A Rich Life

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

“We Have a Problem of Incentives. There Are Huge Incentives for Going Get Rich Quick and Huge Penalties for Going Research-Based. We Need to Turn that Around.”

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

would you like to run down your tangible accomplishments for the year? (Other than finally getting tossed from Goon Central.)

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1) The presentation I gave at FinCon13. I thought I did a super job of summarizing 11 years of discussions in a five-minute presentation.

2) Improvements at the web site. That’s boring stuff. But I was forced to spend a good bit of time on that boring stuff this year.

3) The 52 entries for my weekly Valuation-Informed Indexing column. There are amazing insights advanced in that column on a regular basis that I believe will be the subject of sustained study for many years following the next crash.

4) The tens of thousands of e-mails that I sent out re the Wade Pfau matter and the reactions that I received from big-name experts. My most important job following the next crash is going to be pulling us all together. When people are able to see how academic researchers and other big names responded to the sorts of behavior we saw in the Wade Pfau matter, they will understand what we were up against. That’s how we resolve all the frictions. We need to do just the opposite of what we have been doing. We need to stop covering up and instead make a sustained and united effort to get as much as possible out into the open. Love is the answer. And it is through understanding where the other fellow is coming from that we come to feel love for the other fellow.

5) Getting tossed from Goon Central was a pretty darn big accomplishment. You try to rule that out of consideration here but I reject the ruling. The thing that finally got me thrown off is that I focused in on the personal consequences that are going to be experienced by you Goons in coming years — the financial liabilities and the prison sentences. That’s good stuff. The big problem that we have had for 32 years now is that those who give investing advice benefit from going with a pure Get Rich Quick approach while those who employ the investing advice in their retirement planning benefit from hearing true research-based strategies. We have a problem of incentives. There are huge incentives for going GRQ and huge penalties for going research-based. We need to turn that around. Bringing civil suits for damages and announcing prison terms for those who have posted in “defense” of Mel Lindauer and John Greaney is an important step in the right direction. I believe that the day that the prison sentences are announced for you Goons is the day we will be able to unite everyone in the United States in an effort to rebuild our broken economy. I very much look forward to that (while I also of course intend to continue doing all I can to keep your prison sentences as short as possible and to have as few people as possible going to prison for committing acts of financial fraud re this matter).

Yowsa!

It looks like a pretty darn good year when you take a step back and look at all we have accomplished together.

No?

Rob

“Wade Would Obviously Be Willing to Pay Hundreds of Thousands of Dollars to Be Able to Do Honest Work. He Spent Years of His Life Training to Do the Work He Does — Why Wouldn’t He Want Very Much to Be Able to Do It Honestly? And There Are Obviously Thousands of People in Similar Circumstances.”

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

Rob,

Your entire post is laughable. Let’s just look at your damage claim. To have damages you have to show and quantify a loss. That loss has to tie to the level of the claim. We have yet to see any proof that you had a business that could be valued at $500 million. In simpler terms, the earnings that were earned, prior to the time of the supposed “damage”, would have resulted in a business valuation of $500 million if the “damage never occured. Value is oftened assigned on a multiple of EBITDA or on a projected discounted cash flow.

Care to provide the numbers generated by your “business” prior to your claim of damage?

There are many different ways in which we can show that I am entitled to damages FAR in excess of $500 million,Anonymous. The $500 million is a lowball number. The intent there is to provide the Wall Street Con Men with an INCENTIVE to settle things before too much more financial damage is done to millions of people. I obviously could not provide an incentive by asking for full damages. That number applies only if a settlement is accepted PRIOR to the onset of the next price crash.

Look at how much we spent on the economic crisis. That number is in the TRILLIONS. Every economic crisis we have had for 140 years was caused by the promotion of Buy-and-Hold strategies. So there will in all likelihood not be another economic crisis once we open the internet up to honest posting. Bringing the economic crisis to an end and protecting us all from future economic crises wouldn’t have brought me profits well in excess of $500 million? Yeah, right.

Or look at the situation of people who have trained to be academic researchers in this field and who today are not permitted to do honest work. Wade Pfau was jumping around like a kid in a candy store when he learned how stock investing really works. He saw that he was going to be published in the top journal in the field. He saw that the work he was doing was worthy of a Nobel prize. Do you think that Wade is the only researcher in the field who wants to be able to do honest work?

They ALL want to be free to do honest work, Anonymous. Wade would obviously be willing to pay hundreds of thousands of dollars to be able to do honest work. He spent years of his life training to do the work he does — Why wouldn’t he want very much to be able to do it honestly? And there are obviously thousands and thousands of people in similar circumstances. Multiply hundreds of thousands of dollars by a number in the thousands or the tens of thousands and you end up with a very big number. I’m no math wiz, but I can just tell, you know?

The full truth here is that I am not even going to need to file papers to obtain the $500 million. My good friend Jack Bogle would like to be free to provide honest investing advice. So would my good friend Bill Bernstein. So would my good friend Larry Swedroe. So would my good friend Scott Burns. When all of those people — and tens of thousands of others — are free to do honest work in this field because of the efforts of their good friend Rob Bennett, I have a funny feeling that I will soon be seeing a bag with $500 million landing on my front porch steps with a nice note attached.

Just another one of those crazy hunches that I have been known to experience from time to time.

My best and warmest wishes to you, Anonymous.

Rob

“You Are Right to Suggest That What I Say About Investing Is More in Tune with Liberal Thinking Than It Is In Tune with Conservative Thinking. Shiller Is a Liberal. But It Is Not Right to Say That Conservatives Do Not Ever Value Community. Getting the Deficit Under Control Is a Tea Party Priority. The Deficit Is Something That Hurts Us All As a Community.”

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Set forth below are the texts of three comments put to the Goon Central site: (1) a post by me commenting on a statement advanced by Dab; (2) a response to my post by GW; and (3) my response to GW.

Dab made an important point with his post containing these words:i like how rob gets himself so worked up over what someone else is doing with their own money, and not bothering rob in the least.  as long as they aren’t knocking on your basement door, what do you care?  they are happy and content, leave well enough alone and focus on your own account.

The stock market is a community resource. The Buy-and-Holders rape that resource for their own benefit.

If someone pollutes the ocean and is happy and content to do so, should we all leave well enough alone?

If someone puts cancer-causing chemicals in the food he sells us and is happy and content doing so, should we all leave well enough alone?

The Southern towns that did not permit people with black skin to choose their own seats on public buses were happy and content. Should we have left well enough alone?

There are COMMUNITY values.

The entire community of workers builds our economic system. Buy-and-Holders cannot be permitted to destroy our economic system just because there is profit in it.

My sincere take.

Rob

GW: Strange views for a Tea Party/Palin enthusiast like hocus to espouse.   Hocus ought to do some reading.   For a Tea Party/Palin enthusiast, the answers to all those questions are “yes”.
Only if the Tea Party were your caricature version of the Tea Party.You are right to suggest that what I say about investing is more in tune with liberal thinking than it is in tune with conservative thinking. Shiller is a liberal; he met with Obama during the transition from the Bush Administration to the Obama administration. Fama has not said what he is but he teaches at the University of Chicago, which is known for promoting Libertarian ideas and Libertarians are generally classed on the conservative side of the political spectrum. Bogle has indicated that he has been a lifetime Republican who switched to vote for Obama; I would call that “moderate conservative.”

But it is not right to say that conservatives do not ever value community. Getting the deficit under control is a Tea Party priority. The deficit is something that hurts all of us as a community, not something that hurts only a small number of individuals.

I DO support the Tea Party. But I certainly do not say that the Tea Party is perfect.

I did not vote for Obama in either election. But I have voted for MANY liberals. I voted for Mondale and Clinton and Carter, I worked for McGovern. I’m a conservative, but I certainly have sympathy for many liberal ideas and I certainly feel respect and affection for many proponents of liberal ideas.

One of the big problems I have is that neither liberals nor conservatives see it as a priority to clean up the corruption in the investing field.

One of the big potential edges I have is that neither party has any great reason to oppose cleaning up the corruption in the investing field. Liberals often speak out against Wall Street corruption, so taking action against the Buy-and-Holders is in many ways a natural for them. And conservatives believe that economic growth is important. So they should be working overtime bringing attention to the economic destruction that has been caused by the relentless and reckless and ruthless promotion of Buy-and-Hold “strategies.”

We are really talking about something that goes BEYOND the current-day political ideologies. The New Deal came about in response to the First Great Depression. The New Deal rewrote the rules of politics in this country. The Second Great Depression is likely to cause a similarly large rupture.

The early reaction to the Buy-and-Hold Crisis has been a lot of silliness, liberals yelling at conservatives and conservatives yelling at liberals. We will either go beyond that following the next crash or we will all go down together.

When we get serious about overcoming this economic crisis, we will be taking good ideas from BOTH liberal and conservatives and moving FORWARD together. The Tea Party will be part of the mix doing good things. But so will the many smart and good liberals who are drawn to the ideas of a Robert Shiller.

You’re stuck in the past, GW. You would rather yell and act superior than see the nation move to a better place. I would rather see us all work together to get to the place where deep in our hearts we all truly want to be.

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

Rob

“I Foresee a Future Financial Bloggers Conference Where EVERY SESSION Will Be Devoted to Teaching Bloggers How to Transform Their Blogs into Valuation-Informed Indexing Blogs.”

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

How exactly do you intend to make that kind of money by ‘teaching’ something?

It wouldn’t be possible to list all the ways even in one of those lengthy posts that I have become famous for, Laugh.

Books, speeches, podcasts, coaching, and on and on and on.

Why the heck do you think the Wall Street Con Men are so intent on keeping millions of middle-class investors from learning what the peer-reviewed academic research of the past 32 years really says?

They have been making BILLIONS teaching the OPPOSITE of what the research shows.

And you don’t think that there is HUNDREDS of BILLIONS to be made giving honest advice re stock investing?

You’re kidding yourself.

This is a money field. There is TONS of money to be made in this field.

And there are MILLIONS of middle-class investors in desperate need of HONEST investing advice.

I mean no personal dig. But your suggestion that there is not BILLIONS to be made offering HONEST INVESTING ADVICE is foolish in the extreme.

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

You know how I gave that five-minute talk at FinCon13? I foresee a future FinCon where EVERY SESSION will be devoted to teaching bloggers how to transform their blogs into Valuation-Informed Indexing blogs. Investors have been DELUGED with the smelly Buy-and-Hold garbage for DECADES now. And you don’t think there is a huge and hungry market for the real stuff, for advice that works in the real world?

The market and the demand couldn’t possibly be larger. The opportunities here couldn’t possibly be bigger.

Why the heck do you think the Wall Street Con Men support your Campaign of Terror against us? They are trying to hold onto the huge GRQ cash cow.

I mean, come on.

Rob

“We Need 10 People to Declare Publicly That They Will Stand Together for the Proposition That Honest Posting Should Be Permitted. These 10 People Could Be Bloggers or Investment Advisors or Academic Researchers or Journalists or Policymakers or Whatever. They Do NOT Need to Support VII. They Need to Support Honest Posting on the Possible Dangers of Buy-and-Hold.”

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Set forth below is the text of a comment that I recently put to the Joe Taxpayer blog:

“But I don’t believe that. I do not believe you have offered a valid correction to the safe withdrawal rate question. And I believe that retirement income strategies go much further than the question of a safe withdrawal rate. And so that is why I’ve had to endure your ongoing harassment for months on end now.”

Wade DID say these words. The quote is accurate.

Wade WANTS to tell the truth. He is like lots and lots and lots of other people in this regard. He is a good person and he wants to help us all out and he understands that by telling the truth he helps us all out. But he is AFRAID to do so.

Why would Wade be so afraid? Buy-and-Hold is the dominant model. Millions of people have their lives riding on Buy-and-Hold. They have inner doubts as to whether it works. They are TERRIFIED to see evidence that it doesn’t work. And this Wade Pfau fellow has conclusive evidence (peer-reviewed academic research) showing that it NEVER works. How do you think that makes those millions of people feel? And how do you think it makes Wade feel to know that they feel that way?

Wade is on our side. That is not an issue.

The issue here is that Wade is AFRAID to do what he knows he should do.

It’s not only Wade.

Jack Bogle said things in his book that helped me to understand that the Old School safe withdrawal rate studies get the numbers wildly wrong. That shows that Jack Bogle too is on our side and that Jack Bogle too is afraid to do what he knows he should do.

It’s the same with Bill Bernstein. When one of the Goons asked Bernstein whether the methodology used in the Old School SWR studies is analytically valid or not, he said that “OF COURSE” the studies are analytically valid (he said that part because he is AFRAID) while also saying that anyone who gave consideration to using one of those studies to plan a retirement (the purpose for which they were produced) would have to be out of his or her mind (he said that part because he is a good guy and wants to help us all out).

It’s the same with Scott Burns. When I let Scott Burns know about the errors in the Old School SWR studies, he sent me an e-mail back saying “You’re right!” He asked for my phone number because he was on a book tour and he wanted to interview me for an article he would write when he returned. He did all that because he is a good guy and wants to help. He got cold feet and failed to go through with the call because he became TERRIFIED of what would happen to him if he became known to the millions of scared people as The Person Who Brought Down Buy-and-Hold. He ended up writing an article that said that “some people” now believe that the Old School studies are analytically invalid. He didn’t say that HE believed this (although he obviously does) because he is afraid of what will happen to him if he does and he didn’t name the “some people” because he knows that the Goons would not appreciate him giving a link to my site. But he DID spill the beans in a cautious, convoluted sort of way.

I have people telling me to follow the lead of these people ALL THE TIME. They say: “Rob, don’t you get it? Lots of people make lots of money pushing strategies that are 100 percent contrary to Buy-and-Hold principles. There’s a market for non-Buy-and-Holf stuff. You could tap into that market if you would just stop antagonizing the Buy-and-Holders. You make them mad when you point out that there’s 32 years of peer-reviwed academic research showing that there is precisely zero chance that Buy-and-Hold can ever work for a single long-term investor. Just stop doing that!”

I don’t WANT to stop.

I want to bring Buy-and-Hold down.

Not because I am a meanie, as the Buy-and-Holders will claim.

I want to bring it down because I BELIEVE in the Buy-and-Hold project. And the Buy-and-Hold project is NOT to forever push whatever strategy the Buy-and-Holders once thought might work. The true project is to root investing advice in the academic research. That’s what Bogle and all the other Buy-and-Holders started out believing should be done. I think they were right. I want to take it back to that. I don’t want to offer a strategy different than Bogle and all the other Buy-and-Holders. I want to work WITH the Buy-and-Holders to promote the strategy that is in accord with the core Buy-and-Hold belief (that advice should be rooted in research) TODAY. That’s Valuation-Informed Indexing, NOT Buy-and-Hold.

I am not against the Buy-and-Holders. I am against the idea of the Buy-and-Holders not correcting their mistakes when they discover them. That’s why I am seen as such a threat. But I am not trying to threaten anyone. I am trying to help EVERYONE. We all want the same things. We all want to get this stuff right.

Wade said opposite things after he was threatened because he became afraid to tell the truth. Is that really so hard to understand?

Bogle also does not tell the full truth because he is afraid to do so. Same with Bernstein. And Swedroe. And Burns. And on and on and on.

That’s the problem we need to solve.

People are trying to do things in the wrong order. People want to be 100 percent sure that Valuation-Informed Indexing is the answer before letting anyone post honestly about Valuation-Informed Indexing. If you set things up that way, you will go around and around and around in circles. I am 99.99999 percent sure that VII is the answer. But we are not going to see lots of people make the switch so long as it is only me posting honestly about this stuff. People want to hear what Pfau and Bogle and Bernstein and Swedroe and lots of others believe. AND THEY ARE NOT GOING TO TELL US UNTIL WE MAKE IT CLEAR TO THEM THAT IT IS SAFE FOR THEM TO DO SO.

The first thing we have to do is to open the entire internet up to honest posting on safe withdrawal rates and LOTS OF OTHER critically important investment-related topics. That will lead over time to everyone switching from Buy-and-Hold to Valuation-Informed Indexing. But we won’t see that switch until we first permit the discussion. It is through honest discussion that people come to gain confidence in the new ideas. There is no other way that we can bring this economic crisis to an end. We MUST first work up the courage to permit honest discussion. All the other good stuff follows from that.

Are the Goons going to attack us when we say that we favor permitting honest discussion?

Yes.

But you know what?

The Goons are WEAK today. I was there in May 2002. Things are not going well for the Goons. They are at about 25 percent the power that they possessed in May 2002. The Goons are paper tigers at this point.

The Goons’ favorite tactic is to destroy people one by one. Once they have you isolated, they feel they can scare you. If ten of us stuck together, the Goons would have nothing to work with. They would go down in days. We need ten people to declare publicly that they will stand together for the proposition that honest posting should be permitted on safe withdrawal rated and other critically important investment-related topics. These ten people could be bloggers or investment advisors or academic researchers or journalists or policymakers or whatever. Ten people. That’s all we need. They do NOT need to say that they believe in Valuation-Informed Indexing. They need only to say that they believe that HONEST POSTING on the possible dangers of Buy-and-Hold should be permitted.

We are at the 99-yard line. We are close.

Lots of people are going to become very famous, very well-loved, very rich. Lots of people are going to do an amazing amount of good for millions of other people. This is the biggest turning point in U.S. economic history. On one side is all good, loving stuff and on the other side is all bad, smelly stuff. All we need is 10 brave souls who can publicly attest that they believe that free speech (an idea that has been core to our way of living since the founding of our nation) matters and that intimidation tactics are a big waste of everyone’s time and energy.

I think we are going to make it to the other side and enjoy all the fruits that follow from having a little bit of faith in our system of government and in all the good (but scared) people suffering from the results of this ultimate Buy-and-Hold crisis. Call me madcap.

I tell my Goon friends all the time that they need to understand that I peeked a look at the final chapter of this drama before working up the courage to go forward with that fateful May 13, 2002, post. Love wins in the end. In the end, it’s not even a close call.

It’s not just Rob Bennett saying that. That’s what’s written in the book.

So there’s that.

Rob

“There’s Obviously a Huge Amount of Money to Be Made Telling the Truth About Stock Investing. We Are Going to Need to Replace 95% of the Books Written in This Field. Why Not Get About the Important Business of Doing All That Good Stuff and Make Lots of Money Doing It?”

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Set forth below is the text of a comment that I recently put to the Joe Taxpayer blog:

If he (like so many others) eventually decides to ban you, will that make him an apostate?

I’ll tell the truth.

Carl Richards, who writes a blog for the New York Times, said that my site was the best investing site he has ever seen. He said that he has read everything about Valuation-Informed Indexing that he can get his hands on. He said that my work has “huge value.” And he banned me from his site.

Jack Bogle is the fellow who told me what I needed to know to understand why the Old School safe withdrawal rate studies get the numbers wildly wrong. Jack didn’t lift a finger when Mel threatened physical violence against anyone who dared to “cross” him by posting honestly at the Bogleheads Forum.

Bill Bernstein said in response to an e-mail from one of you Goons that “of course the methodology used in the Old School SWR studies is analytically valid.” In the same e-mail, he said that anyone who gave consideration to using one of those studies to plan a retirement was out of his gourd. That’s what I meant when I said that the studies were “analytically invalid”! The term “analytically invalid” is my shorthand way of saying that those studies got the numbers so wildly wrong that anyone who used one to plan a retirement would have to be out of his or her freakin’ gourd.

So me and Bill were saying the same thing in slightly different ways.As were me and Bogle. As were me and Richards. As were me and lots of people.

Why do all these people say things in a slightly different way than I do?

I don’t see what purpose is served with all the deception. We all agree that there has never been a sliver of support in the peer-reviewed academic research for Buy-and-Hold, right? We all agree that the ruthless promotion of Buy-and-Hold strategies by the Wall Street Con Men has caused four economic crises, right? We all agree that millions of our friends and neighbors and co-workers will be seeing their retirements fail because of the 11-year cover-up of the errors in the Old School retirement studies, right?

Why not just say that? Isn’t saying it clearly and plainly and frankly the quickest way to solve the problem?

There’s obviously a huge amount of money to be made telling the truth about stock investing. We are going to need to replace 95 percent of the books written in this field and 95 percent of the calculators published in this field and 95 percent of the current experts in this field. Why not get about the important business of doing all that good stuff? and have lots of fun doing it and make lots of money doing it?

Are we waiting for someone to ring a bell? Is there some advantage to be gained by holding off for a bit? If there is, my feeble human brain is sure not able to imagine what it might be.Maybe your far superior Goon brain has come up with something. If so, I would be grateful if you would fill me in.

We have filled millions of people’s heads up with Get RIch Quick nonsense. Those people are hurting. They don’t want to hear what the research says. It makes them very, very angry for people to report honestly what the research says. I get that part loud and clear.

But aren’t we just making things worse by holding off?

We are going to have to tell them the truth eventually, no? We don’t really want to live through the Second Great Depression, do we?

Are they not going to be ten times MORE angry if we tell them the truth AFTER they lose another 65 percent of their life savings as they would be if we told them today?

I am not out to “get” Bogle or Lindauer or Greaney or Phau or anyone else. I am trying to SOLVE A PROBLEM that every single one of us should want solved.

To solve the problem, we need to tell people the truth. So that’s what I do.

Do I say that Jack Bogle is a genius and that he discovered dozens of the powerful insights around which I built the Valuation-Informed Indexing concept? I do. Why? Because I want to flatter the big guy? No! I do it because it is the truth.

So why do I ALSO mention that Jack has permitted his name to be used at a discussion board at which the sorts of individuals who have put up posts in “defense” of Mel Linduaer and John Greaney are permitted to post? Same reason. It’s the truth!

I am just a mild-mannered reporter, you know? I report stuff. I report good stuff and bad stuff, whatever happens. I PREFER to report good stuff about my Buy-and-Hold friends. I am human. How could I not prefer to report good stuff about them?

But I cannot just make stuff up. I need them to DO good stuff for me to be able to REPORT good stuff. They need to give me some material to work with. When they do — bam! — you see that good stuff reported on at old Rob’s site, just like I always promised.

I HAVE reported bad stuff about people whom I admire greatly. That HAS happened.

I WOULD like it to stop.

But I do not CONTROL whether it stops or not.

I can realize my great desire to stop filing these negative reports when all these people I admire and respect and even love STOP PUTTING UP POSTS IN “DEFENSE OF MEL LINDAUER AND JOHN GREANEY.’

Do you see?

I report what happens. We need to have these good people STAND UP TO YOU GOONS for good things to happen. So I always urge everyone with whom I come into contact to stand up to you. But I do NOT control the behavior of other people. People do what they do. People do not always listen to what I say. Go figure.

Rob the All-Powerful (Not!)

“This Is Not a One-Man Job. I Need Bogle Talking About the Prison Sentences. I Need the New York Times Writing About the Prison Sentences. I Need All My Fellow Bloggers Talking About the Prison Sentences. That’s How We Work Together to Make Good Things Happen. I Believe We Will ALL Be Talking About the Prison Sentences Following the Next Price Crash.”

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

Why don’t your Value Walk columns ever mention the Buy and Hold Mafia, death threats or prison terms? Where was your FinCon PowerPoint slide on those topics? If these things are important enough to document here (over and over) then why not there?

Thanks for asking an intelligent question, X.

The 11-year cover-up of the errors in the Old School SWR studies is the biggest act of financial fraud in U.S. history by a very wide margin.

They should be writing about this on the front page of the New York Times EVERY DAY.

They are not doing that.

The fact that they are not doing that makes people suspicious when I talk about financial fraud or prison sentences or the Buy-and-Hold Mafia or anything along those lines. I had a guy come up to me at FInCon13 and tell me: “I’ve checked out your site numerous times. I heard you talking about something called ‘The Buy-and-Hold Mafia.’ I figured that I must have missed out on some background.”

That fellow would be more likely to subscribe to my blog if I did NOT refer to this sort of thing. It is a turn-off. It sounds sensational and fantastic and unbelievable.

Do you remember what Rob Arnott told me? He said that I am right on all matters of substance. But he also said that I am too harsh in the way that I describe things. And do you remember that guy who is going to teach Valuation-Informed Indexing in his courses at George Washington University? He said that my stuff was super and that he was glad that he stuck with it long enough to see that. But he also said that he believed that lots of others would take one look at the amazing claims and check out. And he is of course right about that.

You are not 100 percent correct to say that I don’t make any reference to this side of things in my column at Value Walk or in my FinCon slides. I quoted the fellow at GW in my FinCon slides. I worked the issue into the presentation. I often make reference to the cover-up of the errors in the Old School SWR studies in my Value Walk column. I don’t usually use the phrase “financial fraud” or refer to prison terms. But it doesn’t take a whole big bunch of I.Q. points to know that covering up errors in a retirement study is an act of financial fraud, does it? And it doesn’t take a whole big bunch of I.Q. points to know that committing multiple acts of financial fraud over an 11-year time-period lands people in prison cells, does it?

The issues we are dealing with here are EMOTIONAL in nature.

That’s what makes discussion of these issues so STRANGE.

The people who advocate Buy-and-Hold follow it themselves. We usually don’t think of people who advocate strategies that they follow themselves as being involved in acts of financial fraud. If they follow it, they believe in it. If they believe in it, there’s no fraud. Right?

To a large extent, that really is so.

The vast majority of people who today advocate Buy-and-Hold are not guilty of financial fraud. They are telling people what they truly believe. They are wrong. But there’s no fraud involved in being wrong. They just made a mistake.

It becomes fraud only when you put forward 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.

We learned that Buy-and-Hold cannot work in the long term in 1981. That’s when Shiller published his “revolutionary” (his word) research.

Then we had a huge bull market. Millions of people gave the credit for their (temporary) gains to Buy-and-Hold. So Buy-and-Hold became very popular. Buy-and-Hold had nothing to do with those gains. The early gains were caused by the low stock prices that applied in the early 1980s. The later gains (those from 1996 through 1999) were imaginary and temporary. All the same, millions of people sincerely believed that it was by following Buy-and-Hold strategies that they achieved those gains. Those people were wrong to give credit to Buy-and-Hold. But they were not committing criminal acts.

Lots of people who work in this field have had serious doubts about Buy-and-Hold for a long, long time. Those people learned to keep their mouths shut. They learned that it is career suicide in this field to talk openly about the implications of Shiller’s findings. They kept it zipped.

Then I came along. I have no background in this field. I had no idea that it was career suicide to talk honestly about the last 32 years of peer-reviewed academic research. I just came along saying “dum de dum dum” and then spilled the beans while having no idea that that was what I was doing.

I am a product of the internet, X. There was no internet in the early years of this secret. By the time I came along, the cover-up had been going for many years. I didn’t know there was a cover-up! I just told the truth because that’s what people do in every field of human endeavor other than stock investing. The joke was on me, eh?

The Wall Street Con Men cannot keep this secret in the internet age. It’s impossible! They have to figure out some way to come clean.

I am trying to help them. I am saying that the core problem is cognitive dissonance and that the Buy-and-Hold Pioneers helped us in a huge way by building the framework on which I built the Valuation-Informed Indexing Model and all this sort of thing. I am the best thing that ever happened to these people. BUT THEY CANNOT BEAR TO SEE THE WORD GET OUT THAT THEY HAVE BEEN COVERING UP WHAT THE ACADEMIC RESEARCH HAS BEEN SAYING FOR 32 YEARS. Their first reaction is always to destroy that Rob Bennett fellow.

As if that was going to solve their problem! Rob Bennett is not their problem! Their problem is the 32 years of peer-reviewed academic research that Rob Bennett is forever citing in his writings. THEY NEED TO COME CLEAN. Not just to help out the millions of middle-class investors whose lives have been destroyed by the relentless promotion of Buy-and-Hold “strategies.” They need to come clean to help THEMSELVES. But they just cannot bear to come clean, you know? This “idea” that it is not necessary to consider price when buying stocks has caused more human misery than any earlier idea in the history of personal finance. They are ashamed and they are in cover-up mode. They know that they need to come clean but they cannot bear to do it.

I don’t talk about the prison sentences and all that sort of thing in most articles that I write that do not appear at this site because people hate to hear about that stuff, X. They hate it, hate it, hate it, hate it, hate it. Nothing could be more clear from my 11 years of work in this field.

Why do they hate it? Because they are complicit. Bogle doesn’t promote the pure Get Rich Quick approach for his health. He promotes it because it brings the bucks in the door. There has never been an idea in the history of Planet Earth that has been responsible for taking so many dollars out of the pockets of middle-class people and putting them into the pockets of a small number of Wall Street Con Men. Buy-and-Hold has been a BONANZA for Wall Street. If only it hadn’t caused losses so devastating to millions of middle-class people as to bring on the biggest economic crisis in our history.

I don’t talk about the prison sentences at other places because it is not a winning issue for me. I would like to see everyone talking about them. The sooner we turn our attention to the prison sentences, the sooner we bring this economic crisis to an end and bring on the greatest economic boom in our history. I would LOVE it if the New York Times would write about the prison sentences and we could all just move on. But I do not control the New York Times. It does not serve my purpose of spreading the word about how stock investing really works to talk about the prison sentences at other places. So I generally do not do that.

Why do I talk about them here? Because they are an important part of the story!

If I don’t talk about them here, people are going to say after the crash “Oh, don’t you think that you had a responsibility to talk about those prison sentences?” And they would be right. We all have a responsibility to do what we can to get those prison sentences reduced. The goal here is not to see people serve long prison sentences, it is to get the word out about what the last 32 years of peer-reviewed academic research says about what works in stock investing. Do you see?

If one of my fellow bloggers starts writing about the prison sentences, I will be right there with him or her, X. I WANT to get the word out about the prison sentences. Getting those prison sentences announced is part of the process by which we bring the economic crisis to an end and make our way to the other side of The Big Black Mountain.

But this is not a one-man job. I need Bogle talking about the prison sentences. I need the New York Times writing about the prison sentences. I need all my fellow bloggers talking about the prison sentences. That’s how we work together to make good things happen.

I believe we will ALL be talking about the prison sentences following the next price crash. Buy-and-Hold will be an obscene phrase at that time. Nobody will be holding off on their demands that those who have put up posts in “defense” of Mel Lindauer and John Greaney serve long prison sentences for their role in bringing on the biggest economic crisis in U.S. history.

The time is not ripe for that stuff just yet, X. I talk about it here so that there is a record showing that anyone with just a reasonable amount of intelligence could see years in advance that this massive act of financial fraud was leading us all to no place good. But I pull punches in my other writings because most of us are feeling too much emotional pain about what we did to all our friends and neighbors and co-workers because of our reluctance to speak out clearly in opposition to the promotion of Buy-and-Hold “strategies” to feel comfortable talking over the full truth of the matter today.

We are the luckiest generation of investors ever to talk Planet Earth, X. We are the first generation for which stock investing has become virtually a risk-free endeavor. And we have thrown that all away because we couldn’t resist falling for the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind. That hurts. That hurts bad.

My job is to bring on a healing process.

I do that by doing everything in my power to spread the word about all of the important findings of the first 11 years of our discussions.

Yes, we should be talking about the prison sentences as well as all the other stuff.

No, we are not all entirely prepared to go there just yet.

So I have to choose my spots for discussion of that particular matter.

I wish it were not so. But the evidence that it IS so is very, very, very compelling.

We are all trying to break through a wall of emotional resistance. We are making slow progress. That is the bottom line here.

I hope that helps a bit, my future prison-dwelling friend.

Rob

“People Have a Hard Time Understanding How This State of Affairs Could Continue for 32 Years. It Is Because of the Phenomenon Described in This Article. The Idea that Buy-and-Hold Is DANGEROUS (Not Just Imperfect) Has Been Considered Beyond the Pale for Those 32 Years.”

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Set forth below is the text of a comment that I recently put to the Goon Central board:

Simply put, this objection to the president’s healthcare law is based on a falsehood, and letters that have an untrue basis (for example, ones that say there’s no sign humans have caused climate change) do not get printed.

This is the answer to the question put to me so often over the past 11 years — Are you saying that there is a Grand Conspiracy to keep people from learning what the last 32 years of peer-reviewed academic says?

There is a Conspiracy of Ignorance. And there is a Conspiracy of Silence re evidence that Buy-and-Hold is dangerous.

There once was a sincere belief that Buy-and-Hold was the answer. People were very excited about that finding. They lost interest in pursuing alternatives to Buy-and-Hold. The only interest was in REFINING Buy-and-Hold, which is of course something very different.

So long as the bull market continued, this was not going to change. There was no DEMAND for an alternative.

Since 2008, there is SOME demand. It is not yet strong enough to get every board and blog on the internet opened to honest posting on the research. But there is some demand today and it is growing. It will grow much more quickly following the next price crash.

People have a hard time understanding how this state of affairs could continue for 32 years.

It is because of the phenomenon described in this article. The idea that Buy-and-Hold is DANGEROUS (not just imperfect) has been considered beyond the pale for those 32 years. Many, many people have grave doubts. But they are aware of the Social Stigma attached to saying that Buy-and-Hold is DANGEROUS, not just slightly wrong but WILDLY wrong.

The longer the Social Stigma remains in place, the harder it becomes to violate.

Once the Social Stigma is removed, we will all work together to make progress at an amazing speed.

There is ZERO evidence showing that Buy-and-Hold works. ZERO. It was all a mistake. What happened is that people discovered that short-term timing doesn’t work and jumped to the hasty conclusion that long-term timing is not required either. There has never been even a tiny sliver of evidence that the latter claim is so.

This is not science. This is superstition. Scientific claim can be questioned and can survive the challenges put to them. Superstitions must be accepted on faith or they collapse. Buy-and-Hold is today a superstition, something many people believe in but something for which there is zero evidential support. It is BECAUSE there is zero support for Buy-and-Hold that Buy-and-Hiolders are so unwilling to acknowledge the mistake. Acknowledging  a mistake that has been doing damage for 32 years is VERY embarrassing.

The embarrassment gets worse and worse with each day that the Ban on Honest Posting remains in place.

The only way out is tearing down the stigma that blocks us all from engaging in honest and respectful and free discussion of the possible DANGERS of Buy-and-Hold.

The only way out is forsaking superstition and returning to the original idea behind the Buy-and-Hold project — learning what the RESEARCH says about what works in stock investing.

Rob

“The Secret Edge That I Hold in These Discussions Is That There Is a Part of You That Wants to Learn How to Invest Effectively. That Part Is Also a Part of Millions of Other Middle-Class Investors. That Part is Growing Stronger Every Day.”

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Set forth below is the text of a comment that I recently put to the Goon Central board:

but all with RESPECT for all parties, as long as they are operating in good faith: 

I showed a respect to Greaney and to all the Buy-and-Holders that you have never showed them Drip Guy.

I pointed out Greaney’s mistake because I believe that he wants to help people learn how to retire early. It naturally followed that he wants to correct any errors he has made in any retirement studies that he has posted to his web site.

You have demonstrated for 11 years now that you are working from a very, very different presumption re what Greaney is all about.

Greaney has behaved in ways that support your presumption. Still, I know the man better than you. Greaney has ALSO behaved in ways that support my belief that he is suffering from cognitive dissonance. He has behaved poorly. He has committed felonies. He will be going to prison for a long time. All that said, there is a part of him that set up that site because he wanted to help people learn how to retire early and that part of him to this day wants to do that.

The same is true of Jack Bogle.

The same is true of Bill Bernsteinzzz.

The same is true of Scott Burnszzz.

The same is true of Larry Swedroe.

Believe it or not, the same is true of Drip Guy.

This is the secret edge that I have held in these discussions going back the the first day, Drip Guy.

There are not two sides here. We are all on the same side. We all want the same things.

You ACT like you don’t. But you don’t fool me.

You ACT like you fool yourself. But that is never more than partly true.

There is a part of you that wants to learn how to invest effectively and that wants to help others learn how to invest effectively.

That part of you is drawn to learning about what the peer-reviewed academic research in this field really says about what works in stock investing.

And that part of you is also a part of millions of other middle-class investors.

That part is growing stronger in each and every one of us every day.

It will soon grow strong enough to overcome the part in many of us that would rather put forward death threats and demands for unjustified board bannings and tens of thousands of acts of defamation and threats to get academic researchers fired from their jobs rather than to say the words “I” and “Was” and “Wrong” even though admitting fallibility is an essential part of any learning process.

I win in the end, Drip Guy.

Or else we all lose.

I am happy to discuss the terms of our mutual victory this morning if you are up for it.

But I have zero interest in discussing the terms of our mutual defeat.

For obvious reasons.

Respect is indeed what it is all about. When you are feeling enough pain from the prospect of your prison sentence, a light switch will be flipped and you will start respecting yourself again. At that moment, all sorts of good things start happening for every Buy-and-Holder and for every Valuation-Informed Indexer, with not one exception.

Don’t let the bad guys get you down, man.

Rob

“We Have An Entire Nation of People in Pain Over What They Once Believed About Investing. Once the Pain Is Over, It Is Over for Good. So the Thing to Do Is To Do Everything Possible to Insure That the Transition Takes Place As Soon As Possible.”

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

These people are not your friends. In fact, you are like a boil on their ass.

That’s not so, Anonymous.

There is not one person alive who does not want to know how to invest effectively. Not one.

I am teaching them how to invest effectively. So I am obviously their friend.

And I like learning stuff from them too. So it works both ways.

Is there friction in evidence in my dealings with them?

There is indeed.

What’s that about?

It hurts to realize that you have been taken, Anonymous. I am telling them that they have been taken. I am saying things that cause them to feel pain.

So they strike out at me.

But they STILL want to learn how to invest effectively. The pain they feel doesn’t change that.

The pain is a temporary thing. The learning experience is a forever thing.

The bad stuff that we have to work through to get to the good stuff is small. The good stuff on the other side is huge.

I am their friend.

They don’t see it because of the pain, that’s all.

If there were a way to avoid the pain, I would of course elect that path.

There is no such way.

All learning experiences begin with a realization that you don’t know it all. So that has to come first.

If they could see what is on the other side, they would jump in two seconds. Our problem today is that they cannot yet see what is on the other side clearly enough to want to jump to it.

But there is no other way. So that is what they will do in time.

Once the pain is over, it is over for good. So the thing to do is to do everything possible to insure that the transition takes place as soon as possible.

We have an entire nation of people in pain over what they once believed about investing, Anonymous.

Please don’t let that reality get you down.

The pain is in one sense a very good sign. The pain comes from the realization that you could have done so much better with your money. The more pain you feel, the better you could have done.

We are seeing lots of pain. That means that there is lots of forward movement there to be achieved. The advance here is huge.

It is the job of all investment advisors today to help people through this pain. Lots are not doing it because it is hard work. That’s wrong. It is hard work but it is also important work. And very fulfilling work. Once people get past the pain part, they never, ever, ever want to go back to the discredited strategies.

There are no boils on any asses. We are all in this together. We are all friends.

We are humans, of course. So we are scared. We may COMPLAIN of boils on our asses. That’s just us griping about the pain. The thing to do is to bring an END to the pain. We know who are friends are by checking to see who is putting the most energy into that project. The people who are NOT our friends don’t have the combination of guts and love to do it. The people who ARE our friends want to do everything they can to help us out of a tight spot.

I’m your friend, Anonymous. I am not a boil on your ass.

Really!

Rob the Boil (Not!)