWoman. She did not possess magical powers. She just knew inside that she had to do something. And she did it. And when it didn’t work, she waited ten or twelve years and did it again.

Lots of people could have been Rosa Parks. She wasn’t the only one who saw the injustice. She wasn’t looking to be a hero. She saw that something needed to be done and there came a time when she just did it. It’s not that she wasn’t afraid. It’s that things got to a point where she just couldn’t help herself. And because she acted, lots of others worked up the courage to act. And those lots of others inspired more lots of others. And when enough people had been inspired to act, things got done.

Things don’t happen as clean and pretty as we might be inclined to think they do when we read history books. Human advances are achieved through a messy process. It is often the case that someone has to stick his or her neck out to achieve change. And it is often the case that no rational case can be made in terms of self-interest for that person taking the action that needs to be taken.

The odds of Rosa Parks changing history were very small. She knew that. How could she not know it when she had tried the very act once before in her life and it had failed? What possessed her to take the chance she took when the odds of success were so tiny? She just couldn’t freakin’ stand it anymore. She had been placed in circumstances in which she felt compelled to do a crazy but wonderful thing and that crazy but wonderful act liberated millions of people, both black and white.

I am the Rosa Parks of personal finance.

Rosa Parks was a humble woman. So it may not sound entirely Rosa Parks-like to compare myself to a hero. But you asked the question and the question needs to be answered properly and there is no one else who has the guts to say it today. So I need to say it whether it sounds odd or not. I am the person who stood up to the injustice of how information on how to invest is conveyed today in a way that destroys millions of middle-class lives.

Those people matter. I worked with them on a daily basis and saw how trickery and deceit was used to destroy their lives. And things got to a point where I simply could not bear to remain quiet any longer. I possessed zero desire to go down this road. That is evidenced by the fact that I kept quiet about the errors in the Old School SWR studies for three years after I put my first post to the Motley Fool board. I was afraid, like everyone else. But I cared about my fellow community members, the injustice was very, very clear to me and there came a time when I could not not act.

I am not the only person who saw the errors in the Old School SWR studies. That’s why the idea that I would get credit for this discovery causes so much envy in people. Scott Burns is the perfect example. His first words to me when I told him about the errors were “you’re right!” Then he asked for my telephone number so that he could conduct an interview. Scott wanted to be on top of this, he saw the importance of it immediately. But then he thought it over a bit and realized what he was going to be put through if he wrote an honest article on the situation. Then, when I continued down the honest path, he over and over again expressed this bitter envy that I had done so. I had behaved in a “catastrophically unproductive” manner. Not because I was wrong. Because I was right. Because I had done something that Scott Burns wished for years he had the courage to do but had never possessed the courage to do. That was my “crime,” in his assessment.

The similarity is that we are dealing with a situation that everyone who works in this field knows needs to change and a situation that makes everyone who works in this field look bad because he or she did not act to change it years ago themselves. What can I do about that, Sensible? People hated Rosa Parks with a burning hate because she showed them up. She didn’t want to. She couldn’t bring important change to the world without showing them up. So she did what she had to do. They hated her for it. Who was right? Who was wrong?

It is not my intent to bring shame to you or Jack Bogle or John Greaney or anyone else on this planet. I want to make the life of every person with whom I come into contact happier and better. Tell me a way to do that while still bringing on this important change and I will go for it. I search my brain every day trying to come up with things along those lines. That’s not the issue here.

The issue is whether the change is really needed. Your conclusion is that it is not, that we can continue on a few more years the way things are.

My conclusion is that you are wrong. The reason why my conclusion is different is that I have looked at the numbers and I have thought through the implications. We are living at a time when the Buy-and-Hold Era is coming to an end regardless of anything that you or I elect to do or not do. It is happening. Given that it is happening, I cannot bear to see my friends (both the Valuation-Informed Indexers and the Buy-and-Holders) go through such pain. I cannot not act. So I act. That’s the only alternative to the thing that I cannot do.

I care about you. You mock me for saying it over and over and over and over again. That doesn’t change anything. I care about Bogle. I care about Greaney. I care about all my blogger friends.

Give me an alternative that achieves the change and that hurts you less and I am going to grab it in two seconds. But I am going to achieve this change. Not for selfish reasons. Because this change must be achieved. You see that as clearly as I do when you are thinking straight. Every single one of us alive on this planet today needs to see this change take place. There is plenty of credit and an opportunity for thousands of people to become rich and famous here if we work together in a positive and constructive and life-affirming way. That’s what I want to see happen.

But please don’t fall victim to the temptation to believe that perhaps there is some way to put this off another year or another month or another day. The change happens. Once we all agree on that, we all win big-time. We are killing ourselves by putting off this change. We need to stop thinking self-destructive thoughts and start working together to bring as much joy and comfort and satisfaction to as many of us as possible while achieving the change that we all know deep in our hearts needs to take place at this moment in time.

I am the Rosa Parks of personal finance. You can be part of this wonderful, positive revolution in thinking about how stock investing works in the real world. Or you can go down in history as one of the haters. You can bring in your police dogs and your fire hydrants and your sticks and your guns and your nasty words or you can let that stuff go and enrich yourself and feel better about yourself and feel good about helping million of others. You choose. As your friend, I obviously want to do all I can to see that you make the right choice.

I hope that answers your question. I expect to become a very rich man as a result of this. I have zero desire to prevent others from enjoying the riches. I want to see all of my Buy-and-Hold friends turn the corner and become rich themselves while helping their clients and readers become rich as well. We need to take a sad song and make it better. That’s the story here.

I hope that helps a bit. We are living in a time of change. The choices we make affect millions of our friends and neighbors and co-workers and fellow community members. The change cannot be rejected. History does not permit that option. So we all need to figure out how we best fit in to the story of change. You are a part of the story. You need to see your way to playing a positive role, like those who first mocked Rosa Parks for being “uppity” and then realized that, no, she was just human, a human who saw something that just could not continue and who thus directed her humble efforts to seeing that that thing that could not continue was brought to an end.

If the humans never advanced, we would not be able to get up in the morning. Life would be too bleak without advances for us to be able to bear the pain that is also a part of life. This is the biggest advance in the personal finance field that any of us will see in our lifetimes. We owe it to ourselves to experience the joy that comes with doing the right thing here.

I hope that helps a bit, Sensible.

Rob

Set forth below is the text of a comment that was recently posted to another blog entry here by a long-time critic of the Valuation-Informed Indexing concept, followed by my response:

“It’s true that Buy-and-Hold has lots of short-term success stories.”

Someone working for 20-30 years making a modest salary and still being able to retire a millionaire because of Buy and Hold is not a short-term success story. There are literally countless examples of this actually occurring. People have lived, retired on the back of buy and hold, had a good retirement, and died. Their story is over so you can’t say that it was only short-term success,Some the term is over. All you can possibly argue is that another method could have been more successful. There is honestly no room for debate and until you realize this you will have zero credibility. When you tell people who are currently retired with large nest eggs completely cashed out of stocks that Buy and Hold can’t succeed it is like telling a marathon runner who has already crossed the finish line that his training program will not work.

“Joe has somehow managed to figure out how to take price into consideration when buying cars and bananas and sweaters.”

This is actually a terrible example. Joe knows those things are overpriced only in comparison to other identical offering of that product. I have no idea what goes into creating a sweater or what a fair price is for those things I only know how much every store is selling them for. In the case of your theory all stocks are overpriced at the same time. There is never a time where Joe decides that all sweaters in the world are overpriced. This notion would be ludicrous and that is exactly what you are suggesting Joe does with stocks. Certainly if 10 people were selling stocks of MSFT for $40 and then one person was selling it for $100 Joe could make this value decision. What you suggest is the equivalence of Joe understanding intricacies of making a sweater from labor, to cost of fabric, shipping, etc.

“Throwing all your money on the floor and putting a match to it would be easier yet.”

Again a childish and ludicrous comparison. Buy and Hold is a proven system with LONG-TERM success stories that is incredibly easy to implement. You are arguing in favor of what may be a superior system but it is much more difficult to implement. So much so that you are incapable of laying out principles of how to do so and are incapable of actually following the system yourself.

I like your comment, Tron. Most of the points you make in it are reasonable and real. I am going to run this comment as a stand-alone blog entry. I wish that we could see more comments of this nature, comments in which you VII critics stick to your guns but generally avoid the nasty stuff in favor of making points that would strike many community members in the middle as thoughtful.

Rob

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

Back and forth means it goes both ways. He is talking about you there, Rob.

No.

You Goons generate ugliness and I object to the ugliness you generate. Those two are not the same thing. To suggest that they are the same thing is to suggest that a policeman is doing unjustified harm to a killer when he places him in handcuffs. It is the policeman’s JOB to protect us from killers.

Joe obviously gets all that. Nothing could be more clear.

The one point I can give you here is that Joe should be speaking out more clearly about which side is causing the problem. You are right to that extent.

That’s of course not true only of Joe. It is true of just about everyone. It is true of Jack Bogle. It is true of Robert Shiller. It was true of Wade Pfau during the 16 months we worked together (and is more true of him today). Heck, it was true of Rob Bennett up until the morning of May 13, 2002.

How do you propose that we solve this problem, Anonymous?

Rob Arnott told me that I need to be less “strident.” He has been addressing this problem in his less strident way for years now. Has the problem been solved? Have the Old School SWR studies been corrected? Have we launched a national debate on Valuation-Informed Indexing? Have we overcome this economic crisis?

What gets the job done? That’s the question here.

PeteyPerson described me as a “teddy bear”-type poster in the days before May 13, 2002. That’s my natural personality. But it didn’t get the job done to be a teddy-bear type poster re the safe-withdrawal-rate issue, did it? So I moved on to something else. No one refers to me as a teddy-bear type poster today.

It takes a tough man to make a tender chicken, Anonymous. That’s the bottom line, whether I like playing the role or not.

We need to fix our broken economy. There are no two sides re that one. We ALL need that. Jack Bogle needs it as much as Rob Bennett. Bill Bernstein needs it as much as Robert Shiller. Larry Swedroe needs it as much as Wade Pfau.

When we are all working together to learn how stock investing really works and to share what we learn with million of middle-class investors, I will be a teddy-bear-type poster once again. Until that happens, I will be Frank Perdue.

Because I have it in for my Buy-and-Hold friends? No. Nothing could be farther from the truth.

My Buy-and-Hold friends are killing themselves. They are killing all the rest of us while they do it, that much is certainly so. But one of most important realities here is that my Buy-and-Hold friends are killing themselves. If they understood what the research says, they would be behaving in a very different way. And the only way they can ever come to understand what the research says is for there to be a free and open discussion, with thousands of people participating.

My job is to get that discussion started. It could have been done on May 13, 2002, without anyone getting hurt in any serious way. Today, getting that discussion started means huge financial liabilities and in some cases even prison sentences for my Buy-and-Hold friends. Following the next price crash, the penalty to be paid will be 20 times higher.

Joe understands this. He is scared, like lots and lots and lots of other good and smart people. He has not been perfect in his behavior. He loves his country and a person who loves his country should be speaking out more firmly and more clearly and more powerfully than Joe has spoken out. All that is fair enough.

But Joe has put his neck on the line to an extent that few others have put their necks on the line. So I feel that I can cut him some slack re his imperfections. And I have a funny feeling that the millions of middle-class people whose lives are in the process of being destroyed will be cutting Joe some slack following the next price crash.

Will those millions of people be in a mood following the next price crash to cut Anonymous any slack? I have my doubts. Very, very grave doubts.

And so it goes, Anonymous. I wish you all good things.

Rob

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

Rob, what do you think the ‘final solution’ for the Goon problem should be?

That’s a great question, Sensible.

What I believe is that we all need to recognize that we are all on the same side and that we all need to work together to get things on the right track.

The Buy-and-Hold advocates are good and smart people. They are responsible for a long list of amazing breakthrough insights. I want everyone to know that. I want to be viewed as one of the lead people saying that. I HATE it that the public perception of me is that I am anti-Buy-and-Hold. I AM anti-Buy-and-Hold as it is currently promoted by most Buy-and-Holders. But I LOVE what the Buy-and-Holders did for all of us. I obviously love Valuation-Informed Indexing and VII is just Buy-and-Hold with one change (because of a perfectly understandable mistake that was made in the pioneer days). I want to be working WITH all of my Buy-and-Hold friends, not against them. So the very first step to bringing all the nastiness to an end is recognizing the amazing contributions that the Buy-and-Hold Pioneers brought to the table.

The second thing is that we need to bring all the nastiness to a full and complete stop. Not a partial stop. A FULL AND COMPLETE stop. We need to do that by the close of business today. I’d like to think there there will not be one person raising any sort of objection to that at this point in the proceedings. Let’s roll!

The third thing is that we need to educate the public as to the wonders of Valuation-Informed Indexing. For obvious reasons. We all want to bring the economic crisis to an end. We all want to bring on the greatest period of economic growth in U.S. history. We all want to reduce the risk of stock investing by 70 percent. We all want millions of middle-class people to learn what they need to learn to be able to retire five to ten years sooner than they ever before imagined possible. We all want to free everyone in this field to do honest, productive work. We all want to see thousands of people become super-rich developing the tools we all need to become truly effective long-term investors. This one would be a no-brainer if only Shiller had published his “revolutionary” (his word) research in 1961 rather than in 1981.

The fourth thing is that we need to subject Valuation-Informed Indexing to the same level of scrutiny to which I have been arguing we should subject Buy-and-Hold. My good friend Jack Bogle does not have complete confidence in Buy-and-Hold. His behavior re all these matters makes that clear. But Jack does not have full confidence in Valuation-Informed Indexing either. That is also clear. We need Jack coming clean re his doubts re Buy-and-Hold. But we also need him working as hard as he can to find holes in Valuation-Informed Indexing. And we need that from all the other Buy-and-Holders as well.

That’s my four-step program: (1) Make it clear to all that Buy-and-Holders and Valuation-Informed Indexers are on the same team and are pursing the same goal — using the peer-reviewed research to learn how stock investing works in the real world; (2) Bring the Ban on Honest Posting to a full and complete stop by the close of business today; (3) Spread the word about Valuation-Informed Indexing to every investor in the world; and (4) Continue the learning experience by applying the same tough-minded questioning that we have applied over the past 12 years to Buy-and-Hold to Valuation-Informed Indexing as well.

I see this as a win/win/win/win. My feeble, human brain is not even able to imagine any possible downside, Sensible. Does the four-step plan that I have outlined make good sense to you as well?

Rob the Ever-Hopeful

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

Rob,

If people really do support your ideas, why do we not see them participating here in the comments section?

You’re asking an intelligent question, Anonymous.

There are lots of people who have a great interest in the ideas. I’ve seen that at every discussion board and blog at which I have posted. I’ve seen that going back to the first day of discussions — May 13, 2002.

But you are right that people do not post comments here. And people do not stand up for me at other places when you Goons attack me. There have been a few exceptions to that general rule. But, even in those cases, people usually stick up for me one or two times and, when they see the attacks continue, retreat into silence.

I spend a lot of time thinking this over, trying to come to a better understanding of why people behave as they do.

One thing is that people are intimidated by the subject matter. People think investing is complicated. They don’t feel able to form their own assessments of whether the experts are shooting straight or not. They feel that they need to defer to the experts.

The few who don’t feel that way are generally Buy-and-Holders. That is, most people don’t feel they possess enough expertise to have their own opinions. And those who do feel that they possess expertise are generally Buy-and-Holders. Buy-and-Hold is known as the research-based approach. So people who devote some effort to learning the realities usually become Buy-and-Holders.

Another factor is that Buy-and-Hold does seem plausible. I don’t think that it really hangs together. But I acknowledge that it APPEARs to hang together. It is certainly logical. As an overall package, it seems to make a lot of sense.

A BIG factor is that academic researchers support it. That gives Buy-and-Hold a credibility that it would otherwise not possess. If it were only people who work for mutual funds who endorsed Buy-and-Hold, people would be more skeptical. People see that people who lack a financial interest support it and that gives them confidence that all is on the level.

Most people have a good bit of their life savings in stocks and the Buy-and-Holders are telling them that all of that money is real. That’s a more appealing message than the message that I deliver, that most of their bull market gains were comprised of Pretend Money and that we are due for a 65 percent price crash in the not-too-distant future. People are scared that they are not going to have enough money to retire and they don’t like hearing that they actually have less than they have been led to believe they have.

People are social creatures. All advertising is rooted in this reality. So people often go by what their friends and neighbors and co-workers say. Most people today believe in Buy-and-Hold. That’s a self-fulfilling prophecy. So long as most people believe, lots of people are going to believe because everyone around them believes. At some point, the doubters will grow to a large enough percentage of the population that more people will fell free to let themselves entertain doubts.

Many people are open to considering the merits of Valuation-Informed Indexing for so long as I do not criticize Buy-and-Hold or say that Buy-and-Hold is wrong or in error or represents a Get Rich Quick scheme or anything along those lines. I have seen this over and over. People HATE that. People’s minds close when I say that sort of thing.

People don’t like conflict. So, when you Goons bring your poison to the table, people lose interest in exploring the new ideas. There are lots of people who would be open to exploring the new ideas so long as there was no nastiness in evidence. But they leave the room when they see ugly stuff.

The biggest factor of all is how revolutionary a change Valuation-Informed Indexing is. If I told people that I had found a way to reduce stock investing risk by 10 percent, they would think it is wonderful. When I say that I have found a way to reduce stock investing risk by 70 percent, they lose interest. It doesn’t seem possible. So they tune it out.

People think I lack street cred. I did not go to investing school. I have never managed a big fund. People find it hard to accept that I know things about stock investing that people with much better qualifications in this field do not know.

The delayed-feedback thing is huge. Most people don’t like theory. They go by what they see with their own eyes, concrete results. Buy-and-Hold delivered amazing concrete results for many years. People were highly impressed by that. Valuation-Informed Indexing has worked through history in every 30-year time-period. But it takes a long time for 30 years to pass. People feel that it takes too long for VII to “come true” and that it is risky to put their confidence in it because it seems possible that it might not come true this time.

People look askance at explanations of how stock investing works that rely too much on examinations of human psychology. Numbers strike people as hard and real. Explanations of how stock investing works that are rooted in examinations of human psychology strike people as loose and vague.

VII hasn’t been around that long. It’s been 33 years. That’s not a short amount of time. But, given that investing has been around in some form for a long, long time, a model that is 33 years old is really just a baby. When I say something like “volatility is optional,” it strikes people as crazy. Volatility has been around for as long as stock investing has been around. It’s hard to accept claims that rules that have governed how stock investing works for hundreds of years have been turned on their heads.

The leaders among the Valuation-Informed Indexers are tentative in how they state things. Shiller is the perfect example of this. He pulls his punches on issue after issue. Buy-and-Holders don’t pull their punches. Buy-and-Holders speak with great authority. Valuation-Informed Indexers come off sounding as if their ideas are not that big a deal or as if they do not possess great confidence in the ideas. Valuation-Informed Indexing did not even have a name until I gave it one!

People LIKE the big-name Buy-and-Hold advocates. That’s another big one. Bogle is a very likable individual. So are most of the others.

Finally, people are more inclined to participate at a board or blog when they see lots of other people participating. There probably are people who pass through here from time to time who would in other circumstances come forward with comments or questions. They see either that there are no comments or that the only comments are angry ones and they decide to mosey on down the road.

Those are most of the explanations of the unfortunate phenomenon that you refer to that I have been able to come up as a result of my observations of the first 12 years of our discussions.

Rob

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

you’ve tried to suspend the financial market’s equivalent of the laws of thermodynamics.

The idea that we suspend the financial market’s equivalent of the laws of thermodynamics when we show that long-term timing is required of every investor seeking to have a realistic hope of long-term investing success is not just Goon Talk. There are millions of good and smart people who believe this with their hearts, minds and souls.

I don’t see that as a bad thing. I see it as a good thing. It indicates the massive scope of the opportunity presented to us. The peer-reviewed research-paper that I co-authored with Wade Pfau shows us all how to reduce the risk of stock investing by 70 percent. That’s discovering the Fountain of Youth! That’s the biggest advance in the history of personal finance. We all are on the verge of living richer lives than we ever imagined possible in earlier times.

Changing our understanding of how stock investing works in a fundamental way is a wonderful thing. The only thing holding us back is that the people who built their careers promoting the understanding of how stock investing works that was dominant before we learned what we needed to learn to know what really works feel human emotions of embarrassment at having gotten some important things very, very wrong.

We need to be doing all we can to make those people feel better. We do that by pointing out how they built the foundation that made these huge advances possible. There would be no Valuation-Informed Indexing today if it had not been for the contributions of Bogle and Bernstein and Burns and Swedroe and all the others.

We do NOT make these people feel better by ignoring acts of financial fraud in which they are involved. That makes them feel worse! We must hold these people to the standards that they would be holding themselves to were they capable of thinking clearly about these matters today.

And we must all pull together to launch a national debate on these issues. The Buy-and-Holders have important things to teach us. We must provide them a means to make their points in civil and rational ways. The Valuation-Informed Indexers also have many important things to teach us. We must provide them a means to make their points in civil and rational ways as well. And then we must listen with open minds to the wonderful back-and-forth discussions that will follow when everyone feels safe about giving voice to his or her sincere views.

We’re on the one-yard line. We need to see the owner of one major investing site to work up the courage to open his site to honest posting on safe withdrawal rates and many other critically important investment-related topics. Then it’s over. Then all the ugliness is behind us and we find ourselves on the other side of The Big Black Mountain, the place where we all deep in our hearts have been longing to find ourselves for a long time now.

Then it (the good stuff) begins.

We are the luckiest generation of investors ever to walk Planet Earth. We should start tapping into the amazing wealth of investing insights that has been bestowed on us and that we have been reluctant for a time to talk about because it all seemed just too good to believe.

My take.

Rob

Set forth below is the text of a comment that I put to the SuckersBuyIt.com forum:

I totally agree with Ditchit. Most, if not all, of the gurus specialize in selling the “sizzle” and not the steak.

I agree with this as well. But I see an encouraging side to the story.

The reason why it has become the norm to sell the sizzle rather than the steak is that in pre-internet times there was no way for the “experts” selling the sizzle to be challenged. Most of their marketing was done by direct mail or perhaps through articles placed in magazines and that sort of thing. The environment in which the marketing message was pushed was a controlled environment. The person being conned had a hard time seeing the flaws in the pitch because there was no way in which those who knew the flaws could speak up.

The internet is not set up that way. On the internet, it IS possible for those who see the con to share what they know with others. This site is an obvious example. This site does not convince everyone who sees it. But it DOES help a good number of people to gradually come to see the con. Those who are totally convinced of the merit of the con will not listen. But those who have been experiencing doubts can be brought around. Not by one post. People are brought around gradually. So you have to have an ongoing discussion to clear the fog in people’s brains.

The internet is a powerful communications medium. It is different that the other mediums. The best thing about it is that it can help those hearing about a con to see through it. But the internet can also be put to bad uses. The perception that the internet can be used to see through a con can make a con pitch 10 times more powerful than it would be in another medium. The SiteSell discussion boards APPEAR to permit challenges to any con message. That causes a lot of people to have more confidence in those messages for so long as no one has the courage to speak up and reveal the con.

They tell themselves “hey, if there were problems with this, someone would surely speak up and no one is doing so, so this must be the real thing!” That message is more powerful than any message of reassurance that could be advanced by the person pushing the con because the words are coming from the mouth of a person with no financial incentive to trick people. Those sorts of comments (when not countered by comments pointing to the con element of the pitch) are super-powerful and super-harmful to the targets of the con.

Many people think it is rude to expose cons. So they keep their mouths shut. For the internet to realize its potential, that needs to change. People need to see that they have a responsibility to their fellow community members to expose cons when they see them. If people did this, those working cons would be put at a great disadvantage on the internet and those promoting legitimate services would be given a great edge in the marketing wars.

Someone who genuinely permits challenges to his claims on the internet is real, that’s the sort of “expert” you want to listen to. Now that we have a communications medium that permits cons either to be exposed (when challenges are permitted) or to do more harm than ever before (when the appearance but not the reality of open discussion is provided), we need to educate the people to whom cons are directed (95 percent of the readers of internet materials) how to take advantage of the great power to do good that has been placed in their hands by the introduction of this new communications medium.

Rob

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

I look forward to that board you say that you will start soon, and look forward to participating in it. I would relish the opportunity to join you in moderating this said forum.

You won’t be contributing to the new forum except perhaps to a trivial extent, Sensible.

This blog is a general-interest investing blog. I both permit and encourage honest posting on the last 32 years of peer-reviewed academic research. That makes this one special in a day when as a society we have not yet worked up the courage to stand up to the intimidation tactics of The Buy-and-Hold Mafia. But the general purpose is the same as that claimed by most investing blogs — to teach people reading it the realities of stock investing.

The new discussion board will be different. The starting premise of the new board will be that The Buy-and-Hold Mafia should be brought down and that all U.S. citizens should be permitted to give voice to their sincere beliefs about the past 32 years of peer-reviewed academic research. There’s not going to be any debate at the new board as to whether honest posting should be permitted. The debate will be re how we move forward, how do we achieve our goals of bringing down the Buy-and-Hold Mafia and opening the entire internet to honest posting on safe withdrawal rates and scores of other critically important questions.

80 percent of the posts from you Goons that I leave up at this board will be taken down at the new one, Sensible.

You could compare the two boards to a board that might have existed in the 1950s on the question of whether basic civil rights should have been extended to people without white skin to one that might exist today in which discussion of that question would be viewed as insulting to every participant in the board project. On the morning of May 13, 2002, I was not aware of the role played by The Buy-and-Hold Mafia in the destruction of the financial futures of millions of middle-class investors. So I needed a board of this type to learn about the matter. I don’t need that today. I now have access to all the materials at this site, showing beyond doubt how the Buy-and-Holders have employed death threats and unjustified board bannings and tens of thousands of acts of defamation and threats to get academic researchers fired from their jobs to block millions of middle-class investors from learning about the findings of the past 32 years of peer-reviewed academic research. Today I need the new sort of board, one in which posts arguing in “defense” of the purest and most dangerous Get Rich Quick scheme in history will not be welcomed any more than a post suggesting there there is some sort of merit in the idea of denying people with black skin their most basic civil rights would be welcomed in the current-day United States.

The core idea of the new project will be that we as a nation need to move BEYOND Get Rich Quick, that we have already paid too big a price for our unwillingness to stand up to the tactics that have been employed for 11 years now by the sorts of individuals who have put up posts in “defense” of Mel Lindauer and John Greaney (and Jack Bogle?).

Rob

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

Obviously no one ever asks “am I going to prison”. Are you incapable of raising an important topic yourself?

I raise the death threats all the time, Bizarro. Usually the discussion starts on something substantive and eventually we get to a part of the story that sounds unbelievable. I might say “we know today how to reduce the risk of stock investing by 70 percent.” When I hear myself say those words, there is a part of my brain that clicks on and says to me “the person hearing these words is going to have a hard time understanding how that could be so and yet he has never heard about it before.” So I will add a little explanation. I will say something like: “The reason you haven’t heard about this is that millions of people have a huge emotional investment in Buy-and-Hold. They used it to plan their retirements. It’s not possible to talk about what works without explaining what doesn’t work. But people get emotional when you do that. I was a Buy-and-Holder myself until the night of August 27, 2002, when John Greaney threatened to kill my wife and children if I continued posting honestly about safe withdrawal rates and 200 of my friends from the Retire Early board endorsed his post. That told me that this Buy-and-Hold stuff is just too darn emotional and we need a true research-based investing strategy, one fit for use by humans.”

Now –

People can respond to that in different ways, Bizarro.

Just about everyone condemns the death threats. They say “that’s crazy” or “that’s unbelievable” or something like that. But THEY DO NOT ASK FOLLOW-UPS.

It is a very rare event for anyone hearing about the death threats to say “well, did the site ban those people?” or “did you go to the police?” or “did you try telling John Bogle about this and seeing how he felt knowing that his investing strategy caused people to advance death threats?” PEOPLE DO NOT WANT TO KNOW ABOUT THE DEATH THREATS. PEOPLE ARE IN DENIAL RE THIS ASPECT OF THE STORY.”

Do you see?

We are as a society suffering a huge case of cognitive dissonance, the biggest and most damaging case ever experienced in history. We don’t want to know.

BUT WE NEED TO KNOW. Buy-and-Hold is killing us. It caused the economic crisis. It has caused FOUR economic crises since 1870 (that’s four out of the four we experienced in that time-period). It has caused the destruction of many once-fine discussion boards and blogs. It is in the process of sending you Goons to prison. All sorts of bad stuff.

Me talking about it does not by itself change anything. I need to talk about it. If I don’t I am myself participating in the cover-up and I am setting myself up for a prison sentence following the next crash. But me coming forward and saying “this Buy-and-Hold stuff is a big pile of smelly garbage” does not by itself get the job done. I need the New York Times writing this stuff up on the front page. I need Old Saint Jack giving an “I Was Wrong” speech. I need the Ban on Honest Posting reversed at every board and blog that has adopted it.

I do what I can to make all that good stuff happen, Bizarro. But I am not Superman. You might be surprised to learn this but not everyone in this world listens to everything I say. I told the site administrator at Motley Fool about Greaney’s death threats and I asked him to take appropriate action. His response was to send me an e-mail telling me that my suggestions were “thoughtful” and that he agreed with me that it would be “ideal” if Greaney were to permit honest posting on retirement planning at a board focused on retirement planning. I of course agreed with him that that would indeed be “ideal.”

But I did not possess the access to the buttons I needed to push to get Greaney removed from that board. I did not. I could ask. I could even demand. But I could not myself push the buttons. So the buttons remained unpushed.

And I cannot compel people to engage in a discussion of how long the prison sentences should be for you Goons.

I would like to see such a discussion. I believe that, if we were to have such a discussion, the prison sentences would end up being shorter and there would be fewer people serving them. If you Goons saw other people talking about this stuff, you would be less inclined to engage in the behavior that will cause you to go to prison following the next crash. But I am not God. I don’t get to say what people will ask me about or what people will talk about. I can make suggestions. In extreme cases, I can even advance demands. But I do not myself control what the outcome of my suggestions or demands will be. Others are responsible for that.

If you are unhappy that I am not talking to enough people about the prison sentence thing, please take it up with some of these others. It is not me holding back that discussion! It is not!

Fair enough, my old friend?

Rob