Set forth below is the text of a comment that I recently posted to another blog entry at this site:
Hi Rob,
I ask these questions because I believe you have derived implications from Shiller’s work that are unfounded. I’ve tried to encourage you to take not just my word for it but to seek out the opinion of others whose opinions you respect. And, importantly, to do so with enough humility and intellectual honesty to accept their reaction at face value rather than constructing an intellectual Rube Goldberg contraption that allows you to dismiss them. Many of my prior comments to you toward this end were deleted.
I’m not familiar with some of the statements you ascribe to Shiller. But I don’t find it shocking in the least that, for instance, he believes stock prices are a bit overvalued yet he still holds a healthy allocation. That’s because he recognizes something important–the future is unknowable. Just because something has happened in the past does not mean it wil happen tomorrow. Shiller invests with a healthy balance of skepticism and prudence.
I’ve tried to encourage you to take not just my word for it but to seek out the opinion of others whose opinions you respect. And, importantly, to do so with enough humility and intellectual honesty to accept their reaction at face value rather than constructing an intellectual Rube Goldberg contraption that allows you to dismiss them.
You are asking me to cancel out what my brain tells me and to betray my country because of intimidation tactics used by Wall Street Con Men to silence those who ask hard questions, Anonymous. This I cannot do.
That’s because he recognizes something important–the future is unknowable.
That’s the fundamental question on the table — Are future stock prices knowable or not? If they are not knowable, I agree with you that Buy-and-Hold is the ideal strategy. On the other hand, if they are knowable, Buy-and-Hold is the most dangerous Get Rich Quick Scheme ever concocted by the human mind. It has caused four economic crises and is in the process of bringing on the Second Great Depression.
The “revolutionary” (Shiller’s word) aspect of Shiller’s research is that he showed that stock prices are knowable in the long term. That was something new. The entire Buy-and-Hold Model was based on an opposite belief.
The most important economic and political issue before our country today is whether the Buy-and-Holders are right or whether the last 33 years of peer-reviewed academic research in this field is right. I will continue to do what I can to get the internet opened up to honest exploration of this question.
Just because something has happened in the past does not mean it wil happen tomorrow.
It does not.
But 140 years of past is a lot of past.
And please remember that the last 33 years of peer-reviewed academic research shows that Buy-and-Hold worked for zero out of those 140 years.
We have to invest in some way. When we have one strategy that has worked for 140 years out of 140 years of stock market history and another that has worked for 0 our of 140 years of stock market history, I feel more comfortable going with and recommending the former over the latter. Call me madcap.
Shiller invests with a healthy balance of skepticism and prudence.
And incoherence. To say that stocks will not be safe to invest in again until the P/E10 value goes below 10 and then to go with a 50 percent stock allocation when that has not yet happened is incoherent.
Shiller is a great man. I rank him even higher than Bogle. But, like Bogle, he is a man. And, like all men, he get things wrong from time to time. His friends are the ones who tell him so and thereby help him on his way to a better understanding and even greater accomplishments.
My sincere take.
Rob
Anonymous says
Rob,
What do you think is holding you back from being rich, successful and famous?
Rob says
If I had to reduce it to one word, I would say “Shame,” Anonymous.
We are all on the same side. We all want to move forward to a safer and smarter and more simple way to invest. I have played a lead role in developing the first true research-based strategy. So, as you suggest in your question, I expect to enjoy a good bit of wealth and success and fame in days to come. So will lots and lots of others, including most of my Buy-and-Hold friends.
We all have to get over that darn shame over things we didn’t know in earlier days to get to that wonderful place together. That’s the holdup.
I do my best to break down those walls every day, Anonymous. I will continue to do so.
Wish me luck!
Rob
Anonymous says
Who is “we” and why do you have shame?
Rob says
“We” are the entire population of the United States, Anonymous.
This is not the first time that we as a society got something wrong and then needed to correct the error. This is the only time that I can think of in which a mistake of this magnitude was made and then remained uncorrected for so many years after the error was brought to light by peer-reviewed research. We have procedures in place to insure that mistakes like this get corrected. We feel shame because we did not follow those procedures in this case. We feel that we have let our friends and neighbors and co-workers and fellow citizens down. So we continue the doomed cover-up.
I am part of this country. So I share in the shame a bit. I was afraid to speak up prior to May 13, 2002. That was shameful behavior.
I have led the effort to bring the cover-up to an end. But that doesn’t mean that I was never a Buy-and-Holder. I was a Buy-and-Holder on the morning of May 13, 2002. I didn’t give up on Buy-and-Hold until the evening of August 27 2002, when John Greaney threatened to kill my wife and children if I continued to post honestly re safe withdrawal rates and when 200 of my fellow community members at the old Motley Fool board endorsed his post (about 50 endorsed a post by FoolMeOnce saying that this behavior was so repellant that he felt he had to leave the board community).
My wife and I used to take a trip at the beginning of the New Year to make adjustments to our budget. I remember that in the year prior to when I read Jack Bogle’s book and learned about the errors in the Old School SWR studies, we had a good return on the small amount of money we had in stocks and I experienced that little thrill we all feel when Get Rich Quick investing strategies produce good short-term results. I am not proud of that, Anonymous. I’m not deeply ashamed of it. All of us humans are at risk of experiencing those sorts of feelings and it helps me understand what others are going through to remember how I almost got trapped in the GRQ mindset myself. But I cannot say that I am proud that I experienced those feelings and almost gave in to them.
So we’re all ashamed.
The other side of the story is that the same humans who made the mistake that produced this economic crisis also generated the insights that will permit us to avoid economic crises in the future. So I don’t think we are all so terrible in the final analysis.
But, yes, I think it is primarily feelings of shame that are holding us back today.
I hope that helps a bit.
Rob
Anonymous says
I think you can only speak for yourself. Stop blaming others for your problems.
Rob says
The economic crisis is not just my problem, Anonymous. It is a problem for our entire country,
The millions of failed retirements are not just my problem. They are a problem for our entire country.
The Ban on Honest Posting is not just my problem. It is a problem for our entire country.
Stop committing felonies and I can in good conscience stop calling you out on committing felonies.
So long as you continue committing felonies that cause financial ruin for millions of middle-class investors, I think it would be fair to say that I have a moral and civic obligation to call you out on your bad behavior.
I mean, come on.
Rob
Anonymous says
Rob,
Have you ever heard the phrase: “hook, line and sinker”?
It is do easy to put something out there and then watch you make a complete fool out of yourself.
Rob says
I guess.
I don’t feel even a tiny bit comfortable posting dishonestly re the numbers that my friends use to plan their retirements, Anonymous.
Whachagondo?
I naturally wish you all the best that this life has to offer a person in any event.
Rob