A Rich Life

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

Academic Researcher Wade Pfau: “There Are a Lot of People Who Will Automatically Close Their Minds to This (Valuation-Informed Indexing) Because They Think Of It As Market Timing, and I Hope My Way of Presenting It Can Help to Bring Them Around a Bit.”

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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. Wade sent two responses the following day.

In response to my comments re his chart on true wealth accumulation numbers, he said: “This is generally how I was interpreting it as well, which I probably picked up from you before. The main idea is that you shouldn’t be too excited with great wealth accumulations if they happened due to unusually high valuations, and low wealth accumulations shouldn’t be as scary if valuations are also quite low.  So yes, if the blue line drops below the red line (which happens when PE10 falls below it’s historical median), people shouldn’t feel as bad about it.  This is more or less the story I am trying to tell with safe savings rates as well.”

In response to my comments re the defensive tone in his most recent valuations paper, he said:  “I understand your concerns about the defensive tone. But I do have the concerns about the caveats.  And also, I think it could be more persuasive to present the results this way, because the results really do speak for themselves: a valuation-based asset allocation supports generally supports higher withdrawal rates and lower required savings rates than the corresponding fixed allocation.
There are a lot of people who will automatically close their mind to this because they think of it as market timing, and I hope my way of presenting it can help to bring them around a bit.”

Wade asked whether I had seen an article by Michael Kitces in the December 2011 issue of the Journal of Financial Planning. He said: “He presents the results speaking with much more certainty than I did about valuations.  Though my Fisher and Statman paper was more forceful about the point than this current paper. We’ll see how the reviews go with my new paper.  Depending on what the referees say, I may have a chance to make it less defensive. ”

Wade also provided a link to a blog post in which he discussed valuations-adjusted withdrawal rates:

http://wpfau.blogspot.com/2011/12/valuations-adjusted-withdrawal-rates.html

Rob Bennett to Academic Researcher Wade Pfau: “You Note That Many Articles That Led to Nobel Prizes Were First Rejected. The Obvious Question Is — Why? It Is That Knowledge Generally Advances Gradually Over Many Years And Then There Are Occasional Giant Leaps Forward. This Is a Giant Leap”

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Yesterday’s blog entry reported on an e-mail sent to me by Academic Researcher Wade Pfau on December 2, 2011.  My response, sent the same day, is set forth below.

Wade:

Your research IS Nobel Prize stuff.

It could be that you are just being humble or that you are pulling my leg. But in the event that you are serious in thinking that you are not in Nobel Prize territory, I want  to disabuse you of that notion. That is where this is leading.

You note that many articles that led to Nobel Prizes were first rejected. The obvious question is — Why? Why was the merit not seen on first presentation? It is that knowledge generally advances gradually over many years and then there are occasional giant leaps forward. The giant leaps are hard to follow and appreciate. This is a giant leap. So people are going to misunderstand it for a time.

The opportunity is to put everything in place during a time when few are able to appreciate the accomplishment. And, then, when large numbers of people come around, the work is done and all you need to do is to point to it. If, at the time people become interested in a new path, you have already cut through the path, you are there. That’s how it is done.

Shiller certainly merits a Noble Prize. He was asking the right annoying questions at a time when few saw the need to ask them. But Shiller (somewhat inexplicably) does NOT tell the full story. You can read 300 pages of Shiller’s fine book and not come across one paragraph telling you how to invest. People need that. People need to hear the how-to that follows from Shiller’s theory. That’s the Nobel Prize waiting to be won.

You say that “I was discouraged when I first received the desk reject…I realized that I didn’t have a chance with one of the top journals.” I don’t understand the background here. The suggestion here is that, if this lower journal rejected you, the higher ones would too. I have no knowledge base to know if that is so or not. I know the importance of the article. I am not able to say what considerations would come into play when editors decide whether to publish it or not.

Can you describe the general reaction you have seen to your work on valuations questions? Mel Lindauer obviously has been hostile. There is a sense in which that can be taken as a GOOD sign. Have others been hostile? Or intrigued? Or excited? Or indifferent?

I’ll tell you one story from the blogger’s conference just to give you a sense of both what you are up against and how huge the opportunity is that presents itself. I had breakfast one morning with a fellow blogger. We spent two hours talking warmly about a dozen different subjects. He indicated that he wants to move into the investing realm. I made my pitch for working with him. As soon as I started  talking to him about it, his eyes glazed over. He did not want to hear this. It was
like looking at a cartoon illustration of a point.

Now, that is very hard to overcome. If the journal editors have that attitude, you are not going to change their minds by writing a great article. That’s the bad news. The good news is that that attitude has been keeping competitors out of these waters for three decades. We are 30 years behind in the research we should have been doing in this field. When the eyes stop glazing over, there is going to be a huge boom. Some will be positioned for it and some will not be positioned for it.

I can point you to many questions that merit study. The problem is that, to go deep, you need to consider methodologies that will be viewed as unconventional. I’ll give one example. People ask me all the time what it means that the P/E10
is now 21. A P/E10 of 21 does not mean the same thing on the way down as it does on the way up. This particular 21 is a very dangerous 21. People don’t want to hear that. They want to hear that 21 means x and that same rule always holds.

The market has a memory. That’s one of the new ideas. With Buy-and-Hold, the market is being created fresh each day. With VII, what happened yesterday has an influence on where we are today, which is connected with where things will
be tomorrow. It’s an entirely different mindset to think of each day being a separate event vs. understanding that each time-period arises out of and influences those surrounding it.

The question that should be on every policymaker’s mind is — What will we do after the next crash? The next crash will be putting us in the Second Great Depression. We will desperately need to win back the confidence of investors. If they continue to believe that each day’s market is a separate event, there will be no effective means to counter their fears available to us. If we effectively make the case that the market has a memory, we will be able to make a convincing case that investing in stocks will at that time be a smart move. It is going to be critical that big names be able to make this case effectively and quickly. Too slow a response and the entire global economy could collapse.

Your work could make the difference.

Yes, I lay it on thick. But honestly. This is my sincere take.

Anyway, that’s enough for one e-mail. But I do think you have a Nobel Prize in your future if you care to reach for it and do battle with the dragons that will try to stop you from having it. There will be frustrations and disappointments and hostile reactions. But we are getting to the point where the wall is beginning to break down, so those negatives are becoming less of a factor.

Here’s another thing you might want to look at. Under Shiller’s model, it is not the economy that causes stock price changes but stock price changes that cause economic busts and booms. Would you have an interest in exploring an angle that has nothing to do with investor choices but with how Shiller’s work points us to a different understanding of what caused the four economic crises we have seen this Century (every one followed from a P/E10 level of 25 or above)? Why is it that
economists blame protectionism for the Great Depression? Doesn’t it make more sense to say that it was high stock prices, which caused a painful crash, which caused widespread panic, which caused the protectionism? We wouldn’t have had the problem with the protectionism if we had stopped the bull market from developing in the first place. Why didn’t we try? Can we afford to continue not trying in today’s environment?

I hope I have perhaps sparked a few new thoughts that will save you from the boring business of sitting around with too much time on your hands in 2012.

Rob

Academic Researcher Wade Pfau, On Learning That His Breakthrough Research Showing That Long-Term Timing Always Works Would Be Published in Only a ‘Decent’ Journal: “There Is a Saying That Any Article Worth Reading Has To Be Rejected By a Journal At Least Once. And Quite a Few Articles That Led to Nobel Prizes in Economics Were First Rejected By a Journal.”

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Yesterday’s blog entry reported on an e-mail that I sent to Academic Researcher Wade Blog on December 2, 2011. Wade responded the same day,

He said: “I agree with you that Bengen’s message was rather muddled.Though he usually expressed confidence in 4.5%, in one answer he seemed really unsure.  Also, he is out of stocks now, which violates the whole point of his research that 4% or whatever is supposed to be safe with a fixed asset allocation. It’s interesting.”

Regarding his breakthrough research showing that long-term timing always works, he said: ” I was discouraged when I first received the “desk reject” by the editors of the same journal that published the Fisher and Statman paper. I realized that I didn’t have a chance with one of the top journals. Applied Financial Economics is fine.  While it doesn’t have the same reputation as a top journal, it is a respected and credible peer-reviewed international journal in finance.  Maybe it is in the top 20-30 of finance journals.  So it’s not too low. ”

As a joke, Wade noted that: “If you are right about my paper, then maybe I could propel the journal upward :)”

He followed up with a tantalizing observation: “Well, there is a saying that any article worth reading has to be rejected by a journal at least once. And quite a few articles that led to Nobel Prizes in economics were first rejected by a journal.  Not that this is Nobel Prize stuff.  Probably, at least, Shiller is going to win a Nobel Prize in one of these upcoming years.”

The e-mail ended with some reflective comments: “As I was finishing up revising my article, I looked again at 2 pages of handwritten notes I made last December in the middle of the night when I was wide awake with jetlag after flying to Iowa for Christmas. I hadn’t looked at those since maybe February, and its a nice memory about how the whole research plan came out all at once.  But then there were twists, such as safe savings rates, which came out of this rather serendipitiously.  The last year has been a wild ride with this stuff. Hopefully 2012 will provide more positive developments.”

Rob Bennett to Academic Reseacher Wade Pfau On His Discovery That His Breakthrough Research Would Only Be Published at a “Decent” Journal: “Perhaps Frustration With That Experience Is Behind Your Announcement That You Will Not Be Focusing So Much On Valuations in Days to Come”

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Yesterday’s blog entry reported on an e-mail that I sent to Academic Researcher Wade Pfau on August 12, 2011. I next heard from Wade on December 2, 2011.

He said that “Bill Bengen seems to be slowly moving toward something vaguely similar to Valuation-Informed Indexing” and supplied the following link:

http://www.fpanet.org/docs/assets/A92E35B9-9351-1596-3767A57CD8BB29A1/10Q.pdf

He also said that “Michael Kitces has an article about Valuation-Informed Indexing issues and supplied the following link:

http://www.fpanet.org/journal/CurrentIssue/TableofContents/ImprovingRiskAdjustedReturns/

And he said that “I finally got around to finishing the revising for my Fisher and Statman paper.” He said that he aded in the rolling periods analysis and provided the following link:
http://mpra.ub.uni-muenchen.de/35006/2/MPRA_paper_35006.pdf

Wade observed: “It took me a long time to get to it. There is a pretty good chance that it will be accepted at Applied Financial Economics, which is a decent academic finance journal.”

The text of my response, sent the same day, is set forth below.

Wade:

What a treat to hear from you! Super e-mail! Thanks much for the kindness of thinking of me.

I have mixed feelings about the Bengen interview. I found his discussion of SWRs confusing. His positive references to you and to Michael Kitces are certainly encouraging. But I have a hard time understanding where he is really going with the SWR concept.

I saw your comment at your blog where you expressed the thought that it is okay for him to explore his own path. I agree to a point. But getting the numbers right in retirement studies is just too important for people to be so unclear and up in the air about it. My view is that, if leaders in the field do not feel comfortable putting forward clear and informed takes (this is obviously the case), that itself is news.

If Bengen is not sure what makes sense (and he clearly is not), he needs to make public statements to this effect. That’s how we get a national discussion started. I get the sense that people in this field experience some sort of shame in saying the words “I” and “Don’t” and “Know.” Such a terrible mistake and misfortune! If there is one thing I could change, this would be it. People MUST get in the habit of saying they don’t know because that is how those with new ideas will work up the courage to speak up and help us all out.

Michael Kitces recently wrote a blog entry that was so fine that I put it in the “Links That Matter” section on the home page of my site:

http://www.kitces.com/blog/archives/206-Whos-Really-At-Risk-When-Avoiding-Overvalued-Stocks.html#c1312

That was a gutsy article. He talked about the real stuff that people rarely dare mention. He earned big points with me for that one.

Re your article — I am thrilled to hear that it is on its way to publication. I have enough knowledge of the history in this field to be able to say that that will be the most important article yet published in the field of investing analysis. I won’t even put “I think” before that sentence. This is a case where it is “I know.” So congratulations on moving that one a few steps onward.

That said, it makes me sad to hear you describe its possible home as only a “decent academic finance journal.” You of course know all the ins and outs of the politics of publication 50 times better than I do. Perhaps you were hinting that it might not be headed for a top journal when you shared the earlier comments with me and I did not pick up on the hints. Perhaps frustration with that experience is behind your announcement that you will not be focusing so much on valuations in days to come. [Wade had announced at his blog that he would no longer be performing research on the valuations questions that had so excited him in earlier days but would focus on the retirement topics that were winning him a good measure of applause.]

There are four things I feel I can say about the political side of all this.

One, going up against it is going up against a brick wall. 90 percent of my work has been on the politics side and only 10 percent on the content side. There is no way to overstate how difficult and emotionally exhausting it is to direct one’s energies to the political side of this battle.

Two, the political side is the place where the real action is. Once political gains are made, there are going to be thousands rushing forward to join the cause.Then we will be making more progress in a week that we have been able to make in 10 years.

Three, it is a metaphysical certainty that the political resistance is going to fall. I know this by looking at the numbers. The numbers are so big that there are only two logical possibilities: (1) the resistance falls; or (2) the global economy falls. As economic and general political pressures grow, those holding the wall will feel more and more imperiled and less and less confident and one day they will just let go. It is going to take something scary as all get-out to make that happen, so it would be sick to wish for it. The reality, though, is that it is coming whether we wish for it or not and we need to be as prepared as possible for The Scary Stage (to be followed by The Fruitful Stage).

Four, the only way that sense can be made of all this is with an appreciation of the power of the cognitive dissonance phenomenon. I don’t know if you have given any thought to that aspect of things. If you haven’t, you need to do so. Massive cognitive dissonance is the #1 reality here. It is not possible to pull all the threads together (or even to retain one’s sanity and good cheer) without coming to appreciate the role being played by cognitive dissonance. Studying cognitive dissonance reveals both why the good guys have been so long frustrated and why it will soon (let us pray!) become possible to make huge gains in amazingly short amounts of time.

Please let me know if there is ever any way in which I can help you with any of your endeavors. I think you are the tops!

Rob

Rob Bennett re the Peer Review Report on Wade Pfau’s Breakthrough Research on Valuation-Informed Indexing: “The Elephant in the Living Room Is That There Has Never Been a Valid Study Showing That Timing Doesn’t Work. That’s Huge.”

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Yesterday’s blog entry reported on an e-mail that I received from Academic Researcher Wade Pfau on August 12, 2011. The e-mail described the peer review report on Wade’s breakthrough research on long-term timing and Valuation-Informed Indexing. My response, sent later the same day, is set forth below.

Wade:

Thanks for sharing that. It’s fascinating reading. The comments are intelligent.

I agree that the focus on the earlier paper understates the importance of your findings. I fully understand why you set it up that way. From an academic standpoint, you were right — your advance was to show how the Fisher study was flawed. But the implications of your study are so far-reaching that it sort of misses the point to suggest that all you are doing is pointing out limitations of the earlier study (which never got much attention in the first place).

I love the phrase “elephant in the living room.” That gets right to the heart of what is going on here. We are all going to a great deal of trouble to avoid talking about the elephant in the living room.

The elephant in the living room is that there has never been a valid study done showing that timing doesn’t work. That’s huge.

The significance of Fisher is that at least this study TRIED to make this showing. But your work shows where Fisher comes up short. So there is now not one study supporting the core tenet of Buy-and-Hold.

The guy is right to suggest that it is a little hard to know where to go from here.

My answer to that is — We need to launch a national debate on all the unanswered questions.

What happened historically is that people came to believe that there had been a showing that timing doesn’t work when in reality there has never been such a showing. That doesn’t prove beyond a reasonable doubt that long-term timing always works, as I believe. But it sure as shooting proves that we should not be discouraging people from engaging in long-term timing or at least exploring the possibility of doing so.

We cannot get from where we are (confusion) to where we  want to be (confidence that we know what works) in one step. It must be done in two steps. Step One is to acknowledge that we do not know it all and that therefore discussion of all points of view should be both tolerated and encouraged. Then OVER TIME we will come to develop a consensus as to what works.

I of course believe that it is VIII that works. But we can never know until we  have the discussion. Opening up the possibility of frank discussion is the step that leads us out of the darkness. So long as
Buy-and-Holders think there is no need for discussion, there is no hope of advancing knowledge.

Buy-and-Hold is a closed system. That’s what it comes to. There has never been any data showing that long-term timing doesn’t work. Buy-and-Holders believe this because they ASSUME it to be true. Buy-and-Holders and Valuation-Informed Indexers look at the same data and come to different INTERPRETATIONS  of what it means.

What makes this hard for you as a researcher is that you are not supposed to discuss things like human psychology in your studies. You are supposed to report numbers. P/E10 reveals psychological realities so you are getting around the rules when you discuss P/E10. But you can never really nail things down without pointing out that the problem with Buy-and-Hold studies is that they rule out consideration of  70 percent of the investing story (the effect of investor emotions) in the setting up of the methodologies.

These discussions go around and around because the two camps start with entirely opposite premises (emotions cannot matter vs. emotions must matter) and all the findings are just the reflection of those differing premises.

In the end, we are going to have to come up with new research procedures. For example, I suggest that we look at how people behave on discussion boards to identify which strategies help people to feel genuine confidence and which only foster temporary bravado. The world is not ready for that one just yet! But it’s getting there!

You are like a spy in the investing research world who sneaks in consideration of investor emotions by making reference to P/E10, which is a number (acceptable to the Buy-and-Holders) which generates insights about investor emotion (taboo to Buy-and-Holders).

Watch your back, spy!

Rob

Peer Review Report for Academic Researcher Wade Pfau’s Breakthrough Research on Valuation-Informed Indexing: “The Elephant in the Living Room Question Is — What Is the Ultimate Criterion for One to Conclude With Confidence That One Strategy Is Better Than the Other?”

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Yesterday’s blog entry reported on an e-mail that I sent to Academic Researcher Wade Pfau on May 31, 2011. I next heard from Wade on August 12, 2011.

Wade shared with me “the referee report” for his research paper on the Fisher/Statman paper showing (incorrectly, according to Wade’s research) that long-term market timing does not work.

The report stated: “To me, the elephant-in-the-room question is: what is the ultimate criterion for one to conclude with confidence that one strategy is better than the other? Or, put it in another way: should the data last longer, can we have a better idea what will happen? Not really. We need look no further than Figure II to appreciate the challenge: up to 1930, 100% stocks buy-and-hold was superior; from then to mid 1990s, the market-timing strategy fared better; they switched positions again after approximately 2008. It is disappointing for a reader to think that all the difference is only due to the choice of end period.”

It added: “This is not just an abstract question of intellectual interest, for an individual with finite years of life wants to know for sure, given the cohort she is in, what is the optimal investment strategy for her life of 80 years or so. Barring from an altruistic bequest motive, one cannot care less what’s the portfolio value 150 years later. Even though it may be unfair to demand a satisfactory answer from the author (F&S does not remotely address it, either), it would be nice if the author can feature his analysis with this backdrop in mind.”

It continued: “As market timing strategy incurs more transactions costs, is it still dominating buy-and-hold after taking into account of reasonable transactions costs? As the balance grows, the associated transactions costs may not be easily dismissed. Moreover, considering that in earlier years there were no index funds available, how could an investor, even a buy-and-hold type, implement the strategy without piling up substantial transactions costs? A hypothetical percentage transactions cost scheme would be a good start.”

Academic Researcher Wade Pfau: “Mel [Lindauer] Continues With His Criticism, Which Does Have Some Merit, But Which Means That We Can’t Really Use Historical Data to Study Any Issue At All”

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Yesterday’s blog entry reported on an e-mail sent to me by Academic Researcher Wade Pfau on May 31, 2011. My response, sent the same day, is set forth below.

Wade:

Thanks much for sharing your thoughts.

There was some good stuff in the Bogleheads thread. I of course think  that there would have been a lot more good stuff in it if honest posting were permitted there (I don’t mean just for me, I mean for everyone).

I especially liked the chart that Fred Flintstone provided with the various stock allocation percentages that would apply in different circumstances. Except it appeared to me that all the TIPS yields listed were the same! Did I just misread that? I have a feeling that I am not reading the chart right. I love the concept.

I wish you the best of luck in your exam!

Rob

Wade responded the same day. He said that I was reading Fred’s chart properly but that it was not complete, only a slice of a chart to demonstrate the idea behind it. Regarding my comment on how the Ban on Honest Posting limited the discussions held at the Bogleheads Forum, he said: “Mel [Lindauer] continues with his criticism, which does have some merit, but which means that we can’t really use historical data to study any issue at all.”

My response, sent later the same day, appears below:.

Wade:

Okay. I love that chart idea. I am going to try to write a column on that. I like it that he is showing a practical application.

There’s of course nothing wrong with Mel’s point. It is the dismissive tone that is the problem. In my mind this idea of being dismissive of new ideas is the OPPOSITE of what Buy-and-Hold was all about once upon a time. It started out being about data and research and science and learning. Now it’s about BLOCKING efforts to learn and letting appeals to emotion overrun the science. Too sad!

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.”

Academic Researcher Wade Pfau: “I Do Not Wish to Antagonize the ‘Goons’ Too Much… I Do Not Want Them Working Behind the Scenes To Derail Me…I Did Warn the Editor of the Journal of Financial Planning That They May Receive Some Hate Mail After I Mentioned Your Name in the Safe Savings Rate Paper””

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Yesterday’s blog entry reported on an e-mail that I sent to Academic Researcher Wade Pfau on May 2, 2011. On May 16, 2011, Wade put a post to his blog endorsing the idea of permitting honest posting on safe withdrawal rates. He stated: ““Retirees now frequently base their retirement decisions on the portfolio success rates found in research such as the Trinity study. Studies such as those are fine for what they accomplish: they show how successful different withdrawal rate strategies were in the historical data. But it must be clear that this is not the information that current and prospective retirees need for making their withdrawal rate decisions.” I posted a comment to Wade’ blog expressing the view that: “This is the most important paragraph ever written about retirement planning, Wade.” I sent an e-mail to Wade that day. The text follows.

Wade:

Congratulations and thanks on your amazing SWR post!

I have gone into a bit more detail re my reaction in a comment that I just put to your blog

I would like to write this up at my blog tomorrow. Please let me know if you would prefer that I hold off or if there are any comments from your end (in addition to those that I can pull from your blog entry)
that you would like me to include in the write-up.

What a long, strange trip it’s been!

Rob

Wade responded later the same day. He thanked me but said: ” I don’t think I really said anything particularly new though.  It is the kind of thing you’ve been saying for years.”

Re the issue of whether the time was ripe for me to write about his study, he said: Sure, it is okay to discuss the blog, paper, etc. in your blog now. But, perhaps, you do not need to emphasize my name so much, or even at all.  It is okay to just refer to it as “a new academic study” etc. I do not wish to antagonize the “goons” too much, as I would like to reach a wider audience than them anyway, and I don’t want them working behind the scenes to derail me.”

He added that: “I did warn the editor of the Journal of Financial Planning that they may receive some “hate mail” after I mentioned your name in the safe savings rate paper. Maybe it didn’t happen after all, but it won’t be a big problem even
if it does happen now.”

Finally, he reported that Dan Moisand had just been elected to join the advisory panel of the Journal of Financial Planning. He noted that Dan had expressed an interest in writing a column for his “Financial Advisor” column on safe withdrawal rates and valuations.

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