I’ve posted Entry #260 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Shiller’s Ideas Should Be Treated as Mainstream Ideas.
Juicy Excerpt: Shiller is out there. His view of how the stock market works is about as far removed from the view held by the Buy-and-Holders as it is possible to imagine.
So they dismiss him. They patronize him. They ignore him.
Take a look at the investing advice that Jack Bogle was advancing in 1980, the year prior to the publication of Shiller’s revolutionary research. It is identical in every way to the investing advice that Bogle offers today. Shiller’s research findings had zero effect on Bogle’s views. So far as Bogle and all the other Buy-and-Holders are concerned, Shiller might as well not exist. His findings are insignificant.
But how do they explain the best-selling book? How do they explain the Nobel Prize in Economics? How do they explain the fact that millions of investors find merit in Shiller’s ideas?
People don’t ignore Shiller. They ignore you.
Shiller doesn’t say: “The Buy-and-Holders got the numbers wildly wrong in their retirement studies.”
Shiller doesn’t say: “There is zero support in the peer-reviewed research for the claim that price discipline (long-term timing) is 100 percent required for all investors seeking to keep their risk profiles roughly constant through time.”
Shiller doesn’t say: “The 34-year cover-up of my revolutionary findings of 1981 is a criminal act of financial fraud and a good number of people will be going to prison for this following the next price crash.”
Shiller doesn’t say: “It was the relentless promotion of the idea that long-term timing is not always required that caused the economic crisis that began in 2008.” He predicted in a book published in March 2000 that the continued promotion of Buy-and-Hold strategies would by the end of the first decade of the new century cause a massive economic crisis. But, when that crisis arrived, he kept his mouth shut about what he obviously knew to be the primary cause.
Gee, I wonder why.
There are two things that people who work in the investing advice field want to do. One, they want to make a buck. Two, they want to help their clients or their readers. The problem that we have as a society is that the two goals are in conflict. The market produces trillions of dollars of Pretend Money in bull markets. Every investor on the planet possesses a Get Rich Quick urge (because all humans do). The easy way to get people to like you and to buy your product is to tell them that that Pretend Money is real. That’s Buy-and-Hold. There is a mountain of money to be made promoting the pure Get Rich Quick approach.
But the Pretend Money disappears in the bear market that inevitably follows a bull market (irrational exuberance ALWAYS leads to irrational depression — there is not one exception in the historical record). At that point your constant promotion of the pure Get Rich Quick approach has destroyed millions of lives. By promoting Buy-and-Hold, you have failed to achieve your second goal of helping the people who listen to your advice.
I have chosen to pursue the second goal rather than the first. I have demanded recognition of my right to post honestly re the past 34 years of peer-reviewed research because I want my work to be constructive and positive and life-affirming and not to destroy the lives of those who make use of it. The Buy-and-Holders hate me for that with a burning hate. They hate me because they want to be in my shoes and because they have given up hope that they ever will be able to do honest work again.
I didn’t do that to them. I want to be working with my Buy-and-HIold friends. But all they can focus on is the shame they will feel when they say the words “I” and “Was” and “Wrong.” They have chosen to destroy even more lives rather than do what they need to do to help the people they want to help. The case for Valuation-Informed Indexing is so strong and the damage done by Buy-and-Hold is so great that they cannot bear to face up to the realities of what the last 34 years of peer-reviewed research says. That’s too sad, you know? That’s not my doing.
Is it Shiller’s doing? Yes and no.
All of my work is rooted in Shiller’s “revolutionary” (his word) 1981 finding. So Shiller obviously played a huge role here (as did Bogle, to be sure — there would be no Valuation-Informed Indexing if Bogle had not founded Vanguard and made index funds widely available). But Shiller is willing to go only so far with his truth-telling. He doesn’t like the idea of having death threats directed at him or of having demands for unjustified board bannings directed at him or of having tens of thousands of acts of defamation directed at him or of having threats to get him fired from his job directed at him. So he keeps it zipped about the IMPLICATIONS of his revolutionary research. He tells us what the data says and leaves it to each individual investor to figure out for himself WHAT THAT RESEARCH MEANS.
Or NOT figure it out, if that is the investor’s preference. Most of us prefer NOT to figure it out. We all have that Get Rich Quick urge residing within us. By keeping it zipped re the implications of his research, Shiller gets the best of both worlds. He is widely recognized as a genius (which he obviously is). And yet the Buy-and-Holders are okay with him. He tells the truth but in such a limited and tentative way that the millions of investors who prefer a Get Rich Quick approach still give their money to the Buy-and-Holders and are in practical terms none the wiser about the implications of the last 34 years of peer-reviewed research in this field.
That ain’t me, Anonymous.
I tell.
That’s my job.
I have never experienced a moment’s doubt re that one.
I have gone beyond Shiller, far beyond Shiller, not because I am smarter than Shiller but because I refuse to keep it zipped re the implications of Shiller’s research. I don’t let the abusive behavior of the Buy-and-Holders slow me down. I work it and work it and work it and work it. And I tell people what I have learned.
Not too many get to hear me nowadays. You Goons have seen to that. I don’t like it. Not one tiny bit. But I don’t let it slow me down. I keep working it. I keep telling what I have learned. That core reality of my being has not changed one iota in 13 years. That core reality of my being will not change one iota in 13 billion years. You can destroy my Google ranking. You can destroy my reputation. You can intimidate my friends into saying nasty things about me. You can frighten my wife into believing that her children’s lives are in danger. You can insult me in thousands upon thousands upon thousands of posts. But that core reality never changes.
Given that the Get Rich Quick urge that influences all the humans is strong enough that you have been able to do all those things, perhaps some day you will be able to get me put to death. I don’t think it will happen but then I didn’t think that you would ever be able to get me banned from the Motley Fool board solely for telling the truth about safe withdrawal rates. So perhaps I will be put to death. That’s about as far as abusive posting can go, no? If they give me the chair, they better be sure that the voltage is turning up high enough to get the job done. If they don’t put me down, I will be back posting that weekly column at the Value Walk site. And, if the owner of that site drops the column, I will be back sending e-mails to every other investing site on the internet seeking a new place to house the column. Sooner or later, I will find one and we will be back to where we started. So make sure they turn the voltage up to “11”.
It will turn out the way it turns out, Anonymous. I am who I am. I love the Buy-and-Holders. None of the work that I have done would have been possible without the amazing work done by the Buy-and-Hold Pioneers before I came on the scene. That can never change. And the fact that Shiller published peer-reviewed research in 1981 showing that valuations affect long-term returns can never change either. And the fact that there is something in my life history that causes me to love the idea of being the one to tell millions of middle-class people about the implications of Shiller’s revolutionary findings can never change either. It’s what I am.
You’re something different. You’re a Goon. You live to block those millions of middle-class people from learning what they need to know to reduce the risk of stock investing by 70 percent (as shown by the peer-reviewed research that I co-authored with my good friend Wade Pfau). So be it, you know? I don’t like it. I think that our discussions should be governed by the published rules of our discussion-board and blog communities and by the laws of the United States. But the Buy-and-Holders have a strong desire not to go to prison for the 34-year cover-up and see no way to avoid it if the cover-up comes to an end. So published posting rules and laws making financial fraud a felony mean little to them at this point in the proceedings.
I cannot change it. Not by myself. So I accept it for the time-being. I believe that this unfortunate reality will change following the next price crash. So I await that day.
You are fine with Shiller because he doesn’t expose your con. You’re not fine with me because I do. It’s not the name “Bennett” that bothers you. It’s what the fellow named “Bennett” does and says that drives you mad. I tell. I don’t tell half the story like Shiller does. I let it all hang out. Journalism blood. Sue me.
That’s the story. You know it. I know it. Everyone who reads these words either today or years from today will know it. If the Second Great Depression comes to bother us all enough for us to work up the courage needed to do something about you Goons, we will all live better lives from that point forward. We can take it that way or we can take it the other way and see our economic system fall when millions of middle-class investors see what has been done to them by the Bogles and Shillers and Lindauers and Greaneys of the world.
It’s not for me to say which way it goes. I obviously have hopes. And I obviously have beliefs. But it is ultimately not my call. This is a call that will be made by the people of the United States following the next price crash. The worst that can happen to me is that I get the death penalty. That’s the absolute worst that you Goons can dish out. And I don’t have to think two seconds as to whether I prefer the death penalty to posting dishonestly on the numbers that my friends use to plan their retirements. I have never in my life felt more settled re any question that has been put before me as I feel re that one.
If you don’t believe me, ask my wife. She’s the world expert on the particular topic of whether Rob Bennett has any give on the question of his willingness to post dishonestly re the numbers that his friends use to plan their retirements. She can tell you lots of tales that will make your Goon hearts flutter.
I love my wife. I love my kids. I love Shiller. I love Bogle. I love you Goons. I love my fellow community members. I love my country. I love the wonderful game. I love what I think it is going to do for us all when we get to the other side of The Big Black Mountain.
I don’t love the idea of directing my human energies to the task of posting dishonestly re the numbers that my friends use to plan their retirements. I sweated blood to get the numbers right in my plan. I worked that one every night and every weekend for nine years. I worked it while I was waiting for the bus to take me to work and I worked that one while waiting for the bus to take me home again. I worked that one during lunch hour. I worked that one before drifting off to sleep at night and I worked that one when I laid in bed in the morning trying to work up the courage to pull the blankets back and step into the cold of the morning. I never stopped thinking about it for those nine years and I never once in the past 13 years have given two seconds of consideration to the idea of betraying whatever Higher Power elected to give me the insight I needed to see that the Old School safe-withdrawal-rate studies ain’t the way.
I am what I am, Anonymous. You are what you are. I accept that. There is nothing personal in this from my end. I am capable of liking you just fine while remaining 100 percent determined never to agree to post dishonestly re the numbers my friends use to plan their retirements. I hope you understand that there is nothing that you can take away from me that will cause me to betray the things that makes me what I am. It’s BECAUSE I love Bogle that I believe that deep in his heart he wants to help people and that thus deep in his heart he wants someone like me to insist that he come clean re the last 34 years of peer-reviewed research. My love for Jack Bogle (and all the others) is a deep love. It is non-negotiable.
Deal with it.
Or don’t.
Either way you will always remain my friend.
Rob
Is Shiller going to prison as well?
It wil come out that he did not speak out at a time when he could have done a lot of good by doing so.
I don’t believe that he will be going to prison. But I believe that lots of people will be asking him some hard questions. I will not be saying that those people are in the wrong to ask those questions.
I believe that Shiller has done damage to his reputation by failing to speak out on how the continued promotion of Buy-and-Hold strategies has hurt us all. It’s not for me to say whether he goes to prison or not. But I am not going to lie about what has happened.
I will obviously tell people about the pressures that were exerted on Shiller to cause him to hold back on saying what he knows. That I can do and that I will do.
The fact that there is even a question as to whether people like Shiller and Bogle will end up in prison should tell everyone what a disaster this 34-year cover-up has been for each and every one of us. When you learn that you have made a mistake re a subject as important as how stock investing works, the thing to do is to come clean immediately. When you start down the path of engaging in a cover-up, coming clean just gets harder and harder and harder the longer the cover-up continues.
My sincere take.
I naturally wish you all the best that this life has to offer a person, Anonymous.
Rob
H.L. Mencken: “The central belief of every moron is that he is the victim of a mysterious conspiracy against his common rights and true desserts. He ascribes all his failure to get on in the world, all of his congenital incapacity and damfoolishness, to the machinations of werewolves assembled in Wall Street, or some other such den of infamy.”
Mencken died almost 60 years ago, so he is not going to prison.
Mencken is safe, X. You’ve got me re that one.
I think it would be fair to say that I am safe too. If there is one person in the United States who will not be going to prison following the next price crash as a result of his participation in the cover-up of the errors in the Old School safe-withdrawal-rate studies made public on the morning of May 13, 2002, that person would be Old Farmer Hocus. I intend to keep it that way, you know?
I trust that all the rest will work itself out over time.
Rob
How many people went to prison during previous crashes?
I don’t know. I recall Bernstein saying that there were congressional hearings re Wall Street Corruption following one of the earlier crashes. But I don’t know if people went to prison or not.
But this is a very different situation. The three earlier crashes came before the publication of peer-reviewed research showing that there is zero chance that a strategy not calling for the exercise of price discipline (long-term timing) could ever work for even a single long-term investor.
We did not as a people know what worked in stock investing prior to 1981. It’s unfortunate that we suffered those three earlier economic crises. But I think you have to say that crashes were just one of those things in those days.
From 1981 forward, we knew. Or at least those who claim to be experts in this field certainly should have known. If you know about the last 34 years of peer-reviewed research and continue to advocate a Buy-and-Hold strategy, you are in an objective sense engaged in financial fraud. If you claim to be an expert and have not bothered to educate yourself about the last 34 years of peer-reviewed research, that’s also fraud.
Please note that I used the phrase “in an objective sense.” There are millions of good and smart people who today possess a sincere belief in Buy-and-Hold. Those people are not guilty of fraud. They are wrong, according to the research. But one element of fraud is bad intent. Someone who is wrong because the subject has not been discussed widely and because he thus does not possess a full understanding of the realities is not guilty of fraud.
But those who have put up posts in “defense” of Mel Linduaer and John Greaney cannot claim that they do not possess bad intent. Their actions show their bad intent and their actions have been recorded in our Post Archives.
I don’t believe that even all of those who have put up posts in “defense” of Mel Limdauer and John Greaney will be going to prison. I believe that we will have Congress pass some sort of amnesty that will let lots of people off the hook. I see that as a sensible way to go.
But I find it hard to believe that the amnesty will cover those who have posted in “defense” of Mel Linduaer and John Greaney on numerous occasions and at numerous places and over a long period of time. I am not God. I could be wrong. But I cannot honestly say that I am able to imagine a scenario in which there will not be a good number of people going to prison following the next crash.
And you of course feel the same way about it, Anonymous. If you didn’t, you wouldn’t be posting here today. And of course the members of your jury will come to the same conclusion when they read the words of your posts here. I mean, come on.
I hope that helps a small bit.
Rob
Your headline is wrong. You just listed out a number of things that you say Shiller isn’t talking about. Therefore, what you mean is that you think your ideas should be treated as mainstream ideas.
No.
I want to hear what EVERYBODY thinks are the implications of Shiller’s ideas.
I have been writing about what I believe are the implications of Shiller’s ideas for 13 years now. But who am I? I’m some fellow whose “expertise” in this field is that he figured out how to get his words posted to the internet. We need to hear a lot of voices other than my own address themselves to this topic.
How does Bogle think that investors should have changed their strategies in response to Shiller’s “revolutionary” findings? I want to know. You should want to know too, Anonymous. You have your retirement money tied up in this. It’s been 34 years now and Bogle has not seen fit to address this question. That’s okay by you? Huh?
It would be weird if Bogle’s take was identical to mine. I don’t expect that. I don’t even want that. If he agrees with me on some things, great. If he disagrees with me on some things, that’s great too. I learn more when people disagree than when they agree. But I can only learn from Bogle re this matter if he addresses himself to the question. And for 34 years now he has failed to do that.
I have said that we need a NATIONAL DEBATE. Not a Rob Bennett debate. A national debate. I want to see everyone participating. I want to see lots of healthy and respectful disagreement. That’s how we all learn. I want to see thousands of people trying to find holes in all the stuff that I have put forward. That’s how I make my stuff better. We’re not getting that today.
We’re not even getting that from Shiller!
Shiller said following the 2008 crash that investors should not put their money back into stocks until the P/E10 dropped below 10. It hasn’t gone below 10 since. Yet in more recent days he has said that it would be okay for investors to have 50 percent or more of their money in stocks. Huh? Shouldn’t reporters be asking him about that contradiction? That’s how we learn. That’s how Shiller comes to enhance his ideas over time.
Shiller predicted an economic crisis that he said would come by the end of the first decade of the new century if we continued pushing Buy-and-Hold strategies. Then he failed to attribute the crisis to Buy-and-Hold after it arrived. Huh? Why did he do that? Millions of people were affected by the economic crisis. We all should want to know what caused it. No?
Shiller knows about the 4 percent rule. He knows that leading names in this field like Ed Easterling have said that millions of retirees are going to end up as greeters at WalMart as a result of the false claims made in the Old School SWR studies. Does Shiller not realize that this will be the biggest social crisis ever experienced in our nation’s history? Why is he not speaking up?
Rob Arnott told me in an e-mail that I posted at this site that he has seen things similar to what happened to Wade Pfau; he has seen academic researchers told that their careers would be destroyed if they did honest research showing the dangers of Buy-and-Hold strategies. Shiller has surely been seeing similar things. There is no one who has done more to show the dangers of Buy-and-Hold than Robert Shiller. Why doesnt he write a book describing the abusive tactics that the Buy-and-Holders have employed to persuade him to keep it zipped? Would that not be front-page news? Does he not have an obligation to a country that has given him many blessings to do that? It sure seems to me that he does.
I want to see EVERYONE talking about this stuff. Not just me. I have worked hard on my stuff. But I am one guy. We need THOUSANDS offering their takes. Bogle should go first. Buy-and-Hold is Bogle’s baby. Does Bogle believe that valuations affect long-term returns or does Bogle believe that the market is efficient? Both things cannot possibly be so. Does Bogle believe that Shiller is right or that Fama is right? Both researchers cannot possibly be right.
There is no more important public policy question before us today as a nation than the question of whether Shiller is right or Fama is right. We resolve such matters through DISCUSSION. The Ban on Honest Posting has been an unmitigated disaster. We need to work through this pursuant to the laws of the United States. We need to stop the abusive garbage and DISCUSS and LEARN.
That’s my sincere take re this terribly important matter in any event, Anonymous.
Don’t let the bad guys get you down, old friend.
Rob