Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
“Shiller showed that long-term timing always works and is always required in 1981. ”
Do you have a link to the 1981 paper?
I read it once years ago, Sean. You can find it on the internet if you are interested. He wrote the paper with Campbell.
And he talks about it in his book Irrational Exuberance. And of course there are mentions of it in articles and in the newspaper reports on why he was awarded the Nobel prize and so forth.
I find your question interesting in way because it mirrors a question that I often want to ask the Buy-and-Holders. They say that there is research showing the market timing doesn’t work and I always want to ask them to provide a link to the paper showing that. The closest thing that we have is a paper published by Eugene Fama showing that SHORT-TERM timing doesn’t work. There has never been a paper showing that long-term timing (price discipline) doesn’t work. Wade Pfau spent months searching the literature to see if he could find such a paper and he came up empty-handed. There is zero evidence in the literature showing or even suggesting that long-term timing either might not work or might not be required. And of course, if valuations affect long-term returns, as Shiller showed, long-term timing MUST work and is ALWAYS required by every investor seeking to keep his risk profile roughly constant over time.
There can of course be legitimate differences of opinion as to how to practice long-term timing. We don’t know everything there is to know about the subject of stock investing. So we are not able to give perfect guidance today. My guess is that we will never be able to give perfect guidance. But we are able to say that those who absolutely refuse to practice long-term timing even at times of extreme overvaluation are dramatically reducing their lifetime return by doing so while also dramatically increasing the risk they take on with their investment decisions.
Just because we do not know everything does not mean that we do not know anything. We know that valuations affect long-term returns. So we know that dogmatic Buy-and-Hold strategies are dangerous strategies. Those who used a 4 percent withdrawal rate for retirements that began at the top of the bubble have only a 30 percent chance of seeing those retirements survive 30 years. I think we should be telling those people the realities at every investing discussion board and blog on the internet.
My best and warmest wishes to you.
Rob
There has never been 1 documented case of anyone that has successfully implemented VII, yet we have endless data on successful buy, hold and rebalance portfolios. You are just too scared to show this actual data on your website. That won’t look good to your jury.
It’s obviously not possible to have documented cases on successful implementation of a strategy in the days before the research showing the merit of that strategy is published. That covers up to 1981. In the days since 1981, there has been a brutal cover-up. Those who have argued in support of Valuation-Informed Indexing have seen their loved ones threatened with physical harm and have seen their careers threatened by powerful and wealthy and well-connected people. And yet we still have 10 percent of the population that today believes that Shiller’s research was legitimate.
Once we open every discussion board and blog on the internet to honest posting, the percentage of the population following a Valuation-Informed Indexing strategy will increase dramatically. You will have as many successful implementation cases as you desire. The Bennett/Pfau research shows that 100 percent of the people who follow VII will do better on a risk-adjusted basis than those who follow Buy-and-Hold. It’s not possible to do better than 100 percent.
Has Buy-and-Hold had any success? All of the elements of Buy-and-Hold other than the crazy idea that it is not necessary to practice price discipline (long-term timing) when buying stocks have been proven successful. Naturally I incorporated all of those elements into the VII model. So all of the successful elements of Buy-and-Hold will be generating success for Valuation-Informed Indexers.
The only element of Buy-and-Hold that I did not incorporate into the VII element is the one that has been discredited by 37 years of peer-reviewed research. I say that valuations matters. Always. I say that investors need to consider valuations when making investment decisions because the valuation level that applies when making the decision is the most important factor bearing on the question being considered.
Price matters when buying stocks just as it does when buying anything else. ALL of the research shows this. Wade Pfau spent months trying to locate one sliver of research supporting the core Buy-and-Hold claim that it is not necessary to consider price when buying stocks. He came up empty-handed. I wonder why. That one false claim of the Buy-and-Holders has caused more human misery than any other false claim ever made in the history of personal finance.
John Bogle has caused more human misery with that one false claim than Bernie Madoff did with his false claims. 500 times more. I don’t say that he did so intentionally. Bogle developed the Buy-and-Hold strategy before Shiller published his “revolutionary” (Shiller’s word) research. So his mistake was at one time just one of those things. But we can no longer say that 37 years down the road. Bogle should never have tolerated death threats and demands for unjustified board bannings and thousands of acts of defamation and threats to get academic researchers fired from their jobs at a discussion board with his name on it. Bogle was asked to take action re the behavior of the Lindauerheads and he failed to do so. As someone who admires this giant greatly, I urged him to take prompt action I still do.
It will be interesting to see how it all plays out in the days following the next price crash, Anonymous.
I naturally wish you the best of luck in all your future endeavors, dear Goon friend.
Unapologetic VII Advocate (and True Bogle Friend) Rob
There has never been a documented case of a death threat (other than the one you made). There has never been a documented case of a job threat. There are zero facts to back up your “ ten percent” claim. Yet, we have plenty of documented outcomes of successful cases of buy, hold and rebalance portfolios.
All you have is talk, but you lack factual support.
Case closed.
If I lacked factual support, we never would 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. When people behave that way, it is because they feel threatened. And it’s the 37 years of peer-reviewed research showing that valuations affect long-term returns (factual support!) that threatens you.
There’s a mountain of documentation. And there will be millions of people interested in looking at that documentation and bringing both civil and criminal cases in the days following the next price crashes.
Or so Rob Bennett believes, in any event. He’s been known to get things wrong in the past. So you never know for sure. We will just have to wait and see how it all plays out.
I do wish you all good things, in any event. I hope that helps a tiny bit.
All Talks, No Facts Rob
“There’s a mountain of documentation.”
Your website is not documentation. It is just your opinions, which lack factual basis.
I am 100 percent certain that the people who come here looking for answers after they lose 50 percent of their life savings are going to come to a different conclusion.
But it seems to me that we are just going to have to wait until the next price crash to find out for sure
I hope that works for you, old friend.
Non-Documented But Highly Opinionated Rob
Not a smart thing to be living out a fairytale as a retirement strategy. You might as well be telling people that you are waiting for the next rainbow do that you can collect your pot of gold.
I don’t think that it makes sense to commit criminal acts because someone on the internet has a different opinion than yours as to how stock investing works, Anonymous.
I believe that the last 37 years of peer-reviewed research is legitimate research. I believe that Shiller’s Nobel prize was well-deserved. I believe that valuations affect long-term returns. I believe that stock investing risk is not static but variable. I believe that the safe withdrawal rate is a number that varies with changes in valuation levels.
So that’s what I say. If I say things that I don’t believe re these matters, I could hurt people very seriously A failed retirement is a horrible life setback. Financial fraud is a crime, a felony. So I could go to prison if I lie about these matters.
No thanks, you know? Not this boy.
I wish you all good things. But there are limits.
Rainbow-Chasing Rob
“we never would 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.”
None of that stuff ever happened.
No.
No Rob, it never happened.
No, it didn’t.
No, none of it never happened. And you know it never happened. So why do you keep insisting that it happened? What is wrong with you?
“If I say things that I don’t believe re these matters, I could hurt people very seriously.”
Not a chance. Not one single person on earth cares what you say re these matters.
It sounds like we are going to need an FBI investigation to resolve this thing, Anonymous.
I have no objection. I will cooperate fully.
How about you Goons?
Nothing-to-Hide Rob
No, we need a trained mental health professional to resolve this thing. But you’ve always objected to that. You’ve never offered to cooperate with that.
I wonder why.
I’m just crazy enough to believe that honest posting on the last 37 years of peer-reviewed research should be permitted at every discussion board and blog on the internet, that much is fair to say,
I wish you all the best that this life has to offer a person, in any event.
Cooperative Rob
No, you’re quite a bit crazier than that. WAY crazier. But of course you won’t listen to anyone, so here you are and here you’ll stay. Talking in circles to yourself, repeating the same old lies, till doomsday.
Woe is me.
Please take good care, Anonymous.
Circle Talking Rob