Valuation-Informed Indexing #185: Falling in Love With Your Inner Goon

I’ve posted Entry #185 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Falling in Love With Your Inner Goon.

Juicy Excerpt: The Inner Goon is skeptical of new ideas. Shiller’s “revolutionary” (his word) findings were published 32 years ago and big names still promote Buy-and-Hold strategies to this day. That’s bad. Our skepticism is holding us back big time.

But skepticism itself is not a bad thing. The reality is that the Buy-and-Holders advanced many powerful insights. We want to be skeptical about challenges to those ideas. And once we come to accept the need to consider valuations when setting our stock allocations, we will want to be skeptical of challenges to the new orthodoxy as well.

If our minds become too flexible, we will find ourselves jumping from investing fad to investing fad. The idea that long-term timing is not required was a mistake. But it was a mistake that persuaded many good and smart people. We shouldn’t dismiss it too easily. I certainly wish that more people would question it more forcefully. But, trying to be objective about things, I can see that jumping from one core belief to its opposite should be done only with a great deal of caution.


  1. Anonymous says


    You do not understand what Shiller is saying. Further, he is basically saying you are wrong in this article:—robert-shiller-s-cape-is-waving-the-caution-flag-004753218.html

    Notice these quotes:

    “And Shiller is quick to note the CAPE is not a market-timing tool and he remains in the market in his personal account. “We don’t know what it’s going to do,” he says.”

    “As for the idea, proffered here by Citigroup’s Tobias Levkovich, that CAPE is flawed because it doesn’t “normalize” for interest rates (as it does for earnings), Shiller says the following: “He’s right the very low interest rates are a sign maybe you want to keep more invested in the [stock] market now rather than getting nothing [from bonds]. That ought to help explain the high CAPE but that doesn’t mean the high CAPE isn’t a forecast of bad performance.”

  2. Rob says

    Nobody can understand what anyone is saying so long as there is a Ban on Honest Posting in effect, Anonymous.

    How do you know that he is not careful to avoid saying things that upset the Buy-and-Hold Mafia because he has seen what happens to academic researchers who say publicly what they truly believe?

    Perhaps Shiller knows what happened to Wade Pfau.

    Perhaps there are a lot of Wade Pfaus out there.

    Perhaps Shiller could write a book telling about all the threats that were directed at him.

    Once you threaten to kill family members of anyone who posts honestly, people hold back.

    Saying that high CAPE is a forecast of bad performance is the same thing as saying that long-term timing always works. If you know that you are going to see bad performance, you know that risk is higher and you need to lower your stock allocation to keep your risk profile constant.

    You wouldn’t even be posting here if you had confidence that Buy-and-Hold could work. You are scared. If you followed a true research-based strategy, you wouldn’t be scared.

    I am going to continue to post honestly.

    I naturally wish you all the best that this life has to offer a person regardless of what investing strategies you elect to follow.


  3. Anonymous says


    What has enabled you to remain impervious to the all powerful Buy and Hold Mafia something not a single other person on this planet has be capable of?

    Is it…

    1. The Buy and Hold Mafia is something you have made up to try and make sense of your failures.


    2. You are such a failure that the Buy and Hold Mafia has literally nothing to threaten you with because you have nothing.

  4. Anonymous says

    There is NO BAN ON HONEST POSTING (except at this site). There is a ban on trolls that exhibit poor behavior.

    As for my confidence, I put my money where my mouth is. I invest in what I believe and say.

  5. Rob says

    There is NO BAN ON HONEST POSTING (except at this site). There is a ban on trolls that exhibit poor behavior.

    I’ve never broken a posting rule at any board or blog at which I have participated, Anonymous. I’m not a troll and I don’t exhibit poor behavior.

    However, my posts (which report on the implications of the past 33 years of peer-reviewed research) really do upset a good number of Buy-and-Hold investors. That’s a stone cold fact that’s been established beyond any reasonable doubt whatsoever. I have had a number of site administrators APOLOGIZE to me for banning me, telling me that they knew it was wrong but that they didn’t want to lose all the readers they would lose if they followed their own published rules and permitted me to continue posting my honest and research-backed (by a Nobel Prize winner!) views.


    There is a real problem here.

    And the problem existed before I ever came on the scene.

    It is a problem that affects everyone who lives in this nation.

    We need to pull together as a society to solve it.

    My aim is to help us all get about the important business of doing that. I have zero malice towards you or anyone else. But I know with 100 percent certainty that it is wrong that I (and thousands of others) cannot post my honest investing views on every discussion board and blog on the internet.

    The full truth here is that my good friend Jack Bogle cannot post his honest views. I want to know what level of confidence Jack has in Buy-and-Hold. It is not 100 percent or he would not be afraid to be in the same room with me and to respond to my questions. It is not 0 percent or he would be the Frank Underwood of Personal Finance to continue to pretend that he believes. What is it? Is it 50 percent? Is it 30 percent? Is it 70 percent?

    My guess is that it is 70 percent. But I would like to hear what Jack has to say about this matter. And you should want to hear that too. If you heard Jack say that he only has 70 percent confidence, that might cause you to start to question some of your own beliefs. That might take you on a wonderful learning experience. We cannot say until you hear his words and ponder them. We all should at least want you to hear his honest words to find out what effect they ended up having on you.

    I don’t claim to be an investing expert, Anonymous. I never went to Investing School. I never managed a big fund. That’s all the more reason why my words should not be a big deal and I should not be banned at a single site, much less 15 of them. There’s something going on here that is not consistent with how things are usually done in our society. We need to change that. We need to return things to the normal course of business that applies when new ideas are discovered in the United States.

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


  6. Rob says

    As for my confidence, I put my money where my mouth is. I invest in what I believe and say.

    I believe you, Anonymous.

    I believe that this is so of all of my Buy-and-Hold friends.

    And I believe that it is an important point that should be made on their behalf.


  7. Rob says

    What has enabled you to remain impervious to the all powerful Buy and Hold Mafia something not a single other person on this planet has be capable of?

    This is a super question.

    First of all, it is of course not the case that I am the only one who has not been influenced by the intimidation tactics of the Buy-and-Holders. There are lots of people who have made brave statements. I think it would be fair to say that I have made more of an effort to overcome the feelings of wanting to hold back that all humans feel when faced with this sort of social pressure. But lots of people have made some effort.

    A big part of it is what you suggest, that the Buy-and-Holders cannot intimidate me because I have no status in this field and thus have nothing to lose. I obviously want my internet business to succeed. You Goons have made a point of doing everything in your power to see that it does not and then of celebrating whatever financial setback you have caused and reminding me of it over and over again. But it’s not like you can call my employer with a word from Jack and get me fired from my job because I made him “look bad” re some topic or another.

    I am in unusual circumstances. If I break through and gain recognition of my right to post honestly, I go from being a nobody in this field to being the biggest name in it. So I stand to make tons of money on the other side of the line and am not able to make any at all until the Goon matter is successfully resolved. That’s obviously an odd set of circumstances.

    It’s the product of the creation of this powerful new communications medium. Many people do not respect the work product of internet discussion boards and blogs. So they don’t worry about censorship in the new medium to the extent they would be concerned about censorship in newspapers or books or whatever. That is indeed one of the reason why this bad situation has been permitted to drag on so long.

    I do not share these views even a tiny bit. I believe that the new communications medium is a VERY powerful and important one. I believe that people should be talking about the interactions on our boards on a daily basis in all of the other communication mediums. The new medium does a better of showing how people put investing strategies to use and specifically how emotion influences them. Investor emotion is the great unexplored issue in this field. So we should be seeing newspaper articles and speeches and research papers about the ins and outs of our 12-year saga showing up at new places on an almost daily basis.

    We haven’t seen that. One gets the feeling that the results of such explorations would be so fruitful that people are afraid to be the first to go there. Everyone is holding back to see someone else (other than me) try things out and show whether this new ways of doing things can bring in a payoff or not. Most would conclude that it has not thus far brought off a payoff for me. On the day when I get that $500 million paycheck, I think it would be fair to say we are going to see an explosion of new efforts along the lines that I have been engaging in for years.

    That reality makes it all the more urgent both that I stick to what I have been doing and that you Goons stick to what you have been doing. We have fallen into an all-or-nothing sort of battle here. Either I am totally crushed and end up with nothing and you Goons get off with no prison sentences or I become one of the richest men in the United States and it is you Goons who end up ruined.

    That reality makes it pretty darn hard to work out a compromise, eh?

    I don’t know how to change that reality, Anonymous. If I could think of something, I would put it forward. It’s pretty darn hard to come up with anything truly promising.

    The one thing that I can say (and that I do say over and over again) is that we all are in the same boat. I believe that this started out as a mistake and that there are many big-name figures in the field who would like to bring an end to the cover-up. I believe that the cognitive dissonance argument can go a long way to helping address their concerns re what would happen to their reputations when that happens. And I believe that the rewards that would be experienced by the millions of middle-class investors would be so great that they would be in a forgiving mood if the transition was achieved prior to the onset of the next crash.

    I don’t say that that addresses every concern on your end. It does not. There’s just nothing more than I can do than that.

    I am of course 100 percent happy to address every concern that I can possibly address. Re that, there is no issue here. And I think it would be fair to say that I can be pretty darn creative and effective when I put my mind to placing things in a positive light. I am happy to do it because I believe that that is a life-affirming way of going about things. And of course I feel genuine respect and affection for all of my many Buy-and-Hold friends.

    But I am not Superman, you know?

    The circumstances that apply to me are different than the circumstances that apply to anyone else. That’s the short answer to your question.

    I hope that that helps a bit.



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