A Rich Life

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

Former Financial Analysts Journal Editor Rob Arnott to Rob Bennett: “I’m Too Embroiled in My Own Controversies to Magnify Them Further With Collaboration. Your Ideas [About Valuation-Informed Indexing] Are Sound.”

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My last two blog entries reported on e-mail correspondence between Former Financial Analysts Journal Editor Rob Arnott and I in which we discussed the brutal (my word) intimidation tactics that have been employed by Buy-and-Holders in recent years to block the publication of academic research revealing the deficiencies of the “status quo” (Arnott’s phrase) thinking on how the stock market works. He reported that he has had difficulty finding journals to publish his more controversial work and that articles of his that challenged the conventional thinking of today have generated hate mail. In fact, he has not yet been able to find a journal to publish an article on an important topic that he co-authored with Nobel Laureate Harry Markowitz! (I checked his e-mail three times when writing these words to be sure that I did not just imagine this part while experiencing a fever.) I expressed my shock at this report and noted that I believe that the reason why I feel a greater sense of urgency re solving the problem is that  my perspective is that of a journalist rather than that of an investing expert and I thus tend to focus on the public policy implications of the 30-year cover-up of Yale Economics Professor Robert Shiller’s “revolutionary” (Shiller’s word) findings showing how stock investing really works (not at all how the Buy-and-Holders have been for many years now telling millions of middle-class investors it works).

Late in the afternoon of December 6, 2012, Arnott replied to my e-mail of that morning. He wrote: “I am very pleased that you were not offended at my frank advice.  I’m too embroiled in my own controversies to magnify them further with collaboration.  Your ideas are sound.  Your stridency is unhelpful to your cause.  Anyway, all the best.”

I immediately sent back the following words: “I understand. I hope that I am not guilty of stridency. You are certainly not the only person who has said that I am. So I am going to need to work harder to examine my own behavior. I wish you all the best as well.”

I then sent an e-mail to Vanguard Founder John Bogle, Four Pillars of Investing Author William Bernstein, and Academic Researcher Wade Pfau saying: “Since the three of you were copied on the e-mail that I sent to Rob Arnott this morning, I wanted you to see the resolution of our conversation as set forth in his e-mail to me this afternoon and then my response to him. And I of course wish the three of you all the best that this life has to offer as well. Please take good care.”

The following afternoon I received a final e-mail from Rob Arnott containing the following warm message: “Have a wonderful holiday season!”

Rob Bennett to Former Financial Analysts Journal Editor Rob Arnott: “The Illustrations You Offer of the Problem of Buy-and-Hold Dogmatism Are Shocking. I Know From My Discussions With Financial Planners and Bloggers That Many Others Have Had Similar Experiences. This Must Stop. I Feel More of a Sense of Urgency re This Matter. My Focus Is On the Public Policy Implications. We Are Living Through A Public Tragedy of Epic Proportions.”

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Yesterday’s blog entry reported on an e-mail that I received from Former Financial Analysts Journal Editor Rob Arnott describing the hostility that his research has generated among “guardians of the status quo” in the investing field. Commenting on my report of how Buy-and-Hold Goons threatened to get Academic Researcher Wade Pfau fired from his job after he published research showing the superiority of Valuation-Informed Indexing strategies over Buy-and-Hold strategies, he said that he has on occasion experienced difficulty in getting his work published (in fact, he has not yet been able to find a journal to publish an article co-authored by Nobel Laureate Harry Markowitz!) and that journals that have published his work have received “hate mail” after doing so. Rob castigated me in his e-mail for embracing “a victim mind-set” and for characterizing those who threatened to send defamatory e-mails to Wade’s employer  as “Goons.” He copied Vanguard Founder John Bogle and The Four Pillars of Investing Author William Bernstein, whom he described as personal friends and whom I noted had failed to speak up on Wade’s behalf when he was under attack, on his response to me. Set forth below is the reply that I sent early on the morning of December 6, 2012 (I also copied Bogle and Bernstein, as well as Wade Pfau):

Rob:

Thanks much for your response. I have been a huge admirer of your work for years. So it was a thrill to receive it. Your frank and balanced and helpful words have added a nice bit of good cheer to my Thursday morning.

I understand that all you know of my work is the one article that I linked to in the e-mail. It pains me to think that the words of that article may have planted the idea in your head that my respect and affection for John Bogle might be any less than your own. In my ranking of the most important investing analysts of all time, Bogle ranks second only to Robert Shiller. I love the man. I admire his accomplishments. I don’t want there ever to be any doubt in anyone’s mind re that aspect of the question. I also of course feel a good bit of respect for the others mentioned in your e-mail, and, in full truth, for all of the Buy-and-Hold pioneers. All of the work that I have done is built on the Buy-and-Hold Model. There would be no Valuation-Informed Indexing today had a number of smart and good people not rolled up their sleeves and did the work needed to generate the many powerful insights that have helped millions to come to a better understanding of how stock investing works.

The illustrations you offer of the problem of Buy-and-Hold dogmatism are shocking. I know from my discussions with financial planners and bloggers that many others have had similar experiences. This must stop.

You say that “that’s life” and that “life isn’t always fair.” That’s so. But our job is to spend every waking hour pushing in the direction of fairness, no? That’s the struggle. That’s what the work that we all do is all about. We will never succeed entirely. But we always keep pushing in that direction. That’s how Bogle achieved what he achieved, is it not? Bogle met resistance in his early days. He soldiered on. The spirit that he possesses that caused him to fight is the cause of much of my admiration of the man. If I were to give up in the face of frustrations, I wouldn’t in the end be much of a friend to our mutual friend John Bogle, in my own assessment. So I always fight on with the aim of bringing things to a better place over time.

I of course agree that Bogle (and all others) must be true to his own beliefs. If he didn’t criticize the aspects of my work that he does not find convincing with as much gusto as I criticize the aspects of his work that I do not find convincing, I couldn’t feel the respect for him that I want him to feel for me. A friend criticizes perceived deficiencies in a friend’s work not out of any animus but out of a desire to help the friend become his better self. That’s the spirit in which I have found fault with one aspect of Bogle’s teachings (the idea that long-term timing is not required for investors seeking to Stay the Course in a meaningful way) and that’s the spirit in which I hope in days to come he will be finding fault with whatever aspects of my teachings he finds unpersuasive.

My sense is that there is only one point re which you and i have a different take of some consequence. We are both seeking to push the general understanding of how stock investing works in the same direction. But I think it would be fair to say that I feel more of a sense of urgency re this matter. My guess is that the reason for this lies in our different backgrounds. I am NOT an investing expert and I do not pretend to be one. I am a journalist. My focus is on the public policy implications of the dogmatism. I would be grateful if you would take a look at two articles that I have written that argue that the heavy promotion of Buy-and-Hold strategies was the primary cause of the economic crisis: (1) The True Cause of the Current Financial Crisis; and (2) The Bull Market Caused the Economic Crisis.

Say that there is some truth to what I argue in these articles. We are living through a public tragedy of epic proportions. One the one hand, Wade’s research tells us what we need to know to reduce the risk of stock investing by nearly 70 percent (he shows that the maximum portfolio drawdown percentage is 60 percent for Buy-and-Holders and only 20 percent for Valuation-Informed Indexers). On the other, we are on our way to the Second Great Depression because we have as a society elected to impose a Social Taboo to block the frank discussion of these matters. We all want the same things. There is not one person alive, Buy-and-Holder or Valuation-Informed Indexer, who wants to see us fall into the Second Great Depression or who doesn’t want to know how to invest effectively. How did we ever get ourselves into such a crazy fix? It’s all a quirk of history. Had Shiller published his research showing that valuations affect long-term returns in 1971 rather than in 1981,the name of the book would have been “A Valuation-Informed Walk Down Wall Street” and we would today be living in the greatest period of economic growth in U.S. history. How do we get from this awful place where we are today to the wonderful place where we all deep in our hearts want to be tomorrow?

We don’t get there by calling each other “Goons” — I think that much is fair to say!

I don’t want to call anyone names, Rob. It’s the last thing I want to do. If you read my interactions with the Goons carefully (I post daily at the Goon Central site), you will see that I call those who attack me so relentlessly and in such brutally personal terms “friend” more often than I call them “Goon.” The Goons are my friends, Rob! These are people I know from the days when we worked together to build the Motley Fool’s Retire Early Board into the most successful board in that site’s history.

Why do I EVER call them “Goons? I am trying to draw attention to a problem. The death threats really did happen. The tens of thousands of acts of defamation really did happen. The board bannings really did happen. The threats to get Wade fired from his job really did happen. These people are in emotional pain. If you have any doubts whatsoever about this, please take a look at the article I wrote detailing the efforts of hundreds of non-Goons to keep the Retire Early and Indexing boards and blogs open to civil and reasoned and honest discussion of all investing issues. 

We shouldn’t be ignoring this emotional pain. We should be trying to help our friends overcome their pain. THAT”S PART OF THE JOB OF AN INVESTING ADVISOR.

Many of the experts in the field don’t see it that way today. They feel that investing analysis is a numbers exercise, that there’s no place in this field for the discussion of human emotions. This is the core mistake that caused all the trouble, in my assessment. When we see people engage in the sorts of behavior that I am referring to here (and which you have obviously experienced as well in somewhat different form because your work is not as internet-based as mine), we need to try to figure out what is going on and to address the problem. I don’t want to ever have to use the word “Goon” again. I won’t ever need to if people like Jack Bogle and Bill Bernstein and Wade Pfau make clear that they expect the published rules of all of the boards and blogs to be followed. When they fail to do this, they send a signal that in this one area the normal rules of social intercourse that keep us all human do not apply. WE NEED TO STOP SENDING THAT SIGNAL. When we start sending the right signals, good things will start happening. Lots of people want to learn but are afraid to speak up. As more and more people come to feel safe in speaking up, the entire social dynamic will change. We will reach a tipping point and things will begin getting better and better and better each day rather than worse and worse and worse. New ideas cannot grow until we create an environment in which sincere and polite and respectful questioning is permitted. And even encouraged!

That’s where I am coming from, in any event. I detect a suggestion in your e-mail that you would be willing to help in an effort to pull things in a positive direction if I would be willing to engage in private discussions. Of course! Why the heck not? I want to know about any ideas that you or Jack or Bill or Wade (I added him on the Cc for my reply) have for the five of us working together to transform these discussions into something viewed as a 100 percent positive for every single person involved in them. Let’s make that happen! Please be assured that I will do anything that I view as even remotely reasonable that you or Jack or Bill or Wade suggest. Please just shoot me back an e-mail with any suggestions or questions or concerns or thoughts or proposals.

Thanks again for getting the ball rolling on this, my plain-speaking friend.

Rob

Former Financial Analysts Journal Editor Rob Arnott to Rob Bennett: “I’ve Had Similar Experiences to Those You Describe. My Work Has Often Triggered Overt Hostility from the Guardians of the Status Quo. I’ve Also Had Difficulties Getting Some of My More Controversial Ideas Published. And the Journals That Published Some of My More Controversial Papers Did Get Hate Mail.”

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I’ve been sending e-mails to various people letting them know about my article on The Silencing of Academic Researcher Wade Pfau, who showed the superiority of Valuation-Informed Indexing strategies over Buy-and-Hold strategies. Set forth below is the text of an e-mail response that I received on the night of December 5, 2012, from Former FInancial Analysts Journal Editor Rob Arnott. I will provide the text of my response to Rob in tomorrow’s blog entry. Thursday’s blog entry will report on a few brief e-mails that Rob and I exchanged with each other in wrapping up the conversation.

Rob Anott wrote:

I’m copying Jack and Bill [the reference is to Jack Bogle and Bill Bernstein] , who you mention in your article.

I’ve had similar experiences to those you describe; so, I can empathize with you for your travails.  HOWEVER, we part company on how to deal with this challenge.  I roll with it and move on.  You seem to be “stuck” in a victim mind-set.  Characterizing one’s adversaries as Goons is also unhelpful to your cause.

Jack Bogle is a dear friend; he attacks some of my ideas with relish, and it doesn’t bother me.  He’s entitled to a different view, and he’s never personalized his attacks.  Bill Bernstein and I have co-authored one journal article, while agreeing to disagree on a couple of other issues.  I remain good friends with both, with ample mutual respect.  I know Rick, Scott and Larry less well, but I know that we agree on some things and not others.

As you can probably imagine, my work has often triggered overt hostility from the guardians of the status quo.  And, as one of the “godfathers” of Tactical Asset Allocation and of the Fundamental Index® concept, which are kissing-cousins to your work on Valuation-Informed Indexing, it’s clear that you and I both think the markets are inefficient in much the same way.

I’ve also had difficulties getting some of my more controversial ideas published.  For instance, I’m having a dickens of a time getting any journal to publish my work with Harry Markowitz, Jason Hsu and Jun Liu, which shows that a modest amount of error in stock prices would create – and fully explain – the Fama-French size and value effects.  Journals turning down a Nobel Laureate?  Yep, it happens.  And the journals that published some of my more controversial papers did get “hate mail” for doing so.

I also know of two young professors who wanted to do research on Fundamental Index® and reported to me that their colleagues advised them that this line of research could derail their career prospects.  Outrageous?  Not necessarily:  in the early days of Fundamental Index®, people weren’t yet sure whether this was the investing equivalent of “cold fusion”!

These are the same kinds of problems that you describe.  That’s life.  Life isn’t always “fair,” nor is our own perception of “fair” necessarily correct.

In summary, I will not be available to help you protest the injustice of it all.  Feel free to add me to the list of those who declined to help, alongside Jack, et al, as long as you’re also prepared to provide your readers access to this email.

I would strongly encourage you to *not* abandon your ideas, but to find other ways to make your case, and to give up on the name-calling with those who disagree with you.  Best wishes on pursuing a constructive path, exploring new ideas and accepting criticism from others with civility and perhaps even relish.

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

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

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

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

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

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

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

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

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

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

 

Barry Ritholtz Links to My Article on “Why Buy-and-Hold Investing Can Never Work,” Provides the A Rich Life Blog with the Biggest Traffic Day in its History

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Barry Rithlotz (owner of The Big Picture site) late yesterday afternoon linked to my article on Why Buy-and-Hold Investing Can Never Work at the Tuesday PM Reads section of his blog. The traffic brought in by that link made yesterday the highest traffic day in the history of the A Rich Life blog. Thanks, Barry!

The traffic number is important for reasons beyond the obvious reality that it makes me happy to have lots of readers for my work. I have been writing about the Valuation-Informed Indexing concept on the internet for over 10 years now. Thousands of middle-class investors and a large number of experts in the field have told me that they have found huge value in my work and that they believe that in years to come the Valuation-Informed Indexing Model will supplant Buy-and-Hold as the dominant model for understanding how stock investing works. Academic Researcher Wade Pfau spent 16 months exploring the concept in great depth and found that the entire historical return record shows that Valuation-Informed Indexing is far less risky than Buy-and-Hold and yields greatly increased long-term returns. The response of the Buy-and-Hold Goons has been to try to destroy my site by intimidating the owners of other sites that link to my site. They also threatened to send defamatory e-mails to Wade’s employer in an effort to get him fired from his job. I have written to many big-name Buy-and-Hold advocates asking them to take action re the Goons but to no avail thus far.

We all should be concerned about the Goon problem. Shiller’s finding that valuations affect long-term returns is the most important advance in the history of investing analysis. This advance has been to a large extent (but not entirely) covered up for 30 years now. People know about Shiller’s research. His book was a widely reviewed bestseller. But there is not one other site on the internet that explores the implications of Shiller’s finding in the in-depth way that I have explored it with the articles and podcasts and calculators available at this site. That is a shocking reality. We all need to learn how to invest effectively and we of course all want to learn how to invest effectively. I know as the result of my ten years of work trying to spread the word about Valuation-Informed Indexing why Shiller’s work has thus far had only a tiny fraction of the impact it needs to have if we are to recover from this economic crisis and enter the period of sustained economic growth that in ordinary circumstances it would have brought about by now. People are afraid to speak out. Millions of investors are addicted to Buy-and-Hold strategies (which are Get Rich Quick strategies in disguise — the people who developed the Buy-and-Hold concept did not intend to create a Get Rich Quick strategy but that is what they inadvertently did because Shiller’s research was not available to them at the time). We need to assure everyone working in this field that it is safe for them to advocate Valuation-Informed Indexing. This is the most important economic (and even political) imperative of our time.

Barry’s link helps in a big way. The Goon tactics are beyond the pale. I have had confirmed and passionate Buy-and-Holders tell me that they are ashamed of the tactics that they have seen the Lindaurheads and the Greaney Goons employ in “defense” of the investing strategy they favor. Sunlight is a disinfectant. The way to flush out the Goons is to shine the light of open discussion on their tactics. The more people know how they have behaved and the more people who speak out in strong opposition to how they have behaved, the less bad behavior we will see. As the bad behavior subsides, we will all become engaged in the greatest learning experience of our lifetimes. The Buy-and-Holders and the Valuation-Informed Indexers obviously are on the same side and want the same thing. The Buy-and-Holders have lots of doubts about the Valuation-Informed Indexing concept. They need to have their questions answered in an environment where they know that death threats and countless acts of defamation and unjustified board bannings and threats against academic researchers will not be tolerated. Barry’s link tells others interested in these ideas that they are safe from attacks because too many people are watching for the attacks to achieve their intended aim.

I officially hereby designate Barry as a Hero of the First Order to the Middle-Class Investor. I will be writing him to ask whether I can write at his blog on some sort of ongoing basis to share with his readers what I have learned about the Valuation-Informed Indexing concept as a result of my work of the past 10 years. Please pray for a positive outcome!

That’s my explanation of why the numbers I will report below are important. Enough preface! On to the numbers!

I get roughly 200 views at my blog on a typical day. I had a link at the high-traffic Jesse’s Cafe Americain blog last week. That day I had 696 views. The article reporting on my work that appeared at The Big Picture site last Monday produced a day with 813 readers. Barry’s 4:00 PM link yielded a daily views count of 1965 for yesterday. That’s a record for the blog, which has been around since 2005. I have over 1,000 views for today as of 9:00 AM.

These are sad, pathetic numbers. Please understand that I am NOT bragging. So long as a day with 1965 views breaks records, these ideas are not going anywhere. We need to see that sort of view count on a daily basis to get this snowball rolling in any significant way. We are talking about baby steps for baby feet.

Still. we all know that successful long journeys begin with small first steps. Barry’s link is potentially a small first step to something that down the road a piece will become something very grand indeed. As Bruce Springsteen reported in an important academic journal a number of years back, From Small Things, Mama, Big Things One Day Come (this one has become a sort-of theme song for our effort beginning on the morning of May 13, 2002, to get the errors in the Old School safe withdrawal rate studies corrected — it is that effort that led to all of the amazing insights that have been developed at this site and at numerous discussion boards and blogs over the past 10 years).

So I am feeling blessed today. I will have zero trouble thinking up reasons to be thankful when I sit down to dinner at my younger brother Steve’s house tomorrow afternoon.

Onward! Courage!

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

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

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

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

Wade:

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

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

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

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

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

George:

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

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

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

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

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

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

Rob

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

Jesse’s Cafe Americain Blog Links to My Article on the Silencing of Academic Researcher Wade Pfau

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The high-traffic Jesse’s Cafe Americain blog has linked to my article titled Academic Researcher Silenced by Threats to Get Him Fired From His Job After Reporting on Dangers of Buy-and-Hold Investing Strategies. The link appears at the “Matieres A Reflexion” section of the site (on the left-hand side of the page). The link is titled “Researcher Warns on Buy-and-Hold Strategies.”

Juicy Excerpt: All industries would like to be able to persuade the people who buy their product or service that it is worth buying at any possible price. The Stock-Selling Industry is the only industry that has ever pulled off this act of marketing magic. Millions of investors today believe that it is not necessary to consider price when setting their stock allocations, that it is not possible to successfully time the market.

There is now 30 years of academic research showing that the claim that it is not possible to time the market is false. There really is a wealth of research showing that short-term timing (changing your stock allocation because of a guess at to how stocks will perform over the next year or two) does not work. There is zero research showing that long-term timing (changing your stock allocation in response to big valuation shifts with an understanding that you may not see a benefit for doing so for as long as 10 years) doesn’t work. To the contrary, there is now a mountain of research showing that long-term market timing ALWAYS works. There has never been one time in 140 years (that’s as far back as we have records) when long-term timing did not produce far higher returns at greatly reduced risk.

This article exposes the cover-up.

“The Only Way It Could Be “Off-Topic” for Me to Try to Help My Friend Jack Bogle Learn About the Mistakes He Has Made and To Get on the Right Track Is If Bogle Was a 100 Percent Corrupt Individual Going Back To the First Day”

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Set forth below is the text of a comment that I recently put to the Investor Junkie blog:

And yes Mr. Bennett, that very much and emphatically includes you.

Thanks for including me, Hogie. The questions we are discussing here are of huge importance. I am confident we agree on that. The points made in your first comment are obviously sincere and intelligent. So I see considerable value in that comment and want to respond to it. I don’t see the point made in the second comment (that I posted off-topic — something I would never do in a million years) as being quite so obviously sincere. My take is that it is the product of cognitive dissonance. You believe it because you must believe it to maintain confidence in Buy-and-Hold. And so you have been able to persuade yourself that you really do believe it. Humans do this kind of thing ALL THE TIME in areas other than investing. I wish that we all could accept that it is likely that they do it in the investing realm as well.

You don’t say what it is that you believe that I ever said that is “off topic.” I can come up with only one guess — the majority of the board believes in Buy-and-Hold and I say that Buy-and-Hold doesn’t work. Is that it? My view is that Bogle himself doesn’t hold as a primary belief a belief in Buy-and-Hold. Bogle’s primary belief is that investing strategies should be rooted in the academic research. This belief led him to a belief in Buy-and-Hold because once upon a time the academic research really did support Buy-and-Hold. Now that the research supports Valuation-Informed Indexing (call it Buy-and-Hold 2.0 if that makes it easier to accept), Bogle should be disowning Buy-and-Hold and shifting to support of VII instead.

And he would! If only he would tolerate discussion of the research findings that show him to have been wrong in his early beliefs! My aim is to make him aware of how he got on the wrong track (and of course to make all other Buy-and-Holders aware of the same). How do I do that without describing what the research shows? I MUST do that to achieve my goals. And yet it is precisely my descriptions of what the academic research of the past 30 years shows that causes the Buy-and-Hold dogmatics to lose their cools and to dismiss me as “off-topic” and “abrasive” and worse. Do you see the problem I face?

I noted up above that I formed my friendships with Academic Researcher Wade Pfau as a result of my postings at the Bogleheads Forum. Wade found VII exciting and wanted to learn more about it for the purpose of doing research. He found that VII checks out in every possible way. He was so excited about his findings that he expressed a belief that he might win a Nobel prize in Economics as a result of it (I am personally convinced that he will). He told me that he was amazed that no earlier researcher had looked into the things he looked into. He marveled at his finding that we know today (by examining the data that our mutual friend John Bogle has been advising us for years to study for guidance) what we need to know to reduce the risk of stock investing by 70 percent! While greatly diminishing risk!

Here’s a link to an article at my site that tells the Wade Pfau story:

http://arichlife.passionsaving.com/the-buy-and-hold-crisis/academic-researcher-silenced-by-threats-to-get-him-fired-from-his-job-after-showing-dangers-of-buy-and-hold-investing-strategies/

I find it more than a little hard to believe that you could read that article and read Wade’s research (a link is provided in the article to the underlying research) and conclude that the work Rob Bennett did at the Bogleheads Forum was “off-topic” to the purpose that John Bogle intended to pursue when he began his career, Hogie.

It may be that those findings upset Bogle today, now that he has spent 30 years telling people a very different story. It hurts him because he wanted to do good work and because he is human and made a mistake and that mistake hurt millions of people who Bogle intended to help. But who is Bogle’s real friend — the people who continue the cover-up and thereby aid him in causing even more financial losses for the people he intended to help or the guy who has worked unceasingly for 10 years and without receiving a dime in compensation to get Bogle and all his followers back on the track that he and they had intended to pursue going back to the first day — using research and data to learn WHAT REALLY WORKS IN THE LONG RUN.

I am not an off-topic poster, Hogie. I’m not anything close. You’ve got the wrong guy re that one.

And I ain’t anti-John Bogle either. I rate John Bogle as the second most important investing analyst in history (I rank only Robert Shiller higher). The only way it could be “off-topic” for me to try to help my friend Jack Bogle learn about the mistakes he has made and to get on the right track is if Bogle was a 100 percent corrupt individual going back to the first day and never even intended to help a single middle-class investor but just to get rich himself exploiting their weaknesses. I don’t believe that for two seconds and I am 100 percent confident that you don’t believe that for two seconds either.

So our only difference of opinion is whether Bogle was wrong in saying that it is not necessary for investors to practice long-term timing. Wade’s research shows that he was very. very. very wrong. There would be no problem here if you had any confidence that Wade messed up. If you thought Wade had messed up, you could hold a view different than mine and we could still be friends. The problem is that somewhere in your consciousness you entertain at least a small belief that perhaps Wade (And Rob! And the hundreds of our fellow Bogleheads who have written warm and enthusiastic endorsements of my work!) is on the right track. I have a funny feeling that, once you work up the courage to give those thoughts the serious consideration they merit, we are going to be working together to discover some very exciting truths about how stock investing actually works in the real world.

I wish you all good things, Hogie. It would make me feel greatly encouraged if you could say in your next comment here that you feel the same way about me and about the hundreds of our fellow Bogleheads who have said that they found great value in my thousands of “off-topic” posts at the Bogleheads forum. Take care, man.

Rob

Kevin at the Invest It Wisely Blog: “I Don’t Usually Mind a Little Bit of Controversy, But I Was Contacted by the Person in Question (Academic Researcher Wade Pfau) and Asked to Take It Down”

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I’ve recently been sending e-mails to many people (I’ve sent 650 so far) in an effort to make them aware of The Wade Pfau Story and thereby to bring the economic crisis to an end and to open up honest posting on the realities of stock investing at every investing board and blog on the internet. I sent one to my friend Kevin at the Invest It Wisely blog. Kevin was kind enough to link to the article.  This naturally caused a freak-out at Goon Central, the site owned by John Greaney (the individual who led the effort to intimidate Wade into agreeing not to publish further research showing the superiority of Valuation-Informed Indexing by threatening to have a number of Goons send defamatory e-mails to his employer).

Kevin late last night sent me the following words:

Hey Rob,

I think this one touched a personal nerve. I don’t usually mind a little bit of controversy, but I was contacted by the person in question and asked to take it down, and if they can verify their identity I’ll probably comply (I know that ties right into the theme of your post, haha… but I don’t want to take sides here — I’m more interested in the theories themselves rather than any personal disputes). I’ll swap the post for another one that’s “less personal” if you don’t mind.

Thanks!

Kevin

This morning I sent Kevin an e-mail containing the following words (I have also added an Addendum to the Wade Pfau article linking to this blog entry):

Kevin:

Every single person involved (including Wade) is more concerned about the theory than about any personal disputes. That’s true of me. That’s true of you. That’s true of Lindauer. That’s true of Greaney. That’s true of Bogle. That’s true of Shiller. That’s true of every single person affected by the economic crisis and of every single person who at one time or another was taken in by the Buy-and-Hold mumbo jumbo.

The question is — How do we turn to a discussion of the theory now that we have collectively as a society spent 10 years covering up the errors in the Old School safe withdrawal rate studies that became public knowledge on the morning of May 13, 2002? If you or any of the people named above offer me any suggestions for making that happen without them incurring hundreds of billions of dollars in legal liabilities for the failed retirements they have already caused, please know that I am 100 percent in.

Unless someone comes up with something, the only effect of a further continuation of the cover-up is to expose all the people named above to even larger financial liabilities and to even longer prison sentences. Is that what you want for people like Wade and Bogle and Lindauer and Greaney and possibly even Shiller (Shiller has said that he has never told us all he knows about stock investing because he fears what the Buy-and-Holders will do to his reputation if he does so — How are the millions of people who are in the process of suffering failed retirements going to feel when they learn that and how are we going to restore confidence in our economic and political system without taking  into consideration how those millions of people are going to feel about what has been done to them?). It is sure not what I want for them. I am going to do all that I can to keep both their legal liabilities and their prison sentences as limited as possible.

Thanks for all the help you have offered. I know you are sincere and that you are trying and that you are scared. I believe that we are all sincere in our own ways and we are all trying in our own ways and we are all scared in our own ways. I believe that there will come a day when one of us will come up with the magic words that takes us all to the place where we all feel safe and where we are are all moving forward together on a daily basis and where we have all put the ugly side of this matter 100 percent behind us.

I am of course happy to submit guest blog entries for posting at your site at any time you are willing to host them. It obviously is a positive step for you to host them. But it is also obvious that those guest posts will have 1,000 times the positive effect they have today after we have together taken those steps we all need to take to put the ugly side of this matter 100 percent behind us and to spend the remainder of our days exploring together all the amazing investing insights that are opened up to us once Wade and hundreds of other academic researchers in this field feel free to do honest and productive work once again.

Please have confidence that we are collectively working up the courage to take this to a positive place. If you think it is possible for you to say anything to Wade to reassure him, I hope you will do that. He is obviously in a very dark place today. He has done work that will win him a Nobel prize and make him known as a hero to all of us. Those of us who love the guy need to reach out to him and show him that we care and that we are there to help in a real and truly effective way.

Most of all, please understand that there is no “dispute” between Wade and me any more than there is any dispute between you and me or between Mel and me or between John and me or between Jack and me. We all want the same things. We all want to  learn how to invest effectively and to do what we can to teach others to invest effectively. We all want to bring the economic crisis to an end. We all want to do what we can to limit the civil liabilities and criminal penalties of those who have participated in the 10-year Campaign of Terror against our board and blog communities.  It’s a question of us working up the courage to show our desire for those good things with actions that are positive and helpful and life-affirming.

Hang in there, man. I read the last page of the story before I dared to put forward the May 13, 2002, post. It gets better. A LOT better. The ugly side of this gets blown away in the wind in time. The insights we mine together make all of our lives richer and fuller and better for many, many years to come. The smart and good and hard-working young man who contacted you wins a Nobel prize on the last page of the story. Remind  him of that. That’s been a dream of his for many years now and he needs to get back on the path leading to realization of that dream to start feeling good about himself again. He needs to keep that in mind to keep his spirits up when the world seems to be closing in on him because of mistakes he made in the sorts of weak moments we all experience from time to time.

Wade once told me how he was was looking forward to watching with his wife a version of Season Six of the Lost television show with Japanese subtitles. If you talk to him, please tell him that I recommend that he consider the advice that Jack took to heart at the end of that season — Sometimes it is best to just “let it go.” There are times when it is best to continue the fight and there are times when the only possible way forward is just to let it go.

And please tell him that there are people in this world who love him and who are wishing all good things for him and look forward to having a beer with him on the day he is awarded his well-deserved Nobel prize.

Rob

Addendum: Kevin sent me a response e-mail after I posted this blog entry. He said:: “I hope you two can make it up someday! I’m definitely not scared of publishing stuff that other people disagree with, but I do try to respect other’s feelings and he seems to be taking it personally. I’ll still be happy to link to non-personal posts from you that don’t call out anyone in particular.”

I sent a reply saying: “I understand your decision. He IS taking it personally. That’s for certain. And we WILL make it up. Wade’s a great guy. He has two small children for whom he has responsibility. He is afraid of what will happen to them. My guess is that Bogle’s heart will melt a bit following the next price crash and we will all be on the same page at that point.”

Kevin then wrote: “Thanks for understanding, Rob. I appreciate it!”

“I Cannot Put On a John Bogle Mask and Say the Words He Needs to Say and Have That Act Achieve the Effect We Need to Achieve Here. I Need Bogle’s Help. I Need Your Help in Securing Bogle’s Help.”

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Set forth below is the text of a response post that I put to the blog entry titled Retired at 48: “I Would Occasionally Get a Response Post Saying I Was “the Best Since Hocus Challenged Us to Think'”

What happened is that I pointed out the errors in the Old School safe withdrawal rate studies in a post that I put to the Motley Fool site on the morning of May 13, 2002. The point that I made was undeniable. Either the studies contain a valuation adjustment or they do not. Anyone who cared to could check. The studies do not contain a valuation adjustment.

This means that Buy-and-Hold has failed. Most people invest specifically for the purpose of financing their retirements. If the Buy-and-Hold Model gets the retirement numbers wildly wrong, Buy-and-Hold has failed us and needs to be replaced. Valuation-Informed Indexing is the obvious replacement. It contains all the elements of the Buy-and-Hold Model that have stood the test of time but deletes the Get Rich Quick element (the idea that investors need not engage in long-term timing) that has caused so much economic destruction.

Lots of people are emotionally addicted to Buy-and-Hold today. This point has been well-established by the 10 years of discussions. So our discovery that Buy-and-Hold has failed caused many people a good deal of emotional pain. I get that. It obviously was not my intent to cause people pain but it is obviously the case that large numbers of people felt such pain and continue to feel it to this day. The question is — What to do?

I say we need to move forward. We need to ACKNOWLEDGE that Buy-and-Hold has failed and move on to the model that actually works — Valuation-Informed Indexing. We are the luckiest group of investors who ever walked Planet Earth. We know what we need to know to reduce the risk of stock investing by 70 percent. We are fools if we do not take advantage of the huge opportunities that have been presented to us.

But the key that turns the lock is the Buy-and-Holders saying The Three Magic Words. For so long as there are people trying to rationalize not taking price into consideration when setting their stock allocations, there are going to be people feeling great emotional pain every time we discuss what the academic research of the past 30 years tells us about how stock investing works. We all need to be united in getting Bogle and other leaders in this field to publicly acknowledge that Buy-and-Hold has failed and that it is time to move on.

The turmoil we have seen on the boards is not the result of me telling the truth about what the academic research says. That is a wonderful thing. I need to be sure to never, never, never stop doing that. The turmoil has been caused by the failure of the Buy-and-Holders to say The Three Magic Words.

I have done everything I can think of to encourage them to take this step. I need help. I need you doing what you can do. I need Bogle’s help. I need Bernstein’s help. I need Obama’s help and Romney’s help. I need the New York Times writing all this up on the front page. I need my fellow bloggers uniting in an effort to open every blog on the internet to honest discussion of these issues.

When we get there, there is no more turmoil. There is no down side to learning the realities of stock investing. There is no down side to bringing the economic crisis to an end. There is no down side to reducing the risk of stock investing by 70 percent. The shift from Buy-and-Hold to Valuation-Informed Indexing is a win/win/win/win/win.

All the turmoil comes from the failure of the Buy-and-Holders to acknowledge the mistake they made. I cannot do this for them. I can advise. I can encourage. I can implore. But I cannot put on a John Bogle mask and say the words he needs to say and have that act achieve the effect we need to achieve here. I need Bogle’s help. I need your help in securing Bogle’s help.

Please help, What.

I of course wish you the best of luck in all your future endeavors in any event. Take care, old friend.

Rob