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“We Are Going Up Against Heavy Hitters — Vanguard, Motley Fool, the Get Rich Slowly Blog, Index Universe, Morningstar, the Bogleheads Forum”

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

Personally, if I was confident that I’d been wronged and could make $500 million in a lawsuit, I’d pay the lawyer!   It works the other way around too, GW.

If the lawyers were as confident as I need them to be to be sure they can win the case, they would be happy to take it on contingency.

This is what changes with the next crash. After the next crash, what Buy-and-Hold has done to us is in all the newspapers and people are looking for villains to hang from trees. A good lawyer can take advantage of that reality. But that reality is not today’s reality. So the smart lawyer and the smart client wait it out a bit.

I met one lawyer in his office. He liked the case. But he felt that his firm was not big enough to handle it. It was my conversation with him that got me thinking that maybe it was better to be patient. I liked that guy and I would have gone forward had he taken the case. But what he said about needing a big team of lawyers for this particular case struck me as being true. We are going up against heavy hitters — Vanguard, Motley Fool, the Get Rich Slowly blog, Index Universe, Morningstar, the Bogleheads Forum. This is not a job for a small firm.

I don’t want just to bring the case. I want to win the case. A case for $500 million (the case will obviously be for a much larger number — that’s a number that I have put forward as a possible settlement amount for a settlement achieved PRIOR to the next crash) needs to be brought by a team of the best lawyers in the country. Can I get them today? I probably could if I had the right contacts and that still may happen. It could be that one of my e-mail contacts will have an in with some big-name lawyers. But, if I wait until the crash, I will have lawyers lined up around the block. What’s the rush?

My preference in the early days was to bring the case and get the ugly stuff behind us. I still would bring the case today if I had a team of top-flight lawyers showing their confidence by taking it on contingency. But I need to see from the lawyers that they are confident enough to put a good bit of skin in the game. I have a funny hunch that I will see a whole big bunch more of that sort of action FOLLOWING the next crash than I am seeing today. I would rather wait and get a number far in excess of $500 million than rush things and perhaps have to settle for a number a bit smaller than $500 million. Huh? For this case?

You are essentially placing all your bets on a hope that stocks will perform in the future in a manner unlike how they have ever performed before. I am doing the opposite. I say that today’s price is comprised largely of cotton-candy nothingness. It is the product of a huge confidence game, a huge flood of dangerous, worthless emotions. When those emotions fade, you lose it all. You lose the bull market gains you are today counting as real. You also lose the public’s confidence in your SWR studies and the experts’ willingness to pretend that there is some mystical data somewhere supporting those irresponsible claims. You ALSO lose the reluctance of the nation’s top lawyers to bring this case on a contingency basis. Lawyers read the papers. They will see how mad people will be. They know that it is juries that decide legal cases and that juries are comprised of humans.

So it may be that it all flips at the same time.

Rob

 

Investor Junkie: “In Rob Bennett’s Case, He Was Banned for No Known Listed Forum Policy. Except His Viewpoint Was Different From Other Bogleheads and [He Was Perceived As] a ‘Threat'”

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Here’s a wild thread about the decision of Our Lords and Masters at the Bogleheads Forum and their decision to ban Investor Junkie for life:

Banned for Life from Bogleheads Forum

Just keep repeating to yourself: “Buy-and-Hold is science! Buy-and-Hold is science! Buy-and-Hold is science!”

Juicy Excerpt #1: Opposing viewpoints are shunned  – Perhaps this is the most damning issue. This isn’t the first time someone has been banned. In Rob Bennett’s case he was banned for no known listed forum policy. Except his viewpoint was different from other Bogleheads and a “threat”.

Juicy Excerpt #2: The Bogleheads Forum does seem worse than most.

Juicy Excerpt #3: Boards tend to foster small and often narrow-minded communities that don’t look kindly on outsiders, from my observations. Cliques dead? Nah.

Juicy Excerpt #4: Forums have huge potential. This is especially true of the Bogleheads Forum because most of the principles they discuss are solid, research-based stuff. Also, they get a number of big names to post there. People need a place where they can talk things over and learn. But the whole thing is ruined when one group silences opposing viewpoints.

Juicy Excerpt #5: There are lots of super people at Bogleheads. I made lots of good friends there and I learned a lot from a good number of kind and smart and generous people. I’ll give you one example. I met Wade Pfau as a result of my posting there.

Juicy Excerpt #6: I like the BH forum but yea I have found their are some stubborn a-holes over there. They kind of remind me of the old people at my work who are unwilling to embrace change and new ideas/ new ways of doing things. I hope I never become someone like that.

Juicy Excerpt #7: Call it ‘groupthink” over there if you like, but you might ask yourself why it is that tightly moderated forums like BH are popular and why those ‘upstart’ forums who claim they are gonna do it differently fade to obscurity.

Juicy Except #8: Their reasons for suspension is subjective, not objective. Not only shown in my case, but also Rob’s.

Juicy Excerpt #9: As to Mr. Bennett, however, that is a horse of a different color. I suggest you take a look at his long internet history, including having been banned at not one board, or two, but banned at more boards than you have fingers and toes together. It seems to me that much negative interaction is not a misunderstanding; that is a person deliberately trying to be an irritant, rather trying to get a legitimate message across.

Juicy Excerpt #10: I don’t know about that but I certainly am grateful for your kindness in saying so, Sam. I saw you at one of the sessions of the Financial Bloggers Conference in Denver but was not able to get close enough to say “hi!”. Next year I will make sure that we get a chance to talk things over in person a bit!

Juicy Except #11: He is not entirely wrong in saying that I am an irritant. Lots of people have invested their retirement money pursuant to Buy-and-Hold principles and it hurts them to learn that this was a mistake. I don’t say it to hurt them. My view is that it hurts them a lot less to learn about their mistake before they lose most of their retirement money than it does to learn about if after they are busted.

Juicy Excerpt #12: This group strikes me as a bunch of smug, self-rightous church lady sewing circle types.

Juicy Excerpt #13: I can say from what I’ve seen people often claim you are let me put it in a nice way.. abrasive. While I have no issue with your viewpoint, I think many object to the methodology of how you do it.

Juicy Excerpt #14: I think the answer is for people to accept that there are two models and not be so defensive. We all need to acknowledge that the other guy is a friend and someone why is trying his best to help. I accept that there are lots of good and smart people who really believe in Buy-and-Hold. They have a right to believe what they believe. But if I were to say that I believe in Buy-and-Hold, it would be dishonest. There never should have been even a tiny bit of pressure applied to me to persuade me to post dishonestly. My right (and the right of all Valuation-Informed Indexers) to post honestly should be respected.

 

Bogleheads Forum Poster in Thread Discussing Academic Researcher Wade Pfau’s Finding that Valuation-Informed Indexing Strategies Have Provided Higher Returns Than Buy-and-Hold at Lower Risk Throughout the Entire Historical Record: “The Paper Refutes a Central Tenet of the Boglehead Investing Philosophy. It’s a Big Deal.”

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Yesterday’s blog entry reported on an e-mail that I sent to Academic Researcher Wade Pfau on May 18, 2011. My next e-mail from Wade arrived on May 31, 2011.

Jacob Irwin, publisher of the My Personal Finance Journey blog, posted an analysis comparing Valuation-Informed Indexing with what he calls “Passive Investing” (what I call “Buy-and-Hold” — sticking with a single stock allocation in the face of big changes in the price being charged for stocks):

http://www.mypersonalfinancejourney.com/2011/05/valuation-informed-indexing-vs-passive.html

Jacob sent a link to me and Wade and Wade copied me on his reply to Jacob.

Wade said: “VII tends to work as long as there is mean reversion in PE10, which there usually is.  The unprecedented run-up of PE10 in the 1990s makes it hard for VII to compete then.  I think there is not much else that can be done about that.  But I don’t think this means that VII has permanently stopped working. Trying to find a specific strategy for VII to have worked in this 1990-2011 period sounds too much like data mining.  Though in other time periods, it hardly matters which strategy you choose as it is hard to find a period in which VII does not work.”

He also linked to a discussion at the Bogleheads Forum that he said he thought might be of interest to us:

http://www.bogleheads.org/forum/viewtopic.php?t=75585&postdays=0&postorder=asc&start=0

In the Bogleheads discussion, a poster using the name “Fred Flintstone” said that Wade’s research showing the superiority of Valuation-Informed Indexing over Buy-and-Hold “refutes a central tenet of the Boglehead investing philosophy. It’s a big deal.”

“Unless Taylor Larimore [Co-Author of the Book The Bogleheads Guide to Investing) Has Had Some Secret Discussions With Bogle That No One Knows About, He Is Mischaracterizing Bogle’s Position.”

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Yesterday’s blog entry reported on an e-mail that academic researcher Wade Pfau sent me on January 20, 2011. My response is set forth below.

Wade:

That’s super. I am grateful for your constructive efforts.

1) CJKing is an awesome poster, probably the best I have ever seen on this topic. If it’s possible to contact him through a private e-mail system there, he can probably be of help. He is extremely knowledgeable re this topic and also has spent
years thinking carefully through all the angles.

2) His recommendation to read Valuing Wall Street was a great one. Smithers uses a different valuation metric. John Russell did some research seeking to determine which metric worked best (P/E10 or Tobin’s Q). He ultimately went with P/E10 but my recollection is that he also had generally good things to say about Tobin’s Q.

3) John Russell wrote an article making the point you were making re the size of the data set. He certainly agreed with your intuitive sense re this. I will try to track down that article.

4) Richard’s point is the most important, in my view. People need to understand WHY long-term timing works but short-term timing does not. I struggled with this for a long time. Once I was clear on the premises of
the new model, I was able to understand all sorts of aspects to the question that I had been blind to before. If you want me to say more on this (now or later), please just let me know and I will expand on the point.

5) Norbert Schlenker’s behavior is inexplicable. He banned me from his board. However, I think his substantive comments on the thread where he supplied the graphic were perfectly fair. He expressed a certain skepticism but it was more a cautious skepticism than a rigid skepticism. And the one big negative he pointed to — the success of Buy-and-Hold in the late 1990s — no longer applies since the crash. It’s of course not his fault that he happened to prepare the graphic prior to the crash.

6) You described Benjamin Graham’s take properly. I will try to track down an article that quotes his words.

7) Bogle has said that Valuation-Informed Indexing can work:

http://arichlife.passionsaving.com/2009/07/28/bogle-says-valuation-informed-indexing-can-work/

Unless Taylor Larimore has had some secret discussions with Bogle that no one knows about, he is mischaracterizing Bogle’s position. In fact, Bogle warns about the effect of overvaluation in nearly every speech he gives. Bogle himself timed the market successfully! He has said in published interviews that he lowered his stock allocation to about 30 percent at the top of the bull partly because of valuation concerns. He obviously is ahead
today because of his decision to do that. Taylor is of course aware of this. These points were made dozens of times to him in threads that reside today in the Post Archives of the Vanguard Diehards board.

That’s a great thread! I am sure that that is going to help some people gain a better sense of the realities.

Rob

“The Regulars (at the Bogleheads Forum) Did Not Want This Message (That the Old School Safe Withdrawal Rate Studies Get the Numbers Wrong) Being Heard Because of the Board’s History re This Message”

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Yesterday’s blog entry reported on an e-mail that I received from academic researcher Wade Blog on January 5, 2011, in which he expressed the view that an appropriate title for a thread at the Bogleheads board would be “Yes, Virginia, Valuation-Informed Indexing Works!” My response is set forth below.

Wade:

I obviously would love to see you use that title, Wade. And I think that would do a lot to move things in a positive direction.

As I am sure you understand, there are some delicate matters in play here. I am of course grateful for anything you are able to do to open things up and I will of course participate in a constructive way to the extent that it ever becomes possible to do so.

People are defensive and embarrassed (and even ashamed and even fearful of facing legal liabilities). I think that’s the true reason why there were so few views on your third thread. What usually happens in that a few of the regulars posts to a thread and then the far larger number of non-regulars feels comfortable joining in. In the case of that third thread, the regulars did not want this message being heard (because of the board’s history re this message). So they let the thread die. There was a day when every SWR thread got HUNDREDS of posts in that community.

It has never been my intention to make anyone feel bad. That community has huge potential. I have learned a great deal from lots of people there and I have lots of friends there who have said many kind thing about me and my work. The problem is that some have taken dogmatic positions and feel that they cannot back down no matter what. I believe that everyone should be expressing his or her sincere views, but “everyone” obviously includes me and the others who believe that valuations affect SWRs.

I believe that it will all get worked out in the end. The sooner that happens, the better it will be for every single person involved. But there are limits to what I can do to make good things happen. I need to wait for events to turn in a positive direction. When that happens, I will be doing all that I can to bring things to a better place for every single person involved.

Rob

Rob Bennett to Wade Pfau: “It is 100 Percent Wrong That People Posting at Bogleheads Feel Intimdated re Posting My Name…. By Using My Name, You Help Others Get Over Their Feelings of Intimidation”

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Yesterday’s blog entry described two emails that researcher Wade Pfau sent me on December 18, 2010. It also set forth the text of my response to the first of those e-mails. The text of my response to the second of those e-mails is set forth below.

Wade:

Thanks for putting an apology in the new post. That’s fine. I think it is especially good that you mention my name in the new post. It is 100 percent wrong that people posting at that board feel intimidated re posting my name. It obviously is not only you who have felt that intimidation. Lots of good and smart people have felt it and the discussions there obviously would be much more productive if people did not feel that. By using my name, you help others to get over their feelings of intimidation.

Drip Guy is a Super-Goon. I am not saying that you should not respond to him. The points he made in his post needed to be addressed. I am just pointing out that he has a long history of posting with bad intent on numerous boards. It would be wonderful if you got somewhere with him but I don’t see the odds as being good.

The point that matters most from my perspective is where Drip Guy says: “That is, if you had chosen to blindly withdraw 4% per year from a nest egg, it would have lasted at least 30 years until depletion, with 95% conf.” It is this way of saying things that is the cause of most of the confusion, in my assessment. It is of course an objective historical fact that 4 percent always worked in the past. 4 percent is the Historical SURVIVING Withdrawal Rate. There is certainly no question in my mind re that.

What I do not get at all is how he can say that a 4 percent withdrawal could be taken “with 95% conf.” Looking back, we know that 4 percent worked. So, looking back, you could take 4 percent with 100 percent confidence. But a determination of what is safe is by definition a forward-looking concept. The entire idea of having confidence in something only makes sense if you do not know what is going to happen. So the confidence percentage must take into consideration the factors that were unknown to the retiree at the time be began his retirement.

We know the range of possible returns starting from any possible valuation level. What we do not know is what particular returns sequence is going to pop up. Say that the retirement began in 1929. In 1929, 50 percent of the returns sequences that we have seen in the historical record permitted a 4 percent withdrawal to work and the other 50 percent caused a 4 percent withdrawal to fail. So it seems to me that the confidence level for a retiree taking 4 percent for a retirement beginning in 1929 is 50 percent, not 95 percent.

Yes, that retirement worked. But not because it was safe. A retirement that has only a 50 percent chance of working out cannot be retroactively characterized as “safe.” It was a risky retirement plan that worked because of good luck (a good return sequence happened to pop up). I am not able to think of any other field of human endeavor in which we determine what is “safe” by seeing what worked in two or three tests.

Say that we wanted to find out whether drunk driving is safe or not. We test 100 drivers driving 20 miles. 98 of the drivers are sober. 2 are drunk. The 98 drive the 20 miles without incident. The 2 get in major accidents and live but are crippled for life. Would we conclude from this that driving drunk is “safe”?

That’s what we are doing with the Old School SWR studies. A 4 percent withdrawal usually works with lots of room to spare. But it always means trouble for retirements that begin at times of high valuations. Prior to the 1990s, there were
only two times of super-high valuations in the modern record. On both of those occasions, 4 percent barely worked (although it worked with lots of room to spare on all occasions when valuations were not super-high). No, the 4 percent withdrawal did not bring death in either of the two tests (that is, the portfolios did not go to zero). But it came awful close in both cases. Is this not telling us that 4 percent is a high-risk withdrawal rate for retirements beginning at times of super-high valuations?

It seems to me that the Old School SWR methodology is telling us the Historical Surviving Withdrawal Rate. That’s a very different concept than the SAFE withdrawal rate. To determine what is safe, we need to look at the factors that determine what is safe. The record shows that the single most important factor is the valuation level that applies on the day the retirement begins and yet the Old School studies contain no valuations adjustment whatsoever. How could they possibly tell us what is safe if they do not even look to the factors that determine what is safe? This is why I say that these studies are “analytically invalid.”

Rob

Wade Pfau (at the Bogleheads Forum): “My Comment Before [Suggesting That Rob Bennett Had Been Dogmatic in His Posting at This Forum] Was Completely Misguided and I Apologize to Him”

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Yesterday’s blog entry set forth the text of an e-mail that I sent to academic researcher Wade Pfau on December 17, 2010.

Wade sent me two responses the following day. The first contained a link to an article in Business Week which he characterized as “quite sympathetic to the point you were trying to make all along”.  In the second he reported that he had begun listening to my podcast and that he had put up a new post at the Bogleheads Forum containing an apology to me. In that post he stated that “my comment before was completely misguided and I apologize to him.”

Set forth below is the text of my response to the first of Wade’s two e-mails.

Wade:

Thanks for letting me know about the article. I certainly am glad to see some people giving more realistic and more prudent advice.

What the article is missing from my perspective is a focus on the valuations question. It is a downer to suggest that the SWR is ALWAYS 2 percent. Russell’s research indicates that it drops to 2 percent at times of super-high valuations but also
that it rises to 9 percent at times of super-low valuations (while being about 5 percent at times of moderate valuations). I view that as a more balanced and encouraging message.

The valuations-centered message has big strategic implications. If the SWR varies from 2 percent to 9 percent, then stocks obviously offer a dramatically different long-term value proposition at different times and investors need to be willing to vary their allocations to obtain good long-term results.

I do not think dogmatism is at all called for re any of the particular numbers. I think we need to have lots of people contributing lots of good thoughts on the particulars so that over time we all come to better informed takes.

My big push is for LESS dogmatism on the question of how much valuations matter. My take is that valuations matter far more than most of us today realize, perhaps so much that we react with shock even to look at the numbers. I am hoping
that we (the entire community of investors) get to a point where we are at least considering some far-out possibilities that we have not given much consideration to in the past.

I believe that, while the SWR may at times be very low, that does not need to cause any practical problem for individual investors willing to do what it takes to obtain good results regardless (by avoiding stocks when the long-term value proposition is poor and by investing heavily in stocks when the long-term value proposition is strong).

Rob

“Wade Pfau Does Not Post with Full Honesty [at the Bogleheads Forum]”

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Set forth below is the text of a post that I put to the Goon Central board concerning Wade Pfau, associate professor of economics at the National Graduate Institute for Economic Studies:

Does Dr. Pfau not post honestly? 

He does not post with full honesty, Yip.

Wade wrote to the authors of the Trinity Study asking that they correct the errors in their studies.

The Sewer Rats threatened to get him fired from his job for doing so.

He announced shortly thereafter that he would no longer be doing research on valuation-related topics.

He followed that up by putting up a post to my blog saying that he thought it was “harsh” of me to say that Bill Bengen should correct his SWR study now that he acknowledges that he got the numbers wildly wrong.

Wade’s research is possibly the most important research ever published in this field. I believe that there will come a day when Wade will be awarded a Nobel prize for the work he has done. I believe that a case can be made that Wade’s study showing that long-term timing greatly increases long-term returns while greatly reducing risk rivals Shiller’s 1981 research in importance. There is no bigger fan of Wade Pfau on this planet than Rob Bennett.

But, yes, he disgraces himself when he posts at the Bogleheads Forum. He knows about Lindauer. I know he knows because I saw his response to Mel when Mel accused him of dishonest research practices. The proper response to Mel’s dishonesty is not to stop producing research that offends Mel. It is to tell Mel where to shove it and to take whatever steps are needed to see that the sorts of Internet Sewer Rats who have chosen of their own volition to put up posts in “defense” of Mel are removed from community resources like the Bogleheads Forum.

Wade has a right to post honestly at that forum. I have a right to post honestly at that forum. Larry Swedroe has a right to post honestly at that forum. Mike Piper has a right to post honestly at that forum. Bill Bernsteinzzz has a right to post honestly at that forum. John Walter Russell had a right to post honestly at that forum when he was alive. Microlepsis has a right to post honestly at that forum. Michael Kitces has a right to post honestly at that forum. John Craig has a right to post honestly at that forum. Todd Tressider has a right to post honestly at that forum. John Bogle has a right to post honestly at that forum.

All of us true Bogleheads should be throwing up when Mel tells Jack “Go woof-woof, Jack, all us Goons want to hear you go “woof-woof” and Old Saint Jack goes “woof-woof.” It smells. It smells awful. It must stop. So it will stop. I will see to it that it stops.

Get Rich Quick investing strategies don’t just destroy our retirement hopes, Yip. They eat out out souls. Humans are creatures that have the ability to make use of reason. When we give up use of our reason in the pursuit of Get Rich Quick fantasies, we become something less than human. When Wade or any of the rest of us go along to get along with the Goons, we make the problem worse. When Wade’s name appears at the Bogleheads Forum, he lends credibility to a corrupt enterprise.

I don’t lend my credibility to corrupt enterprises, Yip. Perhaps you’ve noticed.

The internet will be opened to honestzz posting on safe withdrawal rates and to many other critically important investment-related topics. And all of the people listed above will be feeling a whole big bunch better about themselves when it is. And all the people who try to benefit from the powerful insights put forward by these people will be obtaining a great deal more benefit from them when we are all able to engage in warm and friendly and intelligent and informed and, yes, HONEST discussion of stock investing at every investing board and blog on the internet.

There’s a part of you that tells you that you should be posting honestly yourself. Listen to that voice. It’s by listening to that voice that you make the break from Buy-and-Hold and become an effective long-term investor and and effective long-term human being.

This is my sincerezzz take re this important topic.

Rob

The Bogleheads Forum Discusses, Um, Not Exactly Valuation-Informed Indexing…. But Something Kinda, Sorta Distantly Connected To It (Kinda, Sorta)

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The Buy-and-Holders are not taking this well, are they?

The thread is here.

Kinda, Sorta Juicy Excerpt #1: Those ridiculous pictures on the right make it hard to follow!

Kinda, Sorta Juicy Excerpt #2: You’ve stumbled across Rob “Hocus” Bennett’s site. This forum was created in large part to get away from his takeover of the old Vanguard Diehards’ forum at Morningstar.com.

Kinda, Sorta Juicy Excerpt #3: There’s an entry about him at urbandictionary, if that tells you anything.

Kinda, Sorta Juicy Excerpt #4: His main point seems to be…. Use the PE10 and adjust expectations accordingly. <—— (That did not take a whole website and a million blog posts, did it?)

Kinda, Sorta Juicy Excerpt #5: He-who-must-not-be-named rears his head again!

Kinda, Sorta Juicy Excerpt #6: I don’t know the whole history and don’t care to get into it, but the guy makes some good points about PE10-based market timing vs buy-hold-rebalance.

Kinda, Sorta Juicy Excerpt #7: This idea used to meet a lot more resistance on the internet.

Kinda, Sorta Juicy Excerpt #8: Although not everyone loved the idea of PE10, the issue with Hocus was his hundreds of rambling and incoherent posts, not their content (if they could have been said to have any). Hence the jump to this blissfully Hocus-free forum where you are free to post on any topic without being harassed or derailed.  PS– THANK YOU to the mods for making this happen. You saved the Diehards.

Kinda, Sorta Juicy Excerpt #9: I’m not sure which is more amazing: (1) That someone would go to the trouble of posting a web page detailing how many websites have had to ban the passionsaving guy; or (2) That the passionsaving guy has been banned from so many websites.

Kinda, Sorta Juicy Excerpt #10: Better be cautious…Hocus has given notice that he intends to sue all those individuals who have disagreed with him and those sites which have banned him, thus doing irreparable damage to his online personal finance consulting business. A drastic step for sure, but one Hocus feels necessary given that his complaints to the FBI, the state police and his congressman regarding his inability to troll at will were not resolved to his satisfaction.

Kinda, Sorta Juicy Excerpt #11: LOL wow, that’s quite a history!

The Bogleheads Forum Discusses the Pros and Cons of Valuation-Informed Indexing

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The Bogleheads Forum has been discussing the merits (or lack thereof) of Valuation-Informed Indexing again.

The discussion is wildly imbalanced. The Bogleheads Forum was created to permit Buy-and-Hold advocates in that community to escape the Morningstar Forum, where honest posting on Valuation-Informed Indexing was permitted for two years. Those discussions were some of the best investing discussions we have ever seen on the internet (a good number of those who were trying to defend Buy-and-Hold from the challenges put to it do not agree, to be sure). The first action taken upon formation of the new forum was to ban honest discussion of Valuation-Informed Indexing. So those listening in to that thread are obviously not getting to hear both sides of the story.

That said, there are lots of smart people in the Bogleheads community and there are some positive as well as negative comments contained in the thread. That’s to the forum’s credit. Also, some of the negative comments are worthy of consideration. You want to explore the pitfalls of a strategy before adopting it. There’s no place where you are more likely to hear a well-crafted criticism of Valuation-Informed Indexing than at the Bogleheads Forum.

Juicy Excerpt #1: You say “You’re right, you are smart and I admire you and you are a sharp dresser. Indexing is great. And we like it so much that we’ve developed something much better than that moldy old indexy indexing. It’s…. active indexing, yeah! It’s Indexing Plus! Or Indexing-X-Treme! Or enhanced indexing or fundamental indexing. It’s indexing, but it’s better! And because it’s better, and only we have it, we get to charge high fees….”

Juicy Excerpt #2: A lot of people on this Forum are skeptical of valuation-informed allocation. I am in the minority. I recently revised my IPS to take into account valuations of both stocks and bonds when making allocation decisions. The algorithm I use is very simple.

Juicy Excerpt #3: Notice that even if he were right that indexing is not the best strategy, it would not follow that his own specific strategy is better.  Differences in opinion is what makes horseracing, and difference in opinion on valuation is what makes the stock market. The case against “valuation-informed” anything is that it is hard to value assets correctly. Even in the year 2000, people were arguing dead seriously that Stock Prices Are Still Far Too Low.  I just don’t believe that a few simple rules based on numbers that are easily available to everyone will substantially improve your risk-adjusted returns.

Juicy Excerpt #4: To RB’s credit, I’d love to see even an incoherent 18-point list titled, “The Case Against Pyramiding Up”

Programming Note: The blog will return on September, 12. Goodbye, Summer of 2011!