I’ve posted Entry #448 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Jeremy Grantham Casts Doubt on the Merit of the Valuation-Informed Indexing Strategy.
Juicy Excerpt: Grantham explains that: ““After the bursting of the tech bubble, the failure of the market in 2002 to go below trend even for a minute should have whispered that something was different. Although I noted the point at the time, I missed the full significance. Even in 2009, with the whole commercial world wobbling, the market went below trend for only six months. So, we have actually spent all of six months cumulatively below trend in the last 25 years! The behavior of the S&P 500 in 2002 might have been whispering in my ear, but surely this is now a shout? The market has been acting as if it is oscillating normally enough but around a much higher average P/E.”
He adds that: “If we have a bear market soon, even a severe one, will it recover to the new normal of 23x or the old normal of 15x? I believe the former. Let me remind you that that new 20-year era of higher prices was very severely stress-tested by the 50% decline from the 2000 Tech Bubble and the 50% decline in 2008-2009, perhaps the biggest foul-up of the financial system in modern times. Neither spectacular event was enough, apparently, to jolt the price trend back to its former lower level.”
You keep saying that we should all wait to see how things play out. Perhaps you could look into your crystal ball and tell us how you see this all playing out.
I believe that we will see a major price drop within the next year or two or three. That will cause a larger number of people to have doubts about the Buy-and-Hold Model for understanding how stock investing works. Today, 10 percent of the population believes that valuations are important. A major price drop may bring that number up to 20 percent. Once we get to 20 percent, the Buy-and-Holders will not be able to get away with abusive behavior that they employ today to suppress discussion of the far-reaching implications of the last 38 years of peer-reviewed research in this field. The national debate re Shiller’s “revolutionary” (his word) research findings that should have been launched in 1981 will finally be launched.
Once the ball gets rolling, we will build up more and more momentum. We all want the same things, Anonymous. We all want to obtain higher returns at less risk. The peer-reviewed research that I co-authored with Wade Pfau shows us how to do that. We will be talking about that research at every discussion board and blog on the internet. And, when people see that research and get excited about it, other researchers are going to jump in and do more exciting research. Things will just get better and better and better. We will look back at how we acted during these past 17 years and wonder what we were thinking.
I believe that, once we get to the other side, we will feel more respect for the Buy-and-Holders than we feel today. Because we will be so happy at what we have learned and, as we examine how we came to learn it, we will see that the Buy-and-Holders played a huge role in helping us get to where we needed to go. Learning experiences help everyone. Moving forward is a win/win/win/win/win. There is no possible downside.
I hope that helps at least a tiny bit.
Rob
What if the big drop doesn’t happen in the next three years? What is this abusive behavior you speak of? Do you have links?
If it doesn’t happen, it doesn’t happen. You asked me what I expect to see and I told you what I expect to see.
Almost every comment that you advance contains a bit of abuse, Anonymous. You Goons have threatened to kill my wife and children if I continued posting honestly on the error that Greaney made in the retirement study posted at his web site (his study lacks an adjustment for the valuation level that applies on the day that the retirement begins). Is that not abusive behavior? Say that you did not personally put forward a death threat. Did you speak out against the intimidation tactics when you saw them? That’s a problem. We all should want that sort of thing brought to an immediate stop. We all should be speaking up in opposition to that sort of thing when we see it appear before us.
My best wishes to you and yours.
Rob
You can’t just make up accusations. You need proof and the only death threats that so have seen have come from you. I am always willing to speak out about someone making threats or being abusive, but you have never offered any direct proof. To the opposite, so have seen direct proof in which you misrepresented comments people have made, leading to false and slanderous statements.
Now if you want to show me or anyone actual comments backing up your claims, so will be first in line to condemn those comments. Lack of support then means we can only conclude you have been lying.
The ball is in your court.
The proof is in the comments, Anonymous. You look at a comment and you ask yourself “Is that the comment of a person who is trying to learn or is that the comment of a person who is trying to suppress learning?”
As a nation, we have been suppressing learning for 38 years now. If valuations affect long-term returns, as Shiller’s research shows, there is zero chance that a Buy-and-Hold strategy could ever work for even a single long-term investor. If valuations affect long-term returns, then an investor must adjust his stock allocation in response to big price swings to keep his risk profile roughly constant. If valuations affect long-term returns and short-term timing doesn’t work, then the only way that an investor can practice price discipline when buying stocks is to adjust his stock allocation in response to big price swings (that is, to practice long-term timing). Price discipline is what makes markets work. Throw away price discipline and you make a market dysfunctional. Throw away price discipline and you force a market to crash (the core purpose of a market is to get prices right and, if you throw away price discipline, the only possible way that the market can achieve that goal is to crash prices).
Any person who cares to can see thousands and thousands and thousands of comments at this site in which Buy-and-Holders reveal a desire to suppress learning rather than to learn. And that’s so at every other investing site as well to a lesser extent (it’s to a lesser extend because only a tiny number of the conversations are about Shiller’s research and so there is much less suppression in evidence — but the discussions that we all need to have are still not taking place). We need to have these discussions so that we can learn what the last 38 years of peer-reviewed research is trying to teach us and we are not having them. We are killing ourselves.
Now —
Will that change with a price crash of 50 percent or more?
I believe that it will change. But we are going to have to watch it play out to know for certain. If we were all thinking clearly, there never would have been any suppression of discussion of Shiller’s “revolutionary” (his word) research findings in the first place. As a society, we very, very, very, very much want Buy-and-Hold to remain the dominant model for understanding how stock investing works. If Buy-and-Hold fails, that means that we have been giving bad investment advice in thousands of books and podcasts and calculators for close to four decades now. We have caused very serious harm to millions of investors. We have caused hundreds of thousands of businesses to fail (trillions of dollars of spending power leave the economy when stock prices crash and that means that consumers must cut back on their purchases of goods and services). Millions of workers lose their jobs when hundreds of thousands of businesses go under. It’s always hard to work up the courage to say the words “I” and “Was” and “Wrong.” In this case it is positively devastating.
But, if Shiller’s Nobel-prize-winning research is legitimate research, we don’t have any choice. We have put the matter off and put the matter off again and put the matter off again for 38 years now. But a 50 percent price crash that remains in place for a significant amount of time will do as much damage as the 2008 economic crisis or more. The damage that we will be bringing on ourselves will be too great for us to continue putting off the need to launch a national debate on Shiller’s amazing research findings. The price of continuing to suppress discussion will have grown too high.
Or so Rob Bennett believes in any event, you know?
My job is to make the transition from Buy-and-Hold to Valuation-Informed Indexing as painless as possible. It cannot be 100 percent painless. Not after 38 years of suppression of discussion of these terribly important matters. But there are different paths available to us. We can elect to tear ourselves apart over the mistakes of the past. Or we can acknowledge our good fortune in now having 38 years of peer-reviewed research available to us that shows us for the first time in history how stock investing works in the real world and pull together and achieve great advances.
I favor the latter path. Which means that is is my job to do everything in my power to help people see the thousands of ways in which the Buy-and-Holders have helped us over the years while also insisting that we bring the suppression of honest posting to a full and complete stop. It is the suppression of honest posting that has been killing us for a long time now. We need to stop destroying ourselves. We need to appreciate our good fortune and bring this crazy abusive stuff to a full and complete stop.
The abusive stuff is not even a tiny bit hard to see. It is omni-present everywhere there are honest people who try to engage in discussions of the far-reaching implications of Shiller’s research finding that valuations affect long-term returns. The thing that has been lacking so far is an insistence on the part of all of us that our laws and our social norms saying that honest posting on the peer-reviewed research in this field be permitted everywhere be recognized. Will a larger number of us start insisting on that after we have experienced the pain that we will all feel when prices crash? I sure think so. I think that the pain that we will all experience will break us out of our complacency and we will all pull together to survive the economic crisis that we have brought on with our relentless promotion of the Buy-and-Hold concept.
I am optimistic. I believe that our future looks good. I believe that we are going to experience a mountain of pain. But I believe that there are six mountains of good stuff on the other side of that one mountain of pain. We just have to work up the fortitude to do what it takes to get us there. I am scared. I am not saying that I do not have concerns. But I remain optimistic re the long term. I have seen too many brave and intelligent and kind people try to help us out over these past 17 years not to be optimistic re what we will see after the next crash.
The efforts to suppress learning rather than to engage in it are there for the eyes of any open-minded investor to see in thousands and thousands of posts put to this site. Will more of us open our minds to the possibility that valuations really do affect long-term returns in the days following the next price crash? I think it is a lock. But I am one of those darn flawed humans. I never thought that it would take 17 years. I thought that it would take two or three days. So it is certainly at least theoretically possible that I am wrong. Time will tell the tale.
I wish you all the best that this life has to offer a person. Flawed human or not, I know with 100 percent certainty that that one is so. Are you okay with showing a little patience waiting for the other one to play out? It is my sincere personal assessment that none of us has any other realistic choice.
My best wishes to you.
Rob
“The proof is in the comments, Anonymous. You look at a comment and you ask yourself “Is that the comment of a person who is trying to learn or is that the comment of a person who is trying to suppress learning?””
For years you have been making claims of death threats and job threats, yet you have never backed up that claim. Once again, you fail to do so.
Based on the evidence, you seem to be the only abusive person. Thus, your isolation.
Okay, Anonymous.
I do wish you all good things, in any event.
I hope that that helps at least a tiny bit.
Isolated Rob
Of course you could dramatically improve your reputation if you post links to back up your claims.
I hope that helps at least a tiny bit.
PassionSaving.com is the link that backs up my claim that many Buy-and-Holders feel that the only way to defend their strategy from what the last 38 years of peer-reviewed research teaches us about how stock investing works is to engage in abusiveness, Anonymous. Almost every comment you advance here contains some element of hostility.
I pointed out in my famous post of the morning of May 13, 2002, that the retirement study posted at John Greaney’s web site does not contain an adjustment for the valuation level that applies on the day the retirement begins. The study has not been corrected to this day. Please explain.
That’s the story.
The research says that a valuation adjustment is required. But the Buy-and-Holders haven’t been including one for years. To do so now would be to acknowledge that they have hurt millions of people in very serious ways. So we see this other crazy stuff.
How do the American people react following the next crash? That’s the question.
If people get involved, we can make a huge stride forward as a nation very quickly.
If people don’t get involved, things will just continue to get worse.
It’s up to the humans, you know? I love the humans. So I am thinking that they will come through for us. But we will just have to wait a bit to find out for sure.
I naturally wish you the best of luck in all your future life endeavors, old friend.
Rob
Show just one reference on your site in which someone made a death threat or threatened Wade’s job.
The only abusiveness I see is this person that calls people goons and tells them they are going to prison.
You’ve seen the Wade one 50 times, Anonymous. I love it. But even I am tired of looking at it.
You’re Goons. And you’re going to prison. People who threaten academic researchers are Goons and they go to prison.
The question is — Why haven’t you gone to prison YET? Why are we talking about it? If it had happened years ago, we wouldn’t be talking about it. Why hasn’t it happened?
People are complacent. Prices are at two times fair value and that’s what people care about. They care about the number on their portfolio statement.
Will they get upset when that number drops by 50 percent or more? If they get upset about that, then they’ll get upset about the criminal stuff. So you’ll go to prison THEN.
Is that crazy? It’s completely crazy. It would be better if we told people the truth about how stock investing works before they lost their money so that they could avoid having that happen to them. And it would be better if you weren’t going to prison. But whachagonnado?
You think you’re going to prison too or you wouldn’t be posting here. At the very least you’re worried about it. It’s not my fault. I asked Motley Fool to give Greaney the boot in June 2002. He wouldn’t be going to prison if they had done that. So what’s his beef with me? He has none.
We can’t have different laws apply for the investment advice field. I know we do for now. But that cannot be a permanent situation. It’s a mixed-up short-term thing.
Irrational exuberance is irrational, you know? High stock prices are irrational. It is true that investors like to act in their self-interest. So, if we permitted honest posting, if we sent you to prison as soon as you committed your crimes, could we even have these crazy prices? We could not. Your crimes helped keep prices up. That’s why we permitted them. We like high prices and it takes a lot of irrationality to get them and your criminal stuff has kept the research-based stuff from shutting down the irrational stuff.
Good for you, I guess.
Yowza!
Rob
No, Rob, ai have not seen any threats to Wade’s job. I, and others, have asked for links to that and to those death threats you have claimed, yet you have provided no evidence. Yet here you are again with your abusive talk about prison and your name calling.
It doesn’t matter what you say you see or what I say I say. What matters is what millions of middle-class investors say they see in the days following the next price crash.
Price crashes change what people can see, Anonymous. Or at least they can change what people say they see. Irrational exuberance disappears in a crash. It just goes “Poof!” And, when fantasies disappear, people see things that they didn’t see while the fantasies had influence over their vision.
I will do what I can to help you out. That much I can offer. I will not necessarily be able to persuade the millions of investors who suddenly will be able to see things that they couldn’t see before now that the fantasy stuff has disappeared for them. I do not have control over what those millions say or do. Perhaps you’ve noticed.
Fantasies giveth and fantasies taketh away. The way it is. Shiller was awarded a Nobel prize because he showed with peer-reviewed research the power that fantasies have over stock investors. We are today living through the stuff that he talks about. We are living through one side of the story today and we will be living through the other side in the days following the next price crash.In those days we will be living through the side of the story in which people like you are placed in prison cells for things they did when as a society we were living though the earlier side of the story.
Or so Rob Bennett sincerely believes, you know?
Hang in there, man. It gets better, prison cells or no prison cells. A lot better.
Rob
“It doesn’t matter what you say you see or what I say I see. ”
It does matter. You have made a series of accusations saying that people made death threats and job threats. Serious accusations require proof. If those accusations are true, then those people that made such threats need to be dealt with. However, if your claims are not proven, then you need to get some help as that is abnormal behavior and cannot be tolerated.
I have said that there have been death threats. I have said that there have been job threats.
There is a mountain of proof. It is impossible for the human mind to imagine how there could be more proof.
If you want absolute proof, check the retirement study posted at John Greaney’s web site. If that study does not contain an adjustment for the valuation level that applies on the day the retirement begins, how do you think that happened? It happened because there is a huge resistance to the idea of acknowledging what the last 38 years of peer-reviewed research teaches us about how stock investing works in the real world.
Acknowledging the far-reaching implications of Shiller’s “revolutionary” (his word) research findings means rewriting every investing book on the market. It means rejiggering every calculator on the internet. It means that lots of powerful and wealthy people who make their careers as investment experts will lose status and lots of currently non-powerful and non-wealthy people will rise up to take their place. The shift from Buy-and-Hold to Valuation-Informed Indexing is the biggest advance in the history of personal finance. That’s why it has been so hard for us as a society to take action re the criminal acts that are the only thing keeping the massive act of financial fraud going at this point.
But we’re close. One more price crash that remains in place for a few years will do it, in my assessment. I am confident that at that time you will not have any problem finding lots and lots and lots of people willing to supply you with THOUSANDS of links proving that the criminal acts took place.
A few weeks ago there was no proof that Epstein committed crimes, in the minds of many. Today there is. Things change, Anonymous.
We all want the same thing. We all want to know how stock investing works in the real world. So I think that we all are going to pull together following the next price crash and get that darn Greaney study corrected and then do of the other good stuff that inevitably will follow from taking on that one. But you are not going to come clean just because that’s what I believe. You are going to have to be taken away on handcuffs for the new realities to hit. Epstein was still keeping evidence of his crimes in his house when he was arrested and a warrant for a search was obtained. The humans have a hard time letting this sort of thing in. The humans who are the type to commit criminal acts have a particularly hard time.
So be it, you know? If there is ever anything that I can do to help you out, please just let me know and I will be on it. No felonies, though. That’s the exception. That one doesn’t fly with this boy. No freakin’ way, no freakin’ how. Not a close call. Non-negotiable.
My best and warmest wishes to you.
Shocked-by-the-Epstein-Stuff Rob
“There is a mountain of proof. It is impossible for the human mind to imagine how there could be more proof.”
Then you should have no problem providing a direct link to the threats.
“If you want absolute proof, check the retirement study posted at John Greaney’s web site. If that study does not contain an adjustment for the valuation level that applies on the day the retirement begins, how do you think that happened? It happened because there is a huge resistance to the idea of acknowledging what the last 38 years of peer-reviewed research teaches us about how stock investing works in the real world.”
Wade Pfau has already explained how you are wrong. Secondly, there are no death threats to jobs threats on Greaney’s website.
“But we’re close. One more price crash that remains in place for a few years will do it, in my assessment. I am confident that at that time you will not have any problem finding lots and lots and lots of people willing to supply you with THOUSANDS of links proving that the criminal acts took place.”
If there are “thousands” as you are claiming, then you should have no problem giving us a link to just one.
Go ahead, Rob. Give us even one link. If you can’t, the only conclusion anyone can have is that you have lied.
Give us even one link
http://www.passionsaving.com.
Wade Pfau has already explained how you are wrong.
After he was threatened. That’s extortion. If you truly believed that Greaney had included a valuation adjustment in his study, you never would have made any threats and you never would have engaged in extortion. You would have had no motive to do so in that circumstance.
the only conclusion anyone can have is that you have lied.
If the jury that meets in the days following the next price crash agrees with you, you are home free. If the jury that meets in the days following the next price crash agrees with me, you go to prison for a long time. That’s how our system works, Anonymous.
One-Giant-Link-Providing Rob
Your link does not show any threats. A jury requires proof. They won’t just take your word for it.
But a jury doesn’t see it without a prosecutor bring charges and the prosecutor will require substantive and irrefutable proof. You have nothing.
Okay, Anonymous.
I naturally wish you all the best that this life has to offer a person.
Rob
“The question is — Why haven’t you gone to prison YET? Why are we talking about it? If it had happened years ago, we wouldn’t be talking about it. Why hasn’t it happened?”
No, the question is why haven’t you sought help from a mental health professional? Why hasn’t your family insisted that you get help?
All of the women who have accused Jeffrey Epstein of sexual abuse crimes need to see mental health professionals too, according to Epstein.
I’m not impressed. I’m going to go with what the jury says.
My best wishes to you.
Rob
So you are saying you are as sick as Jeffrey Epstein? Wow, you have some serious issues.
Um….
Rob