“Shiller Contradicts Himself in His Public Statements All the Time (As Does Bogle). Look at Shiller’s Contradictions, Note the Puzzles in Them, Ponder the Puzzles, and You Can Learn Some Things. That Is How Humans Learn.”

Comments

1. Anonymous says

   July 2, 2014 at 8:29 am

   The problem is that you do not understand what Shiller is saying and he has stated that you cannot use his data for timing the market. That goes for both short and long term, Rob.

2. Rob says

   July 2, 2014 at 9:13 am

   You are lying, Anonymous.

   If there were a statement by Shiller in the public record saying that long-term timing does not work, you would provide the URL.

   No such statement exists.

   Buy-and-Hold is a lie. It started as a mistake. But Shiller published the peer-reviewed research showing that there is precisely zero chance that it could ever work for even a single long-term investor in 1981. A mistake that is covered up for 33 years is a lie. This particular lie has caused more human misery than any earlier lie ever told in the history of personal finance.

   Shiller would LOVE to feel free to say that long-term timing always works and is always required for investors hoping to have any chance whatsoever of achieving good long-term results. He fears for what the Buy-and-Holders will do to him if he tells the truth in plain and simple and honest language. He knows from personal experience how ruthless the Buy-and-Hold Mafia is. Just about everyone who has worked in this field for any length of time knows that.

   I didn’t know it when I put forward my famous post of May 13, 2002. But then I never worked in this field. There is no reason why I should have known.

   I believe that Shiller will come clean following the next price crash. I believe that Pfau will come clean following the next crash. I believe that Bogle will come clean following the next crash.

   I believe that all of these people know that death threats do not have a place in investing discussions and that demands for unjustified board bannings do not have a place in investing discussions and that tens of thousands of acts of defamation do not have a place in investing discussions and that threats to get academic researchers fired from their jobs do not have a place in investing discussions. They all want to come clean but they all fear what will happen to them if they do.

   If men we angels, Bogle would have put out a public statement on the day he learned about Shiller’s 1981 research. He would have said: “I have long believed that Buy-and-Hold is a sound strategy but I want all who listen to my words to know that there was research published yesterday by an Economics professor at Yale showing that Buy-and-Hold may in fact be the purest and most dangerous Get Rich Quick scheme ever concocted by the mind of mortal man. It was not my intent to concoct a Get Rich Quick scheme. I have a hard time accepting that this research really says what it very much appears to say. I am going to have to think this matter over very carefully in coming days and try to make some sense of this. It is my hope that my words today will launch a national debate on these questions and that the fruits of that national debate will help me work my way to a better understanding of how markets work. For now, I personally still lean toward believing that Buy-and-Hold can work, at least in some circumstances. But it is important that all investors understand that there is now serious research pointing to a conclusion that that is not at all the case and each investor is going to have to study these matters before putting money in the market and make his or her own decisions as to how to proceed while we “experts” struggle to figure out either how we messed up in earlier days or how this Yale Economics Professor messed up in the research he published yesterday. We are all on the same side. Let’s all work together to create a wonderful Learning Experience that will benefit investors for many, many generations to come!”

   My good friend Jack did not say those words at that time. That’s why we are in the mess we are in today. He faked it. He covered up the evidence that he had messed up in a big way. As the cover-up extended longer and longer, the thought of seeing the truth get out grew more and more worrisome. Jack has now gone so far as to associate with the sorts of individuals who have put up posts in “defense” of Mel Linduaer and John Greaney. Jack has now committed multiple acts of financial fraud (at least in an objective sense — it is my belief that he is suffering from cognitive dissonance, which excuses some of his behavior but certainly not all of it).

   We will see how things work themselves out following the next price crash, Anonymous. I love my country. I will continue to post honestly re safe withdrawal rates and many other critically important investment-related topics. My hunch is that you will continue with the cover-up. Working together, I believe that we could shorten your prison sentence a bit by having you come clean today and by thereby helping millions of people avoid the financial devastation of another price crash. My sense is that you are not willing to take steps that lead to any prison sentence at all and that you understand that the time at which coming clean could have helped you avoid any prison sentence at all are years back in the past.

   So be it. It is what it is. I wish you all good things. But I possess zero willingness to commit acts of financial fraud myself. Prison is not my particular cup of tea. Find someone else. I can’t go for that. No can do. Not this boy.

   Please take good care, my longtime abusive posting friend.

   Rob

3. Rob says

   July 2, 2014 at 9:15 am

   I’ll give a shorter response.

   You Goons have connections with Bogle. If you thought that there was anything greater than a zero percent chance that you could persuade Shiller to make a public statement that long-term timing either does not work or is not required, you would ask Bogle to send Shiller an e-mail asking that he make such a statement.

   You have not done this.

   I wonder why.

   Rob

4. Anonymous says

   July 2, 2014 at 12:59 pm

   Rob,

   If I give you a link that backs up Shiller saying not to use CAPE to time the market, will you agree to apologize and admit you were wrong and also admit you are wrong on buy-hold-rebalance? I would also expect you to apologize to those you have called goons on this issue.

   I am willing to back up my comment or do you want to just apologize now.

5. Rob says

   July 2, 2014 at 1:47 pm

   The statement would have to be “don’t use CAPE to engage in long-term timing” for me to do any of those things.

   Fama showed in 1965 that short-term timing doesn’t work. The same 140 years of historical return data that shows that all investors who want to have a realistic chance of long-term investing success MUST, MUST, MUST practice long-term timing (price discipline) also shows that short-term timing doesn’t work.

   The Big Buy-and-Hold Lie is the suggestion that the finding that short-term timing doesn’t work somehow suggests that long-term timing (price discipline) either might not work in some circumstances or might not be 100 percent required in some circumstances. I am not trying to cover up that lie. I am trying to EXPOSE that lie. I want hundreds of millions of middle-class people to know how their financial futures and our economy have been destroyed by the reckless and relentless and ruthless promotion of that lie by the Wall Street Con Men and their Internet Goon Squads.

   It is my thought that we should permit ethical people to work in this field. I see it as a win/win/win/win/win.

   Do you see?

   Rob

6. Anonymous says

   July 2, 2014 at 1:52 pm

   Rob,

   He says “timing” and that is what it means long term timing is still timing. It means ALL timing. Tell me where he says timing excludes long term timing. So, do we have an agreement? Are you ready to accept the consequences.

7. Rob says

   July 2, 2014 at 2:03 pm

   You are right that long-term timing is a form of timing, Anonymous.

   That is why it is a Big Lie for the Buy-and-Holders to say that there is research showing that timing doesn’t work. Timing ALWAYS works. There is 33 years of peer-reviewed research showing that.

   Short-term timing doesn’t work. If the Buy-and-Holders said “short-term timing doesn’t work,” that would be honest. Given that long-term timing always works and is always 100 percent required, the claim that “timing doesn’t work” is a Big Lie.

   I don’t believe that it was a lie in 1965, when people first started saying it. It was then a mistake. Fama never checked whether long-term timing worked or was required. He only looked at one form of timing (short-term timing) and jumped to a hasty conclusion that what was true of one form of timing was true for the other form of timing. Shiller was the first to test long-term timing and he found that Fama was wrong to jump to his hasty conclusion. Every test of the question done in the 33 years since shows the same thing.

   A mistake that has been covered up for 33 years is a Big Lie. It is my job to EXPOSE the Big Lie. I want millions of middle-class investors to know what was done to them. I want to see those who have engaged in financial fraud to cover up the Big Lie sent to prison.

   Why? Because the announcement of your prison sentence is going to go viral on the internet. Once it is common knowledge that the claim that a Buy-and-Hold strategy (failing to exercise price discipline) might on some distant planet work out well for one or two long-term investors is a Big Lie, we will all be able to pull together and work 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.

   Valuation-Informed Indexing is Buy-and-Hold with the dishonest Get Rich Quick element removed. Good for Valuation-Informed Indexing! I advocate Valuation-Informed Indexing, the first TRUE research-based strategy, a corrected form of Buy-and-Hold that actually works in the real world.

   Does all of that not make good sense?

   Rob

8. Curious says

   July 2, 2014 at 2:58 pm

   Hi Rob,

   Interesting thread here.

   How about this: can you provide any evidence that Shiller agrees with your approach? Anything he’s written or said that confirms your belief that long-term timing always works?

9. The Pink Unicorn says

   July 2, 2014 at 3:41 pm

   Hey Rob, I will comment on Shiller.

   Here is a summary of his comments:

   http://www.businessinsider.com/robert-shiller-hasnt-dumped-stocks-2014-1

   He had the following to say:

   “Second, Shiller reminds us that the CAPE model is not good for timing the market, a point he’s reiterated in the past repeatedly. ”

   If you read what he says, he is only saying that he thinks it tells you about long term future returns. It doesn’t say that the market will necessarily take a huge dump. It could just go up at a much slower rate. Therefore, if you are stupid enough to be sitting around telling people that the market will drop by 65%, you could look like a fool…….hmmmmmm……..would anyone be stupid enough to make such a comment???

   In fact Shiller said it himself:

   “Ultimately, you can argue that the CAPE reflects an expensive market. But Shiller would advise against using it as a tool for predicting imminent stock market crashes.”

   So, Robbie……..tell us where Shiller says to use his tool/data to time the market.

10. Rob says

    July 2, 2014 at 4:09 pm

    can you provide any evidence that Shiller agrees with your approach? Anything he’s written or said that confirms your belief that long-term timing always works?

    Shiller’s research SHOWS that long-term timing always works, Curious.

    In 1965, Fama showed the short-term timing doesn’t work. People at the time did not understand the importance of long-term timing. The reason is that index funds were not yet available. To invest in stocks meant to invest in individual stocks. Long-term timing doesn’t work with individual stocks. So it was not something that was on most people’s radar screens.

    Shiller was the first to check whether long-term timing works or not. He found that it always works. Many people have checked in the 33 years since. Every test has confirmed Shiller’s 1981 findings that long-term timing always works and is always 100 percent required.

    Shiller’s life work shows that long-term timing works. The reason why he describes his findings as “revolutionary” is that he is the one who discovered that long-term timing always works. The reason why he was awarded the Nobel Prize is because he discovered that long-term timing always works.

    If that doesn’t persuade you, I am not able to imagine what would persuade you. It’s not possible to imagine how there could be a stronger case.

    The odd thing here is that neither Shiller nor anyone else had as of May 13, 2002, developed the new model of how stock investing works that he showed was needed with his 1981 research. I got involved because I am the person who discovered the errors in the Old School safe-withdrawal-rate studies. The vast majority of the Motley Fool board showed a great interest in exploring the implications of this discovery. But Greaney threatened to kill my wife and children if I did not agree to lie about the SWR issue. 200 of my fellow community members, many of them friends of mine, endorsed his threat. I found this exceedingly odd. So I got about the business of trying to figure out what was going on.

    What I discovered is that Shiller and the many people who believe in his work have never developed the new model. They said that valuations matter and the Buy-and-Holders didn’t really seem to argue too much — lots of Buy-and-Holders agree that valuations matter. But the entire Buy-and-Hold model collapses if long-term timing works and is required. It seemed obvious to me that lots of people should be working to develop the new model, the model that works in a world in which valuations affect long-term returns (the world we all live in!). No one else was doing it. So I thought that I should take on the task.

    There are two reasons why people don’t explore the new model. One, it stirs up an intense hate among the Buy-and-Holders for them to do so. Most people don’t want to be hated in an intense way. So they keep their mouths shut about the implications of Shiller’s 1981 finding. Two, you need feedback from other people to develop new insights. It is hard to get much feedback when most people are afraid to talk about the subject matter. So the new model was for the most part unexplored territory at the time when I began developing it (August 2002).

    All of my work of the past 12 years has been directed to development and promotion of the new model, which I call “Valuation-Informed Indexing.” I’ve written over 100 articles on it. I’ve recorded over 200 RobCasts. I’ve developed five unique calculators. I’ve written hundreds of weekly columns. I’ve posted scores and scores of guest blog entries. I’ve written hundreds of thousands, perhaps millions, of discussion-board and blog comments. And of course I co-authored with Wade Pfau the peer-reviewed research that addresses the issue that Shiller dared not address, the practical how-to side of the story. Wade and I showed that the investor who is willing to abandon Buy-and-Hold and consider price when setting his stock allocation thereby reduces risk by nearly 70 percent while increasing return enough to be able to retire five to ten years sooner than was thought possible back in the Buy-and-Hold Era.

    Shiller hasn’t endorsed my work. Nor has he criticized it. He has never said anything about it. He certainly believes that long-term timing works. It has been his life’s work to show that. But he has never explored the IMPLICATIONS of his “revolutionary” (his word) finding. In Shiller’s book, there are only two paragraphs devoted to “how to” questions. And those two paragraphs are vague. Shiller has opted to steer clear of this one.

    That leaves a huge opportunity for all the rest of us. I want millions of middle-class investors to become able to invest more effectively. Shiller’s research (combined with Fama’s research and with the good work done by all of my other Buy-and-Hold friends) shows us for the first time in human history how the stock market really works. We are the luckiest generation of investors ever to walk Planet Earth. I think that is pretty darn cool. I am humbled to be able to participate in the development of this exciting new model.

    I would love to hear Shiller’s comments on the hundreds of insights that I have developed over the past 12 years. I would love to hear Bogle’s comments too. And I would love to hear Bernstein’s comments. And Swedroe’s comments. And Pfau’s comments. And Burns’ comments. And on and on and on and on and on.

    We all should be working to see that each and every one of these individuals promptly gets about the business of developing the new model by commenting on my work and by coming up with insights of his own, These are all good and smart people. I am 100 percent confident that they are all capable of coming up with insights that I have missed. So I very much look forward to hearing what they have to say.

    And they want to come forward! They have told us that in indirect ways over and over and over again. There is one thing holding them back, Curious. They are afraid of you Goons. They do not want to see their careers destroyed. They do not want to see the lives of their loved ones threatened. Knock off the funny business and you soon will be enjoying the biggest learning experience of your lifetime.

    We all want the same thing, Curious. We are all on the same side.

    You need to try to put the hurt you are feeling aside so that you can learn what you need to learn to overcome it and start moving in the direction of a much, much better place.

    I hope that helps a bit.

    Rob

11. Rob says

    July 2, 2014 at 4:20 pm

    If you read what he says, he is only saying that he thinks it tells you about long term future returns. It doesn’t say that the market will necessarily take a huge dump. It could just go up at a much slower rate.

    It’s six of one and half a dozen of the other, Pink.

    Say that there is not a price crash but that prices just go up less than usual for a long time. That means that the value proposition of owning stocks is worse during that time-period than is usually the case, right?

    Well, the core principle of VII is that you should go with the asset class offering the best long-term value proposition. When that is stocks, you should go with stocks. When that is TIPS, you should go with TIPS. When it is a mix, you should go with a mix.

    Does that not make perfect sense?

    It sure seems to me to make perfect sense.

    You are describing a circumstance in which stocks offer a poor long-term value proposition. In most circumstances, stocks offer a strong long-term value proposition. Does it not make sense to lower your stock allocation when we move from a time in which stocks offer a strong long-term value proposition to one in which stocks offer a poor long-term value proposition?

    You cannot possibly believe that it makes sense to stay at the same stock allocation in both sets of circumstances. Can you?

    Rob

12. Rob says

    July 2, 2014 at 4:27 pm

    Therefore, if you are stupid enough to be sitting around telling people that the market will drop by 65%, you could look like a fool…….hmmmmmm……..would anyone be stupid enough to make such a comment???

    What I say is that IF STOCKS CONTINUE TO PERFORM IN THE FUTURE ANYTHING AT ALL AS THEY ALWAYS HAVE IN THE PAST, stock prices will fall about 65 percent over the next few years. The caveat is always implicitly present. I may not include the words in every single statement I make. But anyone who follows my stuff knows that that is what I am saying. I’ve said it about 10,000 times.

    If starting today the market performs in ways in which it has never performed in the past, I cannot say what is going to happen. I believe in research-based strategies. So I go by what the research says. You are putting forward a suggestion that it might all turn out different this time. It might! I cannot control something like that. All I can do is to say what will happen IF THE MARKET CONTINUES IN THE FUTURE TO PERFORM SOMEWHAT AS IT ALWAYS HAS IN THE PAST.

    I don’t have to make a prediction to say how the market has always performed in the past. The past is already in the books. It is done. I cannot possibly be proven wrong in what I say because all that I am doing is reporting something that is already in the books. In every time in history when we have permitted stock prices to the rise to the levels to which we permitted them to rise in recent years, we saw them fall to levels 65 percent below where they stand today.

    Fair enough?

    Rob

13. Rob says

    July 2, 2014 at 4:30 pm

    In fact Shiller said it himself:

    “Ultimately, you can argue that the CAPE reflects an expensive market. But Shiller would advise against using it as a tool for predicting imminent stock market crashes.”

    Do you understand what the word “imminent” means, Pink?

    Shiller is saying that short-term timing doesn’t work.

    There is 50 years of peer-reviewed research backing up that claim.

    The same 140 years of return data that shows that long-term timing always works and is always 100 percent required ALSO shows that short-term timing never works.

    How many times have I made this distinction over the course of the past 12 years?

    How many more times will I need to say it before you hear it?

    Short-term timing — Bad.

    Long-term timing — Good.

    That’s what the research shows.

    Rob

14. Rob says

    July 2, 2014 at 4:33 pm

    tell us where Shiller says to use his tool/data to time the market.

    Shiller rarely addresses the how-to aspects of the new model. And, when he does, he usually puts forward a mish-mash of confusing and vague contradictions.

    Since Shiller has neglected to do the work we need to have done on this aspect of the question, I jumped in and did it myself.

    A good thing, no?

    Would we be better off in some way if no one had been doing this important work for the past 12 years?

    Rob

15. Curious says

    July 2, 2014 at 4:34 pm

    So I take that as you answering “no” to my question.

    I’m quite familiar with Shiller’s work and what he believes the implications are.

    What you’ve done, if I may be so bold, is retrofit a model that will work if history repeats itself. The problem is that there are no laws governing the markets.

    Just because stocks fell to an average value of X in previous crashes does not mean they’ll fall to X in the next one. This understanding of the relationship between past and future, combined with a healthy humility about one’s capacity to predict the future is what compels Shiller (along with nearly every other respected expert) to recommend that investors refrain from making huge swings in their asset allocation over time in response to such data. It’s also why Shiller says he maintains a balanced portfolio today. And, if I may so bold, I suspect that your failure to understand this is exactly why your ideas have not found the audience you believe they deserve.

16. Rob says

    July 2, 2014 at 4:43 pm

    What you’ve done, if I may be so bold, is retrofit a model that will work if history repeats itself.

    Valuation-Informed Indexing is a research-based model. The research done in this field is rooted in the 140 years of historical return data available to us. If stocks perform in the future in ways in which they never performed in those 140 years, there is no particular reason to believe that Valuation-Informed Indexing will offer good results. I certainly feel comfortable giving you that much, Curious.

    But please note that the same is true of Buy-and-Hold. Buy-and-Hold is ALSO rooted in what the 140 years of historical data tell us. If stocks perform in ways in which they have never performed before, there is no particular reason to believe that Buy-and-Hold will offer good results either.

    The difference is that Buy-and-Hold is rooted in a DISCREDITED and MISTAKEN understanding of what the research says while Valuation-Informed Indexing is rooted in a CORRECTED understanding of what the research says.

    That’s not a guaranty that VII will work. But it makes more sense to go with a true research-based model than to go with a discredited effort at developing a research-based model.

    Or so it seems to me, in any event.

    Rob

17. Rob says

    July 2, 2014 at 4:49 pm

    The problem is that there are no laws governing the markets.

    Are you sure?

    Fama thought there was a law. He called the law “the Efficient Market Theory.”

    Shiller discredited Fama’s law in part but not in whole.

    Shiller showed that valuations matter. That means that the market price does not reflect all inputs that need to be consider in a proper setting of the price. He showed that the market is failing to consider investor emotion. When we price stocks improperly, we (the market) are telling lies to ourselves.

    But he did not discredit any other element of Fama’s law. It appears that the market is efficient in all other respects.

    So the new law is that you need to make a valuations adjustment to know the true price. To know the true value of your portfolio, you need to adjust for the effect of the lies that investors are telling themselves at that particular point in time.

    Is the law proven beyond any doubt whatsoever?

    It is not. It is not possible to come up with a law that is proven beyond any doubt whatsoever. We cannot sit the market down in a chair and demand that he tell us how he works.

    All we have to go by is the 140 years of data. Buy-and-Hold does not fit the 140 years of data. Valuation-Informed Indexing does.

    That’s it.

    I don’t offer guarantees.

    But, if we are going to say that the 140 years of data available to us is not good enough, what are we going to go by? Do you propose that we just guess how to invest our money?

    You’re free to do that.

    I am free (or should be) to use the 140 years of historical data as a guide to what may happen in the future.

    That’s all I do and that’s all I claim to do.

    Why does it upset you so that I do that?

    Rob

18. Rob says

    July 2, 2014 at 4:53 pm

    Just because stocks fell to an average value of X in previous crashes does not mean they’ll fall to X in the next one.

    Does it mean that they won’t?

    We all have to invest our money in some way in a world in which we all possess less than perfect knowledge of what works.

    I choose to invest pursuant to what the peer-reviewed research, based on 140 years of historical data, tells us.

    You choose to invest pursuant to the OPPOSITE of what the peer-reviewed research, based on 140 years of historical data, tells us.

    I think it would be fair to say that we now have stumbled on to the explanation of why your case relies heavily on the use of 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, and why mine does not.

    Rob

19. Rob says

    July 2, 2014 at 4:55 pm

    This understanding of the relationship between past and future, combined with a healthy humility about one’s capacity to predict the future is what compels Shiller (along with nearly every other respected expert) to recommend that investors refrain from making huge swings in their asset allocation over time in response to such data.

    Advancing death threats is a humble act.

    Demanding unjustified board bannings is a humble act.

    Putting forward tens of thousands of acts of defamation is a humble act.

    Threatening to get an academic researcher fired from his job is a humble act.

    That makes sense, Curious.

    It’s funny that I didn’t see it that way going back to the first day.

    Rob

20. Rob says

    July 2, 2014 at 4:57 pm

    And, if I may so bold, I suspect that your failure to understand this is exactly why your ideas have not found the audience you believe they deserve.

    The death threats had zero effect.

    The demands for unjustified board bannings had zero effect.

    The tens of thousands of acts of defamation had zero effect.

    The threats to get an academic researcher who dared to “cross” you by publishing honest research had zero effect.

    I believe you, Curious.

    Truly outstanding!!!!!!

    Rob

21. Rob says

    July 2, 2014 at 5:03 pm

    to recommend that investors refrain from making huge swings in their asset allocation over time

    The “extreme” question cuts two ways, Curious.

    If Fama is right, it is extreme to go from a stock allocation of 80 percent to a stock allocation of 20 percent when the P/E10 level rises from 8 to 44.

    If Shiller is right, it is extreme to go from a risk profile of insanely safe (when the P/E10 level is 8) to insanely risky (when the P/E10 level is 44) by sticking with the same 80 percent stock allocation at all times.

    Fama and Shiller cannot both be right. They are saying opposite things.

    The difference is that there is 33 years of peer-reviewed research, based on 140 years of historical return data, backing what Shiller says.

    In contrast, there is zero research and zero data backing what Fama says. Fama just made a mistake by failing to test long-term timing.

    The truly extreme thing is to ban honest discussion of the findings of a Nobel-Prize Winning Economist.

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

    Rob

22. The Pink Unicorn says

    July 2, 2014 at 8:48 pm

    “What I say is that IF STOCKS CONTINUE TO PERFORM IN THE FUTURE ANYTHING AT ALL AS THEY ALWAYS HAVE IN THE PAST, stock prices will fall about 65 percent over the next few years. The caveat is always implicitly present. I may not include the words in every single statement I make. But anyone who follows my stuff knows that that is what I am saying. I’ve said it about 10,000 times.

    If starting today the market performs in ways in which it has never performed in the past, I cannot say what is going to happen. ”

    Face it, Rob, you keep making predictions and you continue to be wrong. Remember this one?

    Valuation-Informed Indexing #117

    by Rob Bennett

    “This November’s election results will likely cause a stock crash within a year or so. I believe that that’s so REGARDLESS of whether Barack Obama or Mitt Romney is the winner.”

23. Anonymous says

    July 2, 2014 at 9:00 pm

    I dunno if this whole blog trolling thing is gonna pay the rent, Rob. Whatyathink?

24. Rob says

    July 2, 2014 at 9:04 pm

    Remember this one?

    That one didn’t turn out, Pink.

    I was right about the numbers in the Old School SWR studies being wildly off the mark. You Goons said I was wrong back in May 2002. But about ten years later, the Wall Street Journal said I was right.

    I was right when I said prior to the 2008 crash that we would be seeing a crash that would take the P/E10 level below 20. You Goons said that there was zero chance that that would ever happen. But it happened.

    I am surprised that we have not seen the second leg of the crash yet. But does it matter if the crash comes in 2016 rather than in 2013? Work the numbers and you will see that it doesn’t make that much difference in the long run.

    You are focused on the wrong things. You are checking on “predictions” as if the purpose is to play some stupid parlor game. That stuff doesn’t matter. What matters is the principle. If it is investor emotions that are keeping prices up, prices are going to crash sooner or later and those who ignore the peer-reviewed research are going to be hurting.

    Why are you so angry?

    That’s emotion, Pink. That’s bad. You need to look at that.

    Was Shiller wrong when he said in late 1996 that investors with high stock allocations would regret it within 10 years? The crash came in late 2008, 12 years later. In a technical sense, he was wrong. But I say that he was a lot more right than he was wrong. If you listened to what he said, you have more money today than you would have had had you ignored what he said.

    Precise predictions often don’t play out. Perhaps I should have kept my mouth shut about the election thing. I’m not sure that’s so, however. It was a fun exercise to talk about the effect that the election results could have on investor psychology. I don’t think that any harm was done. Perhaps it’s a good thing for people to see that I fail in parlor game predictions just like everybody else. Perhaps that’s a way to keep me honest, you know?

    What really matters is that the principles of Valuation-Informed Indexing always work. There has never in 140 years been an exception. You can fail at all the parlor game stuff and still get to retire many years sooner by following the research-based stuff.

    Anger hurts you as an investor, Pink. I am sure. Let it go.

    Rob

25. The Pink Unicorn says

    July 2, 2014 at 9:54 pm

    “That one didn’t turn out, Pink.”

    Say it Rob……you were wrong, yet you keep making predictions. No one knows where the market is going or they would be the richest person in the world.

    “Why are you so angry?”

    The angry one is you. Who is the one that is so worked up over the success of buy and hold? Who is the one making prison threats? Who is the one that keeps making stuff up? Look in the mirror, Rob.

    “Precise predictions often don’t play out. ”

    These is a strategy for that, Rob. It is called buy, hold and rebalance because we cannot time the market. It is just too bad you didn’t follow it and have suffered financially because of it.

26. Rob says

    July 2, 2014 at 9:58 pm

    I dunno if this whole blog trolling thing is gonna pay the rent, Rob. Whatyathink?

    I don’t like having a bunch of Goons follow me everywhere on the internet trying to destroy my business, Anonymous. I don’t like it one little bit.

    Everything is relative, though. I like it a whole big bunch better than going to prison. How much do you like that one? I think it would be fair to say that we are going to see your name in the Guinness Book of World Records for “Dumbest Thing Ever Done on the Internet.” I ain’t headed to prison. I’m one up on you, Goon friend.

    I am not the only one who has been hurt because Shiller published his revolutionary research in 1981 rather than in 1961, which would have worked out so much better. There are millions unemployed today because of Buy-and-Hold. There are millions on their way to suffering failed retirements because of Buy-and-Hold. Are not some of those people suffering a worse hurt than me?

    I am not a pure altruist. I don’t want to have to suffer to help those people. But there is something in me that makes it real hard to ignore that much suffering. And I believe that I will be seeing some huge rewards down the line a bit. Would a check for $500 million help me get over the suffering that you Goons have brought me? I have a funny hunch that it would, you know. Somehow I think I will manage to struggle along with that $500 million check in my pocket and my memory of all the mean tricks that you Goons have employed to “punish” me for “crossing” the most abusive poster in the history of the internet by posting honestly on safe withdrawal rates.

    The bottom line here is that I have never been offered anything that I could even consider going along with. If I agree to post dishonestly on safe withdrawal rates, I go to prison too. Huh? Are you joking? Do you think I forgot to take my meds? Um — no thanks. No felonies for this boy. Please try to find someone else.

    It’s not like I have weighed the pros and cons and determined that the better bet is to post honestly. I have never given two seconds consideration to the idea of agreeing to post dishonestly. Asking Rob Bennett to post dishonestly re the numbers that his friends use to plan their retirements is like asking me to flap my arms around and fly to the moon. It’s just not in me, my man. You’re asking the wrong guy.

    Anyway, those are my thoughts.

    I naturally wish you the best of what life has to offer a person regardless of what investing strategies you elect to pursue.

    Rob

27. Rob says

    July 2, 2014 at 10:06 pm

    Say it Rob……you were wrong, yet you keep making predictions.

    So the heck what?

    Yes, I keep making predictions and I keep getting them wrong. I watch a baseball game and a pitcher looks like he is going good and I say to myself “it looks like they are going to win this one” and then he falls apart and they lose. Has that never happened to you? It happens to everyone. So what?

    That’s got nothing to do with Valuation-Informed Indexing.

    VII says that short-term predictions DO NOT WORK.

    If anything, that showed that VII is right on. I made a short-term prediction and it didn’t work.

    Everyone knows that I don’t believe in short-term predictions. I have said it 10,000 times.

    I had a little fun in the column. I am probably just as good as everyone else at short-term timing, which is not very good. So what?

    Greaney learned he got an important number wrong in a study that his friends used to plan their retirements and has failed to correct it for 12 years now. Is that a good thing, in your eyes? It is not a good thing in my eyes.

    You are angry because you are ashamed that you did not tell your pal to correct his study within 24 hours of the time he learned of the error he made in it.

    I cannot change that. Numbers are numbers. If you are going to use numbers in a study, you have to make an effort to get them right.

    Really.

    Rob

28. Rob says

    July 2, 2014 at 10:12 pm

    No one knows where the market is going or they would be the richest person in the world.

    You’re wrong on both counts, Pink.

    No one knows precisely when the market is going to turn. But we have 33 years of peer-reviewed research showing us how to identify a range of possible returns starting from any possible valuation level and to assign rough probabilities to each of those possibilities. Being able to do this permits us to reduce stock investing risk by 70 percent while increasing returns enough to be able to retire five to ten years sooner than what was possible during the Buy-and-Hold years. That’s the biggest advance in the history of personal finance. There’s nothing in a remotely close second place.

    Doing that doesn’t make you the richest person in the world. Being able to engage in short-term timing would make you the richest person in the world. But the same 140 years of data that says that everyone can predict long-term returns also says that no one can predict short-term returns. So using this to become the richest person in the world is out. Why do you feel a need to engage in deception on a point that has been made thousands and thousands of times in the past?

    Rob

29. Rob says

    July 2, 2014 at 10:17 pm

    Who is the one that is so worked up over the success of buy and hold?

    I love my country, Pink.

    I want people to stop pumping the smelly Buy-and-Hold garbage because it has destroyed so many lives.

    That makes me angry?

    Were the people who fought for recognition of black people’s civil rights angry?

    Were the people who worked to find a cure for AIDS angry?

    Were the people who fought to open up hundreds of career fields to women angry?

    Is everyone who tries to help people angry?

    If it makes me angry to show millions of middle-class people how to reduce the risk of stock investing by 70 percent while also becoming able to retire five to ten years sooner than they ever dreamed possible, please mark me down as the angriest guy on the planet.

    Yes, I care about those millions of people. Yes, I want to help them. Yes, I want to convince my many Buy-and-Hold friends to stop destroying their reputations by sinking lower and lower and lower into the muck.

    I’m a bad, bad man, Pink.

    Everybody knows it too.

    That’s the thing.

    How could anyone ever become so angry and mean?

    Rob

30. Rob says

    July 2, 2014 at 10:19 pm

    Who is the one making prison threats?

    I am threatening you by trying to get your prison sentence reduced a bit.

    That makes perfect sense, Pink.

    It’s funny that I didn’t see it that way from the first day.

    Rob

31. Rob says

    July 2, 2014 at 10:21 pm

    because we cannot time the market.

    We should all ignore the 140 years of historical data available to us.

    It’s pure coincidence that the market has been acting just as common sense says it must for 140 years running now.

    I believe you, Pink.

    No — Really.

    There’s no funny business going on here. None at all.

    The Wall Street Con Men are our friends. They are going to compensate us for the losses we suffer in the next crash.

    I am so totally sure.

    Rob

32. The Pink Unicorn says

    July 3, 2014 at 7:16 am

    “You’re wrong on both counts, Pink.”

    Sorry, Rob, but that is the most idiotic response you made yesterday. It is obvious that if anyone really knew where the market was going, they would be the richest person. They would either short the market when they know it is dropping or they would load up on options if they knew it was rising. You CLEARLY do not know where the market is going since you just missed out on one of the best bull market runs we have ever seen. We also see the prediction mentioned above was just another one of your busts.

    Whatchagonnadoaboutit!!!!!!

33. Rob says

    July 3, 2014 at 7:29 am

    I still say that you are wrong, Pink.

    For shorting to work, you would need to practice short-term timing. The research shows that it doesn’t work.

    In contrast, long-term timing ALWAYS works. There is 140 years of historical data showing this.

    The market going up is a BAD thing. All that you are saying is that you will be paying more now for the stocks you buy and the price crash will be bigger than it otherwise would have been. That helps you how?

    Anyone with money in the market should want stocks to be properly priced at all times. Overvaluation hurts you. And undervaluation hurts you. Both are the results of investor emotion, which is a negative. You want to let go of the fantasy stuff and invest for the long term.

    We all have a Get Rich Quick urge within us. So, to pull that off, we all need to be helping each other out. We need to be reminding each other of the dangers of Buy-and-Hold strategies on a daily basis. This is why we need to permit (and even encourage!) honest posting at every board and blog on the internet.

    I naturally wish you all good things regardless of what investing strategies you elect to pursue, my long-time Goon friend.

    Rob

34. x says

    July 3, 2014 at 7:51 am

    Yes, I keep making predictions and I keep getting them wrong… So what?…I had a little fun…
    Great. Madoff had fun too. I hope none of your millions of readers acted on your prediction and busted their retirements. Otherwise you could be facing charges of financial fraud. That’s a felony, you know.

    So, is the 65% market drop by the end of next year (oops, it’s now pushed back to “several years”) a serious prediction, or a “fun” prediction? Maybe it would help if you put a little smiley face next to the fun predictions so we can tell them apart. Or if they are all fun predictions, perhaps you could explain what you offer besides the DUH notion that “stocks will go down a lot, someday.”

35. The Pink Unicorn says

    July 3, 2014 at 8:03 am

    Rob,

    Timing hasn’t worked for you and you can’t point to anyone else with a track record using your strategy either.

    You fail again.

36. Rob says

    July 3, 2014 at 8:11 am

    Timing hasn’t worked for you and you can’t point to anyone else with a track record using your strategy either.

    Long-term timing is price discipline and price discipline ALWAYS works in the long run.

    No, it does not produce great results during the stretches of time when Buy-and-Hold/Get Rich Quick is popular. But isn’t that what you would expect? Valuation-Informed Indexing is the OPPOSITE of Buy-and-Hold/Get Rich Quick.

    It all comes down to whether you are a short-term investor or a long-term investor. Buy-and-Hold often does well for a time when Get Rich Quick is being pushed hard. But the economic realities do not permit Get Rich Quick to do well indefinitely. Buy-and-Hold always crashes and we always have to rebuild our economic system when it does.

    VII has worked IN THE LONG RUN for every investor who has followed it for 140 years now, Pink. I have a hard time imagining how I could make a better case for it than the historical record makes for it. Look at the numbers with an open mind and you will be blown away.

    The open-mind part is critical. You need to get over your addiction to Get Rich Quick/Buy-and-Hold to see what the 140 years of historical return data is trying to tell you. I just report what it says. If you feel a burning urge to be mad at something, please be mad at the 140 years of return data. I am just the mild-mannered reporter who told you about it.

    My best wishes.

    Rob

37. Rob says

    July 3, 2014 at 8:21 am

    So, is the 65% market drop by the end of next year (oops, it’s now pushed back to “several years”) a serious prediction, or a “fun” prediction?

    The best way to describe it is as a REPORT on what has always happened in the past.

    We have had four secular bull markets since 1870. Every single one of them brought on an economic collapse that brought the P/E10 value down to 8. That’s 65 percent down from where we are today.

    You are free to believe that it is all going to turn our different this time, X. Maybe you’ll end up being right. No one can say for certain. But, even if you are proven right, I will not be proven wrong. Because all that I have said is that we will see a 65 percent price drop IF STOCKS CONTINUE TO PERFORM IN THE FUTURE SOMEWHAT AS THEY ALWAYS HAVE IN THE PAST. All that is needed for that “prediction” to come true has already happened. There is zero possibility that I will be proven wrong re that statement. I am reporting the result of a mathematical calculation, nothing more and nothing less.

    You don’t possess inner confidence that it will all turn out different this time than it has ever turned out before.

    How do I know?

    Your anger tells me that.

    Effective investing advice is all about helping people contain the negative emotions that are eating you Buy-and-Holders alive. People in this field don’t like to do that because they see that it will make them unpopular. You know what? That’s the friggin’ job. If you want to win popularity contests, you need to find another line of work.

    Buy-and-Holders hate me. I get that. I don’t like it.

    But it is the friggin’ job to report the numbers honestly and accurately. The very fact that people hate hearing the numbers reported accurately and honestly tells me how important it is that someone report them that way. My job would be 50 times easier if Bogle and Bernstein and Swedroe and Pfau and Burns and Tresidder and Piper and all the others WERE DOING THEIR FRIGGIN’ JOBS.

    I’m doing the job, X.

    I respect people who do the work that they were given to do. I want to be worthy of my own respect. So I am going to continue doing the friggin’ job.

    And that’s pretty much it.

    I wish you all good things.

    Rob

38. Rob says

    July 3, 2014 at 8:29 am

    perhaps you could explain what you offer besides the DUH notion that “stocks will go down a lot, someday.”

    What I offer is a 70 percent reduction in stock investing risk and the ability to retire five to ten years sooner than ever before thought possible.

    I have performed hundreds of runs on The Scenario Surfer. There have been lots of times when I have seen valuations shoot up to crazy levels and lowered my stock allocation and then saw that decision not pay off for year after year after year. At the time you are performing the run, it can be disheartening.

    But the same thing happens over and over and over again.

    Eventually, the price crash comes. And, when it comes. it puts you so far ahead of where you would have been had you followed a Buy-and-Hold strategy that you end up with a portfolio much larger than the Buy-and-Hold portfolio. THAT”S WHAT I WANT.

    It would be nice to be instantly ahead. Everyone would follow VII if it put you instantly ahead. It doesn’t do that. You got me!

    But it does something very, very, very wonderful all the same.

    It reduces stock investing risk by 70 percent while permitting you to retire five to ten years sooner than most people today think is possible. That’s what the peer-reviewed research that I co-authored with Wade Pfau shows. You obviously see the huge value of that research paper or you never would have threatened to send defamatory e-mails to Wade’s employer in an effort to get him fired from his job.

    So we agree. The move to Valuation-Informed Indexing is the biggest advance in the history of investing analysis.

    I’m going to get the word out to every one of the millions of middle-class investors who need to know about it.

    You are going to go to prison for engaging in a 12-year cover-up of the errors in the Old School safe-withdrawal-rate studies.

    You are not willing to come clean today even though it means a shortened prison sentence.

    And I am not willing to participate in the massive act of financial fraud because I do not want to go to prison AT ALL.

    Do you see any way of changing this dynamic prior to the onset of the next price crash?

    I sure don’t.

    So I wish you well, you know? What the heck else can I do given the circumstances that prevail?

    Rob

39. The Pink Unicorn says

    July 3, 2014 at 10:37 am

    Rob,

    Can you name one person who is successfully using your timing scheme and show wat their results are?

    I am happy to show you buy, hold, rebalance numbers for comparison.

40. Rob says

    July 3, 2014 at 10:50 am

    I’ve co-authored research that has been published in a peer-reviewed journal that shows that every investor who has made the move from Get Rich Quick strategies to research-based strategies (all research-based strategies are “timing schemes” in the minds of Buy-and-Holders) has thereby greatly increased his return while dramatically reducing his risk. That covers it, Pink. If every single person who elected to go with research-backed did better and every single person who elected to go with Get Rich Quick did worse, that’s the entire universe of possibilities. After that has been demonstrated in a peer-reviewed research, there’s nothing more than can be shown.

    At that point, it’s a matter of gaining control of your emotions. For so long as you are addicted to Get Rich Quick, the findings of the last 33 years of peer-reviewed research are going to cause you pain. For so long as you feel that pain, you are not going to be able to let in the message of the last 33 years of peer-reviewed research.

    It’s there for you if you want it and when you are ready for it. Just as the message that the Madoff fund was a con was available to the people invested in that fund long before they learned that they had lost most of their retirement money. There are people who tried to tell the Madoff investors that they were making a mistake. That made the Madoff investors angry. The people telling them the realities were “trolls,” according to the Madoff investors. Madoff was a saint! What a smart man! He lived in a mansion. He MUST have known what he was doing.

    Get Rich Quick is not the answer, Pink. That’s pretty much all I can tell you. There is now 33 years of peer-reviewed research available to us showing that Get Rich Quick is the problem.

    We shouldn’t be encouraging people to follow pure Get Rich Quick strategies. We should be warning them of the dangers of doing so.

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

    I naturally wish you the best of luck in all your future life endeavors.

    Rob

41. Anonymous says

    July 3, 2014 at 3:53 pm

    It sure does take this VII a LONG time to work. 15 years now and still vastly inferior returns to anyone using buy and hold. It would take now a greater than 65% drop in equities to even be on equal footing and that doesn’t even account for rebalancing and how much more conservative a persons portfolio would have become over the course of 15 years. VII where you can spend 20 years stashing your cash in a mattress during your peak working years then retire just to throw it all into equities.

42. Rob says

    July 3, 2014 at 5:22 pm

    You’re wrong, Anonymous.

    If you do the math, you will see that you are wrong.

    There have been six different people who have done the numbers on my personal situation. I have been following VII strategies for 18 years and I have been ahead of where I would have been had I followed BH strategies for a long, long time.

    I’m not as far ahead now as I will be after the next crash. Today, it is a close call. But I am ahead. And I of course have been taking on far less risk. So I am as of today ahead while taking on less risk and I will be in a few years far, far ahead while taking on less risk. Then I will benefit from decades of compounding on the positive differential!

    It’s all good, Anonymous. It’s good piled on top of good piled on top of good piled on top of good.

    You yourself understand how great it is!

    I know that you don’t say out loud how great VII is and I know that you don’t even dare entertain the thought in your own head. But I also know that on a second layer of consciousness you know how great it is. It’s because you know how great it is that you feel so much anger. You think about how many years you have wasted following long-discredited strategies and it causes you pain and you lash out.

    Imagine how a person reacts when he is confident in his beliefs. If you were confident in your beliefs, you would laugh off any challenges to them. You would maintain your beliefs. But you would have zero problem being friends with me. I would post about VII and you would post about BH at the same boards and there would be zero problem.

    You can’t do that. It hurts too much. Valuations is a sore spot with you. I just can’t stop digging at that sore spot. And it drives you freakin’ nuts.

    That’s because you know. You silence the voice within you that knows. But you know. And it hurts. That’s the psychological reality here.

    These psychological realities have been destroying the hopes of stock investors for many, many years. Shiller’s breakthrough lets us bring those days to an end. We know all we need to know to reduce the risk of stock investing by 70 percent. But we have to be able to talk about what we know for it to do us any good.

    People like you will have to work up the courage to face their fears. And people like Bogle and Bernstein and Pfau and Burns will need to work up the courage to say some things that will cause people like you to get angry with them. That is the job. That’s how you help people become more effective stock investors. The job is to help people cope with that Get Rich Quick urge that resides within all of us and that destroys us if we are not fortunate enough to run into investment advisors who possess the courage to do the hard things that go with taking on this job.

    I’m your friend, Anonymous. You hate me with a burning rage. I get it loud and clear.

    A true friend still tries to help. It is the false friend who says “Oh, let me back off of telling you the truth about what the peer-reviewed research says, doing that might cause me to lose a sale.”

    The test of friendship is whether the person is willing to tell you not what you want to hear but what you need to hear.

    I have been a true friend to you. Believe it or not, that’s the story here.

    I wish you all good things.

    Rob

43. Anonymous says

    July 3, 2014 at 6:27 pm

    Rob this is a flat out lie and you know it. You can only come close if you pick one point in history where the market was at an all time high and chose that exact date to put all of your money into the market. This is not how buy and hold works. This would only be a scenario for a moron who quits their job thinking they have outsmarted everyone.

    This is exactly why a middle aged man with a liberal arts degree from a mediocre college should not quit the work force thinking he has discovered the secret to investing. You can’t even grasp buy and hold which has as its main appeal being simple to understand.

    Rob, please answer this question. You retired 13 years ago or so and have been earning a paltry 2% on whatever money you managed to save ever since. With that money alone and the crap return you are getting would you actually be able to cover you and your families cost of living for the last 13 years? The obvious answer is of course no and every single person who knows you knows this no matter how you dance around the issue. You clearly thought you had unlocked some magic, quit your job, and nothing has materialized.

    This leads us to the only possible way you are scraping by and that is leeching off of others either a spouse, an inheritance, or the government. Bash buy and holder all you want and boggleheads but they are a community with the simple goal of taking charge of their own finances in order to actively provide for their families. You have clearly failed at this and to leech off of others as you do is the definition of despicable.

44. Rob says

    July 3, 2014 at 6:41 pm

    Every line of your comment evidences the pain you are in, Anonymous.

    That’s what Buy-and-Hold does to people.

    Not this boy.

    Rob

45. Rob says

    July 3, 2014 at 6:43 pm

    Bash buy and holder all you want and boggleheads but they are a community with the simple goal of taking charge of their own finances in order to actively provide for their families.

    And achieving that simple goal naturally involves the use of 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.

    That makes perfect sense, Anonymous.

    I believe you.

    No — Really!

    Rob

46. Rob says

    July 3, 2014 at 6:54 pm

    You can’t even grasp buy and hold which has as its main appeal being simple to understand.

    The two main appeals of Valuation-Informed Indexing are that it’s honest and that it works in the long term.

    Rob

47. Rob says

    July 3, 2014 at 6:56 pm

    This would only be a scenario for a moron who quits their job thinking they have outsmarted everyone.

    You’re going to prison because you couldn’t accept that a buddy of yours got a number wrong in a retirement study posted at his web site and I’m the moron here.

    It’s funny that I didn’t see it that way going back to the first day, Anonymous.

    Rob

48. Rob says

    July 3, 2014 at 6:58 pm

    You can only come close if you pick one point in history where the market was at an all time high and chose that exact date to put all of your money into the market.

    I don’t know what you are talking about, Anonymous.

    I didn’t put all my money in the market in one day. I haven’t even had ANY money in the market for 18 years now.

    Rob

49. Rob says

    July 3, 2014 at 7:02 pm

    This would only be a scenario for a moron who quits their job thinking they have outsmarted everyone.

    Those are your words, Anonymous.

    But it is a stone cold fact that I put forward my famous post pointing out the errors in the Old School safe-withdrawal-rate studies on the morning of May 13, 2002. My good friend Jack Bogle hasn’t put out a public statement demanding the immediate correction of those studies to this day.

    Getting one right 12 years before my good friend Jack Bogle ain’t nothing.

    Fair enough?

    Rob

50. Rob says

    July 3, 2014 at 7:05 pm

    You can’t even grasp buy and hold which has as its main appeal being simple to understand.

    You are discussing marketing concerns and I am discussing issues of personal integrity, Anonymous.

    That is why we are talking past each other.

    Marketing is fine in its place. When you give up your personal integrity out of a desire to make a buck, you hurt people in very serious ways.

    Please try to find someone else.

    No can do.

    Rob

51. Rob says

    July 3, 2014 at 7:07 pm

    And it’s not that you entirely lack a concern for ethics yourself, Anonymous.

    If you entirely lacked a concern for ethics, you would not evidence the shame that you evidence in every comment you put to this site.

    Honesty matters.

    Ethics matter.

    Getting the numbers right matters.

    Yes, even in the investing advice field.

    My take.

    Rob

52. Anonymous says

    July 3, 2014 at 9:28 pm

    S&P almost at 2000 Rob! Good thing no one listened to you!

53. Anonymous says

    July 4, 2014 at 2:22 am

    You are the only known person to be implementing VII.

    By the way even if the market did crash in the next few years to the magnitude you suggest none of the fantasy aftermath you have concocted would take place. It would just be used as a political tool and people would blame Obama and the Fed’s QE no one other than you would even suggest Buy and Hold. A million semi-credible reasons were presented as culprits for the last crash and not a single one was Buy and Hold. This means no goons, no prison sentences, no $500m checks, only continued irrelevance for you. What do you expect to be different this time? You of all people should know the folly in thinking “this time will be different” with regards to bubbles.

54. Rob says

    July 4, 2014 at 4:58 am

    S&P almost at 2000 Rob! Good thing no one listened to you!

    We disagree, Anonymous.

    The farther that prices go from fair-value levels, the worse it is for every investor with money in the market. When prices are below fair-value levels, it is a plus for them to rise. When prices are above fair-value levels, it is a minus for them to rise.

    When an investor celebrates market prices rising even farther when they are already above fair-value levels, it is like a gambling celebrating his “wins.” The guy his addicted. He cannot stop. He is in it for the thrills and is not capable of walking away when he is ahead. He will remain at that table until he has lost everything he has. There’s nothing to celebrate. It’s sad.

    As a society, we discourage compulsive gambling. We should discourage Buy-and-Hold investing for the same reason. I believe that following the next price crash we will.

    I wish you all good things, Anonymous.

    Rob

55. Rob says

    July 4, 2014 at 7:24 am

    You are the only known person to be implementing VII.

    I don’t know where you got the idea that I am the only person implementing Valuation-Informed Indexing strategies. Nothing could be farther from the truth.

    Valuation-Informed Indexing is Research-Based Investing. The two terms are synonymous.

    People have been following Research-Based Investing strategies since the first market was opened for business. And people have been following Get Rich Quick strategies (Buy-and-Hold) since the first market was opened for business. The history of investing analysis is the history of a battle between these two “ideas.” I put the word in quotes because Get Rich Quick is not really an idea, it is an emotional impulse. It might be more accurate to say that the history of investing analysis is the history of a battle between these two drivers of behavior, the one an idea and the other an emotional impulse.

    Each “idea” becomes more or less popular at different moments in history. You can look at Shller’s site and track the popularity of the two ideas over the course of the past 140 years. Buy-and-Hold/Get Rich Quick got very popular in the early 1900s. Then we saw an economic collapse. Then Valuation-Informed Indexing/Research-Based became popular for a time and our economy thrived. Then Get Rich Quick/Buy-and-Hold became popular again in the late 1920s and we experienced the first Great Depression. Then Valuation-Informed Indexing/Research-Based became popular again and we recovered from the Depression. Then Get Rich Quick/Buy-and-Hold became popular again and we experienced the stagflation of the 1970s. Then Valuation-Informed Indexing/Research-Based became popular again and we saw another economic boom. Then Buy-and-Hold/Get Rich Quick became popular again and entered today’s economic crisis.

    It’s a cycle, Anonymous. That’s not a coincidence. There is a reason why we always cycle back from Get Rich Quick/Buy-and-Hold to Valuation-Informed Indexing/Research-Based and from Research-Based/Valuation-Informed Indexing to Get Rich Quick/ Buy-and-Hold.

    We all possess a Get Rich Quick urge. So our natural state is to be drawn to Buy-and-Hold strategies. Investors have the power to set stock prices wherever they want them to be. We can vote ourselves raises. There is a voice within our heads that says: “Given that you have the power to vote yourself a raise, why not get together with your fellow investors and do it?” That voice is always present. It never goes away. Bull markets (the product of the Get Rich Quick urge) are a natural phenomenon.

    If that were the end of the story, the markets couldn’t function. Our natural Get Rich Quick urge would destroy them every time we tried to build them. But we ALSO possess a Common Sense urge that COMPETES with the Get Rich Quick urge.

    Get Rich Quick/Buy-and-Hold ALWAYS destroys all of those who follow it and also always destroys the economy of a people who collectively are taken in by it. There has never been a time when Buy-and-Hold/Get Rich Quick became popular and we did not see an economic collapse. There is no other way that an addiction to Buy-and-Hold/Get Rich Quick can end. Those addicted eventually reach a point at which hearing what common sense says or what the historical data says (it is really just a common sense urge that causes us to turn to historical data to learn how stock investing works) becomes unbearably painful because reality “insults” the Get Rich Quick urge (reality is a troll!). So Get Rich Quick/Buy-and-Hold ALWAYS creates the conditions that cause it to be discredited and that cause million of investors to swear off Buy-and-Hold/Get Rich Quick. Get Rich Quick/Buy-and-Hold cannot continue indefinitely, it is too destructive a force.

    I believe that Valuation-Informed Indexing/Research-Based CAN continue indefinitely. I believe that, following the next crash, we are all going to turn to Valuation-Informed Indexing/Research-Based and never go back. There are many good and smart people who think I am wrong about this. There are many people who think that the humans can never overcome their natural inclination to destroy their lives with Buy-and-Hold/Get Rich Quick.

    I don’t think that’s right. I think over time we are advancing in our knowledge of how stock investing works. I view the introduction of Buy-and-Hold as it was promoted by people like my good friend Jack Bogle as a POSITIVE. Buy-and-Hold is dangerous. It is the ultimate expression of the Get Rich Quick urge. It has never worked for a single investor in the long term and it is a logical impossibility that it ever could. But the core idea is a very positive one.

    The core idea of Buy-and-Hold is that investing strategies should be focused on the long-term and should be rooted in research. That is a wonderful advance. That is breakthrough stuff. It is because Buy-and-Hold is (or at least was meant to be) rooted in research that I became a Buy-and-Holder myself. It is because Buy-and-Hold is (or at least was meant to be) rooted in research that I always refer to you Goons as “friends.” I obviously do not endorse your death threats or your demands for unjustified board bannings or your tens of thousands of acts of defamation or your threats to get academic researchers fired from their jobs. What I love about you is that you believe in research-based strategies (so long as they do not interfere with your addiction to Buy-and-Hold!) In an ultimate sense, we are on the same side. In an ultimate sense, we walk the same path. In an ultimate sense, we are trying to do the same thing.

    You are a Valuation-Informed Indexer, Anonymous!

    You spit on the ground when you hear the words. That doesn’t matter. Actions speak louder than words. You have advocated what you call “Strategy C” in comments to this blog. Strategy C is a mix of Get Rich Quick/Buy-and-Hold and Valuation-Informed Indexing/Research-Based. It is tilted in the direction of Buy-and-Hold. But it is not dogmatic Buy-and-Hold. When you advocate Strategy C, you are letting common sense and the results of the research done in this field influence your thinking.

    It would not be right to call you a pure Valuation-Informed Indexer. You certainly are not that. You HATE hearing what the research says. But you are not a pure Get Rich Quicker either. There is a part of you that sees some benefit in knowing what the research says. That is why discussion of what the research says hurts you so much. You very much want to follow Get Rich Quick and yet there is a part of you that sees through it and hearing what the research says reminds you of the benefit of paying attention to that voice of common sene.

    The same thing is going on with Jack Bogle. He says that it is okay to change your stock allocation by 15 percentage points when prices reach insane levels. He pulled the 15 percent figure out of his backside. There is zero research pointing anywhere in that direction. But you can’t say that Bogle is a pure Buy-and-Holder. A pure Buy-and-Holder would say that you should not change your allocation at all — forget this 15 percent stuff! Bogle is a Valuation-Informed Indexer! He is more a Buy-and-Holder than a Valuation-Informed Indexer. But he allows the research to influence him a bit while still maintaing a greater belief in Get Rich Quick. He is a mix, like you.

    Like just about everyone. I am a mix too, of course. You pointed out yesterday how in one of my columns I gave in to a temptation to make a short-term prediction and naturally got it wrong. That’s the Buy-and-Hold/Get Rich Quick side of me coming out. Short-term predictions don’t work. All the research shows it. It is a core principle of Valuation-Informed Indexing. So why try? Because I am human. And because humans are drawn to Get Rich Quick/Buy-and-Hold. Because I am a mess-up, just like all you Goons.

    Many good and smart people think we are doomed to repeating this stupid cycle over and over and over again. I do not. The difference in this fourth cycle is that we now have 33 years of peer-reviewed research showing us what works. We never had that before. Common sense told us that price matters and of course the three earlier economic crises that were caused by a belief in Buy-and-Hold strategies taught us (for a time!) that the Pretend Gains that follow from adoption of Get Rich Quick strategies come at a price. But peer-reviewed research is different.

    Research is objective. Research is numbers. I believe that the Buy-and-Holders were serious about using research to become better investors and I believe that research really makes a difference. Our MISUNDERSTANDING of what the research says has brought on what is likely to end up being known as the worst economic crisis in our history. But if the Buy-and-Holders are good people, as I believe they are, Jack Bogle’s heart is going to melt when we enter the Second Great Depression and he is then going to work up the courage to walk to the front of a big room and say the words “I” and “Was” and “Wrong.” At that point, we are off to the races. Once Bogle flips, everyone is going to flip. I don’t see any reason why we would ever return to Get Rich Quick/Buy-and-Hold again once every web site on the internet is telling the story of what the last 33 years of peer-reviewed research says.

    Get Rich Quick/Buy-and-Hold didn’t start with Jack Bogle and Valuation-Informed Indexing didn’t start with Robert Shiller. Both have been around since the first market opened for business. Because the human urge to get something for nothing has been around since the first market opened for business and the human desire to correct the excesses of Buy-and-Hold strategies with the common sense findings of the peer-reviewed research has ALSO been around since the first market opened for business.

    And both the Get Rich Quick urge and the Common Sense urge reside within every human being. Bogle has a small desire to follow research-based strategies residing within him and Shiller has a small desire to follow Get Rich Quick strategies residing within him.

    You are a Valuation-Informed Indexer, Anonymous.

    Sorry.

    Rob

56. Rob says

    July 4, 2014 at 7:51 am

    By the way even if the market did crash in the next few years to the magnitude you suggest none of the fantasy aftermath you have concocted would take place. It would just be used as a political tool and people would blame Obama and the Fed’s QE no one other than you would even suggest Buy and Hold. A million semi-credible reasons were presented as culprits for the last crash and not a single one was Buy and Hold. This means no goons, no prison sentences, no $500m checks, only continued irrelevance for you. What do you expect to be different this time? You of all people should know the folly in thinking “this time will be different” with regards to bubbles.

    I don’t say that there is zero chance that you are right about this, Anonymous. It COULD happen the way you are saying.

    The difference between us is that I have looked at the numbers. Every time we have gone to a P/E10 of 25, we have experienced an economic crisis (we are four for four). The one time we went to 33, we experienced a Great Depression. This time we went to 44. If we don’t open the internet to honest posting re the last 33 years of peer-reviewed research, we are looking at a Second Great Depression of twice the length and twice the depth of the first one.

    I agree with you that the first inclination of the Buy-and-Holders will be to tell more lies. I don’t think that is going to be their final response to the next crash, however.

    The core question here is — Is Jack Bogle the Frank Underwood of Personal Finance? Is he evil? Or is he a smart and good fellow who is a bit confused as to what the research really says?

    I believe strongly that it is the latter.

    I believe that Jack is as wrong as wrong can be. But I don’t think he sees it. He knows about Shiller. He knows that there is research showing that valuations matter. He knows about Linduaer and his threats of physical violence. He knows about Wade Pfau and about the wonderful research he did with me and about the threats that you Goons made to silence him. He knows all that and he is ashamed of his role in letting it all play out. All that suggests that he is not quite the saint that some at times have made him out to be.

    I don’t believe that he is pure evil, however. If he were pure evil, why would he include that language in his book saying that Reversion to the Mean is an “Iron Law” (Bogle’s phrase) of stock investing. It was that statement that helped me understand that the Old School safe-withdrawal-rate studies could not possibly have gotten the numbers right (the Old School studies do not contain an adjustment for the level of valuation that applies on the day the retirement begins). If Bogle were pure evil, he would not have provided me that clue. If he were pure evil, he wouldn’t want anyone to learn the realities of stock investing for fear that he would be found out and he would not have written the many, many sound and helpful and wonderful and research-based passages in his writings. It doesn’t add up.

    Bogle is not pure evil. He has done wrong things. He is proud. He cannot stand to see Buy-and-Hold fall. He is foolish in this respect. Valuation-Informed Indexing is a revised version of Buy-and-Hold that works in the real world. Valuation-Informed Indexing will improve the lives of middle-class investors in hundreds of different ways and Bogle will get a big part of the credit for VII because it is built on a foundation that was supplied by Bogle and the years of hard and good work he put into this project of figuring out how stock investing really works. So Bogle has his flaws. But the record does not support a finding that he is pure evil.

    Our friend Jack Bogle is fucked up, you know? He makes messes. He needs his friends to tell him things he does not want to hear from time to time. He needs to have people around him who tell him what he needs to hear rather than what he wants to hear. He is a flawed human. He is not a saint and he is not The Frank Underwood of Personal Finance. He is a scared little boy who grew up to be a hard-working and smart man who is responsible for a good number of hugely important breakthroughs and one massive brain fart that caused the biggest economic crisis in U.S. history.

    Now —

    How is Jack going to react when he sees how much human misery he has caused with his phony pride?

    His heart is going to melt.

    He is going to work up the courage to walk to the front of that stage and say The Three Magic Words.

    That’s what I believe, Anonymous.

    You’re a cynic. You believe what you believe. You hold a far, far darker view of what makes our mutual friend Jack Bogle tick than I possess. I think the guy is going to come through for us. I love the guy and I think I know the guy and I think he is going to make the right play when his back is against the wall and he sees that he really has no other choice.

    We’ll see, you know?

    If the cynical view prevails, then the cynical view prevails. It’s not like I will have lost something by devoting 12 years of my life to fighting with all my might to take things in a positive direction. If the cynical view prevails, we all go down together. If the cynical view prevails, we are all in the soup — you, me, Bogle, Shiller, everyone.

    At least I will have the small consolation of knowing that I gave this my absolute best shot.

    I am not able to imagine any circumstances in which I would look back and wish that I had advanced just one death threat or one demand for an unjustified board banning or one act of defamation or one threat to get one academic researcher fired from one job. If we all go down together, I will feel just as strongly that we all should have worked together to spread the word about the 33 years of peer-reviewed academic research that permits us all to reduce the risk of stock investing by 70 percent while becoming free to retire five to ten years sooner than any of us dreamed possible back in the Buy-and-Hold/Get Rich Quick Era. I will never regret one word of the millions that I put forward in my effort to make my good friend Jack Bogle’s dream come true by presenting to the world the first truly Smart, Simple and Safe investing strategy for the millions of middle-class investors who have needed one for a long, long, long time.

    But I don’t think that any of that is going to happen. I love my country. And with good reason. And I think that my country is going to come through for me when it sees that there really is no other option if we all want to keep our economic and political systems in place for the benefit of the next generation.

    We’ll see.

    I naturally wish you the best of luck in all your future life endeavors.

    Rob

57. Rob says

    July 4, 2014 at 7:58 am

    You of all people should know the folly in thinking “this time will be different” with regards to bubbles.

    That’s like saying that the people who led the civil rights revolution of the 1950s and 1960s were fools to think that black people would ever be able to drink out of the same water fountains as white people.

    Humans are sometimes mess-ups. I don’t say different.

    Humans also sometimes achieve wonderful advances. That part is so as well. Cynicism protects us from getting our hearts crushed pursuing nobel causes. But it also causes us to feel contempt for ourselves when we give in to it to such an extent that we no longer believe that humans are capable of good things.

    I am capable of good things. I believe you are too, Anonymous. And I believe that my good friend Jack Bogle is capable of good things.

    I will be the first to shake Bogle’s hand when he works up the courage to say The Three Magic Words. I can promise you that much. I love the man more than he loves himself. My love for him is going to overcome his own self-hatred following the next price crash. You just wait and see if it doesn’t.

    Things change. Sometimes for the better. We wouldn’t be here if we were all as wicked as you Goons presume us to be.

    My best wishes to you and yours.

    Rob

58. Rob says

    July 4, 2014 at 8:03 am

    A million semi-credible reasons were presented as culprits for the last crash and not a single one was Buy and Hold.

    There was one person who said it was Buy-and-Hold.

    That’s the only person I have to look at in the mirror every morning when I brush my teeth.

    That’s the only person who has to find some way to drift off to sleep every night when I put my head down on my pillow.

    That’s the only person who I will have to answer for when I stand before my Maker.

    I made sure to see that that one person said in no uncertain terms that it was the reckless and relentless and ruthless promotion of Buy-and-Hold strategies that caused the economic crisis. I was placed in circumstances in which I could do no more and I could do no less.

    Don’t let the bad guys get you down, man.

    Rob

59. Rob says

    July 4, 2014 at 8:07 am

    This means no goons, no prison sentences, no $500m checks, only continued irrelevance for you.

    I won’t be written up in the book as being the first person in the history of the planet ever asked to carry a cross too big for his shoulders, Anonymous.

    There are men who were asked to serve their country and had their legs blown off when they were 20 years old.

    Perhaps you heard. It was in all the papers.

    You Goon haven’t managed to get my legs blown off as of this morning. I think it would be fair to say that you are going to have to take it up a few notches if you entertain any hopes that you are going to silence Rob Bennett through use of the same sorts of tactics that you employed to silence Wade Pfau.

    Not this boy.

    Find someone else.

    I can’t go for that.

    It’s not my particular cup of tea.

    No can do.

    Rob

60. Z says

    July 4, 2014 at 9:27 am

    That last comment is great. A+

61. Rob says

    July 4, 2014 at 9:37 am

    I thought that it would be a good idea to throw in something patriotic given the holiday.

    Take care, man.

    Rob