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

There is no data that challenges my beliefs, Anonymous. 100 percent of the data supports Valuation-Informed Indexing, 0 percent of the data supports Buy-and-Hold.

I wish it weren’t so. If 10 percent of the data supported Buy-and-Hold, we could have fun arguing our different positions and you could learn from me and I could learn from you. But when 0 percent of the data supports your position, you are in a tough spot. That’s why we see 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. You ain’t got nothing else.

I didn’t do that to you, Anonymous. It was Jack Bogle who did that to you. He should have come clean when Shiller published his “revolutionary” (Shiller’s word) research. And, if Bogle was suffering too much from cognitive dissonance to do so, those who love him should have helped him out by asking him to address Shiller’s research and explain what changes he believed needed to be made to the Buy-and-Hold strategy to bring it up to date with the new research. You have a beef with everyone who failed to do that. You have no beef with me. I have done that.

Buy-and-Hold was a mistake. It was based on research that was published in 1965 and then discredited in 1981. When your strategy is discredited, you need to update it. Or else you need to stop claiming that the now-discredited strategy is supported by the peer-reviewed research. Once peer-reviewed research is published showing that there is precisely zero chance that a strategy could ever work for even a single long-term investor, claims that that strategy is supported by the peer-reviewed research become a lie.

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

I naturally wish you all the best that this life has to offer a person, my long-time Goon friend.

Rob

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

I don’t know of a single person that agrees with you Rob, yet each of the points I mentioned are well documented and discoverable with a simple Google search. I would be happy to provide examples again if needed.

Shiller obviously agrees. And the people who awarded Shiller the Nobel prize agree.

And the thousands of our fellow community members who asked that honest posting be permitted on our boards and blogs agree at least in part.

Wade Pfau obviously agrees. He spent months researching Valuation-Informed Indexing and declared at the end of his work that: “Yes, Virginia, Valuation-Informed Indexing works”

I could go on and on. I’ve spoken to economists who agree and bloggers who agree and investment advisors who agree. I’ve had site owners who banned me from their sites tell me in the e-mail informing me of the ban that their personal view is that my site is the best investing site on the internet. I would say that that’s a pretty darn strong statement of agreement.

What I don’t have is people who will say out in public that they agree after they see what you Goons will dish out to them when they do. People don’t like to be threatened. People don’t like to see their reputation smeared. There is a widely shared dislike for these sorts of practices. To get people to say what they believe in clear and firm and bold ways, we are going to have to lessen the penalties imposed for doing so.

The core issue here is that stocks are today priced at two times fair value and so to tell people what the last 36 years of peer-reviewed research tells us re how stock investing works is to tell people that they need to divide the number on their stock portfolio by two to know the true and lasting value of their life savings. For many of us, hearing that we need to divide the number on our portfolio statement by two is like hearing that we have cancer. How popular do you think the guy is who tells millions of people that they have cancer, Sammy? That’s me.

In the long term, people who have cancer are better off knowing that they have cancer. Once you know, you can take steps to deal with the problem. Those who don’t know the true value of their stock portfolio cannot plan effectively for the future. They may not like hearing the realities. But they NEED to know the realities.

Doctors can get away with telling their patients that they have cancer because it has become standard industry practice in the medical field to tell patients where they stand. It has not become standard industry practice to shoot straight with stock investors about the last 36 years of peer-reviewed research. Shiller published his “revolutionary” (his word) research findings in 1981 and the longest and biggest bull market in history began in 1982. No one wants to know the realities in the middle of a bull market. Prices moved downward sharply in 2008 and we saw some slippage in support for Buy-and-Hold in early 2009. But then prices shot back up quickly and we have been stuck in fantasyland in the years since.

I think things are going to change in the days following the next price crash, Sammy. There’s no benefit to living in fantasyland after you have lost most of your retirement savings. At that point, I don’t see what opposition there would be to coming clean. So this is all going to come out. Lots and lots and lots of people will be saying in those days that they supported me all along but that they just were afraid to come forward. And they will be telling the truth.

I wish it weren’t so. But that’s where we stand, my good friend. Lots of people agree with me either in whole or in part. But you would need to cut back on the abusiveness a notch for them to gather the courage to speak up. And I have a funny feeling that you have no intention of taking things in that direction at this point in the proceedings.

My best and warmest wishes to you and yours, old friend.

Rob

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

The market is valued today according to what all the people holding stocks think it’s worth. What the market is valued tomorrow, the next day or any day in the future depends on the collective individual decisions of those who participate in the market by owning stocks. CAPE or PE10 is not some magical metric which tells you exactly what the market value should be or when market valuations will shift. Only in the Bat$hit Crazy Wide World of Hocomania has PE10 been elevated to the status or a religious belief.

The people who comprise the market cannot price stocks properly without access to the information needed to do so. As of today, honest discussion of the implications of the last 36 years of peer-reviewed research is banned at every major investing site. So it is not even possible for today’s investors to price stocks properly. They would need to gain the ability to post honestly to do that.

P/E10 tells you the proper price of stocks presuming that the market continues to behave in the future at least somewhat as it always has in the past. It is possible that the market will behave differently in the future. If that’s what you believe, you can make whatever adjustment you feel you need to make to reflect your personal belief.

There is no question but that emotion plays a huge role in the setting of the daily price and that that price does not last into the long-term to the extent that it reflects only emotions and not economic realities. This is why knowing today’s P/E10 level permits you to have a much better idea of what the price will be in 10 years or 15 years or 20 years than you would have if you did not look at today’s P/E10 level. The P/E10 level tells you how much of today’s price reflects emotional cotton-candy nothingness and how much of it reflects economic realities. You can count on the portion of the price that reflects the economic realities. You cannot count on the portion of the price that reflects only emotional cotton-candy nothingness. It is the market’s job to price stocks properly. So the cotton-candy nothingness just gets blown away in the wind in time.

Do you think that stocks offered the same value in 1982, when they were priced at one-half of fair value, as they did in 2000, when they were priced at three times fair value? I sure don’t. The research shows that the safe withdrawal rate was 9.0 in 1982 and 1.6 in 2000. For a retiree with a portfolio of $1 million, that’s the difference between living on $90,000 per year and living on $16,000 per year. That is too big a difference to overlook in any study purporting to identify the safe withdrawal rate. Aspiring retirees need accurate numbers. If you give them inaccurate numbers, you are going to hurt them in very serious ways.

We agree that P/E10 does not tell you WHEN prices will return to fair-value levels. That is determined by investor emotion. No metric that I know of can tell you that. P/E10 tells you HOW MUCH prices need to correct. But the correction takes place only in the long-term and there is no way to know in advance when it will take place. That is why short-term timing does not work. If you could know in advance WHEN the price correction would take place, you could engage in short-term timing successfully. It just doesn’t work that way.

But, if you are a long-term investor, you certainly need to know the real long-term value of your portfolio. It is not possible to engage in effective financial planning without getting the basic numbers at least roughly right. When stocks are priced at three times fair value, as they were in 2000, using unadjusted portfolio statement numbers won’t get you anywhere even remotely in the neighborhood of having accurate numbers. People were using the incorrect numbers in the Greaney study to determine when to turn in resignations from high-paying corporate jobs. Those people’s lives were destroyed by the errors in that study. I believe strongly that Greaney should have corrected the study within 24 hours of the moment when he became aware of the errors in it.

There is no excuse for the death threats. And the death threats show that Greaney did not believe that it would be possible for him to justify the methodology used in his study in civil and reasoned debate. People who are making an honest effort to help investors do not advance death threats when their statements are questioned. People who advance death threats when questioned are working some sort of con. I mean, come on. I can accept that Greaney worked a con on himself before he worked it on others. But the con that he worked still did a great deal of harm to those others.

You say that today’s market price is determined by the assessment of today’s investors as to what the market is worth. If that were so, how would it be possible for P/E10 to effectively predict the market price that will apply 10 years into the future for 145 years running now, the entire history of the U.S. stock market for which we have records? You are wrong. The market price is set partly by the factors that you refer to. But there is another factor that you and all Buy-and-Holders ignore that was revealed by Shiller’s “revolutionary” research findings of 1981. The factor that we did not know about until 1981 is that the market always eventually closes the gap between the emotionally determined price and the real, economic price. When you know the extent to which today’s price differs from the real, economic price, you know in which direction prices are headed in the long term. That’s very important information for investors planning retirements which will extend for more than 10 years into the future, which is the vast majority of them.

These are my sincere thoughts re these terribly important matters in any event, my good friend. I naturally wish you all the best that this life has to offer a person.

Rob

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

According to you, I am just driving around in my cotton candy car and that my car and that I probably don’t really have a car as it is all make believe.

Please think about what the word “overvalued” means, Sammy. It means “mispriced.” If your stock portfolio is mispriced, then what you say here is so — that wrong number that you are telling yourself is the amount of your life savings is a make-believe number. It’s not just me who is telling you that. Every time you read an article that cites today’s valuation level — the stock market is today priced at two times its fair value — the person saying that is in an indirect way telling you that you need to divide your portfolio value by two to know the amount that you actually have put aside to provide for your old age.

The only thing that I do that is different is that I say it in a direct way. I don’t dance around the topic and put forward all sorts of happy talk. I tell people “if you have barely enough to retire going by how stocks are priced today, you are going to only have half of what you need once prices return to reasonable levels, as they always do.” People HATE when I do that. You are one of those people. You hate me with a burning hate because I have been stating these obvious truths in your presence for 15 years now.

But am I the bad guy or is it the people who are putting forward Buy-and-Hold happy talk who are the bad guys? I believe in planning. You cannot plan effectively if you don’t even get the numbers roughly right. So I believe very strongly that you need to be taking stock valuations into consideration when you develop your investing strategies. Without doing what you need to do to get the numbers right, you are shooting in the dark.

The rarely spoken truth here is that you are not really angry at me. You are angry at yourself. You know on one level of consciousness that you should have been taking valuations into consideration all along. You talked yourself into not doing so because like all humans you possess a Get Rich Quick urge that entices you to ignore common sense and live in a fantasyland and because the vast majority of people who work in this field have noticed that there’s a lot more short-term money to be made encouraging people to live in fantasylands than there is in telling people what the last 36 years of peer-reviewed research shows us.

I am not your enemy, Sammy. Your Get Rich Quick urge is your enemy. Buy-and-Hold is your enemy. You won’t have these feelings of hate toward anyone once you bring your investing beliefs into accord with your common sense. There’s a powerful feeling of peace and confidence that comes with doing that. You are living in a fantasyland today and it doesn’t feel good. But you can give that up and start feeling better about your financial future anytime you want.

That’s my sincere take re these matters in any event, my good friend.

Rob

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

In short, you can’t point to even one person, including you, that has ever been successful with VII.

Shiller knows this and that is why he says not to use his work to time the market as well as he recommendation to stay in stocks.

The only way that we will ever all know what Shiller really thinks is when we act as a society to rein in you Goons. Shiller woild be happy to tell you all kinds of things if you persuaded him that it is safe to do so. The same is so of Bogle. And of Bernstein. And of Swedroe. And of Pfau. And of thousands of others.

I didn’t say what I believed about safe withdrawal rates prior to May 13, 2002. It’s not that I didn’t want to share. It’s that I was afraid of what you Goons would do to me. And you weren’t even Goons in those days! You were my friends in those days. But I sensed that bad things would happen if I told you that your stock portfolio was worth one-half of what you had been led to believe it was worth. Eventually, I did work up the courage and then of course bad things did indeed happen.

It’s that fear of seeing bad things happen that holds Shiller and all the others back today. Shiller said very different things in the wake of the 2008 crash from what he says today. Why? Because people were disgusted with Buy-and-Hold at that time and so he felt it would be safe to do so. Then prices got pushed back up and he became more cagey in his statements.

Everyone will be telling you about the dangers of Buy-and-Hold following the next price crash. It will be a safe thing to do then. But a lot of good it will do you! I’m telling you know when you can still take action to protect your assets. I think that’s the way to do it.

Ease up on the abusive stuff and you will hear very different stories about how stock investing works. There’s a sense in which you get what you want when you intimidate people. But you don’t get what you need. You hurt yourself with your abusiveness when you make people afraid to tell you the straight story.

My sincere take.

Rob

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

“They are all ashamed of their behavior.”

How do you know this? Do you read minds?

I observe behavior.

People don’t put forward death threats when they believe that there is peer-reviewed research supporting what they are saying. Have you ever seen a Valuation-Informed Indexer put forward a death threat? It has never happened. We really have peer-reviewed research on our side. So we feel that it is beneath us to engage in such behavior.

The Buy-and-Holders really do believe in Buy-and-Hold to the extent that they follow the strategy themselves. The fact that they follow the strategy is legitimate evidence that they believe in it. But they lack confidence. It defies common sense to think that there could be a market where it is not necessary to practice price discipline. So every Buy-and-Holder has doubts about the merit of his strategy. Those doubts evidence themselves in defensiveness. The Buy-and-Holders lash out when they are questioned because they cannot bear to hear challenges to a strategy in which they are desperately trying to maintain a belief.

Just ask yourself generally why people make threats of violence. Are there any cases where it is not done out of weakness? People make threats of violence when they are desperate, when they feel that acceptable means of making their point will not work. I cannot think of any exceptions to that rule. You don’t need to be able to read minds to know that the Buy-and-Holders feel shame re their behavior.

This is the sort of thing that should be talked about on investing boards and blogs on a daily basis. The core idea of Buy-and-Hold is that investing is a rational behavior. Because the Buy-and-Hold paradigm today reigns supreme, almost all discussion relates in some way to rational behavior. Investing is treated as if it were a science. We see numbers and graphics and arguments with logic chains and all this sort of thing. This stuff is impressive. This stuff takes a lot of people in. It took me in for a long time.

But that stuff misses a big part of the story. We don’t talk about the fury that the Buy-and-Holders feel when their ideas are challenged. That’s a critical part of the story. That’s emotion, not logic. That shouldn’t be there if Fama is right that investing is a 100 percent rational endeavor. That’s the sort of thing that you should only see if Shiller is right that investing is largely an emotional endeavor. We see behavior on our boards and blogs on a daily basis that supports Shiller’s research and people do not comment on it. They are blind to it because of their desperate need to believe in Buy-and-Hold because their retirements are riding on its legitimacy.

All of this stuff is tangled together. This is what makes it so difficult to achieve the progress that deep in our hearts we all want to achieve. The Buy-and-Holders want to be able to reduce the risk of stock investing by 70 percent just as much as the Valuation-Informed Indexers want to. Why the heck wouldn’t they? But to acknowledge the research showing the merit of Valuation-Informed Indexing would be to acknowledge the cover-up. The Buy-and-Holders cannot bear to acknowledge having been part of a cover-up. Cover-ups are not rational and the Buy-and-Holders like to think of themselves as perfectly rational creatures. They are trapped in webs spun by the contradictions of their own flawed logical premises.

Look at the hate you spew in every post you advance here, Anonymous. That’s shame talking. I didn’t do anything to bring that out in you, it was there before I came on the scene. All that I did on the morning of May 13, 2002, was to ask a question. I didn’t even say “valuations should be counted.” I said: “SHOULD valuations be counted?” I asked a question and lots of community members responded very positively to the question. That’s what you want to see on a discussion board. That’s how you launch a learning experience for everyone.

The Buy-and-Holders responded with rage. Why? It’s not because there is something wrong with asking that question. It’s because the question is a good one. The Buy-and-Holders were smart enough to see that the question was a good one and they felt anger at themselves for not having explored it at an earlier time when they could have saved themselves years of travel down the wrong investing path. So they exploded. They weren’t really angry at me, they were angry at themselves. They directed their anger at me because they were too afraid to examine their own mistakes. They ACTED as if they were angry at me. That’s what shame makes us do. When we feel ashamed, we strike out at friends who happen to say things that make us uncomfortable because we fear that their questions are going to expose our secrets.

All of this needs to get out. Not to hurt the Buy-and-Holders. That’s how you always frame it. You always suggest that Rob is out to get the Buy-and-Holders because he points out bad stuff that they have done. The reality is just the opposite. I see the Buy-and-Holders as my friends. I admire the work that they have done, I feel that they are trying to do the same thing that I am trying to do — develop more effective investing strategies. So I say things aimed at helping my Buy-and-Hold friends get out of the trap in which they find themselves caught.

My problem is that the Buy-and-Holders were in the trap for a long time before I even came on the scene. Greaney knew perfectly well that his study did not contain a valuations adjustment long before the morning of May 13, 2002. That’s why he lashed out. Lots of community members were fascinated by the question. They had never considered it before and getting the safe withdrawal rate right was important to them. So they loved the discussion that they saw developing. But Greaney understood that the discussion would lead to criticism of his study if it continued. So he lashed out. And the ones who had enjoyed the discussion stopped asking for it. They wanted to have a discussion but they did not care nearly as strongly about having it as Greaney and his friends felt about blocking it. For the people who wanted to have the discussion, exploring the realities was a nice idea. For the people who felt shame about the cover-up, it was a matter of life and death to stop it from going forward.

This is the reality of investing analysis in the year 2017. The Buy-and-Holders are good and smart people. But because they are flawed humans like all the rest of us, they made a mistake a good number of years back that put them on the wrong track. In normal circumstances, it would be no biggie. In normal circumstances, someone would point out the error, they would say “sorry about that” and we would all move on. But in this case the thing discovered was truly “revolutionary.” Shiller’s 1981 findings turn everything we once thought we knew about stock investing on its head. The hardest mistakes to acknowledge are the really big ones because they cause the greatest feelings of shame.

The Buy-and-Holders could not bear to admit this particular mistake and so the negative effects of it have been compounding and compounding for decades now. Now the shame is so great that we cannot even get people to point out that death threats should not be permitted on investing discussion boards. The hate on the part of the Buy-and-Holders toward the idea of permitting honest discussion is so great that we cannot cope with it. So most of us just throw our hands up and say “oh, it will work out somehow.”

Will it?

That’s not an evidence-based statement. The one time we got to a P/E10 of 33 we experienced a Great Depression. This time we got to 44. This is a serious matter. We f’d up big time.

But of course the good news here is 50 times more good than the bad news here is bad. If we could have the discussion, the Buy-and-Holders would no longer feel shame because all of the good stuff they genuinely were trying to achieve would suddenly become a reality if they could only retrace their steps, admit their one mistake, and then begin moving forward again. But how the heck do we get them do that? How do we get them to admit the mistake when we cannot even have a civil conversation about the evidence showing that they made a mistake?

Every negative interaction we have had for 15 years now is the product of the shame you feel, Anonymous. There is no other possible explanation for the behavior we have seen on your part. If you were 100 percent sure that I am wrong about investing, that would be fine. If that were how you felt, you would permit me to speak wherever I wanted to speak, confident that the discussion that followed would once again show to interested observers the merit of Buy-and-Hold..

But you don’t feel the confidence in your investing strategy needed for you to be able to tolerate honest and civil discussion of its merits. Your behavior shows that you lack confidence, that you follow the strategy but that you are ashamed of yourself for not having questioned its core premise long before I ever came on the scene. You ask yourself: “What made me get on this track, why oh why did I do it?”

I cannot change your past. You bring it with you to every conversation between us. All that I can do is to reassure you that civil discussion of the peer-reviewed research can never hurt you, that the only reason why you perceive a threat in things that I say is that you were holding and suppressing doubts about the Buy-and-Hold project before I ever came on the scene. My job is to get those doubts out into the open, to have every investor on the planet exploring those doubts so that they can all make informed choices as to whether to continue down the Buy-and-Hold path or to make a mid-course correction given what the peer-reviewed research of the past 36 years tells us about the true realities of stock investing.

I see shame in every thread in which you and your Goon friends participate, Anonymous. You are blind to it because you cannot bear to look at it, it is too painful. You see me as a threat but I am trying to help. I am trying to build up that voice of common sense within you that tells you “I really should be willing to listen to the other side of the story, what possible harm could it do?” That’s how discussions are handled in this country in every field of human endeavor other than stock investing. That’s what I believe would work best in the investing advice field as well.

Rob

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

Just for a little comic relief to anyone that might be reading these comments, here is a little tid-bit Rob posted over at his website:

“I would rate Bogle and me as roughly equal in importance. . . Just as I am nothing without Bogle, Bogle is nothing without me.”

In case you are wondering, it appears Rob was serious when he posted that.

I love Bogle. I learned about the errors in the retirement studies by reading Bogle’s book (he says that “Reversion to the Mean is an Iron Law of stock investing” — the safe withdrawal rate cannot be the same number at all valuations levels if Reversion to the Mean is an Iron Law). I rank Bogle second only to Shiller.

But I believe that Bogle is wrong about valuations. The market is not efficient, valuations affect long-term returns. And the valuations effect is huge. It is about 80 percent of the story for most investors. Most factors that affect stock investing we have no control over. But each investor decides for himself or herself whether or not he or she is going to adjust his stock allocation in response to big valuation shifts. So there is no factor that it is more important to get right than valuations.

And Bogle gets it wrong. That one mistake ruins his other work in a practical sense. Buy-and-Hold is a numbers-based strategy. When you get the numbers wrong, none of it works. And you cannot get the numbers right without taking valuations into effect.

Valuation-Informed Indexing is Buy-and-Hold with a valuations adjustment added. That’s it. That shows how much I love Bogle, that I would spend 15 years developing a strategy that incorporates all of his ideas except for the one big thing that he got terribly wrong. So, yes, Bogle needs to incorporate my work on how incorporating valuations into the mix changes Buy-and-Hold in a hugely positive way just as I incorporated all of Bogle’s ideas into Valuation-Informed Indexing (because they are genius!).

I never had any intent of saying anything negative about Bogle. When I started out talking about this stuff, I called the strategy not Valuation-Informed Indexing but Buy-and-Hold 2.0 or The New Buy-and-Hold. VII is really just Buy-and-Hold updated to reflect the last 36 years of peer-reviewed research. It was because of the negative reaction of my Goon friends that I changed the name. They don’t like VII being called “Buy-and-Hold 2.0” and Bogle made clear that he is with them, so I changed the name so as not to offend.

I still believe that I will be working closely with Bogle following the next price crash. I think he is a great man who has done great things and that the human misery that he sees following the next crash is going to cause him to come clean re his one big mistake and then we are all off to the races. Regardless of what happens, I will always sing the man’s praises. No one has done more to help the average investor by promoting simple and yet effective ideas with a long-term focus. But I have never felt even a tiny bit comfortable saying that valuations can be ignored. I learned from the peer-reviewed research (which Bogle taught me to use as my guide!) that valuations ALWAYS matter big time.

I love the man, Sammy. But, yes, I do believe that he is capable of making a mistake. As am I. As are you. As are we all. I only wish that all of his friends had helped him out by insisting that he deal with the mistake when he first learned about it. I think it would be fair to say that Bogle would feel about 100 times better about himself today had he played it that way back in 1981.

Rob

 

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

As for another example of how Rob lies, here is an article that discusses Rob’s post from May 2002.

https://retirementresearche…

First, Wade does a great job pointing out Rob’s mistake. Secondly, if you read the thread that is linked in Wade’s post (the actual thread from 2002), you will see how Rob is given an education and then admits he was wrong at the very end of the thread. Rob has been embarrassed by this since 2002, so he tries to cover it up with his stories about John Greaney. Further, you will see that his thread is not really “famous”, as Rob puts it. Instead, it was the beginning of Rob’s humiliation.

I did apologize at the end of the thread. I think we all could learn a lot about why our deeper understanding of how stock investing works has been delayed for so many years by thinking through what caused me to apologize.

I loved the Retire Early community; I had made lots of friends there and enjoyed talking things over with the people who congregated there and learning about both saving and investing by trading ideas. My post of the morning of May 13, 2002 (it is VERY famous in the Retire Early and Indexing communities — I had many people come up to me at Financial Blogger Conferences and say “Oh, so YOU are that guy!”) pointed out that the Buy-and-Hold retirement studies lack an adjustment for the valuation level that applies on the day the retirement begins and thus get the numbers wildly wrong.  Shiller showed in 1981 that valuations affect long-term returns, so it is obviously not possible that any study not showing the effect of valuations could get the numbers even close to right at times of insanely high valuations.

The reaction to the post was mixed. There were a large number of community members who loved, loved, loved it. Dozen of people were calling the discussion that followed the best discussion that was ever held at that board community. I of course was gratified by that reaction and didn’t want to let those people down. But there was another, larger group that desperately wanted to stop the discussion and made clear that it would engage in any form of abusiveness needed to crush any community member who offered constructive comments. I did not understand the issues nearly as well then as I do now. But I was strongly committed to sticking with the discussion and encouraging others to do so with the aim of helping us all to enjoy a solid learning experience.

On the night that I made that apology, there was a fellow (I believe that it was “Prometheus”) who made a point that I believed at the time I might have been wrong about. I was not sure and I believe today that I was not wrong. But I felt that the friction might cause lasting damage to the board community and that was the last thing in the world that I wanted to see. So I felt that, if there was even a chance that I was wrong, I should apologize. I also felt that I should not offer a niggling apology. If I was going to apologize, I wanted to say clearly that I was just wrong and not limit the apology by saying that I was wrong only about a few aspects of the question. So I wrote it that way.

Following the apology, the Goons became even MORE abusive. I then realized that they were not willing to try to work things out in any reasonable way, they intended to use intimidation tactics to silence any community members who offered thoughts not in accord with their own. So I re-entered the debate. The rest of course is history.

I did not think that I was 100 percent wrong at the time I made the apology. I said that I did think that. But I do not think that I was being dishonest. I stated things in the best way that I could given the circumstances that applied. My reasoning mind told me one thing (that it is not possible to calculate the safe withdrawal rate without considering valuations if valuations affect the result) and my emotional mind told me something different (that people whom I respect and like believe that a valuations adjustment is not required). For a day or so, my emotional/social brain had the upper hand and I disassociated myself from what my reasoning brain told me was true. Then I returned to making my rational brain the primary one.

This is what we are all going through. Jack Bogle is as smart as smart can be. And I believe that he is a good man — the last thing in the world that he would want to do is to cause millions of failed retirements. But Bogle has let his emotional/social brain achieve primacy over his reasoning brain. His reasoning brain of course understands that it is not possible to calculate the safe withdrawal rate accurately without taking valuations into account (Bogle has said that “Reversion to the Mean is an Iron Law of stock investing ” — it was this statement of Bogle’s that convinced me that the numbers in the Buy-and-Hold studies must be wrong).

But Bogle has invested decades of work into developing the Buy-and-Hold strategy and to acknowledge that valuation adjustments are required in all calculations is to acknowledge that the Buy-and-Holders have been getting important questions terribly wrong for many years now. It’s too much for him to accept, just as it was too much for me to accept that my post might cause the Retire Early community to self-destruct. Bogle is suffering from cognitive dissonance. He “knows” that Buy-and-Hold is gravely flawed and yet he also “knows” that that is impossible.

So he rationalizes. He tells himself that things will work out somehow even if the investing community does not explore these issues. That’s like somebody who suspects he has cancer telling himself that there is no need to see a doctor because he probably is just fine. No! If there is even a tiny chance that the Buy-and-Hold retirement studies got the numbers even a tiny bit wrong, we should be discussing that possibility at every discussion board and blog on the internet. If we see millions of failed retirements in days to come because we failed to grant the wishes of the thousands of community members (including some of the biggest-name experts in the field) that a debate be permitted, we will all live through one of the worst social catastrophes in our nation’s history.

I think we need to permit the debate to go forward. That is in everyone’s best interest. There is not one person who will not benefit from such a debate. In the event that the Valuation-Informed Indexers are right, we of course need to learn that and to get the word out to everyone. In the event that the Buy-and-Holders are right, we need to learn that and, in the event that they are right, the result of the debate will be to show that to be the case.

I was wrong to apologize. I am a little embarrassed by it. How could I get something so simple so wrong?

The explanation is that I am one of those darn humans. We humans are influenced by social pressures and the social pressures to believe that Buy-and-Hold is at least largely on the right track are INTENSE. If Buy-and-Hold is wrong in the way that Shiller’s research shows it to be wrong, it was the promotion of Buy-and-Hold strategies that was the primary cause of our economic crisis (Shiller actually predicted the crisis years in advance in his book –How did he do that if he is such a fool?). This is no small matter. This is a big deal.

In our nation, we talk over big-deal matters. That’s how over time we bring them to successful resolutions. In an ideal world, this debate would have started in 1981, when Shiller first published his “revolutionary” (his word) research. That didn’t happen. I am 100 percent certain that Bogle would play if differently if he could travel in a time machine back to 1981. But of course Bogle does not have access to a time machine and none of us can provide him one. The only thing that we can do at this point in the proceedings is to launch the debate TODAY and do the best we can with what we learn as a result of holding it.

These are my sincere thoughts re this terribly important matter in any event.

I naturally wish you the best of luck in all your future life endeavors, Sammy. Please take good care, my old friend.

Rob

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

Wow. Thanks Sammy. Without knowing the basic back story, I would have never guessed that 2002 Hocus and 2017 Rob are one in the same. The Hocus plan, while totally inadequate of course, at least was lucid and detailed. And some people responded favorably. None of which can be said for today’s Rob.

Conspicuously missing from Hocus are tales of death threats, conspiracies, prison sentences, $500 million paydays, or even VII. Makes one ponder whether this descent was rapid or gradual. Was it accelerated by Rob’s retirement and resulting social isolation?

Just rhetorical questions. No need to respond, Rob, as I’ve picked on you enough this week.

I certainly did not appreciate the extent of the cover-up on the morning of May 13, 2002, Dan. The moment that did more than any other to accelerate my understanding of the realities was the moment that Greaney put forward his first death threat on the evening of August 27, 2002, and 200 of my fellow community members endorsed it while only 50 condemned it. Since then, an important part of my work has been figuring out how something like that could happen. I have made lots of progress but I wouldn’t say that I am 100 percent there even today.

The Buy-and-Holders are good and smart and hard-working people. I have said that hundreds of times because I believe it and because, given that I believe it, I think it would be counter-productive not to say it in circumstances like these. So why? Why don’t the Buy-and-Holders (the vast majority of whom are not out-and-out Goons) speak up about what they have seen?

I’ll spare you my long, detailed answer to that one. The short version is that, so long as the P/E10 value resides where it does today, it really couldn’t be any other way. Say that Motley Fool banned Greaney on the day he advanced his first death threat and that the hundreds of my fellow community members who had expressed interest in having a sustained debate about the realities of safe withdrawal rates had been given what they requested? What would have happened?

The P/E10 value would have fallen to fair-value levels. People want to invest effectively. Each and every one of us. People are indeed capable of rationality even if it’s not safe to assume that we always practice it. Give us the tools we need to make effective investing choices and we are going to make them. If Motley Fool has enforced its posting rules in a reasonable manner, the debate that started at Motley Fool would have spread to lots of other sites. And the hundreds of thousands of investors who thus became better informed about how stock investing works would have lowered their stock allocations. They would do that by selling shares until prices dropped back to fair-value levels, at which point investing in an informed way would no longer require a lowering of one’s stock allocation.

Today we see a lot of abusiveness when we permit honest posting on the far-reaching implications of the last 36 years of peer-reviewed research in this field. Today the P/E10 level is at insanely dangerous high levels. Those two sentences are two different ways of saying exactly the same thing. You couldn’t have insanely dangerous P/E10 levels without lots of abusive posting helping to keep most of us in the dark. And there would be no motivation for anyone to post abusively if valuations were at reasonable levels and there were not lots of investors possessing a strong desire to keep themselves and others in the dark.

I didn’t create this crazy situation, Dan. I didn’t know it existed when I put up my famous post of the morning of May 13, 2002. I walked into a firestorm. Lucky me, you know? My job is to bring the firestorm to an end. My job is to normalize discussions of how stock investing works. That means opening up every investing site on the internet to honest discussion of the far-reaching implications of the last 36 years of peer-reviewed research in this field.

That means taking lots of hits. If Shiller were wrong and Fama were right, it would not mean taking any hits at all. If Fama were right and investors were capable of acting in their self-interest even without ever having been able to talk over the implications of Shiler’s research, the Buy-and-Holders would not be upset to hear me question the accuracy of retirement studies that do not contain an adjustment for the valuation level that applies on the day the retirement begins. They would make their case, permit me to make mine, and we would be friends despite our differences on how stock investing works. But because Shiller is right, because investing is primarily an emotional activity and only secondarily an intellectual activity, we are doing it this other, crazy way instead.

The point is that we cannot all learn how stock investing works until those of us who appreciate the “revolutionary” (Shiller’s word) nature of Shiller’s findings work up the backbone to take on the hits that inevitably are going to be delivered by the Buy-and-Holders and not let them deter us from continuing to state our views in a clear and firm and bold way. I believe in Shiller’s research findings. It follows that I believe that Buy-and-Hold is dangerous. It follows that I must say so if I am to do honest work in this field.

The Buy-and-Holders are not bad people, Dan. I don’t say that. But I do say that they are people. That means that they are subject to the same emotional urges that have influenced people to invest in foolish ways ever since the first stock market opened for business. And, because getting stock investing right is so darn important, our Buy-and-Hold friends are going to get very upset when I state my honest views in perfectly acceptable ways. They are going to put forward death threats and all the rest. In the face of 36 years of peer-reviewed research showing that they made a mistake, what realistic choice do they have?

I cannot go back in time and persuade Jack Bogle to come clean re his mistake when he first learned about it in 1981. We are where we are. The only way out of this dark corner is for people like me to behave just as people behave in every field of human endeavor other than the stock investing field. I have nothing to apologize for in being the first person to identify the safe withdrawal rate accurately. That was a good thing to do. I am 100 percent confident that the entire world will recognize that once we all experience the mountain of human misery that will come with the next price crash.

You often describe the craziness that we have all seen in your comments, Dan. I get it that this is crazy as all get-out, But please understand that it is the “side” putting forward the death threats and all the rest that has brought on the craziness. That stuff has to stop for us all to move forward. It will stop when the pain of Buy-and-Hold becomes so obvious and so widespread that large numbers of people work up the courage to speak up about your abusiveness.

Shiller’s research changes the world in an extremely life-affirming way. I want to bring on that change. I obviously cannot do it by myself. I need a group of people insisting as I do on their right to post honestly, just as people living in this country feel free to do in all other fields of human endeavor. While I am waiting for that group of people to assert itself, I continue on my own to write columns and guest blog entries and to record podcasts and all the rest. Why? Because doing that stuff generates material that will benefit us all once we work up the courage to restore to discussions of stock investing the ethical rules that once applied to them and to this day apply in all other fields of human endeavor.

I don’t deny the craziness. But I believe that in fairness you should also say where the craziness comes from. It begins with the idea that there is some mystery planet where it is not necessary for investors to practice price discipline when buying stocks. That’s not the planet we live on. If there were any evidence that it is not necessary to practice price discipline, the Buy-and-Holders would have pointed to it many years back. What possible motive could they have for not doing so if such evidence in fact existence.

I could be wrong. But I’m not.

My best wishes.

Rob

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

“These discussions have been going on for 15 years, Dan. You have been present for them the entire time.”

No I haven’t. I only stumbled upon you in the last few months. But I have to admit, you are a unique individual.

“I am 100 percent confident that, if you do the calculation again, you will find something similar.”

Why should I do your work? You’re the one who claims to have the answers. State your exact formula, plug in your real time, real life numbers, and let’s see how you made out.

Of course, this will never happen. Your whole shtick is based on pushing vague, unprovable hypotheticals as undeniable fact. That your gut feelings are right, and actual data is wrong. And the fascinating thing is, you never get seem to get tired of it.

It’s true that my gut feelings tell me that the price you pay for stocks should influence the value proposition obtained by making the purchase. I don’t agree that this is a “vague, unprovable hypothetical.” It seems to me that this can be checked by examining the historical return data. And it further seems to me that this is what was revealed by Shiller’s “revolutionary” (his word) research. I am not the only one who believes that that research tells us something important. Shiller was awarded the Nobel prize in Economics a few years back.

I don’t get tired of it because I am always discovering new things that help me to understand in a better and clearer and deeper way what is going on. With Buy-and-Hold, investing analysis was a numbers game. Post-1981, it is still a numbers game. But it is a numbers game informed by consideration of the effects of human psychology. Shiller’s P/E10 is a metric that translates human emotion into a number so that it can be used in investing calculations.

Think of what happened when Freud showed that humans engage in self-deception. That changed everything, didn’t it? It gave us the means to approach issues like crime and drug abuse and marriage difficulties from entirely new perspectives and to make progress dealing with them that was not possible before his insights were advanced. I don’t say that Freud did everything perfectly any more than I say that Shiller did everything perfectly. But I believe that both Freud and Shiller opened up new worlds to explore.

That’s why I don’t get bored with this. I love learning and teaching. It’s the reason why I became a journalist. Exploring the many far-reaching implications of Shiller’s Nobel-prize-winning research provides me opportunities for unlimited amounts of learning and teaching in a field of human endeavor that affects us all in a big way. Putting me in the circumstances in which I have been put over the past 15 years is like putting a baseball player in the World Series or putting a politician in a Presidential debate or putting a group of four musicians on the Ed Sullivan show on Sunday evening in February 1964. This is where it’s happening. This is where I want to be, Dan.

I want to see the work helping millions of people. That’s the aim. So I am not trying to say that I enjoy your abusiveness. I am saying that the abusiveness is part of the story (we would not see abusiveness if Shiller were not right that investing is a highly emotional activity, right?) and that the story needs to be told and that I seem to have been placed in circumstances that permit me to tell it in a way that no one else possibly could. I feel a responsibility not to turn away from the job and to be sure to work it hard enough to get it right. It’s exciting. It’s fulfilling. It’s rewarding. It’s life-affirming.

I hope that that makes at least a little bit of sense to you, my good friend.

Rob