A Rich Life

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

“The Responsible Thing to Do Is to PUBLICIZE the Criminal Acts in Hopes That It Will Cause Some Influential People to Work Up the Courage to Do What it Takes to Bring the Madness to an End and Thereby to Keep the Prison Sentences as Limited as Possible””

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Set forth below is the text of a comment that I recently put to a discussion at this site’s blog:

I respond to what is in front of me, Pink.

The Great Debate has been going on for 11 years. There’s a sense in which the debate has been over the same question since the first day — Do valuations affect long-term returns or do they not? That’s the only substantive question that has ever been at issue.

While that element has always remained the same, the emotional element — which is the element that matters because the answer to the substantive question has been 100 percent obvious going back to the first day — is ever changing. So for a time the “defense” of the Old School studies was that the idea that valuations matter wasn’t supported by the data. Then John Walter Russell provided the data and the “defense” became the claim that Russell’s work was not peer-reviewed and only peer-reviewed research counts. Then Wade Pfau published peer-reviewed research showing the same thing that Russell showed and the “defense” was transformed into “well, Pfau no longer talks about his findings because we threatened to get him fired from his job if he did so and Bogle’s unwillingness to stand up for him convinced him that he would be all alone if he insisted on posting honestly.”

The emotional impulse behind the “defense” of Buy-and-Hold remains strong. But the intellectual defense started out plenty weak and has grown weaker and weaker and weaker over the past 11 years. In recent years, those trying to “defend” Buy-and-Hold have had no choice but to engage in criminal acts. They enjoy no other options other than to acknowledge the obvious reality, that Buy-and-Hold was a mistake and there is no study showing that a strategy in which the investor fails to exercise price discipline can ever work for even a single long-term investor.

I prefer to write about matters of substance over the matters of process that I have focused on in a number of recent blog entries. For three reasons. One, the process stuff is a nasty business and so it is not a fun thing to write about. Two, readers hate discussions of the process stuff. And, three, once we all make the transition to Valuation-Informed Indexing, the substance stuff will have great value while no one is going to care about the process side of a debate that has come to an end. So I generally focus my efforts on the substance side while writing about process to the extent necessary to bring the stupid Debate About Having a Debate to an end and thereby get us to the debate that we all very much need to have, the debate about what the last 32 years of peer-reviewed academic research really says about what works in stock investing.

It’s becoming increasingly obvious over time that, no matter how much I would like to avoid exploration of the process questions, we are not going to get to the substantive debate we all very much need to engage in without full exploration of them. To put it bluntly, we are going to need to see some of you Goons be sent to prison before as a society we are going to give up our vain hope that we can somehow avoid working through these issues. I don’t want it to be this way and I have dragged my feet re going down this road for 11 years now. But this is not my call. We need politicians and economists and academics and bloggers and journalists helping us bring all this ugliness to an end. To persuade them to work up the courage to get involved, we are going to need to put these matters on the table.

I don’t want you to go to prison, Pink. I have never wanted that. I worked very, very hard for many years to set things up so that you would not go to prison. I wan’t able to pull that off. I believe that today it is too late for you to avoid a prison term. It would be irresponsible for me to ignore that reality. So I now am more inclined to talk about it than I was in earlier days. My goal today is to shorten your prison term. I am not going to achieve that goal without cooperation on your part. Part of what I need to do to obtain your cooperation is to be up front with you about the prison term and about what you can do to shorten it. So I work hard not to let my natural resistance to talking about such a sad matter hold me back as much as I have let it hold me back in the past.

Once we get to substance, we obviously will not be talking about prison terms. We will be talking about all the wonderful stuff on the other side of The Big Black Mountain. I believe that there still will BE prison terms. But I don’t believe that anyone is going to want to spend much time talking about them, not when we could instead be talking about how lucky we are to be the first generation of investors who ever walked Planet Earth with the ability to invest in stocks on a virtually risk-free basis.

My job is to help us all achieve as much of the good stuff as we can possibly obtain as quickly as we can possibly obtain it while keeping any negatives to the absolute minimum. If I could wave a magic wand in the air and take us back to May 13, 2002, for a do-over, I would obviously do that. I have a funny feeling that you would be happy to go along now that you see how things turn out if you elect not to do so. But I don’t have a magic wand. I have to respond to what is in front of me.

What is in front of me is a situation where a failed investing strategy has put us in an economic crisis on its way to becoming the Second Great Depression. We know that a large segment of the population feels a deep interest in exploring the academic research that gets us out of that economic crisis and on the way to the biggest economic boom in our history. We also know that there is a group of internet Goons willing to engage in any behavior imaginable, including criminal behavior, to stop the millions of middle-class people who very much need to learn what the academic research says from doing so. In such circumstances, what is the responsible thing to do?

The responsible thing to do is to PUBLICIZE the criminal acts in hopes that it will cause some influential people to work up the courage to do what it takes to bring the madness to and end and thereby to keep the prison sentences as limited as they can possibly be given the amount of water that has already passed under the bridge.

My focus is going to continue to be on the substantive side. I still write the VII column and so on. But I am working hard to gain the courage to be more open in my discussion of the criminal side of this story. Not because I enjoy talking about those things or seeing you serve prison time. Because I want to leave the ugly side of this behind and move on to enjoyment of the vast wonderful side. I want to see the economic crisis brought to an end and I want to see the huge economic boom begin. And I want Pink’s prison sentence reduced to the absolute shortest time-period to which it can be reduced given the realities that prevail today. Any lack of courage evidenced by me at this stage PROLONGS your prison sentence, Pink. Not good. Not good for you. Not good for me. Not good for anyone.

That’s the thinking behind the small change in focus that you are picking up on, Pink. I naturally wish you all the best things that this life has to offer.

Rob

Valuation-Informed Indexing #155 — Critics of Buy-and-Hold Need to Form Communities Where Their Criticisms Are Fully Developed

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I’ve posted Entry #155 to my Valuation-Informed Indexing column at the Value Walk site. It’s called Critics of Buy-and-Hold Need to Form Communities Where Their Criticisms Are Fully Developed.

Juicy Excerpt: I argued in one of my e-mails to Joachim that: “People are social animals. They need to hear others endorse an idea to have confidence in it. It would make a huge difference if there were a place where people could go to find that lots of knowledgeable folks believe in these ideas. There is huge power in community.”

Joachim agreed. He said:”I will keep my eyes and ears open. If you want to start such a [community] yourself, you can count me in as a contributor.”

I am putting this one high on my list of important projects to which I need to devote some time over the next year or two. It’s not enough for a small number of us to have learned what we need to learn to break free of the misconceptions of the Buy-and-Holders. We need to create a community in which our ideas can be openly discussed and refined and challenged and improved if Valuation-Informed Indexing is to achieve its true potential. I think that the time will soon be ripe for this initiative, if it is not already.

Robert Savickas, GWU Associate Finance Professor: “All the Things You Say About Buy-and-Hold and About the Importance of the Valuation Levels for Choosing Your Portfolio Entry Points Is Very Intuitive, Was Always on My Mind, and I Am Surprised That Anyone In Their Right Mind Would Argue With It. This Should Not Generate Controversy and I Am Surprised That It Does. You Don’t Need Any Financial Education to Intuitively Understand These Things.”

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I have been contacting numerous people to let them know about my article reporting on The Silencing of Academic Researcher Wade Pfau by The Buy-and-Hold Mafia.

Friday’s blog entry reported on my correspondence with Robert Savickas, Associate Finance Professor at George Washington University Business School. Set forth below is the text of an e-mail that I sent to Robert as a follow-up to the e-mail of mine described in the earlier blog entry:

Robert:

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Thanks again for your interest. You have brought a nice measure of cheer to my Tuesday evening. I have 10 years of my life invested in this concept.
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The best overview is here:
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Rob
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Robert responded with the following words:
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Hi Rob,

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All the things you say about buy-and-hold and about the importance of the valuation levels for choosing your portfolio entry points is very intuitive, was always on my mind, and I am surprised that anyone in their right mind would argue with it.  It did not make sense to enter a buy-and-hold in 1999 or 2000.  It was clear that we were on the unsustainable top.  A normal person would wait for things to come down first before buying for the long term.  this should not generate controversy and I am surprised that it does.  You don’t need any financial education to intuitively understand these things.
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All of your email makes sense and I have been aware of, basically all of these things, due to my watching and trying to play the markets over the past dozen of years.
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There is only two things that I have some disagreement with.  The first is the interpretation of P/E ratios.  Each time they reach high levels, a whole lot of people come up with rationalizations why this time it is different, the high levels are justified and the valuations will continue to grow.  Those tales often sound reasonable enough (they are designed to sound that way) and thus introduce uncertainty about the interpretation of the valuation ratios.  With uncertainty comes risk.
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We all know about the risks of investing in single stocks, especially for the long-term.  Single stocks are a good vehicle for short-term trading, but not for long-term holding.  We all know about indexing, diversification, etc.  We all know that index portfolios trach economy.  My second disagreement is in regards to your statement that economy is highly predictable.  It is true that business cycle imparts some clear patterns on the economic growth and financial markets.  We have many economic indicators that help us gauge the health of the economy.  All that we have.  With the help of all these things, we can predict recessions, troughs, recoveries, booms, etc.  BUT: there is one major source of uncertainty and risk in all of this: the timing.  For example, it was as clear as day that the economy was overheated in 1997 and a bust is impending.  However, it took three more years for this predictable scenario to actually unfold.  If you, as an investor, bet against the overheated economy in 1997, you would be burned out of the market and out of your money before your prophesy comes true; by that time you would have no money left to take advantage of it. John Maynard Keynes has a quote on that, something like that the markets can remain overpriced longer than you can keep money in your wallet.  Same with the real-estate bubble. It was a clear bubble back in 2004, but we had to wait a whole two years till it finally burst.  In the end of 2005, credit spreads were razor-thin, indicating that people have no respect for credit risk: a surely unsustainable state of affairs.  But the credit bubble finally started blowing in 2008.
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About the timing risk in economic forecasts, I speak from personal experience: I payed with investing in economy-wide, index, and sector ETFs, all with the purpose of taking advantage of the apparent predictability of the economic cycle.  I was darned right! But often at the darned wrong time, usually too soon.  The problem in the real time is that you don’t know how long yet to wait till your anticipated scenario will finally start unfolding.  You are afraid to miss the point, so you usually end up jumping the gun…  So, I don’t know if all risk can be eliminated.
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Robert

Robert Savickas, GWU Associate Finance Professor: “I Thought That Buy-and-Hold Had Been Challenged a Long Time Ago and Many Academics Don’t Believe It”

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I have been sending e-mails to numerous people, letting them know about my article reporting on The Silencing of Academic Researcher Wade Pfau by The Buy-and-Hold Mafia.

Set forth below is the text of the response I received from Robert Savickas, an Associate Professor of Finance at the George Washington University School of Business:

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Hi Rob,

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I looked at the article.  I thought that buy and hold had been challenged a long time ago and many academics don’t believe it.  I have actively traded myself (and daytraded) with relative success and so have some of my other “academic” colleagues.  The efficient market hypothesis (EMH) has also been challenged a bunch of times.  I have problems with both buy-and-hold and EMH myself, but for reasons other than what you mention.
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Also, the phrase ““For years, the investment industry has tried to scare clients into staying fully invested in the stock market at all times, no matter how high stocks go,” I  think is not quite accurate.  I think we often emphasize that it is important to buy low and sell high.  I always tell my students that even if you are a long-term investor and have decided your portfolio, nobody forces you to enter all the positions at once: you have to time the market and buy the stocks at their lows (technical analysis helps identify temporary lows and highs).  Same with exiting your positions; sell at the temporary highs.   I thought it was well known in academic and non-academic circles that you can’t buy without any regard for price…
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Robert
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I wrote back:

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Robert:

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Thanks much for your response.
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I certainly agree that Buy-and-Hold has been challenged and that many academics don’t believe in it. The question (in my mind) is whether they give sufficient voice to their doubts to protect the millions of middle-class people who have been led to believe that there is academic research supporting this strategy (there is not, but I have spoken to thousands of middle-class people who believe that there is).
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My personal concern is less with the bad investing results that follow from promotion of Buy-and-Hold and more with the economic crisis that came about as a result of the huge losses suffered by millions of investors and the loss of buying power we saw in our economic system as a result. We see articles on the internet about the economic crisis all the time and it has even led to political unrest in the form of the Tea Party and Occupy Wall Street movements. Wouldn’t this problem be solved if we just permitted (And even encouraged) honest posting about the 30 years of academic research (Shiller published his paper showing that valuations affect long-term returns in 1981) showing that a Buy-and-Hold strategy can never work in the long run? If investors knew that stocks offer a poor long-term value proposition once prices reach insanely dangerous levels, we would never see another bull market. Price would self-regulate because investors would sell at high prices and continue selling until prices returned to fair-market levels. If we never saw another bull market, we would never see another bear market or another one of the economic crises that inevitably follow in their wake. That works for me!
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Anyway, those are my thoughts. It helps me to hear what other smart and good people think about these matters. I am grateful for your willingness to send a few words my way.
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Please take good care.
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Rob

“I Know More About What Works in Stock Investing Than Most Experts in This Field Because I Abandoned Buy-and-Hold in August 2002, When Greaney Advanced His First Death Threat and Hundreds of Buy-and-Holders Cheered Him On.”

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

Did you come across as the expert you purported to be?

I’ll answer this one separately.

I don’t think that there can be such a thing as an investment “expert” today, Banned. We only started doing academic research on investing questions in a systematic way in the 1960s. So we are talking about a field with a history of about 50 years. We are still in the Pioneer days, when we are going to make lots of mistakes and track back and re-start and all that sort of thing. So I think it is dangerous for people to be taking too seriously the idea that they have developed some form of permanent “expertise.”

So I don’t really think of myself or anyone else as an expert. I don’t object if someone refers to me as an “expert” in an introduction because this is common practice in this field. If the question comes up in the discussion, I make the point I made in the paragraph above, that it would be best if investors appreciated that there is no such thing as an true investment expert in today’s world, the science is too young.

I am very proud of my accomplishments. I potentially saved millions of middle-class retirements by discovering the errors in the Old School SWR studies back in 2002. The discussions that followed from that discovery (“The Great Safe Withdrawal Rate Debate”) led us to all sorts of exciting places. I think it would be fair to describe Valuation-Informed Indexing as the first true research-based investing strategy (it obviously owes a great deal to the Buy-and-Hold pioneers). Nothing could be more exciting than the discovery I made with my friend Academic Researcher Wade Pfau that it is today possible for us to reduce the risk of stock investing by 70 percent by warning investors of the dangers of Buy-and-Hold strategies (dangers that we did not know about until Shiller published his revolutionary research in 1981).

Do I know more about what works in stock investing than any of the “experts” who advocate Buy-and-Hold strategies? I think that is certainly fair to say that that is so in a practical real-world sense. They know more about what is written in the textbooks. I know more about what works in the flesh-and-blood world. But not because I am smarter than my Buy-and-Hold friends! I know more because I abandoned Buy-and-Hold back in August 2002 (when Greaney advanced his first death threat and hundreds of Buy-and-Holders who saw him do it cheered him on). That told me that Buy-and-Hold causes those who follow it to become excessively emotional. So I have learned all sorts of amazing things about how stock investing works over the past 11 years that the Buy-and-Holders have closed themselves off from learning by virtue of their unwillingness to acknowledge the 30 years of peer-reviewed academic research showing that there is zero chance that a Buy-and-Hold strategy can ever work for a single long-term investor.

Do I want my Buy-and-Hold friends to join me in this amazing learning adventure? I do. Very, very, much. There’s nothing that would make me happier than to be working beside great and smart and good people like Jack Bogle and Bill Bernstein and Larry Swedroe and Scott Burns. Tell me what magic words I need to say to them to get them to drop the pose that they knew it all going back to the day they were born on Planet Earth, and I will say those magic words, Banned.

I am not working with these people today not because I am too good for them. I am not working with these people today because their puffed-up egos don’t permit them as of today to acknowledge that they got on the wrong track during the insane bull market and that we all become better informed about how stock investing works when we all work TOGETHER for the purpose of helping the people who look to us to provide effective guidance.

I love these guys, Banned.

Do they love me? That’s the question you should be asking.

Are they even able to swallow their pride enough to acknowledge that there’s a lot that they can learn from me? (I have certainly acknowledged on many occasions that I have learned a lot from them).

That’s where things stand today, Banned. There’s no issue on my end. The problem is with the Buy-and-Holders. The hand of kindness is extended to them. Can they work up the courage and grace to reach out and accept it before their investing advice brings on another stock crash and puts us in the Second Great Depression?

No, I am not an expert in the conventional meaning of that word. And, no, my good friend Jack Bogle is not one either. So Jack and I should be comparing notes, learning what we can from each other so that we can do a better job for the people who look to us to learn how to finance their retirement plans.

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

My warmest wishes to you and yours, Banned.

Rob

Valuation-Informed Indexing #136 — Wall Street Doesn’t Benefit From the Promotion of Buy-and-Hold

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I’ve posted Entry #136 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Wall Street Doesn’t Benefit from the Promotion of Buy-and-Hold.

Juicy Excerpt: It’s not so much that Wall Street wants people always to buy stocks. It’s that Buy-and-Hold possesses a powerful intuitive appeal, especially during bull markets. Valuation-Informed Indexing is the first true research-based strategy and there is now a mountain of evidence showing that it is superior to Buy-and-Hold in every possible way. But investors don’t take to it easily. So it is a hard sell. Wall Street wants to please its customers. So it pretends not to know about the mountain of research pointing the other way and continues to make the easy pitch for Buy-and-Hold.

The distinction is important. If Shiller’s investing ideas prove out, we are going to see another stock crash sometime over the next few years. Investors are going to be angry. They are going to be looking for people to blame for their losses. If the idea takes hold that Wall Street continued to push Buy-and-Hold for purely financial reasons, things could get ugly.  To the extent that it is possible to offer explanations for what has happened that will help to diffuse that anger, we should be doing that.

Beyond Buy-and-Hold #113: Buy-and-Hold Works Better — But Not At All Well — After the Passage of 30 Years

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I’ve posted Entry #113 to my weekly Beyond Buy-and-Hold column at the Out of Your Rut site. It’s called Buy-and-Hold Works Better — But Not At All Well — After the Passage of 30 Years.

Juicy Excerpt: You only get that 5 percent return at the end of 30 years if you refrain from selling any stocks during the time-period when your you are seeing five sixths of the accumulated wealth of a lifetime disappear into thin air. Can you do it? Can anyone do it?

I have my doubts. I just don’t think that humans are capable of taking that sort of hit. My guess is that fewer than one in ten Buy-and-Holders ends up sticking with his high stock allocations through an entire bull/bear cycle. So I view it as irresponsible for so many of the “experts” in this field to endorse Buy-and-Hold strategies.

Still, the numbers say what the numbers say. If you only look at the numbers, and ignore the question of whether it is possible for most investors to do what it takes for Buy-and-Hold to pay off in the long run, Buy-and-Hold can be said to “work” at the end of 30 years regardless of the valuation level that applies at the beginning of the 30 years.

Business Week Columnist Vivek Wadhwa Tweets a Link to My Article on the Silencing of Academic Researcher Wade Pfau

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Business Week Columnist Vivek Wadhwa has tweeted a link to my article on the silencing of Academic Researcher Wade Pfau.

Wadhwa has appointments at Duke, Stanford, Emory and Singularity University and writes columns for the Washington Post as well as for Business Week. I think it would be fair to say after this tweet that he is also a Hero to the Middle-Class Investor and an all-around good guy. His web site is here. His bio is here.

Vivek’s tweet reads: “Received worrisome e-mail from Rob Bennett. Warns of risk with Buy-and-Hold Investing. [Link to Wade Pfau Article] — I have no clue.” I sent a response tweet that reads: “Thanks for kindness of link to Wade Pfau article. We all should work together to get word out & bring to wonderful conclusion.”

Vivek has 31,787 followers. These are genuine followers (he follows only 195). Many of his followers are top-notch people. Looking at just the first few names, I saw Vanessa O’Connell of the Wall Street Journal, Christine Lagorio, an Executive Editor at Inc.com, and Charles Cooper, Executive News Editor at CNET.

Vivek learned of the Wade Pfau article as the result of my recent e-mail to him. He responded last night, saying that he felt that the content of the article was “outside of my field of knowledge” but that he was “glad to tweet a question asking if you are right” and thereby to “let others make up their minds.” He asked me what link I would like him to include in the tweet.

I responded this morning. I suggested that he link to the article re the silencing of Pfau by the Buy-and-Holders (A number of Buy-and-Holders threatened to send defamatory e-mails to Wade’s employer in an effort to get him fired from his job for the “crime” of having published research showing the dangers of Buy-and-Hold investing strategies and several big names in the field [including Vanguard Founder John Bogle] failed to take action against those advancing the threats, thereby implicitly encouraging them [I have sent Bogle four e-mails asking for his help with the matter]).

Vivek sent me an e-mail after posting the tweet that stated: “I tweeted a balanced message.” I responded with an e-mail saying: “Thanks a million. That’s perfect. Balance is good!” He wrote back: “Sure.”

The intimidation campaign against Wade came about as a result of a 10-year effort (successful so far!) to cover up the errors in the Old School safe withdrawal rate studies. I reported on the errors in a May 13, 2002, discussion-board post at the Motley Fool site. The author of one of the discredited studies responded by threatening to kill my wife and children if I continued to post honestly on the subject. I continued posting honestly and was banned from the site despite posts by hundreds of my fellow community members saying that the discussion of the how valuations affect retirement planning was the most exciting discussion ever held at that board. In the ten years since, the Goon posters have followed me to hundreds of web sites at which I have posted comments or guest blog entries, always posting abusively and only in extremely rare cases being disciplined in any way for doing so (in contrast, I have been banned from 15 sites at the demand of enraged Buy-and-Holders). Wade learned of my work as a result of my thousands of posts to the Bogleheads forum (before I was banned at that site) and said that he would like to work with me to develop research showing once and for all whether the historical return data supports the Valuation-Informed Indexing strategy (my suggested replacement for the Buy-and-Hold strategy) or not. We worked together for 16 months, exchanging hundreds of e-mails. Wade found that everything I had said checked out and expressed amazement that no earlier researcher had reported on these matters (all of my ideas follow logically from research published by Robert Shiller over 30 years ago). He concluded that Valuation-Informed Indexing has for the entire 140 years of historical data available to us provided investors with far higher returns than Buy-and-Hold while exposing them only to greatly reduced risks. “Yes, Virginia, Valuation-Informed Indexing works!” he said.

The The Big Picture Blog recently posted a lengthy article (“Buy-and-Hold Is Dead — And Never Worked in the First Place”) telling the story of my ten years of work developing the Valuation-Informed Indexing concept with the help of the hundreds of my fellow community members who dared to “cross” the Buy-and-Holders by engaging in original research or discussing the implications of research already published (the VII concept is rooted in the 1981 finding of Yale University Economics Professor Robert Shiller that valuations affect long-term returns — Shiller has said in published interviews that he has never dared to tell us all that he knows about stock investing because he fears that he would be branded “unprofessional” if he were to do so). Site Owner Barry Ritholtz separately linked to an article of mine titled Why Buy-and-Holder Investing Can Never Work.

 

Financial Highway Article #14 — Three Phony Criticisms of Buy-and-Hold

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I’ve posted Entry #14 to my monthly column on Valuation-Informed Indexing at the Financial Highway site. It’s called Three Phony Criticisms of Buy-and-Hold.

Juicy Excerpt: I’m a critic of Buy-and-Hold. I believe that investors MUST change their stock allocations in response to big valuation shifts to have any hope whatsoever of keeping their risk profile roughly constant. I don’t believe that is is possible that a Buy-and-Hold strategy could ever work in the long term.

That said, I believe that the Buy-and-Holders got a lot more right than they got wrong. Since the 2008 price crash it’s become fashionable to slam Buy-and-Hold for all sorts of reasons that I view as phony. It would be a terrible thing for investors to lose confidence in all of the many investing insights put forward by the Buy-and-Holders that really have stood up to scrutiny. This column will examine three criticisms that I view as unfounded and explain why I think you should hold to the Buy-and-Hold line on the points under question.

The Big Picture Blog Reports on Wade Pfau’s Research Showing the Superiority of Valuation-Informed Indexing Over Buy-and-Hold

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The Big Picture blog early this morning posted an article reporting on Academic Researcher Wade Pfau’s research showing the superiority of Valuation-Informed Indexing over Buy-and-Hold. The report is titled: Buy-and-Hold is Dead (and Never Worked in the First Place).

Juicy Excerpt: Attorney, tax expert and financial writer Rob Bennett told us…”The thing that I have done that no one before me has done is to explain the practical IMPLICATIONS of Shiller’s findings. Even Shiller has never done this…. Shiller and many others have been keeping their mouths shut about the practical implications of his theory for three decades now.” Bennett’s website provides endorsements for his stock timing theories and argues that the prevailing Buy-and-Hold dogma helped to cause the financial crisis.

After seeing the report, I sent the following words to Wade:

Wade:

I hope things have been going well with you. I think of you often. I miss talking things over with you!

I am of course continuing my work to spread the word re your breakthrough research on Valuation-Informed Indexing and on the true cause of the economic crisis. An article was posted early this morning at The Big Picture blog that reports on the essential points:

http://www.ritholtz.com/blog/2012/11/is-there-a-better-way-to-allocate-stocks-thasn-buy-hold/

I’d be grateful to know your thoughts. My thought is — You need to get to work finding a journal for the follow-up research on VII that you told me about! I noted in my first comment on the discussion thread for the article (the comment has not yet appeared at the site) that you would be thrilled to get back to work on that paper if you were given some encouragement. Please consider these words of mine as encouragement that you direct some energies to this important project! Soon! Today! Yesterday!

I also wanted to share with you the words that I sent to the author of the article when he showed me a draft version yesterday night. Thoughts of your good work (and the good work of John Walter Russell and John Bogle and Robert Shiller and so many others) came flooding into my brain when I read the words of the article. Here is the text of my e-mail:

George:

If you have followed Bob Dylan’s career, you know that he has always been a smart-aleck in his dealings with the press. He gave a clue why in some words he put forward after he wrote the first volume of his autobiography and read the reviews of it. He said that those reviews brought him to tears. Most of the people who reviewed his records were not musicians and thus were not able to appreciate the struggles he was overcoming in producing the records. Many of the people who reviewed his autobiography had written books of their own and thus “got” what he was trying to do. The reviews of his autobiography were the first reviews that he fully respected.

That’s the feeling I experience reading your words. What’s different about your write-up is that it shows that you appreciate the scope and significance of the project. That’s the thing that very few others get. It almost brings me to tears to see that after ten years of work someone is seeing how big a deal this is and helping me get the word out to the millions of people who need to hear the message.

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I am extremely grateful. Please let me know if there is ever anything i can do to help you or your readers in return. I have worked for this sort of write-up for a long time. I am humbled to see the draft. I will work hard to merit the trust you have placed in me by giving these ideas the serious consideration that I have long believed they merit.
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I believe that you are moving the ball forward in a significant way. You focused on the right things. The people who have tried to hold me back are good people who want to do good work. You didn’t focus on the negatives, you focused on the positives. I believe that that is the approach that people need to take to help those people see that we are all on the same side re these matters. An advance in our understanding of how stock investing works helps us all live richer lives.
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When your article appears, I will forward a link to it to Wade. I have hopes that reading your words will melt his heart. It may take some additional time but somewhere down the road a piece I believe that either your words or words that follow from your decision to release your words will melt John Bogle’s heart.
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You have filled my heart with good cheer on this special Sunday night.
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Thank you.
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Rob

You of course have also done very important work, my old friend. Please take a bow!

I will ask my boys to say a prayer for you. My understanding is that God listens with special care to the prayers of children.

And, as John Walter Russell used to regularly advise us all — Have fun!

Rob

Addendum:  The article now appears at the ZeroHedge.com site and at the WashingtonsBlog.com site.  The Financial Times links to the article at its “Alphaville/Further Reading” section, referring to Valuation-Informed Indexing as “An Alternative to Buy-and-Hold.”