Set forth below are the texts of two comments that I recently posted to another blog entry at this site:
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.
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 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 decision 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
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
Anonymous says
July, 1996: Price Earnings Ratios as Forecasters of Returns: The Stock Market Outlook in 1996 by stock-market expert, Professor Robert Shiller of Yale University. His conclusion: “It appears that long run investors should stay out of the market for the next decade.”
On July 1, 1996, the S&P 500 Index was 671. A decade later, the S&P Index closed at 1,261.81 (dividends not included).
Anonymous says
From Shiller,
“It is dangerous to assume that historical relations are necessarily applicable to the future. There could be fundamental structural changes occurring now that mean that the past of the stock market is no longer a guide to the future.”
Anonymous says
Shiller on CAPE:
“John Campbell, who’s now a professor at Harvard, and I presented our findings first to the Federal Reserve Board in 1996, and we had a regression, showing how the P/E ratio predicts returns. And we had scatter diagrams, showing 10-year subsequent returns against the CAPE, what we call the cyclically adjusted price earnings ratio. And that had a pretty good fit. So I think the bottom line that we were giving – and maybe we didn’t stress or emphasize it enough – was that it’s continual. It’s not a timing mechanism, it doesn’t tell you – and I had the same mistake in my mind, to some extent — wait until it goes all the way down to a P/E of 7, or something.”
Anonymous says
No Rob, you are wrong. Shiller has said many times you cannot use the data to time the market. Look at just these two (which you can google and find many more).
http://www.businessinsider.com/robert-shiller-on-the-stock-market-2014-9
http://www.businessinsider.com/robert-shiller-on-the-stock-market-2014-8
Shiller says he wishes he could time the market, but he can’t.
Now, show us a link where Shiller says you CAN time the market. Show us the specific words.
Rob says
From Shiller,
“It is dangerous to assume that historical relations are necessarily applicable to the future. There could be fundamental structural changes occurring now that mean that the past of the stock market is no longer a guide to the future.”
I am grateful to you for putting forward that statement, Anonymous. It is responsive to the challenge that I presented in the blog entry.
I will use your comment as a separate blog entry. When the blog entry appears (the next available spot is August 10, 2015), I will add a link to it in the slider that appears at the top of every page of the site. Every investor (both Buy-and-Holders and Valuation-Informed Indexers) needs to know about this comment from Shiller.
Please understand that I do not disagree with what Shiller is saying. He is saying that it would be dangerous to assume that the correlation between valuation levels and long-term returns that we have seen over the 140 years of stock-market history available to us necessarily will apply in the future. It is possible that that correlation will NOT apply. No one can look into the future. So no one can say with 100 percent certainty. As Shiller notes, there COULD be structural changes occurring now that mean that the past will not be a good guide to the future.
That’s a sound, responsible statement. If you want to add that statement to the bottom of every post that I put forward at every board and blog at which I post, I have zero problem with the idea. I think that an argument could be made that that would be a positive. People need to know about this caveat. I sure don’t want anyone changing how they invest based solely on what I say about what the historical data teaches us. I don’t want that sort of responsibility on my head.
Now —
Can you point us to a comment in which my good friend Jack Bogle says the same thing coming from the other direction? It would do my heart good to see a comment in which Jack says: “It is dangerous to assume that historical relations are not applicable to the future. It might be that the stock market will continue operating in the future much as it always has in the past. In that event, those following Buy-and-Hold strategies will be suffering devastating losses in days to come.”
That’s the other side of the story, is it not? It is possible that stocks will never again perform as they always have in the past. Point taken. It is ALSO possible that they will. Every investor on the planet needs to know this. We should all join in together to take actions to insure that every board and blog on the face of Planet Internet is opened for honest posting by the close of business today. It is not even possible to imagine any downside. Am I not right about that one?
There are two schools of thought in the academic community as to how stock investing works. There is the school rooted in Fama’s research and there is the school rooted in Shiller’s research. Both schools of thought need to be represented at every board and blog on the internet. There should be zero controversy over this. There should be a 100 percent consensus re this point.
There are millions of smart and good people who believe that Buy-and-Hold is the ideal strategy. There is a large but much smaller number who believe that Buy-and-Hold has been discredited by 33 years of peer-reviewed research and that Valuation-Informed Indexing is the first true research-based strategy. We all need to get about the business of exploring the merits of BOTH models for understanding how stock investing works.
That’s my sincere take re these terribly important matters, in any event.
Rob
Rob says
July, 1996: Price Earnings Ratios as Forecasters of Returns: The Stock Market Outlook in 1996 by stock-market expert, Professor Robert Shiller of Yale University. His conclusion: “It appears that long run investors should stay out of the market for the next decade.”
On July 1, 1996, the S&P 500 Index was 671. A decade later, the S&P Index closed at 1,261.81 (dividends not included).
Thanks much for that one too, Anonymous. That one too is 100 percent helpful and 100 percent relevant to what we are talking about here.
There is a full-length article here at the site in which I discuss whether Shiller was right or wrong in his 1996 “prediction.”
In a hyper-technical sense, he was wrong. Most investors who were going with high stock allocations did not regret doing this until the crash of 2008. So he was off by two years.
But Shiller was right 10 times more than he was wrong, in my assessment. His 1996 prediction shows the power of Valuation-Informed Indexing. We now know what causes economic crises and we now know how to avoid them. If his 1996 prediction had received greater play and had convinced a far greater number of investors than it did, we would have seen a minor price crash in 1996 as well as a minor economic recession. That would have been so much better than seeing the major crash and the major recession we saw in 2008. We all would have ended up richer. We all would have been able to retire many years sooner. We all would have been able to enjoy investing in a great asset class rendered far less risky than it had ever been before as a result of the learning experience we achieved by virtue of his peer-reviewed research.
Shiller should have spoken more cautiously in 1996. As I should have spoken more cautiously when I said that I thought we would see the next crash by the end of 2015 (and perhaps when I say as I now do that I believe we will see it by the end of 2016). Short-term timing does not work. We are all going to need to get that one through our thick heads. It doesn’t work when Robert Shiller tries it. It doesn’t work when Rob Bennett tries it. It doesn’t work when anyone tries it.
But we DO all need to learn how to practice long-term timing effectively. Long-term timing is the future. With long-term timing, we can reduce the risk of stock investing by 70 percent while increasing returns enough to be able to retire 10 years sooner. With long-term timing, we can avoid economic crises. Long-term timing is as wonderful as short-term timing is horrible.
My take.
Rob
Rob says
Shiller on CAPE:
“John Campbell, who’s now a professor at Harvard, and I presented our findings first to the Federal Reserve Board in 1996, and we had a regression, showing how the P/E ratio predicts returns. And we had scatter diagrams, showing 10-year subsequent returns against the CAPE, what we call the cyclically adjusted price earnings ratio. And that had a pretty good fit. So I think the bottom line that we were giving – and maybe we didn’t stress or emphasize it enough – was that it’s continual. It’s not a timing mechanism, it doesn’t tell you – and I had the same mistake in my mind, to some extent — wait until it goes all the way down to a P/E of 7, or something.”
This one is also relevant. So it is a good thing that you bring it to our attention. But thus one is deceptive. And yo should point that out. Otherwise, you mislead people.
Shiller is saying that you can’t use P/E10 for short-term timing. That’s true. And, yes, everyone needs to be reminded of that frequently.
He is NOT saying that P/E10 should not be used for long-term timing. His life’s work shows that long-term timing ALWAYS works and ALWAYS must be employed by every investor hoping to have a realistic chance of long-term investing success.
There is now 33 years of peer-reviewed research showing that long-term timing is required. Anyone who is familiar with the peer-reviewed research and says otherwise is engaged in an act of financial fraud. There is no excuse for this. Millions of people are today unemployed because of this massive act of financial fraud. Millions are on their way to suffering failed retirements. I will not participate in this massive act of financial fraud in any way, shape or form.
I will do what I can to get the prison sentences of those who HAVE participated in this massive act of financial fraud reduced a bit. But I will never add my name to their “cause.” I love my country. I will fight to protect her from the sorts of individuals who have used their life energies to confuse millions of middle-class investors re the critical distinction between short-term timing (which never works, according to the peer-reviewed research) and long-term timing (which always works and which is always 100 percent required, according to the peer-reviewed research).
And, yes, my hero Robert Shiller is engaging in financial fraud here by failing to make this critical distinction. He is putting millions of retirements in jeopardy by confusing people on this point (and his words ARE confusing to those who have not studied these matters in great depth).
Shiller should be ashamed of himself for playing a part in this very, very, very sick and very, very, very dangerous and very, very, very irresponsible word game.
I cannot say whether he will be sent to prison or not for this act of financial fraud. That’s for the people of the United States to say. I can say that I will never myself participate in these sick and twisted word games. I will tell people about the many wonderful things that Shiller has done for us. I will tell people that he has advanced our knowledge of how stock investing works to a degree that no one else has ever achieved. I will also say that he was too afraid of what the Buy-and-Hold Mafia would do to him if he told the full truth here to state the obvious truth plainly and clearly and boldly and without apology. Shiller hurts us all when he lowers himself to the sort of tactics that you Goons have been employing on a daily basis for over 12 years now.
Again — That’s my sincere take re this terribly important matter. No felonies for this boy! I would be grateful if you would try to find somebody else.
No can do.
I can’t go for that.
Rob
Rob says
No Rob, you are wrong. Shiller has said many times you cannot use the data to time the market. Look at just these two (which you can google and find many more).
http://www.businessinsider.com/robert-shiller-on-the-stock-market-2014-9
http://www.businessinsider.com/robert-shiller-on-the-stock-market-2014-8
Shiller says he wishes he could time the market, but he can’t.
Now, show us a link where Shiller says you CAN time the market. Show us the specific words.
Shiller’s entire life’s work shows that long-term timing is 100 percent required for every investor who wants to have any realistic chance whatsoever of achieving long-term investing success.
Shiller is lying in the words you quote above. He is lying for the same reason why Wade Pfau now lies about this matter. He is lying for the same reason that Mike Piper lies about this matter. He is lying for the same reason that Todd Tresidder lies about this matter. He is lying for the same reason that Bill Bernstein lies about this matter. He is lying for the same reason Larry Swedroe lies about this matter. He is lying for the same reason Carl Richards lies about this matter.
The lies (and the economic crisis caused by these lies) will stop on the day that my good friend Jack Bogle walks to the front of a large room and says the words “I” and “Was” and “Wrong” and those words are written up on the front page of the New York Times. All of the people mentioned above and thousands and thousands and thousands of others will start telling the truth about what the peer-reviewed research of the past 33 years tells us about how stock investing works when they feel that it is SAFE to do so, when they know that those engaging in the sorts of tactics that you Goons have been engaging in for 12 years now will be put in PRISON for doing so, as the laws of the United States of American require.
I wish you all good things, Anonymnous.
I am happy to help you in any way that does not require me committing felonies myself.
No felonies.
Find someone else.
It’s not my particular cup of tea.
Rob
Rob says
Shiller will of course be called to testify in the trials that will be held following the next price crash as to whether he meant to suggest by the words quoted above that his entire life’s work is a pile of nonsense.
He will also be asked to testify re WHY he engaged in such a dangerous and irresponsible act of deception on this point.
I have a funny feeling that I know which way his testimony is going to go.
But we’ll see, you know? I am not God, If you want to believe that his testimony will support you Goons, you can do that. We’re al going to find out for sure soon enough.
No?
Rob
Anonymous says
Everyone else is lying and only you are telling the truth?
Rob says
I am the only one telling the truth re the financial fraud aspect of this, Anonymous. You yourself have acknowledged this on many occasions.
Fama had good faith when he published his wonderful research in 1965.
Fama didn’t distinguish between short-term timing and long-term timing because long-term timing was at the time not a practical option. Bogle had not yet founded Vanguard. Long-term timing works only with index funds.
Shiller was the first to publish peer-reviewed research showing that long-term timing always works and is always 100 percent required. That was in 1981.
Bogle had a responsibility to walk to the front of a large room and to say the words “I Was Wrong” as soon as he learned of Shiller’s 1981 findings.
Bogle can be excused for not acting immediately. Shiller’s findings were truly “revolutionary” (his word). They turned everything we once thought we knew about how stock investing works on its head. It is a common phenomenon for humans to experience cognitive dissonance in such circumstances. This is almost certainly what happened to Bogle and the other Wall Street Con Men. They told themselves that people would figure all this stuff out over time. They noted that stock prices were at rock-bottom levels. It was hard to imagine at that time that prices would ever again be at fair-value levels much less at three times fair-value levels. The Wall Street Con Men rationalized that to hold off on declaring Buy-and-Hold 100 percent discredited for a few years would not do much harm.
The years passed and prices reached a point where telling the truth about what Shiller’s research showed would cause a recession. At that point, the Wall Street Con Men felt trapped. They worried that many would not understand why they held off on telling the truth for so long. They anticipated lawsuits and even prison sentences if the truth were to get out. They engaged in brutally abusive tactics aimed at scaring anyone who told the truth into holding back from doing so.
I came on the scene in May 2002. I pointed out that the Old School safe-withdrawal-rate studies got the numbers wildly wrong and needed to be corrected immediately. You Goons understood that permitting honest posting on the retirement planning question would cause the entire Buy-and-Hold Model to collapse. So you went into Campaign of Terror mode.
Bogle backed you up. Motley Fool backed you up. Morningstar backed you up. Index Universe backed you up. Everyone who had hopes of making a dime in this 100 percent corrupt field backed you up. Because everyone who has been paying attention knows that this field is today 100 percent corrupt and that those who talk about the implications of Shiller’s 1981 findings in places where con men are seeking to push their smelly Buy-and-Hold garbage see their careers destroyed.
Is everyone lying?
Obviously.
Nothing could be more clear.
Am I continuing to refuse to lie?
Absolutely.
Were all the members of Nixon’s White House lying when he obstructed justice, Anonymous?
Were all the people who made a buck from Lance Armstrong’s mountain of deceptions lying when they helped him continue his massive cover-up of his use of performance enhancing drugs?
Were all the people in the Penn State football program lying when they covered up the child molestation going on that Joe Paterno did not want people to know about?
People lie when the cost of doing so becomes so great that their careers and the lives of their loved one are at risk if they dare to “cross” the powerful people demanding that they lie. This is not the first time that something like this has happened. It is the worst. There has never been a lie that caused as much human misery as the lie that there is some mystical, magical research somewhere showing that there might be an alternate universe in which Buy-and-Hold might work for one or two long-term investors.
I’m not lying today. But I am a weak human like all the others. I lied once upon a time. I wrote words of praise for Greaney’s study in my “Secrets of Retiring Early” report. The words were in a hyper-technical sense correct (as are the words of Shiller that you quote here) because I really do believe that his study represented a major advance. But I knew at the time I wrote those words that his study did not contain a valuations adjustment and I knew that that was required. So I lied. I committed financial fraud. Because I was scared of what would happen to me if I told the truth. Shiller and all the others are lying for the same reason today.
Following the next price crash, the lies will stop. The human misery will be too great for people to continue to rationalize their lies. So people will start telling the truth. Buy-and-Hold will collapse, as it should have 33 years ago. And we will figure out as a society what sort of prison sentences should be handed out to all the liars.
I will be arguing for mercy. You can count on me for that.
But I will be telling the story honestly, as it happened. The millions of middle-class investors whose lives have been destroyed by the 12 years (it’s 33 years if you go back to when Shiller published his study) of lies will decide on the length of your prison sentence. That’s how our system works.
I naturally wish you the best of luck in all your future life endeavors regardless of what investing strategies you elect to pursue.
Rob
Anonymous says
“Shiller is saying that you can’t use P/E10 for short-term timing.”
He didn’t say that at all. He said, and I quote: “it is not a timing mechanism”
He provides no caveat, no extension, no explication. Not as some omission. But, because none is needed. In a world where so few things can be stated as absolutes, here we have one right from the inventor himself — CAPE is not a timing mechanism. Jeez, Rob, how many times, from how many people, in how many places, do you have to hear it?
I recall you being told before — “Being stubborn need not be a debilitating thing. Being ignorant is not a debilitating thing. Being stubborn AND [willfully, pridefully] ignorant is devastatingly crippling.”
Anonymous says
Rob said:
Shiller is lying
Shiller is a felon; engaging in financial fraud
Shiller should be ashamed of himself
Shiller is misleading people on purpose
Shiller is playing a dangerous game
Shiller hurts us
For a moment, let’s assume you believe all that blather. So… THIS is your hero, then?
Clearly you have pretty poor judgement yourself, no matter WHICH way things fall.
Rob says
He provides no caveat, no extension, no explication. Not as some omission. But, because none is needed. In a world where so few things can be stated as absolutes, here we have one right from the inventor himself — CAPE is not a timing mechanism. Jeez, Rob, how many times, from how many people, in how many places, do you have to hear it?
For me to believe that there is one person on this planet who doesn’t believe on at least one level of consciousness that price discipline (that’s what long-term timing is) is 100 percent required for any investor to have a realistic hope of long-term investing success, I would have to hear that one person say that in an environment in which he or she felt safe from 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.
Once we see wealthy and powerful and well-connected people engage in financial fraud and get away with it, we are all too intimidated to say what we truly believe re these matters.
I believe that we will ALL (Buy-and-Holders and Valuation-Informed Indexers alike) be better off when Jack Bogle feels safe saying what he truly believes about how stock investing works. I believe we will all be better off when Robert Shiller feels safe. And when Wade Pfau feels safe. And when Scott Burns feels safe. And when Mike Piper feels safe. And on an on and on and on.
I think there is a part of you that would like to see the Ban on Honest Posting brought to an end, Anonymous. I think if you had it to play over, you would speak out in OPPOSITION to Greaney’s death threats when he first made them. I think that the only thing that keeps you from acting on those positive and healthy and life-affirming impulses today is that you don’t want to go to prison for things you have done in the past and cannot today erase from the record.
I can’t change that, can I? I don’t have a time machine.
What I can is to make your prison sentence a bit shorter by persuading others to take steps to insure that your prison sentence begins sooner rather than later. The sooner your prison sentence begins, the fewer lives you will destroy. The fewer lives you destroy, the less prison time the citizens of this country will demand for you. Is that not so?
I am your friend, Anonymous. Anyone who works to get your prison sentence announced as soon as possible is your friend. And of course we are being friends to all those who have not yet crossed the felony line but who today are feeling pressures to do so because they want to work in this field and yet see what happens to those who post honestly re the implications of the last 33 years of peer-reviewed research.
The hand of kindness remains outstretched.
The felony line will not be crossed.
We will have lots of people working up the courage to post honestly following the next price crash. You know this as well as I do or you wouldn’t be posting here. Shiller will be one of the ones posting honestly at that time. So will Bogle.
I love my country. I will continue to do what I can to protect her from attack. I am confident that someday you will join me. And someday your prison sentence will come to an end. From that day forward, we will be working together.
I wish you all good things.
Rob
Anonymous says
Long-term timing works only with index funds.
Why?
Let me destroy both your premise, as well as any response, right now: If you accede that ‘the market’ is nothing more than an amalgamation of individual stocks, and if you further stipulate that economic conditions, raw materials availability, poor management, climate change, consumer preference change, groundbreaking new technologies, geopolitical events, and a myriad of other things can individually or in concert drive a stock’s price higher or lower, then how can one be immunized against a total market change or even collapse just by indexing? Yes, I know that different events affect different companies or sectors or industries in different ways — or perhaps not at all, taken in toto. But surely you accept that while it’s agreed that indexes tend to SMOOTH the effects of individual stock changes (positive or negative) they are in reality absolutely not, and logically cannot ever be some sort of guarantee that the totality can’t collapse, crash, or bubble. IF that is your proposition, then I’d love for you to describe what force or mechanism could provide such surety against all calamity! I want to bottle it and sell it.
Rob says
For a moment, let’s assume you believe all that blather. So… THIS is your hero, then?
Clearly you have pretty poor judgement yourself, no matter WHICH way things fall.
I’m one of those darn humans, Anonymous. I am flawed.
I engaged in financial fraud myself in the days prior to May 13, 2002.
I saw eventually came to see how much damage my cowardice was doing to my fellow community members and I worked up the courage to post honestly.
Shiller is trying too.
And Bogle is trying.
And Piper is trying.
And Burns is trying.
And on and on and on and on and on.
Humans are flawed creatures.
Threaten to kill their loved ones and they say things they don’t really mean but that they rationalize as being “not so terribly bad” for some reason or another.
You do it. Bogle does it. Shiller does it. John Walter Russell did it. We all do it.
We enacted the laws against financial fraud for a good reason, Anonymous. We enacted the laws against financial fraud to protect us from falling into this sort of situation.
If the Wall Street Con Men were not so wealthy and so powerful and so well-connected, it would have worked. But they are and it didn’t. Is that my fault?
I am trying to help.
Bringing this massive act of financial fraud to a full and complete stop helps every last one of us.
Shiller is a flawed human. Bogle is a flawed human. Bennett is a flawed human. Anonymous is a flawed human.
When we all come to recognize that reality, we will all be a lot better off. We will be on our way to bringing the Buy-and-Hold Crisis to an end.
I look forward to working with you, my old friend.
Rob
Rob says
Let me destroy both your premise, as well as any response, right now: If you accede that ‘the market’ is nothing more than an amalgamation of individual stocks, and if you further stipulate that economic conditions, raw materials availability, poor management, climate change, consumer preference change, groundbreaking new technologies, geopolitical events, and a myriad of other things can individually or in concert drive a stock’s price higher or lower, then how can one be immunized against a total market change or even collapse just by indexing? Yes, I know that different events affect different companies or sectors or industries in different ways — or perhaps not at all, taken in toto. But surely you accept that while it’s agreed that indexes tend to SMOOTH the effects of individual stock changes (positive or negative) they are in reality absolutely not, and logically cannot ever be some sort of guarantee that the totality can’t collapse, crash, or bubble. IF that is your proposition, then I’d love for you to describe what force or mechanism could provide such surety against all calamity! I want to bottle it and sell it.
Thanks for asking an intelligent and important question, Anonymous.
Indexing changes everything. Indexing is a FAR more powerful advance than most of its proponent realize. The Indexing Revolution is the great unwritten story of our 12 years of discussions. I often note that I consider Bogle a giant in this field, second in importance only to Shiller, in my assessment. It is largely because Bogle brought us indexing — without which there would be no Valuation-Informed Indexing — that I say this.
Indexing doesn’t protect us from nuclear war wiping out Planet Earth. Nothing can do that.
But none of this matters if nuclear war wipes out Planet Earth. Buy-and-Hold doesn’t protect us from nuclear war wiping out Planet Earth either.
What indexing does is to make future stock prices highly PREDICTABLE.
You can’t predict an election by interviewing a single voter no matter how many questions you ask him. You CAN predict an election with a high degree of reliability if you interview thousands of voters. There is an entire industry built around this reality.
Bogle changed history when we founded Vanguard. In the dark old pre-indexing days, stocks were a risky asset class. Now most of the risk is gone. The peer-reviewed research paper that I co-authored with Wade Pfau shows that investors can reduce the risk of stock investing by taking a single, simple step — vowing to avoid the smelly Buy-and-Hold garbage and always, always, always practicing price discipline (long-term timing) when making asset allocation choices.
The power of indexing is huge, far higher than most of its proponents realize today. People will be praising Bogle to the skies for decades to come for what he did to open up the power of indexing to all of us. You Goons have temporarily held back The Indexing Revolution with your insanely abusive Campaign of Terror against our board and blog communities. But you are going to prison following the next price crash. I am confident that the millions of middle-class investors who have a great desire for a truly safe and smart and simple way to invest in stocks will take The Indexing Revolution to the next step following the announcement of your prison sentence.
Just another one of those funny hunches that I have been known to experience from time to time!
Long Live the Indexing Revolution!
Boo to Financial Fraud and the Prison Sentences and Economic Crises that Follow From It!
Rob
Anonymous says
You asked for some Bogle quotes. I tried to find a ‘variety’ of them, particularly on risk and on uncertainty. He does not say a lot on that; but that’s because his views never change. He is often forced to repeat the same few simple things over and over:
the fundamentals are often overwhelmed by the deafening noise of speculation—the price at which the stock market values each dollar of earnings.”
? John C. Bogle, The Clash of the Cultures: Investment vs. Speculation
speculation represented about 99.2 percent of the activities of our equity market system, with capital formation accounting for 0.8 percent.”
? John C. Bogle, The Clash of the Cultures: Investment vs. Speculation
“I don’t try to be clever at all. The idea that I could see what no one else can is an illusion.”
– The Little Book of Common Sense Investing by John C. Bogle, 2007
“Unless an investor has access to ‘incredibly high-qualified professionals,’ they should be 100 percent passive — that includes almost all individual investors and most institutional investors.”
John C. Bogle Legacy Forum, Bloomberg, 31-Jan-12
“Whatever the consensus on the EMH, I know of no serious academic, professional money manager, trained security analyst, or intelligent individual investor who would disagree with the thrust of EMH: The stock market itself is a demanding taskmaster. It sets a high hurdle that few investors can leap. “
– Bogle Financial Markets Research Center, 13-Apr-04
“While the apostles of the new so-called “behavioral” theory present ample evidence of how often human beings make irrational financial decisions, it remains to be seen whether these decisions lead to predictable errors that create systematic mispricings upon which rational investors can readily (and economically) capitalize.
– Bogle Financial Markets Research Center, 13-Apr-04
“Our markets have gone crazy, and there is 200 times as much speculation as there is investing,”
“Confidence can change overnight, but wherewithal cannot.”
Specifically on uncertainty and risk:
“In every mutual fund prospectus, in every sales promotional folder, and in every mutual fund advertisement (albeit in print almost too small to read), the following warning appears: “Past performance is no guarantee of future results.” Believe it!”
– The Little Book of Common Sense Investing by John C. Bogle, 2007
If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks.
John (Jack) Bogle
Stipp: Much has been written about a new environment that investors are supposedly facing… slower growth….more volatility. I’m wondering what your take is on some of the recommendations that are out there for the need for a more active asset allocation, what’s known as a tactical allocation.
A lot of folks are saying that investors really must be much more opportunistic now, shift their assets around much more frequently.
Bogle: I do not believe that we should rethink the old principles of asset allocation. First, anything that’s opportunistic is by definition, I believe, a market-timing issue when to do it and when not to do it. If you could do it perfectly, I strongly commend it, but I don’t think anybody is able to do that. I perceive that we’re in for some tough times, and so I would emphasize an asset allocation that begins with this crude rule of thumb of having your bond position equal to something relating to your age. So if you’re 60, 60 percent bonds.
CNBC anchor Scott Wapner put the question to Bogle: “You say, ‘prepare for at least two declines of 25-30 percent, maybe even 50 percent, in the coming decade.’ For a buy-and-hold guy, that’s a little concerning, don’t you think?”
Bogle replied: Not at all. They come and go. The market goes up, and the market goes down. It’s never failed to recover from one of those 50 percent declines. I went through one in 1973-1974, I went through one in 2001, 2002, 2003; I went through another one 2008-2009. They’re kind of scary – often terrifying – but it’s typical.
Rob says
Thanks for the quotes, Anonymous.
My reaction is that some of them are the pure gold that support my claim that Jack is one of few true giants in this field, second only to Robert Shiller in the benefits he has brought to millions of middle-class workers through his intelligent and tireless efforts. Others are typical of the smelly Buy-and-Hold garbage that we have all heard far too often from our Wall Street Con Men friends. Overall it is a mix.
I’ll comment specifically on three of the comments.
Bogle says re behavioral finance: “it remains to be seen whether these decisions lead to predictable errors that create systematic mispricings upon which rational investors can readily (and economically) capitalize.”
Then why doesn’t he help us in our efforts to open every board and blog on the internet to honest posting on safe withdrawal rates and scores of other critically important investment-related topics? That would be the best way to find out once and for all how powerful the insights developed from the last 33 years of peer-reviewed research are, would it not?
Bogle says: “I do not believe that we should rethink the old principles of asset allocation. First, anything that’s opportunistic is by definition, I believe, a market-timing issue when to do it and when not to do it. If you could do it perfectly, I strongly commend it, but I don’t think anybody is able to do that.”
I certainly agree that no one can engage in “perfect” market timing. To engage in perfect market timing, you would need to be able to exercise short-term timing as well as long-term timing. There is now 50 years of peer-reviewed research showing that that is impossible. But when he says that investors should ignore the last 33 years of peer-reviewed research, which shows that long-term timing (price discipline) always works and is always 100 percent required, he is causing vast amounts of human misery for millions of middle-class people. Huh? I would prefer to see him comment honestly on what the research says. The laws of the United States require it.
Bogle says: “In every mutual fund prospectus, in every sales promotional folder, and in every mutual fund advertisement (albeit in print almost too small to read), the following warning appears: “Past performance is no guarantee of future results.” Believe it!””
I agree that the 140 years of stock market history showing that Valuation-Informed Indexing is far superior to Buy-and-Hold in every possible way does not guaranty that this will continue to be the case. However, I see no guaranty in doing the OPPOSITE of what has worked for 140 years either. Again, my personal take is that being honest about what the last 33 years of peer-reviewed research shows is the best policy.
Rob
Anonymous says
You’re basically just the biggest Shiller and Wade fanboy ever
Rob says
Fair enough.
But I am ALSO the greatest Bogle fanboy ever.
Bogle played as big a role in the development of Valuation-Informed Indexing as did Shiller. I intent to make sure that everyone who benefits from this strategy for many decades to come is aware of that. I ain’t no Lindauerhead. But I am a Boglehead through and through. I hope to become known all over the internet as the first HONEST Boglehead and thereby of course the most severe critic of Lindauerheads to be found anywhere.
Do you see?
Rob
Rob says
Once a story breaks, all sorts of people come out saying all sorts of things:
http://www.thedailybeast.com/articles/2011/04/01/bill-clinton-katie-couric-woody-allen-jeffrey-epsteins-society-friends-close-ranks.html
Things that few dared to say openly in an earlier day become widely discussed once criminal proceedings are announced.
The time to position yourself for what will be coming out following the next price crash is NOW.
That’s my sincere take re these terribly important matters, in any event.
Rob
Laugh says
The reason shilled said not to wait for pe10 of 7 is because you may go bat s crazy underperforming for 20 years or be so far behind the curve that you never catch up.
The type of long term timing rob Bennett advocates is very dangerous and shiller knows that.
Rob says
Shiller said after the 2008 crash that investors should remain out of stocks until the P/E10 level dropped below 10.
I recorded a RobCast at the time saying that he was wrong. I said that I understood where he was coming from but that his take was too extreme. I said that stocks offer a strong value proposition when they are selling at fair-level prices and that most investors should never go below a 20 percent stock allocation. I said that it makes all the sense in the world to increase one’s stock allocation when the P/E10 goes below 10 but that it does not make sense to hold off on owning any stocks until the P/E10 goes below 10.
It would benefit every investor alive and every expert alive for us all to work together to open every discussion board and blog on the internet to honest posting re SWRs and scores of other critically important investment-related topics.
Financial fraud is “dangerous.” That’s why as a society we adopted laws making it a felony. We were aiming to protect ourselves from people like you who have put ups posts in “defense” of Mel Linduaer and John Greaney and Jack Bogle.
Not this boy.
There is a reason why Valuation-Informed Indexing has performed far better than Buy-and-Hold for 140 years running. Price discipline is 100 percent required when buying any asset available for sale, including stocks. The last 33 years of peer-reviewed research leave no doubt re this point. Hence, the 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 we have seen from the Buy-and-Hold Mafia on a daily basis for 12 years now. There is no other way to “defend” this long-discredited “idea.”
I love my country. I am confident that prison sentences will be announced for you Goons following the next price crash. The rest of us will then pull together 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.
I naturally wish you all the best things that this life has to offer a person regardless of what investing strategy you elect to follow, Laugh.
Rob
grandpop says
” I said that I understood where [Shiller] was coming from but that his take was too extreme.”
So the fact he recomends a different PE10 and/or percent allocation than you means the Professor is breaking the law – commiting a felony. Did I get that right, Rob?
Rob says
No. You didn’t even come close, Grandpop.
It means that Shiller is one of the fallible humans. So all of those of us who love him need to question his stuff and let him know when it appears to us that he has gotten something wrong. He wants to get it right. So he NEEDS that sort of feedback from his friends.
And of course it is the same with Bogle.
And with Bennett.
And with Lindauer.
And with Greaney.
And with everyone.
When someone responds to a correction with a death threat, we need to redouble our efforts to help him out.
Otherwise, we end up with a situation where that fellow and those who have posted in “defense” of him are on their way to prison.
Which is too, too sad.
You committed the acts that put you on a dark path leading to a prison sentence following the next price crash, Grandpop. But all of us who failed to try to help you out by INSISTING on a prompt end to your Campaign of Terror against our board and blog communities played a part in you finding yourself in the circumstances in which you find yourself today.
We are all embarrassed about out behavior over the past 12 years. Understandably so.
But we are going to need to get over the embarrassment and start behaving in a manner that makes us feel better about ourselves. Because every day that we delay the prison sentences for those going to prison get LONGER and the number of people going to prison grows LARGER.
Do you see?
Rob
laugh says
“There is a reason why Valuation-Informed Indexing has performed far better than Buy-and-Hold for 140 years running.”
There are also reasons why no one has ever invested this way.
The Pink Unicorn says
Rob,
You continue to call Shiller, Bernstein, Pfau and others liars. If, they are in fact liars, as you state, then that destroys their credibility. Yet, you support your positions by using some of their quotes as supporting what you say. It seems you play both sides of the fence with these experts.
So, what are the odds that all of these experts, owners/administrators of investment forums and forum participants are all liars when it comes to your issues, leaving you the sole person as the only honest person in the entire investment universe versus you being the one that is lying and exaggerating solely to your benefit?
Rob says
There are also reasons why no one has ever invested this way.
The reason why no one invested this way prior to 1974 is that it was a practical impossibility. Bogle didn’t found Vanguard until then and Valuation-Informed Indexing only works with index funds.
The reason why no one invested this way from 1974 through 1981 is that Shiller had not yet published the peer-reviewed research showing that long-term timing always works and is always 100 percent required for those hoping to have a realistic chance of long-term success. It’s pretty darn hard for a member of the human race to invest effectively when the human race as a whole has not yet acquired the knowledge needed to do so.
The reason why few (but some!) invested this way from 1981 forward is that Jack Bogle made a mistake when he first learned of the peer-reviewed research showing that there is precisely zero chance that a Buy-and-Hold strategy could ever work for a single long-term investor. If men were angels, Jack would have immediately walked to the front of a big room and said the words “I” and “Was” and “Wrong” and we all would have been off to the races. Once he failed to do that promptly, it became harder and harder and harder to do that because Valuation-Informed Indexing is such a huge advance that it is hard to come up with an explanation why you didn’t let the whole world know about it immediately.
If Shiller had published his “revolutionary” (his word) research in 1961, I think it is fair to say that we would ALL be Valuation-Informed Indexers today.
How many Buy-and-Holders do you think will be left six months after we open the internet to honest posting on safe withdrawal rates and other critically important investment-related topics? Perhaps 20 percent? That means that 80 percent of us will be Valuation-Informed Indexers in the not-too-distant future. No?
It’s not me who is holding things back, Laugh. I have been saying that we should open the internet to honest posting since the morning of May 13, 2002. I am the lead voice on the internet delivering that message.
Is that not fair to say?
Rob
Rob says
You continue to call Shiller, Bernstein, Pfau and others liars. If, they are in fact liars, as you state, then that destroys their credibility. Yet, you support your positions by using some of their quotes as supporting what you say. It seems you play both sides of the fence with these experts.
Bogle is a giant. Shiller is a giant. Bernstein and Pfau and lots of others have made huge contributions.
All of these people are liars to differing degrees. None of them want to see their careers destroyed by the Buy-and-Hold Mafia.
Richard Nixon had to resign the Presidency because he engaged in obstruction of justice and urged his aides to commit perjury. Richard Nixon was a liar.
Does it follow that he had zero credibility on all issues to which he addressed himself?
I sure don’t think so. Leaving the partisan politics of the matter aside, Nixon was a great man. He opened relations with China. He took us off the gold standard. He got us out of Vietnan. He greatly expanded the Great Society programs enacted under the Johnson Administration. He was relected in one of the biggest landslides in U.S. history.
Are you suggesting that we should all ignore everything that Nixon ever said about foreign affairs? Or about politics? Or about war?
If you are saying that, my response is that I disagree.
I wish that men were angels. I wish that we always did the right thing. Wouldn’t that be nice?
That’s not the world we live in. We live in a world in which all of us have aspirations to do good and in which all of us face many temptations. There are times when we achieve our aspirations. There are times when we give in to those temptations and cause ourselves and others great suffering. Like it or not, that’s the way it is.
When I hear that Jack Bogle is making a statement, I listen carefully. Because he has a track record of putting forward statements evidencing great insight. He is a national treasure. He is a hero to the middle-class. We had darn well better all listen carefully to him when he makes a statement!
Our heroes sometimes let us down. When they do, they potentially cause a lot more trouble than do non-heroes when they say stupid things. Because so many people listen to Bogle, he bears a special responsibility to see that his statements are honest and correct. When it comes to the long-term timing issue, Bogle has failed himself and all who listen to his words in a very, very serious way.
The way that I test whether Bogle is saying something that I should listen to or something that is just more smelly Buy-and-Hold garbage is to check whether what he is saying conforms to what we have learned from the peer-reviewed research done in this field. When Bogle says “you should focus on the long-term,” that checks out. When Bogle says “you should avoid short-term timing,” that checks out. When Bogle says “stocks are the best asset class for middle-class investors,” that checks out.
When Bogle says “you should never lower your stock allocation by more than 15 percentage points regardless of how insanely high stocks are priced,” that’s smelly Buy-and-Hold. Old Saint Jack pulled that one out of his backside. There is zero support in the peer-reviewed research for that one. Even Old Saint Jack has zero credibility when he ignores the peer-reviewed research and just pulls numbers out of his backside. I mean, come on.
Humans need to eat. Humans have families to support. Humans have aspirations to advance in their careers. The Buy-and-Hold Mafia can pressure humans into telling lies. The peer-reviewed research does not need to eat or support a family or advance in its career. When one of the smart and generally helpful humans tells what appears to be a whopper, the thing to do is to check the peer-reviewed research and see whether there is any support outside of the compromised humans for the claim being made. If there is none, you have to sadly accept that we humans are flawed and go with what the peer-reviewed research tells us is so.
Or so Rob Bennett believes, in any event.
My best wishes to you and yours.
Rob
Rob says
So, what are the odds that all of these experts, owners/administrators of investment forums and forum participants are all liars when it comes to your issues, leaving you the sole person as the only honest person in the entire investment universe versus you being the one that is lying and exaggerating solely to your benefit?
If you had asked me on the morning of May 13, 2002, what the odds were that all of these smart and good people would lie about such a matter, I would have put the odds are 100 million to 1. But here we are, you know? It is what it is.
Say that you were a martian whose only knowledge of the values of the people of the United States came from his reading of the U.S. Constitution. And say that you visited Planet Earth on the day when people were escorting the first black students to attend the public college in the state of Alabama through the doors. And say that you say the fire hydrants and the attack dogs and the screaming and yelling and cursing and hitting. What would you make of that? What would you say were the odds that a country whose fundamental belief was in “life, liberty and the pursuit of happiness” would behave in such a way?
Yet it happened.
We humans get ourselves entangled in some sticky situations from time to time.
My job is to pull us all together so that we can bring this economic crisis to an end and bring on the greatest period of economic growth in our history.
I love my country and I believe that our system works. Not always immediately. Certainly not without some effort on the part of its citizens. But I believe that our system works better than any other system out there. So I think we will bring these matters to a successful resolution just as we brought the Civil Rights matter to at least a somewhat successful resolution.
The situation is a weird one. I will give you that much. But the opportunity here is HUGE. We are talking about reducing the risk of stock investing by 70 percent. We are talking about showing people what they need to do to be able to retire five to ten years sooner. What freakin’ difference does it make what the odds are that things would play out in this crazy way? What matters is that we all get about the business of opening every board and blog on the internet to honest posting by the close of business today.
It’s not a close call.
My sincere take.
Rob
Rob says
Anonymous —
One of your Bogle quotes up above related to his views on behavioral finance. I’ve never written about that before and I am thinking that I should write a column on that topic at the Value Walk site. I am sure that I can find some more quotes along those lines with a Google search. But if you have access to any more quotes from The Big Guy in which he offers his thoughts on behavioral finance, I would be grateful if you would pass them along.
Thanks.
Rob