Set forth below is the text of a comment that I recently posted to another blog entry at this site:
These are the words of Shiller himself in an interview:
“It’s not a timing mechanism, it doesn’t tell you – and I had the same mistake in my mind, to some extent — wait until it goes all the way down to a P/E of 7, or something. But actually, the lesson there is that if you combine that with a good market diversification algorithm, the important thing is that you never get completely in or completely out of stocks.”
So the guy who invented the be-all-and-end-all metric says flat out that you are using it wrong. But you would have people believe that your understanding of PE10 exceeds that of the Nobel Prize winner who invented it.
No, he doesn’t, X.
Everyone acknowledges that investors need to take their personal circumstances into account when setting their stock allocation. I say that the average investor should be somewhere near 30 percent stocks today. That means that an investor like me, who is in circumstances where he needs to be more risk-conscious, should be at zero percent stocks. Even Bogle doesn’t say that investors should ignore their personal circumstances. You are talking trash.
The part where he says that you should not wait until the P/E10 goes to 7 is wonderful. Thank you very much for pointing us to that. Shiller DID say that in early 2009. I didn’t hear him say wait until it goes to 7, I heard him say to wait until it goes below 10. I recorded a RobCast on that quote and I argued that he was going too far. I said at the time that I thought it made sense for the typical investor to stay with at least a 30 percent stock allocation and also that investors should be gradually increasing their allocations as prices continued to decline rather than waiting for the P/E10 to drop to 10 (or 7) before buying any stocks.
Shiller is now acknowledging that he got it partway wrong. Good for him! I wish that Bogle would do the same. That would be wonderful!
Shiller is not God. He is a giant in the field (as is Bogle). But the reality is that we are all flawed creatures and that we all possess today only a primitive understanding of how stock investing works. We are in the early days of figuring out how this stuff works. We should thank our Buy-and-Hold friends for some huge advances. But we should also tell them all to take a pill when we see them becoming as insanely arrogant as you Goons show yourselves to be on a daily basis in your comments here.
Shiller needs to do three things.
One, he needs to speak out about the criminal behavior of those who have posted in “defense” of Mel Linduaer and John Greaney (and my good friend Jack Bogle). None of should want to see your prison sentences to be any longer than they absolutely need to be. We all should show our respect and affection for our Buy-and-Hold friends by doing what we can to help them out at a time when they are in great pain. I think it would be fair to say that Shiller has been negligent re these matters.
Two, he should write more frequently and in a more comprehensive way about the “how to” aspects of the question. He failed to do this in his book. For Valuation-Informed Indexing to become the dominant model, people MUST hear about the practical side of things and not just the theoretical side. Again, Shiller has been negligent re these matters thus far.
Three, he should speak out more about the DANGERS of Buy-and-Hold. It’s not just that Valuation-Informed Indexing is a far superior strategy. Buy-and-Hold is in the process of ruining millions of middle-class lives. It was the promotion of Buy-and-Hold that was the primary cause of the economic criss. These are public policy matters of great import. Again, Shiller has been negligent in failing to address them until today.
Shiller didn’t actually invent P/E10. That was Benjamin Graham. But Shiller has done more to promote it than anyone else. I have no problem with you giving him the credit. But the historical reality is that Graham was actually there before him. Graham wrote about a primitive version of Valuation-Informed Indexing in the 1930s.
Yes, my understanding of the implications of Shiller’s findings exceeds Shiller’s understanding of them. Nothing could be more clear. Saying that doesn’t take anything away from him. The hardest job is being the first to challenge the dominant model. It was Shiller who was first, not me. Shiller is the creator of the VII concept (unless you count Graham — I would list Graham as perhaps the grandfather of the concept). I would describe myself as the first to fully explore the PRACTICAL IMPLICATIONS of Shiller’s “revolutionary” (his word) findings. But, yes, there is a wealth of material at this site showing that I am today FAR ahead of Shiller re the practical implications of his ideas (as I am today far ahead of Bogle — VII COMBINES Buy-and-Hold as it has been promoted by Bogle with Shiller’s revolutionary advance).
Is it a strange reality that some guy whose only claim to expertise in this field is that he figured out how to get words posted to the internet had gone far ahead of both Bogle and Shiller over the course of the past 12 years? It is an exceedingly strange reality.
You know what made it possible?
You Goons.
I don’t mean just the few of you that post at Greaney’s site or at the Bogleheads Forum. I mean all of the investors who bought into the Buy-and-Hold concept and who react with anger when anyone explores the implications of the last 33 years of peer-reviewed research. You saw how that affected Wade Pfau. He has visions of winning a Nobel prize in the days when he was doing honest research and then threw that all away so that investors who had been burned by Buy-and-Hold would not hate him too intensely.
Shiller is human too, X. So is Bogle. If Shiller and Bogle thought that they could explore these ideas and not have people like you threaten to kills members of their families as their “punishment” for having done so, both Shiller and Bogle would have gone far past where I am today long before I came on the scene. Your intimidation tactics are holding us all back.
People learn by talking things over. I didn’t know one-tenth of what I know today on the morning of May 13, 2002. Had I given in to Greaney’s intimidation tactics on the day when he first threatened to kill my wife and children, I would be back where Shiller and Bogle are today. I didn’t. I interpreted the death threats as a sure indicator that there was something terribly, terribly wrong with the Buy-and-Hold Model. Buy-and-Hold is supposed to be science. True science does not prompt people to put forward death threats.
The true appeal of Buy-and-Hold is that it it rooted in emotion and that it appeals to the Get Rich Quick impulse within all of us, not that it is science. We should be helping investors to AVOID emotion, not to give in to it 100 percent. Emotion is the enemy. Emotion is the cause of stock investing risk. When we push emotion so hard, we make stock investing FAR more risky than it would be if we permitted people to learn what the last 33 years of peer-reviewed risk says.
I am ahead of these giants today not because they are dumb or because they are bad. I am ahead of them because I have been working it for 12 years and they have not. Bogle doesn’t work it because he is reluctant to acknowledge a mistake that he has been covering up for 33 years now. Shiller doesn’t work it because he wants to be liked and he has seen how many investors respond when he makes even minimal efforts to explore the practical implications of his revolutionary findings.
We should all be encouraging both Shiller and Bogle and thousands of others to explore these ideas. Doing so is a win/win/win/win/win. You should be doing that. You have money at risk. You should want to learn new things. You are going to learn new things a lot faster when we have thousands of people exploring these issues on a daily basis, not just me.
Those are my sincere beliefs re these terribly important matters, in any event.
I naturally wish you the best of luck with all your future endeavors regardless of what investing strategies you elect to pursue.
I will be writing a column for the Value Walk site re this quote from Shiller. I am grateful to you for helping us all out by pointing us to it.
Rob
It sounds like you have an issue with Shiller. Why don’t you take it up with him and then get back to us.
I do have an issue with Shiller and I HAVE taken it up with him.
We are all scared, Anonymous. I was scared. I started posting at the Motley Fool board in May 1999 and didn’t work up the courage to post honestly on safe withdrawal rates until three years later.
Shiller provided the piece of the investing puzzle that we had been missing until 1981. Now that we have that piece, it all works, it all makes sense.
We are the luckiest generation of investors who ever walked Planet Earth. We need to forgive ourselves for the understandable mistakes of the past and begin living lives far richer than any we could have imagined in earlier days.
Is Shiller guilty of mess-ups? He sure is. He is also responsible for huge breakthroughs.
It’s the same with Bogle.
And with Bennett.
My job is to bring everyone together, to help everyone see that saying the words “I” and “Was’ and “Wrong” is the price we need to pay to step into a very exciting future.
We’re getting there, Anonymous. It’s been slow going. But we’re getting there, step by step, inch by inch.
We live in a great country. It’s a great country because it is built on the idea of us all achieving progress together and enjoying the benefits of doing so.
This is a process that we need to work through. The Civil Rights Revolution wasn’t won in one day. We didn’t become environmentally aware in one day. Laptop computers didn’t become what they are today in one day. Things take time. Very big and important things take more time than small and unimportant things. The advance that we achieved in 1981 is the biggest advance ever achieved in the history of personal finance. So naturally it is taking some time to complete it. But we are on our way and we are close.
I will remind you of the motto that I consult every time I put forward a comment: I need to be as honest as I can possibly be without crossing the line and becoming uncharitable while also being as charitable as I can possibly be without crossing the line and becoming dishonest.
I naturally wish you the best of luck in all your future endeavors.
Rob
Your job is to bring everyone together? Who gave you this “job”?
The people of the United States gave me the job, Anonymous.
Prior to the morning of May 13, 2002, I was some fellow who posts stuff to the internet. I happened to notice that John Greaney got an important number wrong in a retirement study that he posted to his web site. I had built the Retire Early board at the Motley Fool site to the #1 community at the site. So I obviously had a responsibility to share what I had learned with my fellow community members. So I did so.
80 percent of the community was thrilled. Hundreds of posters said that my post started off the best discussion ever held at that board. John Walter Russell began doing some amazing research in response to my post. Then the Greaney Goons entered the picture. They burned the board to the ground. So those of us who wanted to participate in honest discussions went to another site. Then you Goons burned that board to the ground. Then this happened again. And again. And again.
When thousands of people at just a small number of boards showed an interest in learning about this stuff, that demonstrated that there are MILLIONS in the general public who would like to know the realities. You Goons have engaged in THOUSANDS of criminal acts to keep this information from getting out. So you obviously see that it is of immense importance to people. And the Wall Street Con Men have backed you up. This is the biggest act of financial fraud in the history of the United States. There is nothing in a remotely close second place.
I love my country If someone who loves his country learns that the biggest act of financial fraud in its history is destroying the retirement hopes of millions, he obviously has a responsibility to set things right. I do that by pulling everyone together. That’s my job. I take the responsibility seriously.
I wish you all good things, Anonymous.
Rob
How exactly did the people of the U.S. Give you this job?
How exactly did the people of the U.S. Give you this job?
Through circumstances that appeared before me.
If you see someone on a road who needs medical attention, have you been given the job of calling for help? I say that you have been, Laugh. You might or might not have a legal obligation. You certainly have a moral obligation. You might very much not want to place the call. You might be late for an appointment. It doesn’t matter. You will never feel the same again about yourself if you keep walking and that person dies.
I had only one obligation on the morning of May 13, 2002. I believed that Greaney got the numbers wrong in his retirement study. I knew that friends of mine were using his flawed study to plan their retirements. I knew that it was my responsibility to inform them of the errors he made so that they could protect themselves. But that was as far as it went. Had Greaney corrected the study or even just added language letting people know that there are two schools of thought as to how stock investing works and that his study works only under one of those schools and not at all under the other, saying out loud that the study got the numbers wrong would have been the end of my obligation.
That’s not what happened. Greaney threatened to kill family members of anyone who posted honestly on the subject. Hundreds of Buy-and-Holders indicated that that was alright by them. Motley Fool as an entity refused to enforce its own published rules in a reasonable manner. Down the road a bit, Jack Bogle indicated that he is just fine with the use of threats of physical violence on boards that use his name so long as the threats are being employed to silence those raising questions about the 34 years of peer-reviewed research showing that there is precisely zero chance that his investing ideas could ever work out well in the long term for even a single investor.
I have an obvious obligation to share what I have learned with every investor on the planet. If you don’t see that, you are being willfully blind. There’s 34 years of peer-reviewed research showing that it was the continued promotion of Buy-and-Hold for decades after it had been discredited by the research that caused the economic crisis. The economic crisis caused some people on both the left and the right to lose confidence in our system of government. I love my country. The idea that I might not be 100 percent obligated to share what I have learned is 100 percent absurd. I am not capable of telling myself such lies.
Many people HAVE told themselves such lies, either in whole or in part. You Goons do it in whole. People like Jack Bogle and Wade Pfau and Robert Shiller do it in part. I don’t do it AT ALL. It’s not for me to decide the length of the prison sentences that will be given to those who have talked themselves into believing that it might be okay not to tell the world about this massive act of financial fraud. If their juries want to give them long sentences, they will be given long sentences. If their juries want to give them short sentences, they will be given short sentences.
I don’t want ANY prison sentence. I don’t even want it to be an issue.
So I don’t go down the road that leads to prison sentences. NOT ONE INCH.
If you don’t get that, you don’t get that, Laugh. I say that you don’t get it because you don’t want to get it, because you made the decision to go down that dark road a long time ago and cannot bear the thought of suffering the consequences that follow from such a choice. I am not in the same circumstances. So long as I don’t go down that dark path, I don’t even have to worry about going to prison. If you were thinking clearly, you would see why I am not wiling to even consider the possibility of taking a step onto that dark path.
I ain’t gonna say that Greaney’s study contains an adjustment for the valuation level that applies on the day the retirement begins. That’s never going to happen. Not in 13 years. Not in 13 trillion years.
If lies about how stock investing works don’t matter, you have nothing to worry about. My best wishes to you in all your future travels.
If lies about how stock investing works matter a great deal and if those lies are revealed as lies by the next price crash, you are headed to a prison cell in the not too distant future. I will be trying to get your prison sentence reduced a bit. I will tell the truth because I don’t want to go to prison myself. But so long as I have protected myself, I will do what I can to help you. I don’t ask anything in return for that. I do that out of love of a friend.
That’s it.
If you believe what you say you believe, go have a good life with my best wishes.
If you are looking for help to get out of the terrible mess in which you find yourself, you have come to the right place.
But please don’t ask me to help you without you first saying the words “I” and “Was” and “Wrong.” Those are the magic words. I don’t have the power to help you until you work up the courage to say those words.
Hang in there, man. It gets better. A LOT better.
Rob