Set forth below is the text of a comment that I recently put to another blog entry at this site:
Have goons gotten to Shiller? Afterall, he has 50% of his money in the market.
Shiller certainly possesses an Inner Goon. We all do. I possess an Inner Goon, Anonymous.
I recorded a RobCast way back in 2009 titled “Shiller Pulls His Punches.” Why do you think he pulls his punches? It is because he is afraid of the negative feedback he knows he will hear if he speaks with 100 percent honestly re what he knows about how stock investing works. I have written numerous columns at the Value Walk site re things Shiller has gotten wrong. I believe that I have as much of a responsibility to call Shiller out on his b.s. as I have to call out Jack Bogle and the other Buy-and-Holders on their nonsense.
And I of course have a responsibility to call Rob Bennett out on HIS nonsense too. It was b.s. for me to fail to speak up about the errors in Greaney’s retirement study prior to the morning of May 13, 2002. It was b.s. for me to apologize for doing so a few days later. It was b.s. for me to continue to think that Buy-and-Hold could work until the night of August 27, 2002, when Greaney threatened to kill my wife and children and 200 of my fellow community members endorsed his post. It was b.s. for me to hold off on saying that the Old School SWR studies are “analytically invalid” until May 2003. It was b.s. for me to try so hard and for so long to avoid calling Lindauer out on his abusive posting practices when I started posting at the Vanguard Diehards board.
I have a Goon within me, Anonymous. I want people to like me. I want to tell people fairy tales and to be praised for it. I want to be rich. I want to be popular.
And Shiller faces the same demons. And everyone else does too.
I don’t think that the fact that Shiller is going with a 50 percent stock allocation today is a sign of goonishness on his part. The research says that the typical investor should be going with an allocation of about 30 percent stocks. Shiller is more knowledgeable than the typical investor. He may be able to pick stocks or segments that are less overvalued than the market as a whole and that therefore will do better than the market as a whole. So I could see a 50 percent stock allocation working out well for Shiller. I would’t advise him to go higher than that. But I wouldn’t call it goonish for him to go with a 50 percent stock allocation today.
I do think it was a bit goonish for Shiller to say that other investors who are less knowledgeable than him could go with a 50 percent stock allocation or even something a bit higher. That’s dangerous advice, in my assessment. Most investors are not as skilled as Shiller is. The numbers don’t support a 50 percent stock allocation today. And Shiller has predicted a crash. I have a very hard time seeing how you can predict a crash and also say that it is okay for ordinary investors to be going with stock allocations in excess of 50 percent.
There are judgment calls that come into play. People can have different opinions without one of them being guilty of goonishness. But I saw that statement about it being okay for ordinary investors to go with stock allocations in excess of 50 percent as being pretty darn far out there. I don’t think I would be doing my job if I didn’t say that I am not able to figure out a way to justify that statement, given what the peer-reviewed academic research of the past 33 years shows us about how stock investing works.
Perhaps Shiller can justify it. Perhaps Shiller sees something that I do not see. If that’s the case, then I would like to see him spell out his reasoning process re that particular statement. I am of course willing to hear his case. But going by what I know today, I feel compelled to say that I see that particular statement as being an irresponsible statement coming from a guy who is a giant in this field and who has done more to help us all understand how stock investing works than anyone else alive. Perhaps that’s why it bothers me so much to hear my hero give voice to those particular words. I expect more of my good friend Bob.
Yes, the Goons have “gotten to” Shiller to a point. But Shiller has also overcome goonishness to an extent that no one else alive on the planet today has managed. Both things are so. We need to take the good with the bad and to praise the good while criticizing the bad in a spirit of charity when we see it appear before us on our computer screens.
I hope that helps a bit, Anonymous.
Rob
So I could see a 50 percent stock allocation working out well for Shiller.
Yes, I could see a healthy stock allocation working out for myself and millions of other investors too. In fact, it already has! I overweighted stocks during the 2009 crash, and am now doing the opposite, moving back to bonds, as my need to take risk has decreased due to the incredible recent gains of stocks. Profits have been locked in.
Nothing is locked in until your investing lifetime has come to an end, Anonymous.
The research that I did with Wade Pfau shows that.
That research (peer-reviewed!) shows that research-based strategies have beat Get Rich Quick strategies for 140 years out of the 140 years for which we have data.
And what do you think all the people following Buy-and-Hold strategies for those 140 years told themselves to talk themselves out of believing what their common sense told them must be the case?
They told themselves that Get Rich Quick seemed to be working out just fine and that all their temporary gains were “locked in.”
People don’t follow Get Rich Quick strategies because they see that they are Get Rich Quick strategies. People follow Get Rich Quick strategies because they possess great emotional appeal and they permit their emotions to overrule their ability to engage in rational thought.
Anyway, I wish you all the best regardless of what investing strategies you elect to pursue, my old friend.
Rob
Nothing is locked in until your investing lifetime has come to an end, Anonymous.
Oh I’d say the $1.4 million + I have in CDs and low risk bond funds is pretty locked in. It’s not going back to stocks – I have little need to take more risk at this point, and I’m approaching retirement.
That research (peer-reviewed!) shows that research-based strategies have beat Get Rich Quick strategies for 140 years out of the 140 years for which we have data.
I’m just holding an asset allocation that matches my need and ability to take risk, while considering valuations, among other things, like everyone else.
Is that a “reasearch based” or a “get rich quick” strategy?
Your posts show that it is “Get Rich Quick,” Anonymous.
You are filled with venom toward anyone who posts honestly re the last 33 years of peer-reviewed research. You have put up posts in “defense” of Mel Linduaer and John Greaney. You support the Ban on Honest Posting.
All of that stuff is pure emotion.
Giving in to your Get Rich Quick emotions hurts you as an investor in the long term.
That’s my sincere take re this terribly important matter, in any event.
You have my best wishes. But I very strongly believe that you are on a dark path.
And that’s before we even take the prison sentence you have coming into consideration.
Rob
It’s not going back to stocks – I have little need to take more risk at this point, and I’m approaching retirement.
Do you think we should permit honest posting for the benefit of those just starting out?
I do.
Rob
Rob,
Do you also think Buffett should go to prison? Do you think you know more than Buffet on investing?
Buffett is the all-time king on picking individual stocks. In that area, his knowledge surpasses mine by a factor of one-million. There’s no contest.
But 80 percent of investors should be in index funds. Re that group, I am a good bit ahead of Buffett. He does not focus on this area and he has not put effort into it.
I don’t believe that Buffett will be going to prison. But I do believe that he holds back on criticism of the Buy-and-Holders. He has put forward many statements showing that he sees that Buy-and-Hold is Get Rich Quick garbage. But he has failed to say that in clear and firm and frank words. That is unfortunate. If Buffett called Bogle out on his b.s., Bogle wouldn’t be able to get away with it.
I think Buffett should be speaking out more. But I do not think he has committed criminal acts. I think he will be questioned about some of his statements following the next crash. I think that he will come off looking bad re his failure to get involved to a greater extent. But I also think that he will be praised for the gentle criticisms of Buy-and-Hold that he has put forward.
My expectation is that Buffett will be one of the people helping us make the transition from Buy-and-Hold to Valuation-Informed Indexing.
I hope that helps a bit, Anonymous.
Rob