Valuation-Informed Indexing #182 — The Real Reason Obama Is Having a Rough Presidency

I’ve posted Entry #182 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Real Reason Obama Is Having a Rough Presidency.

Juicy Excerpt: At times when valuations are on the increase, spending power is being pumped into the economy. At times when valuations are on the decrease, spending power is being removed from the economy. Voters care about economic results more than anything else. Any President who serves at a time when valuations are on the way downward struggles against a headwind. Any President who serves at a time when valuations are on the way upward enjoys a strong wind at his back. P/E10 values alone don’t determine which presidencies succeed and which one fail. But they can be a big factor.

Comments

  1. Anonymous says

    Yep, and it has nothing to do with the endless streams of issues like Benghazi, the IRS targeting, failed foreign policy, the prisoner swap, immigration and that little issue called OBAMACARE.

    It looks like your political knowledge is right in line with your investing knowledge.

  2. Rob says

    When the economy is booming, people look at lots of other issues in a more positive light, Anonymous. When people are afraid that they are about to lose their jobs, they think you are a bum regardless of what happens in other areas.

    I obviously don’t believe that other issues have no impact. But I believe that how the economy is going is the driver in the public’s assessment of most presidents.

    Thanks for sharing your thoughts.

    Rob

  3. Sensible Investor says

    It takes a lot more than just looking at stock market valuations to properly assess the economy, Rob.

  4. Rob says

    If you look at the dollars, you will see that it is stock valuations that are the dominant factor, Sensible.

    Stocks were overvalued by $12 trillion in 2000. Once prices start falling, they always continue falling until they are at one-half fair value. So we were looking at a loss in consumer buying power of $16 trillion. The out-of-control bull had created a bubble in housing prices too. That was another $4 trillion loss of consumer buying power.

    Can you identify some other factor that takes $20 trillion of consumer buying power out of the economy? I am not able to think of anything.

    There are of course other factors that influence the economy. But none of the other factors are things that we do not permit ourselves to talk about. So we naturally try to fix things that go wrong in other areas. We don’t do that with stock overvaluation. We are ashamed of how we destroy so many human lives with stock overvaluation. That makes that factor different.

    That’s my sincere take re this important matter, in any event.

    Thank you for stopping by.

    Rob

  5. Anonymous says

    Stocks were overvalued by $12 trillion in 2000.

    Then why didn’t you short them and make a fortune? Your own investing strategy (fixed allocation for 20 years) shows how much you believe in this stuff. You didn’t even buy stocks in 2009!

  6. Rob says

    I’m a research-based guy, Anonymous. The research shows that shorting is a disaster. Shorting is even worse than Buy-and-Hold! Holy moly!

    I didn’t buy stocks in 2009. But that doesn’t show that I don’t believe in research-based strategies. The research shows that a good case could be made for buying in 2009. It also shows that a good case could be made for not buying. It’s a question of how much pain you are able and willing to endure to get a good 10-year return. I elected to take a pass on the massive pain. But I certainly don’t fault anyone who went the other way with it. I wonder why you feel the need to engage in deception re this point.

    If you look at the research, you will see that those short-term calls never end up making much of a difference, Anonymous. It’s the long-term that matters. You have to take price into consideration when setting your allocation (and I did that in 2009). Always. Always. Always. That’s the biggie. That’s 80 percent of the game.

    It’s been that way for 140 years. There’s never been a single exception.

    No matter what the Wall Street Con Men tell you!

    Marketing is one thing. What works according to the research is something very, very different.

    My best wishes to you.

    Rob

  7. Anonymous says

    You talk about research, but never back it up, including your claims about buy and hold, which you use as a generic term. In fact, you often comment on our investments without really knowing what we hold.

  8. Interested Observer says

    Were WWII, the fall of the Roman Empire, and climate change also caused by the buy-and-hold mafia?

  9. Rob says

    which you use as a generic term.

    When I make negative comments about Buy-and-Hold, I am ALWAYS referring to the claim that there is some sort of magical, mystical “research” supporting the idea that there is no need to change one’s stock allocation in response to big valuation shifts. That is of course 100 percent lie, the biggest lie ever told in the history of personal finance, the lie that caused our economic crisis and the lie that has put millions of middle-class Americans on the path to experiencing failed retirements.

    I love everything else about Buy-and-Hold. Everything else is gold. I have incorporated everything else in Buy-and-Hold into Valuation-Informed Indexing. The only difference between Buy-and-Hold and Valuation-Informed Indexing is that VII does not include The Big Lie. That’s why I say that VII is the first HONEST research-based strategy.

    When I criticize Buy-and-Hold, I am criticizing the dishonesty of those that lie about there being some mystical, magical research supporting the pure Get Rich Quick approach to stock investing. I don’t buy it. I love the idea of rooting one’s strategy in the peer-reviewed research. But I think we need to do that honestly. All we do when we tells lies about what the research says is to undermine the public’s belief in research-based strategies.

    That’s my sincere take re these terribly important matters, in any event.

    Rob

  10. Rob says

    Were WWII, the fall of the Roman Empire, and climate change also caused by the buy-and-hold mafia?

    Disco too. Don’t forget Disco.

    That Leo Sayer album that somehow found its way into my record collection? It was my good friend Jack Bogle who persuaded the disc jockeys to play that song “Thunder in My Heart” by calling the station over and over again and making a pest of himself.

    Little known fact.

    Rob

  11. Rob says

    you often comment on our investments without really knowing what we hold.

    I see how emotional you are in all your comments, Anonymous. That tells me what I need to know.

    If I saw you getting that emotional when making car-purchase decisions, I would say that the car-purchase strategy you were following was bad news.

    There is a thing called human dignity, you know? When I see people advancing death threats and demands for unjustified board bannings and tens of thousands of acts of defamation and threats to get academic researchers fired from their jobs, I cannot help but wonder what happened to their human dignity that they would be willing to degrade themselves so.

    What happened in your case is that the Wall Street Con Men tricked you and you fell for the trick and you now are so desperate not to acknowledge the realities that you are willing to risk going to prison rather than come clean. That’s pretty f’ing sad, my old friend.

    It’s pretty darn f’ing sad.

    You are an adult. So you have to take responsibility for your actions. That much is fair enough.

    But you know what? It is not just you Goons who are to blame.

    My good friend Jack Bogle contributed to this mess my exploiting your human weaknesses. And my good friend Bill Bernstein contributed to this mess by exploiting your human weaknesses. And my good friend Wade Pfau contributed to this mess by exploiting your human weaknesses. Any my good friend Mike Piper contributed to this mess by exploiting your human weaknesses. It could even be argued that my good friend Robert Shiller contributed to this mess in a small way by not speaking out strongly enough in opposition to the exploitation of your human weaknesses being engaged in by Bogle and Bernstein and Pfau and Piper.

    I’m telling.

    That’s it.

    I love all those people and I love you. And I want your pain to stop and I want their pain to stop.

    So I am telling.

    Does that help?

    It doesn’t matter to me what you hold. What matters to me is how much pain you are in.

    I am telling so that I can pull a group of people together to get you (and all the others) out of that terrible pain.

    I hope that makes good sense to you. It sure makes good sense to me.

    Rob

  12. Anonymous says

    I elected to take a pass on the massive pain. But I certainly don’t fault anyone who went the other way with it.

    Ok, so like everyone over at Bogleheads, you make allocation decisions based on a number of factors. And yet, you’re “VII” and they’re “get rich quick”. What exactly is the difference between you and them, in practice?

  13. Anonymous says

    I see how emotional you are in all your comments, Anonymous. That tells me what I need to know.”

    No, I am not emotional like you. You still have no clue what I or anyone else holds, yet you make comments as if you do. If you disagree, feel free to post what you really think I have.

  14. Rob says

    Ok, so like everyone over at Bogleheads, you make allocation decisions based on a number of factors. And yet, you’re “VII” and they’re “get rich quick”. What exactly is the difference between you and them, in practice?

    The difference is that I don’t advance 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. The difference is that I want to LEARN from the peer-reviewed academic research and the Buy-and-Holders want to BLOCK Learning of what the last 33 years of peer-reviewed academic research says.

    That’s the only difference, Anonymous. You are right that the Bogleheads take a number of factors into consideration when setting their allocations and you are right that I do the same. But there is obviously SOMETHING that distinguishes us. That something is the last 33 years of peer-reviewed research. Everything that I say is rooted in Shiller’s “revolutionary” findings of 1981. And Bogle hasn’t changed his investing advice one iota in those 33 years. He is saying the same thing today as he was saying in 1980!

    I am saying that we should move out of the Dark Ages of investing analysis and get the word out to every investor alive about what the last 33 years of peer-reviewed research says. There is not one person alive on Planet Earth who doesn’t want to see that happen, including Bogle.

    The trouble is that Bogle (and lots and lots of others, to be sure) has committed financial fraud by covering up the findings of the peer-reviewed research for 33 years. So he worries that permitting honest posting at the Bogleheads Forum will land him in a prison cell.

    What do you want me to do about that?

    I BEGGED the man to come clean before the economic crisis hit. Had he come clean back them, I don’t think he would be going to prison AT ALL. So I did right by him, no?

    And I came up with this thing where we attribute his behavior to cognitive dissonance rather than evil intent. I think it would be fair to say that no one else has come up with a better way to get him off the hook for his obstinate behavior. So I CONTINUE to do right by him, no?

    What else can I do?

    You tell me the difference between us. I considered myself a Buy-and-Holder on the morning of May 13, 2002. It never entered my head that there would be anyone other than Greaney who would consider it a bad thing that I discovered a major error in the Old School retirement studies and corrected it. Would you say that Bogle and the other Buy-and-Holders have been appreciative of my efforts? It sure doesn’t seem that way to me.

    There is only one type of poster banned at the Bogleheads Forum — those of us who tell the truth about the last 33 years of peer-reviewed research. Why do you think that is? It cannot possibly just be coincidence that the same type of poster is banned over and over and over and over again.

    It is that the Bogleheads CLAIM to believe that investors should be following the peer-reviewed research but have not updated their investing strategy to reflect the research from 1981 forward. That’s the entire problem.

    Update your strategy and we are all on the same side. Update your strategy and we can bring the economic criss to an end and enter the greatest period of economic growth in U.S. history. Update your strategy and you will no longer see any need to advance death threats and demands for unjustified board bannings and tens of thousands of acts of defamation and threats to get academic researchers fired from their jobs. Update your strategy and there will no longer be any need for you to tell The Big Buy-and-Hold Lie (that there is some mystical, magical research somewhere showing that it might not be 100 percent necessary for ALL investors to ALWAYS practice price discipline when buying stocks).

    This lie is in the process of destroying our country.

    Do you care?

    I do.

    So I am telling.

    But that’s it. There are no other differences. The Buy-and-Holders started out doing something wonderful and then they made a perfectly understandable mistake and then they elected to cover it up rather than acknowledge it and now we are seeing the cover-up of a cover-up of a cover-up of a cover-up.

    Everything works if you fix Buy-and-Hold to reflect the last 33 years of peer-reviewed research.

    If you don’t, you end up in a prison cell. And the rest of us end up in a Second Great Depression.

    Is that clear enough? Am I stating things plainly enough for you to get the general idea at long last?

    Following the peer-reviewed research is a good idea. But you must be willing to be honest about what the research shows or you turn a good idea into a very, very, very, very BAD idea.

    Buy-and-Hold AS IT IS PROMOTED TODAY BY PEOPLE LIKE JACK BOGLE is a very, very, very, very bad idea.

    I love Jack and all my other Buy-and-Hold friends. So I naturally want to do everything I can to persuade them to leave this dark, dark path they entered on the morning of May 13, 2002, and get back to where they once belonged.

    The difference is lies versus truth. The difference is darkness versus light. The difference is Get Rich Quick versus research-based. The difference is short-term versus long-term. The difference is hate versus love.

    Do you see?

    Rob

  15. Rob says

    You still have no clue what I or anyone else holds, yet you make comments as if you do. If you disagree, feel free to post what you really think I have.

    I have responded to this elsewhere on the thread.

    I wish you well in all your future life endeavors, Anonymous. To do well in investing, I believe that you need to get over the pain you are in.

    I do not believe that Get Rich Quick is the answer. I believe that Get Rich Quick is THE PROBLEM.

    That’s my sincere take re this terribly important matter, in any event.

    Hang in there, my old friend.

    Rob

  16. Rob says

    Ok, so like everyone over at Bogleheads, you make allocation decisions based on a number of factors. And yet, you’re “VII” and they’re “get rich quick”. What exactly is the difference between you and them, in practice?

    I’d be interested in hearing what YOU say the difference in practice is, Anonymous.

    If you believe that there is no difference in practice, I’d be grateful if you would be willing to identify what you believe to be the source of the conflict.

    Rob

  17. Rob says

    They didn’t quote me because I am the person who discovered the errors in the Old School SWR studies, Anonymous. I put up the post pointing out those errors on the morning of May 13, 2002. The Wall Street Journal didn’t report on them until nearly 10 years later. So I am Enemy #1 for the Buy-and-Hold Mafia.

    I am still telling the truth re these matters. The Buy-and-Hold Mafia has directed everything it has got against me and they haven’t stopped me. I think it’s fair to say that the 12-year cover-up will be exposed following the next price crash. Who will be in better shape then?

    Wade may be in prison then. I am going to tell people about his great research. I am going to say that he merits the Nobel Prize for the work he did with me. But I also am going to tell people that he committed financial fraud because of the threats that were made to destroy his career.

    Is he better off being quoted in all these places now and getting all these big job promotions now and going to prison then or would be be better off taking his story to the New York Times today and avoiding the years of financial fraud? I think he would have been better just playing it straight. I told him so. In one of my e-mails to him I told Wade that I thought he was “insane’ to get involved in any way, shape or form with you Goons.

    Wade is a grown man and he took the path he took. I still love the guy. I always will. But I wouldn’t be willing to trade places with him today for all the money in the world.

    My contributions have been recognized by thousands and thousands of people (including Wade Pfau, to be sure). People fear you Goons because you have the backing of Jack Bogle and others of the Wall Street Con Men, But the whole corrupt industry will be doing down when millions of middle-class people find out what has been done to them. I am not going down. I have never posted in “defense” of Mel Lindauer or John Greaney or Jack Bogle. I am clean, Anonymous. So I will be getting a lot more recognition following the next price crash, when you are sent to prison.

    It’s obviously not the way I wanted to see things play out. But there is no one on Planet Earth who has done more to rein in you Goons. So I have whatever satisfaction comes from knowing that I have put my very best efforts into this. And I will of course continue to do so.

    I hope that answers your question, Anonymous.

    Rob

  18. Rob says

    If he wasn’t afraid to, he would.

    And he shouldn’t be afraid to.

    The fact that he is tells the tale about how corrupt this field has become in the Buy-and-Hold Era.

    Tell the truth and you never need to threaten anyone.

    Agree to engage in a cover-up and you spend the rest of your lifetime looking over your shoulder.

    I want no part of it, Anonymous.

    If you have to be dishonest to “defend” an investing strategy, there’s something very, very wrong with that strategy.

    Not this boy.

    I hope to gain a reputation all over the internet following the next price crash as the person whom the Buy-and-Hold Mafia couldn’t crack no matter how much they threw at him.

    We’ll see how it goes.

    I wish you all good things, my long-time abusive posting friend.

    Rob

  19. Anonymous says

    “Wade may be in prison then.”

    Maybe a better question is this: Which specific financial experts will NOT be going to prison in your opinion?

  20. Rob says

    There’s a concept that is referred to in the law books as “industry practice” or “industry standard” or something like that. The idea is that one indicator of fraud is engaging in behavior outside the norm of the field in which you work.

    That concept won’t do the job in the investing advice field. The entire industry is corrupt. We have known for 33 years that there is zero chance that a Buy-and-Hold strategy can ever work for even a single long-term investor. But people in the field noticed that the pure Get Rich Quick approach brings in the bucks just fine, peer-reviewed research be danged.

    The standard here has to be broader. We certainly don’t permit 12-year cover-ups of errors in studies that people use for an important purpose in any other field. And we obviously adopted the laws against financial fraud for a reason. If we are going to send Bernie Madoff to prison, it’s more than a little hard to justify not doing the same for the sorts of individuals who have put forward posts in “defense” of Mel Linduaer and John Greaney, who obviously have caused 500 times the human misery.

    We can’t send everyone in the field to prison. It’s not practical.

    But I think it’s fair to say that the millions of people whose lives have been destroyed are not going to be in a terribly forgiving mood when they learn about the 12-year cover-up. So we are going to need to see action that insures beyond any doubt whatsoever that a message will be sent strong enough to insure that nothing like this will ever happen again.

    My guess is that, soon after the next price crash, a number of people will come forward. They will say that their consciences just will not permit them to keep quiet any longer. Then there will be a deluge of truth-telling. . Lots of people will be hoping that by coming forward early, they will either be able to avoid prison or limit their sentences significantly. And It Will Be Clear That the Buy-and-Hold Mafia Just Does Not Have the Power to Maintain the Cover-Up Any Longer.

    We will see a media frenzy. That will lead to congressional hearings.

    My guess is that there will be responsible people who will come forward with the aim of bringing the nasty side of things to a quick end so that we can all get about the business of taking advantage of the wonderful research findings that the Buy-and-Hold Mafia has been denying us for 33 years now. It wouldn’t surprise me if Congress adopted some form of amnesty for advisors who recommended Buy-and-Hold strategies but who did not show any evidence of bad intent.

    I believe that the prison sentences will largely be limited to those who advanced threats of physical violence or who made demands for unjustified board bannings or who advanced hundreds of acts of defamation or who participated in or covered up threats of physical violence against academic researchers. I don’t think that we will be hearing any objections to long prison sentences for those sorts of individuals. It might be that there are other sorts of insanely abusive behavior that has been going on behind the scenes and that that will come out when people are coming forward with honest accounts in an effort to save their skins. But it would be the same general sort of behavior we would be talking about. People don’t care about people making mistakes. People get angry when people are dishonest and when they engage in a cover-up. It’s the people who have engaged in clear acts of dishonesty or cover-ups who should be most concerned about their futures, in my assessment. That means you, Anonymous!

    Once the first prison sentences are announced, I believe that all the ugly stuff will come to a quick end. We will see a total reversal. We live in the most exciting time to be an investor in the history of the planet. There are billions of dollars to be made providing millions of middle-class investors with tools that are consistent with what we have learned from the peer-reviewed research over the past three decades. Once there is an announcement of ANY prison sentences, we will be seeing good stuff piled on top of good stuff piled on top of good stuff.

    It may take decades for all the criminal and civil cases to work their way through the system. Does it really matter all that much? The good stuff here is 50 times more good than the bad stuff is bad. I think that will be the focus for all except those personally involved in the criminal and civil cases. I obviously cannot say how each case will be resolved. It is going to depend on the behavior of the individuals involved. There will be testimony taken at trials. That’s how the system works, no?

    I ain’t going to prison! I know that much! There is no one else alive who has done as much to rein in you Goons as I have. There is no one in a close second place.

    Fair enough, Anonymous?

    Take care, man.

    Rob

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