A Rich Life

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

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

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

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

I’ll answer this one separately.

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

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

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

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

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

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

I love these guys, Banned.

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

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

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

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

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

My warmest wishes to you and yours, Banned.

Rob

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.

Academic Researcher Wade Pfau’s Responses to My Reporting on Our 16 Months of E-Mail Correspondence

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The purpose of this blog entry is to set forward in one place links to the responses that Academic Researcher Wade Pfau has made to my reporting on our 16 months of e-mail correspondence.

1) Wade’s first response came when I told him of my plans to report on our e-mail correspondence. He said of this e-mail at a later date: ““About that first email I sent you in our exchange, please under no circumstances try to summarize or excerpt from it. If you must use it, please include the entire message with nothing left out. I think that is only fair, because you will then have free reign for your rebuttal, and I won’t be around for further rebuttals to that.”

Juicy Excerpt: “I don’t have any hard feelings toward you, but it is hard to have public communications with you after all the attacks you made toward me at your blog following the Bill Bengen incident. You strongly misinterpreted what I wrote at your blog and attacked me so thoroughly, and that makes it hard to see any paths forward in communicating with you publicly.”

2) Wade’s second response came in the form of a post to his blog. In this blog, he praised John Greaney, the leader of the Goons, as the hero of our ten years of discussions on safe withdrawal rates.

Juicy Excerpt:  “Rob desperately wants someone besides him to say that the Trinity study needs to be “corrected,” but I’ve explained that this isn’t how research works. Rather, new studies with new methodologies come to replace old studies. This is a case, however, in which old studies were already available to suggest that we shouldn’t project the findings of the Trinity study forward to future retirees.”

3) Wade’s third response came in a comment to one of my blog posts reporting on our e-mail correspondence. I refrained from responding at the time on the thinking that it was more fair to let Wade have the floor to himself for at least that one blog post.

Juicy Excerpt: “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.”

4) Wade’s fourth response came in a comment to another of the blog posts reporting on our e-mail correspondence. In this case, I set forth my responses in comments that followed his comment.

Juicy Excerpt: “If I *did* lack personal integrity, I could have made this all stop just by saying the meaningless sentence you want so desperately to hear: “I think the errors in the traditional safe withdrawal rate studies must be corrected by using Rob’s analytically valid method.” But I don’t believe that.”

5) Arty, a long-time contributor of comments to my blog (and a mighty fine one!), offered a comment that I think can fairly be said to express Wade’s views. I suggest that those looking to understand Wade’s take re all this consider giving Arty’s comment a look. I responded to Arty’s comment at the blog.

Juicy Excerpt: “Speaking only from a human point of view, if Wade requested you not share personal correspondence, I hope you can find a way to honor his request for those things he wishes to remain between the two of you only…. we can discuss his work—as it should be on its own merits— without the private communications.”

I will be advancing my responses to a number of points raised by Wade (and Arty) in blog entries that I will post in coming days.

Addendum:  Wade posted a sixth presentation of his take on things in a comment made to a blog entry in which I reported on an article on my work that appeared at the The Big Picture blog. My take on the points raised by Wade’s comment follow as additional comments to that blog post.

Juicy Excerpt: Congrats Rob, It’s your finest hour. I hope you can learn a lesson from this. The blogger completely bypassed ‘the Wade Pfau story’ and wrote solely about the underlying investment ideas. In this regard, I’m glad to see his post. Your 1,000 email campaign probably would have been a lot more effective had you stuck to the issues that the blogger discussed, rather than turning it into a personal vendetta against me. No one likes to see a negative campaign.

Purcellville Police Warned of Possible SWAT-ing Attacks by Goon “Defenders” of Mel Lindauer and John Greaney

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I have notified the Purcellville police that I may be the target of SWAT-ing attacks by the internet goons who have advanced posts at various investing discussion boards and blogs in “defense” of Mel Lindauer and John Greaney, the two individuals who have led the 10-year-long Campaign of Terror against the Retire Early and Indexing discussion board communities and the Personal Finance Blogosphere.

Wikipedia defines SWAT-ing (or Swatting) as “an attempt to trick an emergency service (such as a 9-1-1 dispatcher) into dispatching an emergency response team. The name is derived from SWAT (Special Weapons and Tactics), one type of such team. Such action places law enforcement and citizens at risk and are criminal actions. In addition, it reduces law enforcement coverage and costs taxpayer money.” The Wikipedia entry explains that: “CNN interviewed Erick Erickson to discuss an incident in which he had been the victim of swatting. The caller to 911 claimed: ‘I just shot my wife, so…. I don’t think I could come down there…. She’s dead, now…. I’m looking at her…. I’m going to shoot someone else, soon.’ —911 caller. That incident prompted Sandy Adams to push for a Justice Department investigation.”

I am the person who discovered the errors in the Old School safe-withdrawal-rate studies (the studies do not contain an adjustment for the valuation level that applies on the day the retirement begins). I shared my discovery with my fellow community members at a Motley Fool discussion board on the morning of May 13, 2002. John Greaney, the author of one of the discredited studies, has for the past 10 years led a brutal Campaign of Terror against all board and blog communities that have shown an interest in discussing the errors in the Old School SWR studies. The effort was led at Indexing communities by Mel Lindauer, co-author of The Bogleheads Guide to Investing, who made a positive reference to the Greaney study in his book and who has posted in “defense” of Greaney and the Old School studies at the Bogleheads Forum discussion board.

When Academic Researcher Wade Pfau contacted the authors of the Trinity study (another discredited Old School SWR study) seeking a correction, the LIndauerheads and Greaney Goons threatened to send defamatory e-mails to his employer in an effort to get him fired. I have in recent months been reporting on my 16 months of e-mail correspondence with Wade, in which he made many references to the “hostile environment” he experienced when posting on the internet about his research findings showing that the Old School retirement studies get the numbers wildly wrong and about his fears that the Lindauerheads and Greaney Goons would be successful in their efforts to destroy his career if he did not agree to play ball with them.

Wade has announced that he will no longer be doing research on Valuation-Informed Indexing, the investing strategy that I developed as a result of the loss of confidence I experienced in Buy-and-Hold after seeing many Buy-and-Holders fail to speak up in strong terms in opposition to the Campaign of Terror (Wade’s research shows that Valuation-Informed Indexing has provided far higher returns than Buy-and-Hold at greatly diminished risk for the entire 140 years for which we have stock return data). He also announced that, while he still believes that the Old School studies get the retirement numbers wildly wrong, there is no need for them to be corrected. He has praised Greaney as the hero of the  10 years of discussions and has characterized me as “unethical” for insisting that the discredited retirement studies be corrected before they cause more failed retirements.

I have contacted the Purcellville Police re this matter previously — much of the history of my efforts to resolve the matter by contacting the appropriate authorities is described here. I have seen an escalation in the threats since I began reporting on Wade’s decision to capitulate to the demands of the Goons. On July 6, 2012, I received an e-mail containing the following text: “Coming.tanks 4 address and phone number.will help me find u.” One of the Goons recently started a thread at the site owned by Greaney setting forth this image in the thread-starter:

 

Greaney Site Gun Image

John Greaney’s argument for why there is no need to correct the errors in the Old School safe-withdrawal-rate studies

 

I have made public notice at earlier times that I expect to bring civil lawsuits for the recovery of damages to my internet writing business against the owners of web sites that permit Lindauer and/or Greaney “defenders” to post defamatory comments about me or about those who have posted in support of correction of the Old School studies or Valuation-Informed Indexing or in opposition to the Campaign of Terror against our board communities or who in some other way lend support to the efforts of Lindauer and Greaney to continue the ten-year cover-up of my discovery of the errors in the studies. I also expect to help the millions of middle-class investors who have suffered financial losses as a result of the 10-year cover-up to recover the financial damages they have suffered. And I of course will cooperate in any way I can at congressional hearings and in criminal proceedings against those who have posted in “defense” of Lindauer and Greaney.

I intend for this blog entry to put all concerned parties on notice that I would expect SWAT-ing actions to be considered in the criminal and civil and congressional proceedings that I expect will follow the next crash in the price of stocks.

Rob Bennett to the Morningstar.com Site Administrator: “A Poster Named ‘Galeno’ [This Was Greaney’s #1 Supporter on the Board] Put Forward Four Consecutive Posts Rejecting Out of Hand the Idea of Substantive Discussion and Putting Forward Threats of Physical Violence Against Me. One Was a Threat to Come to My House with a Baseball Bat to Kill My Wife and Children”

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Yesterday’s blog entry reported on an e-mail that I sent to the Morningstar.com site administrator on April 18, 2006, relating to abusive posting by Mel Linduaer (co-author of the book “The Bogleheads Guide to Investing”). I sent a follow-up e-mail later that day. I will report tomorrow on the response that I received from Morningstar.

Mstar Casey:

This is my second response to your e-mail. The earlier response supplied the background facts. This post provides links.

Here is a link to a post put forward by Greaney (he posts as “Intercst.”):

http://boards.fool.com/Message.asp?mid=17762586&sort=postdate

Mark33 asked that the personal attacks stop and that a substantive discussion be permitted. A poster named “Galeno” (this was Greaney’s #1 supporter on the board) put forward four consecutive posts rejecting out of hand the idea of substantive discussion and putting forward threats of physical violence against me. One of these was a threat to come to my house with a baseball bat to kill my wife and children.

The posts making the threats were deleted, but there is a quote to one of the threats in the post linked above. The section quoted reads: ” No way! I, for one, am against any and all “substantive” discussions with or about brickhead (aka hocus). I want Jihad! I say let loose the dogs of personal attack. The nastier the better as far as I’m concerned.” Greaney put forward the post linked above, endorsing the threats.

Here is a link to a post in which Greaney reports that he has received an e-mail from Galeno saying that he was suspended from the board for putting up the posts that made the threats of violence. I did not report the threats. Some other community member obviously did so.

http://boards.fool.com/Message.asp?mid=17765010&sort=postdate

Greaney speaks in opposition to the suspension, implicitly endorsing the threats. This endorsement did far more harm to the board than did the actual threats, as Greaney was founder of the board and respected by a number of community members. A large number of our best posters left in the following months.

This is a link to a post by Prometheuss, another leading Greaney supporter. The post comments on a death threat put forward by Galeno and comments negatively on the fact that the death threat post was removed.

http://boards.fool.com/Message.asp?mid=18207722&sort=postdate

Prometheuss: “My comment on galeno’s post was pulled for ‘incivility’. First, I want to apologize to galeno if he took offense at my ‘rude or discourteous’ post. Saying, “You doctors should stick to your drugs and leave bullets to soldiers like me” was rude and demonstrated a lack of courtesy to galeno on my part. Anyway, I will try to cover the important points I was trying to make in a non-offensive way here. Most folks think they know a lot about guns from watching movies or TV, but things are a lot different in the real world….”

Please let me know if you have further question re this matter or need further examples of the nature of the problem that I was making reference to in the post that I put to the Morningstar board.

Rob

Morningstar Site Administrator: “Please Direct Us to the Specific Posting Where You Were Threatened with Violence by Another Morningstar Poster”

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One of my reports on my e-mail correspondence with Academic Researcher Wade Pfau described an e-mail to Wade in which I stated: “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.” One of the Goons asked for a link to the post. I provided the link in the comments section of that blog entry. 

The post appeared in a thread at the Morningstar.com site at which long-time community members were asking why so many abusive posters had recently begun participating in the discussions. Here are the words of my post:

Look at 49451 and see someone with 2 morningstar posts that has nothing to add except a wise crack.

For those not playing close enough attention to understand what is going on here, I will provide a brief bit of background.

There is an individual who got an important number wrong in a study that he published on the internet. He has elected not to acknowledge the error. Because he has his own web site, he has a number of supporters who are willing to do just about anything to block any discussion board on the face of the internet from engaging in honest and informed and reasoned discussions of the topic addressed in the study in which he got the number wrong.

I was aware from my own research that this individual got the number wrong. I reported this to a board at which I posted, and that post generated the most exciting discussions that board had ever witnessed. My position was vindicated beyond any reasonable doubt when we discovered what Bill Bernstein says about the subject matter of the study in his book “The Four Pillars of Investing.”

I put up a post entitled “What Bernstein Says” that reported on Bernstein’s position. The response from the individual who got the number wrong was to threaten to send one of his goons to my house with a baseball bat to kill my wife and kids. Motley Fool banned me because their lawyers are concerned that some crazy supporter of this individual may actually take action on this insane threat and that they could be held liable. The site administrator has said that he would love to have me back on the board (Motley Fool co-founder Tom Gardner wrote one of the blurbs that appear on the back cover of my book) if the individual would “permit” it.

This development caused every effective on-topic poster at that board to leave the board within a matter of months. There is no longer any on-topic posting worth taking note of at that board.

Those interested in the subject matter of that board went on to form four other boards at which they hoped to be able to engage in honest and informed and reasoned posting on the subject matter of the board. As each became successful, the individual sent his goons in to destroy every one of them.

Mel has linked to this individual’s web site on several occasions. The individual’s supporters have interpreted this as an endorsement of this individual’s tactics for “dealing with” the statements put forward by Bernstein and a host of others on what the historical data says re how valuations affect long-term stock returns (a topic closely related to the topic addressed in the study in which the individual got the number wrong).

Rob

In the comments section of the earlier report, one of the Goons asked to see the correspondence that I engaged in with the Morningstar.com site administrator. Set forth below is the text of the first e-mail that I received from Morningstar. I will post the text of my response tomorrow.

hocus,

Please direct us to the specific posting where you were threatened with violence by another Morningstar poster.  In Thread #49557, post 9, you quote a threat from another poster.  Please direct us to that thread and post.

Thanks,

Mstar Casey

 

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

Arty to Rob Bennett: “If Wade Requested You Not Share Personal Correspondence, I Hope You Can Find a Way to Honor His Request”

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Arty posted two important comments to yesterday’s blog entry on my e-mail correspondence with Academic Researcher Wade Pfau. The texts of these two comments are set forth below.

Arty Comment #1:

The report is correct about start and end points mattering. After all, we know that this matters in any single regression, but especially in comparative strategy regressions, even if using only a single asset class for the “stocks”. It muddies further if using some slice/dice model. But this reviewer’s objection can be made on ANY regression! That is, the argument *always* holds. So now what? Don’t do any regressions of any sort? That would render Fama’s 3-Factor model useless too, and many other landmark works. So it kinda’ begs the question.

I especially disagree about the transaction costs objection in that any reasonable shifting strategy (where the shifts would be rare if using PE/10) should not incur any more costs than a buy-and-holder who does normal rebalancing when their allocation shifts outside the assigned ranges.

And if using a broad-range implementation, say a 25-50-75, with hold ranges once a segment was crossed, you would see even fewer rebalancing events than most who buy and hold. I’m not arguing the relative merits of the strategies here, just making this observation vis a vis the objections.

Indeed, in many accounts these days, there would not be transaction costs (say, between Vanguard funds held in a tax-deferred account). But even if we assume transaction costs, I don’t see this as a good objection.

Finally, a writer should be able to discuss the reviewer points. That is the essence of the peer-review process, when done properly. The above would have been my objections to the reviewer comments.

Arty Comment #2:
Rob,

I am a big fan of Wade’s, albeit from afar. And maybe he can use these comments in future discussions with his peers.

But speaking only from a human point of view, if Wade requested you not share personal correspondence, I hope you can find a way to honor his request for those things he wishes to remain between the two of you only.

I know his work is exciting, and worthy of much discussion. And this particular reviewer commentary is a glimpse into a world that is opaque for many. I get that.

But we can discuss his work—as it should be on its own merits— without the private communications. Speaking only for myself here, I hope you can find a way to honor his request, Rob.

My responses to Arty’s comments are set forth in the comments section of the blog entry to which they were placed.

Rob Bennett to Academic Researcher Wade Pfau: “If I Can Think of Things That I Can Do To Soften the Blow to the Goons…I Will Do That… If It Is Any Comfort, I Think It Would Be Fair to Say That the Goons Are Losing Power and Influence BY THE DAY.”

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Yesterday’s blog entry reported on an e-mail sent to me by Academic Researcher Wade Pfau on May 16, 2011. I sent a response the following day.

Wade:

It’s a revolutionary statement. You are telling the truth about safe withdrawal rates. Every advance that we have achieved over the past nine years started with my decision to tell the truth re SWRs in my May 13, 2002 post. It may be that you cannot see today where this is going to lead you in time. As  someone who has already made a good bit of the journey, I can tell you that it is going to take you to some amazing places.

Yes, of course I have been saying this for nine years now. But who am I? I am some guy whose claim to expertise in this field is that I figured out how to get posts to appear at internet discussion boards. My words have power to those who see them. Not too many see them. You are positioned to be able to publish peer-reviewed research. You have the potential to have far more influence.

I of course have no more desire to antagonize the Goons than you do. But the reality obviously is that they ARE antagonized by honest posting on these matters. So that aspect of this is a problem.

My intent was very much to focus on your name (and on Bogle’s name) since it is the fact that you are saying these things (and that, as you note, Bogle has offered important support for the core ideas) that is the news here. I am going to have to give some thought as to whether there is a  “soft” way to report this. It won’t work to say only that there is a “new academic study.” I need to give a link to the study for the story to make any sense at all. And, if I give a link, the Goons will be upset with you.

My guess is that I am going to play it the way I planned. My plan was to include your name (and Bogle’s name) in the headline but to offer only limited commentary. I would quote the key paragraph of your blog post (the one I quoted in my comment at your blog) and I would quote from my comment and perhaps from my e-mail to you from yesterday (I presume that you would prefer that I not quote from your e-mail below and I have no problem with that, so I will leave that out of it) and generally leave it at that. If I can think of other things that I can do to soften the blow to the Goons while still making the essential point that there are today people of influence in this field making public statements about the analytical errors contained in the Old School SWR studies, I will do that. But my guess is that I am not going to be able to tell the story that needs to be told without saying at least that much.

If it is any comfort, I think it would be fair to say that the Goons are losing power and influence BY THE DAY. There was a time when I was blacklisted at every major personal finance blog. Today I am having the experience of bloggers COMING TO ME and asking me to write guest blogs. This is a big change. People are having increasingly serious doubts about the Buy-and-Hold mumbo jumbo. About the only thing people are not willing to go along with today are direct and clear statements about the Ban on Honest posting. I believe that a big part of the concern there are the lawsuits that we are likely to see in days to come. But the wall is eroding. I believe that there will come a day in the not-too-distant future when you will be able to do your work in peace and not need to worry about the sorts of Internet Sewer Rats who have put up posts in “defense” of Lindauer and Greaney putting forward threats to destroy your career and all this sort of thing.

Please continue thinking through the implications of where your research leads. It takes time for it all to sink in. My sense is that you understand that your work is of great significance but that you do not today come close to appreciating just how revolutionary it truly is. That is going to come with time. You have caught a very large tiger by the tale, my good friend. I’m sure of it!

Do not hesitate to let me know if I say anything in the blog post or in the comments that follow that concerns you. I don’t think that is going to happen. But in the event that it does, I obviously want to do everything I can possibly do to keep things on a positive and constructive and life-affirming track.

Please take care.

Rob

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.