A Rich Life

Valuation-Informed Indexing #256

by Rob Bennett

My friend Wade Pfau has written an important article on Valuation-Informed Indexing that I encourage you to read in full. The article is titled: Is High CAPE Cause for Alarm? Part Two: Valuation-Based Asset Allocation.

The article refers to me directly. It states: “We have historical evidence to suggest that mean reversion can be expected at some point, but it most certainly cannot be predicted. Since the precise timing of mean reversion is entirely random and unpredictable, expecting the result to occur in the short-term is unwise. One internet blogger has been using PE10 to predict a 65% drop in the S&P 500 by the end of 2015. This is not how the concept should be applied.”

I am the internet blogger being referred to here. There are points made in that paragraph re which I am in agreement with Wade. But I am very much NOT in agreement with him re the question of whether we should be expecting a price crash of roughly 65 percent by the end of 2016 (I once predicted that we would see the crash by the end of 2015, but that was a good number of year back — I have been predicting it by the end of 2016 for a long time now). The question of whether there comes a time when relatively short-term predictions are feasible is an important one and one that needs to be much more widely discussed.

I agree 100 percent with Wade that mean reversion can be expected whenever prices get too far out of hand. I disagree with his naked statement that “it certainly cannot be predicted.” It is certainly true that there are limits to our ability to predict when mean reversion will take place. But it is not true that no effective predictions are possible. In fact, it is dangerous and irresponsible (in my view!) to pretend that this is the case.

Even the statement that mean reversion always takes place is a prediction. It is not at all a precise prediction. But it is a prediction all the same. The question is not: Are predictions possible? The question is: What sorts of predictions are possible?

I predict that we will see a price crash by the end of 2016. That is only 18 months out and so it is a short-term prediction. The general rule is indeed that short-term predictions do not work. The general rule is that only predictions that go ten years out work. So, looking at things on a surface level, what Wade is saying is in tune with that the research shows.

But there’s a problem.

The P/E10 level peaked in January 2000. The research showed at that time that we would see a crash within 10 years. We of course did indeed see a crash in that time-period — prices fell dramatically in late 2008. So that prediction worked.

But the bull/bear cycle that began in 1982 did not resolve with the 2008 crash. There has never been a bull/bear cycle that ended before the P/E10 level dropped to 8 or lower. This is why Robert Shiller was telling people in early 2009 to stay out of stocks until the P/E10 level dropped below 10. We never got there. The Fed pumped money into the market to block it from falling below 13 and they have continued trying to hold off the deeper price crash that we need to experience before a new cycle can begin. We still have to go to 8 or below, which is a price drop of a bit more than 65 percent from where we stand today.

It’s important to know when we will see that price crash. The answer affects all sorts of things. It obviously affect the efforts of investors to finance their retirements. It also affects the economic recovery we all want to see. Each time prices crash investors lose trillions of dollars of pretend bull-market wealth. That means they cut back on spending. That means that hundreds of thousands of businesses fail. That means that millions of workers lose their jobs. This question of whether it is ever possible to make relatively short-term predictions of where stock prices are headed is a matter of great public policy import.

I do not feel comfortable making short-term predictions. I agree wholeheartedly with Wade that as a general rule “this is not how the concept should be applied.” But I have a big problem with holding back from making the 65-percent-crash-within-two-years prediction in the circumstances that apply today.

The first crash took place in September 2008. As a society we permitted P/E10 levels to reach such insanely high levels in the late 1990s that a single crash was not enough to bring prices to the levels they need to reach for the old bull/bear cycle (which dates back to 1982) to resolve itself and for a new one to begin. So there has to be another crash. Using the ten-year rule (which is the rule supported by the 145 years of historical data available to us today), we should be expecting that second crash by the end of 2018.

So I acknowledge that the prediction that I often put forward — that we will see the next crash by the end of 2016 — may not come through. It is hard to be precise about these things. Shiller famously was “wrong” about the prediction he made to the Federal Reserve that we would see the crash we saw in 2008 by the end of 2006. I put scare quotes around the word “wrong” because it is my view that Shiller was more right than wrong in his 1996 prediction. No, he didn’t get it precisely right. But he got it a lot more right than the many “experts” who were saying that there might not be a huge price to be paid for the insane price levels we saw in the late 1990s. I would rather be roughly right than wildly and irresponsibly wrong (as was just about every expert in this field not named “Shiller” back in 1996).

There are two reasons why I predict that we will see a crash by the end of 2016 rather than by the end of 2018 (the far safer prediction).

One reason is that a lot of my critics insist that I offer claims that can be verified as proof that the Valuation-Informed Indexing concept works. I always explain that precise predictions generally cannot be made. However, I do have some sympathy for their position. To say “there will be a crash someday because prices must revert to the mean but we have no idea when that will happen” is to say just about nothing. It is not fair for critics of Valuation-Informed Indexing to demand more precision than is possible. But it is also at least a little bit unfair for Valuation-Informed Indexers to offer any precision whatsoever. I think we should always employ caveats when we make predictions. But I think we also need to try to be a bit more specific than to say “there will be another crash someday.”

Valuation levels  have been headed downward for nearly 16 years. It’s been seven years since first crash. Ten years is not the amount of time we should expect to see pass before we see a second crash; it is the longest amount of time we should expect to see pass before we see that second crash. At the end of 2016, we will have seen eight years pass. I think it is reasonable to expect to see the second crash by then. It hardly seems fair to say in 2008 that we should expect to see another crash within 10 years and then to continue to say in 2015 that we should expect to see another crash within 10 years. If the 2008 prediction was valid (it was), then it should be possible to say in 2015 that we will see a crash within three years. And, given that that is the longest it should take for the crash to take place, it does not seem to far out to me to say that we should expect to see the crash by the end of 2016.

I don’t offer guarantees. I certainly acknowledge that my prediction could be proven wrong. But I see strong support for that prediction in the 145 years of historical return data available to us today.

The second reason is that I think it would be irresponsible to offer no prediction at all. That’s the safe thing to do. My critics can never catch me in a wrong prediction if I never put forward a prediction.

But the stakes are high here. Millions of people are going to experience failed retirements as a result of the second crash in the event that it plays out anything at all as we should expect to see it play out based on the 145 years of peer-reviewed research available to us. Shouldn’t we at least be trying to warn people of what very much appears to be in the cards? If we cannot be 100 percent precise in our predictions (we cannot be), shouldn’t we at least try to be as precise as possible?

It seems to me that we should be as precise as possible. I do not say that I am certain that we will see a 65 percent price crash by the end of 2016. I say that that’s the best prediction that I am able to advance, given what I have been able to learn from studying the historical data for a long time and in great depth.

I’ll tell you what I would like to see. I would like to see lots of other people making the best predictions that they are able to make. Wade doesn’t think much of my prediction. That’s fair enough. But can he offer some prediction of his own? I think it would be a great learning experience for him and lots of others to try. It’s by trying to form good predictions that we learn more about “how this concept should be applied”

Wade knows a lot. It may well be that he knows more than me. But I wish that he would put himself on the line a bit more. It’s hard for me to accept that he doesn’t think that we can know more than that prices will revert to the mean someday in the future, perhaps next year, perhaps 200 years from now. No, we cannot be entirely. But can we not be more precise than that? If we cannot be more precise than that, I don’t think that Valuation-Informed Indexing will ever catch on. If we cannot be more precise than that, I don’t see that it offers much value to anyone. People need (at least somewhat) actionable information.

I of course don’t mean to direct those words only to Wade Pfau. I’d like to see more predictions from Jack Bogle. I’d like to see more predictions from Robert Shiller. People in this field have a great worry about appearing foolish. But the most foolish thing of all is to let this crash come and not try hard to warn people about it. We cannot get it all right. That option is not available to us today. But we should be trying to learn as much as we can as quickly as we can. Trying to form intelligent predictions as to when that darn crash will arrive can be a great learning experience.

We don’t and can’t know it all. But we can and do know more than a lot of us are letting on. We all need to try harder to address these very important questions in public while of course always attaching the appropriate caveats to the predictions that we do advance.

Rob Bennett’s bio is here.

1) Buy-and-Holders stay at the same stock allocation no matter what valuation level applies. That is, they ignore price when buying stocks. How can it ever be a good idea to ignore price when buying something?

2) It’s not just that common sense tells us that there is zero chance that a Buy-and-Hold strategy could ever work. We now have 140 years of historical return data confirming that what common sense tells us must be so is in fact so. That’s as far back as we have good records.

3) It’s not just that common sense says that price discipline (considering price when setting your stock allocation) is required and that the entire history of the U.S. stock market confirms that this is so. Most of the experts who advocate Buy-and-Hold have made statements showing that they do not truly believe that Buy-and-Hold makes sense. For example, Vanguard Founder John Bogle has said that “Reversion to the Mean” (prices returning to fair-value levels) is an “Iron Law” of stock investing. If that’s so, stocks must offer a far better long-term value proposition when prices are low (and the Iron Law is pulling them up) than when prices are high (and the Iron Law is pulling them down).

4) It’s not just common sense and the entire historical record and what the experts say that tells us that Buy-and-Hold is a doomed strategy. I have been posting about the dangers of Buy-and-Hold on internet discussion boards and blogs for 12 years. The reaction of the Buy-and-Holders has been to demand that discussion of the 33 years of peer-reviewed academic research showing that Buy-and-Hold can never work for a single long-term investor be banned. Why wouldn’t the Buy-and-Holders welcome civil and reasoned discussion of the merits of their strategy if they possessed confidence in it.

5) The researcher who showed that Buy-and-Hold can never work (Yale Economics Professor Robert Shiller) has been awarded a Nobel Prize in Economics for his work.

6) I am the co-author (with Wade Pfau, who holds a Ph.D. in Economics from Princeton) of research that shows that giving up Buy-and-Hold and going with a common-sense investing strategy (Valuation-Informed Indexing, a strategy in which you consider price when setting your stock allocation) reduces the risk of stock investing by 70 percent.

7) I have sent a link to the Bennett/Pfau research to 30,000 academic researchers. Not one found any problems with it.

8)

What is Valuation-Informed Indexing?

It is the model for understanding how stock investing works that replaces Buy-and-Hold.

Buy-and-Hold was the first model rooted in the findings of peer-reviewed academic research. The key research supporting Buy-and-Hold was published in 1965 by University of Chicago Economics Professor Eugene Fama. Fama showed that short-term timing (changing your stock allocation because of belief about how stocks will perform over the next year or two) does not work. Fama found that short-term price changes are random. Thus, risk is stable and no benefit follows from trying to guess which way prices are headed. The best thing to do is to keep expenses low by limiting allocation changes. Since stocks generally provide solid returns (the average long-term U.S. return is 6.5 percent real) and it is not possible to identify better and worse times to own stocks, the best choice is to maintain a high stock allocation (something between 60 percent and 80 percent stocks) at all times, according to the theory underlying the Buy-and-Hold strategy.

Fama did not test long-term timing (changing your stock allocation in response to a big shift in valuations with the understanding that you might not see benefits for doing so for as long as 10 years). He assumed that long-term timing works no better than short-term timing without performing research on this question. Yale Economics Professor Robert Shiller published “revolutionary” (his word) research in 1981 showing that long-term timing always works and is always 100 percent required for investors hoping to have a realistic hope of long-term success. Wade Pfau (Wade holds a Ph.D. in Economics from Princeton) and I published peer-reviewed research in 0000 showing that an investor who goes with a 90 percent stock allocation when prices are low, a 60 percent stock allocation when prices are moderate and a 30 percent stock allocation when prices are high thereby reduces risk by close to 70 percent.

“Valuation-Informed Indexing” is the name I have given to the strategy followed by investors who follow the peer-reviewed academic research of the past 33 years and change their stock allocations in response to big shifts in valuation levels.

Is that the only difference between Buy-and-Hold and Valuation-Informed Indexing?

Yes. But the implications of this one distinction are far-reaching.

Fama’s explanation for why returns are unpredictable is that the market is “efficient.” That is, all factors bearing on price are almost immediately reflected in the price of stocks. Another way of saying it is — stocks are always priced properly and valuations are a non-factor. Shiller won a Nobel prize in Economics for his work. But the Buy-and-Holders have not changed their strategy in even the slightest way as a result of it. The idea of looking at the price of stocks before making a purchase is craziness under the Buy-and-Hold Model. The model posits that price changes are caused by unforeseen economic developments. If this were so, the risk of investing in stocks would always be the same and it would be an exercise in foolishness for an investor to change his allocation for anything other than personal reasons (Buy-and-Holders believe it makes sense to change their allocations when they get closer to retirement age because losses have a bigger personal impact in those circumstances).

The research of the past 33 years shows that long-term returns are highly predictable. This has been so for the entire 140 years of U.S. stock market history. This is a 100 percent impossible result under the Buy-and-Hold Model. The recent research discredits the Buy-and-Hold Model.

The mistake that the Buy-and-Holders made was assuming that long-term timing, like short-term timing, does not work. There is zero evidence supporting this claim. It is simply an assumption that has been proven false.

If long-term timing works, the market is not efficient. That is, the market is not priced properly and changes in the price at which stocks are sold affects the value proposition offered. Stocks offer a better deal when prices are low or reasonable than they do when they are overpriced. The reason why short-term timing does not work is not that the market does such a good job at setting the stock price properly but that it does such a horrible job that investors cannot employ human reason to outguess it. In the short-term, the influence of investor emotions on stock prices is so great that allocation changes selected through the use of reason are ineffective — stock prices are so emotional that it does no good to employ reasoned analysis to identify where they are headed.

However, this is not so in the long run. In the long run, the market must get the price right or collapse altogether; the very purpose of a market is to set the price of the good being bought and sold properly. So investors can compare the current emotional price with the long-term fair-value price and know whether a broad stock index offers a poor long-term value proposition, a moderate long-term value proposition or a very strong long-term value proposition.

Investors who consider valuations when setting their stock allocations can just about eliminate stock investing risk. The discovery that long-term returns are highly predictable is the biggest advance in the history of investing analysis. This breakthrough discovery changes everything we once thought we knew about how stock investing works.

Please give an example or two showing why this is such a big deal.

If the last 33 years of peer-reviewed research is pointing us to something real, then the retirement studies produced under the Buy-and-Hold Model got the numbers wildly wrong and millions of people are going to experience failed retirements as a result. I am the person who discovered the errors in the retirement studies (the error is that they do not contain an adjustment for the valuation level that applies on the day the retirement begins). For a long time, the Buy-and-Holders said I was crazy and attacked me viciously and organized campaigns to have me banned from every discussion board and blog on the internet at which I tried to report the accurate numbers. In recent years, I have been vindicated by articles in the Wall Street Journal and the Economist magazine and about 20 other top-name publications. So the Buy-and-Holders now try to change the subject when retirement planning comes up. But not one of the discredited studies has been corrected to this day. 

This is going to be one of the worst social problems we have ever seen in the United States. Millions of people are going to find themselves homeless in their old age through no fault of their own. These people did everything right. They want to the internet and checked to see what the experts said before handing in their resignations from their jobs. They went with entirely unrealistic retirement plans because the “experts” did not want to acknowledge having made mistakes.

The errors here are not small errors. At the beginning of 2000, the safe withdrawal rate was 1.6 percent real. That means that a retiree with a portfolio of $1 million could take out $16,000 to live on each year. The Buy-and-Hold studies were telling people that it was 4 percent real. That would permit an annual withdrawal of $40,000 per year. So people were taking out $24,000 more than the research says they can afford to take out. Not once. They were taking out $24,000 more than they should year after year after year. One researcher told me that I was wrong to expect corrections. “That’s just not the way things work in this field,” he told me. Indeed!

Another one is the economic crisis. Shiller predicted the economic crisis of 2008 in his book, published in 2000. There have been four times in U.S. history when Buy-and-Hold strategies became popular and each time we have had an economic crisis. We have never once had an economic crisis without Buy-and-Hold strategies first becoming popular. The correlation is perfect. But the reaction of the Buy-and-Holders has not been to acknowledge causing the economic crisis, it has been to dig in their heels and try to shift the blame elsewhere.

It is not hard to understand why Buy-and-Hold always causes an economic crisis. Stocks were overpriced by $12 trillion in 2000. The phony baloney gains produced in bull markets always disappear over the course of about 10 years. So about $12 trillion of spending power was in the process of being removed from the economy by the close of the first decade of the 21st Century. That puts tens of thousands of companies out of business. That puts millions of people out of work. There’s your economic crisis!

 So why didn’t all the economists say that Buy-and-Hold caused the crisis?

Yale Economics Professor Robert Shiller said it in his book. He said: “If over some interval in the first decade or so of the twenty-first century, the U.S. stock market is going to follow an uneven course down, as well it might — back, let us say, to its levels in the mid-1990s or even lower — then individuals, foundations, college endowments, and other beneficiaries of the market are going to find themselves poorer, in the aggregate by trillions of dollars. The real losses could be comparable to the total destruction of all the schools in the country, or all the farms in the country, or possibly even all the homes in the country.”

Now look at what happened after the economic crisis that Shiller predicted became a reality. You don’t hear Shiller saying those sorts of things today. What changed?

What changed is that when he wrote those words, he was describing an event that had not taken place. He was in an indirect way criticized all the people who promoted Buy-and-Hold strategies. He was saying that Jack Bogle was going to destroy an amount of wealth equal to all the homes in the country. And that Bill Bernstein was going to destroy an amount of wealth equal to all the homes in the country. And that Larry Swedroe was going to destroy an amount of wealth equal to all the homes in the country. But the wealth had not been lost yet! So it really didn’t hurt Bogle or Bernstein or Swedroe that much for someone to be saying that about them. The people who follow Bogle and Bernstein and Swedroe were happy with the Pretend Money in their retirement accounts. They didn’t care about any future economic crisis — they pushed that idea out of their mind so that they could continue believing in the Get Rich Quick fantasy these people were pushing in all their speeches and books and articles.

Once the crisis actually appeared, everything changed. Now it would hurt those people to acknowledge that they had caused tens of thousands of businesses to fail and millions of people to be thrown out of work. Now Shiller feels that it would be “rude” to tell the truth about what caused the economic crisis. Now the truth is just too terrible to tell. So now Shiller keeps it zipped.

That’s been the dynamic in all discussions of the dangers of Buy-and-Hold that I have been involved in for 12 years now.

Why wouldn’t Shiller want to take credit for identifying the true cause of the economic crisis?

He’s a nice guy. He is friends with lots of people who pushed Buy-and-Hold strategies. He feels bad for them. He knows that he has identified the true cause of the crisis in his book. He tells himself that that is enough. He tells himself that, when people are ready, they will accept that the promotion of Buy-and-Hold strategies was the true cause. He tells himself that you can only push so hard. He tells himself that people will figure this out eventually and that he has done his part and that there’s too much resistance to the message today and so it’s better just to let it go for the time being.

Is he right?

I don’t think so. I understand why Shiller (and lots of others who feel the same way!) feels the way he does. It’s natural to feel bad when people try to do something good and make a mistake and end up causing huge amounts of human suffering. To a point, I feel that way too. I don’t want the Buy-and-Holders to hurt. I want the Buy-and-Holders to heal.

But I don’t play it the way Shiller does. I do say that the cause of the crisis was the reckless and relentless and ruthless promotion of Buy-and-Hold strategies. I say it because the only way we are ever going to stop the pain is by identifying the cause of the pain. Buy-and-Hold is in the process of causing the economic collapse of our country. All of us who love our country (and I am 100 percent certain that Shiller loves his country) should be doing all we can to bury Buy-and-Hold 30 feet in the ground, where it can do no further harm to humans and other living things. I don’t think it is compassion that holds Shiller back from telling the truth in clear and firm and understandable terms. It is cowardice.

Shiller is hurtingt the Buy-and-Holders by holding back, not helping them. Bogle also loves his country. Bogle promoted Buy-and-Hold because he wanted to help people. He is suffering from cognitive dissonance. He still believes in Buy-and-Hold on  a surface level. But in another part of his consciousness he knows that it is b.s. And there is a part of him that wants to get beyond the b.s. There is a part of Bogle that wants to come clean. He needs our help to get in touch with that part of himself and to work up the courage to stand up on a stage and say the words “I” and “Was” and “Wrong.” When Shiller pulls his punches, he is letting Bogle down. He is enabling him. And that causes him to suffer more pain in the end. We are hurting Bogle and all the other Buy-and-Hold pioneers when we elect to stretch this out rather than to give Bogle and the other Buy-and-Hold pioneers credit for their genuine accomplishments (which are many) while also demanding corrections of the mistakes they have made which have caused so much human suffering.

Cognitive dissonance? Really? Can we return to talking about investing instead of this psychological mumbo jumbo?

It’s not possible to talk about investing in a meaningful way without talking about psychological mumbo jumbo. Stocks are bought and sold by human. Humans have emotions. Ignore emotion and you are ignoring the driver of most investing decisions. You can create lots of pretty graphics containing lots of impressive-looking numbers without taking into consideration the emotional side of investing. But it is important that you know that the numbers reported on by those graphics will be wildly off the mark from the numbers you would have obtained had you used analytically valid methodologies. You cannot get any of this right without a willingness to confront emotional realities that scare many of the big-name experts in this field to death.

 Lots of experts say that Buy-and-Hold is a good strategy. Are you saying that there is a massive conspiracy to trick investors?

There’s a conspiracy of ignorance. To understand where things stand today, you need to understand the history of how our knowledge of how stock investing works improved over the years.

Prior to the 1960s, stock investing was generally not the subject of systematic study in the universities. The big breakthrough that made research-backed strategies the thing was the 1965 finding by University of Chicago Economics Professor Eugene Fama that short-term timing (changing your stock allocation with the expectation that you will see benefits within a year or two) does not work. That finding has stood up to scrutiny; I rank it as the second most important finding in the history of investing analysis.

Unfortunately, Fama did a poor job of describing his finding. He did not say that “short-term timing does not work,” which would have been accurate. He said that “timing does not work,” which is very far from the truth. Many people were not careful to distinguish short-term timing from long-term timing (changing your stock allocation in response to big shifts in valuation levels with the understanding that you may not see benefits for doing so for up to ten years) in those days. Long-term timing has practical significance only for those who purchase index funds and index funds were not available in those days.

It was not until 1981 that the question of whether long-term timing works was tested. The test was performed by Yale Economics Professor Robert Shiller. He found that long-term timing always works and in fact is required for those investors hoping to have some realistic hope of long-term investing success. If men were angels, everyone would have immediately declared Buy-and-Hold discredited by the academic research and we all would have switched to Valuation-Informed Indexing at that time. We all would be a far richer people today and we certainly would not be living through an economic crisis.

Unfortunately, we are not angels. Shiller’s revolutionary finding came as a shock. It is not unusual for a finding this consequential to take five or even ten years to sink in among the experts in the field affected. So, in ordinary circumstances, all of our troubles would have been over by 1990. However, we saw a huge bull market in the 1980s. Investors enjoyed huge gains not because they were following Buy-and-Hold strategies but because stocks had been priced insanely low in the early 1980s and stocks always perform well when purchased at insanely low prices. Still, most investors attributed their gains to Buy-and-Hold, the new, research-based strategy. The industry spent millions promoting the strategies and thousands of practitioners built careers rooted in promotion of the strategy. The small number who raised questions based on Shiller’s findings were ignored.

As the divide between what the “experts” said (that the research supported Buy-and-Hold) and the reality (that the research showed that Buy-and-Hold was the purest and most dangerous strategy ever concocted by the human mind) grew larger, the Buy-and-Holders became abusive in their efforts to keep the millions of middle-class investors from learning the truth. I can only testify personally to things that have happened since 2002. But I saw abusiveness from the first moment that I made reference to Shiller’s findings. So the defensiveness had become well-ingrained among the Buy-and-Holders by that time. I have seen death threats, demands for unjustified board bannings, tens of thousands of acts of defamation and threats to get academic researchers who “cross” the Buy-and-Holders by publishing honest research fired from their jobs. I refer to those who engage in this behavior as “The Buy-and-=Hold Mafia.” I think it is fair to describe the “experts” who continue to advocate Buy-and-Hold strategies 33 years after the peer-reviewed academic research in this field showed that there is precisely zero chance that they could ever work for even a single long-term investor as a criminal enterprise.

Buy-and-Hold started as a good thing. Today it constitutes a threat to the survival of our free-market economic system.

Do you think you might be exaggerating? 

No. The direct losses we are likely to see from the promotion of Buy-and-Hold strategies in recent years amount to about $12 trillion. The total losses (both direct and indirect) are likely to exceed $20 trillion.

For comparison purposes, the Federal debt (that is, all annual deficits going back to the time of George Washington added together) amount to about $17 trillion. Buy-and-Hold has cost our nation more than all of our annual deficits added together. There are few who would say that the Federal debt offers no threat to the continued success of our economic and political system. Buy-and-Hold constitutes a much larger threat in dollar terms.

We saw a loss of confidence in our political system both on the left (the Occupy Wall Street movement) and the right (the Tea Party movement) following the 2008 crash. The next crash is likely to be much more damaging, in the event that stocks continue to perform in the future somewhat as they always have in the past. It is possible that we will enter the Second Great Depression as a result of the 33-year cover-up of the implications of Shiller’s findings. The continued survival of our form of government was in question during the First Great Depression, which played a big role in bringing on World War II. The threat we are facing is serious stuff.

Millions of people invest in stocks today as a means of financing their old-age retirements. They need some means to access honest and accurate information about what the last 33 years of peer-reviewed academic research tells us. This is a big deal. It is imperative that as a people we find some means to open the internet to honest posting about stock investing questions.

So you ARE saying that there is a conspiracy to keep people from learning about this! 

The Buy-and-Hold Mafia very, very much does not want people to learn the realities of stock investing as revealed by the last 33 years of peer-reviewed academic research in this field. That much is certainly so.

But I very much doubt that there was ever a day when a group of people got together in a smoke-filled room and decided to work this fraud on the American people.

In fact, there is much evidence arguing against the conspiracy idea.

I was a Buy-and-Holder on the morning of May 13, 2002, when I put forward my famous post pointing out the errors in the Old School safe-withdrawal-rate-studies. John Walter Russell was a Buy-and-Holder when he began working with me. Wade Pfau was a Buy-and-Holder when he began working with me. There’s a fellow named Larry Evans who was highly skeptical of my claims when he visited my blog. He told me that he was going to spend three weeks studying all the materials at my site and then would report back on whether it made sense or not. A few weeks later he called me at home saying that everything checked out and that he was so excited by Valuation-Informed Indexing that he couldn’t sleep at night because of the excitement he felt about how this could be put to use helping people. People who I know with certainty are not dumb or evil believe in Buy-and-Hold. You don’t have to be participating in a conspiracy to believe in this stuff.

What happened is that the experts in this field came to believe in Buy-and-Hold. They thought they had the answer. They wanted to help people and they believed that they were doing that when they promoted Buy-and-Hold strategies.

The bull market made the people who listened to their message very happy and these experts became even more sure that they were on the right track. They heard about Shiller’s findings. Doubts entered their heads. They pushed those doubts out of their heads. They didn’t want to experience doubts. They wanted to do good and they believed Buy-and-Hold was good. So they pushed it even harder.

Then the evidence that Buy-and-Hold can never work grew even stronger. The bull came to an end. We experienced an economic crisis, just as Shiller predicted in his book. The Buy-and-Holders became concerned. But all of their friends promoted Buy-and-Hold! If they came clean about their doubts, they would make things harder for their friends. Their friends recommended them and praised them and linked to them. They didn’t want to hurt their friends. So they kept it zipped. Or, if they gave voice to their doubts, they did so in ways that were so convoluted that most investors could not figure out what they were saying.

The losses suffered by those who followed Buy-and-Hold strategies grew larger and larger. Now the Buy-and-Holders faced a big problem. If they came clean, they could be held financially liable for those losses. After all, there were decades of research showing that there is zero chance that a Buy-and-Hold strategy could ever work for even a single investor. In extreme cases, people who promoted Buy-and-Hold and engaged in abusive tactics to keep their clients from hearing the other side of the story could even be sent to prison for financial fraud. The internal pressure not to speak up became stronger and stronger and stronger. Those who reported honestly on the academic research became the enemy. The priority was to keep people from learning about the mountain of research showing the dangers of Buy-and-Hold. That was imperative!

Please understand that I am not saying that all these steps were thought through consciously. Cognitive dissonance is a real phenomenon. The experts in this field have their entire careers at stake in keeping people convinced of the merit of Buy-and-Hold strategies. People who have that much riding on something can convince themselves of all sorts of crazy things. The experts are suffering from cognitive dissonance. They do not possess confidence in Buy-and-Hold. They are defensive about it, they are filled with doubts. But they cannot bear the thought of acknowledging that this is all a big pile of smelly garbage. They cannot let that reality in. And so they do not let it in! They fight those who speak honestly about the academic research with a viciousness that they exhibit in no other area of their daily lives. They MUST be proven right re this one! They must! They must! They must!

Their belief is not an intellectual one. It is an emotional one. No intellectual argument has an effect on people who believe something for purely emotional reasons.

Are you really saying that there is no intellectual case for Buy-and-Hold? Many of the top economists and academics and investing professionals in the world believe in Buy-and-Hold.

There was a day when the leading figures in society believed that the sun revolved around the earth. Humankind comes to understand new things about the world as time advances. There has never been any intellectual case for Buy-and-Hold. There were once many smart people who believed in it and there are today many smart people who believe in it. But there is no intellectual case that can be put forward for that belief.

How can you be so sure?

Wade Pfau is an academic researcher who I partnered with for 16 month. Wade holds a Ph.D. in Economics from Princeton. When I met Wade, he believed in Buy-and-Hold. So he came to this with zero bias against Buy-and-Hold. He found my claim that long-term timing always works credible but believed that there must be academic research showing otherwise given how often the Buy-and-Holders have claimed that no form of market timing works. He searched the storehouse of research and was not able to find a single study raising any doubts as to whether long-term timing has always worked.

Wade could not believe his own finding. It just amazed him and he thought that he must have done something wrong. So he went to the Bogleheads Forum and asked if anyone there had ever heard of a single study supporting the claim on which the entire Buy-and-Hold Model was built. No one there had ever heard of a single study. John Bogle posts there. Bogle was not able to give the URL for a single study supporting Buy-and-Hold. Bill Bernstein posts there. Bernstein was not able to give the URL for a single study supporting Buy-and-Hold. Larry Swedroe posts there. Swedroe was not able to give the URL for a single study supporting Buy-and-Hold.

I suppose that you could say that on some future data someone will publish a study supporting Buy-and-Hold. Anything is theoretically possible. But as of today there has never been a single study published supporting. That’s an objective fact. There is no intellectual case that can be made for this strategy.

This seems impossible.

I understand. But don’t you think that it seemed impossible to the people of an earlier day that the earth revolved around the sun? New findings always seem impossible. They conflict with long-held beliefs, beliefs that we have all considered long-settled.

Still, the evidence says what the evidence says. When new evidence overturns seemingly long-settled beliefs, we need to accept this and more forward. It makes no sense to continue believing in discredited ideas. This is especially so in the investing realm, where the stakes are high. If we follow discredited beliefs when financing our retirement plans, we put ourselves in a very dangerous place.

Why doesn’t everybody say what you say?

Lots of people do. I have a “People Are Talking” section of my site where I post comments made by both big-name experts and ordinary investors about Valuation-Informed Indexing. The comments appear in the slider at the top right-hand corner of every page of the site. There are over 200 comments posted there. Please read them. They are illuminating. I believe that those comments sum up the entire 12-year debate in a concise and compelling way.

I’ll cite  just one of them here. Wade spent a great deal of time researching this stuff. He concluded that : “Yes, Virginia, Valuation-Informed Indexing Works!” That says it. This stuff works. It has always worked. There has never been any good reason to believe that it wouldn’t work.

Investors MUST practice long-term timing. It is the only means by which they can practice price discipline. And price discipline is every bit as critical when you are buying stocks as it is when you buy bananas or sweaters or cameras. If you fail to practice price discipline, you are leaving hundreds of thousands of dollars on the table. You are delaying your retirement by five to ten years. For what purpose?

Okay. Let’s say that you have a good idea. Do you have to be so rude about it? You call the people who disagree with you “Goons.” You make reference to a “Buy-and-Hold Mafia.” You lose credibility when you do that.

There’s no question that I lose credibility in the eyes of many when I use that kind of language. I am a journalist. I don’t have any choice. The Goon phenomenon is a real phenomenon. The Buy-and-Hold Mafia really exists and played a big role in bringing on the worst economic crisis in U.S. history. People need to know about these things. We cannot overcome these problems without first coming to understand these problems. And we cannot come to understand these problems without first giving ourselves permission to talk about these problems.

What is the Goon problem?

The Goon problem is that lots of people fell for the Buy-and-Hold concept and are embarrassed about it. John Greaney got the numbers wrong in a retirement study published at his web site. Big-name bloggers caused their readers to delay their retirements. Big-name experts gave bad advice to their clients.

The transition from Buy-and-Hold to Valuation-Informed Indexing is the biggest advance in the history of personal finance. It is good stuff piled on top of good stuff piled on top of good stuff. We should all be dancing in the streets. But those who have promoted Buy-and-Hold strategies don’t see it as good stuff because they gave such bad advice for so many years without knowing it was bad.

What is the Buy-and-Hold Mafia?

The Buy-and-Hold Mafia is all the people who felt embarrassment to learn that they have been giving bad advice acting together to block millions of middle-class investors from learning the realities. The natural way to overcome the embarrassment is to talk over the issues. There should be no shame in making a mistake. We all make mistakes. The people who advocated Buy-and-Hold in the past should just make the change to Valuation-Informed Indexing and counter the negative effect of having given poor advice for so many years with the positive effect of giving good advice from this point forward. Does that not make sense?

The problem is that many of the people who promoted Buy-and-Hold made lots of money and gained lots of influence doing so and they are inclined to use that money and power to destroy those who make an effort to tell the straight story. It is no act of kindness to support the cover-up. The worst possible thing you can do when you discover that you have made a mistake is to cover it up. Richard Nixon was not forced to resign his Presidency because of the trivial crime committed at the Watergate hotel. He was forced to resign because of the cover-up of that crime. We hurt our Buy-and-Hold friends when we encourage them to engage in a cover-up. We hurt them very badly.

I pointed out the errors in the Old School safe-withdrawal-rate studies on the morning of May 13, 2002. I am writing these words in March 2014. We are not still involved in a first-level cover-up today. We are involved in a cover-up of a cover-up of a cover-up. Things have gone so far at this point that a number of my Goon friends will likely be going to prison following the next price crash. Prison? Huh? Because you got an important number wrong in a retirement study or because you are friends with someone who got an important number wrong in a retirement study? That’s insane!

It is insane. But there is another side to the story. The insanity was achieved through a logical progression.

The Goons covered up the mistake because they thought they could get away with it. We all feel temptations to cover up mistakes. We all know it is a dumb thing to do. But we all feel those temptations. The practical reality is that we often elect to come clean because we cannot imagine getting away with a cover-up. In this case, the Goon thought they could get away with a cover-up. Who was going to call them out on their nonsense, other Buy-and-Holders who made the same mistake? So they engaged in a cover-up. But that of course meant that more people suffered losses as a result of the mistake. When meant that the cover-up had to be expanded. And now they don’t want people to know that they engaged in a cover-up and then a cover-up of that cover-up and then a cover-up of the cover-up of the cover-up. The Goons look worse and worse and worse as time goes on. And they now cannot see any way out of the corner into which they have painted themselves.

The ultimate Goon act was their threat to send defamatory e-mails to Wade Pfau’s employer in an effort to get him fired from his job because he had co-authored research with me showing how Valuation-Informed Indexing has soundly beat Buy-and-Hold for the entire 140 years of U.S. stock market history available to us to study. VII always reduces risk, VII always increases the risk-adjusted return. Wade and I had seen amazing responses to that research, even from long-time Buy-and-Holders, who told us that seeing the numbers was causing them to have doubts about Buy-and-Hold for the first time in their lives. I think it would be fair to refer to the Bennett/Pfau research as the most important research published in this field in the past three decades. We showed that an investor can reduce stock investing risk by 70 percent just by being willing to abandon the Buy-and-Hold mumbo jumbo and take price into consideration when buying stocks just as he takes price into consideration when buying every other good and service he purchases.

How do you explain something like that?

The Goons didn’t threaten Wade as their first abusive act. They had made threats to kill any community member who posted honestly years before. They have advanced tens of thousands of acts of defamation before they ever heard of Wade Pfau. They had demanded unjustified board bannings and thereby caused thousands of their fellow community members to suffer failed retirements before that study was ever published in a peer-reviewed journal. What does a Goon do at that point? Does he come clean and accept the consequences of his many years of abusive actions? Or does he engage in even more abusiveness in an effort to cover-up the tens of thousands of abusive acts he has already committed?

We are all to blame for the Goon problem. When we tolerate this sort of behavior, we encourage it. There is no way to defend Buy-and-Hold in civil and reasoned debate given the 33 years of peer-reviewed academic research showing that there is precisely zero chance that it could ever work for even a single long-term investor. So the only possible defense is to engage in abusiveness. And we all encourage more of that abusiveness when we tolerate any of it. The Goons are responsible for their own behavior. But anyone who has witnessed that behavior and failed to speak up shares in the blame for the million of failed retirements and the millions of unemployed and the loss of confidence in our system of government and all the rest.

We live in communities. We all have an interest in seeing our economic system survive. We all have a responsibility to defend it when it comes under Goon attack.

The Buy-and-Hold Mafia exists today because we have as a society permitted it to exist. And each day that our tolerance of this criminal behavior continues, the problem gets worse.

Do you really believe that there is criminal behavior here?

Of course. The question is silly. Bernie Madoff is in prison today for committing financial fraud. The human suffering caused by Bernie Madoff is a drop of water in the Atlantic ocean compared to the human suffering caused by the Buy-and-Holders.

I pointed out the errors in the Old School safe-withdrawal-rate studies on the morning of May 13, 2002. Not one of the studies has been corrected to this day. And you ask me if there is criminal behavior here? How else could such a thing become a reality?

It’s all so strange.

When large amounts of money are at stake, strange things happen.

Is the Lance Armstrong story strange? The guy was an amazing athlete. Yet he threw it all away. Strange. But it happened.

Is the Joe Paterno story strange? The guy was an amazing football coach. Yet he threw it all away. Strange. But it happened.

Is the Bernie Madoff story strange? The guy could have made tons of money doing honest work. Yet he threw it all away. Strange. But it happened.

Is the Richard Nixon story strange? The guy won the U.S. presidency in a landslide. Yet he threw it all away. Strange But it happened.

“Strange” is not the right word. “Tragic” is the right word. Humans are prone to corruption. especially when there is lots of money involved. It’s a reality of this planet.

What do you propose?

We need to open every discussion board and blog on the internet to honest posting. There are millions of middle-class people who want to learn the realities of stock investing. I have seen great interest at every large board and blog to which I have posted. People do not want to see death threats or unjustified board bannings or tens of thousands of acts of defamation or threats to get academic researchers fired from their jobs. We all need to develop the backbone to stand up to the Goons and thereby to win back our country.

We are on the one-yard line. We have been seeking for years to learn how to invest effectively. There were powerful insights in the pre-Buy-and-Hold Era and there were powerful insights in the Buy-and-Hold Era. Then Shiller provided the missing piece in 1981. Now we know how to permit millions of middle-class people to earn the high returns that have long been associated with stock investing while taking on only a tiny fraction of the risk that has also always been associated with this investment class. We know today how to earn higher stock returns than ever while reducing the risk of this investment class by 70 percent. That’s Investor Heaven!

The Goons don’t want people to know what works. That’s too bad for the Goons. Millions of investors need to know. We have rules prohibiting the tactics employed by the Goons at every board and blog on the internet. We need to start enforcing them.

How did you get to be so smart? 

It’s not really a question of being smart or not being smart. Thinking about things that way is part of the problem. The Buy-and-Holders try to turn investing into an intellectual puzzle. But the emotional side of investing is more important than the intellectual side.

There’s a sense in which we have the Buy-and-Hold Pioneers to thank for this insight. It was the Buy-and-Holders who showed that being smart gives you no edge because any development that you happen to notice because of your intelligence has already been noticed by other investors and priced in to the market price. Intuitively, it seems like intelligence should give you an edge. But this is often not the case.

That said, there is one thing that can never be priced in to the market price — mispricing. For mispricing to be priced in is a logical impossibility. So the stock investor who pays attention to mispricing gains a huge edge over all the investors ignoring the mispricing and thereby causing it.

Why is it that I have a greater inclination to pay attention to price? I think it is largely an issue of personality type. This field attracts the INFJ personality type. This is the engineer type. They are strong analytical thinkers and good at math. But they are not strong at understanding human emotions. They are great at what they do. But they are weak at understanding why stocks become mispriced. They want investing to be logical and they convince themselves that it is. But their desire that it be logical does not make it so.

I certainly do not think that I possess more I.Q. points than others in this field. But I lost confidence in all Buy-and-Hold claims on the evening of August 27, 2000. That’s the night that John Greaney threatened to kill my wife and children if I continued posting honestly on safe withdrawal rates and 200 Buy-and-Holders recommended his post. That told me that the Buy-and-Holders were missing an important piece of the puzzle.

Do you really think that people are going to go to prison? 

It’s not for me to say. I believe that there will be people who will go to prison.  But the issue of who goes and for how long is an issue that we need to work through as a society.

My job is to help people understand why they have lost so much of their retirement money and why we are in an economic crisis. It’s an objective fact that the 12-year cover-up of the errors in the Old School safe-withdrawal rate studies is the biggest act of financial fraud in U.S. history. That alone is news. People need to know it and people need to think about how this happened. It reflects on Buy-and-Hold that it was always Buy-and-Holders who supported the cover-up. I don’t know of a single case in which a Valuation-Informed Indexer engaged in the sort of abusive behavior that we have seen on a daily basis from the Buy-and-Holders.

The Buy-and-Holders are scared. Why? People who promote this strategy need to be asking themselves that question.

It seems to me that you contradict yourself. Sometimes you say that the problem is cognitive dissonance. Other times you say that there have been acts of financial fraud.

Lots of good and smart people believe in Buy-and-Hold. I believed in Buy-and-Hold on the morning of May 13, 2002. John Walter Russell believed in Buy-and-Hold when he began working with me. Wade Pfau believed in Buy-and-Hold when he began working with me.

If the Buy-and-Holders are engaged in an act of conspiracy, they have a funny way of keeping people in the dark about it. It was by reading John Bogle’s book that I learned about the errors in the Old School safe-withdrawal rate studies (Bogle said that Reversion to the Mean is an “Iron Law” of stock investing). One of the Goons once asked Bill Bernstein if he agreed with me that the Old School SWR studies were analytically invalid. He said that the studies were valid but that anyone who was thinking of using one to plan a retirement would have to be out of his or her mind (which is another way of saying that the studies are analytically invalid). When I wrote Scott Burns an e-mail telling him about the errors in the Old School studies, his first reaction was to send me a return e-mail saying “you’re right!” And so on. The Buy-and-Holders have grave doubts about Buy-and-Hold. And, if you pay attention to their public statements, you will see that they give voice to these grave doubts from time to time.

They are just afraid to come out openly and say “Buy-and-Hold is a big pile of smelly garbage.” That follows logically from things they have said. But the thought of saying things so clearly frightens them. They know that people who listened to them when they advocated Buy-and-Hold will get angry with them. So they aim to drop hints about what works without being too clear about it. And then they try to convince themselves that they will not cause too much human suffering by doing that. They rationalize. They come to believe their own rationalizations. They come to suffer from cognitive dissonance.

There is some behavior that cannot be excused by cognitive dissonance. Cognitive dissonance does not excuse death threats or demands for unjustified board bannings or tens of thousands of acts of defamation or threats to get academic researchers fired from their jobs. There have to be lines that cannot be crossed for our system of government to work. If we just say that any behavior whatsoever is permitted by people suffering cognitive dissonance, then a claim of cognitive dissonance becomes a Get Out of Jail Free card for those claiming it.

That’s the distinction that I see, in any event. Again, this is a matter for our entire society to decide as a society.

Aren’t the academics independent actors?

I believe that to a large extent the academics are independent actors. I certainly do not think that they are in it just for the money. Money considerations may have some influence on academics; for example, there may be consulting opportunities for those who support Buy-and-Hold strategies that are not available to those who do not. But I think it is a mistake to make too much of that sort of thing. I believe that most academics who advocate Buy-and-Hold strategies to at least some extent believe in them.

That said, it’s important to understand that making someone an academic does not make him an angel. Buy-and-Hold is the dominant model today. That means that one’s career advances more quickly if one produces research supporting that model. All humans are responsive to incentives and disincentives. Even in the academic world, there are huge incentives to favor Buy-and-Hold strategies and huge disincentives to challenge Buy-and-Hold strategies.

What creates the huge bias in favor of Buy-and-Hold?

It’s the $12 trillion of Pretend Money created by the belief in Buy-and-Hold strategies.

That’s the amount by which stocks were overpriced in January 2000. It’s very important that you understand that the $12 trillion never existed. It is investors who set the price of stocks. Stocks are at least temporarily worth whatever we say that they are worth. If we all want to vote ourselves raises, we can do so just by working together to push up stock prices and declaring the amounts on our portfolio statements “real.”

Using bull market gains to finance your retirement is like borrowing on credit cards to support a lifestyle that you could not support on your salary alone. It’s a game. It’s a fantasy. It’s irresponsible. But it is a fun game while it lasts.

Investing experts get a good reaction when they tell their clients that the Pretend Gains are real. So do academics who produce research suggesting that the Pretend Gains are real. So do bloggers who encourage their readers to believe that the Pretend Gain are real. So long as the bull market continues, everyone is happy and it appears as if there will be no price to be paid for believing in the fantasy.

Get Rich Quick investing strategies are popular. Buy-and-Hold tells us that it is okay to believe in phony bull-market gains. That’s why Buy-and-Hold is popular.

Isn’t it just human nature to believe in bull markets? Isn’t this all just going to play out the same way over and over again?

I don’t think so. We now have 33 years of peer-reviewed academic research showing us how stock investing really works. That changes everything once we are able to get the word out.

It’s important to keep in mind that investors who follow Valuation-Informed Indexing strategies get to retire five to ten years sooner than those who follow Buy-and-Hold strategies. That’s a big plus. Once large numbers of investors learn what they need to learn to invest effectively, it will be very hard ever again to persuade them to adopt Buy-and-Hold strategies.

The big problem today is that the expert who see through all the b.s. don’t feel that they can make money advocating research-based strategies. That’s because they cannot gain traction for their ideas as long as the Goons possess a veto power over what can be said on the internet re stock investing. Once the Ban on Honest Posting is overcome there is no going back to the Buy-and-Hold days.

Do you really believe that there are people who want to advocate Valuation-Informed Indexing but who are today afraid to do so?

I have zero doubt about it. I have talked to many such people. There are academics who want to publish honest research that helps people. There are advisors who want to give honest advice that helps people. There are bloggers who want to write honest articles that help people. And on and on and on.

People love helping people. They just don’t want to see their businesses destroyed when they do it. When the people who want to help us see other people’s businesses being destroyed, they pull back.

Please give me one example.

Here are some words that appeared in a column in the Wall Street Journal written by Brett Arends:

For Years, the Investment Industry Has Tried to Scare Clients Into Staying Fully Invested in the Stock Market at All Times, No Matter How High Stocks Go. It’s Hooey. They’re Leaving Out More Than Half the Story.

That’s Valuation-Informed Indexing in a nutshell. The entire purpose of the investing material at this site is to tell the half of the story that the Wall Street Con Men leave out.

The editors of the Journal would not have permitted those words to appear if Arends’ claim did not check out. It checks out. There is a mountain of evidence supporting that claims and nothing supporting the claims of the Buy-and-Holders.

I believe that column was a trial baloon. Had the column gone viral, the Journal would have followed up with a series of articles telling investors all the things they need to know about stock investing that the Buy-and-Holders have been keeping from them.

The article did not go viral. It was hardly mentioned anywhere except at my site. But I believe that the Journal will jump when the see that investors are ready to hear about the realities.

Are you angry at the Buy-and-Holders?

That’s like asking me “does racism make you angry?” or “does ignorance make you angry?”

I don’t like what racism does to people. I don’t like what ignorance does to people. I don’t like what Buy-and-Hold does to people.

But I don’t think that giving free rein to one’s anger helps. We need to understand where racism comes from to overcome it. We need to understand why people are drawn to Buy-and-Hold to lead people to a better place.

I want to defeat Buy-and-Hold. I want to bury it 30 feet in the ground, where it can do no further harm to humans and other living things.

But I try to bring a loving spirit to that task. The Buy-and-Holders are great people who have contributed many powerful insights that benefit us all. There would be no Valuation-Informed Indexing had Buy-and-Hold not come before it. I want to work with the Buy-and-Holders to bring their dream to fruition. I want to take Buy-and-Hold to exciting new places it has never been to before. I want to make Buy-and-Hold workable in the real world. The name for the Buy-and-Hold strategy that is workable in the real world is “Valuation-Informed Indexing.”

Is Valuation-Informed Indexing your idea or Robert Shiller’s idea?

Shiller is the grandfather of the concept and I am the father.

The way this worked is that I put a post to a Motley Fool discussion board on the morning of May 13, 2002, pointing out the errors in the Old School safe-withdrawal-rate studies. It generated a lot of controversy. There was a group that was saying that the discussion of the realities of stock investing that followed was the best discussion that we had ever had at the board. Another group vowed to burn the entire board to the ground if the discussion didn’t stop immediately.

The error in the studies was that they did not include an adjustment for the valuations level that applied on the day the retirement begins. I knew that a valuation adjustment was needed because I had heard about Shiller’s 1981 research showing that valuations affect long-term returns. If valuations affect long-term returns, there is obviously no way that the safe withdrawal rate could be identified without taking into consideration the valuation level that applied on the day the retirement began. The board was being torn apart and I wanted to save it. So I went looking for boards that explored the implications of Shiller’s ideas. I was not able to find any!

This amazed me. Shiller had discovered that one of our fundamental beliefs about stock investing (that the market is efficient and that thus long-term timing is not required) was false. He had written a best-selling book. His ideas made perfect sense (it never made sense to me that we don’t need to consider price when buying stocks even though we do consider price when buying all other goods and services). And yet no one was exploring the implications of his revolutionary insight. And then I realized that even Shiller never did this. His book devotes only two paragraphs to the question of how to go about investing. It’s as if there was a Social Taboo that prohibited us all from exploring how the new model works.

Since no one else was doing it, I directed myself to the project. I have spent the last 12 years of my life to developing Shiller’s core insight. I had huge research assistance from John Walter Russell and Wade Pfau. The model is a revision of the Buy-and-Hold Model. So I obviously owe a great debt to Eugene Fama and John Bogle. And there were thousands of community members who contributed important insights, including  a number of my Goon friends.

Do you see yourself a qualified to develop a model for understanding how stock investing works?

Not really. I did not study investing in school. I never managed a big fund.

But someone had to do the job. And no one else seemed inclined to step forward.

So I gave it my best shot. Lots of big-name experts have offered extremely kind comments on my work. So I am confident that I am very much on the right track. That said, I very much would like to see the entire internet opened to honest posting on all investing questions so that I can obtain more informed feedback. There are lots of smart people out there who would be capable of offering constructive criticism of my ideas if only they were not so afraid of those darn Goons!

Do you try to provoke people into anger?

No. Never.

I tease the Goons sometimes because some of the things they say are so over the top that it would be insulting to my readers if I were to act as if I took the comments seriously.

But PeteyPerson, a poster from my Motley Fool days, nailed me when he said that in the days before I posted about investing, I was “a puppy dog poster.” I like to learn. I like to teach. I like to have fun enjoying warm conversations with my friends. I hate conflict. I avoid it at all costs.

I was forced into taking on the Goons because they are blocking millions of people from learning what they need to learn about stock investing and I care about those people too much to go along with that sort of thing. This is the work I do. I must do it honestly. It it an outrage that there is even one person who believes that I should agree to post dishonestly just to appease the Goons. I am freshly insulted every time that idea is put before me again.

If Valuation-Informed Indexing really worked, wouldn’t the Goons want to learn about it?

Say that you have a friend who is an alcoholic. His wife has left him. He has lost his house and his family and his friends. He has lost most of his money. His health is failing. There are signs that he may soon be fired from his job. How does he respond when you suggest that he get himself to an AA meeting?

He insists that he doesn’t have a problem. He insists that he has it all under control. Denial is part of the disease.

So it is with Buy-and-Hold investing.

If Buy-and-Holders were capable of thinking clearly about how stock investing works, they wouldn’t be Buy-and-Holders in the first place. The idea that price doesn’t matter when buying stocks defies common sense. There is zero evidence for this idea. Why? Because it is nuts.

The belief in Buy-and-Hold is emotional, not intellectual. Intellectual arguments leave no mark on the true believers.

There are many who are not so fanatical, however. There are many who do want to learn. Those are the people we should be trying to help. Our problem is that it upsets the Goons for anyone to learn the realities. They are like alcoholics who see other people living peaceful, fulfilling lives and go crazy when they see it because they think that these people have something that they can never have.

Do you think that the Wall Street Con Men will try to crush you with lawsuits if your site becomes more popular?

I don’t entirely rule it out. When John Greaney vowed to get me banned from the Motley Fool site, I dismissed the idea out of hand. The owner of the site had written one of the blurbs that appear on the cover of my Passion Saving book. I was the most popular poster at the entire site before I began writing about investing. I had been hired to teach the site’s Retirement Planning course. My report on Secrets of Retiring Early was the #1 best-selling report in the history of the site’s Soapbox service. I obviously had zero intention of ever putting forward a post that was abusive in any way. It just seemed to me impossible that this fellow who was angry because I had pointed out that he got an important number wrong in a retirement study was going to be able to get me banned from the board I had built into a huge success. But he pulled it off! Ever since then, I don’t rule anything out entirely.

But, no, I don’t believe it will happen. If the Wall Street Con Men were going to sue me, I think they would have done so before now. The Goons made lots of threats along those lines and I have never been served any papers. They were trying to intimidate me into silence. I think there’s a risk that, if they sued me, it would just generate publicity re these matters, which is the last thing that the Wall Street Con Men want to see.

When Greaney made his death threats, did you believe that he would carry them out?

I saw it as an intimidation tactic. That said, my wife was worried about it. Our one boy was two years old at the time, the other was an infant. I could understand her concern.

And the other thing is — How can you really rule anything out when you are dealing with someone who would threaten to kill someone because he pointed out an error in a retirement study? The behavior is so off the wall that you cannot rule out the kind of person who would engage in it doing just about anything.

Did Wade Pfau really believe that the Goons could get him fired from his job?

He did. We talked about it. He told me that he was worried about it. He said that he did not think that his employer would investigate the truth of the claims made in the defamatory e-mails, they just wouldn’t want to have an employee that caused them to have to deal with such matters.

The Goons are bullies. Bullies take advantage of the fact that normal people are embarrassed to hear ugly things said around them. None of the Goons has been banned at any of the sites at which they have employed their dirty tactics. Site owners do not expect to see consequences visited on the for banning honest posters. They don’t know what to expect from the Goons. So they are careful not to do anything to antagonize them in any way. The Goons get their power from the fact that people fear them.

The Goons say that they do not demand that you be banned because of what you say but because of how you say it. Is there any truth to that?

There’s a little bit of truth to it. If I were to go on a board and say “I am going with a low stock allocation even though I know that Buy-and-Hold is the answer because I am a scaredy cat and I just cannot work up the courage to do what is right,” they would not object. A statement like that poses no threat to their investing beliefs. What they don’t like about me is that I cite peer-reviewed academic research. Their marketing claim is that the peer-reviewed academic research supports Buy-and-Hold. When people find out that that is not so, their marketing pitch collapses.

But they really are objecting to the content of my message. I am saying that the peer-reviewed academic research does not support Buy-and-Hold. There is no way that that message can be expressed to which they would not object.

Shouldn’t web sites be permitted to ban whomever they want?

No. Web sites should follow their published rules.

A site owner would certainly be free to say “this site is about day-trading and Valuation-Informed Indexing is not a day-trading strategy and so it may not be discussed here.” But the Retire Early board at Motley Fool was founded for the purpose of helping people learn how to plan effective early retirements. To ban discussion of the errors in a retirement study heavily promoted at such a site is an act of financial fraud. Motley Fool had published rules prohibiting the tactics that the Goons used to keep the readers of the site from learning the realities. Death threats, for example, were prohibited. Intimidation tactics were prohibited. Jumping onto threads for the sole purpose of driving people off them was prohibited. The people who engaged in the abusive tactics should have been banned, not the people expressing a desire that honest posting be permitted.

Most people who view the material at a board do not know or care much about the board politics. When they see a retirement study being discussed on a daily basis by the people who visit the board, they naturally conclude that the study checks out, that there are no errors in it. If errors have been discovered and are being covered up, those people are being put at grave danger of suffering failed retirements. And the owner of the board is complicit in the act of fraud if he knows about the errors and about the abusive tactics used to cover up those errors and has done nothing to protect the community.

Why do you think the site owners banned you if you had violated no rules?

The Stock-Selling Industry has spent hundreds of millions of dollars promoting Buy-and-Hold. Everyone knows about it. Valuation-Informed Indexing is a new idea. Lots of people have expressed a desire to learn about it. But they naturally start out as skeptics and can only be brought around in time as they ask questions and hear the answers and think things over. I have never violated any site posting rule. No site owner has ever identified one that I broke. But the Goons follow me from site to site and make everyone present uncomfortable with their insanely abusive behavior. Most people truly hate that stuff and express an intent to leave the site if the ugliness is not brought to a stop. The site owners ban me as a way of making the ugliness stop.

The obvious question is — why don’t the site owners ban the Goons, who are the ones breaking the rules?

Buy-and-Hold is Get Rich Quick. Get Rich Quick is popular. The site owners want to be make money and you don’t make money by being against what is popular. So the site owners do the thing that makes them popular.

The problem, of course, is that people’s retirement money is at stake. There is nothing wrong with a site owner wanting his site to be popular. But an owner of an investing site who cares only popularity and is willing to permit verifiably false investing claims to be presented without permitting any possibility of those claims being challenged is engaged in an act of financial fraud.

I pointed out the errors in the Old School safe-withdrawal-rate-studies on the morning of May 13, 2002. About ten years later, the Wall Street Journal published an article confirming that I was right. There are millions of people who will likely suffer failed retirements because of the failure of the authors of those studies to correct them for those 10 years. Who should bear those losses. The people who relied on the studies did nothing wrong. They checked studies before planning their retirements. The site owners allowed those studies to be promoted at their sites even though they knew about the errors in the studies and even though they knew that the authors of the studies were covering up those errors through the use of death threats and other intimidation tactics. Big-name experts like John Bogle and Bill Bernstein and Larry Swedoe participated at these forums without raising objections to the abusive tactics employed to cover up the errors. Is it equitable in such circumstances to say that the investors should suffer these losses? It certainly seems to me to be proper to hold the study authors and the site owners and the experts liable for the financial losses. No?

It sounds like you are saying that the investing advice field has become 100 percent corrupt in the Buy-and-Hold Era.

Yes, that is a concise statement of the reality, in my assessment.

May talented people work in this field. All signs are that they got into the field at least in part because they wanted to help people. A mistake was made and they ended up destroying millions of middle-class lives. Lots of people want to be able to retain their personal integrity and still work in this field but they are not able to find any means to make that dream a reality.

Do you have any recommendations?

I’ve made the same recommendation thousands of times. We need to open every investing board and blog on the internet to honest posting on all investing-related topics.

The Buy-and-Holders are threatened by this idea. But it is by talking things over that we enjoy learning experiences. We all benefit from learning experiences.

We are going to have to make the move to Valuation-Informed Indexing eventually, whether the Buy-and-Holders like the idea or not. Buy-and-Hold is a huge wealth-destruction machine. The time is not too far off when as a society we will no longer be able to bear the losses. Given that we are going to have the discussions sooner or later, it is better for the Buy-and-Holders that we have them sooner, when their financial liabilities are smaller.

I hate it that the Buy-and-Holders have introduced so much ugliness into the debate. We have discovered amazing things over the past 30 years. We should be enjoying our good fortune, not arguing over whether honesty should be permitted in investing discussions.

Do you think that others might not see Valuation-Informed Indexing as being quite such a big deal?

Yes, that’s absolutely so. That’s probably the most important driver to all that is going on.

People fell in love with Buy-and-Hold. It sounded sensible. They liked it that it was rooted in academic research. They felt that it survived its real-world test when it performed so well during the bull market.

People have begun to entertain doubts since the beginning of the economic crisis. But they do not want to drop Buy-and-Hold altogether. They are okay with the idea of paying a bit more attention to valuations. But the idea of abandoning Buy-and-Hold strikes most people as extreme. Their retirement money is at stake. Most people want to avoid extreme steps when their retirement money is at stake.

We are living in a transition period. Ultimately, people need to choose either Buy-and-Hold or Valuation-Informed Indexing. There is no support in the research for the middle ground. If valuations matter, it makes sense to quantify the extent to which they matter and that makes you a Valuation-Informed Indexer.

But people do not want to make that jump today. There is a great psychological resistance to making that jump.

Do you think then that you might have more success if you didn’t push so hard?

I’d be more popular if I didn’t push so hard.

I wouldn’t know as much, however. It is by pushing and listening to the reactions that I get from my pushing, that I sharpen my understanding of the realities of stock investing. Then I am able to pass that information along to others.

I am the co-author (with Wade Pfau) of peer-reviewed research that shows investors how to reduce the risk of stock investing by 70 percent. I am very proud of that research. I think it would be fair to describe it as the most important research published in this field in the past 30 years. I couldn’t have produced that research had I not pushed. I had been pushing for years when I connected with Wade and it was because of all I learned in the discussions that followed from my pushing that I was able to answer all of his questions. Pushing gets you places.

And please remember that Shiller didn’t publish his breakthrough research last week or last month or last year. Why haven’t we taken advantage of Shiller’s insights. Because some people don’t want us to (they make their careers advocating Buy-and-Hold) and because those who see the merit of Shiller’s work don’t push hard enough.

We know how to stop economic crises today. We know how to reduce the risk of stock investing by 70 percent. We know how to invest so that we can retire five to ten years sooner. We know that stuff intellectually. But most of us don’t know it in a practical sense because we have accepted a situation where talking about these wonderful advances has been prohibited. Huh? My thought is that some pushing is called for in these circumstances.

Yes, I push. But please let it be noted that I am pushing for something very, very good.

And please let it be known that there will be no losers when this exercise in pushing succeeds. It’s all winners. It’s good stuff piled on top of good stuff piled on top of good stuff. It’s a rare opportunity to be able to improve millions of lives without having any other group needing to take on any costs. This is truly exciting stuff. So I push (in a loving way).

Isn’t it possible that you are wrong?

Yes, it is. I have been wrong about important things at earlier times in my life and it could be that it is happening again. If it were, I would probably be the last to know. Please don’t take anything I say to heart solely because I say it.

Why do you believe that stock prices will fall by 65 percent within the next few years?

Because there has never in U.S. history been a secular bear market that ended with the P/E10 level above “8.” A drop to “8” would be a drop of about 65 percent from where we are today.

Is there magic in this “8” P/E10 level? Why must history repeat?

There’s no law that says that history must repeat. In fact, if we opened the internet to honest posting, I do not believe that we would ever see the P/E10 level fall to 8. A P/E10 level of 8 is crazy. It means that we are pricing the entire market at one-half of fair value. Why do that? At least when we overprice things, we make ourselves richer for a time. When we underprice, we make ourselves poorer for a time. Why do that? Especially when we are already in bad economic times?

It’s human psychology that drives us to do this crazy thing. It makes no logical sense to price stocks at one-half of their fair value. But you must keep in mind that most of us are trying hard to believe that our portfolios are worth what our portfolio statements say they are. The market must eventually price things properly and so the P/E10 value must fall to 15. But, when it does, that will depress us because we will have lost so much wealth that we were planning to use to finance our retirements. The depression will cause us to feel an irrational hatred of stocks as great as the irrational exuberance we felt in earlier days. People who feel an irrational hatred of stocks push the P/E10 value to 8, one-half of fair value. It only makes sense emotionally, not intellectually.

The only way to get past all this dangerous emotional business is to become familiar with the lessons of the last 33 years of peer-reviewed academic research. That’s why I keep hitting that note over and over and over.

Why can’t you just admit that you don’t like the Buy-and-Holders?

Because it’s not true. I like them as people. I admire them for their contributions. I respect them for their genuine and important accomplishments. I am grateful for what I have learned from them. I look forward to working with them.

It’s important to keep the long-term picture in mind. When the history books are written, they won’t focus on these internet squabbles. The focus will be on the huge advance in our understanding of how stock investing works that we are about to achieve. The Buy-and-Hold Pioneers played a big part in making that advance a reality. I tell on them when they mess up, I think it i fair that I sing their praises when they do good stuff too.

Are you bitter?

I don’t think so. I would describe myself as anxious to move on to a better world.

I’ve heard that you expect to receive a payment of $500 million. Is that so?

I expect to receive that amount in a settlement from the Wall Street Con Men. My hope is that I will not have to follow legal papers. I believe that John Bogle’s heart is going to melt following the next price crash and that he is going to want to set things right and that we will be working together to pull our nation out of its economic crisis and to spread the word on Valuation-Informed Indexing (which could fairly be called “Buy-and-Hold 2.0”) far and wide.

So you’re in it for the money?

I work for money like everybody else. I have done very important work and I expect to be paid an amount reflective of the value of the work. I have had some hard day at the office over the course of the first 12 years!

I want to see all Valuation-Informed Indexers be well compensated. One of the big problems we have today is that the rewards for pushing Get Rich Quick strategies are so great that people cannot ignore the temptation to go down that dark road and the rewards for pushing the true research-based stuff are today so slight that it is hard to persuade people to work up the courage to flip to the bright side of the road. The more money we see travel in the direction of the Valuation-Informed Indexers, the better off we all will be.

What do you think will happen after the next crash?

I am not able to anticipate specifics. I remember feeling a big change in the water temperature following the 2008 crash. I wasn’t able to post at most investing blogs prior to that crash. I was at least implicitly banned just about everywhere. After that crash, I was able to get guest blog entries at all sorts of places that were closed to me in earlier days. I believe that the next crash will push the door the rest of the way open and exciting things will start to happen for us all.

We will need to move fast. A lot of people will be experiencing panic. We will be seeing political unrest. It will be a dangerous situation. We will need to get good news out to people as quickly as possible to reassure them about their economic futures. This is why I have been trying to get articles like this one in place prior to the crash. I want these materials to be available promptly when they are needed.

Can you sum up what Valuation-Informed Indexing is all about in a few words?

Valuations matter.

That’s it.

Can it really be that simple?

I think so. The most important truths are the simple, fundamental ones.

Once we open our minds to the need to quantify the effect of valuations, we become able to gain an awareness of the extent to which emotions ruin our ability to make sound investing decisions. The change we are in the process of achieving is the move from living in a fog to becoming self-aware. Investing is leaving its dark ages. Investing will in the future be a more dignified and intelligent an endeavor.

When you describe your investing ideas to people you interact with in your day-to-day non-internet life, how do they react?

I don’t get the Goon stuff in real life. Sometimes people get it. Usually, they do not. Most people respond politely but with a sort of My-Eyes-Glaze-Over look that tells me that they feel that understanding investing is beyond them or what I am telling them is too good to be true or that someone other than me would be advocating it if it were real or something along those lines.

Does that tell you something?

It doesn’t tell me that I am wrong. If I were wrong, people would be able to identify where it is that I have gotten off track. No one has done that in 12 years and many, many people have told me that I am the first person who has described how investing to them in a way that truly makes complete sense. It’s not just ordinary people who have said that. Big names in the field have told me that. It seems impossible that so many people could file such glowing reports and that there would really be nothing there.

If we don’t see a crash for another three years, will you give up on Valuation-Informed Indexing?

That’s the hardest question you could ask me. I could never go back to believing in Buy-and-Hold. Once you have seen the holes in the theory, you cannot forget that you have seen them. I am strongly drawn to research-based strategies and, outside of Buy-and-Hold and Valuation-Informed Indexing, there are no others. So I would be in a fix. My guess is that I would look for some new research-based strategy. But it is hard for me to imagine what that would be. I would feel a need to add stronger caveats to my case for Valuation-Informed Indexing if we did not see a crash by the end of President Obama’s second term in office.

Intimidation Act #1: I Failed to Report on the Errors in the Greaney Retirement Study for the First Three Years That I Posted at the Motley Fool board. I was afraid of what Buy-and-Holders would say about me if I revealed my sincere beliefs about the value of a retirement study that did not contain an adjustment for the valuation level that applied on the day the retirement begins.

Intimidation Act #29: When I Reported on How My Posts Were Being Deleted at the Get Rich Slowly Blog, Site Owner J.D. Roth Threatened Me. I believe that the deletions were the result of a technical malfunction. Still, the words that J.D. directed at me were less than friendly, especially given that the technical malfunction had taken place at his blog. J.D. (whom I consider a friend), wrote: “I’m serious: You need to take this down, and now. It’s not a trivial matter to make false accusations. My reputation is all I have on the internet, and I will NOT have it tarnished by your misperceptions and allegations. I’m now asking you to not only remove the two paragraphs in question, but also your comments. In fact, I’d recommend removing this entire post.”

Intimidation Act #30: Vanguard Founder Jack Bogle Did Not Respond to a May 2006 E-Mail from Me Asking to Hear His Thoughts on the Valuation-Informed Indexing Concept. The allocation shifting strategy that I described in the e-mail (75/50/25) is the one endorsed by Benjamin Graham (Warren Buffett’s mentor) in his book Security Analysis, published in the 1930s. At the time that I sent the e-mail, Bogle was visiting the Vanguard Diehards board on a weekly basis and Mel Lindauer and his Goon Squad were engaging in an almost-daily Campaign of Terror against the hundreds of member of that board community that had expressed a desire to learn about the decades of peer-reviewed academic research showing the superiority of Valuation-Informed Indexing over Buy-and-Hold. It was when I expressed an intent to attend an annual meeting of the Vanguard Diehards at which Bogle would have been present and subject to questioning that the leaders of the board opened a new board that would not be subject to Morningstar.com administrative decisions and asked that all community members move to the new board to escape my posts reporting on the last three decades of peer-reviewed academic research in this field.

Intimidation Act #31: Vanguard Founder Jack Bogle Did Not Respond to a July 2009 E-Mail That I Sent Him Asking His Help in Steering the Indexing Revolution to a New and More Promising Path than the Discredited Buy-and-Hold Path That Led to So Much Abusive Posting at the Vanguard Diehards Board and the Bogleheads Forum Board. I explained to Jack that: “I do not ask you to endorse Valuation-Informed Indexing today. I ask you to endorse an end to the ugliness that has blocked civil and reasonable debate on these questions for a good number of years now. The indexing movement needs to leave that ugliness behind us once and for all.”

Intimidation Act #32: Vanguard Founder Jack Bogle Did Not Respond to a ____ E-Mail

Intimidation Act #33: The Owner of the Investor Junkie Blog Wrote; “In Rob Bennett’s Case, He Was Banned for No Known Listed Forum Policy, Except His Viewpoint Was Different From Other Bogleheads and [He Was Perceived As] a Threat.”

Has there ever been anyone else who was banned from 15 different sites without once violating a posting rule? There must be something that I am saying that makes a lot of powerful people look very, very bad, no? How do you think millions of middle-class people are going to react when it finally comes out? It will, you know. My guess is that it comes out following the next price crash.

Intimidation Act #34:  The Owner of the My Journey to Millions Blog Sent Me a Note on Twitter Saying: “I Still Don’t Understand Why You Fight. Who Cares?”

All signs are that his expression of bewilderment is sincere. If Evan feels that way, my guess is that many others feel that way. This is one the hurdles that I need to overcome. This is part of the Big Black Wall of Cognitive Dissonance. I not only have to fight the bad guys. I have to fight the good guys who don’t understand how the bad stuff done by the bad guys is killing us all.

The answer to the question is: Once honest posting by one person (me) is permitted on one important topic (safe withdrawal rates), the entire wall of intimidation will fall and we will be hearing thousands of people posting honestly on scores of topics. It won’t be just Wade Pfau publishing honest research. Hundreds of academic researchers will join him once they feel it is safe to do so. Bogle will be sharing with us his sincere views. So will Bernstein. So will Swedroe. So will Burns. We will be learning from all sorts of people and we will be generating new insights of our own as a result of what we learn from them. There are now 33 years of insights that we have denied ourselves. Once we open the floodgates, we will be advancing in our understanding of how stock investing works at warp speed. There’s huge leverage in the idea of opening the internet to honest posting on the last 33 years of peer-reviewed academic research. 

Intimidation Act #5: When I Began Posting at Blogs, the Greaney Goons Took Their Campaign of Terror to the Personal Finance Blogosphere. Most Bloggers Responded Not By Banning the Goons But By Banning Discussion of the Issues that the Goons Wanted to See Blocked. In the link above, Mike, the author of the Quest for Four Pillars Blog, notes that the Goons were posting at blogs only to cause trouble and that they were not regular participants at the blogs at which they were posting abusive comments. Mike later banned honest posting at his own blog (which is now titled the Money Smarts blog.

Intimidation Act #8: Maryland Financial Planner Michael Kitces told me following the 2008 Crash That “A Lot of Planners Are Starting to Question Their Passive Investing Beliefs.” This is obviously something that millions of middle-class investors needed to know about. Why didn’t we hear lots of media reports? The financial planners were afraid to have word get out to their clients that the investing advice they had used to invest their retirement money as gravely flawed. I told Michael that I would like to make www.PassionSaving.com the meeting place for financial planners who had lost confidence in Buy-and-Hold and who were looking for to learn about more realistic long-term strategies.

Intimidation Act #11: Maryland FInancial Planner Michael Kitces, Who Evidences More Honesty and Smarts in His Comments on Stock Investing Than Just About Any Other Financial Planner I Have Encountered, Explained His Reluctance to Criticize Buy-and-Hold on Grounds That “A Large Number of People Will Harm Themselves Is They Do Anything Besides Being Passive.” Michael was responded to an e-mail from me in which I argued that no one can attain true expertise in this field until we see a national debate on the merits and dangers of Buy-and-Hold strategies.

Intimidation Act #22: Vanguard Founder Jack Bogle Has Spoken In Support of Several Key Principles of Valuation-Informed Indexing But the Buy-and-Hold Mafia Does Not Acknowledge the Common Ground and Continues to Employ Vicious Smear Tactics to Create the Impression That There Is No Common Ground.

Intimidation Act #26: Mike Piper, Owner of the Oblivious Investor Blog, Banned Dicussion of Mel Lindauer’s Campaign of Terror Against Those Who Posted Honestly on the Three Decades of Peer-Reviewed Academic Research Showing the Dangers of Buy-and-Hold Investing Strategies. Mike told me at the 2011 meeting of the Financial Bloggers Conference that he views Lindauer as “a jerk” but that he does not object to his abusive posting practices because he fears that Lindauer would try to destroy his business if he did. Mike believe that Valuation-Informed Indexing can work even though he forbids discussion of it at his blog. He explained that: “I do see (at least a potential) value in adjusting asset allocations as a function of current price levels. But to be honest, I see the misinformation spread by the financial services industry (about active management, picking stocks, etc.) as a far larger issue. And until that battle is won — which I doubt will ever completely happen — I don’t foresee myself taking on any other issues with my writings.”

Intimidation Act #27: Mike Piper, Owner of the Oblivious Investor Blog, Told Me That He Received E-Mails From His Readers That Described My Comments at the Blog as “Spammy” and “Obnoxious.” Mike told me in the same e-mail that be views me as “a genuinely good guy” who is sincere about his message.

Intimidation Act #30:  Mike Piper, Owner of the Oblivious Investor Blog, Deleted a Comment In Which I Pointed Out that Mel Linduaer and Taylor Larimore, Authors of The Bogleheads Guide to Investing, Evidenced a Lack of Personal Integrity By Supporting a Ban on Honest Posting on Safe Withdrawal Rates at the Bogleheads Forum. I argued in the deleted comment that “the book does not say the same things about retirement that it would say if Taylor and Mel had permitted honest discussions of the flaws in the Old School studies and had learned from those discussions.” and that “The reason why discussions of the errors made in the Old School studies have been so contentious is that there are integrity issues involved in the failure of the community of Passive Investing advocates to address these issues for over seven years now. ” I contended that: “We are not going to be able to duck these issues indefinitely. Our integrity is part of what makes us human.”

Intimidation Act #31: Mike Piper, Owner of the Oblivious Investor Blog, Acknowledged That My Comment on the Lack of Integrity Evidenced By Mel Linduaer and Taylor Larimore By Supporting a Ban on Honest Posting on Safe Withdrawal Rates Was “Respectful” But Justified the Ban on Grounds That “It Brings Up Things That Happened at Another Forum, Which, Frankly, Most of My Readers Don’t Seem to Care About.” We all care about whether the people whose investment advice we follow possess personal integrity. One of the reasons why our 12 years of discussions have been so contentious is that the Buy-and-Holders had been covering up the errors in the Buy-and-Hold strategy long before I came on the scene. When I came on the scene, people were not willing to own up to the cover-up because it demonstrated a lack of personal integrity among the people promoting Buy-and-Hold strategies. Mike didn’t delete my comment because no one cares about whether people offering investing advice possess personal integrity or not. He deleted it because everyone knows that personal integrity matters and that those who have been ignoring Shiller’s findings for over three decades have shown that they do not possess it. People want to believe in Buy-and-Hold. But they do not know how to do so without silencing those who bring up the personal integrity matter. So as a society we are playing  a stupid and dangerous game in which we pretend that personal integrity does not matter in the investing advice field.  The reality is that it matters as much in this field as in any other and the long time-period in which those pointing out the importance of personal integrity have been silenced has created a pent-up desire for personal integrity among investing advisors that will end up hurting Buy-and-Holders following the next price crash. At that point, I will be trying to help people understand the unique circumstances that caused so many of us to pretend for so long that personal integrity does not matter in this one particular field of life endeavor.

Intimidation Act #32: One of the Greaney Goons Accused Me of “Hubris and Self-Absorption” When I Argued to Mike Piper That “Integrity Issues Are Always On-Topic.” Mike Piper agreed to my request that he include a note at his blog saying that I had written a blog entry at my site explaining why the comment had been deleted. That was a classy move. We would all be in a better place today if other Buy-and-Holders made as much effort as Mike has on several occasions to understand the other fellow’s point of view.

Intimidation Act #35: Morningstar Reaffirmed Its Ban on Honest Posting When Several Community Members Expressed a Desire to Hear Both Sides of the Story. Morningstar justified its ban on honest posting by saying that accurate reports on what the peer-reviewed academic research of the past 33 years tells us about how stock investing works is “inflammatory” in communities populated largely by Buy-and-Holders.

Intimidation Act #40: Shiller Pulls His Punches on a Number of Issues.

Intimidation Act #46: J.D. Roth, Owner of the Get Rich Slowly Blog, Sent E-Mails to Those Participating at His Forum Asking Them Not to Respond to My Comments.

Why would a blogger not want people to participate in a discussion being held at his forum?

Intimidation Act #48: Mike Piper Told Me That He Does Not Like to Ban People But That He Was Banning Me But That I Should Not View That As An Act of Intimidation.

Mike was responding to an e-mail in which I argued that having a successful blog was not going to mean much of we see an economic depression. In response to his e-mail, I told Mike that I certainly viewed the banning as an act of intimidation. I said that “it makes me feel there is something dirty or rude about challenging passive investing at your blog.” Mike said that he would not feel a need to ban me if I posted less frequently. But doesn’t the entire problem stem from the fact that Mike’s readers have not heard about the dangers of Buy-and-Hold a lot more frequently? No one would be shocked to learn what the academic research says if that message was being repeated daily at every board and blog on the internet. It is because people have heard Buy-and-Hold promoted so often that so many have adopted the strategy as their own and now are upset to hear that there is 33 years of peer-reviewed academic research showing that it never works. The only way in which I could justify posting less frequently is if one of the Buy-and-Holders found something wrong in what I was saying. None has ever done that. Instead, I always hear that I should post accurate information less frequently. My view is that we all need to hear accurate information post more frequently and inaccurate information (information that promotes Buy-and-Hold strategies) less frequently. Accurate information helps people. Inaccurate information hurts people. No?

I told Michael that: “You should be writing about the fact that you have community members who are upset to hear criticisms of Passive Investing. That’s part of the story. That’s news.” We ALL should be talking about the defensiveness of the Buy-and-Holders, which evidences itself at every board and blog at which they congregate. True research-based strategies inspire a calm confidence, not a panicky defensiveness. The Buy-and-Holders are telling us in the manner in which they respond to challenges to their strategy that the strategy is a loser.

Mike’s response was to say that: “There IS something rude about disagreeing with me repeatedly at my own blog” Huh? Why open a blog comment to discussion if you view disagreement as “rude”? Do advocates of any idea other than Buy-and-Hold Investing adopt this attitude toward people who disagree with them?

I told Mike that “this cannot be put off indefinitely.”

Intimidation Act #49: Mike Piper Told Me That “There Are Certain Social Norms Regarding Blog” and That One of Them Is That “It Is Generally Regarded As Rude to Repeatedly Disagree With the Blogger.”

I pointed out to Mike that there are decades of peer-reviewed academic research showing that Buy-and-Hold has never in the history of the U.S. market worked out well for a single long-term investor and that in ordinary circumstances “your response would be to stop making the false claims once you became aware of the errors in them.” I explained that his readers felt uneasy because they were being told two opposite things and that the ordinary way of calming them would be to resolve the differences through fair and full and civil discussion of them. I said that instead of ducking the issues Mike should be directing his talents to figuring out the realities and then sharing his sincere take with his readers.

Mike denied ducking the questions. I proposed that Mike give me space at his blog on a once-per-month basis to make the case for Valuation-Informed Indexing in return for an agreement on my part not to comment on his many posts each month promoting Buy-and-Hold.  Mike pondered the idea for the better part of the day but ultimately rejected it. He explained that he believes that the people who sign up for his blog want to hear only his views. He said that he does not want to squelch other viewpoints, he just does not want to provide his readers any opportunity to learn about them by reading his blog. I thanked Michael for his willingness to consider the idea.

I sent Michael an article that links to 20 studies pointing out the dangers of the Buy-and-Hold strategies he promotes at his site. He said that he would not link to the post announcing the article because “All the stuff going on in the comments is precisely what I want no part of. All the back and forth name calling (and worse) is something I don’t want to be connected with in any way.”

Intimidation Act #50: Mike Piper Objected to “Back-and-Forth Name-Calling At My Blog When All of the Intimidation Tactics Were Tactics Being Employed by the Buy-and-Hold Goons in an Effort to ‘Persuade’ Me to Stop Posting Honestly on Safe Withdrawal Rates and Other Important Topics.

I argued that: “We’re all involved, Mike. Anyone with any interest in the subject of investing is involved. Anyone who cares about John Bogle’s many wonderful contributions and the reputation he is going to have in future days is involved. Anyone who has a blog (on investing or any other topic) is involved. Anyone who wants to see the U.S. economic and political system survive its current troubles is involved. Anyone who is human or cares about other humans is involved. A man is not an island. We all benefit from our connections with others. When we stop caring about the others to the extent we need to stop caring about the others to permit this sort of ugliness to continue, we sacrifice what makes us human in doing so.”

Mike advised that I contact law enforcement authorities re the death threats advanced by those trying to “defend” Buy-and-Hold in the face of the decades of peer-reviewed academic research showing that there is precisely zero chance that it could ever work for a single long-term investor. I told him that I had done this but that the law enforcement authorities, like him, had not wanted to get involved given the power and money and connections possessed by the Wall Street Con Men who have been pushing Buy-and-Hold strategies so relentlessly and for so many years.

Intimidation Act #55: J.D. Roth, the Owner of the Get Rich Slowly Blog, Told Me That: “You Might Want to See Somebody — This is Paranoia!”

It’s not paranoia if someone is really out to get you, J.D.!

I told J.D. that all bloggers should be united in opposition to the tactics employed by the Goons. Even Buy-and-Holders should not want to be associated with those sorts of tactics and should want to bring an end to them so that we can all enjoy the benefits of a community learning experience. J.D. sent a reply in which he engaged in word games and I told him that I believed that the word games were hurting all of us. I specifically noted that “reasonable people are not going to believe that you are concerned about my mental health. J.D.”

We kinda, sorta patched things up in the exchange of e-mails reported on in this post. It should be noted here that I have had numerous exchanges with J.D. in the years since both by e-mail and in person (at Financial Blogger Conferences) and that I consider him a good (but sometimes misguided!) blogger friend.

Intimidation Act #56: When I Asked J.D. Roth for Help in Organizing Financial Bloggers to Prevent Goons from Intimidating Our Readers, His Response Was to Tell Me That “You Are Your Own Worst Enemy in This Matter.”

The owner of the Lazy Man and Money blog had suggested that I contact J.D. He noted in an e-mail to J.D. that: “He says that some goons have been trying to stop him wherever he posts. If there’s truth to what he’s saying, a site with the popularity of yours could put this injustice out there and maybe help you both out.”

I pointed out that: “I cannot post dishonestly on safe withdrawal rates…I don’t have any wiggle room — It’s a numerical calculation.”

Intimidation Act #60: The Publisher of the Index Universe Site Invited Me to Write a Column on Valuation-Informed Indexing and Then Backed Away from the Idea After His Editor Evidenced Concern re How the Lindauerheads Would React.

Site Publisher Jim Wiandt compared me to Rob Arnott, asking “What is it with guys named Rob?” and trouble-making in the investing field.

Site Editor Matt Hougan sent me an e-mail re my reporting on the death threats and other intimidation tactics employed by the owners of the Bogleheads Forum to block honest posting on the last 33 years of peer-reviewed academic research during the time that the discussion-board community was housed at Morningstar.com (which permitted honest posting, to the consternation of Mel Linduaer and his Goon Squad. Matt wrote that: “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.” The article on the Bogleheads Forum that Matt published at the Index Universe site failed to report on its long history of abusive posting and financial fraud, realities that are of obvious importance to the readers of any board being used by people seeking advice on how to invest their retirement money. Matt made clear with these words that he was not concerned about correcting this oversight. In fact, he was taking steps to see that readers of the article did not learn the realities via comments posted re the article.

I told Matt that: “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.”

I sent Matt a follow-up e-mail reporting on an abusive post put to his site by one of the Goons and asked him how he would like me to handle it. He said that he would handle it by deleting ALL the comments posted to the discussion thread, meaning that the readers of the article on the Bogleheads Forum were denied the information they needed to know that the owners of the Forum has engaged in multiple acts of financial fraud by making use of death threats and other intimidation tactics to block discussions of the errors in the Old School safe-withdrawal rate studies.

I told Matt that: “That sends exactly the wrong signal. The Goons who destroyed the Vanguard Diehards board are watching what you do to see what they can get away with. The purpose of the abusive posting on this thread was to have the thread taken down, just as the purpose of the abusive posting on the Vanguard Diehards board was to have the board destroyed as a learning resource. The proper response is to administer the rules of the site in a reasonable way.

Jim sent me a response to my first column entry that said: ” This is what all the fuss is about?…. It seems pretty harmless to me.  That doesn’t mean I agree with it- but it’s not like you’re proposing some kind of wild new idea.” He told me to work with Matt to arrange for a publication data.

I explained to Jim that the “fuss” was because of the multiple acts of financial fraud engaged in by Mel Linduaer and John Greaney, that because I had called them out on their felonies they saw me as a threat and would do anything to insure that my message not be heard. Jim elected to send the same pro-Goon signal that Matt had sent, saying: “The personal stuff is a waste of time, so that’s the kind of thing we’ll nip in the bud to ensure that the discussion is, sure, lively, but also civil and substantive.” Of course, financial fraud is not “personal stuff,” it is a felony under the laws of the United States. It is because the cover-up of the errors in the Old School retirement studies have been covered up for 12 years that we are in an economic crisis today. And it is because numerous site owners have elected to aid in the cover-up by failing to exercise their responsibilities to enforce their posting rules in a reasonable manner that the cover-up of the errors in the retirement studies (and of the dangers of Buy-and-Hold investing strategies in general) has continued for so long.

Jim had told me to work with Matt to set a publication date for the article. Matt was not responsive to my e-mails. So I sent an e-mail to Jim asking for his help. At that point Matt wrote me with his first comments on the article: “My general sense is that it would need a dose of academic rigor before we would add it to the site. We really like our columnists to break new ground AND to support that with hard data (think charts, tables, and return series). If you revisited the piece and added in strong data and such, I’d be willing to look at it again.”

I explained to Matt that I had intended the first entry for the column to offer an overview of the Valuation-Informed Indexing concept and that I planned to add academic rigor in follow-up pieces. Matt responded with a note saying: “The issue is that you are, to be frank, a lightening rod of controversy. I don’t really know why (nor do I care).” This suggests to my ears that Matt had been in contact with the Lindaurheads. He said in this e-mail that my articles would be judged by a different standing than what applied for articles by anyone who was not a target of the Linduaerheads — “Anything you publish on our site has to be extra-well-documented and fully supported by hard facts and research.”

I thanked Matt for his frankness and told him that I agreed both that Valuation-Informed Indexing is pure common sense AND that it has generated huge amounts of controversy in an era in which Buy-and-Hold strategies have been promoted so relentlessly. I pointed out that thousands have responded in very positive ways and that those people have a right to hear more about them even if there is a group of people that hates the idea of people hearing about the ideas with a burning passion. Matt said that he could not respond right away because he was swamped with deadlines but promised that “we’ll figure something out.” After I wrote numerous e-mails asking where things stood, he told me: “I’m going to decline to run your articles at this time…. I’m not sold enough on the concept to roll it out in pieces over time, as you suggest … I’d have to be 100% on board before I did that … and that would require seeing the data in a concise article format.”

I sent Matt an e-mail summarizing the mountain of research showing the superiority of Valuation-Informed Indexing strategies and the dangers of Buy-and-Hold strategies. He sent me a five-word e-mail in response: “Thanks for the information, Rob.”

 Intimidation Act #61: A Discussion That I Had With the Value Investing Congress Group on LinkedIn.com Ended With the Conclusion That: “It Is Very Difficult for the Average Person Because Most in the Professional Money Management Business Are More Focused on Making a Living Themselves By Getting Their Cut Rather Than On Maximizing Returns to the Investors.”

What’s so intimidating about that? That sounds supportive, no?

The intimidating part is that there are lots of smart and good and  influential people in the Value Investing Congress. I was told that I am right about how stock investing work, which is of course nice. But the indication here is that none of the people in this group are going to do anything about the problem. The Wall Street Con Men are powerful people. If we are going to find a way to get accurate investing information out to millions of middle-class people, we need to be united in demanding that. All conservatives and all liberals should be involved. All young people and all old people should be involved. All white people and all brown people and all black people should be involved. All Christians and all Muslims and all Jews and all Atheists should be involved. All women and all men and all children should be involved.

It’s intimidating to hear that some are complacent about these issues. It’s intimidating to hear that some do not see it as their fight and would prefer that others take the lead.

Intimidation Act #62: The Wall Street Journal Published a Column Reporting That Buy-and-Hold is “Hooey,” That the Wall Street Con Men Have Been “Leaving Out Half the Story” and Advising Investors Not to Be “Bullied” By Those Who Claim Falsely That There Is Academic Research Supporting the Buy-and-Hold Claims.

Again, the intimidating part re this one is the lack of reaction among the many journalists and bloggers and investment professional who have advocated Buy-and-Hold strategies in recent decades. The Wall Street Journal is a well-edited newspaper. The Journal would not have run this column if there were nothing to the article. So everyone working in this field should have responded in some way to this breakthrough article. Those who have long had doubts about it should have cited it as part of an ongoing effort to educate millions of middle-class investors as to the destructive power of this dangerous investing “strategy.” Those who still believed in Buy-and=Hold should have written articles stating why they believe the Wall Street Journal got it so wrong.

But the article did not go viral. Not by a long shot. That’s intimidating. That suggests that a lot of us believe that The Stock-Selling Industry is so corrupt that it is beyond redemption. And that suggests that a good number of people have given up on the ideals that made our country a great one in earlier days.

I don’t believe that we have given up. I believe that we will rise up and demand that honest posting be permitted following the next price crash, which will likely put us in the Second Great Depression. But I don’t like it that it appears that it is going to take a Second Great Depression for us to start taking advantage of the wonderful things we have learned about how stock investing works as a result of the last 33 year of peer-reviewed academic research. It scares me that it has come to that and to experience that fear re the future of my country is to experience a form of intimidation.

Intimidation Act #63: The Bad Money Advice Blog Offered a Reasoned Case Against Valuation-Informed Indexing.

Again, the intimidation here was the lack of follow-up. If this fellow could do it, why couldn’t hundreds of other bloggers who still believe in Buy-and-Hold do it? Why isn’t every blogger trying to get to the bottom of this?

They are afraid to even suggest that Buy-ad-Hold might be flawed because they will lose readers if they do and because the Wall Street Con Men and their Internet Goon Squads will attack them if they do.

Their fearfulness should scare anyone hoping that we will proceed in the way Americans of the past have always proceeded when such issues were brought to the table.

Intimidation Act #64: Readers of the Hope to Prosper Blog Responded in a Warm and Friendly Way to My Guest Post on the Merits of Valuation-Informed Indexing.

Again, this obviously made me happy. But, again, I couldn’t help wondering why these people (many of whom were bloggers themselves) did not get more involved in an effort to spread the word.

There are two sides to all controversial issues. The problem with this one is that those who favor Valuation-Informed Indexing are so much less intense than those who do not. That holds back progress.

The Hope to Prosper thread is a sign that things are changing and so it fairly can be described as encouraging. But there is a sense in which it hurts more to hear encouraging responses that don’t really accomplish much than it is to hear Goon responses. Goons are Goons and over time you come to accept that they are going to behave goonishly. The good and smart people who participated on that Hope to Prosper thread could make things happen if they put their minds to it. But something within them (I think it is a desire not to offend the millions of people who still believe in Buy-and-Hold) holds them back. That turns the otherwise positive development into something bittersweet.

I’ve included these surface-positive incidents in the list of 101 acts of intimidation because I have found that they take more wind out of my sails than do the Goon attacks. The Goon attacks are cartoonish. The real scandal of the 12 years is that we have seen so many cases in which good and smart people see the problem well and yet elect not to get involved on grounds that it is someone else’s battle. We all live in the same economic system. We all get hurt when our economic system collapses. We all should love our country and step up to protect it when it is under attack.

I don’t mean to say that the people who fail to act don’t love their country. I believe they do. My point is that they see the problems with Buy-and-Hold but don’t spend enough energy exploring its long-term dangers to see that the continued promotion of this long-discredited strategy constitutes an attack on our way of life. The Goons wouldn’t get away with one-tenth of what they get away with if the many people who see them for what they are realized the consequences that follow for millions of us as a result of our failure to take effective action.

Intimidation Act #65: Bill Bernstein and Scott Burns, Who Both for Years Participated in the Cover-Up of the Errors in the Old School Safe-Withdrawal-Rate, Acknowledges at the Bogleheads Forum That the Studies Are Garbage Without Offering Any Apologies to the Millions of Middle-Class People Whose Lives They Destroyed.

Nor did any of the hundreds of community members who watched the cover-up unfold on their computer screens speak up. It’s not about helping the millions of middle-class people who turn to the experts in this field for honest and helpful advice It’s about making a buck and building a reputation as the sort of expert who never acknowledges a mistake, consequences to millions of middle-class people be damned.

This one is a special form of sickening. I feel great affection and respect for both Bill and Scott. But I intend to testify honestly re this one when called to the stand. Yowsa!

Intimidation Act #66: A Reader of One of My Weekly Columns Told Me That: “To Blame Bogle for the Economic Crisis Is Slinging Mud.”

The crushing part here is that this fellow is not a Goon. He is stating his sincere view.

If investing idea that I had promoted for years had caused an economic crisis putting millions of people out of work, I would want my friends calling me out on it.

The full truth here is that Bogle has asked that his friends tell him when they discover mistakes he had made.

Intimidation Act #67: Yale Economics Professor Robert Shiller Has Not Endorsed My Writings or Identified Any Points Re Which I Have Gone Off Track.

I have spent 12 years exploring the implications of Shiller’s “revolutionary” (his word) finding that valuations affect long-term returns. Surely he either finds merit in the work I have done or see flaws in it. Wouldn’t it be the obvious thing for him either to encourage this work or discourage it? Reading between the lines of some comments that Shiller has made re the lack of respect that many in this field hold for Behavioral Finance insights, I interpret this lack of comment re my work as evidence of Shiller’s desire to avoid controversy. It’s intimidating, given how brutal the attacks are that are coming from the other side of the table. If those who believe in Behavioral Finance stuck up for each other to the extent that those who believe in Buy-and-Hold stick together, we all would make much quicker progress.

Intimidation Act #68: A Community Member Who Participated in Discussions at the Early Retirement Forum Posted a Comment to My Blog That Was Largely Supportive of Me But Then Referred to the Threats That John Greaney Made to Kill My Wife and Children If I Continued to Post Honestly on Safe Withdrawal Rates as “Alleged.”

My wife did not consider those threats to kill Timothy (who was age 2 at the time) and Robert (who was an infant) as “alleged.”

You shouldn’t  have to be a critic of Buy-and-Hold to speak up firmly and clearly in opposition to threats to kill small children because their father posted honestly on errors made in a retirement study.

We are ashamed of our behavior during the Buy-and-Hold years. That’s what is really going on here. It is not that the case against Buy-and-Hold is not strong enough. It is that the case is so strong that it makes us ashamed to acknowledge that we went along with promotion of Buy-and-Hold strategies for all those years.

Intimidation Act #69: Alex Fract, Site Administrator for the Bogleheads Forum, Acknowledged Publicly That I Was Banned from the Forum Even Though I Never Violated Any Posting Rules — He Said That I Represent a “Threat to the Community.”

Is that anything like being an Enemy of the State?

The truth here is that I represent a threat to Buy-and-Hold. The community would thrive if we all worked together to bury the smelly Buy-and-Hold garbage 30 feet in the ground where it can do no further harm to humans and other living things.

Intimidation Act #70: Academic Researcher Wade Pfau, Who Holds a Ph.D. in Economics from Princeton University, Posted an Entry at His Blog Declaring that “Valuation-Informed Indexing Works!”

Again, the intimidating aspect of this is the fact that everyone who had banned me or smeared me for years did not offer immediate apologies on learning of this exciting development.

In this case, a further intimidating element to the story is that Wade took the blog post down after the Greaney Goons threatened to send defamatory e-mails to his employer if he continued publishing honest research. My good friend Jack Bogle indicated that he is okay with that. Oh, my!

Intimidation Act #71: The Bogleheads Forum Examined the Research That I Co-Authored with Wade Pfau Showing that Valuation-Informed Indexing Beat Buy-and-Hold in 102 of 110 30-Year Time-Periods in the Historical Record — But Did Not Lift the Ban on Honest Posting That Applies At That Board.

Wade offered a great comment: “WHY IS IT SUCH AN ODIOUS VIOLATION OF THE TENETS OF BOGLEHEADISM TO EXPLORE WHETHER SOMEONE WHO HAS ENOUGH PATIENCE AND ENOUGH TIME ON THEIR HANDS MIGHT BE ABLE TO BENEFIT FROM THE TRANSITORY NATURE OF SPECULATIVE RETURNS (I.E. THE IDEA THAT THE P/E RATIO EVENTUALLY ENDS UP WHERE IT STARTED)?” [The caps were in the original.]

Those were the days!

Intimidation Act #72: Several Community Members at the Bogleheads Forum Asked That I Be Reinstated When They Saw the Research That Wade Pfau and I Co-Authored Showing the Superiority of Valuation-Informed Indexing over Buy-and-Hold — The Site Administrator Deleted the Posts and Threatened the Posters Who Put Them Forward With Bannings If They Ever Again Objected to the Ban on Honest Posting.

Buy-and-Hold is science.

Isn’t it?

Intimidation Act #73: I Let My Good Friend Jack Bogle Know About Alex Fract’s Behavior at the Discussion Forum Bearing Jack’s Name — and Jack Did Not Respond!

I try to adopt a light tone when talking about this sort of thing. But Jack really is a hero of mine. And his involvement in what at least appears to be an act of financial fraud (I am holding out hope that Jack’s behavior can be excused by cognitive dissonance) truly makes me sad.

Do you think this might be why so few bloggers and journalists are afraid to speak out about the 33 years of peer-reviewed academic research showing that there is precisely zero chance that a Buy-and-Hold strategy could ever work for a single long-term investor?

Yeah, I kinda think this might have something to do with it too.

Intimidation Act #74: A Number of My Fellow Bloggers Got Involved in a Great Discussion in Response to One of My Guest Blog Entries — But Held Back from Calling for All Bloggers Unite in Opposition to the Ban on Honest Posting.

The Goons know that they can cut any of our heads off so long as they are going against us one at a time. They also know that, if we present a united front, they are finished. Bullies are cowards. They go running when their intended victims work up the courage to hit back. That’s one of the reasons why I am no longer willing to sit in silence when I see them trying to trick my friends with their b.s. marketing mumbo-jumbo.

Intimidation Act #75:  I Mentioned That I Was Going After the Guinness Book of World Records Entry for “Most Times Banned from An Investing Site Without Cause” And a Fellow Blogger (Jim Yih) Told Me That He Would Be Happy to Help Me Out By Banning Me from His Site As Well.

This is not an act of intimidation. This is the opposite of an act of intimidation. This is an act of friendship. I post there here to show the contrast between how things are and how things should be.

Would doing more of this sort of thing really be so hard, people? A little more joking around like this would shut those Goons up quick-like.

The moral of the story is — People can question our investing strategies and still remain our friends.

Or at least that should be the case!

Intimidation Act #76: Wade Pfau Argued re the Old School Safe-Withdrawal Rate Studies That: “We Will Not Know If There Is Going to Be an Increased Failure Rate for Another 20/30 Years.”

And if the tobacco companies came out with a study stating that “if you start smoking four packs per day at age 20, you will live to be 100,” we would not know for 80 years whether the claim turned out to be true or not.

That is not how you determine whether the methodology used in a study is analytically valid or not.

We know that the valuation level that applies on the day the retirement begins has a huge effect on the returns earned in the early years of the retirement. We know that the returns earned early in the retirement determine whether the retirement succeeds or fails. Thus, we know that it is an insanely irresponsible act to fail to take into consideration the valuation level that applies on the day a retirement begin in any analysis of whether the withdrawal rate called for in the retirement plan is safe or not.

All of that is simple and easy to understand. All of the complexity and confusion we have witnessed over the past 12 years came about because of the efforts of smart people to come up with some means of rationalizing the failure of the authors of the Old School studies to consider the most important factor bearing on the safe withdrawal rate question in their studies purporting to identify the safe withdrawal rate.

The honest path is a simple. The dishonest path is an insanely complicated one. And adding all these layers of complexity helps precisely no one.

Intimidation Act #77: When I Called Wade Out on the Silliness of the Claim He Was Making in Item #76 Above, He Took It As a Challenge and Topped Himself By Arguing That “Perhaps the Trinity Study Was Not Meant to Be a Safe Withdrawal Rate Study.” [Please See the Comments Section.]

I suppose that in the final analysis it all depends on what the meaning of the word “is” is.

Intimidation Act #78: Wade Pfau Finally Put on His Hero Shoes and Contacted the Authors of the Trinity Study About the Analytical Errors in Their Retirement Study — and Drip Guy (One of the Greaney Goons) Immediately Shot Back with Threats.

Here are Drip Guy’s words:

“Rob,

You likely think yourself quite clever for actually enlisting an apparently naive but scholarly dupe as your proxy to contact the Trinity authors about these supposed ‘errors’ (yet to be elucidated) that only you seem capable of seeing; leading YOU and you alone to come up with all kinds of self-invented grandiose names for what are merely your own delusions, misunderstandings, and confabulations.

As watchers of your bizarre shenanigans are well aware, you have attempted this same technique of ‘daring’ or goading others to make your arguments for you many times before, but usually to no avail.

I think you will be surprised at how this apparently initially successful attempt will backfire on you, as do all your Wile E. Coyote-like schemes, because while Wade has certainly shown he is mostly mild mannered in demeanor, I think he is doggedly determined in being accurate.

He is very much, in that respect, the Anti-Hocus. I think you will shortly be adding him to Scott Burns, Michael Kitces and others who have innocently engaged you, only to discover your true nature after the fact.

Oh, and Hocus — I dare you — I triple dare you, to let this reply stand on your site, and not be immediately swept off through your ruthless moderation to the bit bucket like pretty much any post containing criticism of you, your wacky ideas, or your disgusting and transparently manipulative methods.”

It’s a good thing that The Science of Buy-and-Hold has done away with investor emotionalism for those who follow its principles. No?

Intimidation Act #79: A Long-Time Buy-and-Holder Responded to the Research on the Superiority of Valuation-Informed Indexing That I Co-Authored with Wade Pfau by Saying: “At First Glance, I Find This Interesting.”

This isn’t an act of intimidation per se. I note the incident here because it illustrates what the power of that research to convert long-term Buy-and-Holders. This reaction hints at where we would be today if there were no Campaign of Terror being waged against our board and blog communities.

Intimidation Act #80: A Non-Goon Poster Told Me That: “Your Outlandish Statements Create a Giant Chasm That Regular People View as Just Another Infomercial, Over-the-Top Claim.”

I know what the guy is getting at. I was a Buy-and-Holder myself on the morning of May 13, 2002. I flipped on the evening of August 27, when John Greaney (the author of one of the discredited Old School SWR studies) threatened to kill my wife and children if I continued to “cross” him by posting honestly on the SWR topic and 200 of my fellow community members endorsed his position. Now that was an outlandish statement!

What that told me was that Buy-and-Hold is pure emotionalism, there is no true intellectual content to it, the intellectual content is there only to foster rationalization.

Intimidation Act #81: My Good Friend Jack Bogle Put Forward a Statement Indicating a Good Bit of Support for Valuation-Informed Indexing But Included a Crazy Claim That Valuation Changes Should Not Be More Than 15 Percent.

My Buy-and-Hold friends will no doubt take this the wrong way but I am convinced that Jack pulled that 15-percent-limit thing out of his backside. The research shows that the most likely 10-year annualized return in 1982 was 15 percent real. In 2000, it was a negative 1 percent real. An 80 percent stock allocation makes sense in the former case and a 20 percent stock allocation makes sense in the latter case. That’s a change of 60 percent, which is four times 15 percent. So Jack is off the mark only by a factor of 400 percent.

Am I making fun of my good friend Jack? I am.

Is that not what friends do in circumstances like this? Would Jack not prefer getting shaken out of his stupor to seeing his investing ideas cause an even deeper collapse of the U.S. economy?

I love Jack. I love him enough to want to shake him when he puts forward stupid ideas like this one about how investors should never change their stock allocations by more than 15 percent regardless of how high stock valuations go.

There is no limit. To know how much you need to change your stock allocation, you need to check how out of control prices are.

The limit is 100 percent. You probably shouldn’t lower your stock allocation by more than 100 percent except in extremely unusual circumstances.

I challenge anyone to provide us with the URL for a piece of peer-reviewed academic research supporting this crazy claim that allocation adjustments should be maxed at 15 percent.

Intimidation Act #82: Todd Tresidder Wrote a Great Article on the Errors in the Old School SWR Studies but Asked Me Not to Offer In-Depth Comments At His Site.

Todd called me on the phone and told me that he did not want to upset his readers by permitting me to provide too much background on the 12-year cover-up of the errors in the studies.

We have to come clean to move forward at a quick pace. All this pussyfooting around about the greatest act of financial fraud in U.S. history hurts everyone.

The prison sentences will be shorter if we come clean sooner. The financial liabilities will be smaller if we come clean sooner.

None of us can feel safe doing our best work until we come to possess confidence that honest posting is socially acceptable once again.

This is common sense. It is not the mistake that is killing us. It is the cover-up of the mistake that is killing us.

Intimidation Act #83: The Book The Myth of the Rational Market Does a Great Job of Describing the Mistake That Caused the Academic to Think Buy-and-Hold Could Work — But Fails to Describe the Strategy That Makes Sense (Valuation-Informed Indexing) Now That We Know That the Buy-and-Hold Concept Is Rooted in Error.

I sent Justin an e-mail describing Valuation-Informed Indexing but he did not write back.

Intimidation Act #84: Wade Pfau Told Me That “Your Comment About Mr. Bengen Causing Failed Retirements Is Too Harsh.”

Who worries about the millions of middle-class people who will be suffering failed retirements as a result of Bill’s mistake?

I don’t fault him for the mistake. I fault him for the cover-up of the mistake.

There are responsibilities that come into play when you elect to offer investment advice for money.

Is it really necessary that I say these things? Is the idea of high-paid professionals taking responsibility for their mistakes rather than covering them up really such a controversial notion?

How do people in this field think that middle-class people are going to react following the next crash, when they realize that much of their life savings is gone and won’t be coming back?

I like Bill Bengen, by the way. That’s one of the reasons why I have tried to help him out.

Intimidation Act #85: When Wade Pfau First Posted About Me at the Bogleheads Forum, He Employed Defamatory Language So That the Goons Who Posted There Would Like Him.

Wade apologized. But why did he feel a need to do this? He said that the board was “hostile.” Why? And why do so many otherwise good and smart people fail to do anything about it?

Why doesn’t my good friend Jack Bogle do something about it? His name is on the board. The hostile atmosphere reflects poorly on him, does it not?

Intimidation Act #86: Academic Researcher Wade Pfau Noticed That Taylor Larimore, the Co-Author of The Bogleheads Guide to Investing, was “Mischaracterizing Bogle’s Position” But Thought It Best to Keep His Mouth Shut About It.

Wade observed that: “Other people have already pointed it out to him and he doesn’t seem to care.”

Intimidation Act #88: After Wade Was Threatened and Flipped to the Dark Side, He Said: “Bennett Desperately Wants Someone Besides Him to Say That the Trinity Study Needs to Be Corrected, But I’ve Explained That This Isn’t How Research Works.”

It isn’t how things work in the investing research field in the Buy-and-Hold Era, that much is certainly clear at this point.

But why? What would happen if investing researchers acknowledged their mistakes when they discovered them? Would the idea that Buy-and-Hold strategies can work disappear from the face of the earth?

Yeah, that’s what I thing as well.

Intimidation Act #89: When Wade Presented Our Research at the Bogleheads Forum, Mel Linduaer Accused Him of “Data-Mining.”

Wade took offense at the time.

I believe that a big part of the explanation for why Wade later flipped to the dark side is that so few community members came to his defense when Linduaer came after him. It’s hard to imagine that Jack Bogle’s failure to speak up didn’t leave a particular mark.

Intimidation Act #90: Wade Sent FInancial Columnist Scott Burns (Who Popularized the Now-Discredited “4 Percent Rule”) His New School SWR Studies and Received a Polite Brushoff in Return.”

Intimidation Act #91: When the Goons Threatened to Send Defamatory E-Mails to Wade’s Employer in an Effort to Get Him Fired From His Job, He Did Not Report Them to the Police But Reacted in Fear, Thereby Empowering Them.”

This has got to be the low point.

I’ve said that before and been proven wrong.

But we cannot fall any lower than this, can we?

Intimidation Act #93:Wade Expressed a Fear That the Goons Would Send Hate E-Mails to the Editors of the Journal of Financial Planning But He Continued Posting at Discussion Boards Controlled by the Goons Without Telling People Reading His Words That These Were Corrupt Enterprises.

Intimidation Act #94: Wade Warned the Editor of the Journal of Finance Planning that the Goons Might Be Sending Hate Mail.

His concern was that he not do anything to “antagonize” the Goons.

It’s very important that we all be careful never to do anything to antagonize those Goons! They can get pretty darn grumpy when antagonized!

Intimidation Act #95: Wade Agreed to the Goons’ Demand that He Post the Following Words: “If I Did Lack Personal Integrity, I Could Have Made This All Stop by Saying the Meaningless Sentence You Want So Desperately to Hear — I Think the Errors in the Traditional Safe Withdrawal Rate Studies Must Be Corrected by Using Rob’s Analytically Valid Method.”

A bookkeeper can be fired for getting the numbers wrong in a company’s financial statements. But there is no need for researchers who get the numbers wildly wrong in retirement studies used by millions of middle-class people to plan their retirements to apologize for the errors and to correct them. In that case, it is better to cover things up. Makes sense!

Intimidation Act #96: A Community Member at the Bogleheads Forum Noted That the Research Paper That I Co-Authored With Wade “Refutes a Central Tenet of the Boglehead Investing Philosophy” But I Did Not Receive a “Thank You” Note from Jack Bogle Later That Day.”

The Goons who own the Bogleheads Forum deleted the comment.

Intimidation Act #98: The Peer Review Group That Rejected the Research Paper That Wade and I Co-Authored Gave a Reason for Rejecting It That Actually Argues for Publishing It, Saying: “The Elephant-in-the-Living-Room Question Is — What Is the Ultimate Criterion for One to Conclude With Confidence That One Strategy Is Better Than the Other?”

That’s a wonderful question. We can answer it effectively only by educating ourselves as to all the issues. We do this by holding a debate. And to be sure that the debate is informed, we need to have the top journals accepting for publication breakthrough research re these questions. How are we ever going to learn which strategy is better without talking about what the historical return data has to tell us on this question?

Intimidation Act #99: Academic Researcher Wade Pfau Wrote: “Now That I Am Accounting for Risk, I Am Even More Amazed by How Well Valuation-Informed Indexing Works…. Why Haven’t Academics Already Published Research About This?

Wade didn’t intend these words as an act of intimidation at the time he wrote them. But now that he knows the answer to his question, I think that it would be fair to say that any academics entertaining thoughts of doing honest research who come across these words will see the threat to their careers suggested in them.

Intimidation Act #87: Wade Pfau Said in Regard to a Comment by One of the Greaney Goons at the Bogleheads Forum That: “If You Can Get Over the Fact That He Compared You to the Potato Famine and the Black Plague, I Think You Can Find a Compliment Buried in His Remarks.”

Those who have read this far down merit some comic relief.

Intimidation Act #100: Academic Researcher Silenced by Threats to Get Him Fired From His Job After Reporting on Dangers of Buy-and-Hold Investing Strategies.

I’ve sent e-mails linking to this article to the 30,000 academic researchers listed in the Social Science Research Network database. What does it tell us that fewer than one in one-hundred sent back responses either asking questions or asking how they could help?

Intimidation Act #101: When Community Members at the Vanguard Diehards Board Complained About the Influx of Abusive Posters, I Explained How Linduaer Was Working With Greaney to Keep Honest Posting on the Last 33 Years of Academic Research Off the Board — Morningstar’s Response Was to Play Word Games and then to Threaten to Ban Me.

I explained to the Morningstar site administrator that: The Greaney supporters openly discuss tactics for disrupting Morningstar threads.… They Have taken comfort in the posts by Mel Linduaer.”

I also explained that: “A Poster Named “Galeno” [This was Greaney’s #1 supporter at the Motley Fool board] put forward threats of physical violence against me and that one was a threat to come to my house with a baseball bat to kill my wife and children.” 

Morningstar’s response e-mail said: “ “Consider this a formal warning.”

Intimidation Act #92: Wade Told Me That He Viewed It as “Unethical” of Me to Report on the Goon Threats to Destroy His Career and on How His E-Mail Correspondence WIth Me Showed That Those Threats Caused Him to Reverse His Public Position on Scores of Critically Important Investment-Related Topics (Including the Need for Corrections to the Old School SWR Studies.

Intimidation Act #104: The Owner of the Invest It Wisely Blog Went Out on a Limb and Said Publicly That In His Dealing With Me He Found Me to Be “Not Insane.”

I told him that I was going to use that as a blurb on the back cover of my book on investing. It’s been a long time since anyone has offered so kind an assessment of my work.

Please understand that it is not my intent here to take a dig at Kevin. I find these attempt at humor warm and helpful and humanizing. We need more of this sort of thing.