SWRs

Rob Bennett to Academic Researcher Wade Pfau: “The Issue of Your Job Search Is NOT Entirely Private. It Goes to Motive… It Is of the Utmost Importance That We Make Clear to People WHY So Many Experts Fail to Speak Out Against Buy-and-Hold 30 Years After the Academic Research Showed That There Is Zero Chance That It Will Work for Any Long-Term Investor”

July 11, 2012 by Rob

Yesterday’s blog entry reported on an e-mail sent to me by Academic Researcher Wade Pfau on April 7, 2012. I sent a response within 20 minutes. The text is set forth below.

Wade:

I’m happy to use the entire text of the first e-mail, Wade.

Is it your preference that I run the entire text of your other e-mails?

Rob

Wade responded within 25 minutes. He said: “My preference is that you do not write about any of my emails!” He then identified the e-mail that he wanted me to run in full text. He said: “Beyond that email, I feel that my emails to you are meant to be private, and I don’t want them posted publicly. As long as you posted the entire above email first, please then just summarize any other emails I sent you without using quotes or excerpts. I wrote the first email under the assumption that you would post it publicly, but my other emails to you were written under the assumption they would be kept private. Also, please do not mention that I am looking for a job in the United States, as this is something I do not want my university to know. Some of these matters are very private!”

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

Wade:

There obviously would be no good purpose served in reporting on matters that are entirely private.

The issue of your job search is NOT entirely private. It goes to motive. Most people have common sense and so most people understand that the price they pay for stocks must affect the value proposition they obtain from them. I have asked people why the general rule does not apply in the case of stocks. The answer I get is that “the experts say that is so and I presume that they know what they are talking about.” So it is of the utmost importance that we make clear to people WHY so many experts fail to speak out against Buy-and-Hold 30 years after the academic research showed that there is zero chance that it would work for any long-term investor.

The obvious (to those who have watched The Great SWR Debate) explanation is that the experts are AFRAID to express their honest views in public. It is certainly not only you. You are in very good company. Bogle is afraid to speak in complete honesty. Bernstein is afraid to speak in complete honesty. Tressider is afraid to speak in complete honesty. Burns is afraid to speak in complete honesty. And on and on and on. (These are all great people who have provided many powerful insights — that should go without saying but I don’t think it hurts to say it often given the circumstances.)

This is the problem that has to be overcome. When this one is overcome, all our problems are over. We will not all be in agreement, nor should we be. But at that point all this ugliness will be behind us. We won’t be associated with people who engage in death threats and defamation and board bannings and all this sort of thing. We will be free to do the work we all want to do and to feel good ourselves while doing it.

So THAT sort of thing I very much need to report on. That’s the thing no one else is doing. And it is because no one else is doing this important work that we are in an economic crisis today.

I offer this preface so that you understand where I am coming from. There is ZERO desire here to do anything to cause you any discomfort. I want to see you win the Nobel Prize. That will be one of the happiest days of my life. It is not going to happen until we get to a point where we are all posting in complete honesty and moving things forward at a good pace. I didn’t ask for the job of doing this important work. I was volunteered. I obviously have never been offered any other options. So I obviously just have to do what I have to do, even when it pains me to see that the situation as a whole has caused some pain for people whom I think of as good friends and good people.

I think it is probably possible to avoid mentioning your interest in a job in the United States. I can’t make a commitment at this moment because I haven’t given much thought yet to how these articles would be put together. But my first thought is that it would be okay for me to say something like “Wade mentioned a private matter that caused him to not want the articles to appear at this time.” I don’t at the moment see why people would need to know more than that. [Please see the note at the bottom of this blog entry re Wade’s blog post to understand why I ultimately decided that it was necessary to include Wade’s words re the job in the United States to tell this story in a complete manner.]

That’s not the case with the earlier threats by the Goons to get you fired from your job in Japan. Those threats appear to have played a big role in your move to the dark side. Those threats are already public. The Goons posted them at Greaney’s board for all the world to see. So that stuff is already public and serves as a powerful demonstration of the the power of the Goons to block the public’s ability to learn about very important matters.

One of my jobs is to bring lawsuits against the Goons and those who have permitted them to post at their sites and those who have failed to speak up when they posted at sites at which they post and thereby have lent credibility to the Goons. I think it would help to diminish people’s anger for us to see that there are prison sentences served by those who have posted in “defense” of the Goons on more than a small number of occasions.

A showing that the Goons made threats to get a respected researcher fired from his job for the “crime” of speaking honestly about a matter of great public policy significance and that the researcher did indeed feel intimidated by this threat is PRECISELY the thing we need to get before people to get the major political blogs writing about this story. I believe that this story is going to break as a political story rather than as an investing story because most of the owners of the investing blogs are too compromised by their desire to be on good terms with the hot shots in this field.

I am not going through all this to further inflame you. That’s the last thing in the world I want to do. I am going through all this in an effort to help you better understand how you have managed to get yourself entangled in some very, very dangerous and foul stuff. My personal belief is that your worry about the U.S. job is trivial compared to what is coming down the road. After the next crash, people are going to be very, very angry about what has been done to them and will be looking for people to hang from a tree. Anyone who has put forward words in “defense” of the Goons has set himself up for a world of pain at that time, in my assessment. I pray that my friends will soon catch on to this reality and cease engaging in further acts of self-destruction, Anyway, the purpose here is to help you understand the realities. If you are not capable of appreciating them today, I hope that perhaps you will reread this e-mail at some later date when you are in circumstances that help you come to a better appreciation of what is going on here.

I love you, man. I believe that my appreciation of your research is greater than your own (because I am in circumstances which permit me to see implications that follow from it that you are not able to let into your consciousness today). My hope and belief is that there will be a day when we are both on the other side of the Big Black Mountain of hate and anger and shame and guilt that separates us today and have a beer together and laugh together at the craziness that for a time caused us to think there was some significant difference in our self interests. I don’t think there is. I think we are very much on the same side, regardless of how things may appear to look on the surface..

If you have any further concerns or questions re what I will write or what I have written, please always feel free to drop me a note. My aim is be FAIR both to my readers and to those I write about. I work that side of things very, very hard. I think about it and think about it and think about it. I lose sleep over it. So don’t ever think that I dismiss any request you make casually. Never do I do that. I obviously cannot promise to go along with every request. There are millions of people today who have lost jobs because of all this Buy-and-Hold garbage and I obviously need to worry about the career prospects of those people too. But I care about you and I will always remain open to spinning things in your favor to the extent that it is possible for me to do that in good conscience.

Hang in there. It is my strong sense that things are in the process of getting better. The Goons are feeling more and more desperate every day. Perhaps there will come a time in the not too distant future when all the ugly part of this will be behind us and we will have only the fun, fulfilling parts of the project to work together on. Let us pray!

Rob

This e-mail was my last communication with Wade.

Wade wrote a blog entry at his site making defamatory comments about me (while also making a number of legitimate points) on May 16, 2012:

http://arichlife.passionsaving.com/2012/05/17/wade-pfau-bennett-desperately-wants-someone-besides-him-to-say-that-the-trinity-study-needs-to-be-corrected-but-ive-explained-that-this-isnt-how-research-works/

He deleted the comment that I posted to that blog entry. I checked his site a few weeks later to see that he had deleted comments that I made to other blog entries at his site.

Academic Researcher Wade Pfau: “The Role of Valuations in Affecting Safe Withdrawal Rates Will Definitely Find Its Way Into the Retirement Management Analyst Curriculum…. As I Am in the Early Stages of Hoping to Return to a Job in the United States, I Do Request That You Tone Down a Bit Whatever You Will Be Writing About Me. I Am Just Concerned About What Potential Employers May See When They Google My Name.”

July 10, 2012 by Rob

Yesterday’s blog entry reported on an e-mail that I sent to Academic Researcher Wade Pfau on April 6, 2012. Wade responded a few hours later.

He said: “Thanks for sharing. And I’ll keep plugging away at this. I’m not sure if you saw the news before, but I recently became the curriculum director for the Retirement Management Analyst designation, which focuses on the post retirement period. I was surprised to learn that CFPs don’t learn about post retirement, and their curriculum doesn’t even cover things like the Trinity study. The role of valuations in affecting SWRs will definitely find its way into the RMA curriculum.”

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

Wade:

Please take good care. You’re the best.

I will send you an e-mail when I post the articles. My intent will
obviously not be to stir things up. I just feel better if you hear
news that you might consider unpleasant coming straight from
me rather than finding out about it through some other means.

Rob

Wade responded the same day. He said: “As I am in the early stages of hoping to return to a job in the United States, I do request that you tone down a bit whatever you will be writing about me. I’m just concerned about what potential employers may see when they google my name.”

He added: “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.”

Rob Bennett to Academic Researcher Wade Pfau: “You Feel That I Am Questioning Your Ethics. I Am! Not Just Yours, Though. I Am Questioning the Ethics of Every Person Who Has Seen That Those Studies Have Not Been Corrected and Has Failed to Do Anything About It. The Entire Field Is Corrupt, Wade.”

July 9, 2012 by Rob

Yesterday’s blog entry reported on an e-mail sent to me by Academic Researcher Wade Pfau on April 6, 2012. I responded within an hour. The text of my response is set forth below.

Wade:

Thanks.

I need to get out the door to attend some Good Friday services.

I will get back to you either late today or more likely tomorrow.

I didn’t want you to think that I was not responding because of some sort of anger or something.

Rob

I sent a follow-up response later that day. The text is set forth below.

Wade:

I agree 100 percent when you say “I’m doing what I can.” You have done numerous hugely constructive things. There is no one I can think of who has done more. Re this there is zero dispute.

I agree to a point and disagree to a point when you say that “the way that is best done is to provide new research.”

Providing new research is certainly constructive. That’s clear’y a great thing to do.

But is that response mutually exclusive with the response of pointing out the errors in the Old School studies and getting them corrected?

I put up the post pointing out the errors in the Old School research on May 13, 2002. The Retirement Risk Evaluator was published a few years later, MANY years prior to the many recent media reports that finally
report that the Old School studies get the numbers wrong.

I am not a researcher. I did not have the skills needed to create that calculator on my own. If I had not put forward a post pointing out the errors in the Old School studies, John Walter Russell would never have started doing his research and we would not have that calculator today.

ALL of Russell’s research (some of the most important research that has ever been done in this field, in my assessment) exists because I put that post to that board and we thereby connected. It’s the same with the Return Predictor and the Scenario Surfer and my 200 podcasts and every entry in my three weekly columns. None of that material would exist if I had not had help from John and from hundreds of other community members who connected with me because of that post
and the discussion it generated (still going strong today ten years later!).

And to the extent I have helped you, that help wouldn’t have been provided had I not written that post. Anything that you read by me from my Vanguard Diehard days was the product of work effort that followed from the May 13, 2002, post.

You are doing fantastic work, Wade. I know I have said this many times and I know that I have never said otherwise because the thought that there could be an otherwise has never entered my brain. But there
are many roads to Dublin, to quote a phrase. Pointing out the errors in the studies is important work too.

Say that we get the ban lifted. Microlepsis was one of the most effective and most popular posters at Diehards. John D Craig was another. Retire at 48 was another. All were banned when the board moved to Bogleheads. It’s not just Rob Bennett who would be posting there if honest posting were permitted. Lots of people who were banned because they posted honestly would be there and lots of people who silence themselves on important points today would be speaking up if there were not punishments exacted for doing that.

Rober Shiller has said in interviews that he has never told us all he knows about investing because he would be considered “unprofessional” if he did so. Robert Shiller! This guy has tenure! At Yale! And he doesn’t dare cross the Goons. There is a serious problem here, Wade.

You do something very smart in seeking feedback at Bogleheads. It’s a great way to learn about the strong and weak points of a line of research before getting too formal with it. That’s a huge plus of this new communications medium that I’d like to see lots of people taking advantage of.

But not at the price of their personal integrity! Death threats? Defamation? Threats to get people fired from their jobs? Huh?

This stuff is not slightly unethical, Wade. It is so far over the line that, if we tolerate this stuff, there is no longer a line. We cannot become cannibals. When we give a Lindauer or a Greaney veto power over what is said on the internet, we compromise ourselves in very, very serious ways. This is a money field. This is not a field in which any of us can afford to do that.

Research must be subject to challenge. If it’s not, it’s not science. You submit yourself to peer review. What the heck good is peer review if there is an understanding that research done in this field is never to be corrected no matter how wrong and dangerous it turns out to be?

I’ll tell you why I think you got upset about the Bill Bengen thread. I think you know on some level of consciousness that I am right. And I think you feel that I am questioning your ethics.

I am! Not just yours, though. I am questioning the ethics of every person who has seen that those studies have not been corrected and has failed to do anything about it. The entire field is corrupt, Wade. That sounds like an extreme statement but it really is just a statement of obvious objective fact. So many people got so many things so wrong that we have all adopted a policy of not “telling” on anyone. So the mistakes just get worse and worse.

I want to take it the other way.

That does NOT mean that I have it in for Bill Bengen or John Bogle or John Greaney or anyone else. I do not. I like all those people. I’ve learned from them all. I am trying to help them all.

I suggested to Greaney very early on that he join me in writing a New School study. He would be famous today! He turned me down. But he could have done that.

Bengen can do a new study. He can make it better than his old one. I would be thrilled to help him out. I bet you would be too. I bet the entire Bogleheads board would be if a few troublemakers were shown the door first.

The learning process begins with the admission of mistakes. There is nothing whatsoever bad about admitting mistakes. People would LOVE Bill if he would openly admit his mistake and then get about the business of doing a better job. People would love Bogle if he would admit his mistakes and then get about the business of doing a better job. This sort of thing is done in other fields ALL THE TIME. It’s InvestoWorld that is weird.

I’ll tell you the core problem.

We are in the early days of understanding how stock investing works. Our knowledge today is primitive. We do not know it all. And that scares us. So we act like we do.

If we could just admit that, we could learn bunches. By getting so full of ourselves, we close the door to all sorts of wonderful advances.

There are lines of research that you cannot even imagine today. You are thinking too small. You are trying to follow in the footsteps of people who came before you when you have the opportunity to go to places to which they never went.

Yes, do that new research. That’s A+ stuff. But also please try to understand that it’s important that we get lots of other people doing A+ research. And to do that, we need to make clear as a community that we don’t think we know it all, that we understand that the purpose of the research is to help investors and that part of our responsibility in that regard is to correct mistakes and that we all favor the openness to new ideas that has long been characteristic of our society outside of the investing realm.

Does any of this make sense? Does it click?

It’s not “Do new research” or “Identify problems with old research.” It’s both! Both things are wonderful. Both things are needed. The idea that there is something wrong with admitting a mistake or something mean with pointing one out is killing us. I’m proud that I was the person who discovered the errors in those studies! And properly so!

Rob

Academic Researcher Wade Pfau: “The Reason I Contacted Them [the Authors of the Trinity Study, an Old School Safe Withdrawal Rate Study) Was To List Some Concern I Had (Valuations, Fees, 30-Year Time-Period) About Whether the Results of Their Study Are Applicable for Recent Retirees. I DIdn’t Think the Trinity Study Is Helpful for Recent Retirees. Now, I Think Even More Strongly Than Before That the Trinity Study Is Not Helpful.”

July 8, 2012 by Rob

Yesterday’s blog entry reported on an e-mail that I sent to Academic Researcher Wade Pfau on April 7, 2012. I sent a follow-up e-mail one hour later. The text is set forth below.

Wade:

I thought of a way to reduce the long response I sent a few minutes ago to something much shorter. So I thought I would pass that along. Then I promise to shut up.

You sent an e-mail to the Trinity authors asking them to correct their study.

Why?

Rob

Wade responded the same day. He said: “‘I’m glad to see you’ve pulled back your troops as it seemed you’ve been trying to start a war with me when we really have nothing to be fighting about.”

The e-mail continued: I” don’t have any problem with what you wrote in your last message, except that I have a slightly different view about the issue of correcting old studies. The way I think that is best done is to provide new research to replace the old research. On the issue of old school SWR studies, that is what I tried to do with my August 2011 Journal of Financial Planning article. Now it is just a matter of getting the word out about it, and the results from that article have been featured in the Wall Street Journal and SmartMoney. In June I’ve been invited to speak to a group of high level people from a bunch of different finance companies about this same topic. I’m doing what I can.”

Wade explained: “You asked about why I contacted the Trinity authors. I’m not sure why you even feel a need to ask. It seems like you’ve decided in your mind that I’m a Goon when I’ve not changed my outlook on this or any other relevant issue. The reason I contacted them was to list some concerns I had (valuations, fees, 30 year time period, etc) about whether the results of their study are applicable for recent retirees. I didn’t think the Trinity study is helpful for recent retirees. Now, I think even more strongly than before that the Trinity study is not helpful.

He concluded: “This is why I’m so confused about your attitude toward me since the Bill Bengen incident.”

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

July 7, 2012 by Rob

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

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

Here is the link for the article:

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

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

Wade:

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

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

I am a Boglehead, Wade!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Rob

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

July 5, 2012 by Rob

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

Wade:

I hope things are going well with you.

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

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

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

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

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

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

You have removed my name from the post. Why?

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

I believe you are making a huge mistake, Wade.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Rob

Rob Bennett to Academic Researcher Wade Pfau: “I Do Not Think He [Harold Evensky] Goes Nearly Far Enough in Warning People of the Dangers of the Old School Safe Withdrawal Rate Studies”

July 4, 2012 by Rob

Yesterday’s blog entry reported on an e-mail that I sent to Academic Researcher Wade Pfau on January 1, 2012. I sent a follow-up e-mail later the same day. The text is set forth below.

Wade:

I’ve now had a chance to look at the paper.

I am certainly glad to see his positive comments re your work. He is advancing the ball by pointing people to a new way of thinking about retirement planning.

I do not think he goes nearly far enough in warning people of the dangers of the Old School SWR studies. My view is that many just do not seem to get it yet that VII and Buy-and-Hold are OPPOSITE models. People are trying to work out the differences between them. Buy-and-Hold and VII are a fork in the road. You take one path or the other. The two choices take you to very different places.

My sense is that people who have gained “expertise” (I put the word in quote marks because there can be no true expertise in this field until our understanding of how stock investing works advances to something less primitive than what it is today) under the old model find it painful to acknowledge that most of what they have learned and taught was discredited by Shiller’s findings.

I wish that people could respond to the things we have learned in more positive ways. It’s not even a little bit true that the time spent learning about the Buy-and-Hold stuff was wasted. There were important insights mined in those days and people who understand them well have a head start in learning about the new model. Also, those who get involved in developing the new model obviously will be miles ahead of those who jump aboard the train years later. Many people see
only threats to their status. I see huge (and I do mean huge) opportunities.

That’s my take, for good or for ill. I greatly appreciate you thinking of me. As I noted in an earlier e-mail, it makes me feel less lonely in my never-ending struggle when someone like you does that. It means a lot to me.

Please take care.

Rob

Academic Researcher Wade Pfau: “Because We Just Don’t Have Enough Historical Data to Be Really Sure About Valuations, I Think You Just Need to Be Satisfied With These Sorts of Statements”

July 3, 2012 by Rob

Yesterday’s blog entry reported on an e-mail that Academic Researcher Wade Pfau sent me on December 20, 2011. I next heard from Wade on December 31, 2011.

He said: “It certainly has been a very interesting discussion on your blog these past few days.

He offered the following link:

http://www.fpanet.org/journal/CurrentIssue/TableofContents/RetirementIncomeResearchProvedFruitfulin2011/

Wade observed: “Because we just don’t have enough historical data to be really sure about valuations, I think you may just need to be satisfied with these sorts of statements.” He said that Harold Evensky, the author of the article, “really is one of the leading names in the retirement planning world.”

My response, sent the following day, is set forth below.

Wade:

Thanks much for letting me know about the article and for your comments about the blog thread.

I have some things I need to do this morning. So I won’t be able to read the article until later today. I’ll let you know my reaction when I get to it.

I do have an immediate reaction to your statement that “Because we just don’t have enough historical data to be really sure about valuations, I think you may just need to be satisfied with these sorts of statements.”

I have a catch phrase that I use from time to time — The Big, Black Mountain. The Big, Black Mountain is the Social Stigma that we have created as a society to block ourselves from raising the questions that would cause us to doubt the now dominant model for understanding how stock investing works. My core aim is to get us to the other side of The Big, Black Mountain. Once we get to the other side, all sorts of wonderful possibilities open up. I’m not even a tiny bit worried about what will happen once we make it to that good and fruitful and enriching and life-affirming place.

Please understand that I do NOT believe that everyone is going to agree with Rob Bennett’s views when we get to the other side. There are going to be many, many different viewpoints expressed. Some will conclude as I (tentatively) have that Valuation-Informed Indexing is the answer. Some will continue to believe in Buy-and-Hold. Some will make in-the-middle statements of the sort put forward in the article. There will be new variations that we are not even able to imagine today.

All of that is healthy. The more ideas people try out, the more we are going to figure out over time what ideas really make sense and what ideas really seem to turn the keys. We are not going to arrive at the final resting place in a day or a month or a year or a decade. We will be talking this stuff over for many years to come.

The thing that must go is the dogmatism. That’s all. That’s the entire problem.

Say that there is someone who sincerely believes that a 4 percent withdrawal will always work. That person should properly conclude at the end of his study that that is his belief. But he should also do something else. He should include in his study mention of the reality that there are good and smart people who believe that valuations must be considered and that studies that consider valuations come to different conclusions. If a researcher does that, he is off the hook. He has left it to the reader of the study to conclude for himself what to do with his retirement plan after informing him of the state of current thinking in the field.

The Old School studies now available on the internet do not do this. They present themselves as conclusive on the question of what withdrawal rate is safe. The reality is that there are two models that come to very different conclusions.

My aim is not to get everyone agreeing with me. My aim is get everyone giving voice to his or her sincere views. People who believe that valuations have an effect are not offering their sincere views today. They are holding back for fear of offending the Buy-and-Holders. I have much experience with this. I know this to be so. This must stop. When people hear one point of view repeated over and over and rarely or never hear the other point of view expressed clearly and firmly and completely and boldly, they come to believe that the matter is settled.

The matter is not settled. Our understanding of what works in stock investing is PRIMITIVE today. We are only just beginning the journey. We cannot learn if we act as if we already have it all figured out. All learning comes from a desire to add to one’s store of knowledge. We have to be able to accept that the storehouse is not full if we are to gain the ability to learn more than we know today.

It is taking on an awesome responsibility to tell people how much they need to save for retirement. People who do studies in this area need to show an appreciation of the dangers to which they are exposing people when they venture forth with
“scientific” conclusions about whether people are in a position to hand in resignations from well-paying jobs or not. Everyone should be contributing his or her sincere views. But everyone should be doing so in a spirit of humility. The proper measure of humility is sorely lacking in much of the work done in this field today, in my assessment.

That last comment is obviously (I hope!) not directed at you. I am obviously grateful for your huge contributions and for your efforts to move things in a positive direction. The purpose of the comment is to indicate to you what I view as the most important need — a change in the TONE of the discussions. I believe that there are all sorts of wonderful things we are all (very much including the Buy-and-Holders) going to discover once we achieve a change in tone.

A Happy New Year to you as well!

Rob

Academic Researcher Wade Pfau: “Naturally, I Am Finding that Valuation-Informed Indexing Can Allow You to Reach a Wealth Target With a Lower Savings Rate, Use a Higher Withdrawal Rate, and Also Have a Lower ‘Safe” Savings Rate, Than a Fixed Allocation”

June 28, 2012 by Rob

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

He thanked me for my encouraging words and said: “The idea about PE10 going up being different than P/E10 going down does make sense.”

Wade told me about a book titled “How to Profit From Formula Plans in the Stock Market,” which was published in 1961. He said that he downloaded it at a time when a free download was available but that there was no longer such a download available. He said that it talks about a “halfway rule,” which takes advantage of this concept.

The e-mai stated: “I had a productive evening. Bengen’s discussion about changing asset allocation being the next step got me moving to combine my safe savings rates program with my valuation-based asset allocation program. (do you remember in February when DRiP Guy complained about using a fixed allocation in my safe savings rate paper? That is what I fixed now) Naturally, I am finding that VII can allow you to reach a wealth target with a lower savings rate, use a higher withdrawal rate, and also have a lower “safe” savings rate, than a fixed allocation. The only exception occurs a little bit with the 1990s stock market boom, as you saw earlier with my blog entries about the rolling periods. I’m attaching 3 figures I made about this tonight. This here is probably enough to write an article for Journal of Financial Planning. I’m thinking about this now.

The three figures referred to by Pfau appear below:

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

June 23, 2012 by Rob

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.

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