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The five big benefits of Valuation-Informed Indexing

I’ve been arguing for nine years now that the Buy-and-Hold investing strategy needs to be updated. Buy-and-Hold was developed to reflect lessons learned from the academic research of the 1960s and 1970s. A key premise of this model, that investors do not need to change their stock allocations in response to big price swings, is rooted in the research of the University of Chicago Economics Professor Eugene Fama. But Fama’s research was discredited 30 years ago.
Yale Economics Professor Robert Shiller showed in 1981 that valuations affect long-term returns. If valuations affect long-term returns (there is now a mountain of follow-up research backing up Shiller’s 1981 finding), the value proposition of stocks is a variable and not a constant thing. Thus, investors should not be staying at the same stock allocation at all times but changing their stock allocations in response to big price swings. Those who fail to do so are permitting their risk profiles to swing wildly. It is only by changing our stock allocations in response to big price shifts that we can keep our risk levels roughly constant.

Valuation-Informed Indexing

I call this new approach Valuation-Informed Indexing. Wade Pfau, Associate Professor of Economics at the National Graduate Institute for Policy Studies in Tokyo, Japan, recently posted at his blog preliminary research showing that it works well. Pfau found that: “Valuation-Informed Indexing provides more wealth for 102 of the 110 rolling 30-year periods” in the historical record.

Combined with the message delivered by Brett Arends ina recent Wall Street Journal column that the only reason why experts have been so slow to pick up on the implications of Shiller’s research is that “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” and that “they are leaving out more than half the story” and that Buy-and-Hold has been revealed as “hooey,” I believe that the time has come for the launching of a national debate on the true realities of long-term stock investing.
Set forth below are five reasons why I view Valuation-Informed Indexing as the investing strategy of the future.

1) Higher returns

Having less money in stocks when they are priced to crash (a regression analysis of the historical stock-return data showed that stocks were in 2000 priced to provide a likely annualized 10-year return of a negative 1 percent real) leaves you with more money to invest in stocks when prices are moderate or low. You lose less at times of high prices (the only bad time to own stocks) and you gain more at times of low prices (both because you have more money to invest after suffering smaller losses and because Valuation-Informed Indexers go with higher stock allocations at times when stocks are offering mouth-wateringly high long-term returns [in 1982, stocks were priced to provide a likely annualized 10-year return of 15 percent real!)];

2) Less risk

The most important implication of Shiller’s research is that the inherent riskiness of stocks is greatly overstated. To say that valuation levels affect long-term returns is to say that valuation levels predict long-term returns (not precisely, but to a significant extent). Risk is uncertainty. To the extent that long-term returns can be predicted, stocks are not risky. A statistical analysis shows that 78 percent of the 20-year return of an index fund is determined by the valuation level that applies at the beginning of the 20-year period. Only 22 percent is due to factors that cannot be known by the investor at the time the investment is made.

3) Better emotional balance

Valuation-Informed Indexers do not become elated by price jumps or depressed by price drops. Why? Because every upward price movement has its downside (it lowers the most likely long-term return from that point forward) and every downward price movement has its upside (it increases the most likely long-term return from that point forward). The stock portfolio of a Valuation-Informed Indexer is adjusted for the effect of overvaluation or undervaluation and thus increases at a steady pace over time rather than jumping wildly up and down in tune with the manic-depressive mood swings of Mr. Market.

4) True long-term focus

Buy-and-Hold purports to be a strategy for long-term investors. The reality, however, is that most Buy-and-Holders pay almost as much attention to the short-term ups and downs as stock investors have since the beginning of time. The reason is that Buy-and-Hold posits that price changes are the result of economic developments. Investors who believe that short-term economic developments are affecting their retirement hopes can hardly expect to honor vows not to pay attention to what is going on in the economy. Shiller’s research suggests that the primary driver of short-term price changes is investor emotion. Thus, short-term economic developments are of little consequence to the Valuation-Informed Indexer. By encouraging a thought process in which the short term truly doesn’t matter, the new strategy helps investors tune out the short-term noise not just in theory but in reality.

5) Enhanced money management abilities

Stocks were priced at three times fair value in January 2000. That means that an investor with a stock portfolio nominally worth $300,000 possessed a lasting wealth of only $100,000. Millions spent more on houses, cars, and vacations than they would have if they had known their true financial status. Valuation-Informed Indexers discount the nominal value of their portfolios for the extent of overvaluation present in the market and thus are better able to manage their non-investing financial affairs.

Comments

  1. Sustainable PF

    Interesting concept. I can’t say I disagree, however, the investor must be well versed in investing to employ this strategy. S/he needs to understand how to calculate fair value for a stock, and, know when the market is at a peak. For example, the market is humming along nicely right now. Is it at a peak? How do we determine if it is at a peak? (really, I don’t know but wish I did!). I think a lot of investors are simply not equipped with the knowledge to make such evaluations with any sort of accuracy.

  2. Rob Bennett

    Thanks for sharing your thoughts, Sustainable.

    Many, many people see it as you do. My take is that what people are missing is the dramatic difference between short-term timing (changing your allocation with the expectation that you will see a benefit within a year or two) and long-term timing (changing your allocation is response to big price swings with the understanding that you may not see a benefit for 10 years).

    I don’t claim to have any idea whether the market is at a peak today or not. I think it is possible it could double over the next two years. And I think it is possible that it could fall 50 percent over the next two years. I don’t know which is going to happen and, when it comes to setting my stock allocation, I don’t much care. What I know (where stock prices are headed in the long term — most likely down hard!) is far more important than what I don’t know (where stock prices are headed in the short term).

    It’s the same factor that makes short-term timing impossible that makes long-term timing always work. Why does short-term timing never work? Because it is investor emotion that determines stock prices in the short term. How could any of us, no matter how smart, predict emotions given that emotion is a fundamentally irrational phenomenon?

    It’s not emotion that determines long-term prices, however. That’s why in the long term stock prices are highly predictable (except for the emotional input that will be applicable at the later time — stock prices are always at least somewhat unpredictable because of this factor).

    Just about everybody gets it today (we have the Buy-and-Holders to thank for this) that short-term timing never works. But it’s only a small minority that has come to an understanding that the same realities that make short-term timing a bad idea make long-term timing a requirement for those hoping to enjoy long-term investing success. When investor emotions and the economic realities get wildly out of whack, there MUST be a closing of the gap if the market is not to collapse altogether. All that has been going on for the past 11 years is that we have been living through the early years of the inevitable closing of the gap following the out-of-control bull of the late 1990s.

    Your other point, the one about calculating the correct value of a stock, does indeed apply with those picking individual stocks. Individual stock prices cannot be predicted even in the long term. However, that problem does not apply for indexers. With indexing, you get a mix of winners and losers and thereby make the overall price highly predictable in the long term.

    Or at least so a good number of smart and good people have come to believe as a result of studying the research of Yale Economics Professor Robert Shiller and considering its many exciting implications.

    Rob

  3. Sustainable PF

    Thanks Rob. As I mentioned, it all makes sense to me but i’m still not sure how to conduct the evaluations on when to get out of the market or a stock. I guess I have some research to do!
    During the 08/09 downturn I held onto what I owned and bought more at cheaper prices. I felt this was an OK approach but I can see the benefit of selling when there is a major downturn and re-using that money to buy much more when the market is at a low. Still, it is a difficult thing to gauge.

  4. Rob Bennett

    i’m still not sure how to conduct the evaluations on when to get out of the market

    I have a calculator (“The Stock-Return Predictor”) at my site that performs a regression analysis on the historical stock-return data to reveal the most likely annualized 10-year return starting from any possible valuation level:

    http://www.passionsaving.com/stock-valuation.html

    You need to enter the P/E10 level (that’s the current price of the S&P over the average of the last 10 years of earnings) that you want to examine and the calculator identifies the range of possible long-term returns that applies and the rough probabilities that any of the particular returns in the range of possibilities will actually show up.

    For example, in 1982, the most likely annualized 10-year return was 15 percent year. It’s could have turned out that the actual return would be a bit higher or a bit lower than that. But it’s hard to go wrong investing heavily in stocks when 15 percent real for 10 years running is the most likely outcome!

    The other extreme is January 2000. The most likely annualized 10-year return at those prices is a negative 1 percent real. It’s hard to imagine a scenario in which things work out well for those going with a high stock allocation at those prices.

    What I do is to compare the most likely 10-year annualized return for stocks with the certain 10-year return available through super-safe asset classes like TIPS and IBonds. When the super-safe asset classes offer a better return or the same return as stocks, I go with the super-safe asset classes. When stocks offer a likely long-term return at least 2 percentage points better than the super-safe asset classes, I go with stocks (I feel that I should obtain 2 points of extra return for investing in stocks as my compensation for being willing to take on the volatility of stocks).

    This tool does NOT pick tops or bottoms. I do not believe it is possible to do so. All the tool is doing is telling you the rough odds of various long-term outcomes starting from all of the various starting-point valuation levels. The investor has to take into consideration his life goals, his financial circumstances and his risk tolerance in deciding what to do in response to the numbers provided.

    The idea here is just to provide one additional point of information that has not generally been available to investors in the past. The root question is: Do stocks offer a stable value proposition (if so, Buy-and-Hold makes perfect sense) or a variable value proposition (if so, long-term investors need to be willing to make allocation shifts once every eight to ten years on average — otherwise, at some point they will be taking on risk levels that are wildly inappropriate for investors in their circumstances).

    I much appreciate your openness to consideration of the general concept, Sustainable. That’s kind and helpful. I also understand your skepticism. The idea that stock returns are highly predictable in the long run is a big change and a healthy measure of skepticism is 100 percent appropriate. I would be worried about you if you were not at least a little bit skeptical. I certainly was when I started out down this path and all the other “converts” that I know about were as well.

    Rob

  5. Rob Bennett

    As for whether it is difficult to use this profitably or not, I would say that it can be but it need not be.

    If you limit yourself to one allocation change every 8 or 10 years, it is as simple as pie. If you only make measured changes at the extreme valuation levels (when this is most likely to pay off), it is impossible that this could ever hurt you.

    However, If you get too cute with it and try to identify the tops and bottoms and all this sort of nonsense, then it does indeed become dangerous.

    The key is always keeping in mind the distinction between short-term timing and long-term timing. Short-term timing NEVER works. Long-term timing ALWAYS works. Merging the two will help you sometimes and hurt you sometimes. It’s best not to let any inclination to engage in short-term timing enter your thinking.

    What helps me keep the distinction clear in my mind is focusing on the REASON why one approach to timing always works and the other never works. The reason is that short-term prices are determined by investor emotion and long-term prices are determined by the economic realities. You always want to invest to take advantage of the economic realities and to tune out the short-term emotional stuff.

    So what you really want to do is to stop paying so much attention to the short-term price changes. Hearing about that stuff mislead you. It makes you more emotional than you would otherwise be. You want to come to see short-term price changes as being insignificant.

    This is why I refer to “Emotional Balance” as the third big benefit of VII. When all price changes become immaterial to you (because both ups and downs have both a pro side and a con side), you come to simply no longer care about what happens in the short term. You become indifferent to reports of short-term price changes.

    This is a huge change in the history of investing. Things have never been done this way before. That doesn’t make this a bad thing. I think it makes it a very, very good thing. It’s a huge advance.

    The big picture story is that what is going on here is that the decision in the 1960s to make the project of learning about how stock investing works a scientific pursuit is starting to pay off big-time. Buy-and-Hold was the first scientific approach. It thus represented a huge advance. But it should not surprise us that the first scientific approach did not get every last thing right.

    The Buy-and-Holders got about 10 things right in a big way and also happened to get one very important thing (whether long-term timing is required or not) horribly wrong. Now we just need to correct that error and we have the best approach to investing that has ever been available.

    The problem we had during the bull market is that few were interested in moving forward. For so long as Buy-and-Hold was providing good results, people didn’t care about its theoretical weaknesses. Now we are getting close to a point where we will be able to take the huge breakthroughs provided by the Buy-and-Holders and add to them and make the scientific approach something that really will pay off big for millions of us.

    The idea here is to make Buy-and-Hold workable in the real world. This is not so much anti-Buy-and-Hold as it is a fulfillment of what Buy-and-Hold was intended to be in the beginning. The only thing that held the Buy-and-Holders back is that not all of the research that was needed to make sense of stock investing was available to us at the time the Buy-and-Hold Model was being constructed.

    Rob

  6. Tom

    Hi, thanks for the informed discussion. After reviewing some of this material I feel like I am missing something. The approach seems to jive with all the value based investing learning I have been engaged in; including Ben Graham, Jarislowsky, Kyle, Green, Motley Fool, Josh Peters, Geraldine Weiss, Browne. Sounds like bottom up value investing to me, entry point very important, adjustments to allocations important. So why all the controversy? Why the bans? What am I missing from the strategy?
    Thanks
    Tom

    • Sustainable PF

      Tom,
      My take, and i’ve experienced this in the past (example below) is that anyone who is adamantly offering an opposing opinion to what the masses believe/are-led-to-believe is “the enemy”. Proponents of buy-and-hold will use an excuse such as “you are cancerous to our community” instead of opening their minds to the possibility that there is not one, and only one, approach to investing that can actually work.

      Rob does not tow the company line nor does he believe that buy-hold is in the best interest of the “average” investor. He (from what I understand) believes the people who re-inforce buy-hold, aside from perhaps Buffet, don’t actually employ such a strategy – they know of VII and use it in some form or the other and are part of the small percentage of people out there who truly succeed in the market – not just match the market.

      While I wasn’t “banned” from the forum, some time ago I took a stance against all the boys-with-their-toys in a thread @ RedFlagDeals where I stated (and brought forth viable arguments) that netflix.ca was a waste of money due to the deprecated and obscure content and that Usage Based Billing could come and bite people in the butt big time. I feel that $8 per month is too much for a service greatly in superior to that offered in the US for $1 more. I made an analogy that if I were to offer some of these boys a FULL MONTH worth of the Globe and Mail, but it was content from 2007, would they kindly pay me $8 per month for it? There is entertainment value in old news and older lifestyle stories, so why isn’t this a service that exists? Cuz it SUCKS. Anyhow, to stop rambling – the result of my disagreeing with the masses of tech geek nerd kids who have to have the newest toy always – I was admonished as a “troll” who provided no value to the forum blah blah blah.

      Results? Increasingly in that thread people posted they were quitting the service. Why? Content was deprecated and obscure, they didn’t need to waste time watching crap tv/movies and then … you got it … the CRTC approves usage based billing.

      So all that being said (I feel my response may be longer than some of Rob’s!) the fact is Rob has a differing point of view that upsets people who have been inandated with the buy-hold strategy and after enough complaints from the masses the “powers that be” ban him from their sites. They can’t handle the heat (or perhaps the truth).

      Personally, i’m not entirely sure Rob is correct. However, I do like to read differing opinions to allow me to make my own valuations and judgments that I can live with. I had Rob guest post on our site and have read many more of his articles as well. Still up in the air, but he at least deserves to be able to present contrary opinion / ideas / theories w/o being banished by the weak and the scared.

  7. Rob Bennett

    That’s a super question, Tom. Thanks for asking it.

    Valuation–Informed Indexing is a COMBINATION of the insights of Buffett (Value Investing) with the insights of Fama/Malkiel/Bogle (Buy-and-Hold). I view Value Investing as the best of all investing strategies. I also think that Bogle did something huge in coming up with an approach simple enough to permit the typical middle-class worker (who has little desire to research stocks) to tap into the benefits of stocks. But Buy-and-Hold cannot work long term without a valuation component. The idea here is to make Buy-and-Hold workable in the real world.

    In an intellectual sense, there is nothing even the slightest bit controversial here. You are 100 percent right about that. None of the people who insist on bans dispute that valuations affect long-term returns. There is no disagreement as to what the research says.

    The controversy is rooted in concerns over the practical implementation of the finding that valuations affect long-term returns. When financial planners use safe withdrawal rate analysis to help people plan their retirements, should they include a valuation adjustment in the analysis? If no adjustment is included, the SWR is always 4 percent. If one is included, the SWR varies from 2 percent at times of high valuations to 9 percent at times of low valuations. For someone with a $1 million portfolio at the time of retirement, that’s the difference between living on $20,000 in every year of the rest of his life or living on $90,000 in every year of the rest of his life.

    If valuations really affect long-term returns (there is today a mountain of research showing that they do), the Old School SWR studies have caused millions of middle-class people to plan retirements that are almost certainly going to fail. And the asset allocation advice given in 90 percent of the investment books available today is wildly wrong. And the risk management advice is wrong. And on and on.

    To understand what is going on, you need to appreciate the history of how our knowledge of how investing works has developed over time. Research showed in the 1960s that short-term timing never works. This was a huge advance. Unfortunately, most researchers of the time did not see the need to distinguish short-term timing from long -term timing. So the interpretation of the finding that short-term timing does not work was that “timing doesn’t work” (the finding is correct but the interpretation is wildly wrong).

    Then Shiller did research showing that long-term timing ALWAYS works and in fact is required for long-term success. This finding is ALSO of huge importance and needs to be integrated into the mix (investors need to be told both to avoid short-term timing and always to be certain to practice long-term timing). But the Buy-and-Hold advocates don’t like even a tiny little bit the idea of acknowledging that they made a mistake.

    You are right to note that Buffett (and all Value Investors) were aware of the importance of valuations going back to the first day. Had Fama and the others paid more attention to Buffett, they never would have gotten us into this mess. They didn’t. They created academic models that improperly ignored Buffett’s insights.

    Shiller’s research essentially incorporates Buffett’s insights into the academic research. We now have two camps taking the academic research down two opposite paths. The Fama camp lives in the imaginary world where the market is efficient and thus valuations don’t matter. And the Shiller camp lives in the real world where valuations are the most important thing that an investor needs to look to in setting his stock allocation.

    Both camps are analyzing the same data and yet coming to wildly different conclusions on every practical investing question. The reason is that they are starting from opposite premises. One camp calculates all its numbers with zero consideration of valuations. The other includes valuations in its analyses and thereby learns that valuations are by far the most important factor bearing on just about every question examined.

    There is zero dispute re the facts. But there is a HUGE controversy as to whether the facts as we know them today may be REPORTED on public investing boards and blogs.

    Rob

  8. Tom

    Thank you I believe I am tracking.

    Tom

  9. Rob Bennett

    Please just ask me questions any time there is anything that appears before your eyes that does not seem to make sense, Tom. There are Post Archives backing up everything I have said (not just here but everywhere I have posted) and I can point interested parties to the right materials quickly.

    There is one point here that is of huge substantive importance but that at first appears to be a process thing (and has been discounted by some as a result). I often refer to the “Ban on Honest Posting.” That sounds overly dramatic. People think it cannot really be so bad that there is a widespread Ban on Honest Posting.

    There is always a Ban on Honest Posting when there is a huge bull market. The one cannot happen without the other. Think about what it means to say that stocks are “overvalued.” It means they are mispriced. Mispricing is deception. All bull markets are acts of huge collective self-deception. We adopt a Social Stigma on discussion of the realities and thereby permit prices to go far above fair value and stay there for a time.

    What has happened is that technology is catching up with our ability to deceive ourselves about how stock investing works. The internet favors transparency. If we let the internet do its job (by letting people post effective challenges to Buy-and-Hold and thereby pop the illusions that sustain the acceptance of the mispricing), we will gain the level of self-awareness needed to make any future bull markets a logical impossibility. That would also make bear markets (and the economic crises that follow from them) a logical impossibility as well.

    We are on the threshold of something very exciting — a new day in stock investing in which we are all better informed than ever before, in which we all enjoy higher returns at less risk than ever before, and in which we all also enjoy an economic system functioning far more smoothly than any we have ever had before. We already have access to everything we need to make all that a reality in short order. The only thing holding us back is the difficulty of the transition period. To take advantage of what we have learned, we obviously need to be able to acknowledge that we did not always know it all.

    I of course want to do everything that I possibly can do to make that transition period proceed as smoothly and as quickly as possible. But I of course also want to be sure that the transition does indeed take place. To make good things happen we all need to combine honesty and charity in the proper proportions.

    Every single person involved in all this is on the same side. Some of us have just not yet been able to let in how wonderful the blessings are that have been bestowed on us in recent years.

    Rob

  10. Rob Bennett

    Proponents of buy-and-hold will use an excuse such as “you are cancerous to our community” instead of opening their minds to the possibility that there is not one, and only one, approach to investing that can actually work.

    You’ve described the core dynamic very well, Sustainable. I am grateful to you for taking the time to craft that post.

    The thing that throws people about all this is that they don’t appreciate that there are LOTS of people who don’t agree with Buy-and-Hold. It might only be 10 percent of the population. But that is millions of people! Those people tell me all the time that they have learned just to keep their mouths shut when there are Buy-and-Holders around. They suggest that I too learn what it takes to stay out of trouble.

    That won’t work! That will make things worse! There is a spectrum of opinion on every topic under the sun. Most people have a natural inclination to notice what the spectrum is and to aim to place their own views somewhere in the middle. During a huge bull, the only people who are talking are the 7s, 8s and 9s on the spectrum of opinion re Buy-and-Hold (there are a lot of 7s, 8s, and 9s in those days, to be sure). Newcomers see this and conclude that an “8” opinion is pretty darn moderate and go with that. But an 8 opinion is not moderate. it is extreme!

    An 8 opinion on Buy-and-Hold might translate into a stock allocation of 70 percent at a time when a moderate opinion would translate into a stock allocation of 20 percent and an opinion on the other extreme might translate into a stock allocation of zero. Everything is thrown off because the cost of being wrong is so great that the majority cannot bear to have its views questioned.

    They call this science! This is the opposite of science! This is mob rule!

    We all should be saying what we believe. I certainly do not want to see the Buy-and-Holders silenced. I think the Valuation-Informed Indexers learn from the challenges to their thinking presented by their Buy-and-Holder friends. But I firmly believe (I insist!) that the Valuation-Informed Indexers be permitted to post their sincere views.

    If I lie to my friends about the numbers they are using to plan their retirements, nothing I say from that point forward is worth 10 cents. No community member at any board or blog should ever be pressured to lie about his beliefs. Once such pressure reaches the point where those who refuse to give in to it are removed from the community, the community has become a corrupt enterprise. Nothing said at that community can be trusted from that point forward because the community as a whole is no longer operating consistent with the dictates of personal integrity.

    Is that not so?

    Rob

  11. Rob Bennett

    He (from what I understand) believes the people who re-inforce buy-hold, aside from perhaps Buffett, don’t actually employ such a strategy – they know of VII and use it in some form or the other and are part of the small percentage of people out there who truly succeed in the market – not just match the market.

    I don’t hold this cynical a view, Sustainable.

    I think Buy-and-Hold is a disaster for the middle-class. But I don’t believe that it is the product of some grand conspiracy aimed at taking money from middle-class pockets.

    The people pushing Buy-and-Hold know very well that the valuation matter is the weak point in the theory; their off-the-charts defensiveness reveals this to be so. But I don’t think they permit themselves to think through the implications of what it means that their theory has been discredited.

    They want to believe and so they don’t permit themselves to consider ideas that threaten their confidence in the theory. They are not guilty so much of deliberate deception as they are of cognitive dissonance. They deceive themselves before they deceive any others.

    I believe that the Buy-and-Hold advocates very much want to help people. If they could calm down for a few minutes and listen to the other point of view, they could help people a great deal. But the human mind possesses powerful self-protection devices. As soon as troubling thoughts begin to enter, rationalizations are called in to shut down those troubling thoughts. Buy-and-Holders are invariably smart. Which means that they are among the best rationalizers out there.

    All of the Buy-and-Holders will be thrilled when this all eventually comes to click with them. We just need to figure out a way to persuade them to calm down long enough to let in a few new and very promising (at least in my sincere belief!) ideas.

    Rob

  12. Rob Bennett

    Personally, i’m not entirely sure Rob is correct. However, I do like to read differing opinions

    I’ve been tracking for years now how people come to be “converted.”

    Rarely does it happen with the flash of a lightening bolt from the sky. It is usually a very gradual process. Someone has a question and the answer given makes at least a little bit of sense and that softens them to consideration of further points down the road a bit. The issue under consideration here is a fundamental one. People don’t change their fundamental views in one day or one week or one month.

    My view is that the idea should be to make the process of consideration of different points of view a fun one. I had a friend Brian who I used to meet with for lunch once or twice a week back in the late 1990s. We would talk about investing and he would conclude by saying: “You know you are nuts, right? I don’t mind talking about this stuff with you but I would not feel that I was much of a friend unless I noted that I of course understand that you are totally 100 percent nuts, Rob.”

    And I would say: “Yes, understand that I am 100 percent nuts, Brian. I think I will just keep using the historical return data for guidance in setting my stock allocation all the same.” And we would remain on friendly terms.

    After the crash, he called me and gave me credit for having seen something that he had failed to see. And I of course told him that my discussions with him were one of the things that helped me see it.

    That’s the way it should work. People with different viewpoints are not enemies. It is the mix of different viewpoints that makes discussion-board and blog communities fun and interesting and lively. We should be not only permitting people to post their honest views but encouraging them to do so.

    And most people want that. That’s why the rules at every board and blog are written to permit the expression of different views. it is a small group of abusive know-it-alls who ruin things for the rest of us. We need to work up the courage and heart to stand up to these people and insist (not ask!) that they honor the promises re their behavior they made when they were granted permission to post in our communities.

    We are better people than we appear to be when we let the lowest among us dominate us. These things should not be decided by who among us shouts the loudest and the longest but by what all of us agreed about how to govern ourselves when we established the various communities.

    Rob

  13. what

    I think you asked a great question Tom. The answer to ‘why the bans?’ is that people cannot stand Rob at all. He is a classic passive/aggressive Internet spam troll.

    It has almost nothing to do with his ideas which are not particularly ground breaking and are discussed at nearly all the forums at which he has been banned on a regular basis.

  14. Rob Bennett

    The answer to ‘why the bans?’ is that people cannot stand Rob at all. He is a classic passive/aggressive Internet spam troll.

    Here is a link to an article at my site setting forth comments by 101 community members who have expressed a desire that honest posting be permitted at every board and blog:

    http://www.passionsaving.com/The-Great-Safe-Withdrawal-Rate-Debate.html

    It has almost nothing to do with his ideas which are not particularly ground breaking

    I provide 85 quotes from both big names in the field and from ordinary people who have commented on the value of my work in this field at the “People Are Talking” section of my site (on the left-hand side of the home page of my “A Rich Life” blog):

    http://arichlife.passionsaving.com/

    and are discussed at nearly all the forums at which he has been banned on a regular basis.

    I put forward the first post pointing out the analytical errors in the Old School SWR studies to a Motley Fool board on the morning of May 13, 2002. My findings have been confirmed by numerous big-name experts during the nine years since.

    Not one of the Old School SWR studies has yet been corrected. All the discussion in the world doesn’t offer much help to the millions of middle-class people who will be suffering failed retirements in days to come as a result of the demonstrably false claims advanced in those studies.

    The source of the friction here is not what the historical data says. Everybody who checks obviously finds that it says the same thing. We are talking about numerical calculations.

    The new element that I bring to the table is my claim that, when we do studies of investing-related topics, we take on an obligation to report the findings accurately and honestly. The many people who have offered exceedingly kind assessments of my work have commented that they see considerable value in this change from the practices that were followed during the Buy-and-Hold years.

    I have a calculator called “The Retirement Risk Evaluator” at my web site, What. I promote it as the first retirement calculator that gets the numbers right. Are you able to point to any other retirement calculator available on the internet today that includes an adjustment for the valuation level that applies on the day the retirement begins?

    Rob

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