Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
The crash is here!
https://www.cnbc.com/2018/02/02/us-futures-move-lower-as-investors-worry-about-rising-yields.html
Call up The New York Times. Get that article on the front page. The checks should come rolling in and you will have your $500 million.
Do you think that the risk of seeing a price crash is greater when stocks are priced at two times fair value than they are when stocks are priced at fair value?
I do.
If that’s so, then there is a price attached to every price increase that takes place at a time when stocks are already overpriced. The price increase leads to a bigger number on the portfolio statement. But the increased risk diminishes the value proposition for stocks on a going-forward basis. The pros and cons of such price increases cancel each other out, meaning that price increases that take place at times of overvaluation are not real. They are pretend.
It makes a difference, If an aspiring early retiree ignored what the last 36 years of peer-reviewed research teaches us about pretend price increases, he would use a 4 percent safe withdrawal rate to plan a retirement planned to begin on Jan. 1 2000. If he took the 36 years of peer-reviewed research into consideration, he would use a safe withdrawal rate of 1.6 percent for his planning. Getting the numbers right in retirement planning makes a difference.
The promotion of Buy-and-Hold strategies always leads to stock crashes. There has never been one exception in the history of stock investing. Stock crashes hurt people in very serious ways. It’s not for me. I was a Buy-and-Holder in the days when I believed that claim that Buy-and-Hold is rooted in the peer-reviewed research. When I learned that that is not so, I moved on.
I don’t laugh about causing stock crashes. I see nothing funny about them. Your behavior tells the tale. Buy-and-Hold is rooted in investor emotion, not peer-reviewed research. It is investor emotion that has been making stocks a risky asset class since the first stock market opened for business. The job of an investment adviser is to help people rein in their emotions, not to encourage them to give their emotions free rein.
My sincere take.
Rob
Yes, buy and hold certainly failed for Warren Buffett.
This makes no sense. Because stock crashes have always occurred you could say that just about anything creates them.
Buffett considers the value proposition that he is obtaining with every purchases he makes, Anonymous. There are many things that need to be looked at to determine the value proposition that applies for a purchase of an individual company’s stock. It is a complicated process. The average person is better going with index funds — it is a far simpler process. But to take the value proposition being offering into account when buying an index fund, the investor MUST consider the valuation level that applies at the time the purchase is being considered.
Valuation-Informed Indexing is a combination of the ideas of Bogle and Buffett. It contains all the simplicity benefits of indexing and also all the benefits of Buffett’s focus on obtaining strong long-term value propositions.
I hope that helps a small bit.
Value-Conscious Rob
This makes no sense. Because stock crashes have always occurred you could say that just about anything creates them.
I think it makes perfect sense, Laugh.
It is the very purpose of a market to get prices right. That’s what markets DO.
Now, think what happens to the stock market when people become Buy-and-Holders and just flat-out REFUSE to consider price when making their purchases. The price just keeps going up and up and the long-term value proposition just keeps going down and down until we get into the sort of situation where we are today. The market wants to get the price back to fair-value levels. But the only way it can do it when purchasing decisions become as dysfunctional as they are today is to crash. Crashes hurt us all. I think we should all be doing what we can to avoid crashes, not to encourage them.
Buy-and-Hold is the ultimate crash-inducer. What causes crashes? The lack of price discipline. What is the key Buy-and-Hold principle? Don’t ever, ever, ever consider price when buying. Huh? What the f? In every market that exists, price is the most important thing that buyers need to keep in mind at all times. But what do the Wall Street Con Men tell us? They say that there’s is some mystical, magical secret sauce that they apply to the stock market so that price makes no difference when buying stocks — stocks are ALWAYS worth buying, say the people who sell stocks. Um — sure they are. Um — I believe that! No, really, I do! Really!
It’s a scam, Laugh. Price has mattered for the entire 150 years for which we have good records of stock prices. It will continue to matter for the next 150 million years. It is a logical impossibility that there could ever be a market in which price did not matter. That’s a marketing gimmick that the Wall Street Con Men use to separate us all from our money. It’s a lie that has made the Wall Street Con Men very rich indeed. But it is not working out so great for the millions of middle-class people who are seeing their hopes of being able to afford decent retirements some day destroyed. That is causing political frictions on both the left and the right. I OPPOSE that sort of thing. I love my country.
Get Rich Quick is not the answer, Laugh. Not in this boy’s sincere opinion. I wish you all good things. But I cannot say that I do have much confidence that all of the laws of stock investing that have applied since the beginning of time are going to be turned on their heads and that the pure Buy-and-Hold “strategy” is going to work for one or two long-term investors for the first time in history.
I guess we will all get to see how it plays out, right?
My best wishes to you in any event, my dear Buy-and-Hold Goon friend.
Research-Believing Rob
“Valuation-Informed Indexing is a combination of the ideas of Bogle and Buffett.”
Yeah right.
“The idea that a bell rings to signal when investors should get into or out of the market is simply not credible.” John Bogle
“Market timing is required for long-term investing success.” Rob Bennett
“I never have the faintest idea what the stock market is going to do in the next six months, or the next year, or the next two.” Warren Buffett
“The market will crash 65% within two years” (slightly varied wording) Rob Bennett, in 2010, 2011, 2012, 2013, 2014 and 2015.
You are slipping, Rob. You need to point out to everyone that Buffett, Bogle and Shiller are all holding back on the truth due to death threats by the goons.
“Valuation-Informed Indexing is a combination of the ideas of Bogle and Buffett.”
Yeah right.
“The idea that a bell rings to signal when investors should get into or out of the market is simply not credible.” John Bogle
“Market timing is required for long-term investing success.” Rob Bennett
“I never have the faintest idea what the stock market is going to do in the next six months, or the next year, or the next two.” Warren Buffett
“The market will crash 65% within two years” (slightly varied wording) Rob Bennett, in 2010, 2011, 2012, 2013, 2014 and 2015.
Over the past 16 years, I have explained the difference between short-term timing and long-term timing about 10,000 times, Anonymous. 100 percent of the research in this field shows that short-term timing never works. And 100 percent of the research in this field shows that long-term timing always works and is always required. So that’s what I tell people.
Long-term timing is price discipline. The idea that there might be some alternate universe somewhere where long-term timing is not required is preposterous. How can the market work without investors exercising price discipline? If enough investors are persuaded that they do not need to exercise price discipline, we are going to see a crash. At least that’s the way it has been working for 150 years now.
I wish you all good things. But I continue to believe that it is dangerous to fail to exercise price discipline when buying stocks. I think that Jack Bogle was right the first time. I think that using the peer-reviewed research as a guide to how to invest in stocks makes all the sense in the world.
My best wishes.
Rob
“And 100 percent of the research in this field shows that long-term timing always works and is always required. So that’s what I tell people.”
Well, if it was 100 percent, it wouldn’t just be you doing the telling, would it?
Perhaps part of the problem is that you’ve never explained how to implement “long-term timing.” In such a way that doesn’t require Bogle’s bell to ring. And perhaps the other part of the problem is that you never will explain it.
You are slipping, Rob. You need to point out to everyone that Buffett, Bogle and Shiller are all holding back on the truth due to death threats by the goons.
I put forward my famous post pointing out that the retirement study housed at John Greaney’s web site does not contain a valuations adjustment on the morning of May 13, 2002, Anonymous. 16 years have passed and the study has still not been corrected. It does not take 16 years for people to check whether a study contain a valuation adjustment or not. I mean, come freakin’ on.
Yes, Buffett, Bogle and Shiller are holding back. And so is everyone else working in this field. That’s the only possible explanation for what we have seen.
Buy-and-Hold is a mistake. It is a strategy that was developed before all the research was completed. People thought that timing wasn’t necessary and so they endorsed Buy-and-Hold. Then Shiller published “revolutionary” (his word), Nobel-prize-winning research showing that price discipline (long-term timing) is always 100 percent required and the people who had already built their careers around promotion of the Buy-and-Hold strategy suffered cognitive dissonance over this research-proven reality. They couldn’t bear to accept that they had made such a terrible mistake. So they told themselves that things would be okay if they did not correct the error and they went into cover-up mode. And they continued to promote the Buy-and-Hold “strategy”! And we ended up at valuation levels far higher than those that caused the Great Depression!
People don’t like to see death threats directed at them. People don’t like to see demands for unjustified board bannings directed at them. People don’t like to see thousands of acts of defamation directed at them. People don’t like to see threats to get academic researchers whom they work fired from their jobs as their “punishment” for doing honest work. If as a society we come to tolerate that sort of behavior, we are going to bring on an economic crisis. There is no other way that it could turn out once we begin walking down that road.
We will have a chance to set things right following the next price crash. Our Wall Street Con Men friends are good people. I think they are going to work up the courage to speak out in the days following the next price crash, when they are able to see with their own eyes the human misery that follows from not doing so. Then we will see 37 years of advances in our understanding of how stock investing works achieved in a few weeks or a few months. Good for us, you know? I am going to do everything in my power to see that things go well for every single person alive on the planet at that time (including my Goon friends!).
If I were king of the world, we would have seen things going better for every single person in the world starting on the morning of May 13, 2002. But I am not king of the world. Perhaps you’ve noticed.
We will have to wait a bit to see how it all plays out. I wish you the best of luck with it, my dear Goon friend. I hope that that at least helps a tiny bit.
Compassionate Rob
Well, if it was 100 percent, it wouldn’t just be you doing the telling, would it?
Shiller was awarded a Nobel prize for his work. It’s not just me.
Perhaps part of the problem is that you’ve never explained how to implement “long-term timing.”
You should implement price discipline when buying stocks in the same manner that you implement price discipline when buying socks or pop tarts or cameras or bobby pins. Always look at the price before making a purchase and determine whether a purchase at that price benefits you or not. That’s it. That’s the secret to long-term investing success.
You can’t go just by what the stock salesmen tell you. They are compromised by their desire to turn a quick buck. I suggest going by the peer-reviewed research. Peer-reviewed research is not just marketing garbage. It’s real. Looking at the peer-reviewed research gives the average guy a chance in his efforts to see through the marketing garbage being pushed by the Buy-and-Holders.
My sincere take.
Rob
It is just you. Shiller has said many times not to market time, and has never once said or implied that anyone should market time. Short, long or medium term.
And of course, the rest of your gibberish does not even begin to explain how to implement long-term timing. Rob, when will you ever admit what so many people have told you – that you’ve got nothing of substance. All you have is empty Rob-feelings, that you somehow never get tired of babbling about.
It will be interesting to see how it all plays out, Anonymous.
I do wish you all the best that this life has to offer a person, in any event.
Rob
“Yes, Buffett, Bogle and Shiller are holding back. And so is everyone else working in this field. That’s the only possible explanation for what we have seen.”
……….the only possible explanation??? When you said “I could be wrong”, you didn’t really mean that, right?
I meant it.
Me being wrong doesn’t explain what we have seen. If the issue here were that I were wrong, we would never have seen a single death threat or a single demand for a single unjustified board banning or a single act of defamation or a single threat to get a single academic researcher fired from a single job. If the Buy-and-Holders were convinced that I was wrong, they would be happy to let me make my case at every board and blog on the internet and then they would make their case with confidence that it would prevail.
The Buy-and-Holders follow Buy-and-Hold principles. That’s clear. But they lack confidence in their own strategy. That’s why we see all this strange behavior.
We have an emotional time-bomb out there. People like Shiller and Bogle and Bernstein and lots of others don’t say all they know because they do not want to set off the time bomb. They are afraid of the reaction that they know they will see based on what they see when they try to let our small parts of the truth. Millions of investors are terrified of what is coming. They know that it makes zero sense to believe that stocks are the only thing you can buy where price doesn’t matter. But their entire lives are riding on this strategy. They cannot bear to accept that they have made such a big mistake. The experts are afraid to set off that time bomb by coming clean about all the stuff they have been holding back on.
I could be wrong. Anything could be wrong about anything. But you sure do not believe in your heart that I am wrong. If you believed that, you would never have behaved in the manner in which you have behaved for 16 years running now.
I am here for you, Anonymous. I will always be here for you.
And that’s as far as I can go with it, you know?
Rob
So Bogle, Buffett and Shiller are all worried about job threats, death threats and getting banned from the boards, so they hold back. Got it.
All human beings want to be liked. All humans beings want to be able to work in the profession in which they have trained for years. No human beings enjoy seeing their words upset others.
I believe that these feelings of not wanting to go against the herd have been installed in our being by evolution. I believe that millions of years ago those who did not go along with the herd did not survive. So we all have this inclination to try to go along with majority opinions.
That’s why we have bull markets, Anonymous. We all would be better off if we did not have them. We all would be better off if we saw stock prices increase by 6.5 percent real every year without fail. But we don’t “vote” in the way that would serve our best interests. Some of us push prices higher and higher and higher, even to insanely dangerous heights. And the rest of us tolerate that behavior. Lots of us limit our participation in bull markets. But few of us actively try to stop them in their tracks. Few of us call out our friends and neighbors and co-workers on their b.s.
And so we end up with bull markets. And the bear markets that follow from them. And the economic crises that follow from them.
Shiller showed us the way out of the craziness.
But he hasn’t helped us in a practical sense because we have not yet given ourselves permission to post honestly re what the last 37 years of peer-reviewed research shows us re how stock investing works in the real world.
I think we are going to give ourselves permission in the days following the next price crash. I think that we are going to realize at that time that we don’t really have any other choice available to us.
We’ll see.
My best to you and yours.
Rob
Hi Rob
Earlier today I left a reply to your March 28th article but it did not appear, could you explain why?
You made a point that you have made many times before and that I have responded to many times before.
You said that Greaney calculated the Historical Surviving Withdrawal Rate accurately. I of course agree and have always agreed. I say that he did NOT include a valuations adjustment in his study and that there is 37 years of peer-reviewed research showing that valuations affect long-term returns. Thus, his claim that he calculated the safe withdrawal rate is false. The safe withdrawal rate VARIES with changes in valuations levels.
I am not willing to post dishonestly re this matter.
I wish you all good things.
Rob
“All human beings want to be liked.”
First you said it was death threats, job threats and board banning a. Now you say they just want to be liked. Which is it?
It didn’t start with death threats for me either, Anonymous. It started with small expressions of disapproval. I didn’t take the hint. I continued to say that valuations affect long-term returns and to offer investing advice consistent with that belief. Then the expressions of disapproval grew stronger. Then they became outright intimidation tactics. Eventually they became death threats and board bannings.
The same would happen if Shiller said everything that he believes about stock investing. If you want to hear him offer his true beliefs on all possible topics, you Goons need to take a chill pill. Let him say what he truly believes and he will be happy to help you out. When he sees even tiny hints of the truly ugly stuff, he pulls back. And then you never get to hear what he has to say.
And of course it’s the same with all the others. We could have thousands and thousands of people advocating Valuation-Informed Indexing strategies every day. But you need to punish people less if you want them to offer their sincere views. That’s the key. You Goons all need to take the hate stuff down about 17 notches.
I hope that helps a tiny bit.
Rob
Where has Shiller or anyone else said that they are holding back because of goons?
Read Shiller’s book. He talks about when he appears on television interviews, the host will often make some comment to the effect that he needs to be aware that he could cause prices to crash is he says anything too strong. That sort of thing affects a person. Do you think that Shiller is the first human who ever lived who wouldn’t care if he caused millions of people to see their retirement accounts wiped out? He cares. And it influences what he says.
Look for practical how-to advice in his book. 90 percent of the people who buy investment books buy them to learn how to invest. Shiller never once dares to comment on any how-to questions. Why do you think that is? It’s because that’s what gets the Buy-and-Holders hot. The Buy-and-Holders tune out all his stuff about how it is investor psychology that causes price changes. But if were to have said in January 2000 that the likely annualized 10-year return was a negative number, the Buy-and-Holders would have gone nuts. He knows that and so he pulls his punches.
I didn’t pull my punches and the Buy-and-Holders threatened to kill my wife and children if I continued posting honestly. That’s the difference.
Everybody holds back in the face of that kind of abuse. That’s why you engage in it. You want people to hold back and the abusive stuff gets the job done. I want people to post their honest views. So I call you out on your abusive garbage.
Rob
So Shiller has never said he is holding back. It is just something that you are claiming.
It is something that I am claiming.
And it is something that I am documenting.
There are thousands and thousands of cases of this phenomenon reported on at my site.
Bogle said in his book that Reversion to the Mean is an “Iron Law” of stock investing. Yet he had not come out an stated in clear and firm terms that the Buy-and-Hold retirement studies get the numbers wrong.
Bernstein said that investors would need to subtract 2 percentage points from the 4 percent number to get the correct safe withdrawal rate at the top of the bubble. But he never demanded that the studies be corrected or that honest posting on the safe-withdrawal-rate topic be permitted.
Wade Pfau said that the Buy-and-Hold retirement studies are “dangerous” and that “Yes, Virginia, Valuation-Informed Indexing works!” But he also stopped reporting on the amazing peer-reviewed research that he co-authored with me and doesn’t speak out publicly about the abusive behavior that he reported to me and that he told me scared him.
It’s the same with Michael Kitces. And with Bill Shultheis. And with Larry Swedroe. And with Carl Richards. And on and on and on and on and on.
Bull markets are an emotional phenomenon. And it is the Buy-and-Hold tall tales that drive that emotion.
‘We will either open the entire internet to honest posting in the days following the next price crash or we will watch our economic system go down together. I am betting on the people of the United States. I think we will work up the courage to stand up to you Goons when we see how much human misery we have caused by failing to do so up until now. I think we are going to have Jack Bogle leading the way and that no one will be able to stand in our way once Bogle signs up with the good guys.
But we will have to wait to see how things play out, you know? I ain’t God. I could be wrong.
Yes?
Slightly Uncertain Rob
I don’t see any documentation. Correct me if I am wrong on that and link me to the proof. Otherwise, it is still just your claim.
The statement “O.J. killed Nicole” is just a claim too, Anonymous.
The original jury was influenced by emotion and he was acquitted. But it is hard to find anyone today who will say that they don’t believe O.J. did it. Emotions change over time. And, when the emotions change, the beliefs that are rooted in those emotions change too.
That’s how it works in stock investing too. There was a day when the Madoff Fund investors referred to Madoff as “Saint Bernie.” Not today. Not a close call.
It will work the same way with Bogle and Buy-and-Hold. How funny do you think people will find all the Buy-and-Hold lies after they have seen 50 percent of their retirement money disappear into thin air? I predict not too funny.
But we’ll see, you know? Just like with baseball, you have to play the games to find out for sure.
I wish you the best of luck with it in any event.
Rob