Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
Please help us understand why you wouldn’t do everything in your power to relieve the stress on your wife by getting a job.
Because I think that I can bring in a higher income (by a factor of 500 or more) by doing the work that I am doing today. I have spent decades developing the abilities that I employ to do this work. I want to put my talents to their highest and best use.
We know from the reactions that we saw to my posts before you Goons were able to intervene with your garbage that there are millions of middle-class investors who want to know more about what the last 36 years of peer-reviewed research tells us about how stock investing works in the real world. I have the ability to reach those people through this amazing new communications medium and it would be foolish and irresponsible of me to pass up the opportunity.
People generate wealth by adding value. Opening the internet to honest posting on the last 36 years of peer-reviewed research in this field is the biggest value-add that I have ever come across in my lifetime. I love the work. I obviously hate the ugly stuff that you Goons add to the mix. But I think it is a terrible mistake for people to shy away from doing the important work that needs to be done here out of fear of the ugly, smelly stuff that you Goon dish out.
We have laws against financial fraud. Let’s enforce them, you know. Then we all get to the place where deep in our hearts we all really want to be (including you Goons, to be sure!).
It’s a win/win/win/win/win, Anonymous. Learning experiences are the one true free lunch available to us in this world. If you were thinking clearly, you would have seen this yourself going back to the first day. That’s my sincere take in any event.
Don’t let the bad guys get you down, man.
Rob
Wade Pfau has a new book. Were you the primary author of this too? Is Wade trying to take credit for all of your peer reviewed research?
https://www.amazon.com/dp/1945640022/
Shiller is interviewed in this week’s Barrons. Does he finally warn people to get out? Um, no. In fact the title of the article is “Who Says This Stock Market Is Overpriced?”
Barrons: Is it time, then, to discard the CAPE as a predictive tool?
Shiller: Well, I wouldn’t. It may yet do that [be correct].
And that is as strongly as he defends the metric that has guided your investing strategy for the last 21 years. And Shiller’s personal investments?
“I still have U.S. stocks…I have European and emerging markets stocks, and not much fixed income. I have some real estate funds and REITs outside the U.S.”
Not much fixed income means he is mostly in stocks. When PE10 is insanely high. Any comment, Rob? Are the goons forcing him to buy stocks?
Wade Pfau has a new book. Were you the primary author of this too? Is Wade trying to take credit for all of your peer reviewed research?
The words in Wade’s book were obviously influenced in a very big way by the life-altering and career-altering work that Wade did with me and by the interactions that he had with thousands of our fellow community members at times when he thought that it was safe for a moment to exchange in some honest interactions with others. Wade had zero problems saying that in the days before you Goons threatened to send defamatory e-mails to his employers in an effort to get him fired from his job and before Jack Bogle, a powerful man in this field, signaled that he was okay with that.
Why do you think that Wade said so many times and in such strong language that I had a huge influence on his work if he did not believe it to be so?
Another way of getting at the essential point is to ask why you advance death threats and demands for unjustified board bannings and tens of thousands of acts of defamation and threats to get academic researchers fired from their jobs if you don’t think such intimidation tactics have an effect. You think they have an effect. That’s why you directed them at Wade and that’s why you directed them at many, many others.
Wade’s book would be a better book if he felt free to say what he believes without fear of what will happen to his career is he “crosses” you Goons. The Campaign of Terror against our board and blog communities needs to come to a full and complete stop by the close of business today. Corruption in the entertainment industry has done great harm to people who have associated with Harvey Weinstein and corruption in the investing advice field has done great harm to millions of middle-class investors. We all should be pulling together to do what we can do to EXPOSE corruption that hurts millions of people when we see it.
I am 100 percent sure.
I hope that helps a small bit, my long-time Buy-and-Hold friend.
Rob
Barrons: Is it time, then, to discard the CAPE as a predictive tool?
Shiller: Well, I wouldn’t. It may yet do that [be correct].
Any comment, Rob?
I have several comments.
My first comment is “thanks for bringing this to our attention.
Shiller is the founder of Valuation-Informed Indexing. He has never used that word. It is my word. I noticed back in 2002 that neither Shiller nor anyone else had ever explored in depth the many far-reaching implications that follow from his “revolutionary” (that’s Shiller’s word) research findings of 1981. I needed a name to apply to the investing model that logically follows from a belief in Shiller’s work and I came up with the name “Valuation-Informed Indexing.” Shiller himself rarely explores the practical how-to-invest implications of his work. He sticks to theory in his formal writings. He sometimes touches on the how-to-invest implications in interviews but almost always only in a vague and unsatisfying way and he frequently says things in one interview that conflict with things he has said in other interviews. I cannot claim full credit for Valuation-Informed Indexing because it is Shiller’s work that drives the machine but Shiller cannot be said to have endorsed the many things that I say follow from his Nobel-prize-winning work because he has not put his name to my explorations of the implications of his work.
So my first comment is to say “thank you” on behalf of the millions of middle-class investors who I believe should be trying to learn more about how stock investing really works in the real world. We all need to know more about what Shiller thinks re these matters and you Goons often bring to my attention things that he has said that I would otherwise not know about. You are helping me when you do that and you are helping investors who read the words at this site either now or after the next crash when you do that. I am grateful.
Shiller doesn’t disown Valuation-Informed Indexing in the words that you quote. He doesn’t say that anything that I have said is wrong. His words are consistent with my words. But I think it is 100 percent fair of you to suggest that he is showing a distinct lack of enthusiasm for the Valuation-Informed Indexing concept (a concept rooted in his own Nobel-prize-winning research) in the words that you quote. It is an exceedingly odd phenomenon.
My take is that Shiller has lots of experience with the anger that is provoked in Buy-and-Holders when they hear about what the last 36 years of peer-reviewed research tells us about how stock investing works in the real world and that he tries hard to steer clear of advancing comments that will cause that anger to be directed to him. That’s what I believe, Anonymous. I see it as a 100 percent human reaction. No one likes to have other people angry at him. No one likes to have other people calling him names. No one likes to see other people experience pain and angst and unhappiness. Shiller is responding in a human way to a situation that he did not create, to a situation that he was placed in as a result of the circumstances of his life. He discovered some amazing stuff about how stock investing works and the implications of what he has discovered upset lots of people in a very big way and his response has been to hold back on offering clear comments on the many far-reaching implications of his work.
I believe that it is unfortunate that Shiller has acted in this way. I would like to see him respond in more forthright ways. If he showed leadership in this regard, lots of others would feel emboldened to follow the path he pioneered. When Shiller speaks in a tentative way, others who see value in his work follow his lead and speak in a tentative way as well. The result is that knowledge of and belief in the Valuation-Informed Indexing model grows more slowly than it would were Shiller leading the charge into battle every day. That hurts each and every one of us, Buy-and-Holders and Valuation-Informed Indexers alike, in my assessment.
It is of course correct to say that P/E10 may prove to be a predictive tool yet once again, just as it has proven to be a predictive tool for 147 years running now. So Shiller’s comment is of course correct. But it is an awfully defensive way to make the point. If I were asked that question, I would ask back in response why anyone would think that it might NOT prove to be a predictive tool yet once again. It appears that there was some discussion that came before the words you quote in which it was noted that we have not yet seen a drop to fair-value P/E10 levels and that we have been at super-high P/E10 levels for longer than any earlier time in history. That much is so and that’s an important point to raise in an interview with Shiller. He DOES need to be asked to explain that — it is a good reason for having doubts about Valuation-Informed Indexing. But I think that I could make a much more powerful case in favor of Valuation-Informed Indexing than Shiller offered here.
The point that is evaded in the interchange is that stocks have also not in recent years behaved in accord with how the Buy-and-Hold model says they should behave. The annualized real return for stocks from January 2000 through December 2016 was 2.25 percent real. Huh? There is not one Buy-and-Holder alive who would have predicted that if you asked him in January 2000 what sort of return he thought we would see from stocks for the next 17 years. Something very, very, odd is going on in the market in recent years and it is the most important public policy issue before us as a nation today to figure out what it is.
It COULD be that Valuation-Informed Indexing does not work. I don’t believe that and Shiller doesn’t believe that. But neither of us can see the future and neither of us are incapable of errors in judgment. So that COULD be the case. But it also could be the case that Buy-and-Hold is in error. That in fact MUST be the case if Valuation-Informed Indexing is not in error; the two models for understanding how stock investing works cannot be reconciled — it is a logical impossibility that they are both correct. There is a certain charm in the humble way in which Shiller makes his case, I will give him that much. But as the fellow who performed the research that discredited the Buy-and-Hold Model (if it is valid, as I believe it to be), it is Shiller’s JOB to make the strongest case possible for the new model (while also being charitable to those who continue to believe in the model that he discredited and while also acknowledging his own human imperfections and noting that there are developments that have taken place that justify SOME doubt about the Valuation-Informed Indexing project, to be sure).
I am not able to say precisely what Shiller would say re these matters if he felt no pressure to avoid provoking Buy-and-Holders by speaking plainly. I think he would be much stronger in the case he makes for Valuation-Informed Indexing and for the failure of the Buy-and-Hold Model if he did not feel such pressures. But I also think that it is possible that he is experiencing a measure of cognitive dissonance, as Bogle experienced a measure of cognitive dissonance before him. And it is of course also possible (and likely!) that, even if no pressures to hold back were present, Shiller would disagree with me on several or even numerous points. It is a rare case in this world when two people agree on every point. Ask anyone who has ever been married for more than a week!
I credit Shiller for writing an amazing book and for producing the most important research ever published in this field. I would be horrified if any of my fellow humans ever came to the conclusion that I speak for him. I certainly do not. Nor does he speak for me, if you want to take it from the other direction. I am a guy who posts on the internet about his views on stock investing, views which are informed by a belief in the “revolutionary” (Shiller’s word) research produced by a Nobel-prize-winning economist in the year 1981, research which 100 percent discredits the Buy-and-Hold Model for understanding how stock investing works if it is indeed valid research (which I believe it to be), no more and no less.
We would all know more about what both Shiller and Bogle believe re all of these terribly important matters if as a society we came to the conclusion that we need to open every discussion board and blog to honest posting on safe withdrawal rates and scores of other important investment-related topics. We learn a little bit from this interview. But think how much more we would learn if we could ask Shiller to the next Bogleheads convention and put him on the hot seat for an hour (while anticipating putting Bogle on the hot seat in the following hour!) and if we did so in an environment in which it had become clear to every member of the community that we both permitted and encouraged hard-hitting questions on these matters because we understood as a people that it is by asking and obtaining clear answers to hard-hitting questions that we over time gain a better understanding of the realities. Shiller would both teach and learn in that environment, as would Bogle, as would I, as would you Goons, as would every single other community member who elected to participate in the powerfully enriching experience.
These are my sincere thoughts, Anonymous.
I naturally wish you the best of luck in all your future life endeavors.
Rob
So on the subject of CAPE/PE10,
Rob says “It’s the price of stocks. And it’s insanely high.”
Shiller says “Well, I wouldn’t discard it.”
So Rob says “See? We totally agree.”
Obviously Shiller can’t say he would discard it. To do so would be to say he didn’t deserve his Nobel Prize. The test is where Shiller is putting his own money, and he just said he is heavily in stocks. A point you avoided in that huge comment.
“The words in Wade’s book were obviously influenced in a very big way by the life-altering and career-altering work that Wade did with me and by the interactions that he had with thousands of our fellow community members at times when he thought that it was safe for a moment to exchange in some honest interactions with others.”
Does that mean that you are the coauthor of his book as you claim you are the coauthor of one of his papers?
So on the subject of CAPE/PE10,
Rob says “It’s the price of stocks. And it’s insanely high.”
Shiller says “Well, I wouldn’t discard it.”
So Rob says “See? We totally agree.”
Obviously Shiller can’t say he would discard it. To do so would be to say he didn’t deserve his Nobel Prize. The test is where Shiller is putting his own money, and he just said he is heavily in stocks. A point you avoided in that huge comment.
I think your comment is a fair one, Anonymous.
I 100 percent say that P/E10 is the price of stocks and that it is insanely high.
And Shiller said that he wouldn’t discard it. That statement is not inconsistent with what I say. I wouldn’t discard it either. But the tone used by Shiller and the tone used by me are very different. I am saying that we should be permitting honest posting re the effect of an insanely high P/E10 value at every discussion board and blog on the internet because, in the event that Shiller’s Nobel-prize-winning research is legitimate, the continuation of the Ban on Honest Posting may cause the Second Great Depression. That’s not good for anybody.
What I most like about your comment is where you say: “Obviously Shiller can’t say he would discard it. To do so would be to say he didn’t deserve his Nobel prize.” Yes! That’s exactly right. Shiller is biased. I am biased. You are biased. Bogle is biased. We all are biased. That’s why we should permit honest posting. When we permit honest posting, the people reading the boards to learn about the subject of investing get to hear both sides and then to form their own opinions. They can’t do that when only the advocates of one side are permitted to post their honest views. When you prohibit honest posting for those advocating the minority position, you turn the entire board into a corrupt endeavor. No one can trust a thing that is said at a board where one point of view cannot be expressed. How do you know whether the stuff being said by people holding the other point of view is legitimate? There is no one to challenge them when they say dubious things.
I don’t think that the test is where Shiller is putting his money. Shiller has indicated in many comments that he believes that he is able to engage in short-term timing successfully. He has said that he believes that a crash is coming but that he also believes that there are economic indicators that he can look at that will tell him when to get out. I am with the Buy-and-Holders re that one. I think Shiller is fooling himself re that one. It sounds like he might be one of those darn humans! The fact that Shiller gets that one wrong (in my view!) does not discredit his research findings. The research findings have been checked many times and they have passed every test. I believe that Shiller’s Nobel-prize-winning research is legitimate research.
By the way, I did NOT say that Shiller and I totally agree. I don’t see how any fair-minded person could get that from my comment. I couldn’t have done any of my work if Shiller has not published his “revolutionary” (his word) research findings of 1981. Everything that I have done is rooted in a belief that valuations affect long-term returns. But I don’t believe that Shiller and I agree on every point and I certainly have never said that we do.
I don’t agree with my wife on every point. I don’t think that I agree with my dog on every freakin’ point. Sometimes it is raining and he doesn’t want to go for a walk and I have to persuade him. He usually goes along with some reluctance but I don’t get the sense that he entirely agrees with me. He doesn’t like the rain, you know? He really doesn’t. But my view is that he needs to take a pee sooner or later, rain or no rain. Whachagonnado?
I think it might be that the difference between Shiller and me is that he is an academic and I am a journalist. Academics are very cautious. I think he feels that, if he makes his point and doesn’t argue it very forcefully, events will over time prove him right or wrong. I think he believes that there is going to be a crash and that that will vindicate him and that he doesn’t need to convince anyone today.
Up to a point, I agree with that. I do think that there will be a crash and that it will vindicate both me and Shiller. But I feel more of a sense of urgency re bringing the intimidation tactics that the Buy-and-Holders have employed to keep discussions of this stuff bottled up to a full and complete stop. If we permitted honest posting at every board, there would still be lots of people who would follow Buy-and-Hold strategies. There are many people who would not be persuaded of what I say even if I and all others were permitted to post with full honesty. I see that as being all part of the wonderful game. That doesn’t concern me.
But it concerns me greatly that we don’t permit honest posting today. When we ban honest posting, we violate the core social norms of this country. When we ban honest posting, we open lots of people to civil lawsuits and even to criminal prosecutions after the crash arrives. Huh? How is that a good thing? That sort of thing is very much NOT all part of the wonderful game. I don’t favor that sort of thing.
As an academic, Shiller adopts an ivory tower perspective. The idea is :”The truth will reveal itself over time, regardless of anything that I say. So there is no need for me to speak up with any great force.”
As a journalist, I believe that telling people the true story regardless of how they elect to react to it is a matter of great importance. The idea is: “Get the word out and let people decide for themselves how to react once they are fully informed. But always get the word out. Do not let intimidation tactics dissuade you from playing this important role, the role you have been given in this society. Speak truth to power. Do not falter.”
We believe in essentially the same things. But of course we don’t agree on every tiny detail because no two people on this planet do. But we come at things from different perspectives. Shiller is an academic and so he tends to come at things from the perspective of an academic. I am a journalist and so I tend to come at things from the perspective of a journalist.
As a journalist, I see this as the biggest personal-finance-story in the history of the United States. I think we’ve got a tiger by the tale re this one. That’s my sincere take.
My best wishes to you and yours.
Rob
Does that mean that you are the coauthor of his book as you claim you are the coauthor of one of his papers?
I wouldn’t call myself the co-author of the book. Wade contacted me to ask if I would be willing to work with him on the research that we co-authored. He said that he saw great potential in research determining the merit of the Valuation-Informed Indexing model but that he did not think it would be ethical for him to do such research on his own since he understood that I had spent years developing the Valuation-Informed Indexing concept before he learned about my work by visiting the Bogleheads Forum. He certainly never had any problem with crediting my big influence on his understanding of these issues prior to the day when you Goons threatened (with Bogle’s apparaent acquiescence) to destroy his career if he continued doing honest work in this field. I wonder why the 180 degree change overnight?
I never had any involvement with the book. But I certainly think that he should credit me with the influence on his thinking on all points made in the book where I did indeed have an influence. It would be dishonest of him not to give me credit for what he learned from me. And, again, he obviously shared this view 100 percent in the days before you threatened him. Wade knows that he is wrong not to give me credit for the things I taught him but he is frightened that he will not be able to make a living in this field if he “crosses” Bogle’s Goons. I believe that the people of the United States should all pull together to bring the intimidation tactics to a full and complete stop by the close of business today. Criminal behavior hurts all of us. Otherwise, why would we have made it criminal in the first place?
Make sense?
Rob
“I don’t agree with my wife on ever point. I don’t think that I agree with my dog on every freakin’ point. Sometimes it is raining and he doesn’t want to go for a walk and I have to persuade him. He usually goes along with some reluctance but I don’t get the sense that he entirely agrees with me He does like the rain, you know? He really doesn’t. But my view is that he needs to take a pee sooner or later, rain or no rain. Whachagonnado?”
So Shiller is like your dog and needs to do what you say?
“I don’t think that the test is where Shiller is putting his money.”
That is the only test. Action talks, bullshit walks. Shiller’s stock allocation is absolutely inconsistent with what VII says it should be at this PE10 level (to the extent that anyone can figure that out.) Which means Shiller doesn’t agree with VII. No other conclusion is possible.
So Shiller is like your dog and needs to do what you say?
Um — Yeah, Anonymous, that’s exactly what I said.
Please take good care, man.
Rob
That is the only test. Action talks, bullshit walks. Shiller’s stock allocation is absolutely inconsistent with what VII says it should be at this PE10 level (to the extent that anyone can figure that out.) Which means Shiller doesn’t agree with VII. No other conclusion is possible.
Shiller has more confidence in the merit of short-term timing than I do. I think that would be 100 percent fair to say. A core principle of Valuation-Informed Indexing is that short-term timing doesn’t work. So it would also be fair to say that Shiller does not endorse every principle of Valuation-Informed Indexing.
But you are going way too far when you say that “Shiller doesn’t agree with VII.” It could be that he believes that he personally is able to succeed at short-term timing because he is a Nobel-prize-winning economist but that he does not think that ordinary investors should he employing short-term timing strategies. We just don’t know the details. To learn the details, we would need to open the internet to honest posting re these matters so that we all could talk them over and encourage the people who interview Shiller to ask him these questions or to interview him ourselves by inviting him to the next Bogleheads Forum.
Which you very, very, very, very, very much do not want to do. I wonder why.
Rob
What has Shiller done with respect to his own investing to suggest he follows and believes in VII?
He has said that he believes that there is a price crash coming and that he is waiting for his “signals” to tell him when to get his money out. If that works, it will be the best of all worlds. He will get the benefits of being in stocks when prices are going up and then being out of stocks when prices are going down. Sweet deal!
I think he is 100 percent right re the part about there being a crash coming and I think that he is fooling himself re the part about the signals giving him sufficient warning to get out of stocks before a crash hits. But it could be that I am the one who is wrong re short-term timing, you know? That’s why I don’t seek to ban people (like Shiller!) who believe in short-term timing. I make my case and I permit them to make their case and I remain friends with them and I try to learn from them when I can.
If Shiller pulls it off — if he goes to zero stocks the week before the crash hits — I am going to note the achievement in a blog entry here at this site. Now, I am not going to myself become a believer in short-term timing unless he puts forward some peer-reviewed research showing that these “signals” of his have a long-term track record of doing what I today believe to be the impossible. But it could be that Shiller is just one big step ahead of me and that short-term timing is really the cat’s meow. I am not convinced as of today. Please write me down as a skeptic. But don’t look for me to send any death threats in Shiller’s direction. I am fine with the reality that this great man holds a different view than me on this one issue. What of it? It’s perfectly normal and healthy that we would disagree on one or two issues. I try to focus on the stuff that I have learned from him and not worry too much that he happens to hold a different view on the short-term timing question.
If Shiller puts forward research showing that short-term timing works that wins him another Nobel prize, I will take a serious look at it. As of now, all that he is showing by using short-term timing in his own plan is that he PERSONALLY believes that it works and only for him. That doesn’t impress me so much. It was my good friend Jack Bogle who taught me that it is a good idea to see what the peer-reviewed research says because that helps you avoid the subjectivity of emotions and to root your investing plan in something solid and objective and real and long-lasting. I am personally persuaded that Jack nailed that one. Sue me, you know?
Rob
“He has said that he believes that there is a price crash coming and that he is waiting for his “signals” to tell him when to get his money out.”
Obviously you didn’t even read the article. He said no such thing. Here’s another quote.
Barrons: What will cause the next bear market?
Shiller: The next big crash occurs when people think other people are changing their minds. I don’t have a precise way of forecasting.
He did not say the crash will be caused by valuations, or buy-and-hold. Nor did he say anything about “signals” he uses for timing the market. You’re just making stuff up. Your Shiller is a cartoon caricature of the real guy.
He did not say the crash will be caused by valuations, or buy-and-hold. Nor did he say anything about “signals” he uses for timing the market. You’re just making stuff up. Your Shiller is a cartoon caricature of the real guy.
I’ve read Shiller’s book. I know why he believes that we are headed for a crash. And, yes, it is valuations that cause crashes, according to Shiller. His research showed that valuations affect long-term returns. They don’t affect them in a neutral way. High valuations cause low long-term returns. Low valuations cause high long-term returns. We are today at super-high valuations. That means a crash is coming. There is not one exception in the historical record.
It’s not Shiller that says Buy-and-Hold causes crashes, that’s Rob Bennett. I say that because Shiller says that high valuations cause crashes and because it is Buy-and-Hold that causes high valuations. If it were not for Buy-and-Holders telling people not to exercise price discipline when buying stocks, everyone would exercise price discipline when buying stocks. Why wouldn’t we? That’s what we do when we buy sweaters and bananas and vacations, isn’t it? The peer-reviewed research that I co-authored with Wade Pfau shows that exercising price discipline when buying stocks increases returns dramatically while also diminishing risk dramatically. So what possible reason could anyone have for not exercising price discipline when buying stocks?
Most of us don’t exercise price discipline when buying stocks because the Wall Street Con Men who push the smelly Buy-and-Hold garbage so relentlessly say that it is not necessary to do so. When we ask them why, they send their internet Goon squads after us with their death threats and their demands for unjustified board bannings and their tens of thousands of acts of defamation and their threats to get academic researchers fired from their jobs. And, just by pure coincidence, these criminal acts have kept the millions of dollars that the Wall Street Con Men get from promoting this “strategy” flowing into their pockets.
Shiller never said in his book that “my research obviously discredits the Buy-and-Hold strategy.” But he should have. It does that, doesn’t it? Shiller’s research shows that valuations affect long-term returns. If valuations affect long-term returns, stock investing risk is not stable but variable. If risk is variable, then no investor who is unwilling to adjust his stock allocation in response to big valuation shifts can maintain a constant risk profile. Even the Buy-and-Holders acknowledge that we should all be seeking to maintain a constant risk profile. No?
I don’t know whether Shiller talked about the signals he uses to time the market in the Barron’s article or not. All that I know about the article are the lines that you quoted from it. The question that I was asked was why Shiller does not go with a low stock allocation given what his research shows us about the effect of valuations on long-term returns. The answer is that Shiller believes that he can engage in short-term timing effectively. He has said in earlier interviews that he believes that a crash is coming because valuations are so high but he believes that economic indicators that he looks at will tell him when he needs to get out of stocks. He doesn’t see a need to get out of stocks now because his indicators aren’t telling him that the crash is imminent.
If I believed that I could know from indicators that I watch when the crash was arriving, I would go with a high stock allocation until that time too. I just don’t believe it. I believe in long-term timing because of what Shiller’s research shows. But I do not believe in short-term timing. I wouldn’t feel comfortable relying on indicators to know when to get out of stocks. So I just lower my allocation to the extent necessary when high prices push stock investing risk too high for me. So long as I keep my risk level at the right level, I don’t have to worry about knowing the precise time that the crash will come. It doesn’t matter for someone who keeps his risk profile constant.
Please note Shiller’s comment that “The next big crash occurs when people think other people are changing their minds. I don’t have a precise way of forecasting.” That’s precisely right. That’s why I lower my stock allocation when prices go too high and don’t wait for signals to tell me when precisely the crash will arrive; I don’t think it is possible to know. Shiller is here making a case for why short-term timing is not a good idea — none of us possess a precise way to forecast. Given that we don’t have a precise way to forecast, the best thing is just to lower our stock allocation to whatever it needs to be to keep our risk profile constant. It appears to me that Shiller is contradicting himself here.
Some of the wording used in your comment (and in several other comments that you submitted and that I deleted) shows that you are angry. Following Get Rich Quick strategies makes investors highly emotional. This is one of my many objections to the Buy-and-Hold “strategy.” I think that we all make better strategic choices when our emotions do not get so wildly out of control.
I hope that helps a small bit.
Rob