Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
Then (2013): “I can give the reasons why I view the end of 2015 as being an outside date…But the entire historical record indicates we should see the crash by the end of 2015.”
Now: “I never said that it was certain that we would see a crash by the end of 2015…The data says that we should see it by the end of 2018. But that’s the farthest-out date…”
“But it’s not a blown call.”
Nothing but your own quotes. If that’s goonish, doesn’t that make you the goon?
Do you think that Shiller was wrong when he said near the end of 1996 that investors who were heavily invested in stocks would come to regret it within the next 10 years?
We didn’t see the crash until near the end of 2008. Shiller was off by two years.
He was technically wrong. But he got something very important very right. We were headed toward an economic crisis. He saw it coming. Few others did. Jack Bogle certainly was not saying what Shiller was saying.
Had we listened more carefully to what Shiller was saying in 1996, we could have avoided the economic crisis that began in 2008. Millions of people who are unemployed today would not be unemployed today. Millions of entrepreneurs who have seen their businesses fail would not have seen their businesses fail. Millions of people on both the left and the right who have begun to lose confidence in our political system would not have begun to lose confidence in our political system. Millions of people who are on their way to suffering failed retirements would not be on their way to suffering failed retirements.
I think we should have listened more carefully to what Shiller said in 1996. That’s my sincere take, Anonymous.
If you want to say “Nyeh, nyeh, nyeh, Shiller was off by two years.” I guess you can do that. I cannot stop you. But it is my view that you are focusing on the small error contained in Shiller’s words and ignoring the huge breakthrough insight also contained in Shiller’s words. He got something wrong. That’s so. But he also got a much bigger thing right. That’s part of the story too. Both things are realities and both realities need to be taken into consideration by every investor alive today.
If you follow me around and press me to make short-term predictions about how the market is going to perform in future days, I am going to get some of them wrong. You shouldn’t be surprised by that. The entire historical record shows that anyone trying to predict the future turns of the market is going to get some of them wrong. I have no better ability than anyone else to get them all right. So I am certainly going to get some of them wrong.
If I want to maintain a perfect record, I am just going to have to refuse to make predictions. But I don’t intend to play it that way. You ask me to make predictions because you want to be able to hold me accountable. I think it is healthy for me to be held accountable. So there are circumstances in which I will agree to make predictions. And in some cases I will get them wrong. There’s nothing that I can do about it. That’s just the way it works.
If you were fair-minded, you would put the wrong prediction in its proper context.
I said on the morning of May 13, 2002, that Greaney got the numbers wildly wrong in his retirement study. You Goons pretended to believe that I was the one in the wrong. Ten years later, the Wall Street Journal ran a story saying that the 4 percent rule is a big pile of garbage. So did the Economist magazine. So did Smart Money magazine. So did the Financial Mentor site. So did about 30 other leading publications in this field. Greaney ruined thousands of lives with his false claims about the safe withdrawal rate. I told the world about his mistake. That’s a big deal. I would have saved millions of people from suffering failed retirements had my May 13, 2002, post been given the publicity it merited and would have received had it not been for the insanely abusive and indeed criminal behavior of you Goons.
Is my exposure of the errors in the Old School safe-withdrawal-rate studies more important or less important than my wrong prediction? It is 500 times more important. The prediction of when the next crash will come is a parlor trick. It means nothing. The crash is going to do us all bone-crusing damage regardless of whether it comes by the end of 2015 or by the end of 2016 or by the end of 2017. I got the year wrong but I did not get the bigger point wrong — We are headed for a massive price crash that will deepen the economic crisis and may even land us in the Second Great Depression and we all should be working 24/7 to lessen its impact. That’s what matters, not knowing the precise day and hour that the crash is going to come.
We can know some things and we cannot know some things. We know that practicing price discipline when buying stocks is 80 percent of the game. There has never in 145 years of stock market history been an investor who practiced price discipline and who achieved a poor long-term result. And there has never in 145 years of stock market history been an investor who failed to practice price discipline who achieved a good long-term result.
Buy-and-Hold always dramatically increases risk while also dramatically reducing return. Buy-and-Hold is the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind. Valuation-Informed Indexing, in contrast, is the first true research-based investing strategy. Valuation-Informed Indexing is the strategy that Bogle thought he was developing when he developed Buy-and-Hold plus a whole lot more than he did not even imagine as within the realm of possibility. Buy-and-Hold is the past, Valuation-Informed Indexing is the future.
Perhaps there will come a day when we will know more about how stock investing works than we do today and when it will be possible not only to make effective long-term predictions but also to make effective short-term predictions. I have my doubts, but you never know, perhaps that day will come. So my advice is that you take any short-term predictions that I or anyone else puts forward with a huge grain of sale.
The same mountain of peer-reviewed research that shows why you should not place too much confidence in short-term predictions shows why you MUST pay very close attention to long-term predictions rooted in consideration of price levels. Those predictions ALWAYS work. It is not possible for the rational human mind to imagine some alternate universe where price would not play a huge role in determining the merit of a stock purchase and of course the entire historical record confirms that what common sense tells us must be so really is so. The Buy-and-Holders have destroyed millions of lives by telling lies re this matter and they destroy thousands more with each day they continue doing so. They should knock off the funny business. Now. Today.
I am going to continue posting honestly re safe withdrawal rates and scores of other critically important investment-related topics, Anonymous. I have never given two seconds of consideration to playing it any other way, and, if I am true to myself, I never will.
I intend to say a few words at your trial aimed at getting your prison sentence reduced a bit. I ask nothing in return from you for doing so. I think it is the right thing to do given the circumstances that apply, so that is the way that I am going to play it. But I will of course testify honestly. Going to prison is not high on my bucket list. So that one is 100 percent non-negotiable.
I naturally wish you the best of luck in all of your future life endeavors, my long-time Goon friend.