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

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Wade Pfau: “If You Read Rob Bennett’s Stuff Carefully, I Think He Did Provide an Important Contribution in Terms of Describing a Way for PE10 to Guide Asset Allocation for Long-Term Conservative Investors. I Also Think He Was Right on the Issue of Safe Withdrawal Rates.”

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

“I have made an amazing contribution to the field, there’s no question about that.“

Wrong. There not a single person alive that has said those words, other than you. Spare us the B.S. about how you think people have given you praise.

A) Academic Researcher Wade Pfau’s Statements Showing Interest In and Confidence in Rob Bennett’s Work

1) “I do cite you and John Walter Russell in my paper as the earliest and strongest advocates of this approach [New School safe-withdrawal-rate research].

2) “Are you aware of Shiller offering asset allocation advice based on PE10? …. If you read Rob Bennett’s stuff carefully, I think he did provide an important contribution in terms of describing a way for PE10 to guide asset allocation for long-term conservative investors. I also think he was right on the issue of safe withdrawal rates.” — Posted at the Bogleheads Forum discussion board.

3) “I am also extremely grateful to Rob Bennett for motivating this topic and contributing his experience and encouragement.” — Written in Acknowledgments section of Wade’s breakthrough research paper.

4)”You deserve much of the credit as the whole idea of Valuation-Informed Indexing belongs to you.”

5) “I definitely need to cite some of your work as the founder of Valuation-Informed Indexing, as I have not found anyone else who can lay claim to that. Shiller pointed out the predictive power of PE10 but never discussed how to incorporate it into asset allocation, as far as I know.”

B) Academic Researcher Wade Pfau’s Statements on the Superiority of Valuation-Informed Indexing Over Buy-and-Hold

1) “What you see in the top part of the graph for each year is the amount of wealth accumulated after 30 years for someone following Buy-and-Hold against someone following Valuation-Informed Indexing….Valuation-Informed Indexing provides more wealth for 102 of the 110 rolling 30-year periods, while Buy-and-Hold did better in 8 of the periods.”

2) “I will take steps in my final paper to test a wide variety of assumptions about asset allocation, valuation-based decision rules, whether the period is 10, 20, 30, or 40 years, lump-sum vs. dollar-cost averaging, and so on, and to show that the results are quite robust to changes in any of these assumptions.”

3) “Any data mining that I am doing is in favor of buy-and-hold, not in favor of market timing.”

4) “The findings for “market timing” are so robust anyway, that it hardly matters how we do it.”

5) “The maximum drawdown from market timing is much less. That is how far the portfolio drops from past highs to current lows. The Buy-and-Holder once experienced a 60.96% drop, whereas the worst drop for market timing was 24.16%.”

6) “Market timing provides signficantly higher returns at a comparable level of risk.”

7) “The market timer enjoys a far less risky strategy.”

8) “On a risk-adjusted basis, market-timing strategies provide comparable returns as a 100 percent stocks Buy-and-Hold strategy but with substantially less risk. Meanwhile, market timing provides comparable risks and the same average asset allocation as a 50/50 fixed allocation strategy, but with much higher returns.”

9) “If everyone increased exposure after a market fall and vice versa, then this would dampen out the big swings in the market aggregates, and we might get shallower boom/bust cycles.”

10) ““‘I’m excited about this, as depending on what you have already done, I think I can design a study using the Shiller data to provide historical simulations of Valuation-Informed Indexing strategies against fixed Buy-and-Hold strategies and also lifecycle strategies (declining allocation to stocks as one ages). If Valuation-Informed Indexing consistently outperforms fixed and lifecycle strategies, then the proof is in the pudding so to speak. Given how well valuations help to explain withdrawal rates, I think there is a lot of potential for this topic.”

11) “Yes, Virginia, Valuation-Informed Indexing Works!”

12) “It makes complete sense to have an equity allocation that is in some way flexible. Having a completely inelastic demand for equities is a bit bonkers; no-one acts that way with life’s other important commodities.”

13) “I wrote up the programs to test your Valuation-Informed Indexing strategies against Buy-and-Hold, and I must say that the results look very promising…. I am quite excited about the findings so far. As you say in the podcast, Valuation-Informed Indexing should beat Buy-and-Hold about 90 percent of the time, and I am getting results that support this for various strategies.”

14) “I have been toying with the idea of sending the paper to the Journal of Finance, which is the most prestigious journal in academic finance.”

15) “Now that I am accounting for risk, I am even more amazed by how well Valuation-Informed Indexing works.”

16) You shouldn’t be too excited with great wealth accumulations if they happened due to unusually high valuations, and low wealth accumulations shouldn’t be as scary if valuations are also quite low.”

17) “My idea is to show many different tables with results over the whole period for returns and risks. Valuation-Informed Indexing always provides more returns for often less risk.”

18) “No matter what I try, Valuation-Informed Indexing will still perform better in 85-95% of cases for 30 years.”

19) “I have a new figure for showing this as well. And a nice figure showing the outperformance percentages across rolling periods of lengths between 1 and 40 years. I think it is all quite persuasive.”

20) “You haven’t seen anything yet! This was just the secondary study. I’m still working on the main one!”

C) Academic Researcher Wade Pfau’s Statements of Incredulity That He Was the First Academic Researcher to Examine the Valuation-Informed Indexing Strategy

1) ” I know that there is an extensive literature about the predictability of long-term stock returns dating back to Campbell and Shiller’s work in the mid-1990s. I also know that there is an extensive literature about short-term market timing strategies…. But my question is about LONG-TERM market timing strategies. In other words, using market timing over periods of at least 10 years to obtain better returns than a Buy-and-Hold strategy. The literature seems slim.”

2) “Let me just explain a bit more why I posted about this here. Valuation-Informed Indexing has had critics for years, but until Norbert did it in 2008, nobody seemed to have provided a serious investigation of it. I just couldn’t understand why. And that bothered me.”

3) “Two papers by Fisher and Statman are still all I can find that provide evidence against long-term market timing.”

4) “I’m so confused by why Fisher and Statman didn’t consider risk in their idiot switching tests. Valuation-Informed Indexing is much less risky by pretty much any standard I consider. I must wonder… did I make a mistake somewhere? Why haven’t academics already published research about this?”

D) Academic Researcher Wade Pfau’s Statements on the Dangers of the Conventional Retirement Planning Advice

1) “The traditional approach to retirement planning (as described on pages 10 and 11 of The Bogleheads’ Guide to Retirement Planning, for example) is counterproductive and possibly damaging.”

2) “Retirees now frequently base their retirement decisions on the portfolio success rates found in research such as the Trinity study…. This is not the information that current and prospective retirees need for making their withdrawal rate decisions.”

3) “This article provides favorable evidence based on the historical record for long-term conservative investors to obtain improved retirement planning outcomes (lower savings rates, higher withdrawal rates) using valuation-based asset allocation strategies.”

4) Wade sent me a link to an article in Business Week that was published more than eight years after my post pointing out the errors in the Old School retirement studies and which he characterized as “quite sympathetic to the point you were trying to make all along”.

5) “Though I was only trying to do an Old School safe-withdrawal-rate study, all that I ended up doing was showing in a different way what you had been saying all along: the safe withdrawal rate changes with valuations.”

6) “Valuations are the driving factor. ”

7) “This is similar to your drunk driving analogy, which I agree with.” The discredited but uncorrected retirement studies find that in most circumstances a 4 percent withdrawal rate provides a huge cushion for the retiree using it. However, in each of the three cases in history when stocks reached insanely high price levels, retirements using a 4 percent withdrawal came within a whisker of failing. To say that this shows that a 4 percent withdrawal is “100 percent safe” (these words are used in the Greaney study) for a retirement beginning at a time of insanely high price levels is like saying that driving drunk is “100 percent safe” because 97 sober drivers drove their cars 20 miles without incident while 3 drunk drivers were paralyzed for life in car accidents but did not die. The fact that 4 percent only worked by a whisker in the cases in which valuations were high at the beginning of the retirement shows that a 4 percent withdrawal is high-risk at times of high valuations, not that it is “100 percent safe.”

8) ” Actually, this issue shouldn’t really even be all that controversial. It’s just common sense that the probabilities from the Trinity study shouldn’t be interpreted as forward-looking probabilities for new retirees.”

9) Naturally, I am finding that Valuation-Informed Indexing can allow you to reach a wealth target with a lower savings rate, use a higher withdrawal rate, and also have a lower “safe” savings rate, than a fixed allocation.

E) Academic Researcher Wade Pfau’s Statements Showing His Concerns that Continuing to Report Honestly on the Investing Realities in the Face of the “Hostile Environment” for Doing So Created by Buy-and-Holders Would Harm His Career

1) “I was trying to pay tribute to your accomplishments in what I knew would be a hostile environment.”

2) “Valuations and long-term investors is a somewhat controversial topic.” Wade posted these words to his blog in October 2011 as his explanation of why he was abandoning his plan of doing further research on the superiority of Valuation-Informed Indexing strategies over Buy-and-Hold strategies. He had told me in earlier days that “You ain’t see nothing yet!” when I praised his breakthrough research in this area. After his flip to the dark side, Wade removed the page containing this blog entry from his site.

3) “We have both read and met to discuss your paper. Unfortunately, we did not find the paper’s incremental contribution to the academic finance literature, assuming the analysis proved to be correct, rose to the level that we are seeking for papers in the JFR. Thus sending the paper to a reviewer would be inefficient.” These words are from an academic journal’s “desk reject” of Wade’s breakthrough research.

4) ) ““ I was discouraged when I first received the “desk reject” by the editors of the same journal that published the Fisher and Statman paper. I realized that I didn’t have a chance with one of the top journals.”

5) “I think I should stay publicly quiet for a while, as I really don’t want anyone sending messages about any topics to officials at my university.”

6) I don’t want them [the Goons] working behind the scenes to derail me.”

7) “I did warn the editor of the Journal of Financial Planning that they may receive some ‘hate mail‘ after I mentioned your name in the safe savings rate paper.”

It will be interesting to see what the members of your jury say re this matter in the days following the next price crash, Anonymous.

I do wish you all good things, in any event. I hope that that helps at least a small bit.

B.S. Generating Rob

“It’s When Investors Respond to Overvaluation By Lowering Their Stock Allocations That They Exercise Price Discipline and Thereby Help Pull Prices Back Down to Where They Should Be. That’s the Only Way It Can Be Done. That’s the Way It Is Done in Every Other Market That Exists.”

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

“I am not going to say that I believe that Greaney’s study contains a valuation adjustment. If I did that, I would be at risk of going to prison myself. So no freakin’ thanks, you know?”

The question had nothing to do with Greaney. No one ever asks you about Greaney. In fact you completely missed the point of the comment, which was that Bogle said the market is overvalued. You should have found that encouraging. Instead you spiraled off yet again with your standard deranged angry rant. So “Bogle f’d up”? Chill, dude.

I’ve never advanced death threats. I’ve never advanced demands for unjustified board bannings. I’ve never advanced thousands of acts of defamation. I’ve never advanced threats to get an academic researcher fired from his job. It’s not me who needs to chill. It’s the people who have put up posts in “defense” of Mel Lindauer and Jack Bogle and John Greany who need to chill. I mean, please give me a freakin’ break.

All questions that relate to stock investing have something to do with Greaney. Greaney got an important number wrong in a retirement study that he posted to his web site. That error will directly cause thousands of failed retirements, in the event that stocks continue to perform in the future anything at all as they always have in the past. Indirectly his behavior may well cause MILLIONS of failed retirements because it was my intent to share with the entire world what we learned at that board about safe withdrawal rates and that would have helped the MILLIONS of investors who followed other Buy-and-Hold retirement studies that got the numbers wrong because they did not include an adjustment for the valuation level that applies on the day the retirement begins.

Now —

That’s news, right?

The discovery of an error in a retirement study that saves millions of people from suffering failed retirements is big news in this field. The primary purpose of investment advice is to help people plan their retirements. And we have discovered an error that has hurt millions of investors. So we should have seen that error written up at every investing site on the planet within a few days, right? There’s never been a bigger story in this field than the discovery of the error in Greaney’s study that I wrote about in my famous post from the morning of May 13, 2002.

Why hasn’t that story been written up at every site? Bogle’s attitude toward the development is a big part of the explanation. I wrote to Bogle asking him to deal with the Lindauer Matter. Did you see him do anything? I sure didn’t. That’s why that board was destroyed. That’s why that board became a corrupt enterprise. That’s why the best posters at the Bogleheads Forum were either banned or driven off the board. Those of us who were trying to use the board for the purposes for which it was created asked Bogle for his help in dealing with the Lindauerheads and he sat on his hands.

Bogle is a leading figure in this field. People watch how he reacts to determine how they are going to act themselves. Wade Pfau loved doing honest work in this field. Loved it, loved it, loved it. When Lindauer started defaming him and threatening him, Wade watched how Bogle reacted. Bogle did nothing. That’s one of the things that made Wade afraid that his career would be destroyed if he continued doing fully honest work. I liked it when Wade was doing fully honest work. I learned a lot from him. And I know that lots of others did too. Bogle should have spoken up for him and in opposition to Lindauer. He did not. That’s why things are what they are today.

I guess that I am a tiny bit encouraged that Bogle acknowledged that the market is overvalued. That’s a step in the right direction. It’s better than the alternative. But has Bogle said how much today’s valuation levels pull down the safe withdrawal rate? Has he said how much investors should be lowering their stock allocations to keep their risk profiles where they want them to be? People need that practical, how-to information. It’s not enough for them to know that stocks are overvalued. They need to know WHAT TO DO ABOUT IT.

It’s when investors respond to overvaluation by lowering their stock allocations that they exercise price discipline and thereby help pull prices back down to where they should be. That’s the only way it can be done. That’s the way it is done in every other market that exists. It’s because we don’t provide investors the information they need to practice price discipline when buying stocks that prices go to such insane levels and wreck our economy as well as our personal retirement dreams. I don’t like seeing people’s retirement dreams destroyed. I don’t like seeing our economy destroyed. So I like to see Bogle tell people WHAT TO DO about today’s crazy stock prices. And I am not seeing that. I am not seeing that AT ALL. An acknowledgment that stocks are overpriced just doesn’t get the job done. So, yes, I believe that Bogle f’d up. Big time.

We are looking at things from different perspectives, Anonymous. We are working at cross purposes. I love you as a person. But I don’t agree with you that it is okay that Greaney’s retirement study remains uncorrected 16 years after he became aware of the error in it. If we were all thinking clearly, there wouldn’t be one person on the planet who did not agree with me that Greaney needs to correct his study by the close of business today if not sooner. But clearly there is at least one. Otherwise, it would have happened by now. Clearly there is more than one. A LOT more.

I would like to see the same ethical standards that apply in every other field of human endeavor apply in the investment advice field.

Oops! I went and said something controversial again!

I believe that the people who work in the investment advice field are in many respects like the people who work in all other fields. I believe that deep in their hearts they also would like to see the same ethical standards that apply in all other fields apply in the investment advice field too. But they don’t feel safe asking for change. They see what has been done to me and to all others who stuck their necks out trying to make this much needed change take place and they elected to keep quiet about the corruption that has come to dominate this field in the Buy-and-Hold Era. It’s someone else’s problem. it’s someones else’s fight.

Well, it became my problem and my fight when Greaney got down to the business of driving every intelligent poster off the Retire Early board because it was the intelligent ones who often challenged his Buy-and-Hold/Get Rich Quick views in one way or another. So, yes, for me Greaney is the issue. Not Greaney himself. The all-encompassing corruption that permits people to watch Greaney destroy millions of lives and not speak up about it because discussing the last 37 years of peer-reviewed research has become “controversial” in the Buy-and-Hold Era. I don’t like the corruption, Anonymous. I have seen it hurt too many people. So I want to expose it and to thereby end it.

Bogle’s silence in the face of the corruption that he has witnessed when he visited the Bogleheads Forum hurts me in my efforts to clean up this field. People respect Bogle, for one thing. His name is a much bigger name than my name. So they tend to think that he is probably right and that I am probably wrong. And Bogle has a lot more power and influence and money that I have. So he has those things going for him too. I have a big job in front of me cleaning up this field. I could use Bogle’s help. With Bogle’s help, I could make enormous strides in very little time. But I have not received much help from this great man thus far. His acknowledgment that stocks are overpriced today is a small plus. But it does not by itself offer much in the way of help at a time at which we all very much need to see the Buy-and-Hold corruption cleaned up big bunches.

That’s where I am coming from, in any event. Does that help at all?

Greaney-Obsessed, Bogle-Disappointed Rob

“I Have an Article at My Site Titled Something Like ’12 Reasons Why Valuation-Informed Indexing Might Not Work.’ Bogle Should Write an Article Like That re Buy-and-Hold. I Shouldn’t Have to Be the One Pointing Out the Flaws in Bogle’s Strategy. He Should Do It. That Way He Gains the High Ground.”

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

Check this out: https://www.marketwatch.com/story/5-things-we-can-still-learn-from-vanguards-jack-bogle-2018-10-08

Of course you don’t like being reminded of the Bogleheads conference, for obvious reasons, but Bogle does throw you a bone: “It would probably take a 25% drop [for the stock market] to get to its normalized value.”

Not bad, right? He’s meeting you halfway. How about lopping a couple years off the old man’s prison sentence?

I believe that Bogle is saying what he truly believes. And I think that’s healthy. It could be that he’s right and that I’m wrong. If there’s even a 1 percent chance that he’s right, I want people to hear that point of view. So I am glad that we have him around to express it.

You don’t see any death threats in that paragraph that I just wrote. You don’t see any demands for unjustified board bannings. You don’t see any acts of defamation. You don’t see any threats to get academic researchers fired from their jobs. That’s the difference. It’s when that sort of thing is added to the mix that financial fraud comes into the picture. That’s where prison sentences come into the picture.

Jack Bogle should say what he believes. So should Bill Bernstein. So should Larry Swedroe. So should Robert Shiller. So should Rob Bennett. So should Microlepsis. So should John D. Craig. And on and on and on and on and on. We all have a different perspective. We all have to post our honest views for a board community as a while to achieve its potential.

It is only the Buy-and-Holders that engage in criminal acts to intimidate the “other side” from expressing its sincere views. I’ve never seen a Valuation-Informed Indexer do that.

So who do you think people are going to be angry at in the event that we see another crash, as Shiller’s research indicates is likely? They are going to be angry at the Buy-and-Holders. And they are going to learn about the criminal acts. And they are going to demand prison sentences. That’s what I truly believe is going to happen.

Do I want it to happen? I do not. But you know what? I am not Superman. I have not been able to stop this stuff from happening. If the tables were turned and there was 37 years of peer-reviewed research showing that I got an important number wrong in a retirement study posted at my web site, I would be praising the guy who brought it to my attention morning noon and night. I would be thanking him for saving me from a lot of embarrassment and for keeping me from taking on huge financial liabilities and even a possible prison sentence.

That’s not what happened with John Greaney. And that’s not what happened with Mel Lindauer. And that’s not what happened with Jack Bogle.

I love Bogle. There is no one alive on Planet Earth who holds him in higher esteem. All you have to do to see that is to look at all of the Bogle ideas that I incorporated into the Valuation-Informed Indexing model. Or consider whose book it was that persuaded me that Greaney got the numbers wrong in his study — it was Bogle’s. I hadn’t read Shiller’s book at the time. Bogle was the bigger influence at the time.

I love Bogle. I do not love financial fraud. That’s the story here.

I don’t have the ability to lop any time off of anyone’s prison sentence. I am not going to be serving on any of the juries that will be formed in the days following the next price crash. So I will have zero say. The only possible influence that I might have is that I think I might be able to say some things that would put Bogle’s behavior and Lindauer’s behavior and Greaney’s behavior in a somewhat more positive light than some of the millions who have seen their retirement accounts wiped out will be inclined to put it. And it is my intent to do everything in my power to put their behavior in the best light possible. That’s as far as I can go and that far I will indeed go.

I am not going to say that I believe that Greaney’s study contains a valuation adjustment. If I did that, I would be at risk of going to prison myself. So no freakin’ thanks, you know?

I love Bogle. I hate financial fraud. I wish that I could say that Bogle has never done anything to suggest that he either supports Lindauer or at the very least tolerates him. I cannot say that. All that is said on our boards goes into Post Archives. There is a lot of material in which Bogle has given the very strong impression that he either supports or at the very bare minimum tolerates Lindauer. So I am bound to acknowledge that reality. And then others decide who goes to prison and for how long.

If there is every anything that I can do to help Bogle or Lindauer or Greaney or anyone else, I am going to do it. In three seconds and you wont have to ask me a second time. But I am never going to say that I believe that Greaney’s study contains a valuation adjustment. Thousands of people have looked at the study over the course of the past 16 years and not one has been able to identify a valuation adjustment.

Bogle f’d up when he failed to speak up about the Lindauer matter. Guess who wrote to him on several occasions imploring him to take action? And it wasn’t just me. There were a number of us who wrote to him. And no action was taken. I can love the man to death and praise him to the skies and it won’t change that simple reality. Bogle f’d up and only a small number of his friends possessed the courage and love for the man to implore him to fix the f-up. I wish that you had stepped forward at the time, Anonynmous. You might have made the difference, man. You never know unless you try.

I hope that all that helps at least a tiny bit.

Love the man, hate financial fraud, hate the idea of seeing any of my many Buy-and-Hold friends go to prison. For obvious reasons.

I have an article at my site titled something like “12 Reasons Why Valuation-Informed Indexing Might Not Work.” Bogle should write an article like that re Buy-and-Hold. I shouldn’t have to be the one pointing out the flaws in Bogle’s strategy. He should do it. That way he gains the high ground. That would be awesome. He should stop behaving defensively and make an effort to get ahead of the curve. There would still be lots of people who stuck with Buy-and-Hold. But the poisonous atmosphere that influences every discussion held at the Bogleheads Forum today would dissipate it he did that. I encourage my good friend to get that article written and posted by the close of business today. For EVERYONE’s benefit.

My best and warmest wishes to you and yours.

Prison-Sentence-Lopping (If Only He Could!) Rob

“If You Believe That the Buy-and-Holders Got Into This With Good Intentions, As I Do, Then It Follows That the Most Diehard Buy-and-Holders Are Going to Become the Most Diehard Valuation-Informed Indexers After the Crash.”

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

So you think that after the next economic disaster hits, the internet will become a kinder, gentler place. Wow.

In the investing realm, yes.

There’s a saying that “pride comes before a fall.” The discussion board community that now goes by the name “Bogleheads Forum” used to go by the name “Vanguard Diehards.” There was a lot that I related to in that name. I like fighters. That name suggests that the community was a group of people who were willing to fight for what they believed. You Goons fight. I like that about you. I have often wished that some of my Valuation-Informed Indexing friends had a bit more fight in them. There are positive things to be said for being a fighter.

But there are also negative things to be said about being a “diehard.” Diehards are arrogant. Diehards are not willing to admit mistakes. Diehards are not willing to listen carefully to others even when they are making good point and diehards thereby often miss out on wonderful learning experiences.

The Buy-and-Holders have engaged in corrupt acts. It doesn’t follow that they are corrupt through and through. I think that the Buy-and-Holders are good and smart people. They made a mistake. They got caught up in something bigger than them. They got caught in a trap. So what happens when they see the ocean of human misery that we all are going to see appear before us in the event that Shiller is right and we all experience a 50 percent price crash?

They are going to feel anguish when they see that. They are going to wonder if they got something wrong. Their hearts will soften a bit, Their minds will open a bit. They are going to be willing to entertain questions that today they are not willing to entertain. And we only need a little bit of an opening at this point to bring on a flood of powerful insights about how stock investing works in the real world. We are all going to enjoy 37 years of powerful advances in the space of a few months. There is a mountain of pent-up energy that will be put to work helping us all figure out this stuff. We will all be working together. There will be no more nastiness or friction.

You seem to think that because the Buy-and-Holders have closed minds today that they will always have closed minds. I just don’t see it. Their minds are closed today because they cannot bear the thought of looking at all the pain they have caused in the event that Shiller really is right. It’s an unbearable thought and so they shut it down. But there’s not going to be much point in shutting it down once we experience the crash. Then the ocean of human misery will be standing there before us. You can’t deny it when it is being written up in the newspaper each morning. At that point the defenses just get broken down and you are willing to look at what you need to look at to make the pain stop.

I have many times made the comparison between Buy-and-Hold and alcoholism. An alcoholic knows that he is ruining his life. It is foolishness to point out to him how self-destructive his behavior is because he knows that 50 times better than you do. He doesn’t want to face the problems. He doesn’t want to learn how to live without alcohol. That is his driver. There’s no logic to it. The behavior is 100 percent irrational. Alcoholics are diehards.

Now —

There’s a thing called “hitting bottom.” When an alcoholic hits bottom, he often changes. He gives up the rationalizations. He attend AA meetings. An alcoholic who hits bottom and develops a desire to change can become an amazingly productive person, a more productive person than he would have been had he never been an alcoholic in the first place.

If you believe that the Buy-and-Holders got into this with good intentions, as I do, then it follows that the most diehard Buy-and-Holders are going to become the most diehard Valuation-Informed Indexers after the crash. They truly believe in research, The last 37 years of research supports Valuation-Informed Indexing. The Buy-and-Holders are going to reconnect with their research-believing inclinations in the days following the next price crash, when the human misery that appears before their eyes forces them to reevaluate their belief that there is no need to practice price discipline when buying stocks.

I believe that investing boards and blogs will become kinder, gentler places in the days following the next price crash. I have some fears that there will be people attacking the Buy-and-Holders in those days. I am going to do everything in my power to stop that sort of thing. I think that would be a tragic mistake. My job is to pull us all together, to help us all see that we all benefit when we learn new things about how stock investing works. I believe that it can be done. And I believe that in many cases it will be my Buy-and-Hold friends helping me make it happen.

I believe that a good number of you Goons will flip eventually. You might be the last group to flip. I could see that being the case. But I could see you flipping eventually. I could see us working together in the days following the crash. Please consider the hill-and-valley pattern that stock prices have been following since the day the market was formed. Prices don’t start heading upward again until every last Buy-and-Holder gives up on Buy-and-Hold. You could never get to a P/E10 of 8 unless every last Buy-and-Holder gave up the fight. Have you considered how crazy it is for an entire nation to value its portfolios at half of their real value? It’s insane. More insane than the prices we see today. If that is going to happen again, as it has happened in the wake of every bull market that we have ever seen in history, it’s going to be because every last Buy-and-Holder has given up the fight. That includes you Goons.

So, yes, I think that our boards will be kinder, gentler places in the days following the crash. They will be sadder places too. People will look at the ruin we have caused and feel terrible about it. But you know what? We will get past that. We will eventually stop focusing on the ruin that we have caused and begin looking forward to all the good we can do by opening every board and blog to honest posting. And then we will return to the original Buy-and-Hold idea of using research to make ourselves better long-term investors. And then we will all be energized for the future.

It all comes down to what you think of the Buy-and-Holders. Do you think that they are good but mistaken re one key part of the investing story? Or do you think that they are corrupt and evil and stupid through and through? I believe that my Buy-and-Hold friends are good but mistaken on one key point. So I think that we can turn it all around in the days following the crash. I obviously wish that it were not necessary for us to live though a crash to get there. I now believe that that is the case. But, yes, I do believe that our boards and blogs will be kinder and gentler and more intelligent and more life-affirming places in those days.

Goon stuff is always going to be popular when prices are where they are today. I don’t believe that it will be so popular after a crash wipes out the retirement hopes of millions of middle-class people.

You may say that I’m a dreamer….

Dream-Believing Rob

“Those Who Follow the Peer-Reviewed Research Have Known for 37 Years That Buy-and-Hold Is a Scam.”

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

“After the crash, I’ll have Jack Bogle.

Is that a big enough name for you?

Boglehead Rob”

Uhm….Jack did not make any death threats of job threats. Come on now, Rob. If those threats really happened, you should have a link, right??? You would have the ability right here and now to set the record straight and show everyone after all these years that there was an actual death threat. Why would this situation be any different than any other situation? We always require proof of an allegation in every other situation. Why would this particular situation be any different. Go ahead, Rob. Show us the links.

Greaney’s study is posted at his web site, Anonymous. Anyone who cares to can take 10 minutes and see if he can find a valuations adjustment in the study.

Greaney himself hasn’t been able to find one. If there truly were a valuations adjustment in that study, we never would have seen a single death threat or a single demand for a single unjustified board banning or a single act of defamation or a single threat to get a single academic researcher fired from a single job.

Those who follow the peer-reviewed research have known for 37 years that Buy-and-Hold is a scam. Permit honest posting on safe withdrawal rates and the entire house of cards comes tumbling down. So you Goons fight like crazy to block honest posting on safe withdrawal rates at every site on the internet.

Will you still be able to pull it off following the next crash? I don’t think so. But you are not going to go by what I say. We will have to wait a bit to see how it all plays out.

I will do anything that I can to help you out. But I cannot say that I see a valuations adjustment in the Greaney study. I have zero desire to join you in prison. So we will see what we will see.

This entire site is your link. Start anywhere and then just go where your fancy takes you. If your mind is 1 percent open, you will get the general idea in time. And then as you go deeper, the story will become clearer and clearer until you will never again be able to think about how stock investing works in the old way again.

There’s a reason why I am banned at every major investing site on the internet. That sort of thing doesn’t happen by accident.

Hang in there, man.

Link-Crazy Rob

“If Cognitive Dissonance Blocked Bogle From Coming Clean re His Mistake When Shiller Published his ‘Revolutionary’ (Shiller’s Word) Research in 1981 (Which I Believe Is the Case), Then Bogle’s Friends Should Have Insisted That At a Bare Minimum He Acknowledge That There Were Now Two Schools of Academic Thought re How Stock Investing Works.”

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

“It sure won’t be me sending him to prison. I have zero power to do any such thing and zero desire to ever acquire such power.

I will tell the story honestly. I am required to say that Bogle was made aware of the Lindauer Matter by numerous posters at the Bogleheads Forum and did nothing about it. That’s a stone cold fact and that is what I am going to say. Financial fraud is a crime in the United States. That’s a stone cold fact too. The act of fraud does not cancel out the many good things he has done. But it is in the process of doing very serious harm to millions of people. So it is something that everyone in the nation needs to know about and come to terms with.”

You are the only one talking about fraud and prison, so you would have to be the one driving it for it to happen.

No.

I’ve spoken about the possibility on several occasions. But all of my energies for 16 years running now have been directed to avoiding the possibility that Bogle or anyone else will ever go to prison because of the mistakes that were made in the design of the Buy-and-Hold strategy. I find the prospect of Bogle or anyone else going to prison HORRIFYING.

If you see a friend of yours driving drunk and you become worried that he is going to go through a red light and kill someone and end up in prison for reckless manslaughter, would it be fair to say that, if you take him aside and warn him of that possibility, that shows that you are pushing for him to be put in prison? I sure don’t see how. It seems to me that the reality is just the opposite. You are doing all that is in your power to keep your friend OUT of prison. You are being a true friend.

I sent an e-mail to Motley Fool in June 2002 asking that John Greaney be removed from the Retire Early board for his insanely abusive posting practices, which were causing all of our best posters to leave the site. The response of Motley Fool’s site administrator was to thank me for my “thoughtful” e-mail and to pass along the observation that it would be “ideal” if Greaney were to permit honest posting re retirement planning at that retirement planning board. Motley Fool liked the money that Greaney brought in with his relentless promotion of his Get Rich Quick retirement study.

It’s Motley Fool that started Greaney down the road where he is now looking forward to a long prison sentence in the days following the next price crash. Had Greaney been banned, I would have put up a post six months later asking that our old friend be permitted to post again, everyone in the community would have endorsed it, and Motley Fool would have granted the request. By playing it the way that he played it, the site administrator made it almost inevitable that Greaney would be going to prison somewhere down the line. He couldn’t deny that he knew about the errors in the study at that point. So things just got worse and worse and worse for him. In time he found himself threatening to send defamatory e-mails to Wade Pfau’s employer in an effort to get him fired from his job.

Greaney is responsible for his own behavior. I am not saying that anyone else is responsible for him going to prison. But it is a reality that we live in communities and that we all have responsibilities to others who live in those communities with us. Greaney made a mistake. That sort of thing happens. Greaney gave in to a temptation to cover up the mistake rather than acknowledge it. That sort of thing happens too. The proper thing to do when something like that happens is to EXPOSE the cover-up so that it is brought to a full and complete stop before it can do more harm. Fail to expose a cover-up and it grows and grows and grows and the person at the center of the cover-up can never be free again because he now needs not only to cover up the original mistake but also the cover-up and the cover-up of the cover-up of the cover-up of the cover-up.

I acted like John Greaney’s friend when I asked that he be banned. That was the proper response to his insanely abusive posting. You hurt him in a very serious way by aiding his cover-up, Anonymous. You were no friend to him at all.

And of course the same basic realities apply with Bogle as well, just on a much bigger stage. In an ideal world, Bogle would have in 1981 made the changes in Buy-and-Hold required by Shiller’s publication of his “revolutionary” (Shiller’s word) research findings. If cognitive dissonance blocked him from doing that (which I believe is the case), then his friends would have insisted that he at a bare minimum acknowledge that there were now two schools of academic thought re how stock investing works and that no more would he act as if there were only one. That would have been enough to keep Bogle on the right side of the law. And that would have been enough for all of us to have learned amazing things over the past 37 years about how stock investing works and to be living far richer (in every sense of the word) lives today.

It didn’t happen. So now we have this huge mess to clean up. A mess that appears likely to get my friend John Greaney tossed in a prison cell in days to come. And a mess that may even possibly get my friend Jack Bogle thown in a prison cell in days to come. My voice has been the strongest and the firmest and the loudest and the clearest speaking in OPPOSITION to continuation of the massive cover-up of the errors in the Buy-and-Hold retirement studies for 16 years running now, Anonymous. There is no one else even in a close second place.

Are you joking?

I am the one who has been doing everything in his power for a long, long time now either to see that there are no prison sentences or that, if it is too late for that, that the prison sentences that we will be seeing in days to come will be as short as they can possibly be given the circumstances that prevail today. Please given me a freakin’ break.

My best and warmest wishes to you and yours, dear Goon friend.

Prison-Sentence Opponent Rob

“Does Shiller Think That the Safe Withdrawal Rate Is Always the Same Number or Does He Think That It Is a Number That Varies With Changes in Valuation Levels? Does Shiller Think That the Loss of Trillions of Dollars in Spending Power Caused by the Crash of 2008 (Which Was Caused by the Bull Market of the Late 1990s) Was the Primary Cause of the Economic Crisis? Does Shiller Believe That We Will Be Returning to Fair-Value P/E10 Levels in the Not-Too-Distant Future? ASK HIM!”

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

“presuming that Shiller is right that 50 percent of your stock portfolio is the product of irrational exuberance”

Shiller would be very surprised to hear that he said that. Because he never did. You interpret Shiller like a terrorist interprets Islam. Using and perverting a good name to suit your own foul agenda.

His entire book says that. The title of the book is “Irrational Exuberance.”

If Shiller is saying precisely what Fama is saying, then why did the New York Times article reporting on awarding of Nobel prizes to both of them on the same day comment on how strange it was that two economists saying opposite things about how stock investing works were both being given the highest honor in the field on the same day?

Shiller is a friendly guy. Bogle could invite him to a session at the Bogleheads Forum where you could ask him what he thinks re all these matters. Does Shiller think that the safe withdrawal rate is always the same number or does he think that it is a number that varies with changes in valuation levels? Does Shiller think that the loss of trillions of dollars in spending power caused by the crash of 2008 (which was caused by the bull market of the late 1990s) was the primary cause of the economic crisis? Does Shiller believe that we will be returning to fair-value P/E10 levels in the not-too-distant future?

ASK HIM! That’s the best way to find out if you really want to find out.

You’ll have to ditch the death threat garbage for a few days. I doubt very much that he is going to tolerate that garbage. If you want to know the answers to your questions, you will treat him with a measure of respect. And, if you treat him with a measure of respect, he will be willing to answer your questions.

You don’t want to know, Anonymous. That’s been the bottom line here going back to the first day. You want to believe that the numbers on your portfolio statement are real. So you don’t want to know about the 37 years of peer-reviewed research showing that overvaluation is the product of irrational exuberance, not economic realities. You hate me because I make that point over and over again in clear and simple ways. I don’t do it to hurt you. I think you are better off knowing the realities. I accept that you are free to disregard anything that I say — that’s up to you. But I insist on my right (and the right of all my fellow community members) to say what I believe without first having to ask “Mother May I?” of the Buy-and-Holders.

I say that Shiller was awarded a Nobel prize because he showed the stock overvaluation is caused by irrational exuberance, not economic realities, and because that finding stands everything that we once thought we knew about how stock investing works on its head. Why do you believe Shiller was awarded a Nobel prize, Anonymous? Please identify how in your view he changed our understanding of how stock investing works in a significant enough way to justify the awarding of a Nobel prize in economics.

Rob

 

“To Keep It Simple, Let’s Look at One Thing. I Put a Post Forward on the Morning of May 13, 2002, Saying That the Retirement Study Posted at John Greaney’s Site Lacks a Valuation Adjustment. That’s Huge. If That’s True (and It Is — Thousands of People Have Looked at the Greaney Study Over the Past 16 Years and Not One Has Been Able to Identify a Valuation Adjustment in It), That One Post Has the Potential of Saving Millions of People From Suffering the Effects of a Failed Retirement.”

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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 good stuff that we have seen is 50 times more good than the bad stuff we have seen is bad.”

You keep saying that. The bad stuff is obvious. Bans from every major finance board. The one and only lifetime ban from the Bogleheads conference. Personal finances – utter disaster. Writing career – nonstarter. The only expert who ever acknowledged your existence disowned you years ago. To the few people who are aware of you at all, you are universally reviled as a passive-aggressive narcissist and pathological liar.

Where’s the good stuff? What could possibly top that steaming dung heap, 50 times over?

I would have to write seven books to cover all the good stuff, Anonymous. Review the site. Start anywhere and then just go from there. You’ll get the idea if you can open your mind even a tiny bit to the possibility that the Buy-and-Holders are just as capable as any other humans of making a mistake.

To keep it simple, let’s look at one thing. I put a post forward on the morning of May 13, 2002, saying that the retirement study posted at John Greaney’s site lacks a valuation adjustment. That’s huge. If that’s true (and it is — thousands of people have looked at the Greaney study over the past 16 years and not one has been able to identify a valuation adjustment in it), that one post has the potential of saving millions of people from suffering the effects of a failed retirement. It’s not just Greaney who made that mistake. Lots of people did. There were thousands of articles on retirement planning that advised people to employ the infamous 4 percent rule that Greaney advocates in his study. Once we open the entire internet to honest posting re the last 37 years of peer-reviewed research in this field, we will be making honest and accurate retirement planning studies and calculators available at every site on the internet.

If getting those accurate retirement planning numbers out to millions of people were the only thing that I did with this thing, that would justify all of the abuse that you Goons have dished out to us. But that of course is not the only thing. That was the first day. I have been building on that foundation for 16 years now. And I will continue to do so.

Has the bad stuff hurt us? obviously.

What really matters in the long run? The good stuff.

Love builds. Hate destroys. Love triumphs over hate in the end. Every time. If it didn’t, we wouldn’t be here. If it didn’t, we wouldn’t live in such a great country. You could look at a lot of things and focus on the bad stuff and talk about how terrible the world is. The trick is to overcome the bad stuff, to make something good out of it. And you can look at the slider at the top of every page of this site and see what expert after expert after expert who visited this site had to say about the amazing work that I have done with the help of thousands of fine fellow community members.

Goon garbage is Goon garbage. I am stunned that you Goons ever enjoyed a single victory. I’l give you that one. But the very fact that you have had to engage in criminal behavior tells the story of what following a pure Get Rich Quick investing strategy does to people. Not this boy, you know?

I love my country. So I am going to continue to follow the laws of my country and to advise all others to do the same. I will do anything in my power to help you Goons out because I think it would be fair to say that you got caught up in something a lot bigger than you realized you were heading into in the early days. But nothing on the wrong side of the felony line for this boy. Not in 16 years, not in 16 billion years.

Does it make me sad to reflect on how things have transpired over the first 16 years of our discussions? Sure. Without question.

Does it make me excited to look forward to the advances that we will be achieving in days to come? Sure. Without question. And the positive feelings are 50 times stronger than the negative feelings.

We’ll see how it goes, Anonymous. I am 100 percent certain that the American people are going to come out on top re this one. But you are not going to believe it just because I say it. You are going to have to see it all play out with your own eyes. You are going to become worried about what it means to cause millions of failed retirements on the day they take you away in handcuffs to your prison cell. It breaks my heart. But I can’t change it, can I? At least we have all the good stuff to look forward to. So I make an effort to focus on that.

Love is the answer. I am 100 percent sure.

And I do wish you all good things.

Rob

“The Noise Will Come in the Days Following the Next Price Crash. I Predict Lots of Noise. I Predict Hundreds of Visitors at This Site Every Day. Perhaps Thousands. Perhaps Tens of Thousands. Perhaps — Hundreds of Thousands? We Live in Communities. When I Have a Community of People Helping Me Out, Amazing and Magical Things Will Happen. I Am Sure.”

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

When a tree falls in the woods and no one is there to hear it, does it make a noise?

When Rob Bennett posts on the internet and no one reads it, does it really matter?

I think it matters, Anonymous.

If Shiller is right (I obviously believe that he is), we are going to see another price crash within the next year or two or three. Millions of middle-class Americans will see 50 percent of their lifetime saving disappear into thin air overnight. It will have been the relentless promotion of Buy-and-Hold strategies that will have caused that. If we permitted honest posting re the last 37 years of peer-reviewed research, we could never have another bull market. Stock prices are self-regulating so long as investors have access to the information they need to act in their self-interest (that is, so long as they are able to learn when stock prices are so high that they no longer offer a strong long-term value proposition). Once we rule out future bull markets, we also rule out future bear markets because it is the insane irrational exuberance of bull markets that produces the insane irrational depression of bear markets. And once we rule out future bear markets, we rule out future economic crises because it is the huge loss of consumer buying power that we experience in bear markets that causes economic crises.

So we are close. Very close. The bad news here is genuinely bad. It breaks my heart to think of the ocean of human misery that we have collectively brought on with out participation in and tolerance of the Ban on Honest Posting. But it remains the case that the good news here is 50 times more good than the bad news here is bad. We live in a great country. We have processes in place by which we as a people overcome these sorts of problems. I am 100 percent certain that we are going to prevail in the end. Could I be wrong? It certainly has been known to happen. I could be wrong. But I don’t think so. I think I am right. I think we are going to get to the other side of this mess stronger than ever. We’ll see, you know?

When we get to the other side, we will all be united. We all are on the same side. We all want to learn about a better way to invest. It is silliness to think that there could even be a single exception to that general rule. Some of us have gotten caught up in our personal dramas over the course of the past 37 years and we don’t see it that way at the moment. But after the crash? After the crash, the realities that Shiller pointed to in his Nobel-prize-winning research are no longer theoretical. After the crash, we will all be seeing the results of ignoring those realities discussed in our daily internet news feeds. That changes things. In a big way.

Which side do you think Jack Bogle is going to be on in the days following the next price crash? I have a funny feeling that Bogle is going to be on the side of the American people at that time, not on the side of the Lindauerheads. Where does Mel Lindauer go when Jack Bogle calls for his removal from the Bogleheads forum (a forum named for Jack Bogle, not Mel Lindauer)? Your guess is as good as mine, you know? I think he goes somewhere whehe can no longer disrupt the conversations that we are trying to have. Again, we will see. But that is certainly what I expect to see happen.

All of the material housed at this web site will be available at that time to every single person interested in learning what happened to us. Yes? That’s a pretty darn freakin’ big deal. I think it would be fair to describe the 16-year cover-up as the biggest case of financial fraud in the history of the United States. Thanks to the power of this exciting new communications medium, we will all be able to quickly make complete sense of what went down. Which means that we will all be able to quickly come to terms with what down and move forward into a brighter future for all of us. I am obviously humbled and honored to have been able to have played the role that I have played in making it all happen.

And you will see in that day how I will be helping you. The stuff that you Goons did will be reported. That’s part of the story. That cannot be covered up if we all are going to move forward. But the other side of the story is that lots of Normals TOLERATED your behavior. That puts your behavior in a different light than it would be placed in had the reality been otherwise. That helps you. And, yes, I will be reporting how I was one of those cowardly Normals for a time, how it took me three years to work up the courage to point out to my fellow community members (my friends!) that the retirement study posted at John Greaney’s web site lacks an adjustment for the valuation level that applies on the day the retirement begins. It will all come out And each and every one of us will be better off as a result so long as I continue to follow my policy of being as honest as I can possibly be without ever crossing the line and becoming uncharitable while also being as charitable as I can possibly be without every crossing the line and becoming dishonest. That’s the American way and that’s the way that I intend to continue playing it, my dear Goon friend.

The noise will come in the days following the next price crash. I predict lots of noise. I predict hundreds of visitors at this site every day. Perhaps thousands. Perhaps tens of thousands. Perhaps — Hundreds of thousands?

I don’t know. We’ll see. I’ll do my best to keep up with whatever flow of traffic appears before my eyes.

I could be wrong. I said that before. It doesn’t hurt to say it again. I could be wrong. But I don’t think so. I think that I am right. So long as playing it the other way translates into a prison cell for Old Farmer Hocus too (I obviously do not believe that Greaney included a valuations adjustment in his study), I am going to continue to keep to the right side of the felony line and let things play out however they play out. I wish you the best of luck in all of your future life endeavors. But I also need to watch out for myself. And that is my sincere take re what is in my personal best interests (as well as in the best interests of the world at large, to be sure).

Does all of that work for you? I sure hope so. It sure would give me some mental relief to know that my plans were all A-OK in your book.

I think there is going to be plenty of noise. I heard lots of noise on the morning of May 13, 2002, and that noise told me that something terribly important was going down. That something important has not been resolved in a successful way in the past 16 years. Too bad! That unfortunate reality makes me want to cry. It really does. But the bottom line here is that I am not Superman. I have done all that one human being can do. We live in communities. When I have a community of people helping me out, amazing and magical things will happen. I am sure. We will have to wait a bit to hear that amazing and magical noise. I think it would be fair to say that not one of us will at that time question whether it all was worth the wait 10,000 times over.

I think it matters.

But I could be wrong.

And I naturally wish you all the best that this life has to offer a person.

— My dear, Goon FRIEND.

Insignificant (for Now!) Rob

 

Site Visitor: “I Read the ”Intelligent Investor” by Graham. He Mentioned at Least 50 times or More That Before You Invest One Needs To Be Sure That You Are Not Paying Too Much for Stocks. He Recommends a 25- 75% Portfolio, That is 25% When They Are Overvalued and 75% When Undervalued. He Does Not Recommend Buy-and-Hold, He Even Mentioned P/E10. He Also Says It Is Inevitable That Markets Will Always Correct By 50% to 90% at a Certain Point When Overvalued.”

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

Hello Rob,

I read the ” Intelligent Investor” by Graham last couple of weeks. In his book he mentioned at least 50 times or more that before you invest one needs to be sure that you are not paying to much for stocks. Because you make your money down the road if you buy when stocks are cheap, or undervalued. He recommends a 25- 75% portfolio, that is 25% when they are overvalued and 75% when undervalued. He does not recommend buy and hold, he even mentioned PE10. He also says it is inevitable that markets will always correct by 50% to 90% at a certain point when overvalued. I am just a retired middle class guy learning , but no way would I have 50 or 100% of my portfolio invested in stocks right now. I currently have it at 25%, I can emotionally handle a 50% drop which would be 12.5% of my total portfolio.

So the point being is the evidence of value investing is irrefutable, by the” experts” , but mostly by common sense to me. When I buy tomatoes I wait till prices are at normal levels not high, WHY is it than the buy an holders , do not have an open mind about this and want to stop any discussion about it? More than that making fun your work and others. . They have a plan of a 50-50 mix of bonds and stocks, or a 100% level in stocks no matter what values are.? Well that is ok that they believe this .What is so bad about discussing different methods of analysis? It could only be that that they are like robots marching along to Bogles plan,. Yes, I have also read the Boglehead’s investing and boards. The lessons of 2008 are so quickly forgotten, the anguish ad pain of people’s lives and marriages being wiped out. Like Gramn says ” there is always a new and better plan about doing things ” right before a crash.
I thank you for your research and your blog, this is only my 2 cents , my thoughts of just an average guy learning…
Max

Everything you say here is right on, Max. Thanks much for stopping by.

Taking valuations into consideration is exercising price discipline. How could that ever be a bad thing? As you point out, the case for Valuation-Informed Indexing is “irrefutable.” The way that I say it is that precisely 100 percent of the evidence available to us today supports Valuation-Informed Indexing and that precisely 0 percent of the evidence available to us today supports Buy-and-Hold.

You are right to cite Benjamin Graham, who was Warren Buffett’s mentor. Graham is the godfather of Valuation-Informed Indexing. The references he makes to the concept in his book are the earliest references to it that I have seen.

So why are there still people today advocating Buy-and-Hold?

One reason is that people love it, Love it, love it, love it. Millions of middle-class people are today invested in stocks to provide for their retirements. Most of them are not as far along in the process as they would like to be. Say that you are a middle-class guy who is age 64 and would like to be able to retire next year. Say that you need $1 million to retire. Say that you have $900,000 in your account. You expect to put aside $10,000 this year. If you earn 10 percent on the $900,000 in your account, you will barely make your goal in time. So you are a little worried. The Buy-and-Holders don’t say that you will get a 10 percent return. But they say it’s possible. They say that there’s a chance that you will make it and that, if you don’t, there’s a better chance that you will achieve your goal one year late (you would only need to earn 5 percent each year to pull that one off). So — not an ideal situation. But not too terrible either. Kinda, sorta okay.

Now —

What is this Rob Bennett fellow telling you?

He’s telling you that you need to take valuations into account to know where you stand. Stocks are today priced at two times fair value. So you need to divide your portfolio number by two to know its true, lasting value. Divide by 2 and you have $450,000 in your account with one year remaining to reach your goal of $1 million saved. What do you think your chances are of pulling that off?

There was a discussion at a Canadian Bogleheads board of whether to ban me or not. One woman said: “Rob is the sweetest and most polite poster I have ever encountered on the internet. And he irritates me to no end!” Do you see? That’s the story here. She voted for banning me not because I violated any posting rule or because I said anything that is not true and backed by 37 years of peer-reviewed research (as well as by common sense, as you quite properly note). She voted to ban me precisely because I told the truth! A truth that she very, very, very, very much does not want to hear.

The second reason is that the “experts” support Buy-and-Hold. The people we call “experts” in this field (with the rare exception of someone like Robert Shiller or Rob Arnott or Benjamin Graham) are the people who are able to make a living giving investing advice. What is the key in every field to getting people to buy what you are selling? The first and most essential step is getting people to like you. People will buy just about anything from someone they like. People will not buy a sweater in February from someone who irritates them to no end!

LOTS of people who work in this field want to tell the truth about how stock investing works. Lots and lots and lots of them. Why don’t you hear about them? Those who actually go ahead and tell the truth are removed from the field. They can’t make any sales and so they don’t make any money and so they have to find another way of making a living. And all the others who are giving thought to telling the truth see what happens to the few who work up the courage to do it and learn the lesson that they need to learn to be able to continue to put food on the table for their families.

The tragedy here is that the valuations story plays out slowly. Yes, those who ignore valuations pay a huge price in the end. Buy-and-Hold always fails and it always fails spectacularly. The peer-reviewed research that I co-authored with Wade Pfau shows that investors can lessen the risk of stock investing by 70 percent by being willing to abandon Buy-and-Hold and instead follow common-sense strategies when investing in stocks. If I had showed people how to reduce the risk of stock investing by 10 percent, I would have had my face on the cover of Time magazine as “Man of the Year.” I showed them how to reduce the risk of stock investing by 70 percent and I am banned for life at every large investing site on the internet. Why? Because to reduce risk by 70 percent, you need to acknowledge that Buy-and-Hold is a scam. And the fellow with $900,000 does not want to acknowledge that $450,000 of his life savings is the product of a scam, the product of irrational exuberance.

That’s the entire story in a few paragraphs. We all want to be scammed. And, if you want to make a living in the investing advice field, you have to go along with the scammers. Point out the scam and you are perceived as a threat by the people making a living promoting the scam and you are eliminated. That’s the way it works.

If Shiller’s research is legitimate (it is), the next price crash will cause millions of middle-class people to lose 50 percent of their lifetime savings. What do you think is going to happen to our economic system then? People who lose that much money cut back on spending. When millions cut back on spending, hundreds of thousands of businesses fail.. When hundreds of thousands of businesses fail, millions of people are thrown out of work. When millions of people are thrown out of work, political frictions intensify. We are not just looking at an economic crisis if stocks continue to perform in the future somewhat as they have always performed in the past. We are looking at a political crisis.

Is the situation hopeless?

Not even close!

The Wall Street Con Men want to tell the truth, Max. The experts in this field are people. They are just like all other people. They chose their careers in part to make money to feed their families and in part because they wanted to put their talents to work helping other people. I am 100 percent sure of this. There is a mountain of evidence supported this claim residing in the Post Archives of the first 16 years of The Great Safe Withdrawal Rate Debate.

We didn’t always know how stock investing works. Benjamin Graham was the first to catch on to the basic idea. Shiller developed that idea in his “revolutionary” (his word) peer-reviewed research of 1981. The fine people who awarded him a Nobel prize for that research advanced the ball in a major way by doing so. I have developed the concept in hundreds of ways in the work that I have been doing on a daily basis for 16 years now. John Walter Russell devoted eight years of his life to helping me out in many amazing ways. Wade Pfau put his career on the line to help us all out. Bill Bernstein has helped us out in big ways. So had Larry Swedroe. So has Bill Shultheis. So had Carl Richards. So has Jack Bogle. So have lots and lots and lots of others.

We are on the one-yard line. Once we have one large investing site that permits honest posting, that site is going to get so much traffic as a result that the money will be flowing in and then other sites will copy what it is doing and the ideas will go viral. When you reward something, you get more of it. We have been rewarding the pure Get Rich Quick approach and punishing the first true research-based approach for a long time now. And of course we are suffering as a result, both economically and politically. What do you think is going to happen when we start punishing the pure Get Rich Quick approach (by pointing out the ocean of human misery caused by the Buy-and-Hold “strategy” over the years) and rewarding the first true research-based strategy? I think it would be fair to say that we will see the biggest economic expansion in this history of our nation.

We will see a new form of capitalism, a form in which the average middle-class person finally has a chance to get a bit ahead over the years and does not have to worry that one day he will wake up to find most of the savings of a lifetime vanish into the mist in one of those mysterious price crashes that seem to appear out of nowhere from time to time to ruin the Buy-and-Hold fantasies.

We live in a great country, Max. I am sure. We are close. We just need to hang in there. And of course we need to help each other out. You are helping lots of people out with your posts here. The Goons win by intimidating all of the good people. When they intimidate us into silence, they fool us into believing that the world is populated solely by Goons. No! I have had thousands of people thank me for the work I have done in the investing realm. There are lots of people just like you who want to know how this stuff really works so that they can plan effectively for their futures. The Goons want us all to feel isolated so that they can cut us off one by one. When one of us works up the courage to speak out, it helps the rest of us to feel less alone. That’s how we get a fire started.

We have the law on our side. That’s a big deal. The Goons go to prison following the crash. We don’t. That puts us a big leg up on them. We would not as a people have enacted laws against financial fraud if we wanted to have internet Goons robbing us of our retirement money. I mean, give me a freakin’ break. I have seen how this saga ends. The good guys win it all on the last page of the story. Yes, there have been some suspense-filled moments along the way. I was there for all of the action. I saw it all go down. But I always knew how it was going to turn out. I always knew that it was going to turn out in the only way that it could turn out if our economic system and our political system were going to survive for very much longer into the future.

Whew!

My sincere take.

It’s always nice to hear from you, my good friend. I remember the day that I learned that Benjamin Graham was telling the truth about stock investing many, many years ago. It wasn’t just that I had forgotten to take me meds! Knowing what Benjamin Graham believes about how stock investing works puts you ahead of 90 percent of the “experts” in this field, Max. And they get paid big salaries to push their smelly Buy-and-Hold garbage. The sad thing is that, the harder you push Get Rich Quick, the more money you make in this field. And I think it would be fair to say that Buy-and-Hold is the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind. Quite the money maker! And quite the human life destroyer!

Benjamin-Graham-Following Rob