Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
Again we see that everyone out there is a liar, except for Rob Bennett.
I was aware that Greaney’s retirement study did not contain a valuation adjustment in May 1999, when I put my first post to the old Retire Early board. I didn’t say that the study was in error until May 2002. Does that sound honest to you, Anonynmous?
Humans are liars. That’s a reality. Humans are also truth-seekers. That’s also a reality. The reason why Buy-and-Hold and Valuation-Informed Indexing are so different is that Buy-and-Hold is driven by marketing concerns while Valuation-Informed Indexing is the first true research-backed investment strategy. The core question on the table is — Are we as a society going to insist that honest posting re how stock investing works be permitted or not?
I believe that we are going to go there. I believe that we awarded Shiller a Nobel prize because we understand how important it is that we achieve this advance. If we are going to go there sooner or later in any event, everyone involved is better off if we just go there now. So that is what I advocate.
The Buy-and-Holders see that investing advice has always been marketing-dominated and believe that that will always be the case and that they will always be able to stomp out any brush-fires of honest posting. I think it is going to get harder and harder to do that after the next price crash, especially if valuation levels well below fair-value prices remain in effect for many years. I think that as a society we are ready to make this huge advance and that it is going to happen soon. I think that we have no choice but to make this advance. The pain that will follow from sticking with a pure Get Rich Quick approach will soon be just too great and too pervasive for us not to recognize Shiller’s great accomplishment.
We’ll see, you know? I have my opinion as to how things will go and you have yours. The drama of the thing is that no one can say with absolute certainty until events play out in the real world.
I am a liar. So are you. So is Bogle. So is Shiller.
We are all liars. Because we are all humans. But deep down inside we all would like to be more honest because we know that we would achieve better investing results if we could pull that off. Shiller has pointed out the way forward and I believe very strongly that each and every one of us would choose that way if only we were thinking clearly. As of today, there are enough of us NOT thinking clearly that a Ban on Honest Posting remains in place at all large investing sites. It remains to be seen whether that ban will remain in place for too long after the onset of the next price crash.
You’re a liar, Anonymous. I might just as well say that you are a human. It comes with the territory.
The question is whether you want to make use of the tools now available to all of us who want to be more honest and thus more successful stock investors. The price is saying the words “I” and “Was’ and “Wrong.” You obviously see that as being too big a price to pay today. Perhaps that will change in the days following the next price crash. We will have to wait and see.
I do wish you all good things, in any event. I hope that that helps at least a tiny bit.
The Honest Liar (and Dishonest Truth-Teller) Rob
Wade’s firm says you should avoid all timing and just rebalance.
https://retirementresearcher.com/occams-should-you-try-timing-to-avoid-bad-markets/
Bottom line: Avoidall these get rich quick timing schemes.
Thanks for the link, Anonymous. I am not personally persuaded. But I think the guy does a good job of making the case. I think that anyone considering going with a Valuation-Informed Indexing strategy should read that article, think it over and discuss it with people from both sides of the table to come to a better understanding of the issues. If there are flaws in the VII concept, you want to identify them before you put money on the line. When someone goes to the trouble to present a reasoned argument against your strategy, he is helping you out in a big way. So I like this one.
Here’s the sentence where I think his logic chain breaks down: “They’ve priced in that information, and the current prices are the market’s best estimate of the value of the stock market.” If investors were 100 percent rational beings, that would be so. But what if most investors are humans, in which case they would be highly emotional beings? If investors were humans, we should expect to see a lot of abusive posting on all investing discussion boards and blogs at times when prices reach the level where they are today. We should expect to see death threats and demands for unjustified board bannings and thousands of acts of defamation and threats to get academic researchers fired from their jobs. Investors are not able to price in information that they do not even know about or that they are not able to discuss, are they? If the market (which is really just all investors acting collectively) is not even able to gain access to the information it needs to estimate the value of the market, how the heck can it do so effectively?
This guy is helping us. I 100 percent support the idea of permitting him to post his honest views. But I also 100 percent support the idea of permitting all others to post their honest views, including those of us who believe that Shiller’s Nobel-prize-winning research is legitimate research.
My bottom line? Always, always, always practice long-term timing, which is just price discipline going by a different name. Price discipline is key to the functioning of every market that ever existed. When we discourage people from exercising price discipline when buying stocks, we set up circumstances in which the stock market crashes because it cannot figure out any other way to get prices down to where they should be for the market to continue to function. That hurts all of us in very, very big ways.
Market Timing Advocate (and Buy-and-Hold Critic) Rob