Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
After reading this blog I learned something new. The increase in someone’s portfolio at these crazy levels are not real. When the crash comes poof ! its all gone. That’s why in 2000 and 2008 all my friends were buying new cars and homes with their new windfall. What happened after the crashes they lost their houses, jobs, marriage.
Just being an average guy with no financial education except for my extensive reading. It boils down to such a simple concept, in regards to Value investing. If I am looking to buy a new house will I want to buy at the most expensive valuation or wait until real estate comes down to fair value.? If I buy a car am I going to wait for the sale or will I buy when a new model comes out and pay top price? If I buy dividend stocks for buy and hold forever will I buy them at PE10 of 30 or 8?
Shiller is covering his ass as I like too to say. He doesn’t want to be the one to predict the crash nor does he want to be left out if the market goes up. Rob my friend you tell the truth, yet you get criticized ? The market is worth billions and with lots of money comes corruption every time
Thanks for saying that, Max.
You are right that we are talking about a very simple concept. Do you know how I came to be in the situation that I am in? I first learned about how to save effectively. It’s all about recognizing value propositions. I learned that, when I spend my money on cars or clothes or vacations or whatever, I am giving up the opportunity to achieve financial freedom and all that goes with it earlier in life. It’s a trader-off. I was a horrible saver in the years before I realized that. I became a saving demon once it clicked for me.
Saving effectively led me to circumstances in which for the first time in my life I had money to invest. Given the excitement I had developed for how frugality can enhance my enjoyment of life, I naturally wanted to be frugal with my investing dollars as well. I wanted to find out where the best value propositions are. My research led me to believe that Shiller has the best answer to that one. His P/E10 is the price tag for stocks. Stocks offer an amazing value proposition when the P/E10 is low, a perfectly strong value proposition when the P/E1o value is moderate and a poor value proposition when the P/E10 value is high. Stocks are like anything else you buy. There are some prices at which stocks are worth buying and there are some prices at which they are not. Anyone who tells you otherwise is trying to sell you something and does not have your best interests in mind.
You humble me when you say “you tell the truth.” That is certainly my intent. I have learned from thousands of other people, including thousands of my Buy-and-Hold friends. So please don’t think that I am the only one trying to tell the truth re these matters. That is far, far, far from the reality. But I do think it would be accurate to say that I have been placed in circumstances that have permitted me to explain some important truths that most of us are not aware of and I have tried my best to take advantage of those opportunities. Lots of us are trying to do good and we are all up against some unfortunate realities and we all try to do what we can in our own ways. I hope that I have done some good with my efforts. I believe that I have.
Your corruption comment is hard to take. It is certainly true that, wherever there is lots of money at stake, there are going to be temptations to follow corrupt paths, and there certainly is a mountain of money at stake in the investing advice field. So, yes, we have seen corruption. To say otherwise is dishonest.
But it is important to be charitable as well as honest. The Buy-and-Holders are good people who want to do good things. They follow the Buy-and-Hold strategies that they recommend for others. I am 100 percent sure of that much. So, if they are working a con, they conned themselves first and others only afterwards. That reality doesn’t make the corruption go away entirely. But it does place it in a context more favorable to our Buy-and-Hold friends. They didn’t get involved in these matters with the thought of hurting anyone. The hurts that they have delivered are real and substantial. But I don’t see evidence that they started out trying to deliver hurts (and I would feel bound to say so if I did see such evidence).
The full reality here is that we just didn’t know how stock investing worked prior to 1981. Shiller’s research findings really were “revolutionary,” just as he says in the subtitle to his book. Shiller’s Nobel prize was merited. Now we know what we need to know to invest far more effectively than has ever been possible at any earlier time in history. But of course there were lots of powerful people who built their careers around the ideas that Shiller discredited with his revolutionary research findings and those people have managed to slow us from spreading the word about the first true research-based investing strategy for 36 years now. Our economic system cannot survive unless we find a way around the abusive (and, yes, corrupt) practices of these people. So we absolutely must do that. But if we are going to keep our country from being torn apart as a result, we are going to need to reach down deep and be as loving as we possibly can be toward all these good and smart people. We need to combine honesty (which tells us that there is corruption) with charity (which tells us that there but for the grace of God go we). It’s a funny kind of corruption in which those pushing the corruption hurt themselves as much as others and we need to keep that in mind at all times, in my view.
Those are my sincere thoughts re these terribly important matters, in any event.
I hope you will post again, Max. The trick to persuading lots of others to post here and to thereby advance the cause of the first true research-based investing strategy is to show them that this is not a one-man show, that there is nothing weird or odd or mentally ill or taboo about wanting to get this stuff right. If everyone who saw merit in the ideas had shown the courage to post at this site going back to the first day, the new ideas would have taken over the world by now and we wouldn’t have seen millions of people lose their jobs in the 2008 economic crisis (which was caused by the promotion of Buy-and-Hold strategies, according to Shiller’s book). We need to stick together. Each time one of us dares to speak out about what we truly believe, it helps others work up the courage to do the same. Eventually, the whole world will be following these ideas. It is the pioneers that do the hardest part of the job of getting us all to that magical place where deep in our hearts we all want to live.
I know what people are going to say when we all make it to the other side of The Big Black Mountain. They are going to say” “Rob, you are so lucky to be the one receiving that settlement payment of $500 million!” I am going to punch the first person who says that right in the nose! It’s not luck. I am happy to live in a country where millions are paid to people who put themselves though this stuff in order to help out their fellow community members. But it is not luck. I earned every penny of that settlement check. I hope that the appearance of your post is a sign that as a society we are reaching a point where we will soon begin making some sustained progress.