Set forth below is the text of a comment that I recently posted at another blog entry at this site:
Rob,
You do not understand what Shiller is saying. Further, he is basically saying you are wrong in this article:
http://finance.yahoo.com/blogs/daily-ticker/-it-looks-like-a-peak—robert-shiller-s-cape-is-waving-the-caution-flag-004753218.html
Notice these quotes:
“And Shiller is quick to note the CAPE is not a market-timing tool and he remains in the market in his personal account. “We don’t know what it’s going to do,” he says.”
“As for the idea, proffered here by Citigroup’s Tobias Levkovich, that CAPE is flawed because it doesn’t “normalize” for interest rates (as it does for earnings), Shiller says the following: “He’s right the very low interest rates are a sign maybe you want to keep more invested in the [stock] market now rather than getting nothing [from bonds]. That ought to help explain the high CAPE but that doesn’t mean the high CAPE isn’t a forecast of bad performance.”
Nobody can understand what anyone is saying so long as there is a Ban on Honest Posting in effect, Anonymous.
How do you know that he is not careful to avoid saying things that upset the Buy-and-Hold Mafia because he has seen what happens to academic researchers who say publicly what they truly believe?
Perhaps Shiller knows what happened to Wade Pfau.
Perhaps there are a lot of Wade Pfaus out there.
Perhaps Shiller could write a book telling about all the threats that were directed at him.
Once you threaten to kill family members of anyone who posts honestly, people hold back.
Saying that high CAPE is a forecast of bad performance is the same thing as saying that long-term timing always works. If you know that you are going to see bad performance, you know that risk is higher and you need to lower your stock allocation to keep your risk profile constant.
You wouldn’t even be posting here if you had confidence that Buy-and-Hold could work. You are scared. If you followed a true research-based strategy, you wouldn’t be scared.
I am going to continue to post honestly.
I naturally wish you all the best that this life has to offer a person regardless of what investing strategies you elect to follow.
Rob
Every nut on the internet makes the same rationalization. Let me generalize it for you:
The reason nobody agrees with [insert crazy theory] is simply that [insert massive conspiracy] is keeping everyone silent and afraid.
Uh huh.
How many of the nuts have 34 years of peer-reviewed research backing them up?
How many of the nuts have had many of the biggest names in the field tell them that their work is top notch?
How many of the nuts are exploring the implications of an idea that was discovered by a Yale Economics Professor who was awarded a Nobel Prize for his contributions?
How many of the nuts are doing battle with an idea that its advocates all believe cannot be “defended” except through the use of death threats and unjustified board bannings and tens of thousands of acts of defamation and threats to get academic researchers fired from their jobs?
Buy-and-Hold is a long-discredited idea. Valuation-Informed Indexing is the future.
This nut say so! So it must be true!
Anyway, I’d rather be a nut than a Goon!
Take care, my long-time abusive posting friend.
Rob
Every advocate of a Ponzi scheme makes the same rationalization. Let me generalize it for you:
It’s going to work this time! No, really! Please ignore all the research and all the historical data! It can work if you just don’t ask any questions or look too closely at what is really going on.
Please don’t ask questions! Please don’t look at the peer-reviewed research! I will have to ban you from my site if you do. It upsets the marks — er, I mean customers! — when you tell people what the research says.
Rob
“Nobody can understand what anyone is saying so long as there is a Ban on Honest Posting in effect”
In other words, only what you say matters.
My take is that it is what the laws of the United States say that matter.
You’re going to prison following the next crash, Dizzy. I’m not.
I wonder why.
Rob
How many of the nuts have 34 years of peer-reviewed research backing them up?
I wasn’t talking about the fact that, historically, valuations have sometimes correlated with future returns. That’s Investing 101. Everybody knows that.
I was talking about Hocomania – the death threats, the fear others have about discussing the topic, the massive conspiracy of silence, etc.
Valuations are not sometimes correlated with future returns, Anonymous Valuations are always correlated with future returns. That’s been so for 140 years, which is as far back as we have records
And this is not some small correlation we are talking about. Valuations are the primary influence on future returns. If you fail to count valuations, the safe withdrawal rate is always 4 percent. If you count valuations, the safe withdrawal rate is a number that goes as low as 1.6 percent and as high as 9.0 percent. That’s huge. That’s the difference between millions of investors suffering failed retirements and millions of investors planning responsibly for their retirements.
This should be Investing 101. We have known this since Shiller published his “revolutionary” (his word) research in 1981.
But there is not one web site other than this one that today openly and fully explores the implications of Shiller’s Nobel-Prize-winning research. That’s because of the death threats. That’s because of the demands for unjustified board bannings. That’s because of the tens of thousands of acts of defamation. That’s because of the threats to get academic researchers fired from their jobs. That’s because of the 13-year cover-up of the errors in the Old School safe withdrawal rate studies That’s because of the biggest act of financial fraud in the history of the United States.
Everyone alive today wants us to bring this economic crisis to an end. Everyone who works in this field wants to be freed to give honest investing advice. There are BILLIONS of dollars to be made developing the tools that investors need to be able to avoid the traps set for them by the Wall Street Con Men in their endless pursuit of the cheap, smelly buck made by exploiting the emotional vulnerabilities that for many years have made stocks far more risky than they need to be.
To bring the economic crisis to an end and to make it possible for people who work in this field to do honest work once again, we need to put you Goons in prison, where you belong. People who possess personal integrity are not willing to work alongside the sorts of “individuals” who have put up posts in “defense” of Mel Lindauer and John Greaney and Jack Bogle. So prison terms it will be. This is a great country and we were smart to enact laws insuring that these sorts of individuals would land in prison cells if they engaged in the sort of behavior that we have seen over the past 13 years.
Once your prison term is announced, it’s all downhill racing. We all will enjoy our good fortune of being the first generation of investors in history to be able to invest in stocks on a virtually risk-free basis while earning returns FAR higher than anyone imagined possible during the Buy-and-Hold Era. Good for us!
It all happens following the next price crash. Jack Bogle did not intend to cause an economic crisis. He was embarrassed when Shiller revealed his mistake and, instead of coming clean immediately, he reacted poorly and went into cover-up mode. Now that he has ruined millions of middle-class lives, it is harder than ever for him to come clean. But Bogle has a conscience. It was by reading his book that I learned about the errors in the Old School studies. If the man lacked a conscience, he wouldn’t be sprinkling honest and accurate comments in his books along with the smelly Buy-and-Hold garbage that he pushes so recklessly and ruthlessly and relentlessly.
So Bogle will flip.
And, when Bogle flips, everyone flips.
There are lots of ambitious people in this field who would LOVE to feel free to offer honest investing advice. Once Bogle flips, we will be hearing from thousands of them. Good for them. Good for us.
Prison terms eventually come to an end, Anonymous. If your prison term had begun on the morning of May 13, 2002, and you had been given a term of 30 years with the chance of release at the end of 15 years in the event of good behavior, you would today be looking at the possibility of regaining your freedom in only two more years. Does that put things in a different light? Your friends should be doing all that they can to see that your prison term is announced as soon as possible. Because the sooner your prison term begins, the sooner it will come to an end.
I will say a prayer tonight that your prison term begins as soon as possible. I will say a prayer that a few of the people who work in this field work up the courage to demand that as an act of kindness to you.
I wish you all good things, my long-time abusive posting friend.
It gets better. A LOT better.
I am sure.
Rob