Set forth below is the text of a comment that I recently put to another blog entry at this site:
For each to do the same thing, yes, it would require a mass conspiracy. What are the odds that each would act in similiar fashion on their own accord. The odds of that happening are astronomical.
There obviously is no mass conspiracy. That is obviously a 100 percent silly idea.
But you are wrong when you say that the odds are against large numbers of people acting in a similar manner. When there are huge incentives for people to act in a certain manner, it should not be even a tiny bit surprising to find that most elect to take advantage of those incentives.
To understand what is going on, you must understand how stock prices are set. There is no governing body that has to approve a price increase. It is 100 percent up to investors to determine whether prices go up.
Now –
How many of the humans benefit from an increase in stock prices? We ALL seem to benefit! Every last one of us. The Stock-Selling Industry is happy with a price increase because they sell more stocks. Investors are happy because they appear to be closer to financing their retirements. The newspapers are happy because more people want to read the business pages. More books are sold. Politicians are happy because people are more satisfied with their lives and more likely to vote for incumbents. Clothing stores are happy because people have more money to spend on clothes. And on and on and on.
Is that a conspiracy?
Not in the usual way in which that word is used. It is a case where everyone has an incentive to do the same thing — push stock prices up. It’s a case of all incentives pointing in the same direction.
The answer is to provide equally strong incentives pushing people to act to keep from stock prices getting out of hand. The way to do that is to permit honest posting on the peer-reviewed academic research of the past 32 years. People can retire many years sooner if they follow a research-based strategy. But they have to know about it first! So we must open the internet to honest posting.
That’s the story, Questions.
There is no conspiracy. There is an unhealthy lack of balance to the incentives being provided to investors and investing experts.
Cigarette companies once advertised the health benefits of smoking. Why do you think they did that? It helped sell cigarettes. And there was no downside. To change that situation, we imposed a downside. We adopted laws and regulations that made clear to the cigarette companies that their top executives would go to prison if their companies continued to make false claims about the health benefits of smoking.
The Stock-Selling Industry is today where the tobacco industry was in the days when cigarettes were promoted as a boon to good health. We need to send people to prison when they make false safe withdrawal rate claims and then respond to those pointing out the falsity of the claims by threatening to kill their family members. When these people go to prison, all the others making false claims will notice and will stop making false claims themselves.
That’s how it works.
All the incentives today are encouraging people to talk nonsense about stock investing. The result is that we are in the worst economic crisis in our history. To change that, we need to provide disincentives to promote Buy-and-Hold strategies and incentives to promote Valuation-Informed Indexing strategies.
My warmest wishes to you.
Rob
What you continue to describe would still have to be a mass conspiracy. Your cigarette analogy is what is silly.
By the way, I see your behavior got you kicked off the board again. It looks like you haven’t learned anything over the last 11 years.
It’s a conspiracy of ignorance, Questions.
Humankind did not start out knowing everything. When we do learn new stuff, it’s a wonderful thing. We learned the most important thing we ever learned about stock investing in 1981, when Robert Shiller published his peer-reviewed research showing not only that long-term timing always works but also that long-term timing is always REQUIRED for those investors hoping to have some realistic hope of achieving long-term investing success.
The people trying to stop us all from learning what we need to learn (you Goons!) are hurting. They feel that to acknowledge what the last 32 years of peer-reviewed academic research shows is to acknowledge that they have thrown years of their lives away following Buy-and-Hold strategies. I cannot redo their lives for them. I don’t have that power. I am happy to do anything I can to help learn about better strategies that they are free to follow in the future. But the past is gone and there is nothing that I or anyone else can do to help people who have elected to continue to be held back by that pain. My hope for these people (you Goons!) is that they will someday come to see that it is a mistake to live in the past and that the best thing to do is to try to get over that pain and move on into what looks to be a very bright future for all of us.
“The Board” you are referring to is the Goon Central board. I have a funny feeling that I will somehow manage to get over the terrible embarrassment of being kicked off the smelliest board existing on Planet Internet today. Oh, the horror!
I’ve learned a lot over the past 11 years. But I certainly haven’t learned the thing you Goons would like me to learn — how to stab the thousands of my fellow community members who have expressed a desire that honest posting be permitted at every board and blog on the internet in the back. I have a funny feeling that you might be waiting 11 billion years re that one, my old friend. I think it would be fair to say that asking Old Farmer Hocus to post dishonestly on the numbers his friends use to plan their retirements is much akin to asking him to flap his arms and fly to the moon.
But none of us has a crystal ball. So I suppose that none of us can ever say for absolute certain, right?
My best and warmest wishes to you and yours.
Rob
Rob
Could you please reconcile your apology for misinterpreting the SWR study with your decade-plus rant about how it contains errors?
http://boards.fool.com/the-differences-between-how-dory36s-online-17225279.aspx
-TIA
Trebor
Thanks for asking an intelligent question, Trebor.
All of us humans are social creatures. Our thinking is influenced by what OTHERS around us think. This is the premise upon which the entire advertising industry is built. There is a reason why marketers put phrases like “As Seen on TV” on their products. If the product was seen on TV, there are probably millions who use it. If millions use it, we will not be viewed as fools ourselves for buying it. We all like to learn that our thinking is consistent with the thinking of a much larger group. We like to read books that are bestsellers. We like to buy records that are in the Hot 100. We like to see movies that everyone is talking about. This is how we humans are built.
I had believed for a long time that the Greaney study was in error. I was 90 percent confident that I was right. But I was not certain. Lots of smart people whom I respected seemed to think it was just fine. I couldn’t help but wonder — Why do they see things differently than I do? I finally worked up the courage on the morning of May 13, 2002, to say what I believed. A good number of people found merit in what I said and that reassured me. But another group argued INTENSELY that I was out to lunch. That caused me to feel doubts.
On Saturday, John Walter Russell put up his post reporting sensitivity numbers for the Greaney study. The sensitivity numbers showed that the study was pure garbage. As one poster commented, anyone who would use a study with sensitivity numbers like that to plan a retirement had to be out of his or her mind. From that point forward, my confidence was strong. But my confidence was not strong on the evening on which I put up the post linked to up above.
I had doubts that night. I cared deeply about that board community and I hated to think that I had done anything to cause it any unnecessary turmoil. I obviously did not want to do anything to do harm to anyone’s retirement planning efforts. My thought process was that, if there was any significant chance that I was wrong, the thing to do was to advance a clear apology. At that moment in time, I believe that an apology was appropriate and so I went ahead and put one up.
I hope that helps you make sense of the situation, Trebor.
Rob
In short, Rob, you are saying that you don’t know what you are talking about.
That sounds right, Anonymous.
Rob
Tell us about sensitivity studies, Rob.
It shouldn’t be just me telling you about them, Anonymous.
MILLIONS of people who care about the future of our country should have started talking about John’s sensitivity study shortly after it was posted. If John’ study is valid (it is), then the Buy-and-Hold retirement studies are dangerous. If the Buy-and-Hold retirement studies — which have been used directly or indirectly by millions of middle-class people to plan their retirements — are dangerous, everyone alive on the planet today needs to know about it.
Are you going to bail out the millions of failed retirements, Anonymous?
Is Old Saint Jack going to bail out the millions of failed retirements?
If you are not going to bail out the millions of failed retirements, you must permit the discussion that THOUSANDS of our fellow community members have expressed a desire to participate in to go forward.
We enacted the laws against financial fraud for a purpose. This is that purpose.
A nation has a right to defend itself against the sorts of individuals who put their personal feelings of wounded pride above the interests of millions of their fellow citizens.
That’s my sincere take re this terribly important matter, in any event.
I naturally wish you all the best things that this life has to offer a person.
Rob
You still didn’t tell us a thing about sensitivity studies, Rob.
What are they, how do they work, and why did one of them change your entire outlook?
Also, how are you uniquely qualified to judge their validity, as in when you make the absolute statement:
“If John’ study is valid (it is)”
BIG HINT:The fact that one lay-person happens to say what you hoped to hear, against a backdrop of hundreds of dissenting professionals and experts, does NOT constitute true and actual validation.
Thanks!
There is not one professional alive in this field today who would say that the Greaney study is analytically valid unless one of you Goons had a gun to his head, Anonymous.
The Wall Street Journal wouldn’t have published an article pointing out the errors in the Old School SWR studies if the errors had not been verified by many people.
Nor would the Economist magazine.
Nor would Smart Money.
Nor would any of the many other publications that have noted in recent years that I was right to point out in May 2002 that those studies lack a valuations adjustment.
Nor would Yale Economics Professor Robert Shiller have been awarded the Nobel prize for his finding that valuations affect long-term returns if that finding had not been confirmed many, many times over the past 30 years.
There is no vast conspiracy to make John Greaney feel bad. The vast conspiracy that makes the Lindauerheads and the Greaney Goons so angry is the peer-reviewed academic research of the past 32 years.
I will be receiving a settlement of $500 million from the individuals and organizations who have lent support to the efforts to keep the errors in the Old School SWR studies covered up for 11 years.
You will be going to prison for a long time for your participation in this massive act of financial fraud.
I will continue to wish you all good things all the same.
My best wishes to you, Anonymous.
Rob
“The Wall Street Journal wouldn’t have published an article pointing out the errors in the Old School SWR studies if the errors had not been verified by many people.
Nor would the Economist magazine.
Nor would Smart Money.”
……
That is why they did not do so. Nor has any other person, institution or article ever said they found ‘errors’ in any SWR study. You are the sole person saying that. If you think my blanket statement is in error, it’s very easy to refute — prove just ONE link to just ONE reputable source (i.e. not yourself) who claims such studies have a specific ‘error’ in them. You, of course, will fail to do so, as you have failed for over a decade to provide any such substantiation when asked to back up your claims. In this, you are your own worst enemy, impugning your own much-sullied reputation anew, on a daily basis.
You still didn’t tell us a thing about sensitivity studies, Rob.
What are they, how do they work, and why did one of them change your entire outlook?
Also, how are you uniquely qualified to judge their validity.
Nor has any other person, institution or article ever said they found ‘errors’ in any SWR study.
They get the numbers that millions of people have used to plan their retirements wildly wrong. But there are no errors in them.
It was the intent all along to get the numbers that millions of people have used to plan their retirements wildly wrong.
Makes sense!
Rob
You still didn’t tell us a thing about sensitivity studies, Rob.
I’ll send you a book that you can read during your prison years, Anonymous.
Fair enough?
Rob