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Banned at Boglehead.com June 5, 2009

Posted by shaferfinancial in Finance.
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As regular readers know, I routinely scan the web monitoring investment oriented blogs.  I rarely post at them because of time constraints.  I was communicating with someone who made some incredible claims about censorship on some of the large blogs that frankly I found not very convincing.  So I tried a little experiment.  I posted on boglehead.com.  They banned me in three days.

Here is the link.  I posted under jedifool:

The original post I responded too:

Jack,
The reason for my post is that I pulled my money out of the market in September 17th 2008 after a few years of being a client with the publicly traded fund manager private client’s group. My client account manager called me yesterday and suggested that I come in and meet with the CEO, as she knows we have a personal relationship that predated my investing with the firm, and talk about getting my money invested back in the market. I am really thinking about investing on my own using a fund family like Vanguard after reading your book as well as a few chapters of David Swensen. I wondered if you, or someone on this site, would be willing to help me prepare (or guide me in the right direction) for creating a presentation to challenge the status quo on the true ROI/versus costs and risk associated with Actively Managed funds. I think it would be valuable to state the case with factual data. I will collect the facts and prepare the analysis and report, but I wanted to make sure I was moving in the right direction.
Any help, direction or similar publicly available documents you or other Bogleheads can provide would be greatly appreciated.
Ideally I would present the following:
1. Historical risk adjusted return performance of their actively managed funds vs an equivalent category low cost fund
2. Calculate the after-tax adjusted return comparison
3. Project the fee/performance impact over 30 years on net worth.
4. Any thing else that I am missing

My post that lead to my being eventually banned:

I'm curious, how did that broker do for your prior to your exit?
What made you decide to pull your money out of the market in Sept.?
Have you researched all strategies?
Have you considered other asset classes beyond stock and fixed interest rate index funds?
Have you read any of the critiques of EMT including Warren Buffett?
Have you looked at how the wealthy invest?
Are you sure you want to continue to be passive when it comes to your money?
If so, can you withstand large drawdowns emotionally?
Just curious because at this forum you really only get one viewpoint. It is full of "true believers" that can be considered to be totally wrong over the last 20 years.
But if you have looked at all the above and have decided on passive index investing [or passive index investing with asset allocation] you can't find a better place to learn about that strategy. Just do yourself a favor and don't buy into the ideology!
As to your broker/financial planner. Professional courtesy would mean at least offering a phone call to tell them why you are terminating the relationship.

Well if you read the full topic you will see that I was attacked on all levels.  Eventually they banned me here:


I know who he is because I know his e-mail and IP address. Since he runs a "investment coaching" business, his statement above is only correct in the most narrow sense (he does not manage money, he only tells people what they should buy, undoubtedly including the purchase of whole life insurance for reasons we shall see in a moment) . Based on this, the moderators have concluded his primary purpose for posting here is either trolling or commercial solicitation and he has thus been banned.
BTW, "investment advice" is in quotes as he does not hold an RIA, CFP, CFA or any other financial professional designation or certification that I can determine, he is however licensed to sell life insurance. Unsurprisingly, the "value" of whole life insurance is featured prominently on his site and blog.
To bring this back to the original poster's situation, you can take this an example of just how far those who make a living raking off big chunks of the investments of others are willing to go to save their business model.

Now personally I don't care about being banned, but any reasonable person would conclude that the moderators are protecting their readers from ideas outside the realm of their ideology.

Note, I never brought up EIULs.  I never linked to my site nor this blog.  I never solicited in anyway.  I never suggested the folks there were bad or uninformed or anything else.  I only suggested that the poster consider becoming an active investor and look into other asset classes [you know I was thinking about real estate!].  And my snide remark about ideology and opposing viewpoints was ironically proven by my banning.

You know you can come to this blog for an opposing viewpoint to the herd.  You know you will get the latest data [evidence] on investing here.  You know I am open to opposing viewpoints presented rationally without acrimony.  Sometimes I wonder if it is worth it to keep blogging against the tide.  This provides evidence that people really do need to be able to hear alternative thinking on the subject of personal finance.


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Comments»

1. Russell Johns - June 14, 2009

Dave, are you really open to opposing viewpoints presented rationally without acrimony?

If so, then I’d like to hear you say why you think your view on the following issues beats the prevailing wisdom and scholarship, and in particular, I’d love for you to publicly disclose your own fees and commissions on the products you sell, as well as sharing your own net worth figures, since you claim that is a vital metric to judge the value of ideas from advisors, and ridicule advisors who don’t share that info.

DIVERSIFICATION: Diversification sucks. I don’t like mutual funds [conventional wisdom is that diversification hedges risk]

LEVERAGE: Leverage, Leverage, Leverage! If no leverage is created, then the returns can only be miniscule [conventional wisdom is that using excessive leverage (i.e beyond a conventional mortgage) is very risky, and something the average investor should avoid]

INSURANCE: I sell EIUL policies almost exclusively because in my opinion it is the best savings vehicle on the market.” Surrender fees… are really meaningless. Expenses and commissions are front loaded…[Can you really with a straight face claim that your own self-interest as a salesman of these high commission, high fee products are a good deal for the average investor, and are superior to buying a mix of term life and a PROPER investment vehicle, as conventional wisdom dictates?]

REAL ESTATE: I love real estate as an investment for the middle class… I can think of no better way to have a comfortable retirement [do you think the average working stiff ought to try to be a land lord of rental property, including out of state? Do you think your own position as a seller/advisor of mortgage products and planning services for money taints your perspective? Isn’t this, in fact, quite risky?]

MUTUAL FUNDS: fees charged… doesn’t matter… people are fooling themselves if they think they can fuel an abundant retirement by investing in mutual funds… I can help them to that abundant retirement at the Shafer Wealth Academy[Do you really think you can beat a mix of 60% TSM and 40% government treasuries? If so, why not but some actual numbers around Bennett’s “Lucky Seven”, and go for it? List your strategy, parameters, limits, entry and exit points, trades, fees, costs, etc on a public spreadsheet, so we can all track and discuss?]

FINANCIAL PLANNERS: financial planners, no matter what their designations after their names, represent Wall Street or Insurance Companies interests, not your interests… mutual funds are sucker bets sold by sharks! [So you think fee only planners are a bad idea? Really? And that instead, people should give their money to “Shafer Wealth Academy”?]

shaferfinancial - June 14, 2009

I took the liberty of editing out the acrimonious parts of your post. Hope you don’t mind! You can find my reasoning on all the issues you bring up at various posts on my blog. My fees are all disclosed on my web site. The EIUL fees are mentioned many times and when I do an illustration I include a chart demonstrating all the fees which I can produce with Minnesota Life. I made a decision several years ago to be as open as possible and attempt to be. You seem to be totally obsessed with fees and how much money I make. My stock picks are also published on my blog and every six months I update with the returns and current prices. So you can follow along with that. I have one coming up in July as soon as I get settled into my home in New Hampshire. You should be able to tell by the title of my blog that we are worlds apart in our thinking. I will briefly hit on the highlights of the strategies I suggest, but once again they are fully fleshed out in various blog posts.

Diversification: Buffett says it all about diversification from “diversification is a protection against ignorance” to “I can’t be involved in 50 or 75 things. That’s a Noah’s Ark way of investing–you end up with a zoo that way.” I also point out that diversification skews potential returns down significantly. Folks like you like to stay fully in theory [or as you call it research]. But the real facts are that people who invest in mutual funds get significantly lower returns than even the mutual funds they invest in [see Dalbar, Inc. studies, etc.]. There are no data points finding wealthy people who invested mainly in mutual funds. In fact as I recently posted the real median numbers for peoples’ retirement accounts [mostly funded with mutual funds] is quite low. But I sure you don’t see what I am saying. The bottom line is I made a decision to attempt to get double digit returns in my stock investing and even at this point of a bear market after ten years am pretty close to that. What I found out is that to have any chance at really creating wealth in investing you have to think very differently than your average mutual fund investor. I know this type of thinking is not for the average person and [look at the title of my blog] don’t expect you or anyone else to accept my thinking since it is counter to what is generally out there as advice.

Leverage is what every wealthy person had to use to gain that wealth. There are different kinds of leverage; financial leverage, value leverage and labor leverage. Since I see no way to get to the number I am aiming for without leverage of some sort I employ it and manage it as best I can. Once again it is about my mindset and looking at where the average person is headed [see the post on household finance published by the federal reserve] that pushes me.

EIULs are fully discussed in several posts including the amount of front loaded fees. They are very lucrative for the salesman/woman. However, they provide a great rate of return by not going negative and avoiding taxation. The data [evidence again] points out that the internal rate of return on these products, long term, are higher than folks actually get from their mutual funds [again Dalbar studies tells us what investors actually get]. But they are not for everyone as I point out. If you are hyper worried about how much commission is made or how high the fees are then they are probably not for you. If you don’t plan to have a decent income in retirement that would require tax rates above 15% then they aren’t for you. If you think taxes aren’t going up in the future then they aren’t for you. If you think you have the emotional skills to invest in index funds rationally, then they might not be for you. Personally, I own a large one. I am very happy with it.

Real Estate investing has been demonstrated to be a great way to build a solid retirement. Since I don’t suggest investing in Florida right now and only do mortgages in Florida [well Virginia and Ill and Indiana too] I don’t see where I am tainted. I have a couple of brokers who have been in the business for more than 30 years that I give their information out to my clients. They make the commission. But more importantly they have the experience to guide their clients to successful real estate investing. I have no idea who “the average working stiff” is, but I know if you are talking the working class they don’t invest in mutual funds either [see household finance data]. But I can say that anyone that wants to learn about real estate investing and has some capital and reserves is well served looking around the country for real estate investing opportunities. Bottom line is that you can invest and get cash flow, use leverage to pump of capital appreciation, and get double digit returns without having to depend upon the ups and downs of the stock market which varies much more than any real estate market over an investing life.

Financial planners have been shown to reduce returns for their clients. Perhaps because they are using the same strategies that DIY use, but charge a price to do it. Now there are some financial advisers [and hedge funds] that do beat the market and are most probably worth the money they charge.

I’m sure this is not what you expected. You should invest as you see fit.

At the end of the day, I am very comfortable with the decisions I make about my investments and the products and services I offer. I blog openly and tell people what I believe. You are free to invest as you see fit and disagree with me. Good luck with your index fund investing.

2. Russell Johns - June 15, 2009

I’m sure this is not what you expected.

Actually, It is *precisely* what I expected — a (long!) non-answer answer.

Q: What is your net worth? A: Not given.

Q: What are your fees? A: Not given. You say “I can find them” — why not either state them, or provide a specific link to the specific information?

etc.

It is clear to me that this blog is nothing more than a vehicle intended to expedite your own enrichment, by hawking your ‘products’ which you get paid to promote. Now, you may chose to not approve this comment, considering that to be “acrimonious”, but it is simply a sincere and honest take on what I see here, and your approach.

I’ll not spend too much further time at your blog, but I will certainly look for the table or posts that you claim are on the site and show your investments beating the market with around double digit returns in the midst of this bear market. Again, no specific link nor figures were given in response, so I do not have too high an expectation that I will find actual substantiation, but will withhold judgment until I see your figures. Again, providing a clear and direct answer, or a link is the best way to illustrate a good faith attempt to answer versus just obfuscation and a wild goose chase.

In any (and all) events, you are correct that our philosophies are just different – you claim the best way to wealth is a big single bet at one turn of the roulette wheel, using borrowed money, then and you go further and take note of the rich man leaving (Buffet) and tell people to ‘act’ like him, or even let him place your bet for you, and that will lead to wealth. Well, good luck with that approach!

shaferfinancial - June 15, 2009

Yes, well I think my readers can see how disingenuous you are. You shouldn’t have a hard time finding my fees since you posted them on another blog! [here Comment #473; Dear Reader I wouldn’t bother trying to read all the comments most are a waste of time]
As for my net worth, I don’t see why I should do that as I could post any number and no one would have an ability to tell if it was truthful or not. I post much personal information on the internet, but not that nor my account numbers!

“you claim the best way to wealth is a big single bet at one turn of the roulette wheel, using borrowed money, then and you go further and take note of the rich man leaving (Buffet) and tell people to ‘act’ like him, or even let him place your bet for you, and that will lead to wealth. Well, good luck with that approach!”

This is of course nothing close to what I advise, but you know that.

“It is clear to me that this blog is nothing more than a vehicle intended to expedite your own enrichment, by hawking your ‘products’ which you get paid to promote. Now, you may chose to not approve this comment, considering that to be “acrimonious”, but it is simply a sincere and honest take on what I see here, and your approach.”

You are a little closer here. The blog is part of my marketing strategy, I have never claimed otherwise. The real question is why that bothers you. Most blogs are selling something even if it is companionship or finding others that think like you, some are just more direct than others. I chose not to tell my readers about your behavior vis-a-vis Bennett [I changed my mind several times on this], but when you include that behavior along with your posts here you get a pretty clear picture of what you are about.

Since you choose to not comment on any real data, like the Dalbar Studies or the rate of return from Berkshire Hathaway or Health Care REIT or even investment real estate versus your index funds I assume you have nothing to say about my admitted non-common investment ideas. And for my readers who wonder why it is you chose to post at a blog that obviously you have no interest in reading, only attacking the owner, it is because I had posted in agreement to a gentleman on another blog. That post agreed that the price you buy a stock at is of critical importance to your long term returns. The original poster is someone who apparently Russel Johns has a long standing issue with and he goes around the internet chasing this guy and posting attacks on him. Apparently since I agreed with him he felt the need to attack me.

3. Russell Johns - June 15, 2009

Your clumsy (and one would have to surmise purposeful, since you are a pretty bright guy) MIS-use of the Dalbar results were completely debunked already over on Bogleheads, in your troll post thread, so I did not feel compelled to restate it — the findings were that individual investors do not garner the market return because they make poor behavioral decisions — buying high, selling low, trading frequently, paying big fees and commissions, and other losing strategies.The study specifically indicates that a buy and hold passive strategy, i.e. the Boglehead portfolio, would actually outperform active strategies. This fact has been well documented in nearly every significant period measured and tested since the inception of the markets, by many studies. Since that outcome is antithetical to your own ‘active trading for everyone’ approach, I can imagine why you might be inclined to put the worst face on it, but honestly Dave, as was pointed out in the thread, you surely must know that passive investing is not the culprit; it is failing to adhere to the plan! You claim the Bogleheads are monolithic, but it simply isn’t true. Posters there include traders, timers, sector rotationists, REIT specialists, commodity hounds, gold bugs, bond specialists, TIP-enthusiasts, etc. The one thing all active posters do have in common, though, is a sense of decency towards each other, and a lack of personal agenda and aggressive behavior towards those who think differently. Self-promoting commercial activities are not smiled upon, especially when the first few posts you made were a broadside to the very forum principles. Diehardism/Bogleheadism are pretty passive, pretty laisse faire approaches, and the reason many congregate there is to chew the fat and *talk* about markets, in lieu of dithering around with their actual nest egg. Many (myself included) are however, so much NOT religious about the tenets, that we purposely maintain a ‘dabble’ portfolio of perhaps 10% NW allowed in our written investment plans, where we might buy favored individual issues, try trading strategies (including TA, penny stocks, options, Foreign ETFs, etc). That said, the posters who congregate there really have come to a pretty common personal conclusion that an individual trying to beat the market is on a fool’s errand. One thing you will read there also, though, is “There are many roads to Dublin.” That is worth some thought, IMHO.

shaferfinancial - June 17, 2009

The funny thing is when people think they can separate out “behavioral issues” from the basic strategy. You can’t, no one can. So if the strategy is failing because of behavioral issues, that means the strategy is good???? Some really weird logic there. Everyone understands investing is a behavior. Thinking you are above the behavioral issues is the real “fools errand!”

shaferfinancial - June 17, 2009

You might want to re-read my posts at boglehead to find where I was self promoting or commercial. I wasn’t. And there was only two comments that could have considered counter the group and they were pretty tame.

4. Russell Johns - June 15, 2009

Sorry to have to make this a second post, Dave, but could not find it on your site any longer — had to go to Internet Wayback Machine cache, but I did find you talking about how to decide on whether to value an expert’s advice — looks like you ask their net worth. That is why I asked you, but of course, you declined to answer.

Dave Shafer: “I talked to two folks over the weekend about the Shafer Wealth Academy(www.shaferwealthacademy.com). It was interesting. They started to tell me about the economy and what to invest in. [b]I asked them what their net worth was.[/b] Neither of them had a positive net worth. Think about this, you call someone up who is offering to help you build your net worth, and start to tell them about good investments. Yet, you are poor. Oh, and by the way, they were both ”former” real estate agents! So far I have talked to several real estate agents, mortgage originators, mutual fund/insurance salesmen, a CPA, and a stock broker. All were basically broke. Think about that the next time you get advice from a so-called expert!”

shaferfinancial - June 18, 2009

Finally, it is probably useful to outline my issues with the ideology of DIY folks. Now not every one has this ideology at these web sites, but it does dominate replies:

No one can beat the market. This is wrong and easily observable.
Market timing doesn’t work. Long term timing has been demonstrated to be successful, especially paying attention to metrics on price.
Financial advisers are ripping off people. No, but I do agree that most financial advisers do not add value.

See recent posts on this subject.

5. where to Invest my money - January 1, 2013

Nice post, I’d like to add that… Avoid checking on your stocks every day. Making wise stock market investments not only requires company research, it also requires you to maintain a good degree of emotional distance. By nature, the stock market moves up and down. If you let yourself get caught up in every rise and fall, you will soon become emotionally exhausted. Additionally, investing for the long run will bring more rewards than short-term strategies or day trading, unless you are a very experienced stock trader.


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