“This Is a Funny Kind of Fraud. It’s Fraud in Which the People Advancing the Fraud Deceive Themselves About How Stock Investing Works Before They Deceive Anyone Else. That’s Not Usually How Fraud Works. So This Is an Exceptional Thing.”

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

But I still don’t understand how this all comes back to you, as you know, there are millions and millions of comments on boards out there. Almost anyone can find 10% or more that agree with their position on almost every subject. Everyone will also say that normal people agree with them or will come around to their position. Again, how does this all come back to you in which some lawyers seek you out?

This issue is unique in that there is 39 years of peer-reviewed research showing that it is impossible to calculate the safe withdrawal rate accurately without taking valuations into consideration. There is zero research showing that market timing is required. Wade Pfau spent a lot of time checking that one out. And he concluded that there is zero support for the key Buy-and-Hold claim. And this fraud affects every working person in the United States. We all have to invest for retirement. We are all going to suffer the consequences of this massive act of financial fraud.

The real issue is not whether Greaney included a valuations adjustment in his study or not. That one is silly. It takes all of 10 minutes to check out the study and to see that I was right to say that he did not. The real issue is — How the heck did the cover-up of that error continue for 18 years after I pointed it out. That is the one that we all need to deal with if we are going to get this stuff right.

There is a reason why my book is titled “Investing for Humans.” John Bogle was in an objective sense committing fraud when he told people that it is not necessary for them to practice market timing. That is an absurd claim. Market timing is price discipline. If anyone told people that they did not need to practice price discipline when buying cars or sweaters or bananas, they would be laughed out of the room. So Bogle’s position is on its face preposterous. But he sincerely believed it. If someone had given Bogle a lie-detector test and asked him if he believed that market timing is required, he would have said “no” and he would have passed the test.

So this is a funny kind of fraud. It’s fraud in which the people advancing the fraud deceive themselves about how stock investing works before they deceive anyone else. That’s not usually how fraud works. So this is an exceptional thing.

I have studied how this weird form of fraud works more than anyone else alive. I have been on the case for 18 years now. One chapter of my book will examine the safe withdrawal rate issue. But that is only a small part of the story that I have to tell. The remaining chapters will look at what it is about human psychology that makes it possible for so many truly smart and truly good people to deceive themselves so completely about so important an issue for so long a time.

I have something totally different to say about this subject that no one has said before me. Not even Shiller. And it is not possible to explain what has been happening for 18 years now without taking into account the things that I have to say about this subject. So I believe that I have something of great value to offer to the world. And that that value will be recognized in the days when millions of people are suffering failed retirements and hundreds of thousands of businesses are going under and millions of workers are being thrown out of work and political frictions are worsening on both the left and the right.

We’ll see, you know? It hasn’t happened yet. But I believe that it will happen in the days following the crash. I don’t believe that our political system can remain stable if we continue to ban discussion of the last 39 years of peer-reviewed research. If we are not going to permit honest discussion of peer-reviewed research, we shouldn’t even have peer-reviewed research. If we want to see Buy-and-Hold remain dominant for all time, we should just shut down all the Ph.D. programs, you know? That would be a more honest and more direct way of achieving the goal.

I don’t believe that we are going to shut down all of the Ph.D. programs. I believe that, when we see with our own eyes how much human misery the Get Rich Quick/Buy-and-Hold stuff always causes, we are going to take a step back and reconsider the idea of banning honest posting on the peer-reviewed research. Then we are all off to the races. And I have an 18-year head start or anyone else trying to make sense of this massive (and exceedingly odd in nature) case of financial fraud.

That’s my sincere take, Anonymous.

Front-Runner Rob