Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
“We don’t feel a need to beat the market, just to match it.”
You could have done that 20 years ago by buying an index fund, and saved yourself several million words of typing.
If PE10 is everything, why didn’t its father mention it in that article? Why is he now giving the exact same advice as Buffett, Bogle, and all the Bogleheads? It’s almost as if he was embarrassed by PE1o.
Face it Rob. Shiller is a buy-and-holder. The war is over.
I couldn’t do that 20 years ago because stocks were not available for sale at a reasonable price. I would prefer that stocks ALWAYS be available at reasonable prices. If we opened up the internet to honest posting on the last 36 years of peer-reviewed research, we would be there. But we do not today live in a world where honest posting on the last 36 years of peer-reviewed research is widely tolerated. The reality is what it is whether I approve of it or not.
Shiller should have mentioned P/E10 in the article. I am 100 percent with you re that one, Anonymous. All of the points he makes are legitimate. There is nothing wrong with the words that he put forward. But it is weird for him to put those accurate words forward without also including a discussion of the valuation-related aspects of the question. I think you are right on re that observation.
I cannot see into his mind. I can speculate as to what is going on. But I cannot say with certainty.
I don’t know if I would go quite so far as to say that Shiller is giving the exact same advice as Bogle. But I agree with you that what he is saying sounds close to what Bogle is saying. He is certainly not doing much to highlight his differences with Bogle. I can see how someone who read only that article could think he has no major differences with Bogle. I have lots in common with Bogle but I don’t think that anyone would say that about me. I highlight the differences, Shiller does not. That’s a perfectly fair assessment, in my view.
I don’t think that Shiller is embarrassed by P/E10. I think that he doesn’t want to be slammed and he has learned from bitter experience over the years that being too clear in one’s statements re what the last 36 years of peer-reviewed research shows leads to one being slammed pretty darn hard. I think your statement that “it’s almost as if he was embarrassed by P/E10” is a fair one. The behavior is exceedingly odd. I don’t think that deep down he really is embarrassed of his life’s work. But I think it is fair to say that at times he gives that impression. It’s a strange way for someone who truly is the creator of the Valuation-Informed Indexing concept to spread the word re his “revolutionary” (his word) research findings. If it is all so revolutionary, why doesn’t he tell us more about the revolutionary how-to aspects of the question from his perspective?
I don’t think that Shiller is a Buy-and-Holder and I don’t think that the war is over. I obviously believe something quite to the contrary. But I cannot say that I fault you too much for saying this. I have won every battle we have fought on the content side and you have won every battle that we have fought on the process side. It’s a pretty darn big victory for you to be able to point to Shiller statements of this sort while also pointing out the absence of Shiller statements saying that what Bogle is saying is wrong and dangerous. If I were you, I would be pointing this out. I don’t quite agree with you. But I don’t think you are engaging in much distortion re this particular point.
If you really cared about your own long-term investing success, you would want to pin both Shiller and Bogle down to a far greater extent than they have allowed themselves to be pinned down thus far. That’s my comeback. Shiller is offering you a certain measure of happy talk. Are you going to let him get away with it? If you were thinking clearly, you would be holding his feet to the fire. You don’t do that. That tells me that you are worried that, if you tried to hold his feet to the fire, you would hear things that you very much do not want to hear.
So your position is ultimately a weak one. You have a temporary strength that you can use to get people like Shiller and Bogle to issue public statements that keep the fantasy going. Okay. But what do you do for an encore, you know? If the last 36 years of peer-reviewed research points to something real, prices are going to collapse and a lot of people are going to be angry about what happened to their retirement portfolios. People are going to be asking hard questions in those days and looking for real answers to them. Happy talk is not going to close the sale in those days. I have a mountain of real answers to offer them. I got off the happy talk road a long time ago.
It all comes down to whether people develop a desire to know the realities or not. If they do, I win. If they don’t, you win. That’s the bottom line, The desire is not intense enough today to overcome your abusiveness. But what about tomorrow? Will a price crash bring about a change? I believe that it will. I cannot see into the future. But I don’t feel comfortable being one more person generating a lot of happy talk. So I guess that I will just continue to walk this path that I have been on for the past 15 years.
I believe that Shiller will be singing a clearer and bolder tune in the days following the next price crash. But I cannot prove it. We will have to wait to see how things play out.
A few years back I talked these matters over with my priest. I supplied him with a summation of events and he asked me: “Have you considered contacting Shiller and asking for his help?” It’s a fair question, no? That’s pretty much the same point that you are getting at here, no? Shiller is the guy with the Nobel prize. One would think that he would be doing everything in his power to spread the word re the last 36 years of peer-reviewed research. But the reality is that he has never said “The Buy-and-Hold retirement studies get the numbers wildly wrong” or “Bogle’s investing advice is dangerous” or “It was the promotion of Buy-and-Hold strategies for decades after the peer-reviewed research showed that there is precisely zero chance that they could ever work in the real world that served as the primary cause of the economic crisis.” It hurts the cause that that is so.
I obviously would like to hear Shiller say all those things. What do you want me to do about it? I cannot force the man to say those things any more than I can force Bogle to say the things that I would like to hear Bogle say. There would be no Valuation-Informed Indexing without the contributions of Shiller and Bogle. So I obviously need to be supremely grateful to both of them. And I just have to accept that neither of them sees fit today to offer all the help that I would like to see them both offer. It’s not like I can do anything about it anyway, you know?
It wouldn’t surprise me to see Shiller publish a sequel to his Irrational Exuberance book in the days following the next price crash in which he reports on all the how-to implications of his research that he has held back commenting on through this day. I have no inside knowledge. But it would not surprise me to learn that he has already written the sequel and is just waiting for a time to publish it when he believes that the follow-up work will generate a good reception.
I want to read the sequel now, you know? I don’t want to wait. When it comes to learning what I need to do to invest my retirement money effectively, I am an impatient sort of fellow!