Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
“There are no two sides when it comes to learning how stock investing works in the real world.”
We already know how it works. It really is no mystery.
If you were confident in what you think you know, we never would have seen a death threat.
If we already knew everything that we will ever know about stock investing, we would not be handing out new Ph.D.’s every year. If we already knew everything that we will ever know about stock investing, there would be no journals publishing new peer-reviewed research. If we already knew everything that we will ever know about stock investing, investing discussion boards would not permit new posts — they would just advise any interested readers to read the posts put up until the day when every last thing about the subject became known.
You are kidding yourself. We don’t know it all today and we never will. Discussion boards are for learning. And, following the next price crash, we are going to unite as a nation and have you Goons sent to prison so that they can be used for that purpose once again.
My sincere take.
Rob
“You are kidding yourself. We don’t know it all today and we never will. Discussion boards are for learning.”
But you said you know how investing works and that we should be following VII. Are you now saying you don’t know either?
I certainly think that I need to be questioned and challenged by all who have different ideas.
I certainly don’t know it all. I want the research to continue. I want to continue learning. It is my hope that in 10 years we will know things we don’t know today and that in 20 years we will know even more new things.
Learning Together is the one true free lunch. We should never stop trying to learn new things.
Rob
Uh oh, it looks like Warren Buffet is taking the lead again from the goons. He is telling us to stay in stocks:
https://www.cbsnews.com/news/warren-buffett-advice-investors-to-stick-with-stocks/
You better go set him straight, Rob.
We all should set him straight at the same time that we all are being set straight by him.
Buffett has said on numerous occasions that much of the conventional investing wisdom is nuts. He certainly doesn’t believe that the market is efficient and that’s the core idea behind the Buy-and-Hold strategy. Have you set him straight re those comments?
And Bogle’s mentor Benjamin Graham is the grandfather of Valuation-Informed Indexing. I have a funny feeling that Bogle doesn’t believe that everyone who shares his mentor’s views on stock investing should be banned from the internet.
Rob
Buffett says the average investor should buy and hold the S&P 500 as the market timers have a record of failure.
Long-term timing has been working amazingly well for 150 years. The peer-reviewed research that I co-authored with Wade Pfau shows that beyond any reasonable doubt whatsoever. Failing to exercise price discipline always DRAMATICALLY increases risk while also DRAMATICALLY reducing return.
Buffett was no doubt referring to short-term timing when he said that. Re that one, I agree wholeheartedly.
Rob
Buffett says you’re wrong. Bogle says you’re wrong. Even Shiller says you’re wrong. They are rich. You are poor. They are respected. You are at best ignored, at worst a sad joke. They are successful. You suck at pretty much everything.
I’ll go with the winners.
I say that we should open up every investing discussion board and blog on the internet to honest posting re the last 37 years of peer-reviewed research in this field.
Shiller showed that investors are not 100 percent rational but in fact are highly emotional. Every abusive post that you advance lends more support to Shiller’s “revolutionary” (his word) findings.
We invest more effectively when we learn how to rein in our emotions. And we learn how to rein in our emotions when we are able to discuss the research quantifying the costs of failing to do so.
My best wishes to you and yours.
Research-Based Rob
“I say that we should open up every investing discussion board and blog on the internet to honest posting”
And I say those boards are already sufficiently open. That doesn’t mean they have to indulge every nut with a half-baked timing scheme. There’s enough annoying noise on the web already.
A strategy backed by 37 years of peer-reviewed research and a Nobel prize is not half-baked. You find Valuation-Informed Indexing annoying because it is research-based and you’ve seen by the reactions it gets that that’s what most middle-class people want.
Valuation-Informed Indexing is the future, Anonymous You have slowed it down. You can’t stop it.
My take.
Rob
“A strategy backed by 37 years of peer-reviewed research and a Nobel prize is not half-baked. ”
Where, specifically, has Shiller backed VII? If he backs VII, why has he continued to say we should hold stocks?
Shiller backed Valuation-Informed Indexing when he put his name to peer-reviewed research showing that valuations affect long-term returns. Valuation-Informed Indexing is the investing strategy that is rooted in the belief that valuations affect long-term returns rather than the belief that the market is efficient. That’s what is “revolutionary” (Shiller’s word) about it. If it is true that the market is efficient, then Buy-and-Hold is the ideal strategy. If it is true that valuations affect long-term returns, then everything that we thought we knew about stock investing in the pre-1981 time-period is wrong. If valuations affect long-term returns, then risk is not static but variable and investors who want to keep their risk profiles constant over time MUST be willing to practice long-term timing (price discipline) to have any hope of being able to do so.
Most investors SHOULD continue to hold stocks because we don’t know when prices will drop. But they should go with lower stock allocations at times when prices are where they are today because the risks of owning stocks are so much greater at such times.
Shiller doesn’t spell out the strategic implications of his Nobel-prize-winning research for the same reason why thousands of other good and smart people don’t do so. None of us like to be subject to death threats. None of us like to be subject to demands for unjustified board bannings. None of us liken to be subject to thousands of acts of defamation. None of us like to be subject to threats to get academic researchers fired from their jobs. If you want to hear Shiller discuss every aspect of how stock investing works in great detail and in a clear and firm and simple manner, knock off the funny stuff. I am 100 percent certain that he and thousands of others will be perfectly happy to help you out.
As a society we enacted the laws against financial fraud to protect us from this sort of situation. I believe that we will begin enforcing those laws in a reasonable manner in the days following the next price crash. But I have been wrong before. To see whether that is the case again this time, we are going to have to wait a bit to see how things play out in the days following the next price crash. I hope that works for you, my dear Goon friend.
My best wishes to you.
Early Talking Rob
VII is “half-baked” because you can’t define how to implement it. That’s what that term means. People have asked you countless times to define the VII strategy. You duck, dodge, evade until people get tired of asking, and finally you get banned. Playful fun for you, annoying noise for everyone else.
“Valuations affect returns” is not a strategy. Why is it so impossible for you to grasp that simple fact?
You implement the strategy by aiming to keep your risk profile constant over time rather than your stock allocation. That’s it. That’s the only difference from Buy-and-Hold.
If the market were efficient, your risk profile would remain constant even if you never changed your stock allocation. If valuations affect long-term returns, you MUST adjust your stock allocation in response to big shifts in valuations to have any hope whatsoever of keeping your risk profile even roughly constant. So Valuation-Informed Indexers do that.
Just do everything that you would do as a Buy-and-Holder but then add in the last 37 years of peer-reviewed, “revolutionary,” Nobel-prize-winning research, and you’ve got it. It’s not at all hard to understand what to do or why you need to do it. The hard part is saying the words “I” and “Was” and “Wrong.” Lots of people have their lives invested in Buy-and-Hold. It is hard for them to accept that they have been doing it wrong all these years.
It is by talking things over that we work through that pain. That’s why it is so important that we open every discussion board and blog on the internet to honest posting. We can’t begin the healing process until we bring the financial fraud stuff to a full and complete stop.
A simple example of how you implement a research-based model is to calculate the safe withdrawal rate accurately. At the top of the bubble, it was 1.6 percent going by the research and 4.0 percent going by the discredited Buy-and-Hold Model. Do you see how those are different numbers?
Now, you can take out whatever you want. Not all Buy-and-Holders take out 4 percent in retirement. The safe withdrawal rate is defined as the withdrawal rate that will work if the worst-case scenario ever seen in history happens to pop up in your retirement. That’s a very safe number. So a Buy-and-Holder might say “I’m going to take 4.5 percent, not 4 percent, that’s safe enough for me. Fine, you know? It’s his choice. It’s the same with a Valuation-Informed Indexer. He might take 2.0 instead of 1.6 even though his retirement begins at a time when valuations are what they were at the top of the bubble. What of it? It’s his money so it’s his choice.
The different between the two models is that the Valuation-Informed Indexer uses valuation-adjusted numbers to INFORM his decision. He starts with 1.6 and makes whatever personal adjustments he wants to that number, he doesn’t start with 4.0 and make whatever personal adjustments he wants to that number. The difference in implementation is that the Valuation-Informed Indexer uses accurate calculations. The last 37 years of peer-reviewed research shows that you have to take valuations into consideration to get the numbers right, so he does that.
Make sense?
Rob
“You implement the strategy by aiming to keep your risk profile constant over time rather than your stock allocation.”
Define “keep your risk profile constant”. No? Of course not. You’re defining one vague undefined notion with another. Are you really surprised that your talking in circles game hasn’t made you more popular?
“At the top of the bubble, it was 1.6 percent going by the research and 4.0 going by the discredited Buy-and-Hold Model. Do you see how those are different numbers?”
Made up numbers are of no interest to anyone. Yes, there is a reason that you are a pariah. But that reason is not financial fraud or goons.
Define “keep your risk profile constant”. No? Of course not.
I co-authored research that was published in a peer-reviewed journal that examined this aspect of the question in great depth. My co-author (Wade Pfau) presented our work at the Bogleheads Forum and a good number of community members expressed excitement at our findings, saying that they turned everything that had been said at that board up until that time on its head. Mel Lindauer’s response was to defame Wade, to argue that he was engaging in unethical research practices. You Goons threatened to send defamatory e-mails to his employer in an effort to get him fired from his job. Wade had two small children for whom he was responsible at the time. Jack Bogle was aware of all this (people had been writing him about the Lindauer Matter for several years before these events transpired) and did nothing.
The problem is the massive act of financial fraud led by Mel Lindauer and John Greaney and Jack Bogle. The 37 years of peer-reviewed research showing us all how to invest far more effectively than we have ever been able to invest before is wonderful, life-affirming stuff. The massive act of financial fraud is a big pile of smelly garbage. The members of your jury will determine the length of your prison sentence. That one is not my call.
I naturally wish you all the best that this life has to offer a person, Goon friend.
Rob
As always, when cornered you walk away from the VII “strategy” discussion, and babble your Wade, Greaney and prison nonsense. And you chalk it up as another win. What an empty life.
Okay, Anonymous.
I do wish you the best of luck in all your future life endeavors, in any event.
I hope that helps a small bit.
Hang in there, man.
Rob