A Rich Life

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

Ed Rager, Mel Lindauer and Taylor Larimore to Rob Bennett: “You’ve Constantly Misquoted, Distorted, and Disrespected Jack Bogle and Bill Bernstein. Your latest Post “Jack Bogle’s Big Mistake” Was, in Our Opinion, the Final Straw. Jack and Bill Both Join Us at Our Private Events Because They Enjoy Meeting with Friendly, Like-Minded Diehards in a Relaxed and Secure Atmosphere….You Will Not Be Allowed to Attend.”

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While I was looking through my old e-mails to recover the ones that I sent to the Morningstar site administrators and reported on in the last few blog entries, I came across the e-mails that I sent to sign up to attend the Vanguard Diehards Conference with John Bogle in 2007. I had intended to ask Bogle questions about the cover-up of the errors in the Old School safe-withdrawal-rate studies, which I had reported on at a Motley Fool discussion board on May 13, 2002, and which have not been publicly acknowledged by the “experts” in the investing advice field until recent months. I thought that these e-mails too were worth reporting on. I did not receive a response to the question I posed in the last e-mail.

Set forth below are the texts of three e-mails: (1) the e-mail that I sent to Ed Rager on February 17, 2007; (2) the response that I received from Ed on February 18, 2007; and (3) the reply that I sent on Feburary 19, 2007.

Ed:

This is Rob Bennett (“hocus” on the boards). I’d like to make my reservation to attend Diehards VI.

I live in the area. So I do not need a hotel reservation.

My personal information is:

[….]

Please let me know what I need to do to transfer the registration fee of
$189.

Thanks for all the work you did putting this together.

Rob

Hi Rob:
Our Diehards get-togethers are private social meetings of friends and like-minded souls who love, admire, and respect Jack Bogle and his teachings.  You’ve constantly misquoted, distorted, and disrespected Jack Bogle and Bill Bernstein.  Your latest post “Jack Bogle’s Big Mistake” was, in our opinion, the final straw.  Jack and Bill both join us at our private events because they enjoy meeting with friendly, like-minded Diehards in a relaxed and secure atmosphere.  We want them to continue to enjoy and attend our private social events.  Therefore, we regret to inform you that you will not be allowed to attend.
Ed, Taylor and Mel
<br>
Ed, Taylor and Mel:Boo, baby!These statements are of course absurd.Have you notified Jack Bogle of what you have done?

If you have notified him, would you please let me know his reaction?

Rob

Morningstar Site Administrator to Rob Bennett: “If the Post Where You Were Threatened Did Not Occur on the Morningstar Boards, Then Why Bring It Back to Life on the Morningstar Boards?….Consider This a Formal Warning.”

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Yesterday’s blog entry reported on an e-mail that I sent to Morningstar.com site administrators on April 18, 2006, reporting on death threats advanced by John Greaney at an earlier time that were being used by Mel Lindauer, co-author of the book “The Bogleheads Guide to Investing” at that time to intimidate Vanguard Diehards community members into not posting honestly on the errors in the Old School safe-withdrawal-rate studies. Set forth below is the text of the response I received from Morningstar on April 18, 2006, followed by my reply to that response. I did not receive a response from Morningstar to the question I posed in that reply.

Hello Rob,

Thank you for writing.  Unfortunately we are not concerned with the goings-on in other forums outside of Morningstar and have no control over other forums.  If the post where you were threatened did not occur on the Morningstar boards, then why bring it back to life on the Morningstar boards?  As far as we can tell, this constitutes as a posting of misleading information.  Consider this a formal warning.

If you have any additional questions or comments, please don’t hesitate to reply to this email and I will be happy to further assist you.

Best Regards,
Matthew B
Morningstar Support

Matthew:

I certainly agree that the Greaney matter should not be brought to the Morningstar boards. The reality is that it has been brought up there by a number of posters. My post was an attempt to explain to my fellow community members the background as to why this was happening. I did this only after the matter had been injected into discussions held at Morningstar on numerous occasions.

I certainly am okay with the idea of not making further reference to the Greaney matter at the Morningstar boards.

Would it be helpful if I were to notify you on future occasions on which the Greaney matter is brought into the discussions at Morningstar by other posters?

Rob

Rob Bennett to Morningstar Site Administrator: “The Greaney Supporters Openly Discuss Tactics for Disrupting Morningstar Threads….They Have Taken Comfort in the Posts by Mel [Lindauer]”

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Yesterday’s blog entry reported on an e-mail that I received from a Morningstar site administrator on April 17, 2006. The e-mail read: “Please direct us to the specific posting where you were threatened with violence by another Morningstar poster. ” Set forth below is my response, which was sent the following day. I will provide the text of my follow-up e-mail in tomorrow’s blog.

MStar Casey:

I’ve never been threatened by any Morningstar poster.

I have been threatened with violence by a poster from another board. This poster has made numerous threats against posters who in his view “cross” him by questioning his views on investing.

There are a group of posters at another board who support this individual. Several of them have signed up at Morningstar since I began posting there and have put forward disruptive posts as their attempt at harassment.

There have been several posts in which Mel and a number of others at Morningstar have posted links to the web site and the discussion board of the poster who threatened me. His name is John Greaney and he is the owner of the RetireEarlyHomePage.com web site. There is a discussion-board site connected with that web site at which he has several boards devoted solely to the topic of ridiculing me and any of the hundreds of posters who at earlier times supported me on a number of Retire Early boards at which I have posted. The obvious purpose is to intimidate posters who post at these boards not to offer support for me or to disagree with his views.

The posters at Greaney’s board have interpreted Mel’s linking to Greaney’s site and discussion board as support for Greaney’s tactics. I have seen the tactics used by Greaney supporters destroy a number of boards. These are not your ordinary discussion-board tactics.

The post that I put to the Morningstar board was in response to a post in which a poster complained about posters following me around from thread to thread and harassing me. My post was an attempt to explain the background. The Greaney supporters openly discuss tactics for disrupting Morningstar threads (and threads at other boards at which issues relating in some way to what the historical data says re long-term stock returns). They have taken comfort in the posts by Mel and a few others to the Greaney web site and the Greaney discussion board.

The root issue is that Greaney got an important number wrong in a study of safe withdrawal rates that he posted to his web site. There is no reasonable dispute about the fact that he got the number wrong. This has been confirmed by numerous experts, including William Bernstein and Scott Burns. It has also been confirmed by extensive examinations of the historical data on which the study is based. Greaney does not want to acknowledge getting the number wrong, and he understands that permitting honest posting on the safe withdrawal rate topic makes him look bad for failing to acknowledge the error. Honest posting at Morningstar embarrasses him because there are a good number of posters who participate at the various Retire Early boards who also participate at the Morningstar board.

It may take me an hour or two to find the post at Motley Fool at which the threats of physical violence were made against me. I will provide links in a follow-up e-mail. There were numerous threats made (the threats and the fallout from them caused just about all effective on-topic posters to leave the board). The posts in which the threats were made were deleted from the board, but there were several cases in which the threats were quoted in later posts. The last time I checked, the posts quoting the threats were still at the board. I will get back with links in a little bit.

Rob

“I’d Respectfully But Firmly Ask That You Stop Posting Comments on the Topic of the Morningstar Dispute”

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Yesterday’s blog entry set forth the texts of e-mails between Jim Wiandt and me re an article that I wrote on Valuation-Informed Indexing for the www.IndexUniverse.com site. Those e-mails were sent on January 28, 2008. The two e-mails below were sent on the following day. The first was sent by Matt Hougan, who served as site administrator for discussions held at the site’s forum. The second was my response to Matt.

Mr. Bennett –

We’ve worked very hard to create a professional, informative Web site focused on indexes, index funds and ETFs.  Our discussion boards are a key part of that site, and we are committed to keeping the discussions there respectful and topical.

I’m not intimately involved in your dispute with the Diehards board, and I’m not taking one side or the other. I do not, however, want our discussion boards to become the forum for interpersonal disputes between you and other posters. I want to keep the forum open, but some of the recent posts by both you and others have crossed the line of civility. I’m going to delete many of the posts in the recent thread, which I have discretion to do as moderator.

I’d respectfully but firmly ask that you stop posting any comments related to the topic of the Morningstar dispute.

Best regards,

Matt Hougan

Matt:

I have never put forward a post that crosses the line of civility. I never will.

You do not need to be “intimately involved” in a “dispute” to know that making death threats is wrong.

If you want to set up an arrangement in which I notify you promptly when someone posts abusively on a thread at which I am participating, I would be happy to go along with that. Please just let me know any details of how you would like to proceed and I will do my best to make things work for all the people who are trying to learn about the subject of index investing. Those are the people I am concerned about.

Rob

“The Right of Contributors to Post Their
Sincere Views Must be Respected”

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Retired at 48 recently announced at the Vanguard Diehards board that he has entered negotiations with Morningstar.com to deal with the abusive posting problems that have plagued the board in recent years. Set forth below is an e-mail that I sent to Retired at 48 offering to help out in this effort. I have received a response from Retired at 48. We have not made a decision as to whether to go public with any future correspondence.

Retired at 48:

This is Rob Bennett. I posted as “hocus” at the Vanguard Diehards forum from July 2005 through February 2007.

I saw your note at the board concerning your talks with Morningstar to open the forum up to honest posting by community members coming at things from various points of view. That’s good and important work.

I don’t know how much you know about my background. It was my honest posting on the safe-withdrawal-rate topic (and other valuation-related topics) that caused formation of the Bogleheads.org forum in the first place (the board was formed to provide the dogmatics an escape from Morningstar, which was not willing at the time to go along with a ban on honest posting). Here’s a link to an article at my site that provides some background re the thoughts of other community members on the tactics used to enforce the ban:

http://www.passionsaving.com/investing-discussion-boards.html

Here’s a link to an article that sets forth the text of an e-mail that I sent to my congressman on this matter:

http://www.passionsaving.com/internet-harassment.html

Here’s a link to a blog post setting forth the text of an e-mail that I sent to my local police department and that I discussed in telephone conversations with a Virginia state police official who deals with internet crimes (Mel often invited contributors to the Greaney board to the Vanguard Diehards board to help intimidate those seeking to post honestly and two long-time contributors to the Greaney board were named “moderators” for the Bogleheads board on the day it was formed):

http://arichlife.passionsaving.com/2009/01/22/my-e-mail-to-the-virginia-police-re-the-campaign-of-terror-against-our-board-communities/

I wish you luck with your endeavors. I believe that the internet discussion board is an important communications medium of the future but that to achieve its potential the right of contributors to post their sincere views must be respected; that is, site owners must honor the promises they make to those who build their boards to protect them from intimidation tactics. If there is ever anything that I can do to help move things in a positive direction, please let me know.

Rob

“An Important Communications Medium of the Future”

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Katy Marquardt has written about the split-off of the Bogleheads community from the Vanguard Diehards community at her U.S. News and World Report blog.

Juicy Excerpt: Concludes Coleman: “The revamped Diehards.org is better organized, easier to navigate and much more intelligently moderated than the older version,” he says. “It’s becoming a true social networking site.”

I put forward a comment filling in some of the background that Murray Coleman “overlooked” in his write-up at IndexUniverse.com (referred to in Katy’s blog entry)

Juicy Excerpt: The internet discussion board is an important communications medium of the future. We learn things on discussion boards that we cannot learn through books or magazine articles or speeches. The magic is that we get to see how real live people apply the theories they learned about in books and magazine articles and speeches.

Threads are ongoing both at the Bogleheads community and at the Vanguard Diehards community. There’s a thread ongoing at Goon Central too but I recently added as a plug-in to this blog an Extreme Dumbnosity Filter and it will not permit me to post the link; you’ll have to dig that one up on your own.

Oh, shoot! — Here it is.

Today’s Passion: Jim Wiandt, publisher of IndexUniverse.com (referred to in Katy’s blog entry), said of the Valuation-Informed Indexing approach that “It’s not like you are proposing some wild new idea!” That’s me — Good Old Moderate-Sounding Non-Stop Troublemaker Rob.

“The Focus on Active/Passive Is a Distraction”

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There’s good stuff going on at the Vanguard Diehards board lately. Petrocelli offers us a dose of The Common Sense That May Not Be Spoken when he says: “My conclusion after all these years is this: the focus on active/passive is a distraction. The focus should be on buying low-cost funds and diversifying. That’s all. The active/passive distinction can make for some fine pissing contests, but it doesn’t really accomplish a lot in the end.”

That’s good stuff.

I see Passive Investing as the Devil With a Blue Dress On of InvestoWorld. I say “don’t even start up a conversation, you’ll end up in the gutter with a bottle in your hand.” But Passive Investing didn’t get to be so popular just by being evil. There’s got to be some serious good in there or there wouldn’t be so many smart people who have fallen for it. Petro is pointing us to two of the obvious good points when he notes that those who push Passive argue for diversification and for keeping costs down. The other obvious good is that those who push Passive push sticking with a plan for the long term. Those three goods are a very big three goods.

That’s the blue dress part. I believe that God put me on earth to warn you about the devil part. So we better get to that.

Petro is proposing a non-dogmatic approach to Passive Investing. That makes sense. Apply the principles of Passive Investing in a non-dogmatic way and you can enjoy the three goods without falling into the pit. Where I might take issue with Petro a bit is re his possibly too glib suggestion that there are a good number of investors who can pull this off in the real world.

Delete the dogmatic from Passive Investing and you’ve got the one you’ll be proud to bring home to meet your parents. But what are the odds of getting Ms. Passive to go along? Is the Petro vision a fantasy?

I think the Petro vision can be realized. But I think we need to think it through a bit to make it happen.

You can avoid becoming dogmatic about Passive Investing by knowing its limitations. I think that’s the key. In order to make Passive Investing work out in the real world, you need to go in with a peaceful easy feeling, with both feet planted firmly on the ground.

Passive is dangerous in its suggestion that it is okay or acceptable or (heaven help us all!) even a good thing to stick with the same stock allocation when prices go through wild swings. Petro doesn’t care about that rule. He’s a practical guy. He wants what works. So I don’t think he would be opposed to the idea of people hearing why it’s critical that they lower their stock allocations when prices get to the sorts of levels that apply today. So Petro’s vision can work.

People need to be told about the realities, though. We’re born with evil hearts. We all feel temptations to buy into Get Rich Quick schemes. We all possess a desire to hurt ourselves, and unless we are warned about it in no uncertain terms, we will bite into the apple. We need all this stuff spelled out.

We need articles warning us of the dangers of failing to make adjustments in our stock allocations when price changes require it. We need calculators using the historical data to prove the point. All that good stuff. With all that good stuff, I think we can make some changes in the conventional approach to Passive to make it a workable investing strategy.

A generally Passive approach can work. A reformed Passive approach can work. A non-dogmatic Passive approach can work. A valuation-informed Passive approach can work.

A fellow named “Heaths” zeroes in on the good side of Passive a few posts later when he asks: “it seems that you agree that the degree of active is important and more than a distraction. Is that right?” Yes, that’s right. Investors should aim to limit the number of allocation changes they make. And beginning investors should limit the extent to which they engage in stock picking. Those Passive rules are good rules. it is the dogmatic jive talk of The True Believers that causes all the trouble.

Heaths focuses in on an extremely important point a bit later on. He says: “Most investors do not have the skill and/or temperament to actively invest, except perhaps in very modest ways. Because of this most should follow the basic tenets of passive investing: low cost, diversification, and stay-the-course. Some modest active investing might be desirable provided the investor fully understands all of the pros and cons of his investment decisions, but when in doubt most should err toward the passive.”

That’s stated reasonably. It’s not the crazy dogmatism that has made such a mess of so many of our boards over the past six years.

I don’t entirely agree with Heaths, however. I agree that there are important goods in the Passive model and that all investors should be taught about them. I don’t agree that we are not capable of knowing when we need to make changes in our stock allocations, however. All of us have experience paying attention to price when we buy cars and houses and bananas. I am highly skeptical of the claim that we are not capable of doing the same when buying stocks.

It’s true, though, that most of us do not possess this ability today. Heaths nails the current state of play.

You know why? It’s because nobody talks about these realities! When was the last time you heard Bogle give a speech telling us how to know when prices have reached a point where we need to lower our stock allocations? Or Bernstein? Or Burns? Or whoever?

When the Big Shots get down to the business of telling us what we need to know, we will listen. And we will learn. It’s not that we can’t do it right. It’s that the “experts” are so afraid of talking straight about this stuff that they never give us a chance to take the good stuff in.

I know whereof I speak. I have been talking about the effects of valuations on long-term returns on a daily basis for over six years now. Thousands of community members have either expressed gratitude or expressed a desire to learn more. These are ordinary people. These are Normals. These are “most investors.”

We are perfectly capable of learning. What we need today are some “experts” possessing the courage to get about the business of doing some honest and informed and non-dogmatic teaching.

Good job, Petro! Good job, Heaths! Let’s see more of the same!

Today’s Passion: The non-dogmatic Passive Investor is free to do all sorts of things that the dogmatic type dare not even think about. He can pick stocks! No, really. Read all about it in the article entitled Stock Picking for Indexers. Please don’t let any friends of Mel Lindauer know that I wrote that one. I’m in enough trouble as it is.