I’ve posted Entry #216 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Did Shiller Change Anything?
Juicy Excerpt: But how much has the conventional advice on how to invest in stocks changed as a result of the “revolutionary” research that Shiller published in 1981 (and that has been confirmed many times in the three decades since).
Not at all.
If you are able to identify any changes, I’d be grateful if you would point me to them. My sense is that everything is pretty much the same. Shiller’s ideas have not been debated or discredited in any way. They have been ignored.
Anonymous says
Schiller has not been ignored. You just understand what he has said.
You are the one that has been ignored.
Rob says
You are wrong, Anonymous.
The subtitle of Shiller’s book uses the word “revolutionary” to describe his research findings.
Bogle made zero changes to his strategy following the publication of Shiller’s revolutionary research.
For practical purposes, Shiller has been ignored. He is patronized by the Buy-and-Holders. They acknowledge that he is a great man who has done great work. But they continue pushing the same ideas that they were pushing before his revolutionary findings were published. So far as the Buy-and-Holders go, it’s as if Shiller’s work didn’t exist.
We need a national debate on the implications of Shiller’s research. I am going to continue to explore his ideas in my writings and to encourage all others who work in this field (both Valuation-Informed Indexers and Buy-and-Holders) to do the same.
I believe that, once your prison sentence is announced, we are going to see rapid progress. Many people have told me that they LOVE the idea of exploring these ideas. They HATE the threats of physical violence and career destruction that we all see from you Goons whenever the rest of us have tried to engage in honest and reasoned and civil discussions. We were smart as a society to enact laws making financial fraud a felony. Now we just need to all pull together to insure that those laws are enforced in a reasonable manner.
My strong hunch is that that will happen in the days following the next price crash. I think it would be fair to say that the day on which your prison sentence is announced will in time come to be declared a national holiday as it will free us all of the failed investing strategies of the past that have caused such massive ruin to so many of us.
We will see.
I wish you all good things.
Rob
Anonymous says
The subtitle of Shiller’s book uses the word “revolutionary” to describe his research findings.
Ohhh that’s simply amazing! So did the last 50 diet and self help books I read. How did he manage to get the word “revolutionary” printed right there on marketing portion of the cover?
Anonymous says
Shiller’s ideas have not been debated or discredited in any way. They have been ignored.
Only in your fantasy world. In reality, he won a Nobel prize, is constantly featured in the media, and has been the topic of thousands of discussions on Bogleheads and elsewhere.
And Vanguard, among many other sources, has published papers on the historical correlation between P/E 10s and future returns. Of course, being Normals, the folks a Big V caution that the future is a very uncertain place.
Rob says
How did he manage to get the word “revolutionary” printed right there on marketing portion of the cover?
The man was awarded a Nobel prize in Economics. They didn’t award him a Nobel prize because he said the same thing as many people had said before him.
Shiller’s finding that valuations affect long-term returns is revolutionary. If valuations affect long-term returns, the market is not efficient, as the Buy-and-Holders believed. If the market is not efficient, risk is not stable. Risk VARIES with changes in valuation levels. That finding changes every strategic consideration in fundamental ways.
In an intellectual sense, the world of investing analysis was stood on its head in 1981. In a practical sense, we are not yet caught up. Money comes into play in a big way in this field. Money considerations have been holding us back for 34 years now. We need to overcome the money considerations and get the word out about what the research of the past 34 years tells us.
This is the most important personal finance advance in our history. Putting you Goons in prison is the step that sends everything forward in a big way. Bloggers and economists and advisors and policymakers do not want to go to prison. They will tell the truth when they see that there are consequences to be paid for not telling the truth.
We need to make a demonstration as a people that we will not tolerate the intimidation tactics of the Buy-and-Holders any longer. They make their claim that there is no need to practice price discipline when buying stocks as a money-making thing. We need to take away all incentives to lie about these matters and impose disincentives for doing so.
The full reality here is that a high percentage of those pushing the smelly Buy-and-Hold garbage today possess a desire to tell the truth. They are afraid to do so because they have seen or heard about the tactics of the Wall Street Con Men and their Internet Goon Squads. We need to take effective action.
All the rest is downhill sledding. Valuation-Informed Indexing is the investing strategy that the Buy-and-Holders were seeking to create when they got started with their work. It is the first true research-based strategy. Had it come first, every Buy-and-Holder would have endorsed it. The only thing holding us back today is the shame that the Buy-and-Holders feel over the 34-year cover-up of their mistake. Every day that the cover-up remains in place hurts every Buy-and-Holder (as well as every Valuation-Informed Indexer). Continuation of the cover-up is a lose/lose/lose.
My best and warmest wishes to you and yours, Anonymous.
Rob
Rob says
Of course, being Normals, the folks a Big V caution that the future is a very uncertain place.
Bernie Madoff has the words “the future is uncertain” appear on some of his marketing materials. Adding the words “the future is uncertain” added to fraudulent claims does not transform the fraudulent claims into honest claims.
There is no research supporting the Buy-and-Hold Lie that it is not necessary to practice price discipline when buying stocks. That lie is the biggest lie ever told in the history of personal finance. It has destroyed more lives than any earlier lie.
The reason why Buy-and-Holders still tell that lie today is that they believe that the money and power behind Buy-and-Hold can keep them out of prison. We need to unite as a society to show them that that is not so. We need to show them that there is little uncertainty about what their punishment will be for perpetuating that lie for 34 years after the peer-reviewed research discredited it — they will be sent to prison, some for a long time.
Fair enough?
Rob
Anonymous says
“We need to make a demonstration as a people that we will not tolerate the intimidation tactics of the Buy-and-Holders any longer. ”
Intimidation? Please. You’ve been afforded much more presumed credibility than any internet crank deserves, by having many people tolerate your crap and even respond to it as if it were a legitimate case of ignorance or misunderstanding or other solvable situation, rather than just ignoring you — as is the most deserving response. Over the years, people have continually provided you links, discussion, argument, examples, references, analogies, details, particulars, history, explanation, and any number of other valuable resources all geared towards your personal enlightenment. So, ‘Intimidation’? Please. Hardly. For the last decade, you have used the same phone number that you publicly provide, same address that you publicly tout, same web address, same everything, and have never provided once scintilla of evidence of a SINGLE threat or act of intimidation. So, I’d say that is not just remarkable, but damn near incredible, given the nature of the internet, which attracts crazy likes flies to a picnic. And no, this is not a death threat, you idiot. It’s a friendly and human sincere invitation for you to finally to wake up, smell the coffee, greet your wife, kids, community, and acquaintances anew, and from this day forward, begin to act towards them as a responsible adult: get a job, save some money, be a responsible parent and spouse, and quit being nothing but a full-time nuisance internet crank, devolving deeper and deeper into your self-made land of mental illness, and imaginary threats.
Rob says
I’ll talk a bit about intimidation.
The thrust of your comment is a suggestion that you will not be going to prison because you never came to my house with a gun at fired it at my wife or children. That’s not the test. You will be going to prison.
The threat to come to my house with a baseball bat and kill my wife and children is an act of intimidation. My wife certainly saw it as that. She will testify to how she felt when that threat was made. She was at the time taking care of a two-year old and an infant of five months of age. The jury will hear all this. They will decide on the length of your prison sentence.
Motley Fool deleted the most violent posts. But I believe we can get them to present as evidence either by going to the Motley Fool files or by using a WayBack machine or through some other means. Portions of the deleted posts were included in posts that were not deleted. So we always have those. And there were references to the death threats made at the Bogleheads Forum and other boards and blogs and you Goons demanded bannings of all posters who posted honestly on the matter. That shows a guilty conscience. If the death threats had not been made, there would have been no need to cover them up.
I filed a police report re the death threats. That will be available as evidence. I also made a report with a special office on internet crimes in Virginia. I also contacted the FBI. The question that the police officer focused on was whether I believed that you would follow through on the threats. I said that my wife was much more worried about that than I was but that I did not believe that my wife should have to live in fear because an individual got an important number wrong in a retirement study posted at his web site and because I pointed that out to friends of mine who had been planning their retirements pursuant to a belief that that individual (John Greaney) had done honest work. I said that I personally did not believe that you Goons would kill anyone. I added that I could not be certain because anyone who was crazy enough to put up a post in “defense’ of John Greaney is capable of just about anything.
I have copies of posts containing HUNDREDS of threats of physical violence. There are posts where you Goons discussed what model of gun to use to kill me. Those will be seen by your jury. I have copies of posts in which you posted photos of my church and made suggestions that you Goons would be showing up there. Those will be seen by your jury. I have posts showing that a swarm of you Goons descended onto the Bogleheads Forum when community members there complained about the constant abusiveness. You wouldn’t have had a swarm descend if you didn’t have a long record of abusiveness at many different forums. Those posts will be seen by your jury. And on and on and on and on and on.
And of course your jury will be seeing all of the threats that were directed at Wade Pfau. The Bennett/Pfau research is the most important piece of research published in this field in three decades. That research should have been written up on the front page of the New York Times when it was first published. The only reason it has not been is because you Goons threatened to destroy Wade’s career if he continued to post about it and Jack Bogle indicated that he backed you and your use of intimidation tactics 100 percent. Bogle allows his name to be used at a site that permits posting by Mel Linduaer, a guy who was employing threats of physical violence to suppress honest posting on the peer-reviewed research in this field long before I came on the scene!
The most important question is WHY Buy-and-Holders feel a need to resort to threats of physical violence and of career destruction whenever anyone posts honestly on safe withdrawal rates or any other critically important investment-related topic. The obvious explanation (it wasn’t obvious to me on the morning of May 13, 2002, but it is 13 years later) is that Buy-and-Hold was based on a MISTAKE going back to the first day. There has never been even a tiny sliver of support for the preposterous Buy-and-Hold claim that there is no need for investors to practice price discipline when buying stocks. The entire historical record shows that practicing price discipline is 80 percent of the game. That’s a lie that Buy-and-Holders use to take money out of the pockets of millions of middle-class investors and to put it into their own.
This massive act of financial fraud will be exposed. I will expose it. You have my pledge. I am sure.
I will name names. Any blogger who has permitted participation at his site by an individual who has posted in “defense” of Mel Linduaer or John Greaney or Jack Bogle will be named. Their juries will decide the length of their prison sentences. That’s not my call. But I guaranty you that their names will become known to the millions of middle-class investors who are in the process of seeing their lives destroyed because of the 34-year cover-up of the biggest “revolutionary” (Shiller’s word) advance in the history of personal finance.
I am going to see that you are put in prison, Anonymous. There will be no meanness to it. My aim is to put you in prison as soon as possible so that your sentence will be as short as possible, given the circumstances that apply. But it would be cruel of me for me to suggest that there is any but the most long-shot chance that you will not be going to prison. I will continue to do what I can to get your sentence reduced a bit. But that’s as far as my bending goes. There will be no felonies being committed on my end. There will be no discussion of felonies being committed on my end. Find someone else.
My best and warmest wishes to you, Goon friend.
Rob
Anonymous says
Two quotes from Rob on the same day:
Shiller’s ideas have not been debated or discredited in any way. They have been ignored.
The man was awarded a Nobel prize in Economics.
Please do share these with your MHPs!
Rob says
Both of those things are so, Anonymous.
Shiller won a Nobel prize because his work is of immense importance. And Shiller’s ideas are ignored by the Wall Street Con Men because they have seen how much money there is to be made by pushing a pure Get Rich Quick approach.
There is no intellectual debate. The intellectual debate was settled in 1981. Buy-and-Hold today is just a brute power thing. The Buy-and-Holders push the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind and, whenever anyone points out the 34 years of research showing that Buy-and-Hold is pure garbage, they respond with intimidation tactics.
I’m not playing.
Prison sentences will end this.
I am sure.
From the day we open the internet to honest posting on safe withdrawal rates and scores of other critically important investment-related topics forward, it’s all downhill sledding.
The good stuff starts with the next price crash.
I naturally wish you all good things.
Rob
Anonymous says
Shiller’s finding that valuations affect long-term returns is revolutionary.
Your ignorance is showing re: this matter Rob. Shiller showed no such thing. He (and many others) showed some correlation between valuations and future stock prices. That is not in any way showing an affect. Correlation does not imply causation.
No sane person would morph this correlation into believing he could accrurately predict future stock prices, like “the market will drop by 65% in 3 years”. That’s like thinking you’re about to get a $500 mm check in the mail – pure fantasy.
Rob says
You’re wrong, Anonymous.
The stock market is not the only market that exists in this world. There are THOUSANDS of markets that we can look to to determine how markets work. In every market other than the stock market, it is universally accepted that price discipline is essential. That’s so in the banana market and in the car market and in the sweater market and in every market on the face of planet Earth.
The Buy-and-Holders believe that the stock market is the sole exception. But they have provided precisely zero evidence supporting this preposterous claim. ALL of the historical data shows that price discipline is 100 percent required for the stock market to function properly and that investors who fail to exercise price discipline increase their risk dramatically while also reducing their long-term return dramatically.
There was legitimate confusion on this point for 16 years. In 1965, Eugene Fama published research that convinced a good number of smart people that price discipline is not necessary in the stock market, that the market is efficient and adjusts almost immediately to mispricing without investors needing to change their stock allocations. Fama made an honest mistake. He looked only at short-term timing and wrongly concluded that neither short-term timing nor long-term timing is 100 percent required.
Now we know better. Bogle founded Vanguard in the mid-70s and people started to become aware of the distinction between long-term timing (which can only be achieved with index funds) and short-term timing. Shiller tested whether long-term timing works in 1981 and found in his “revolutionary” (his word) research that price discipline ALWAYS works and is ALWAYS 100 percent required. Every examination of the question done over the past 34 years has shown the same thing.
It’s not just correlation, it’s causation. There are two academic theories as to what causes stock price changes. They are caused either by unforeseen economic developments (this is the core principle of the Buy-and-Hold Model) or by investor emotion (this is the Valuation-Informed Indexing Model). Shiller’s finding discredited the belief that it is unforeseen economic developments that cause stock price changes. If it were unforeseen economic developments that caused stock price changes, long-term returns would fall in the pattern of a random walk. They do not.
Unforeseen economic developments do NOT cause stock price changes. Shifts in investor emotion (which obviously are AFFECTED by unforeseen economic developments) cause stock price changes. Investor emotion (measured by the P/E10 level) CAUSES long-term stock returns. 100 percent of the evidence available to us today shows this. There is ZERO evidence supporting the Buy-and-Hold Lies. That’s why it is ONLY Buy-and-Holders who advance death threats and demands for unjustified board bannings and tens of thousands of acts of defamation and threats to get academic researchers fired from their jobs. The Valuation-nformed Indexers have no need of such tactics because the entire historical record supports their belief that the stock market is just like every other market and price discipline is 100 percent essential.
The Buy-and-Hold Mafia has responded to honest reports of what the research says with brutally abusive and criminal tactics to silence those who have told the truth re the last 34 years of peer-reviewed research. Those who have posted in “defense” of Mel Lindauer and John Greaney and Jack Bogle will be going to prison following the next crash and all the rest of us will then be free to learn about the first true research-bakced strategy.
The stock market works just like every other market that has ever been developed. Pay attention to price and you will do very well. Fail to focus on price and you will do very poorly. If we permit the Wall Street Con Men to persuade millions that there is no need for investors to focus on the price of stocks when they buy them, we will see our economic system collapse. It has happened every time that Buy-and-Hold has become popular and it is not possible to imagine how it could ever turn out any other way.
It is indeed a wonderful advance. There’s no question about that. But it’s not a fantasy that we are seeing play out. It’s the benefit of permitting people to do honest research and then share it with every investor on the planet. We were smart to make financial fraud a felony in the United States. It is through enforcement of the laws against financial fraud that we will put those who have posted in “defense” of Mel Linduaer and John Greaney and Jack Bogle in prison. Good for us!
My best wishes to you.
Rob
Anonymous says
If it were unforeseen economic developments that caused stock price changes, long-term returns will fall in the pattern of a random walk. They do not.
Your ignorance is again on full display here Rob. Stock market prices reflect economic conditions, which everyone knows often move in cycles, as opposed to completely randomly.
Shifts in investor emotion (which obviously are AFFECTED by unforeseen economic developments) cause stock price changes.
No sane person would make such a statement without proof or evidence. But there is none. For example, internet stock prices were high in 2000 because investors misjudged their future potential. Has nothing to do with being happy or sad.
Rob says
Stock market prices reflect economic conditions, which everyone knows often move in cycles, as opposed to completely randomly.
You’re not thinking this through at all carefully, Anonymous.
It is only unforeseen economic developments that affect stock-market prices, according to the Buy-and-Hold Model. Economic developments that are anticipated are reflected in prices. If economic conditions followed some sort of cycle independent of the stock market, that cycle would be reflected in prices as soon as it began playing out. Stock prices would quickly adjust to reflect the cycle.
That’s not what happens. That has NEVER happened. This theory does not hold water. It is not in accord with the 145 years of data available to us.
It is true that the economy goes through good and bad cycles. But it is the stock market CAUSING those cycles. It’s not economic cycles that cause stock market cycles, it is stock market cycles that cause economic cycles.
Bull-marlet money is Pretend Money. It ALWAYS disappears in the long run. There has never yet been a single exception.
So we have two sorts of circumstances in the market. We have circumstances in which the market is generating trillions of dollars of Pretend Money, which causes the economy to become inappropriately juiced-up, And we have circumstances in which the trillions of Pretend Money disappears, causing the economy to become inappropriately depressed.
All of our problems go back to Buy-and-Hold and the criminal acts that have been used to keep it alive for 34 years after the peer-reviewed research showed that there is zero chance that it could ever work for even a single investor.
There is no study showing that any of what you say here is so. You are just repeating garbage that you picked up from reading materials generated by the Wall Street Con Men. If any of the claims made by the Wall Street Con Men were legitimate, they could point to peer-reviewed research supporting those claims.
You have been taken, Anonymous. Not be me. By your Wall Street Con Men friends. Go yell at them. I didn’t do a darn thing to you except tell you honestly what the last 34 years of peer-reviewed research says.
Don’t let the bad guys get you down, man.
Rob
Rob says
internet stock prices were high in 2000 because investors misjudged their future potential. Has nothing to do with being happy or sad.
Investors misjudged because of the Ban on Honest Posting.
If the Buy-and-Hold Mafia had permitted honest posting, every investor on the planet would have known that stocks were priced in 2000 to provide a negative return.
And, yes, the lies that were told by the Wall Street Con Men made investors happy at that time. Stocks were priced at three times fair value. And the Con Men were telling investors that they could count on the nominal value of their portfolios to help them finance their retirements! Huh?
Investors who had $200,000 of real value in their portfolios were being told that they had $600,000 of real value in their portfolios. That’s not financial fraud? What the heck would financial fraud look like?
Buy-and-Hold is a Lie. We need to put these people in prison. We need to do that by the close of business today.
I mean, come freakin’ on!
Rob