A Rich Life

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

“Jack Bogle Owes Every Investor Who Has Followed a Buy-and-Hold Strategy an Explanation of Why He Did Not Correct the Errors He Made Promptly Following Shiller’s Publication of Research Showing Them to Be Errors”

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Set forth below are the texts of six comments that I recently put to a discussion thread at this blog:

There is no conspiracy.

Former Financial Analysts Journal Editor Rob Arnott copied Jack Bogle on his e-mail to me saying that my investing ideas are “sound” and sharing with me his own experiences with intimidation being employed to stop academic researchers from doing the research that we all need to see to learn how stock investing really works. Jack did not respond.

I don’t think “conspiracy” is precisely the correct word to describe what is going on here. But there is certainly some sort of funny business going on when Jack Bogle does not offer a public response to an e-mail of that nature. No?

Please explain Bogle’s failure to respond to Rob Arnott’s e-mail from your perspective that there is no “conspiracy” going on re these matters.

Rob

 

You are delusional.

You were one of the ones saying that on the morning of May 13, 2002, when I put up my famous post pointing out the errors in the Old School safe withdrawal rate studies.

In the past year or two, every major publication in this field has acknowledged that I was right.

Is it Rob Bennett who is delusional? Or is it the “experts” who continue to try to “defend” Buy-and-Hold in the face of 32 years of peer-reviewed academic research showing that there is precisely zero chance that this strategy can ever work for a single long-term investor?

Rob

 

You have been banned from a large number of boards.

And I have seen a good percentage of the site administrators who banned me write me notes APOLOGIZING for the bans and telling me that they see great value in my work.

Odd?

Rob

 

As to not getting responses, no one owes you anything.

Jack Bogle owes every investor who has followed a Buy-and-Hold strategy (and they number in the millions) an explanation of why he did not correct the errors he made in development of the strategy promptly following Shiller’s publication of the research showing them to be errors, Sparky.

With great influence comes great responsibility.

Rob

 

Name any crackpot idea and you usually find that 2 or 3% of the population will support that position. That is really not a great percentage.

No one employs death threats and board bannings and tens of thousands of acts of defamation and threats to get academic researchers fired from their jobs to “defend” their ideas from the challenges raised by crackpots, Sparky. Your own behavior tells the tale here.

Rob

 

you seem to be viewed as a nuisance.

I am viewed as a nuisance and a lot worse by people who are still turning a buck through the promotion of Buy-and-Hold strategies 32 years after the peer-reviewed academic research showed that there is precisely zero chance that such a strategy could ever work for even a single long-term investor. That much is certainly fair to say, Sparky.

Rob

“People Do Not Post Comments Here. And People Do Not Link to Me. They Are Afraid to Do So. I Had Tons of Support Before Greaney Threatened to Kill Family Members of Any Poster Who Expressed Support for Me.”

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

I have 140 wildly supportive comments posted (with links!) at the “People Are Talking” section of the site, Sparky. There is no other blogger on the face of Planet Internet who has even a fraction of the number of wildly enthusiastic endorsements that I have won for myself.

Tell me one other blogger who has his name in the Acknowledgments section of peer-reviewed academic research (saying that he was the person whose views on investing inspired the research). And we’re not talking about any old research paper here. We are talking about research that a Ph.D. graduate from Princeton says belongs in the Journal of Finance, the top journal in the field.

Are you joking?

You are right that people do not post comments here. And people do not link to me. And people do not write articles about me.

They are afraid to do so.

I had tons of support before Greaney threatened to kill family members of any poster who expressed support for me. Do you think that might have something to do with the lack of comments here?

And it’s not just the death threats. The death threats were advanced by social misfits who in ordinary circumstances no one would pay attention to for two seconds. The bigger problem is the failure of people like Jack Bogle and Bill Bernstein and Larry Swedroe and Scott Burns to speak up and demand that something be done about those death threats and all the other intimidation tactics that you Goons have employed.

When Bogle speaks up, it is over, Sparky.

From that day forward, I will have not just hundreds of comments at this blog every day, I will have thousands.

That’s why I built the Retire Early board at Motley Fool into the most successful board in that site’s history in the first place. I want thousands of comments every day. And I want a thriving community of people helping those thousands of people to save and invest more effectively.

When your prison term is announced, that news is going to go viral. And then it will be over. The ugly part, I mean. The wonderful, life-enhancing exploration of the realities of saving and investing will continue for years and years and years.

Do I like it that my success depends on you being sent to prison?

I do not like it one tiny bit.

That’s why I have spoken out against the intimidation tactics going back to the first day.

I don’t control everything that happens in this crazy, mixed-up world of ours, do I, Sparky?

If it were up to me, there would be thousands of comments here every day and you would not be on your way to prison. It’s not up to just me. So I have been forced to watch it play out this other way instead.

I wish you all the best, my long-time abusive posting friend.

Rob

“I Have Engaged in Hard Self-Evaluation Every Day for 10 Years Running Now. I Have Come to the Conclusion That It Is Possible That I Am Wrong.”

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

I agree in full with the first two points you make here and in part with the third, Sparky.

I am 100 percent confident that many of the recipients of my e-mails find the e-mail campaign an odd way of spreading the word. How can I be so sure? I find it an odd way of proceeding MYSELF. If the person sending the e-mails finds it an odd way of proceeding, how could at least a significant percentage of those receiving them not feel the same?

And I certainly agree that the vast majority of people do not share my views on investing. If they did, stocks couldn’t possibly be priced as they are today. So that one also is settled.

Your third point is that I should do some hard self-evaluation and consider the possibility that I am wrong.

I agree 100 percent with those words as stated. I have engaged in hard self-evaluation every day for 10 years running now. So I obviously agree with you that this is needed. And I have come to the conclusion that it is possible that I am wrong. I’ve been wrong before. I thought I was right on those occasions. If it happened those times, why would it not be possible that it is happening again?

The part re which I disagree is unspoken but implicit in your words.

Your implicit suggestion is that I should stop sending the e-mails.

No.

That would be a terrible, terrible, terrible choice for me to make.

This is where YOU need to consider the possibility that it is YOU who are wrong.

If you are wrong, we have available to us today a means of reducing the risk of stock investing by 70 percent and we are not making use of it.

If you are wrong, we have caused an economic crisis because some Big Shots in this field were not able to work up the courage to acknowledge that what the academic research appeared to show 30 years ago no longer applies (something that all “experts” in this field should know as a result of their obligation to keep up with the new research as it appears).

If you are wrong, we have destroyed many fine discussion boards and blogs for no good reason whatsoever.

If you are wrong, many of our friends will be serving long prison terms following the next price crash. Huh? That makes sense? It’s not a close call, Sparky. That makes zero sense.

I could be wrong. You could be wrong. So it goes in this crazy, mixed-up world of ours.

Fortunately for us, we have as a society figured out a way to deal with this dilemma. We permit both sides to have their say. Then all the people interested in the subject listen in and decide for themselves. That way, as the case for an idea weakens, it is replaced by another, ultimately stronger idea.

That’s how we have to play it. I am not wrong re that one. That one is backed by all our cultural norms and indeed by our entire legal system and by thousands of years of human civilization. It’s not even remotely possible that I am wrong re that one.

Say that I really am wrong and that Buy-and-Hold is the ideal investing strategy. If that is so, Buy-and-Hold will survive any challenges that I or anyone else can present. The Buy-and-Hold idea will be stronger after it is vindicated than it is today. If Buy-and-Hold is the ideal strategy, that’s what you and I both want to see happen, no?

So let’s get to work, Sparky!

Let’s get that Ban on Honest Posting lifted at every discussion board and blog on the internet and let’s see Buy-and-Hold (or Valuation-Informed Indexing!) vindicated in the national debate that follows.

I look forward to working together with you and all of my other Buy-and-Hold friends to put all the ugliness behind us and to transform these discussions into helpful and fruitful and warm and friendly ones from this point forward.

Please let me know at what time today I should begin posting again to the Bogleheads Forum. I believe that it would be helpful if you would ask Mel to put up a “Welcome Back, Rob!” thread. That would set the right tone for where we all want to take this in coming days.

Thanks for hanging in there, my old friend!

Rob

“We Are Going Up Against Heavy Hitters — Vanguard, Motley Fool, the Get Rich Slowly Blog, Index Universe, Morningstar, the Bogleheads Forum”

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Set forth below is the text of a comment that I recently put to the Goon Central board:

Personally, if I was confident that I’d been wronged and could make $500 million in a lawsuit, I’d pay the lawyer!   It works the other way around too, GW.

If the lawyers were as confident as I need them to be to be sure they can win the case, they would be happy to take it on contingency.

This is what changes with the next crash. After the next crash, what Buy-and-Hold has done to us is in all the newspapers and people are looking for villains to hang from trees. A good lawyer can take advantage of that reality. But that reality is not today’s reality. So the smart lawyer and the smart client wait it out a bit.

I met one lawyer in his office. He liked the case. But he felt that his firm was not big enough to handle it. It was my conversation with him that got me thinking that maybe it was better to be patient. I liked that guy and I would have gone forward had he taken the case. But what he said about needing a big team of lawyers for this particular case struck me as being true. We are going up against heavy hitters — Vanguard, Motley Fool, the Get Rich Slowly blog, Index Universe, Morningstar, the Bogleheads Forum. This is not a job for a small firm.

I don’t want just to bring the case. I want to win the case. A case for $500 million (the case will obviously be for a much larger number — that’s a number that I have put forward as a possible settlement amount for a settlement achieved PRIOR to the next crash) needs to be brought by a team of the best lawyers in the country. Can I get them today? I probably could if I had the right contacts and that still may happen. It could be that one of my e-mail contacts will have an in with some big-name lawyers. But, if I wait until the crash, I will have lawyers lined up around the block. What’s the rush?

My preference in the early days was to bring the case and get the ugly stuff behind us. I still would bring the case today if I had a team of top-flight lawyers showing their confidence by taking it on contingency. But I need to see from the lawyers that they are confident enough to put a good bit of skin in the game. I have a funny hunch that I will see a whole big bunch more of that sort of action FOLLOWING the next crash than I am seeing today. I would rather wait and get a number far in excess of $500 million than rush things and perhaps have to settle for a number a bit smaller than $500 million. Huh? For this case?

You are essentially placing all your bets on a hope that stocks will perform in the future in a manner unlike how they have ever performed before. I am doing the opposite. I say that today’s price is comprised largely of cotton-candy nothingness. It is the product of a huge confidence game, a huge flood of dangerous, worthless emotions. When those emotions fade, you lose it all. You lose the bull market gains you are today counting as real. You also lose the public’s confidence in your SWR studies and the experts’ willingness to pretend that there is some mystical data somewhere supporting those irresponsible claims. You ALSO lose the reluctance of the nation’s top lawyers to bring this case on a contingency basis. Lawyers read the papers. They will see how mad people will be. They know that it is juries that decide legal cases and that juries are comprised of humans.

So it may be that it all flips at the same time.

Rob

 

“An Entire Industry Is Going to Have to Be Rebuilt. The Freakin’ Textbooks Are Going to Need to Be Rewritten. That’s What’s Holding Us Back.”

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Set forth below is the text of a comment that I recently put to the Goon Central board:

What absolute BS.  After he makes his “famous” (but actually insipid) statement on 2 May 2002, less than two weeks later he says: That shows the power of social pressure, GW.

Which is the entire story here.

I am not smarter than Jack Bogle. And I am not smarter than Bill Bernsteinzzz. And I am not smarter than Scott Burnssss.

All those people — and most of the others who have advocated Buy-and-Hold since 1981 — know about Shiller’s research.

So why was I the first to point out the errors in the Old School SWR studies?

It’s because they face greater social pressure than I do. When Bogle gives his “I Was Wrong” speech (and he will), an entire industry is going to have to be rebuilt. The freakin’ textbooks are going to need to be rewritten. All the tests that these people take to become “qualified” to give investing advice are going to need to be redone. That’s pressure. That’s what’s holding us back, not a lack of intelligence. Almost without exception, the Buy-and-Holders are smart as smart can be.

I was sure on the morning of May 13, 2002. I checked it every which way it can be checked before I pushed the “Send” button.

But I was not so sure that I could not still be persuaded by relentless and ruthless social pressure exerted by hundreds of my internet friends.

I did write the apology post. I did believe it was appropriate that Thursday night.

But it turned out that I was wrong about being wrong, didn’t it?

Two days later, Russell advanced his sensitivity study of Greaney’s study. That pretty much sealed the deal, didn’t it?

I was sure. Then I faced relentless social pressure that made me unsure. So I did the right thing and took the words back. Then I saw the numbers-based proof that proved beyond any reasonable doubt that I was right to be sure. And then of course we have had 10 years of confirming evidence since then without ever seeing a tiny sliver of data pointing in the other direction.

This story is a story of the power of social pressure to cause people to believe things that do not make sense.

That’s not just the story of safe withdrawal rates. That’s the story of stock investing.

It is the social pressure we all feel to pretend that we believe that bull prices are real that is the source of just about all stock investing risk.

You take that social pressure away and we never again have another bull market. You take that social pressure away and stocks are no longer any more risky than Certificates of Deposit.

Social pressure is the story here. All you are doing in showing that social pressure influences Rob Bennett just like it influences everyone else is showing how powerful a force social pressure is in stock investing. Yes, it affects me too. That’s because I am human.

If social pressure can influence that stubborn SOB Rob Bennett on the very topic on which he is a stubborn SOB, why should anyone believe that it has zero influence on JAck Bogle or Bill Bernsteinxxx or Scott Burnsxxx?

Social pressure matters, GW. It’s social pressure that got us into this mess in the first place.

And yes, I was have been wrong about things. I was wrong about being wrong about SWRs. There are now 10 years of Post Archives showing this to be so.

And you have been wrong about things. And, when people like Bogle and Bernsteinzz and Burns come to see that it is their job to help you to RESIST the social pressure to believe in bull markets, you will become empowered to earn far higher returns at greatly diminished risk and to retire many years sooner.

Empowering you (and millions of others) has been the entire point of this going back to the first day.

Rob

“I Am Indeed Slow to Act. Some Interpret That As a Lack of Courage. My Take Is That It Is Better Understood As a Situational Kind of Courage. I Need to Be Very Sure Before I Become Unbending.”

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Set forth below is the text of a comment that I recently put to the Goon Central board:

He’s all talk and no action.   He never does anything.

I am slow to act, GW. For good or for ill. If I were asked to give one word to describe my personality, it would be “methodical.” I like to be sure.

That’s why I was the first one to go public about the errors in the studies. I had noticed them years before. My guess is that lots of other people noticed them. I didn’t shoot my mouth off. But I didn’t stop thinking about them either. I thought and thought and thought. And when I felt that I knew enough to venture forward and say something, I ventured forward and said something.

It was the same with everything else.

It was the same with contacting Bogle. It was the same with sending the e-mails. It was the same with saying that Buy-and-Hold caused the economic crisis. It was the same with saying that the new research shows us that stocks are less risky than bonds and that we can reduce stock risk by 70 percent. It was the same with using the phrase “financial fraud” (I used that phrase in correspondence with an e-mail respondent the other day, the first time I recall using it somewhere other than here — I test things out here and then work up the courage to follow-up elsewhere). It was the same with making note of the prison sentences.

There are some lines that I will never cross. No matter how bad things get.

I am the leader re this matter. But FoolMeOnce  once made the point that being a leader doesn’t amount to much if you don’t have followers. FoolMeOnce wanted to be with me. But he was afraid because there were not lots of others publicly declaring that they wanted to be with me. Lots of people are like that.

If that never changes, my efforts will never succeed. This is not a one-man job.

You’ve got me re that one.

I think it will change. But I am not God. I’ve been wrong about lots of things. It could be that I am wrong about this.

However, if there comes a day when people show a willingness to follow, I will lead. I’ll be scared. I was scared when I put forward the May 13, 2002, post. I forced myself to push the “send” button. I’ll force myself to lead this effort where it needs to go for millions of people to feel safe saying what they truly believe about stock investing on EVERY board and blog on the internet. That’s the job. I will see it through to completion presuming that I someday have the number of followers required for this to be a viable proposition.

I don’t think of myself as being a person of great courage. If I had been a person of great courage, the May 13, 2002, post would have gone up in May of 2000.

But I am something. I follow through. When I commit myself to something, after pondering and pondering and pondering whether it is the right choice or not, I stock to that path in the face of relentless opposition. There have been one or two other turning points in my life in which similar events played out. I handled things in the same way. With love for the other side. With a great desire for compromise. But with a steel resolve not to betray the core mission, which I elected only after a great deal of pondering as to what was the right way to proceed.

It’s not my purpose here to brag. I am not saying how great I am or how strong I am. I am not predicting ultimate victory. Perhaps I will end up in the electric chair, like Greaney once predicted.

What I am saying is that, if I fail, it will not be because I did not follow through. I am slow to act. But I evidence determination in the actions I take. There’s something in the nature of the methodical person that makes him slow to act in cases in which he is not sure (which is most cases) and determined in cases in which he is sure (the small number of cases to which he has devoted so much thought that even his methodical soul is clear re what must be done).

I believe — based on my life story — that the methodical person is the most determined person once he has convinced himself that an action absolutely must be taken. People don’t see it that way because the methodical person so rarely sticks his neck out. But it is not really a lack of courage that causes the methodical person to generally refrain from sticking his neck out. It is a lack of certainty. The methodical person sees both sides of the story. So he is generally content to let the other guy — who seems so much more sure of himself — call the play. In those few cases in which the methodical person has directed enough mental energies to a matter to feel comfortable sticking his neck out, he is so sure that he cannot live with himself if he does not evidence follow-through.

That’s where I think things stand, in any event.

There are lines that I will never cross because I could never feel comfortable crossing them. I will never say “I know for certain that Valuation-Informed Indexing works” because I don’t believe it is possible for one person to be that sure of anything. No one person knows it all. I could be missing an important piece of the puzzle. I can believe that VII works. I cannot by myself know for certain.

It’s not just me on the issue of whether honestzzz posting should be permitted. That one is backed by our entire society, our entire culture, our entire history, our entire legal system. That’s why I feel so sure re that one. Re that one I am positive.

If I obtain a sufficient number of followers to achieve my goals, I will have what it takes to follow through. I know this from life experience. I won’t flinch. I won’t go sentimental. I won’t offer deference to my “betters.” I’m tough as nails when the circumstances are such that a person with my personality feels driven to be as tough as nails.

If I don’t obtain a sufficient number of followers, this will not happen. I will never feel that it is right to force it. I don’t believe that that can ever be the right thing to do and I will never be able to persuade myself that it is the right thing to do, no matter the circumstances. If things reach a point where our entire economic system is about to collapse and I still do not have a sufficient number of followers, so be it, that’s what was meant to happen. I don’t judge myself according to whether I achieve success in the eyes of the world (perhaps you have noticed!). I judge myself according to whether I have lived up to my internal standards. My internal standards compel me to send the e-mails. My internal standards forbid me from crossing lines that I believe should never be crossed. So there are many “options” that some others might consider that are not even remotely possible options in my mind.

Anyway, that’s where things stand from my perspective.

I am determined. And I am optimistic. But I am not certain. There are ways that things could play out that you guys would “win.” That sort of win would be a horrible loss for all of us, in my assessment. But I do not say that there is zero chance that we will all have to endure what comes with a win for you guys (and witches).

I am not entirely lacking in courage, though. I am indeed slow to act. Some interpret that as a lack of courage. My take is that it is better understood as a situational kind of courage. I need to be very sure before I become unbending.

“My Personal Preference Would Be to Find Some Way That No One Would Go to Jail. For Years I Did All in My Power to Make That a Reality. I Don’t Think That’s Possible Today.”

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

Rob,

Just a few more questions

How many boards have banned you?

How many emails have you sent to Wade?

How many emails have you made about Wade?

How many posts have you made about Wade?

How many people do you think should go to jail?

On what basis do you believe people will be charged with a crime that would lead to jail time?

There have been roughly 15 bannings.

Wade and I exchanged scores of e-mails.

The count for the e-mails that I have sent was at 9,500 this morning. I sent 100 more today. So it’s 9,600 at this moment in time.

I have an article that provides links to all the blog entries about Wade. My recollection is that there were 140. That was before I began the e-mail campaign.

I’m not able to answer the jail question. My personal preference would be to find some way that no one would go to jail. For years I did all in my power to make that a reality. I don’t think that’s possible today. Too many people have been hurt in very serious ways. I believe that there will be a good number of people going to prison. The question of who and for how long will be one that we will decide as a society. I will be arguing for prison sentences somewhat reduced from those that are supported by the consensus of opinion. I would like to see us focus on the positive side of all this rather than on retribution and all this ugly stuff. I believe that we need to work hard to keep our eyes on the prize.

No one will go to prison for believing in Buy-and-Hold. There are obviously millions of good and smart people who believe in Buy-and-Hold, The prison sentences will be for those who have engaged in financial fraud over a prolonged period of time. If you have failed to correct a retirement study after learning of an error you made in it, that’s obviously financial fraud. If you threaten to kill people to cover up errors you made in a retirement study, that’s obviously financial fraud. If you ban honest posting at your web site, that’s obviously financial fraud.

It’s not possible for any one person to say what is right re the prison question or what will happen re the prison question. We have never faced circumstances like this before. People are going to be very angry. And there’s no way to pay them their money back — the money was all pretend in the first place! So there are going to be calls for prison sentences for those who threatened academic researchers and all this sort of thing. I see it as my job to try to rein in emotions and to keep people focused on the positive. That’s why I am working hard today to bring the cover-up to an end. I see bringing the economic crisis to an end as our best option for keeping the prison sentences as limited as possible.

The charge will be financial fraud. You need to be careful here. The academic research showing that there is zero chance that a Buy-and-Hold strategy can work in the long term was published in 1981. So in an objective sense anyone who has recommended Buy-and-Hold strategies over the past 30 years has engaged in financial fraud.

The full reality, though, is that the vast majority (perhaps all?) of those who have recommended Buy-and-Hold are suffering from cognitive dissonance. They know in one part of their minds that Buy-and-Hold cannot work. That’s why Buy-and-Holders become so defensive when their strategies are questioned. But they also “believe” in the strategy in another part of their minds. They follow it. I have not seen any evidence that the people endorsing Buy-and-Hold strategies are not following them themselves.

So you don’t have bad intent. Bad intent is an element of the crime of financial fraud. So an endorsement of Buy-and-Hold in itself is not fraud despite the 30 years of research showing that it cannot work.

But what about when you have death threats or board bannings or defamation or threats to academic researchers?

Those acts show bad intent. Those acts turn a misunderstanding of what works in stock investing into financial fraud, a crime under the laws of the United States.

That’s my sincere take re this matter, Sparky. It obviously would be a good thing if others chimed in. If some want to argue that there is no financial fraud here, we need to hear from them, If others are as concerned about the prison sentences as I am, those people should be speaking up. It is only by speaking up that we can help our Buy-and-Hold friends either avoid prison sentences altogether (in cases in which they have not yet evidenced bad intent) or have their prison sentences reduced (by helping to bring the economic crisis to an end and thereby diminishing the public anger that otherwise might result in very long prison sentences).

I hope that helps a bit, Sparky. Don’t let the bad guys get you down, man.

Rob

“The Wall Street Con Men Have Huge War Chests They Can Put to Use Destroying People Who Tell the Truth About Stock Investing”

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

Another example of you misunderstanding what you read.

I don’t think so, Evidence.

Michael is trying to earn a living. Like Wade Pfau. Like Robert Shiller. Like Rob Arnott. Like lots of us.

The Wall Street Con Men have huge war chests they can put to use destroying people who tell the truth about stock investing. So the people who tell the story straight nearly always pull their punches so as not to find themselves on the wrong side of a vicious and unrelenting smear campaign.

So, yes, he states things a bit softer than I do. But we are delivering precisely the same message. Everything I have said for 10 years now follows logically from the findings of Robert Shiller’s 1981 research. If people were not afraid to speak the truth out loud, there would be HUNDREDS of web sites saying what I say at this one.

The problem is that people are afraid. And, because people are afraid, they don’t say things clearly. And, because they don’t say things clearly, many people don’t hear the message. And, because many people don’t hear the message, it’s hard to make a buck telling the truth about stock investing. And, because it’s hard to make a buck telling the truth, many are tempted not to tell the full truth. And, because many don’t tell the full truth, it remains possible for the Wall Street Con Men to single out those who do and crush them.

When the Ban on Honest Posting is lifted, we will have hundreds of researchers saying what Michael says in his paper. And, when there are hundreds saying what he says, each of those hundreds will feel emboldened to say things more clearly and with more details and with a discussion of more practical implications. And we will then begin achieving a huge number of amazing advances in a very short amount of time.

We are mid-way through a process, Evidence.

We started out not knowing. This con was not a deliberate con. People really once believed in Buy-and-Hold. We have known now for 30 years that there is precisely zero chance that a Buy-and-Hold strategy can ever work for a single long-term investor. But, until the 2008 crash, most of us were afraid to speak up. Now we are getting some people to speak up in a tentative sort of way. Those voices will grow louder and firmer and more assertive over time.

Michael is saying the same thing that I am saying. He is just saying it in a softer way. What’s important to you as an investor is the message. The Efficient Market Theory was a terrible mistake. Buy-and-Hold was a terrible mistake. We need to move on.

I wish you well, Evidence.

Rob

“People Will Start Making Money From Valuation-Informed Indexing Once the Social Taboo Is Lifted. New Calculators Will Be Created. Books Will Be Published. There Won’t Be One Academic Researcher Showing the Superiority of VII Over Buy-and-Hold, There Will be Hundreds.”

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Set forth below is the text of a comment that I recently put to the Goon Central board:

Will the argument remain circular after the Campaign of Terror is brought to a full and complete stop (by the close of business today?).To a large extent, it will.

The true believers will remain true believers. They will no longer make use of death threats and board bannings and tens of thousands of acts of defamation and threats to get academic researchers fired from their jobs. But their minds will not change in a day or a week or a month.

It is the minds of those on the edge that will change. I did not believe most of what I believe today on the morning of May 13, 2002. I learned because I heard things said that I had never heard said before. John Walter Russell changed his mind on many things too. Wade Pfau changed his mind on many things too. So did hundreds of others.

More of that will happen once all the ugliness is put away. The percentage of the population that believes in Valuation-Informed Indexing will grow once honestzzz posting is permitted at every board and blog on the internet.

People will start making money from Valuation-Informed Indexing once the Social Taboo that today stops people from talking about the last 30 years of peer-reviewed academic research is lifted. There will be new calculators created and the people who created them will become famous and seeing that will encourage others to create new calculators. There will be hundreds of books written exploring the ideas that I have explored at my web site over the past 10 years. There won’t be one academic researcher publishing research showing the superiority of VII over Buy-and-Hold, there will be hundreds. The Goons will be sent to prison. News of that will go viral. People will wonder how it could be that an investing strategy that is promoted as research-based ended up causing hundreds of people to get sent to prison.

The new ideas will grow and grow and grow and grow and the old ideas will lose supporters and lose supporters and lose supporters and lose supporters.

Eventually there will be no more circular discussions because there will be no more Buy-and-Holders. Buy-and-Hold was a mistake. The reason why the discussions have been circular is that there is no effective way to defend a mistake. The only hope that the Buy-and-Holders have had going back to the morning of May 13, 2002, was to turn the discussions into a circle of nonsense and add generous helpings of hate and anger and envy and malice and intimidation to the mix.

Those days are coming to an end.

The discussions will not be circular much longer.

Once we give ourselves permission to discuss the peer-reviewed academic research of the past 30 years honestly, there is no more Buy-and-Hold.

That’s a very, very, very good thing for all of us.

There is no purpose in discussing Get Rich Quick strategies. They never work.

We should be discussing research-based strategies.

Once those who have posted in “defense” of Mel Lindauer and John Greaney are placed in jail cells, that’s what we all will be doing.

Do I wish that prison cells did not have to enter the picture? Of course. Obviously.

But that one was never my call, was it?

My call was whether to post honestly on the errors in the Old School safe withdrawal rate studies or not.

I elected to post honestly.

And that has made all the difference.

Rob

University of Siena Economics Professor Roberto Reno: “Your Article Was Thoughtful, Even If I Don’t Like Too Much the Conspiracy Idea. For What It May Count, I Am Not Pressured by Anyone in My Research”

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I have been sending e-mails to numerous people letting them know about my article on The Silencing of Academic Researcher Wade Pfau by the Buy-and-Hold Mafia. Set forth below are the words of the response I received from University of Siena Economics Professor Roberto Reno, followed by my reply to him:

Thanks for your article. I will have a closer look at Pfau’s paper and pass it to students.

However, I have to disagree on a couple of things.

1) The fact that you mention (long-term stock prediction) is also contained in the enclosed paper by Cochrane (admittedly, the more mainstream scholar around) [My guess is that Reno wrote these words quickly and had intended to suggest that Cochrane is NOT the most mainstream scholar around — Rob] and was published in the Journal of Finance (top in the field).

2) It is not strictly true that there is no research on this. Let me enclose a small example from myself. Here we show that, when properly computing standard deviations, presumed long-term strategy with extra returns are actually as effective as random picks. There are, obviously, many other examples. I just supervised an undergraduate thesis on value investment.

Your article was thoughtful, though, even if I don’t like too much the conspiracy idea. For what it may count, I am not pressured by anyone in my research.

Best.

Roberto

Roberto:
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Thanks for your kind and balanced and well-informed response. Thanks especially for the two attached articles.
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I agree with the point that you are making. There ARE people who say that returns are predictable in the long run at the same time that there are people who say that Buy-and-Hold strategies can work. I think that the best way to describe today’s reality is to say that we are in a twilight zone. We know that the market does not behave the way it would have to behave if it were efficient (there should be no predictability). But we have thus far been unwilling as a society to explore in an in-depth way the IMPLICATIONS of this reality.
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If the market is not efficient, it is predictable. If the market is predictable, stocks are not nearly as risky as we have long thought them to be. Wade’s research shows that an investor who is willing to give up following Buy-and-Hold principles can thereby reduce the risk of stock investing by 70 percent (the largest Portfolio Percentage Drawdown goes from 60 percent to 20 percent). That’s huge! We could be doing an awful lot of good for an awful lot of people by publicizing this reality. Also, we could stop economic crises by publicizing this reality. Each of the four economic crisis we have seen since 1870 were preceded by a P/E10 level of 25 or higher. If people knew how bad a deal stocks are once the P/E10 level exceeds 25, most investors would sell once prices became insanely high and that would pull prices back to fair-value levels so the economic crisis would be averted. The economic and political implications here are very far-reaching.
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We have thus far held back from doing that. Why? Paradoxically, it is precisely BECAUSE the benefits of exploring these realities would be so great that we hold back from doing so! That sounds crazy but it really makes sense in a crazy kind of way when you think about it. Huge advances make those who did not discover the realities that led to the advances feel bad that they were not the ones who discovered them. There are a lot of Buy-and-Holders who do not want us to move forward because of emotional failings that are common to all humans. My sense is that the Buy-and-Holders are not even aware of their feelings of envy and shame (the humans often experience cognitive dissonance re these sorts of things). But they are there and they are real and they are affecting our ability as a society to learn things we need to know about stock investing in very important ways.
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I am trying to take us from the unfortunate place where we are today to the wonderful place where we all deep in our hearts want to be tomorrow. The Buy-and-Holders of course want to experience the benefits of knowing the realities of stock investing as much as everyone else. The tough part is — How can we get past their defenses and help them learn the realities of stock investing without TALKING about the last 30 years of research-based findings? We can’t. We must feel free to talk openly about these matters to make progress. But it is open discussion of the research findings showing that Buy-and-Hold never works in the long run that sets the Buy-and-Holders off. They worry about all sorts of things. They worry that they failed themselves and that they failed their friends and neighbors and co-workers and on and on. And of course there are career concerns and pride concerns. The Buy-and-Holders are in great emotional pain today and I believe that it is the responsibility of everyone in this field aware of this pain to do what he or she can to relieve it.
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That’s the goal of my project. I want to help the Buy-and-Holders develop the self-awareness needed for them to react to these findings in the way that deep in their hearts they have always wanted to react to these findings. I believe that great advances await us on the other side of The Big Black Wall.
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I understand that my words here relate to emotions and that it is not the norm in the research field to discuss such matters. That is the problem! The core flaw of Buy-and-Hold is its excessive rationality. Investing is a largely emotional enterprise and we can never understand it fully without first coming to accept that we will need to be willing to examine human emotions to become able to do so effectively. It’s hard dealing with the emotional stuff. But my strong sense of things is that the potential rewards of doing so are large indeed. I hope and believe that following the next crash there will be many people (including many who advocate Buy-and-Hold strategies today) who will see the merit of going down this path.
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I understand why you say that I am putting forward a “conspiracy theory.” I don’t think I am. But it is a close enough call that I can see how people of good intent would see it that way. I would describe this as a conspiracy of ignorance. The humans were born in ignorance and we develop knowledge over time. When we are on the verge of making huge advances, we get scared because we have grown comfortable with our old ideas. That’s what I see going on here. I view the Buy-and-Holders as heroes and pioneers. They laid the foundation for the huge advances that I believe we will be making in the next few years. I want to be friends with all the Buy-and-Holders. The hostility is all on their end (I say that not as some sort of dig but just to let you know that I feel great affection and respect for my critics because of all the great work they have done). I hate it that I am required by the standards of my profession (I am a journalist) to say negative things about the Buy-and-Holders. There is just no other way to tell the amazing and incredibly positive (despite some surface appearances!) story without doing so. I hope that I always balance the negative things I say with a good bit of telling of the other side of the story, which is every bit as important and true.
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If you have doubts about whether other researchers have been intimidated, you might want to take a look at the words of the response I received from Former Financial Analysts Journal Editor Rob Arnott. He told me that young researchers who were planning to do work supporting his ideas were taken aside and told that their careers would be damaged if they did so. This is what happened to Wade. This sort of thing should never happen. This is serious stuff. Research that is not independent is research not fit for publication. I believe that MANY researchers (perhaps MOST) are affected by the intimidation tactics without knowing that they are being affected. We all are social creatures and we all become aware of taboos that may not be violated. Questioning Buy-and-Hold has become taboo in our society. I had one fellow on a discussion board tell me that he had never heard anyone before me describe Buy-and-Hold as a “Get Rich Quick” scheme. But, if the price you pay for stocks affects the value proposition you obtain from them and Buy-and-Holders encourage investors to ignore price when setting their allocations, that is precisely what it is, no? I have spoken to numerous bloggers and financial planners and economists who are aware of the intimidation tactics and of course appreciate how big a story it is and yet hold back from writing about it because they feel “funny” about it. Most of these people have not been directly intimidated but yet they feel and act intimidated all the same. The Social Taboo that holds us all back from speaking openly about the dangers of Buy-and-Hold strategies is a poison that is killing us all, in my assessment.
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The full truth is that this was so of me for a long time. I am the person who discovered the errors in the Old School safe withdrawal rate studies. Paradoxically enough, I learned about them by reading one of John Bogle’s books! This was in the late 1990s. I held back from posting about the errors in the retirement studies (they fail to make an adjustment for the valuation level that applies on the day the retirement begins!) until May 2002. I was afraid of what would happen to me if I went public with what I knew. And the reaction I saw was 5,000 times worse than anything I imagined in my worst nightmare. Lots of people either saw that or sense the possibility of something similar happening to them and hold back from speaking out plainly and boldly and firmly as to their views on investing as a result. It’s a mess!
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To some extent I am shooting in the dark with these e-mails. I am putting ideas before people and seeing how they react. I am trying to learn in more detail the reasons why we have as a society been so reluctant to talk about ideas that could do us so much good. Each reaction that I get makes the picture a tiny bit clearer to me. So I am grateful to you for taking time out of your day to help me out.
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Please take good care.
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Rob