A Rich Life

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

Academic Researcher Silenced by Threats to Get Him Fired From His Job After Showing Dangers of Buy-and-Hold Investing Strategies

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I’ve posted an article to the “The Buy-and-Hold Crisis” section of the site titled Academic Researcher Silenced by Threats to Get Him Fired From His Job After Showing Dangers of Buy-and-Hold Investing Strategies.

Juicy Excerpt: The question this article addresses itself to is — How do they pull it off?

It’s not hard to understand why financial planners would want to encourage their clients to invest heavily in stocks — most of the money made in this field is made through the selling of stocks and all industries want their customers to believe that the product they are selling is a good buy at any possible price. But how has Wall Street managed to convince millions of middle-class people to throw away large portions of their retirement money through a misguided belief in this obvious fiction?

Buy-and-Hold advocates argue that the academic research on stock investing supports their claims that market timing doesn’t work or isn’t required for long-term success. Academic researchers are independent actors. How have the researchers been persuaded to keep quiet about what the entire historical record so clearly shows to be the case, that long-term market timing (changing your stock allocation in response to big swings in valuations with the understanding that you may not see benefits for doing so for as long as 10 years) always provides investors with much higher long-term returns at greatly reduced risk?

It’s done through the application of brutal intimidation tactics aimed at those who stray from support for the company line. Other researchers with thoughts of telling the truth about stock investing see what has happened to their peers, learn the lesson that the industry needs them to learn for their Buy-and-Hold marketing slogans to remain effective, and self-censor their research.

Rob Bennett’s Responses to Academic Researcher Wade Pfau: #18 — The Problem Is That Not One Buy-and-Holder Today Has Confidence in Buy-and-Hold

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I would be embarrassed.

If someone on “my side” put forward a death threat, I would cringe. If someone on “my side” engaged in defamation, I would disassociate myself from the comments. If someone on “my side” sought unjustified board bannings, I would object if the site administrator went along. If someone on “my side” threatened to get an academic researcher fired from his job, I would rush to put up comments saying that I want to know what that academic researcher really believes, that silencing the researchers makes it impossible for any of us to trust what any of the researchers say from that point forward.

It’s a good idea to learn how to reduce your message to a few words, to figure out how you would make your pitch if you were trying to convince someone during the 30 seconds you would share in an elevator. So I am going to keep this one short.

Wade Pfau published research showing that Valuation-Informed Indexing has provided far greater returns than Buy-and-Hold at greatly reduced risk for the entire 140 years now in the historical record. The research of this Ph.D. from Princeton is the most important research ever published in this field. We all should be thanking him. We all should be exploring his ideas. We all should be making the shift to Valuation-Informed Indexing and encouraging our friends and neighbors and-co-workers to do the same.

John Bogle isn’t doing that. Bill Bernstein isn’t doing that. Scott Burns isn’t doing that. Jonathan Clements isn’t doing that. Larry Swedroe isn’t doing that.

They don’t believe.

It’s that simple.

If they believed, they would react differently to the news of the silencing of a great researcher. There are two legitimate responses here. One is to make the switch from Buy-and-Hold to Valuation-Informed Indexing. One is to make the case for why Buy-and-Hold remains a legitimate strategy despite the publication of the powerful new research findings.

Threatening to get the researcher fired from his job is not a legitimate response. Creating a “hostile atmosphere” (Wade’s term) for the researcher is not a legitimate response. Ignoring the research is not a legitimate response. Ignoring the story of the silencing of the researcher is not a legitimate response.

The Buy-and-Holders do not have confidence in their strategy. That’s 11 words. That’s the story here.

They follow it. There is a mountain of evidence showing that they follow it. They are not lying about that part.

But they don’t believe in it. Not deep in their hearts.

The only question that remains is when they will work up the courage to say that publicly and thereby let the effort to learn what does work to proceed.

I hope that happens soon. I have a funny hunch that deep in their hearts every last one of the Buy-and-Holders hopes the same thing. I promise to continue doing my part to bring them to a point where they feel able to say The Three Magic words and thereby to see their long-deferred dream of promoting a smart, simple, safe and truly research-backed strategy for millions of middle-class investors come true.

Hate is not a sound long-term investing strategy. Love is the answer. I know that much for sure.

Rob Bennett’s Responses to Academic Researcher Wade Pfau: #15 — No Apologies?

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Where are the apologies?

I’ve generated hundreds of important investing insights in my podcasts and weekly columns and articles and discussion-board comments of the past 10 years. The Buy-and-Hold Machine is not happy to see me telling people about those insights and yet has not been able to find any flaws in the academic research that supports them. Let’s say that the insights are all baloney. Let’s say they are all wrongheaded. All but one. The first one cannot be wrongheaded because even The Buy-and-Hold Machine now (tens years later) agrees that that one is on point. The Old School safe-withdrawal-rate studies got the numbers that millions of middle-class people used to plan their retirements wildly wrong. There’s no argument anymore than I am off base re that one. We have achieved a consensus at least re that one.

So where are the apologies?

I am owed an apology re that one even if every other insight I have generated is baloney, no? It was no small insight. One of the primary reasons why people invest in stocks is to finance their retirements. The Old School studies didn’t get the retirement numbers a little wrong, they got them wildly wrong. A failed retirement is a serious life setback. I helped everyone out — or at least I tried to help everyone out — when I dared (it took courage) to step forward and tell the truth about safe withdrawal rates. I helped — or tried to help — the retirees who would have suffered failed retirements if I didn’t work up the courage to take on The Machine (the retirees may suffer failed retirements all the same because of the ten-year cover-up but I also spoke out in the strongest possible terms against the cover-up). And I helped the “experts” in this field who were leading the cover-up. They have incurred hundreds of billions of dollars in potential legal liabilities. I did all I could to help them avoid those liabilities. No?

So where are the apologies?

Where are the expressions of gratitude? John Bogle has not sent me an e-mail saying “Thanks, man!” Huh? What’s the problem here?

Where are the offers to help me spread my ideas far and wide?

Where are the links to my web site?

Where are the articles demanding that the Goons drop their Campaign of Terror against our board and blog communities, including a number of communities that I built pretty much with my bare hands?

Is there a problem?

There is a problem.

We are ashamed.

All of us.

We need to get over it.

Do you know why the Buy-and-Holders act like they know it all? A number of people who agree with my general take have said that it is because there is money in it. What industry wouldn’t want people to believe that the product it offers for sale is worth buying at any price imaginable? That’s what Buy-and-Hold says, is it not? When the stock-selling experts tell us not to time the market, what they are really saying is not to take price into consideration when buying stocks. Just buy stocks! Lots of them! Price be darned! As Church Lady might observe, “How convenient!”

I certainly agree that money-making comes into play here. I do NOT believe that this is the primary problem, however. I think that some of my friends may at times fall into the trap of being a little too cynical.

Say that we were to open up every internet board and blog to the discussion of Valuation-Informed Indexing. Say that the idea spread like wildfire. Say that one year from now 90 percent of investors were Valuation-Informed Indexers. Would the profits of The Stock-Selling Industry go up or down?

They would go up. Investors who understand how stock investing works have confidence in their financial futures. People who have confidence in their financial futures buy stuff. If most investors became Valuation-Informed Indexers, the fears that keeping consumers from spending and extending and worsening our economic crisis would be overcome. We would see an economic boom. And investors who understand how stock investing works buy more stocks than investors who are intimidated by the subject. Valuation-Informed Indexing is common-sense investing. If the experts got behind the idea, more people than ever before would buy stocks. The transition from Buy-and-Hold to Valuation-Informed Indexing would be a boon for millions of middle-class investors and for the industry that advises them both.

So this is not really a money thing. Those who participated in the ten-year cover-up of the errors in the Old School SWR studies are worried about lawsuits. To that extent it’s a money thing. But the opposition to honest posting came long before lawsuits were a big concern. The core problem here is something different. If we are going to overcome this mysterious force that is holding us back from an economic boom and that is threatening to pull us into the Second Great Depression, we need to develop a true understanding of what it is.

What is really at the core of all this craziness?

On the surface, it appears to be arrogance. The Buy-and-Holders don’t admit mistakes. They don’t ever, ever, ever, ever, ever admit mistakes.

But what’s behind the arrogance? Why are they like this?

Say that you were a doctor and that you thought that cutting someone open might help them with their problem but you were not sure. What would you do? A lot of us would not be able to cut unless we were sure. So we would try to convince ourselves that we were sure. Then, if there were a bad result and someone questioned our decision, we would become angry and defensive. The person questioning the choice is giving voice to our own doubts. So their words really hurt. And it becomes important to us to silence that voice.

That’s why the Buy-and-Holders hate me. It’s not that I am saying something they don’t think makes sense. If they thought that what I said doesn’t make sense, it wouldn’t bother them. They would laugh it off. They wonder themselves if what I am saying is right and, when I give voice to their doubts, it makes them go crazy. The want me to shut up. And I won’t. Not because I want to hurt them. Because I believe that they are on the wrong track and that deep in their hearts they want to be on the right track. So I am doing for them what they would want me to do for them if they were able to think straight about these issues.

Why can’t the doctor acknowledge that he really doesn’t know if cutting is a good idea or not? Because cutting is a big deal. No one wants to be cut for no good reason. You can’t just go ahead and cut unless you are sure. Unfortunately, the humans are born ignorant. We don’t it all. Sometimes we are guessing. That’s sometimes so even when we are making decisions as important as whether to cut another human body or not.

If a perfect world, the investing experts could continue doing studies until they learned everything there is to know and only then offer any advice to investors. We don’t live in an ideal world. In the world in which we live in people need investing advice TODAY. We don’t have perfect information today. So we might mess up. But we cannot take a pass. We have to recommend something.

The Buy-and-Holders did the best they could given the limited extent of their knowledge when they designed the Buy-and-Hold Model. But, since the matter they were advising people on (what to do with their retirement money) was so important, they acted like they were a lot more confident than they were. And, because they cannot stand the thought of having caused the great human misery they caused if they really are wrong (as they now suspect), they become highly defensive when challenged. They cannot admit they were wrong. They feel that their lives will have been wasted if they admit that.

I don’t say that the investing experts did nothing wrong. What I say is that we all did wrong too. We should have made clear to them that we don’t expect them to have all the answers. We never should have started calling John Bogle “Saint Jack.” That put him in a terrible spot. That made it that much harder for him to acknowledge his mistakes. He feels that he needs to live up to the exalted view we have of him. We would have been better friends if we had made it a practice to ask hard questions of him, to always challenge him to learn more and to sharper his ideas over time.

So it is not only John Bogle who today is feeling shame. All the people who followed John Bogle’s ideas are feeling shame too. That’s most of us.

The shame makes us defensive and our defensiveness causes the problem to grow worse and the problem growing worse makes us feel more shame. We’re caught in a trap of self-recrimination.

I believe that the next price crash will help. The next crash will scare us more than did the first one. People who become very scared give up their pride in desperation. If we give up our pride, we will open our minds to accepting ideas that show that we got things wrong in earlier times. That sort of thing doesn’t seem like such a big deal when things reach a point where your way of life is at risk.

We need to hurt. We need to suffer. It’s the only way past the defensiveness and the anger and the shame that keeps us in ignorance today.

We all want the same things. I did not develop the Valuation-Informed Indexing concept by myself. Hundreds of people helped me. Including lots of Buy-and-Holders. Including John Bogle.

I wish that John Bogle and my other Buy-and-Hold friends could see that and that it could help them feel less ashamed of the mistakes they have made. If they felt less shame, they would find it easy to thank me. And I would find it easy to shake their hands and say “don’t worry about it” and begin working together with my Buy-and-Hold friends to rebuild our broken economy.

Rob Bennett Responds to Academic Researcher Wade Pfau: #7 — Will the Power and Wealth of The Stock-Selling Industry Be Employed to Crush Me Through Lawsuits?

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This one addresses a sensitive issue that is often wondered about by people thinking of endorsing Valuation-Informed Indexing but rarely mentioned aloud. Wade never told me that he was afraid of getting sued. I don’t think he was. But he was clearly afraid of how “crossing” the industry leaders could do harm to his hopes for career advancement. What happens to those who ignore the friendly advice to back off? Do we get sued?

People worry about this. Here are some words from a blogger who is sympathetic to my investing ideas: “As your promotion of Valuation-Informed Indexing gathers steam–and I fully expect it will–you have to be prepared for The Backlash. Every concept has entrenched interests, and they’ll fight ugly if they feel threatened.  What you have to be careful about is that you don’t provide fodder for future lawsuits.  When you’re a voice in the woods, no one is paying much attention to what you say.  But when your ideas gain acceptance, the technocrats (hitman in business suits working for the entrenched interests) will be out scouring the countryside (and the world wide web) for anything they can go after you for legally. Legal action is the last preserve of the doomed, and they will use it as a last desperate attempt to stay afloat. Attack ideas, and you’ll invite debate; attack people, and you’ll invite lawsuits.  I’m not saying you’re attacking people, but you want to avoid the appearance that you are.  The web may be the bastion of free ideas, but it’s also a rich source of legal evidence.”

No one else has phrased things quite as directly and darkly as that.  But others have expressed concerns to me that they don’t want to call out the Goons on their tactics because they may have friends in high places and you never know.

I’ve described Mel Lindauer and John Greaney and those who post in “defense” of their terrorist tactics as “Goons.” I’ve said that Wade Pfau engaged in an act of financial fraud when he said that there is no need for the Old School safe-withdrawal-rate studies to be corrected. I’ve characterized John Bogle’s failure to help us with the Lindauer matter as “shameful.” So I’ve named some names. Could lawsuits be directed at me?

I don’t think it is likely. But I don’t rule it out. I do think it is possible.

I understand the issue about naming names. When it is possible to avoid doing that, it’s better to avoid doing that. But I am a journalist and this is an important story (I view it as the most important economic and political story of our day). Journalists have to name some names to tell the full story they are telling. The Goons didn’t threaten just anyone with the loss of a job. They threatened an academic researcher who has published research showing the dangers of Buy-and-Hold. They saw a threat and they went after the guy who posed the threat. If we cannot trust academic researchers to tell us the straight story about stock investing, we are in big trouble. This is a public policy issue and the names of the persons making the threats and being threatened are part of it.

In my pre-investing days I was described as a “teddy-bear-type poster.” I am by nature a person who avoids conflict. So I am not somebody who likes the nastiness in which my efforts to tell people about the realities of stock investing have become embroiled. But that’s the story, isn’t it? No one has been able to identify any flaws in the Valuation-Informed Indexing concept. The problem for ten years has been that people who gained fame or money promoting Buy-and-Hold want the contender to the throne to go away. As a society, we cannot let that happen. We need to get the word out to middle-class investors re the first true research-based strategy. To the extent that that absolutely requires the telling of some unpleasant truths, we need to be willing to go there. We should never spend more time there than necessary. But we need to go there when there is no other way to get the job done.

But there is a risk of lawsuits when you step on big toes. And the toes of the Big Shots in The Stock-Selling Industry are some of the biggest toes around. So, even though there is no legitimate case against me, there is a risk here. I have already been denied the ability to make a living for 10 years by the Goons and the web sites that have permitted their use of brutally abusive tactics. It is possible that leaders in this field will try to crush me financially with lawsuits. It is possible they will succeed.

I don’t have any choice but to proceed to make the case for the first true research-based approach. Shiller’s research shows that our free-market economy cannot long stand unless we make the change. We need to move ahead. Of course, I am not the only one who is scared about what will happen to me if I do the right thing. Lots of people who in other circumstances would be helping me have refrained from doing so because they are scared too. Shiller published his research in 1981. We wouldn’t be still fighting these battles in 2012 if there were not a lot of people who are very scared to give public voice to their true beliefs on how stock investing works.

That’s both a discouraging thought and an encouraging thought.

It’s discouraging because it is the decision of many good and smart people to silence themselves that has caused this problem. In ordinary circumstances, the idea that anyone could be financially ruined because he presented the world with a superior investing strategy would be outlandish. Valuation-Informed Indexing lets people earn far higher returns at greatly reduced risk. It shows people how to retire years earlier. It takes most of the emotion out of the investing experience. If we could publicize this approach, we could greatly stabilize the economy. How could there be even one person who could object to all this, much less think of bringing lawsuits to stop it?

The problem is that there is so much money in this field. Where there is money, people become associated with particular ways to bring in money. And, when those ways work, the people who receive the money don’t like the idea of those ways being challenged. Buy-and-Hold is a gravely flawed strategy. It has caused more human misery than any earlier idea in the history of personal finance. But it has brought a lot of wealth to the people who have promoted it. Those people don’t view the question of whether Buy-and-Hold or Valuation-Informed Indexing is superior as an interesting intellectual puzzle. They see my efforts to get the word out to middle-class people re what really works in the long run as a threat to their gravy train. They don’t like me. And there’s not much they would not do to stop me.

But how much can they do?

I see risks in lawsuits for those trying to keep people from learning about the dangers of Buy-and-Hold.

The biggest risk is that the filing of lawsuits will generate publicity. I have a lot of material at this web site documenting the research and the many expert statements that have been made supporting Valuation-Informed Indexing. The Buy-and-Holders don’t want that getting out. Bringing lawsuits might start a chain of events that would lead to it getting out.

The other thing is that lawsuits often proceed slowly. Buy-and-Hold was much more popular before the price crash than it is today. It is much more popular today than it will be after the next price crash. It might be that there will be a lot of people angry at the Buy-and-Holders after the next crash. Things might not turn out well for the Buy-and-Holders if they bring lawsuits today that are not resolved until after the next crash. And there’s no way of knowing when that next crash will come.

Yet another factor is that there are today a lot of experts in this field who are anxious to move on to the post-Buy-and-Hold Era. Lots of people know that Buy-and-Hold doesn’t work in the long run. They see opportunities to establish themselves as experts in whatever strategies will become popular next. These people may help lots of investors to learn how they were fooled by the marketing tricks that were used to sell Buy-and-Hold. That could make lawsuits problematic.

My bottom line on this matter is that I see no way to avoid moving forward. The Goons have made clear that there is zero chance that they will let me post at any investing board or blog without harassing me until I agree to post dishonestly on safe withdrawal rates (they want me to say that there is no need for the discredited studies to be corrected). If I refuse to go along with the Goons, I might get sued. But what if I DO go along? I might get sued in that event too! It would be an act of financial fraud for me to say that I believe that the discredited retirement studies don’t need to be corrected when I obviously do believe that they need to be corrected. Couldn’t someone whose retirement failed because I agreed as part of a deal with the Goons not to post honestly sue me to recover his losses? It sure seems so to me.

This possibility reveals the complete craziness of our current circumstances. Buy-and-Hold was discredited by the academic research 30 years ago and yet its advocates continue to this day to promote it as a research-based strategy. That’s dishonest. Engaging in dishonesty about a money-related matter always brings with it the risk of being sued. But being honest is risky too so long as The Buy-and-Hold Machine possesses enough power to silence those trying to get the word out about the last 30 years of research. Hoo boy!

My view is that our problem is a political problem, not just an economic problem. If every investing expert who has advocated Buy-and-Hold were sued for the damages he caused to millions of investors, the large group sued would collectively not have enough money to cover the bill. My guess is that we are going to need legislation to work out these problems. Significant sums of money will be collected from the industry as partial payment to those who have been done financial harm. But we won’t be able as a society to offer full compensation because it is just not possible to do so. You’ve heard of how some banks are too big to fail? Perhaps it could be said that The Stock-Selling Industry is today too unethical to be held accountable for the results of its huge act of collective fraud.

It depresses me to talk about this aspect of the question. My guess is that it depresses you to hear about it.

Every time I start to feel down, I try to focus on the positive side of the story. We are the most blessed group of investors who ever lived. Valuation-Informed Indexing is going to change all our lives for the better in many important ways. All the ugly aspects of the story are going to be forgotten in a short amount of time while the life-affirming parts will be enriching all our lives for many years to come.

And please understand that the people who I am worried today may sue me are heroes of this story for what they did on the substantive side in the days when it really did look like Buy-and-Hold was the real thing. I need to act tough when the Goons come around because Goons don’t respond positively to polite behavior. But as a society we need healing. We don’t get healing by hating those who have attacked us. We get healing by reaching out and trying to understand where they are coming from. The way I sometimes put it is that we need to be honest up to the point at which it becomes unloving and we need to be loving up to the point at which it becomes dishonest.

I might get sued by my friends (I am not being sarcastic here) in The Stock-Selling Industry. But the full truth is that I think of many of those people as heroes. If they don’t sue me or if they try to sue me and fail, I am going to have a blast working with my smart and good Buy-and-Hold friends to rebuild our broken economy and to spread the word far and wide about what really works in stock investing.

Pray for me! And please pray for Bogle and all the others too! We are all in this together. We all are fighting for the same things in the end. There’s plenty of credit it go around.

Don’t sue me, Jack! I love you, man!

 

Rob Bennett to Academic Researcher Wade Pfau: “People Cannot Live In This Sort of Dishonesty Forever. What We Are Going Through Is a Temporary State. It Will Change After the Next Crash. Then Things Will Be Flipped. There Will Be Lots of Angry People Demanding the Heads of Those Who Failed to Speak Up And I Will Be the One Asking for Mercy and Asking People to Understand the Pressures That People In This Field Faced.”

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Yesterday’s blog entry reported on an e-mail sent to me by Academic Researcher Wade Pfau on April 5, 2012. Wade sent a folow-up e-mail later the same day.

He said: “Coincidentally the article stemming from that January 2011 blog post was published today. I’m attaching it and you can find your name on page 12 of the PDF. So please take it easy and don’t act like I’m an enemy of you or anyone because I don’t agree with 100% of your views.

Here is the link for the article:

http://dx.doi.org/10.1080/09603107.2011.648317

I responded the next morning. The text of my response is set forth below.

Wade:

I am of course grateful for the mention in the paper. Thank you.

I wish that you could read the paragraph that makes the mention through my eyes. You thank the Bogleheads, which is appropriate. And you thank Rob Bennett, which is appropriate. But there is something
horribly wrong being conveyed with those words.

I am a Boglehead, Wade!

The way it should be is that, when you are thanking the Bogleheads, you are thanking me because I am one of the leading voices in that community. I am not saying that you should have taken on that question in that paragraph. That obviously is not the place for it. But the idea that there is some distance between the Bogleheads concept and the Rob Bennett concept is the problem that is holding us all back .

You of course ran into the same thing. You posted some wonderful research at Bogleheads and Mel Lindauer suggested you had doctored the results. You came back at him in a firm way. That was one of your finer moments. That’s what we need. We need people speaking up to that segment of the Bogleheads community that opposes integration with those who accept and explore the message of the last 30 years of research.

We cannot have two camps. Wade. We can of course have disagreements within a single camp. That is healthy and to be expected. But we cannot have two camps. The same research applies for everyone. Investing works in the same way for everyone. Everyone must favor learning and therefore everyone must favor permitting all voices to be heard.

This is why it is so important that the Old School SWR studies be corrected. A big part of it is that we don’t want to see millions of failed retirements. We don’t want to be dishonest to our customers, the people who make use
of the research. But another very important consideration is that we don’t want to be dishonest with OURSELVES. Mistakes are a wonderful thing. They bring on learning experiences. Mistakes that are covered up do not bring on learning experiences. They bring on rigidity. Our participation in cover-ups undermine all the good work we do.

You didn’t create this problem. I obviously understand that. But you are part of it whether you like the idea or not and whether you think that is fair or not. Every single person working in this field today is affected by this problem. The work of each and every one of us is affected. How we deal with this problem determines to what extent the implications of our work can be explored and to what extent our findings can be heard and put to good use.

You have a part to play. I do too. My job is to REPORT the story. It’s an important job. I take pride in it. I cannot yield to pressure to perform my job dishonestly.

It is dishonest not to correct a study that gets the numbers that people use to plan their retirements wrong, Wade. That is not  a controversial statement. It is an OBVIOUSLY true statement. The strange thing is that you don’t hear lots of people saying that today, only me. That’s exceedingly odd. But the oddness of our circumstances does not change the objective reality. The Old School studies must be corrected and we must make an effort to learn from the mistakes that caused them.

That’s how we achieve healing. That’s how we bring everyone together. That’s how we learn how to interact with warmth and kindness and good cheer and good humor. That’s how we become able to feel good about our futures again and about the work we all do.

If I were to say that it doesn’t matter much whether Bill Bengen corrects his study or not, I would be dissing Bill Bengen. I would be saying that his work doesn’t matter much or that I have such a low opinion of his ethical standards that I never expected him to be able to adhere to the most basic social norms. I’ve obviously never said such a thing about Bill and I obviously never will.

I would have been saying the same sort of thing about you if I reacted any other way to your statement that it was “harsh” of me to insist that Bill correct his study. I’ve obviously never said such a thing about you and I obviously never will.

This is a people business. People cannot live in this sort of dishonesty forever. What we are going through is a temporary state. It will change after the next crash. Then things will be flipped. There will be lots of angry people demanding the heads of those who failed to speak up and I will be the one asking for mercy and asking people to understand the pressures that people in this field faced and all this sort of thing.

Everyone working in this field today wants to fix this problem,  Wade. Even the Goons want to fix it. They obviously won’t say so in direct words. But there is a part of them that wants to fix it. I talk to them every day. I know.

We cannot fix it in a day. I understand that. We need to be making consistent, measurable progress. We can’t settle for less than that. We need to work up enough courage to be able to insure that at least that much is being achieved at all times.

I am a Boglehead, Wade. If you have gotten in the habit of thinking otherwise, that’s a problem. It’s a trick that the Goons have played on you. We are all working toward the same goal and that needs to come through. This is your problem. Not
just yours. But it is the problem of everyone who works in this field and you are such a one.

I am always going to have the hand of kindness outstretched and I am always going to be willing to do whatever I can do to get things back on the right track. I am never going to be willing to post dishonestly on safe withdrawal rates. It is
an insane thing that pressures were ever exerted on me (or you or anyone else) to do such a thing.

I wish you all the best, my man. I am always available to talk over any aspect of this with you or with anyone else who sees opportunities to take things to a better place.

Rob

Rob Bennett to Academic Researcher Wade Pfau: “I Strongly Believe That There Are Things You Must Do and Things You Must Not Do to Protect Your Reputation As An Ethical Person. I Believe Today That There Is Serious Reason to Question Whether You Have Managed to Stay on the Right Side of the Line…. Are You Insane, Man? Please Think!”

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Yesterday’s blog entry reported on an e-mail that I sent to Academic Researcher Wade Pfau on January 1, 2012. My next e-mail to Wade was dated April 5, 2012, and was titled “Concerns Re You Going to the Dark Side.” The text is set forth below.

Wade:

I hope things are going well with you.

This e-mail will not be a pleasant one to write (or to read). I don’t think I have any choice but to write it, given recent developments.

Before I start, I want to state the obvious preface. I have great feelings of respect and affection for you personally and I admire your research work probably more than anyone else alive on Planet Earth today. In ordinary circumstances, that would be the basis for a wonderful relationship. As you know, there have been things that stood in the way of that since our first communications. Those obstacles have always saddened me. My strong sense is that the problem side of the relationship has grown much worse since your postings at my blog re whether Bill Bengen should correct the errors in his SWR study. The purpose of this e-mail is to (1) attempt to confirm whether that is indeed the case or not; and (2) get some things off my chest that I need to get off my chest to fell that I have always dealt with you in good faith.

You are of course aware that there has been an organized effort on the internet to destroy my reputation which has been led by Mel Lindauer and John Greaney  and which has made it impossible for me to earn a living for 10 years now. I believe you know that I plan to bring lawsuits against the sites that have permitted the Lindauerheads and the Greaney Goons to engage in defamation and death threats and other tactics to block numerous board and blog communities from learning what they need to learn what the last 30 years of academic research says about safe withdrawal rates and other important investment-relarted topics.

I believe that we all have a responsibility as part of the ethical demands of our respective professions to speak up when we see this sort of behavior. I have of course spoken up. You have spoken up on a few occasions in small ways but generally have kept quiet re this aspect of things. It’s not easy to say where precisely the line should be drawn re speaking up or not speaking up. My problems are of course not your problems and I of course do not expect you to feel as  great a concern re this aspect of the question as I feel since I am directly involved. That said, I strongly believe that there are things you must do and things you must not do to protect your reputation as an ethical person. I believe today that there is serious reason to question whether you have managed to remain on the right side of the line.

I was questioned the other day by one of the Goons as to whether we were still in e-mail communication. My answer was that I presumed we were. I don’t recall us having a back-and-forth discussion since the day you posted on the Bengen blog post. My recollection is that I sent you a copy of an e-mail that I sent to a visitor at my site because he referenced you in the e-mail and I wanted you to see both his words and my words. I did not receive a response to you re that e-mail but I did not see that as being a big deal.

Today, I was communicating with another financial blogger and wanted to send him a link to the blog post in which you explored Valuation-Informed Indexing and found that it beat Buy-and-Hold in 102 of 110 of the rolling 30-year time-periods in the historical record. As you obviously know, this post of yours was a big help to me in trying to overcome the Campaign of Terror against me and the many board communities in which numerous community members have expressed a desire that honest posting on SWRs and other valuation-related topics be permitted. The goal of the Internet Sewer Rats has been to persuade my potential readers and customers that I have not done important work and your mention of my name in a post that shows that I was right all along made it impossible for them to continue to maintain that position.

You have removed my name from the post. Why?

You of course have a right to re-write posts. In this case, however, the action is an exceedingly odd one. You have been attacked by Lindauer yourself. You have acknowledged in posts that Drip Guy has sent you e-mails and you have changed positions you have taken in discussions at the Bogleheads board as a response to his threats. When you contacted the Trinity authors about correcting the errors in their SWR study, the Greaney Goons put up posts threatening to get
you fired from your job if you followed through and you then retreated from your position after letting me know that you were indeed concerned that you might lose your job as a result of their actions. We of course both know that the Sewer Rats have employed similar tactics in numerous other cases.

I believe you are making a huge mistake, Wade.

Please don’t hear that as a threat. I hope you will hear it as a friend speaking to a friend. I said similar words to Greaney 10 years ago and he is where he is today because he ignored those words (Greaney was my personal friend in earlier times). I said similar words to Lindauer. It breaks my heart to see another one of my friends take this horrible path. Are you insane, man? Please think!

I am a journalist, Wade. My job is to tell this story in as honest and as complete and balanced way possible. I take the responsibilities of my profession seriously and I will honor them. I WILL let personal friendships influence me (I have done
this with Greaney on many occasions). I think it would be inhuman of me not to do so. But I WILL also honor my responsibilities to my readers.

There are millions of middle-class people who have been done great harm by this economic crisis. They need to know the story here. The hardest question for them to understand is — Given that the academic research has shown for 30 years that Buy-and-Hold can never work for any long-term investor, why are there still people today advocating it? I need to tell BOTH sides of that story. That’s my job.

My strong hunch is that you would prefer to stick to the research and keep away from all this ugly junk. Guess what? Every single one of us feels the same way. The full reality here is that the reason your research has not received the attention it merits (I understand that you have received a great deal of attention and that that attention is fully deserved) is because people cannot come to terms with the ugly, emotional side of all this. If our free market economy is to survive for much longer into the future, we all need to work up the courage to deal with that side of things. We need to do so with love, to be sure. But we need to do so with honestly as well. There is no other way.

If I hear a response from you that indicates that you want to deal with the issues at stake here in a responsible way, I will do whatever I can to put in place a process that will work to help every single person involved come out of this looking as good as it is today possible for them to look. That’s the love part of the formula.

The honesty part of the formula is that, if I do not hear from you, I need to report on what you have done in this case and in your other interactions with the Goons on the Bogleheads Forum and elsewhere. I hate being put in these circumstances as I know you hate being put in these circumstances. The bottom line here is that these are the circumstances into which we were born and we both need to work up the courage to make the best of them.

Please always know that, if you see something that I have written and you feel that I have not told things in a precisely fair way, I will be thrilled to give you space in the article or blog post to tell your version of events in your own words. My preference is that it be done in that way.

Please also know that I will of course always respect the work you have done. I very much still believe that you are someday going to win that Nobel Prize and that we are going to see your name on the front page of the New York Times. It will be a great day for all of us when that happens.

Please also know that I will do everything I can to slant things as much as I can in your favor without failing to honor my obligation to my readers to provide them with the detail they need to hear to  make sense out of the amazing circumstances that apply in InvestoWorld today.

Please also know that I will always think of you as a friend and will always wish the best for you and will always be\ honored to be associated with you in any way (even if this crazy mixed-up world of ours puts me in circumstances in which I need to name you in lawsuits at other times!).

I will close by letting you know of three things that I have in mind at the moment (the purpose of this e-mail is to assure myself that I have done every last thing that I can do to avoid going ahead with these steps):

1) I am going to start a thread at the Goon Central board letting them know that I have sent you this e-mail (without posting the text).  Drip Guy asked me about you directly yesterday, which suggests to me that he feels you have been compromised. I argued yesterday that this was not the case. I don’t want the Goons thinking that I play games re this sort of thing and I have been careful always to respond honestly to their questions. So I think I need to let them know that my sense of where things stand has changed as a result of what I learned today;

2) I expect to post the text of this e-mail at my blog within another week or two. This is obviously an important development in the saga. If you have indeed gone to the Dark Side, that is a major win for the Goons, who have been feeling greatly weakened in recent months aside from this development; and

3) I am in the process of writing a long article that will detail 101 incidents of this nature (you are not the only one who is afraid of what the Goons will do to your reputation if you state your honest beliefs about investing in clear terms!). You are certainly not the focus of the piece. But my expectation is that you will be mentioned in five or so of the incidents. I just want you to know that that is in the works as I feel that each time we go a step down the dark path, it makes it harder to move to the better path for all concerned. How I wish that others could see this point as clearly as I do!

The Goons are not going to win, Wade. They CANNOT win. If we don’t help people learn what they need to learn about stock investing, the numbers show that the whole thing is going to go down (please ask if you have questions about this
aspect of things). There was a big change in people’s attitudes after the 2008 price crash. I’ve been doing this for 10 years and I can tell you that nothing had as much impact as that. The next crash is going to hurt worse (because it follows on
so many down years) and is going to cause a much bigger change in public opinion. You want to be positioned on the right side of things when that happens. We are going to need to act quickly then and we need you working with us!

If you have particular concerns or questions, please let me know of them and we can do out best to resolve them when they can be resolved with relative ease.

I cannot post dishonestly on safe withdrawal rates. It is insane that I was ever asked to do this and it is insane that there is even one responsible person who ever thought that it might be possible that I would go along with such a demand. Just
about anything else is negotiable because, once we achieve the right to post honestly on that topic, a lot of the ugly feelings of shame will dissipate. I cannot give an inch on that one. For reasons that should be obvious to all reasonable people.

Sorry for the long e-mail. I hope it leads to good things!

I wish you the best in all your future endeavors, my good (non-Goon, please?) friend!

Rob

Rob Bennett to Academic Researcher Wade Pfau: “I Am a Bit Disappointed With the Defensive Tone. I Am Extremely Uncomfortable With the Idea That No Shift At All Is Required. I View That Take As a Dangerously Irresponsible One. I Hear a Certain Amount of Apologizing for Bringing the Subject Up in Your Paper.”

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Yesterday’s blog entry reported on an e-mail that I sent to Academic Researcher Wade Pfau on December 10, 2011. I sent a follow-up e-mail the same day.

Wade:

The valuations paper is certainly a step forward. So little work has been done in this area that each new study helps people become more comfortable with the idea of considering valuations.

I was a bit disappointed with the defensive tone. There is no question but that the conventional view is that there is no need to justify Buy-and-Hold strategies, that there is some sort of magic to accepting the idea of making no allocation shifts as a reasonable default. I have never heard anyone justify this position. So I don’t buy it. My view is that an investor must make a choice as to his allocation and that staying at the same allocation at all times is just another choice (one that I personally find intellectually indefensible). I don’t have dogmatic views as to how much of an allocation shift is appropriate in different circumstances. But I am extremely uncomfortable with the idea that no shift at all is required; I view that take as a dangerously irresponsible one. I hear a certain amount of apologizing for bringing the subject up in your paper. Perhaps that is politically smart. But I worry that it allows the dominant “Buy-and-Hold is fine” view to remain dominant
a bit longer.

According to my calculator, the SWR varies from 2 percent to 9 percent. Who are we helping if we suggest that it is acceptable to say that it is always 4 percent? (I understand that you are not saying that directly but I feel that it is an implication that follows from any suggestion that Buy-and-Hold is a reasonable strategy). I don’t object to people defending Buy-and-Hold on grounds that the market really is efficient. That follows intellectually. But I believe that we need to get about the business of settling the question of whether the market is efficient or not and from that point forward accept that research that fails to adjust for the effect of valuations is analytically invalid and must be corrected. It’s too dangerous to leave the question open indefinitely.
If we don’t even know whether valuations have an effect or not, we really are at so primitive a stage of understanding that I question whether we should be calling the analyses we perform “research.” To leave so basic a question unresolved is cowardly, in my assessment (I don’t mean to aim that word at you in particular but at all who work in this field, including journalists as well as researchers).

All that said, there’s a place in the world for a multitude of viewpoints and a multitude of approaches, It could be that your approach will prove to be more influential than mine. Perhaps my experiences have biased me. So I certainly wish you the best of luck with it and i hope the paper generates more discussions coming at the question from a variety of perspectives.

Rob

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.”

Rob Bennett to Academic Researcher Wade Pfau, After the Greaney Goons Threatened to Get Him Fired From His Job: “The Site Is Owned by Greaney. It Was Set Up Solely for the Purpose of Intimidating People Like You”

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Yesterday’s blog entry reported on an e-mail that I sent to Academic Researcher Wade Pfau on May 1, 2011. In the e-mail, I tried to offer words of comfort to my friend, who was living in fear that the Greaney Goons would follow through on their efforts to get him fired from his job because he had posted honestly on safe withdrawal rates. I knew from our earlier correspondence that Wade is married and has at least one small child (this came up during the time there was a concern over a possible nuclear meltdown in Japan because Wade had particular concerns about what might happen to his wife, who was pregnant at the time). I sent  a follow-up e-mail the next day. The text is set forth below.

Wade:

I reread your e-mail this morning and noticed something that might suggest a misperception that needs to be cleared up. You ask that I not delete the thread at the Hocomania site. I have no ability to delete threads there. That site is owned by Greaney. It was set up solely for the purpose of intimidating people like you, people who have expressed some interest in uncovering the realities of what the historical data says.

For example, there was a time when we had many people participating at Bogleheads who thought that valuations should be considered in calculations of the SWR. They would analyze each thread at the Hocomania board and discuss strategies for destroying people who had expressed the view that valuations should be considered. They would talk about defamatory things they could all agree to say over at Bogleheads to get people not to like that poster or things that they could say the poster had said that would help to get the poster banned or organize campaigns to send e-mails to Morningstar to demand a ban. If  a reporter wrote an article, they would send e-mails to the reporter’s boss to try to get him or her fired. There was a time when they called a poster’s place of work to try to get that poster fired. Mel Lindauer would then put a link up at Bogleheads so that everyone knew that the person who had said that valuations should be considered was being “punished”  and understood what would be in store for them if they elected to “cross” Lindauer or Greaney by posting honestly on investing topics.

This is why I often note that there is a Ban on Honest Posting on SWRs in effect at Bogleheads and many other sites today. This group uses Google searches to find out each day if there is anyone posting honestly about SWRs or other important investment-related topics and then sends their Goon Squads in to deal with the matter. As I said in the earlier  e-mail, this has been going on for nine years now. Given the huge legal liabilities they have run up, there is precisely zero chance that they will stop of their own accord, in my assessment.

I have no way of knowing precisely how much of the background of all this you know about. I have been presuming that, since you have seen Drip Guy’s behavior and Lindauer’s behavior, you had the general idea. Your comment about me
deleting a thread led me to believe that you might be thinking that I have some sort of ownership interest in that board. I have opposed the Campaign of Terror against our board communities going back to May 13, 2002. I put a post to Motley Fool demanding Greaney’s removal on November 23, 2002 (this was after he put up a post threatening to kill family members of any community members who posted honestly on the SWR matter). I post at that board only to correct the record to the extent I can and to answer questions that the Goons have (even the Goons would benefit from understanding the realities of stock investing and there have been rare cases where they have asked sincere questions). I have zero authority to delete threads at the Hocomania board.

The Bogleheads board at one time had a reputation for not encouraging lots of abusive posting. When the Goons showed up, a number of long-timers there asked where the Goon posters were coming from. I put up a post describing Greaney’s tactics and Lindauer’s role of linking to Greaney’s board each time a new poster dared to post honestly. I also contacted Morningstar about the matter and offered to send them e-mails each time Lindauer linked to the Greaney board. The Morningstar admins did not respond to the e-mail. Lindauer has said that “higher-ups” at Vanguard follow the board closely and know what goes on at it. The threatening threads were a daily occurrence during the years when I posted there. It was my May 13, 2002, post at Motley Fool that first noted the analytical errors in the Old School studies. So the Goons knew from my first post at Bogleheads that I would be posting honestly and started a smear campaign on the first day.

The Bogleheads board was launched for the purpose of blocking any possibility of honest posting. There had been numerous posters arguing that honest posting should be permitted back when the board was located at Morningstar.com. The smear campaigns caused many good people to leave but some soldiered on. The idea of moving to Bogleheads.org was to no longer have to operate under the Morningstar admins, who had not taken action in response to the smear campaigns but who had also not been wiling to ban those posting honestly, as the Lindauer and Greaney Goons demanded. Today they can of course ban anyone who comes to represent any sort of threat. So you no longer see discussions of whether honest posting on SWRs should be permitted or not.

I hope that background helps you make a little bit better sense of this. If ever there is a time when you have questions about the history, please don’t hesitate to ask. For good or for ill, I’ve had a front-row seat going back to the first day.

Rob

Academic Researcher Wade Pfau to Rob Bennett: “You Really Shouldn’t Have Posted My Private E-Mails. This Is So Unethical.”

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I have for several weeks been reporting at my blog on my 16-month e-mail correspondence with Academic Researcher Wade Pau. The most recent blog entry (posted this morning) was titled: Academic Researcher Wade Pfau (In Response to a Threat by the Greaney Goons to Get Him Fired From His Job for Posting Honestly on Safe Withdrawal Rates): “I Think I Should Stay Publicly Quiet for Awhile As I Really Don’t Want Anyone Sending Messages About Any Topics to Officials at My University.” Wade posted his reaction to the blog entry as a comment to it. His words are set forth below:

Rob,

After months of trying to prop yourself up at my expense, and showing such utter lack of personal integrity in posting the contents of my private emails when I explicitly asked you not to, you’ve finally gotten to your big payoff: the “proof that I’ve been threatened into silence.”

Let’s back up:

-As this whole email history reminds, I was always somewhat confused about your position. I now realize you believe that market valuations can be used to better identify a “safe withdrawal rate.” But I don’t think so. The U.S. experience has been rather unique, and the relationship between past market valuations and withdrawal rates in the U.S. is not necessarily indicative about future withdrawal rates. There is even less historical data to link valuations to safe withdrawal rates than there this is to simply look at what withdrawal rates worked in the past.

-The Trinity study came about as an offshoot of research by financial planners. But financial economists had long known there is no such thing as a safe withdrawal rate from a portfolio of volatile assets, well before the Trinity study was ever written. This means that you didn’t discover anything that wasn’t known before. It is dishonest for you to pull out all these 1.5 year old quotes from me and ignore what I’ve learned and said since then.

-Your blog post today refers to a heated exchange that DRiP Guy and I had at Bogleheads in April 2011. And do you recall what the outcome of that exchange was? That is when I realized that he was right about this whole matter. And so I did not write to the Trinity authors to ask for a correction, I wrote to apologize to them for being too publicly critical of their study, but to also point out some reasons why the limited U.S. historical data may not really be sufficient to have a clear idea about the safe withdrawal rate. I told you that before.

-I’ve said the Trinity study is not helpful for new retirees. You’ve said that this doesn’t go far enough because the study needs to be corrected. But what you really mean is: you want to become rich and famous and you think this will happen if there is a formal process to republish old studies acknowledging you for “discovering” an “error” in them and providing your proposed “correction.” Since you are wrong about the “error” and the “discovery” and the “correction,” I’m not sure how successful you are going to be with this plan.

-Now about this job threat business. You’ve accused DRiP Guy of calling my employer and all sorts of other oddities, but why don’t you just provide a link so that people can judge the accusation for themselves:

http://boards.fool.com/hocus-gets-college-prof-to-question-swr-studies-29265775.aspx?sort=whole

This was still a period of uncertainty about what would happen in Japan after the Great Kanto earthquake the month before, and a new president had also just been installed at my university indicating a shift in power away from the group that had hired me. So you have here what looks like your big triumph… proof I’ve been silenced. However, I quickly recovered from my initial concern and realized that the whole thing was ridiculous. Anyway, there is no threat there. intercst knows how to push your buttons. That’s all. I wouldn’t lose my job even if people did complain about me, and as far as I know, no one ever did email or call my employer. My research has not been impacted by any alleged threats, and it is really insulting and disgusting all of the times you’ve suggested otherwise. And I was still peeved that you misrepresented why I emailed the Trinity authors, which is what caused the whole issue in the first place.

-You owe Mr. Bengen an apology, because it does look like the 2000 retirees are going to be okay after all with 4%. We are getting far enough along in their retirements to see this. While that doesn’t mean that 4% was safe ex ante, it does mean that he did not cause millions of failed retirements, as you’ve explicitly suggested before.

-Finally, you shouldn’t have posted my private emails. That is so unethical. And it really doesn’t help to build you up. Posting my outdated private emails will only give second thoughts to anyone in the future who might have been willing to give you the benefit of the doubt.

I’m not going to get into a back and forth with you about this. I already know your response. You will be outraged. You will suggest that I’ve turned my back on average Americans and sold out to Wall Street. You will remind us all that you’ve been a victim of death threats. You will say that we could have discussions about all of these diverse viewpoints if only some internet discussion boards would be opened to honest posting. You will say that you discovered errors in the 4% rule and that those with a vested interest in preserving 4% have terrorized you for trying to get past studies corrected. As such, you will ignore everything I wrote above. You will just spin my comment as proof that I’m really afraid to speak truthfully. You will do this all in a very long series of comments which may approach 10,000 words in total. But it’s all so tiring and implausible. Please don’t spend your day doing this. Go play with your kids. It’s time to move on.