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’s a point that I need to add that did not hit my brain until a moment after I pushed the “send” button.

It is our need as a society for better answers to this sort of question that compels me to soldier on re these matters. We all should want to see the studies that could be produced re this question if every academic researcher alive today felt free to do honest work in this field. No researcher should feel intimidated re performing ANY research whatsoever. We all lose when researchers are afraid to research certain questions. I want to see this sort of research go forward. Not just one study either. I would like to see dueling studies. Let’s have a Buy-and-Holder do a study and then have a Valuation-Informed Indexer do a counter-study and then on and on and on until we are all exhausted with our studies of the question.

What’s the freakin’ downside? That’s a win/win/win/win. That’s what our discussion boards and blogs were created to do. That’s why we have people like Wade Pfau spend years in school learning how to do competent research. We want them looking at questions like this because we all live better lives when we become empowered by their research to form better informed views re questions like this.

I feel this so strongly. This is what drives me. I believe that God put me on earth to make the case for opening up this field to honest research because it is so important that we all get on the same page re this one. This is not a case where the Buy-and-Holders have to win or lose and the Valuation-Informed Indexers need to win or lose. Everybody wins when this kind of research goes forward. Learning Together is the proverbial free lunch. It is because I believe so strongly in the Learning Together concept that I built that Retire Early board into the #1 most successful board in the history of the Motley Fool site. This stuff matters. Big time.

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

This is the sort of question that I live for, Anonymous. Thanks for getting my blood going so early this Wednesday morning. Yowsa!

My meds! Where are those darn meds?!

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:

Of course, in your mind, it doesn’t matter, because you have a “plan”, which you have described at your website as follow:

“The $500 million is for a settlement of civil claims. It is a separate matter from the criminal charges. I believe that we will likely need a legislatively adopted amnesty to address the criminal side of this because that is so sensitive a matter. I don’t see the $500 million settlement payment as being such a big problem. That’s just money. The Wall Street Con Men have tons of money. They will of course want me working with them for p.r. purposes as well as for lots of other reasons Paying $500 million to make that happen quickly is nothing for them. I don’t see any problems in that area once the story gets out.”

I put up a post on the morning of May 13, 2002, pointing out that the Buy-and-Hold retirement studies do not contain valuation adjustments and thus get the numbers wildly wrong. In the 15 years since, not one person has been able to find a valuations adjustment in any of the Buy-and-Hold retirement studies. I think it would be fair to conclude at this point that I was right in what I said in that post.

That’s a pretty darn big deal, is it not? Do you seriously question whether I contributed something of a value of much more than $500 million to the millions of investors who use retirement studies to plan their retirements? I think that’s a pretty darn low settlement number, given the circumstances that apply here.

Is it all 100 percent crazy? It is indeed. You get no argument from me re that one. It is the craziest thing that I have ever seen in my entire lifetime. It is crazier than the Mets winning the World Series in 1969. It is way, way out there.

But the reality remains. I put up a post on the morning of May 13, 2002, pointing out that the Buy-and-Hold retirement studies lack a valuations adjustment. And not one person has been able to identify one in the 15 years since. And not one of those studies has been corrected as of this morning. And every investor alive possesses a great need for accurate and honest retirement studies.

If all that doesn’t add up to $500 million plus, I have a hard time imagining what might add up to $500 million plus. Did Bill Gates do something of more value to the world? Did Steve Jobs? It is my understanding that both Gates and Jobs brought in a big bunch more than $500 million in their day. So why should leading the transition from Buy-and-Hold to Valuation-Informed Indexing not do the same?

We need accurate investing advice, Sammy. I have talked to researchers who would like to feel free to do honest, good work in this field. And to professors who feel the same. And to investing analysts who feel the same. And to bloggers who feel the same.

Freeing those people to do honest, good work is not worth $500 million? Are you joking?

That’s my sincere take re this terribly important matter, in any event. I naturally wish you all good things, 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:

And you think it is nonsense that your wife is questioning you on the reliance of a $500 million windfall to provide for the family, versus you getting a job that provides a steady paycheck?

We obviously don’t meed $500 million to get by, Sammy. I believe that it is entirely reasonable to expect that we will see a settlement of that size following the next price crash. But most of that money is gravy, things that will help us with extras, like charitable donations or building new businesses either in the investing realm or outside of it. All that we need personally to get by is a middle-class income.

I think it is a little silly to think that we will not be seeing a middle-class income coming in following the next price crash. The shift from Buy-and-Hold to Valuation-Informed Indexing is the biggest advance in the history of personal finance. There are millions of investors who want to know about a means of investing in stocks that reduces risk by 70 percent. My site has a mountain of materials on the subject that is not available at any other site on the internet. How could these realities not translate into an income far, far bigger than what a middle-class family would need to get by on?

Now —

My wife is in good company in not feeling certainty re these matters. If everyone in this field who understands the importance of Shiller’s revolutionary findings appreciated how much money there is to be made developing the Valuation-Informed Indexing concept in great depth, there would be thousands of people doing what I am doing. There are not thousands of us. So lots of people clearly have doubts.

The explanation of this puzzle is that humans learn by talking things over with other humans. We are not information processing machines, as the Buy-and-Holders would have it. Ideas pop into our heads. Then we test them by bouncing them off other humans. Then we make adjustments as those humans identify flaws in the new ideas. Then we dig deeper on the aspects of the new way of looking at things that pass muster. Over time, our confidence in the new ideas grows. That’s how change is achieved in this world.

This process of gradual change has been blocked in the investing realm. Shiller pointed out the weaknesses in the Buy-and-Hold model 35 years ago. That should have started the process of questioning. But investing is a uniquely important subject matter and the errors that Shiller discovered were fundamental ones and his conclusions were to a large extent counter-intuitive. Humans are reluctant to accept change. When the changes are as big as the ones we are talking about here and the thinking behind the new ideas is as counter-intuitive as what applies here and the risks of getting it wrong are as great as they are here, humans are VERY reluctant to accept change. So the process has been held back for a good long time now.

All that said, the evidence that Fama made a non-intentional mistake is very strong, in my assessment. It is impossible that Fama and Shiller are both right. If Shiller is right, Fama is wrong. I believe that Shiller is right. So I naturally have concluded that Fama is wrong (which is not at all to say that Fama did not make a huge positive contribution — I believe that he merited that Nobel prize). So I believe firmly that we are as a society in the process of making the transition from Buy-and-Hold to Valuation-Informed Indexing and that that process will speed up considerably following the next price crash, when the need for consideration of the new ideas will become compellingly evident to each and every one of us.

The pioneers in development and promotion of the new model are going to be the ones who make the big bucks. I am not in this primarily to make big bucks. I certainly would like to earn a middle-class income but my primary goal is the journalistic one of telling a story that very much needs to be told. But I certainly do not have any objection to earning the big bucks. If that’s how it plays out, and that is indeed how I expect it to play out at this point in the proceedings, good for me, you know? I will do my best to make good use of the money.

Any money that I earn from this will be well-earned. The positive leverage here is off the charts. I have spoken to college professors who believe that Valuation-Informed Indexing is the future and who want to teach it to their students but who are afraid to do so today. It’s the same with academic researchers. It’s the same with bloggers. It’s the same with economists. It’s the same with investment advisors. It’s the same with policymakers.

Can you imagine how much progress we are going to be making in this field when we all feel free to post our honest views at every site we visit? I want to know Jack Bogle’s sincere beliefs re how stock investing works. I want to know how he thinks Shiller’s findings affect his strategy. I don’t think that Bogle is necessarily going to endorse Valuation-Informed Indexing, at least not in the short term. But I do think that he is going to have lots of interesting things to say that until this date he has not said. I want to know what he thinks on about 20 different questions. It may well be that, when Bogle addresses himself to these matters, he will convince me that I am wrong re some things that I have said. That’s of course what I want. I want to get it right. To get it right, I need to be hearing feedback from giants like Bogle.

I am not hearing from giants like Bogle today. That’s what needs to change. We all want the same things. We all want to know about stock investing really works. We all want to invest effectively. We all achieve that dream together when we all give each other permission to share our sincere beliefs on all questions that come up. When we get to the other side we are going to be hearing things we have never heard before from Bogle and from Shiller and from Bernstein and from Swedroe and from Richards and from Schultheis and from Pfau and on and on and on and on.

How much do you think the people of the United States will determine it was worth for someone to hang in there for 15 years and do the work that was needed to open up that flood of good stuff? I have a funny feeling that there won’t be a single person saying that it was not worth a lot more than $500 million. So I am not too worried about whether I will be able to cover my bills or not once we get to the other side together and leave the nasty stuff behind us and take this thing in a positive and life-affirming direction.

But it is hard for my wife to see that as clearly as I do today. She hasn’t been on the front line for 15 years as I have. I probably wouldn’t be so clear about it myself had I not seen all that I have seen and had not engaged in all the discussions that I have engaged in. I have learned day by day by day and my confidence that we will see a positive result in the end has grown day by day by day. It’s not fair for me to expect others who have not been through the same experiences to see things quite as clearly.

The good news is that everything that I have experienced over the 15 years is documented at my web site. We will be able to go through all of it together and learn from it together. That’s what I live for. It is my Life Project to enhance human knowledge in that sort of way. I am extremely humbled that I was chosen (by God or Evolution or whatever it is that you believe does the choosing) to be the one to carry out this important work. It is my intent not to let down the thousands of good people who have put their trust in me and who have told me that they are praying for my success.

Does that help a small bit?

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:

So you consider it a higher priority to keep Posting on the internet versus providing financial security for your family.

I’m doing both at the same time, Sammy.

People love learning more about how stock investing works. Shiller’s “Irrational Exuberance” was a best-seller. The man was awarded a Nobel prize. On the day when I put forward my first post on the Valuation-Informed Indexing topic (this was before I even had a name for the new investing model), there were hundreds of posters saying that that was the most exciting post that they had seen in years at the Retire Early board at Motley Fool.

So there is huge interest. And there i virtually no competition. We are 35 years down the road from when Shiller published his “revolutionary” (his word) research. Yet we have not until today settled the most basic questions. The question of what the safe withdrawal rate is is pretty darn basic. But I put up my post questioning the validity of the Buy-and-Hold retirement studies on the morning of May 13, 2002, and no one has a found a valuations adjustment in those studies for all these years and yet not one of the studies has yet been corrected. There’s a goldmine here waiting for anyone with the courage to pick up the hunks of gold and carry them home.

The only reason why I am not a multi-millionaire today is that this is such a huge advance that we are having a hard time as a society making the transition. Change is hard and this one means rewriting the textbooks that people use to advise people how to invest for their retirements. People are today afraid to discuss the most basic questions because they know that it will hurt the feelings of lots of good and smart people for them to do so in a clear and convincing way.

I am doing that. I am doing it in as kind a way as I possibly can. But I am also trying to be as clear and convincing as I can. And every sign that I have seen has told me that there will be a pile of gold waiting for me on the other side of the rainbow. We all benefit from making it to the other side of the rainbow. My Buy-and-Hold friends more than anyone. These are good and smart and hard-working people. They want to be giving sound investing advice. They are trapped in unfortunate circumstances at the moment. But that is very much what they want. I know because I have talked to a good number of them re how they feel about all this.

There is only one way to jump into a pool, Sammy. You have to make the jump. I have made the jump. That’s what we all need to do, When we all do that, there will be no problems anymore. We just need to work up the courage. I believe that the next price crash will scare us enough that a sufficient number of us will work up the courage. But we will have to wait to see how it all plays out to know for sure, you know?

I reject out of hand your idea that moving from a discredited model for understanding how stock investing works to the first true research-backed model is a bad financial move. I feel that I was blessed with an amazing opportunity. I have not earned a dime from this for 15 years now. So in a surface sense you certainly are right. But people were right in a surface sense to tell Steve Jobs not to drop out of college to make computers. Sometimes there is more than a surface story to be told. I believe strongly that this is one of those times.

I hope that helps a bit, 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:

The paper doesn’t list me as co-author.

But that is certainly the role that I played. I didn’t go to Wade asking that he write a paper. He came to me because he had learned about Valuation-Informed Indexing by reading my posts at the Bogleheads Forum. He was afraid to post there because of the abusiveness he saw from you Goons whenever I or someone else discussed Shiller’s research and the many important implications that follow from it. So for about two years he just soaked up knowledge that he had never acquired when he was working on his Ph.D. at Princeton. He was the one who approached me and asked if I would be willing to work on the paper with him.

He felt that he did not even have the right to work on the paper if I did not agree. He said that he would give me 100 percent of the credit for the Valuation-Informed Indexing concept. He is obviously very well read in this field. And he said that he had never heard of anyone who had developed the concept in a way even approaching the degree to which I had developed it. We discussed scores of issues in e-mails that I have posted to my web site. There were several occasions on which he was amazed by what he learned from me. He would tell me that he was surprised by something that I said but then when he did research to discover the reality that what I said turned out to be correct. That happened enough times that he said that he had learned to assume that what i was saying was right because his skepticism about something I said had been answered so many times.

Wade wrote in the Acknowledgments section of the paper that: “The author is extremely indebted to suggestions and reading recommendations provided in the thread ‘Any Studies on Long-term Market Timing?’ at the Bogleheads Forum (www.bogleheads.org). Because market-timing strategies are specifically not part of John Bogle’s investment philosophy, the author wishes to thank without implicating users including Adrian Nenu, afan, alec, Alex Frakt, bob90245, cjking, crl848, dmcmahon, DP, grayfox, Les, lostcowboy, market timer, matt, Mel Lindauer, Norbert Schlenker, peter71, pkcrafter, Rodc, SP-diceman, tadamsmar, wearethefall, and yobria. I am also extremely grateful to Rob Bennett for motivating this topic and contributing his experience and encouragement.”

The thread to which he refers came into existence as a result of the 15-year Great Safe Withdrawal Rate Debate that began when I put a post to a Motley Fool discussion board asking whether a valuation adjustment is needed to calculate the safe withdrawal rate accurately. Not one person has been able to find a valuation adjustment in the Greaney retirement study (to which I referred in my Motley Fool post) or in any other Buy-and-Hold retirement study or in any other Buy-and-Hold retirement study in the 15 years of discussion that followed from that post. I have developed a funny hunch over the years that that might be because there is no valuation adjustment in those studies. Yet not one of the Buy-and-Hold studies has been corrected in the 15 years. Wade once asked the authors of the Trinity study to correct their study but was rebuffed.

Wade had zero problem acknowledging that I was the lead author on that study in the days before you Goons threatened to send defamatory e-mails to his employer if he continued to post his honest views about it. Again, the e-mails in which he expresses his fears of you Goons are posted at my web site. I have no problem with the acknowledgment he gave me in the study. It was perfectly appropriate and generous-spritied. I particularly liked it that he also thanked the Buy-and-Holders who participated in the debates that led to creation of the study; that was a very balanced and charitable and life-affirming way to approach things; that was typical of Wade’s behavior in those days.

I do NOT believe that Wade should have agreed to stop posting his honest views on safe withdrawal rates as a means of appeasing you Goons. I told him that that was an “insane” decision. We had planned to have that paper featured in a front page story in the New York Times. It merits that sort of treatment. Every investor alive needs to know how much valuations matter to long-term investing success. Wade is in a position to help advance the ball re these matters and I strongly believe that he should be doing all that he can do.

That said, Wade is in very good company re his fearfulness. I have mentioned in earlier comments here that I held back saying what I knew about safe withdrawal rate for three years because I was afraid of what you Goons would do to me if I dared to “cross” you in that way. That was shameful behavior. And of course there are lots of others who remain fearful today. Bogle is in that group. Shiller is in that group. Bernstein is in that group. Swedroe is in that group. And on and on and on and on and on.

Once we send a clear message that it is safe for everyone working in this field to express his or her sincere views, no one will be holding back. Some will be advocating Buy-and-Hold. That’s good. Some will be advocating Valuation-Informed Indexing. That’s also good. Some will be advocating elements of both models. That’s also good. No one should ever be afraid to express his sincere views re these terribly important matters. The only way to change things is for some of us to work up the courage to show others the way. I have endeavored for 15 years now to set a good example by being as honest as I can possibly be while never crossing the line and becoming uncharitable while also being as charitable as I can possibly be without ever crossing the line and becoming dishonest.

I am 100 percent certain that there will come a day when Wade and I will be working together again and when he will praise me to the skies for my contributions to that paper as I of course have always praised him to the skies for his contributions. Wade and I are on the same side as are Bogle and I and Shiller and I and Bernstein and I and even in a deep sense Greaney and I and Lindauer and I.

I hope that helps clear up any confusion re these points at least to a small degree.

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

This might just be a crazy thought, but don’t you think you need to have a track record of success if you want to have any credibility?

You know…….how does it sound when you say, “Hi, I am Rob Bennett. My retirement plan was a horrible failure, but you need to listen to me about how to retire successfully.” Or, “Hi, I am Rob Bennett. My investment strategy has greatly underformed most everyone else, but I will lie to you anyways about the results and then you should follow me down the path of fantasy”.

It depends on how you define success, Sammy. I have had thousands of my fellow community members tell me that they learned more about how stock investing works from me than from anyone else they have ever known. I have had some of the biggest names in this field tell me that they view my site as the best investing site on the internet. I have my name on a research paper that was published in a peer-reviewed journal and that says things that, if true, make it the most important piece of research published in this field in my lifetime.

That’s success in my eyes. I am humbled by the great successes that I have achieved over the past 15 years. I couldn’t be prouder. I couldn’t be happier with how things have gone on the substance side. I set out to make a small contribution and the cards fell in such a way that I was able to make a very big contribution. It is certainly not something that I expected to see happen when I was a younger man, you know? It’s got to be a pretty darn great country that we live in that such things can even happen. Holy moly!

You are focused on something else. We didn’t always know how stock investing worked. Shiller published his “revolutionary” (his word) research in 1981. That research supplied the missing piece (valuations) to the stock investing puzzle. Before then, we just didn’t know. So we got it wrong. We wrote lots of textbooks that got things wrong. It’s hard for people to admit mistakes. So those textbooks still get passed around today. There’s a lot of resistance to the new and better ideas. So it has been possible for you Goons to block my efforts to spread the word.

Too sad!

I could go up to my room and cry into my pillow re the unfairness of it all. i guess I’ve earned the right to do that. But would it do any good? That’s what I wonder. That’s what holds me back.

I’ve been successful in the ways that I most want to be successful. Many good people have thanked my effusively for helping them out. That matters to me. I am happy to have been able to do some good. Bob Dylan once wrote: “There’s no success like failure and failure is no success at all.” I couldn’t have done 90 percent of what I have done if I had not been wiling to take the abuse dished out by you Goons. So missing out on success in the crass terms in which you define it is part of the deal here. I don’t like it. But I guess it would be fair to say that missing out on that kind of success is a price that I have determined I am willing to pay for obtaining the other kind of success that means so much more to me.

My personal hunch is that I am going to obtain the crass form for success too before all the sand runs through the hourglass. I can live with that! I can go with crass so long as the price is not too high. I’ll take a crass trip to crass Disney World when that happens, you know? So long as I have the deeper form of success in the bag as well, I can enjoy a ride on Space Mountain. We’ll have to see how it all plays out.

Can you wish me luck, 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:

And, once again, Rob makes up stories about Bogle, Shiller and Buffett. When pointing out comments to the contrary, Rob says that they are lying or that they are afraid of speaking the truth.

That’s absolutely my message, Sammy.

It’s the biggest story in personal finance in my lifetime.

And the longer it goes on, the harder it is to turn around. The best time to admit a mistake is on the day that you learn you made a mistake. Putting it off makes things worse and worse and worse.

My best wishes to you.

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:

Bogle, Shiller, Buffett, and countless other successful investors say you are wrong. Does any person you can name say you are right?

They do not.

Bogle, Shiller and Buffett have all made statements suggesting that they believe that there is zero chance that Buy-and-Hold can work. But none of the three have ever explained in any detail either why they do believe it can work despite the mountain of peer-reviewed research showing otherwise or why they do not believe it can work. All three (and hundreds of other “experts” in this field, to be sure) continually and repeatedly duck this critically important question.

Shiller and Fama were both awarded the Nobel prize in Economics on the same day a few years back. The New York Times report on this development noted how odd it was that two men whose research showed entirely different things about how stock investing works were awarded the highest honor in the field. It’s not even logically possible that both Shiller and Fama are right. So why give the one who is wrong the highest honor?

That’s where we are as a society today. The mountain of research showing that Buy-and-Hold can never work for a single investor has grown so large that even the biggest names in the field can no longer entirely ignore it. So even people like Shiller and Bogle and Buffett offer occasional glimpses into their real beliefs re this critically important subject. But none of these three (or of the hundreds of others) dare to give voice to the plain and obvious and clear and provocative and exciting truth — Buy-and-Hold was a mistake and could be seen as one by anyone following the peer-reviewed research in this field as early as 1981.

We are as a society working up the courage to enjoy 35 years of powerful research-based insights on the single day when we open up the first large web site to unrestricted, honest discussion of what the peer-reviewed research really says. I have spoken to numerous researchers and professors and advisors who would like to feel free to do honest and helpful work in this field but who today hold back because they know that their careers will be destroyed by you Goons or other Goons much like you should they dare to “cross” you by doing so. But all that will come to an end following the next price crash, when the dangers of covering up the realities any longer will become so real to all of us that we will feel that we have no choice but to put Buy-and-Hold behind us and move forward together.

That’s my sincere take, Dan. If you really wanted to know Shiller’s beliefs, you would drop all the nasty stuff and ask him and he would be happy to tell you. it’s the same with Buffett. It’s the same with Bogle. It’s the same with the hundreds of others. The only problem that we face today is that Valuation-Informed Indexing represents such a huge advance that it pains the Buy-and-Holders to hear that they were taken in for a long time. Keeping quiet about this matter is not charity, it is cowardice.

Deep in our hearts, we all want the same things. Deep in our hearts, we all want to learn the realities of stock investing so that we can invest effectively for our retirements.

I wish you the best of luck in all your future endeavors, 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:

“But I don’t see that you have offered any justification for the belief outside of your assertion of it”

That statement applies to almost everything you post. When anyone asks you to back up a single thing, you merely reference something you posted.

There’s only one thing that I believe that you don’t, Sammy — I believe that valuations affect long-term returns. That’s the opposite of what Buy-and-Holders believe — Buy-and-Holders believe that the market is efficient (that is, that it is impossible for the market ever to be overvalued or undervalued because investors always collectively act in their self-interest and price things properly).

We start from differing starting points and so we end in very different places. That’s the entire story.

I wouldn’t say that I ask anyone to take my core belief on faith. Shiller showed with peer-reviewed research that valuations affect long-term returns But I do acknowledge that millions of good and smart people believe in Buy-and-Hold in the sense that they follow it themselves (whether these people possess a true confidence in their strategy or not is a different question).

And I of course acknowledge that Eugene Fama was awarded a Nobel prize on the same day that Robert Shiller was awarded one. So a good case could be made that both Buy-and-Hold and Valuation-Informed Indexing are academically respected strategies. What I find shameful about Buy-and-Hold is how many of those who believe in it engage in abusive behavior to block millions from hearing about the alternative strategy and how many more fail to speak up when they see their fellow Buy-and-Holders engaging in such tactics.

If you were to list the 20 most important beliefs about how stock investing works, you would find that you and I agree re 19 of them. We disagree only about the most important one of all, the one that has the greatest influence on whether an investor experiences long-term success — whether it is true that the market is efficient or that valuations affect long-term returns.

I believe that the idea that the market is efficient was a MISTAKE that was made because index funds were not available at the time Fama did his research and that, had Fama never done the research that was misinterpreted as showing that no form of market timing is required, every investor who today follows a Buy-and-Hold strategy would today be following a Valuation-Informed Indexing strategy because of what we learned when Shiller published his “revolutionary” (his word) findings of 1981. Those findings would not have been considered revolutionary had an entire industry not already been built teaching the opposite belief.

The battle between Buy-and-Holders and Valuation-Informed Indexers is not an intellectual debate. All of the intellectual content supports Valuation-Informed Indexing. The battle is a turf battle. Buy-and-Hold makes mountains of money for those who promote it and the rich and powerful people who promote the strategy don’t want to give up that money.

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

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 recently posted to the discussion thread for one of my columns at the Value Walk site:

It has always been that way.

I was brought into the brokerage business because the head office noticed that I was doing arbitrage trades that their research department had not thought of yet. I got to look at the business from behind the scenes until the crash in 87. I was short index futures hedged with index future calls after that Labor Day and did quite well. I had to bail out family members that had borrowed against their homes because they were sold the buy and hold mantra. It killed the business because nobody wanted to talk to a broker so I went back to university. There I was exposed to MPT, CAPM, EMH and could see the insanity of it all. It is very interesting as a practitioner to try to point out the errors of academic finance to professors that admit it is all wrong but easy to teach. I fear that the advisory business lives by that rule – it is all wrong but easy to indoctrinate the people into buy and hold.

I am a value guy and I am at 70% cash. After the dollar finishes its run I might make a few more purchases. Baidu and Tencent look like the most miss-priced compounding machines out there right now. Whether looking at net nets or compounders or anything in between my holding period is about 5 years under normal conditions. Markets are not operating normally so I watch and wait for a better opportunity set. Waiting for the reversion to the mean. It will kill the buy and hold crowd again.

Okay. Thanks so much for taking the time to respond.

I agree that it’s always been that way. I have hopes that we are on the threshold of a big change because of Shiller’s research and because he was awarded a Nobel prize for his work. I think that, as our society has become richer, stocks have become more important to more people. So I believe that as a society we are going to have to advance in our understanding of how the market works. With Shiller’s research and with the interest that I have seen both among experts in the field and with everyday investors, I see us as being ready for a great leap forward.

We never had computers until some fool worked up enough courage to give the idea a good shot. We never went to the moon until some fool worked up enough courage to break the sound barrier. We never had the Beatles until Ed Sullivan took a chance by putting them up on his stage.

People have to do things for things to happen. I was amazed when I learned in 2002 that Shiller’s research had been around for 21 years and yet people planning early retirements didn’t realize that what Shiller showed meant that the safe withdrawal rate could not possibly be a constant number. So I got off my duff and did some things. And here I am.

I haven’t earned a dime with this for 14 years. I just got a lot of people mad at me. So maybe it will continue always to be the way it has always been in the past.

But I sure hope not! I’ve got a lot riding on my bet that we are all going to see a giant leap forward in coming days.

Rob