Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
Wrong. They all say the same thing in the sense that they all say the same thing. Just one example, the phrase:
Shiller’s “revolutionary” (his word) finding
Appears in the 3/6, 9/11, 8/21, 9/18, 7/11, and in many earlier columns. That’s just from the first page of the Google results.
I make that point over and over and over again because it is a critically important point. Shiller changed the world in 1981. We should have launched a national debate at that time re the hundreds of ways in which he changed our understanding of how stock investing works. I wish it had happened. It didn’t. That’s just the reality.
If you say in the year 2018 that the safe withdrawal rate is a number that changes with changes in the valuation level, you are saying something that is obviously true but also something that CANNOT be true. If that’s really true, wouldn’t the studies have been corrected a long time ago? It is very hard to understand how people could make an error that would cause millions to suffer failed retirements and it wouldn’t be corrected for years.
The explanation of how that happened is that Shiller’s research was revolutionary in nature. He showed the need for a paradigm change. People don’t just give up on paradigms overnight. They have to look at things from lots of different angles before they are ready to do so. They need to ask lots of questions and be persuaded by the answers given. They need to become comfortable with the new paradigm before they are willing to give up on the old one.
Every column that I write is looking at some aspect of the new paradigm. So it makes sense to remind people in each column that this stuff is revolutionary. If you come to my stuff wearing your Buy-and-Hold hat, you are not going to get it. You need to come to it with an understanding that, given the revolutionary nature of Shiller’s work, everything that we once believed — and that most of us still believe — is now under question.
If Buy-and-Hold had never existed, everyone would get Valuation-Informed Indexing in 10 minutes. It is simple, clear, common-sense stuff. But most people have heard of Buy-and-Hold. Most people have heard the Buy-and-Hold dogmas repeated thousands of times. So they think there must be something to them. You’ve got to persuade them to question those dogmas before you can have any hope of helping them to understand what the new research is showing us. Once you become committed to lots of wrong stuff, it becomes hard to accept the right stuff.
Shiller and Bogle cannot possibly both be right. They are saying opposite things. The first order of business at every discussion board and blog should be to help people figure out which of the two is right. You have to get that one right for anything else you do to work.
Revolutionary advances are good news. But they are not easy to accept. There is a lot of emotional resistance to revolutionary advances. People do not like change. Change can be a plus and in this case it is. But you cannot make an effective case for Valuation-Informed Indexing without pointing out regularly how revolutionary Shiller’s work is. People need to keep that thought in mind to have any hope of making sense of it. It is unusual for a piece of research to change everything that we once thought we knew about a subject. But that’s what happened in this case.
Good question.
Revolutionary Rob
I am not sure how you think you are providing new aspects. Everything you write, you have already repeated hundreds or thousands of times. People have already responded to your points long ago and over time have just grown tired of what you have to say. Look at how you continue to even repeat your nonsense of a post from 2002. That is SIXTEEN YEARS AGO.
Shiller published his research showing that valuations affect long-term returns in 2002. Every word that I have written over the past 16 years is just an expansion on those words. So are more words from me needed?
They are needed.
Take a look at Greaney’s site, Anonymous. He has not yet corrected the error in his retirement study that I pointed out on the morning of May 13, 2002. His death threats were not really a “response” to my post. They were an attempt at intimidation. The proper response would be to correct the darn study.
So, no, the message has not gotten through. So, yes, the point must be made again. And I of course am not just talking about Greaney. There are people who have authored similar studies. And there are people who have recommended Greaney’s study and similar studies. All of those people need to hear the message again and again. Until they get it. And respond appropriately.
Do you see?
How often does a person who smokes three packs of cigarettes a day need to hear the message that smoking causes cancer? Until he freakin’ gets it. It’s an important issue. It’s life or death. As is the matter of whether the market is efficient or valuations affect long-term returns. There will never come a day when we will have heard that message as often as we need to hear it. Say that a day came when there is 100 percent agreement that valuations affect long-term returns and that we must all practice long-term timing when buying stocks. Would the message no longer be needed? By no means! If we stopped repeating the message, we would just eventually fall back into our habit of following Get Rich Quick/Buy-and-Hold strategies. We all have that Get Rich Quick urge within us that has been making stock investing risky since the first market opened for business. We need to be ever vigilant lest it rise up again within us and destroy our retirement hopes once again as it has done so many times before. This powerful new understanding of how stock investing really works will never be old news.
Now —
If someone has been told that smoking causes cancer and has chosen to ignore the message, do I think that it would be a good idea to keep insisting that he listen to it? No. That’s obviously crazy. Similarly, I don’t see it as my job (or anyone else’s job) to convert all the Buy-and-Holders to Valuation-Informed Indexing. I see it as my job to invite them to follow a strategy that I view as far superior. But each person gets to decide which strategy he is going to follow. I am not going to pester someone who has rejected Valuation-Informed Indexing with repeated appeals that he reconsider. That would obviously be annoying and non-productive and inappropriate.
But we have to open every board and blog on the internet so that those who ARE interested in hearing the new message have a place to access it and ask questions about it and so on. That’s the key. Once all sites are open to honest posting re the last 37 years of peer-reviewed research, there’s no problem. Those who prefer Buy-and-Hold do their thing and those who prefer Valuation-Informed Indexing do their thing. That’s how we do it in this country re every subject other than stock investing and that’s how we need to do it re stock investing as well.
I think we do it different with stock investing because the new message comes as such a shock to our Buy-and-Hold friends. Most of us care a great deal about our life savings. The Buy-and-Holders are telling us that the full amount listed on our portfolio statement is real. The Valuation-Informed Indexers are saying that we need to divide that amount by two to know the true and lasting value of our portfolio when stocks are priced as they are today. That’s a darn alarming message to those who truly came to believe that Buy-and-Hold is the answer. It’s scary stuff. So a good number of our Buy-and-Hold friends have come to react in crazy ways.
We need to normalize our discussions. Had we all started talking about what Shiller showed back in 1981, when he showed it, my famous post from the morning of May 13, 2002, would not have come as a shock to anybody. What I was saying was so obvious. We know that valuations affect long-term returns. So we need to consider valuations when calculating the safe withdrawal rate. What a shocker!
But it was a shocker, wasn’t it? Why? Because we had not been talking about Shiller’s breakthrough research findings from 1981 through 2002. When I brought them up, the Buy-and-Holders among us went nuts. Shiller’s work was too strong for them to reject it. But they couldn’t imagine accepting that the safe withdrawal rate is not a constant but a variable. So we got this nutso stuff.
We need to move beyond the nutso stuff. When we move beyond it, I don’t think that everyone is going to become a Valuation-Informed Indexer. I think that lots of people will. But lots will remain Buy-and-Holders because that is what they will prefer, for whatever reason. And lots of others (probably the largest number) will choose some path between those two (that’s what lots of investors do today — after we open the internet to honest posting, they will still do that but in a better-informed way).
The idea that giving in to the Get Rich Quick impulse is a bad idea is going to be with us until the end of time. That’s the Valuation-Informed Indexing message. That’s Shiller’s breakthrough. That’s the whole story in a nutshell. We will never say it enough times because the Get Rich Quick urge is never going to go away and we are always going to need to be combating it. Thinking that it will go away is like thinking that reminders of the dangers of smoking are going to go away or that admonitions against cheating on your spouse are going to go away or that recommendations not to drink and drive are going to go away. These are basics of the human condition, as is the inclination that all investors feel toward Buy-and-Hold/Get Rich Quick investing strategies.
The difference is that every reasonable person acknowledges today that it is bad to drink and drive while millions of good and smart people still view Buy-and-Hold as the perfect strategy. So we experience clashes when some fellow comes along and points out that the Buy-and-Hold retirement studies lack adjustments for the valuation level that applies on the day the retirement begins. We need to figure out as a society how to live together in peace in a way that permits us all to have access to the important realities discovered by Shiller’s research while not upsetting our Buy-and-Hold friends unduly. That’s the project facing us today. That’s the thing we need to work through together to get this process moving forward and to a better place.
The basic message will be repeated until the end of time. Why? because those darn humans have a tendency to forget the basics. If you want them to learn how to invest effectively, you need to remind them of the basics over and over and over again. Shiller’s finding that valuations affect long-term returns is the most important basic of all. We obviously have as a society lost site of it in recent years. If we hadn’t, we never could have gone to the valuation levels that apply today. But even after valuations drop to fair-value levels, we are going to need to be reminded of that important reality regularly or we will just forget it and start going through that darn boom/bust cycle all over again.
Make sense?
Repetitive (and Proud of It!) Rob
“Make sense?”
No.
All your points have been addressed hundreds, if not thousands of times. You just don’t like the answer, so here you sit living in a state of denial.
Okay, Anonymous.
I do wish you all good things, in any event.
Please take good care, old friend.
Rob (Residence: State of Denial)
Your lack of traction and productivity over the last 2 decades should have told you that.
To the contrary, the reaction that we have seen from our Buy-and-Hold friends to my reports re what the last 37 years of peer-reviewed research teaches us about how stock investing works tells me that there is something lacking in the Buy-and-Hold strategy. There’s a saying from World War Two that, when a bomber pilot is getting a lot of flak, it should tell him that he is close to his target. If you did not sense on at least some level of consciousness how powerful Shiller’s research findings are, you would not be so upset to see people hear about them.
My sincere take.
Tractionless Rob
bad analogy. People that are consistently wrong are given consistent feedback on their false assumptions and statements.
Outcomes tell us as to what is/was correct and your track record is one of failure.
I have my name on the most important peer-reviewed research paper published in this field in the past 30 years. Is that a failure?
You have done your best to make it temporarily appear like a failure by threatening my co-author into silence about it and thereby keeping the paper from being written up on the front page of the New York Times. If that is a “success,” it’s a very sick kind of success and a very temporary kind of success and of course a criminal kind of success.
I can live in peace knowing that my efforts produced that research paper and that it will be written up on the front page of the New York Times in the days following the next price crash. Not in perfect peace. But in a better peace than I could achieve if I had to live with the knowledge that some internet Goon intimidated me into posting dishonestly re the numbers that my friends were using to plan their retirements.
Not this boy, you know?
I wish you all good things. But we all have to set limits for ourselves and posting dishonestly re safe withdrawal rate is on the wrong side of the line for this boy. It’s not a close call.
My best wishes.
“F” for Failure (Track Record Demonstrated!) Rob
“Do you see?
How often does a person who smokes three packs of cigarettes a day need to hear the message that smoking causes cancer? Until he freakin’ gets it. ”
This is advice you need to take. Every one of your points have been addressed hundreds of times and you choose to twist it around, lie about it or ignore it. Repeating your lines has not helped and continuing to do so, will similarly fail. HOW OFTEN DO YOU NEED TO HEAR THIS UNTIL YOU FINALLY GET IT.
I put up a post pointing out the error in Greanry’s retirement study on the morning of May 13, 2002. The study has not been corrected as of today. Today’s date is November 1, 2018.
You say that my points have been addressed. But the study has not been corrected. Does that reality not tell a tale? People used that study to plan retirements.
I think it would be fair to say that we all are living under a sort of spell. The name given to this sort of spell in the psychology literature is “cognitive dissonance.” If Greaney were thinking clearly, he would have corrected the study a long time ago. If Bogle were thinking clearly, he would have insisted that Greaney correct the study a long time ago. Getting the numbers wrong in a study that people use to plan their retirements is a big deal
I love Jack Bogle, I would like to be working with him. It pains me that some see us as being on “different sides.” I think it would be fair to say that Bogle himself feels this way given that he did not respond to my three e-mails to him. That shouldn’t be. And of course I love John Greaney too. I would like to be working with him too. It pains me that he sees us as being on “different sides.” And the same is true re hundreds of others.
You say that my points have been addressed. But the study has not been corrected. The last time I checked, people were still recommending use of it to plan retirements. The points have not been addressed. The actions that need to be taken have not been taken.
I suppose that you could say that a majority at the various boards has made a decision that there is no need to do anything about the studies. I think that would be fair to say. But those of us (and it is not just me, it is a minority but it is not just me) who believe that the study is in error have both a right and responsibility to point out the problems in it to people who will be inclined to make use of it to plan a retirement if we fail to do so. If those people elect to make use of the study despite what we say, that’s on them. But if we don’t at least make an effort to inform them so that they can make an intelligent choice, that’s on us.
How will this situation ever change if none of us insist on our right to post honestly? It’s been 37 years since Shiller published his “revolutionary” (his word) research. Are we going to wait to see how it feels to live through a Second Great Depression before we speak up? I can’t go for that. It’s too much human suffering. I couldn’t live with myself if I saw millions of retirement failures coming into play and did nothing to help. If you knew about the 911 attacks before they happened, would you feel comfortable saying “oh, it’s not my problem, too bad for all those people who will get killed.” I would like to think that, if I knew about the 911 attacks before they happened, I would have tried to do something to prevent the huge amount of human suffering before it took place. That’s how I feel about this other matter.
I know that you don’t want me to say anything. I get that much. I know that you have powerful people on your side. I get that too. And I know that the majority sides with you. But I feel that as a nation we have to come to terms with this problem. We have created a mess and we need to fix it. And there is no way to fix it other than for more of us to work up the courage to speak up.
You don’t get to decide for everyone. You get to decide for you, that’s all. If 10 percent of a community wants to hear about Shiller’s findings, that’s good enough for me. In time, I am confident that the 10 percent will become 20 percent and then in some more time 40 percent. That’s how our country works. Someone comes up with a new idea and then over time it grows and grows and grows. You are going against the fundamental beliefs of our country when you try to kill this idea in the crib. And I just don’t feel even a tiny bit comfortable going along with that given how much human suffering we are talking about here.
The advances have been amazing. Yes, you have had the power to stop them from helping as many people as they should be helping. But the advances have been flat-out amazing. I want to share those advances with millions of people. Each person gets to decide for himself or herself whether he will tap into the benefits of the new ideas. But if there are millions who decide that they want to do so, I want to be there for them. We have already seen thousands express an interest and that was under very difficult conditions. So I think it is entirely possible that we could bring it up to millions in time. We will have to see how it all plays out.
I believe that, when we get to the other side, you will thank me, Anonymous. Did you ever have that happen? You don’t want to see a particular movie and someone else does and you end up being dragged into it and then you love the darn thing. I think that is what will eventually happen here. You will come around in time. You’ll need to stop fighting it so hard for that to happen. But I believe it will happen eventually, If not prior to the crash, then afterwards.
Can you please say what you see as the downside to opening every site on the internet to honest posting re the last 37 years of peer-reviewed research? I don’t see any. I cannot even imagine any possibilities. How many times do you need to hear that to get that, you know?
I believe in letting all sides talk. I don’t believe in abusive stuff. But I believe in letting all sides who come to the table with non-abusive stuff to talk. You can say that people have rejected that idea in this particular case. But we still have published rules at all the sites that show respect for that idea. And we still have laws that respect that idea. That idea is who we are as a people. This other thing is a mistake that we have made in this particular field of human endeavor. And we need to be working together to overcome that mistake before it does us more harm.
That’s my sincere take, Anonymous. I have heard all of your responses and I have also heard the responses of the thousands who have said they love the idea of learning more about Valuation-Informed Indexing if only it could be done in a peaceful environment. I care about those people. I want to give those people what they want and I don’t think that you have a right under the published rules of the sites or under the laws of the United States to stand in the way, You can decide for you and then you need to let others decide for others.
That’s where I am coming from. I hope that helps a tiny bit.
Slow on the Uptake (When His Country’s Values Are in Question) Rob
You Goons have made it a challenge to get the word out re this stuff. I’ll give you that much!
With-a-Tip-of-the-Cap Rob
“I put up a post pointing out the error in Greanry’s retirement study on the morning of May 13, 2002. The study has not been corrected as of today. Today’s date is November 1, 2018.
You say that my points have been addressed. But the study has not been corrected. Does that reality not tell a tale? People used that study to plan retirements.”
Noted expert, Wade Pfau, has already explained how you were wrong. To this day, you have not apologized. This is long over due.
Noted expert, Wade Pfau, has already explained how you were wrong. To this day, you have not apologized. This is long over due.
I deleted this one when it appeared last night on grounds that it is a time-waster and an insult to the intelligence of my readers, However, after sleeping on it, I have had second thoughts and restored it on grounds that it gives me an opportunity to fit in the rant posted below.
The reference here is to something that Wade said when he was threatened by you Goons and flipped to the dark side so that his career would not be destroyed. Wade told me on numerous occasions (the texts of his e-mail appear at this blog under the “Wade Pfau” category) that he agrees with me on the subject of safe withdrawal rates. He has referred to the (uncorrected to this day) Buy-and-Hold retirement studies as “dangerous.” That says it.
When Wade was trying to come up with some explanation for his flip, I believe that he had Greaney help him with the wording because the explanation that he put forward was too lame for his own brain to have come up with. It was something that Greaney has said on earlier occasions. So I am pretty darn sure that that is where it came from.
The explanation offered was that Wade went back to the thread where my famous post from the morning of May 13, 2002, appeared and saw that Greaney had a post on it in which he said something to the effect of: “If you don’t think that 4 percent is safe, just take a lower withdrawal rate.” Wade said that those words solved the entire problem. That is of course not so.
The point of friction is: Are people who believe that the last 37 years of peer-reviewed research in this field is legitimate research permitted to post their honest views at every discussion board and blog on the internet? I say that they are. Greaney says that they are not (they may believe that the Buy-and-Hold retirement studies are in error but they may not let their fellow community members know what they believe and why). At the time he was flipping, Wade pretended to believe what Greaney believes.
The research showing that the Buy-and-Hold retirement studies are in error (that it is not possible to calculate the safe withdrawal rate accurately without taking the effect of valuations into consideration since valuations affect long-term returns) was published in 1981. About 10 percent of the population today appreciates the problems with the Buy-and-Hold strategy. All of us who believe that the last 37 years of peer-reviewed research is in error should want to get that percentage up. I certainly do. It doesn’t help get that percentage up for me to use a different withdrawal rate than the one recommended by Greaney in my own retirement plan and to fail to tell my fellow community members that I am doing that and why I am doing that.
The question that people should be asking themselves re this entire matter is — Why the heck did it take 21 years for someone to see that it is not possible to calculate the safe withdrawal rate without taking valuations into consideration? It’s OBVIOUSLY not possible to do that. In a sensible world, my post of May 13, 2002, would have been greeted with a yawn, not a nuclear explosion. What’s that all about?
We are all under a spell, I wrote that in a post from yesterday afternoon. We are all under a spell. The name given to that spell in the psychology literature is “cognitive dissonance.” We suffer from cognitive dissonance because we don’t question the Buy-and-Hold stuff, we don’t point out that the emperor is wearing no clothes, we don’t take note of the parts that make no sense and ask the “experts” pushing this strategy on us to please explain. The errors in the Buy-and-Hold Model are very, very, very simple and obvious ones. We suffer from cognitive dissonance re these errors because the errors are so simple and obvious that we assume that we must be wrong to even think that they are errors; if they were, surely these hot shot experts would have discovered them a long time ago.
The errors are real. It is not possible for any market to function without the exercise of price discipline and there has never been any reason to believe that the stock market is different than every other market in this regard. It is ESSENTIAL that investors exercise price discipline when buying stocks. Shiller has described the intellectual leap from the finding that short-term price changes are unpredictable to the Buy-and-Hold belief that the market sets prices properly as “one of the most remarkable errors in the history of economics.” That’s it. That’s the story of our 16-year saga. The entire Buy-and-Hold thing has just been one long mistake going back to the first day. Our problem is that the mistake has been covered up for so long that the Buy-and-Holders cannot today bear to acknowledge that the whole thing has been a big mistake and so they become violently abusive when someone points out the mistake.
I cannot solve that problem by taking note of the error in Greaney’s study, using a different withdrawal rate in my own planning and then then not saying anything to my fellow community members taken in by Greaney’s false claims. If I want to help my fellow community members (which is what we all should be trying to do when we post on a discussion board), I need to point out the freakin’ mistake to them. That’s the thing that Greaney doesn’t like. That’s the thing that he wants to block. That’s the thing that causes him to advance death threats and demands for unjustified board bannings and thousands of acts of defamation and threats to get academic researchers fired from their jobs. That’s the story here. Are we going to let the mistake destroy even more lives? Or are we going to speak up and incur Greaney’s wrath?
I say that we need to speak up. I want to see every investment discussion board and blog on the internet opened to honest posting on the last 37 years of peer-reviewed research in this field. I don’t want there to be a single exception. If we were to permit a single exception, that would hurt us all, So why do it? Why not just permit honest posting? Let the Buy-and-Holders say what they believe, let the Valuation-Informed Indexers say what they believe and let all the people listening in decide after hearing both sides how they are going to play it.
If people CHOOSE to use the Buy-and-Hold retirement studies after hearing both sides, that’s on them. I obviously think they would be making a mistake to do that. But it’s their money and so it’s their call. Perhaps I am the one who is wrong. I am not going to tell anyone else what to do with his or her money. But if people choose to follow the Buy-and-Hold numbers only because the Buy-and-Holders blocked their ability to hear about the errors in the Buy-and-Hold studies, that’s fraud. Boards that do not permit both sides to be heard are corrupt enterprises. People who block posting about Valuation-Informed Indexing can be held liable in civil lawsuits after they cause investors to suffer financial losses in the next price crash. In extreme cases, they could be prosecuted criminally for engaging in acts of financial fraud. Not this boy, you know? No way, no how.
That’s the rant. That’s the rant that I have been advancing for 16 years now. I love my Buy-and-Hold friends. I love my Wall Street Con Man friends. I even love my freakin’ Goon friends. But I don’t love failed retirements. I don’t love financial fraud. I don’t love civil lawsuits, I sure don’t love criminal prosecutions. So I speak up in OPPOSITION to that sort of stuff. Over and over and over and over and over.
I would be joined by every single person alive in the United States today if only Shiller’s Nobel-prize-winning research showing that valuations had only been published last week. We’re all in the same boat. We all want to invest effectively. We all want to avoid failed retirements. The problem that we face is that 37-year cover-up. Those who participated in that cover-up are embarrassed about it and don’t want people to find out. So they engage in all sorts of crazy behavior to block Valuation-Informed Indexers from speaking honestly about what the last 37 years of peer-reviewed research in this field teaches us. And so far their efforts have “succeeded” in making life worse for each and every one of us, including themselves to be sure.
I say “no” to all that. I say that the same ethical standards that apply in every other field of human endeavor should apply in the investment advice field as well. I say that, if the only way that you can think of to “defend” Buy-and-Hold is to engage in criminally abusive behavior, you should be looking for a new investing strategy to defend. If you can defend Buy-and-Hold WITHOUT engaging in criminally abusive behavior, by all means have at it. Millions of good and smart people believe in Buy-and-Hold with their hearts and minds and souls. When they make their case in a civil and reasonable way, they help all of us to come to a better understanding of these matters. So that stuff is pure gold and we should all welcome it. But we should all adopt a zero tolerance policy towards the sorts of stuff that we have seen advanced by those posting in support of Mel Lindauer and John Greaney.
No death threats. Death threats have no place in investing discussions. No demands for unjustified board bannings. Unjustified board bannings have no place in investing discussions. No thousands of acts of defamation. Thousands of acts of defamation have no place in investing discussions. No threats to get academic researchers fired from their jobs, Threats to get academic researchers fired from their jobs have no place in investing discussions. My sincere take. No apologies whatsoever.
Rant completed (for now — but sure to be extended in coming days).
Best wishes, etc., etc.
Rob the Friendly Ranter