Set forth below is the text of a comment that I put to the discussion thread for one of my columns at the Value Walk site:
I am sure you will write more articles from this in which you explain how this expert, like all other experts are wrong and how you are right. It goes along with how you say Michael, like the other experts, “pull their punches” as you have this unique ability to read their minds.
Just to note, it is interest how Michael, like many other experts, no longer speak with you. I wonder why that is????
Michael likes me a lot, Sammy. And I like him a lot. We engaged in many e-mail conversations. We are friends.
You are right, though, that today he keeps his distance from me. And you are right that that is true of many other experts in this field. I am “controversial.”
I shouldn’t be. Everything that I say just follows naturally from Shiller’s 1981 finding that valuations affect long-term returns. If valuations affect long-term returns, then stock risk is not constant but variable. If stock risk is variable, then investors must change their stock allocations in response to big shifts in valuations to have any hope whatsoever of keeping their risk profiles roughly constant. The Buy-and-Holders say not to do that. So what I say makes the Buy-and-Holders look bad. It’s not my intent to make the Buy-and-Holders look bad. But that’s the inevitable result that follows from exploring the implications of Shiller’s “revolutionary” (his word) research findings.
We need to normalize these discussions. We need to encourage more people to challenge the Buy-and-Hold strategy recommendations. None of them can be even close to right if Shiller’s research is legitimate (and there is now 34 years of peer-reviewed research backing him up).
It comes as a shock to a lot of people when I point out how the Buy-and-Holders got so many things wrong. It’s shocking because people have not heard it before. Buy-and-Hold became popular during the bull market and millions of people are counting on the Pretend Gains they experienced in the bull market to finance their retirements. It pains them to hear that they made a mistake in coming to believe that those gains are real.
I am controversial and people keep their distance from me as a result. I would like to see that change. I would like to see us all working together to learn more and more and more. But this is a sensitive matter. If Shiller is right, 90 percent of the investing advice that people have heard in recent decades is wrong. As a society, we are having a hard time letting that in. We’ll get there. We need to. The advances in our understanding as a result of Shiller’s research are too important for us not to develop far more fully than we have in the first 34 years since his research was published. And we are making progress. But it would be fair to say that progress has been slow.
Yes, Michael pulls his punches. But he has also put forward some amazing stuff. I prefer to focus on the positive.
I hope that helps a bit.
Rob
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