Set fort below is the text of a comment that I recently posted to another blog entry at this site:
Mark Twain was referring to the Bible. [The reference here is to the quotation in which Twain said that it is not the things that you don’t know that hurt you but the things that you know for certain that just ain’t so.]
His point is well taken regardless of what he was referring to, Critter.
When people come to believe strongly in something, it is difficult for them to give up that belief. That’s a reality of human life.
So you have to be careful about what you believe. We are imperfect creatures. We make mistakes. When we come to believe something that isn’t so, we place ourselves in a tough spot. We then have to go through whatever efforts it takes to unbelieve that thing. And that can be a tough business.
It is a very, very, very tough business when the thing that we are trying to unbelieve is our core belief about how stock investing works. The particular thing that we got wrong here (Buy-and-Holders reject the reality that price discipline is REQUIRED when buying stocks just as it is when buying anything else) doesn’t produce bad results for a long period of time and then produces massive amounts of human misery. That combination produces incentives for covering up the mistake that have proven to be very difficult to overcome.
With most mistakes, you get negative feedback in a short amount of time. If someone said that it is a good idea to drive a car while drunk, we would see negative effects from that advice quickly and we would warn people of the dangers of following that advice. In this case, Fama made a mistake in 1965. It wasn’t discovered until 1981. And then, since stocks were at rock-bottom lows in 1981, the mistake did not even have any practical effect until 1996 (when prices had reached the insanely dangerous level). But even when prices reach insanely dangerous levels, it can take 10 years or a little bit more to see serious negative effects (we had a slow-leak crash that began in 2000 but that did not upset too many people given how big the gains had been in earlier years). People began to realize that something was seriously wrong in 2008. But even the onset of the economic crisis wasn’t enough to shake a lot of people from their belief in Buy-and-Hold, given how great was their emotional investment in it. I believe that the next price crash will do it. But we are today a long ways off from 1981, when the peer-reviewed research was published showing that there is zero chance that this strategy could ever work for even a single long-term investor.
If the human misery caused by this mistake were not so vast, it would have been corrected following the 2008 price crash. That was a development that affected millions. Shiller predicted the economic crisis in his book. How could a people not sober up and acknowledge that pure Get Rich Quick is not the way to go in stock investing following an event of that magnitude?
The problem is that the pain was TOO great. If we acknowledge that Buy-and-Hold caused the economic crisis, we are acknowledging that our universities failed us and that our investment advisors failed us and that our journalists failed us and that our bloggers failed us and that our economists failed us and that our policymakers failed us. We had a warning that the investing strategy that is pushed 24/7 on all media outlets was 100 percent false, 100 percent dangerous, that it had caused three earlier economic crises, that there was not a grain of truth to it. It was all written up in a book that was a best-seller and that was written up in all the major publications. And we did nothing. Huh? How could we do nothing when a book told us the simple truth about stock investing, a truth that would have stopped the economic crisis if only we had heeded the message?
It’s very, very, very, very, very painful stuff.
The good stuff that comes from permitting discussion of the last 33 years of peer-reviewed research is 50 more times good than the bad stuff is bad. But the bad stuff is very, very, very hard to hear. So, 33 years after the mistake was uncovered, as a society we continue to pretend that it might not really be a mistake. We have no logic to offer in support of that proposition and we have no research to offer in support of that proposition and we have no common sense to offer in support of that proposition. But we have threats of violence, we have threats to destroy people’s careers. So Buy-and-Hold soldiers on. Barely. By the skin of its teeth. But it’s still there. There are still people who can overlook all the human misery that the pure Get Rich Quick approach has caused and pretend that there might be some alternate universe where everything would work the opposite of how the last 33 years of peer-reviewed research shows that it always works. Hey! Nobody has a crystal ball. It COULD turn out that way! Anything is possible. No?
We’ll see, Critter.
I love my country and I think we were smart to adopt laws against financial fraud and I believe that following the next price crash there will be lots of good and smart people (including many of my Buy-and-Hold friends!) who will demanding prompt enforcement of those laws.
You don’t see it. Or at least you say publicly that you don’t see it even if you do worry that you bet on the wrong horse.
We cannot click on the remote and get to a channel that permits us to see how the future plays out.
I am not capable of committing financial fraud under the laws of the United States. So I am going to continue playing it the way I have always played it.
All signs are that you are going to do the same from your end.
Someday in the not-too-distant future, we will all find out for sure.
I certainly wish you the best of luck with it, my old Goon friend.
As more sand runs through the hourglass, we will all see how things go. My focus today is on making sure that, when that day comes, there will be thousands and thousands and thousands of post in the Archives showing that I spoke up in the strongest and firmest and most non-compromising terms possible in support of the idea of permitting honest posting on safe withdrawal rates and scores of other critically important investment-related topics. I can do no more and I can do no less.
My best and warmest wishes to you and yours.
Rob
Someday in the not-too-distant future, we will all find out for sure.
The worst financial crisis in decades just happened. Anything we were going to “find out” would have happened them. The next one that severe is probably decades away anyway.
I don’t agree.
If stock-price changes were caused by unforeseen economic developments, as was once widely believed to be the case, I would agree with you. Stock crashes are rare events. If they were also random events (which would be the case if price changes were caused by unforeseen economic developments — which obviously cannot be predicted), it would be extremely unlikely that we would see two crashes within a short amount of time.
I no longer believe that stock-price changes are caused by unforeseen economic developments. Shiller showed in 1981 that valuations affect long-term returns. That means that stock-price changes do NOT fall in a random-walk pattern, that stock-price changes are NOT caused by unforeseen economic developments.
What are they caused by then? They are caused by shifts in investor emotion. Shifts in investor emotion can be measured by looking at P/E10. Investor emotion (that is, stock prices) does not follow the pattern of a random walk. It goes up, up, up for many years. Then it falls down to a P/E10 level of 8 or lower and remains there for a good amount of time. Then it eventually works it way back up again.
We have not gone to 8 yet in the boom/bust cycle that began in 1982. So the crash that we saw in 2008 was not a random event unlikely to be repeated in the near future. It was part of a long-term boom/bust cycle that cannot be completed until we see another crash of 65 percent and then see prices remain at insanely low levels for a number of years.
So I think that you are wrong. I am not God. I could be mistaken. It’s happened before and it could be that it is happening again. If it were, I would in all likelihood be the last to know because I am the worst of all the humans at seeing my own biases.
That said, I think it is important that I post honestly re these matters. There are laws that compel me to do so or else risk a prison sentence. I love my country. So I think it best that I follow its laws.
I naturally wish you the best of luck in all your future endeavors.
Rob
“I could be mistaken.”
But there is no scenario under which you will ever admit the mistake. You’ve been waiting for years to be proven right, and clearly you’re prepared to wait forever.
The Bennett/Pfau research shows that Valuation-Informed Indexing has so far done better than Buy-and-Hold for 145 years of the 145 years available to us in the historical record. If everything were to suddenly flip and Buy-and-Hold were to prevail for the next 145 years, that would make the two strategies even.
Would it be right to give up on Valuation-Informed Indexing if the two strategies were even? I sure don’t think so. VII makes sense. BH DEFIES common sense. I would need to see BH do BETTER than VII to give up on VII given that VII makes sense and BH defies common sense. It would take a minimum of 145 years of success for BH to get us to that point, probably a lot more.
I believe in research-based strategies, X. Guess who taught me that? Jack Bogle. Smart fellow. Darn nice too. You should check him out.
My sincere take.
Rob
Rob, the Shanghai stock exchange had a P/E of 20+, which the Lucky VII strategy says means a big crash ahead, right?
Then the index proceeded to triple (allowing plenty of rebalancing to bonds along the way):
http://blogs.wsj.com/moneybeat/2015/05/29/china-pumps-up-the-volume/
Is this another one of those “174 years of data proves it could never happen but it just did” scenarios?
What are they caused by then? They are caused by shifts in investor emotion. Shifts in investor emotion can be measured by looking at P/E10.
Do you have any evidence, facts or links to back up this assertion? Changes in P/Es can be caused by all sorts of things, from interest rates to projected economic conditions going forward.
Rob says: “The Bennett/Pfau research shows that Valuation-Informed Indexing has so far done better than Buy-and-Hold for 145 years of the 145 years available to us in the historical record. If everything were to suddenly flip and Buy-and-Hold were to prevail for the next 145 years, that would make the two strategies even.”
Wrong, Rob. You have been given data time and again of very successful buy, hold and rebalance strategies, yet you have decided to delete those posts. What are you scared of? Why would you block honest posting?
Putting that aside, this is a big year for you, Rob. You have been repeating your prediction of a 65% crash for years and you listed 2015 as being on the outside of that prediction:
Do you remember these words?:
“I was asked to give a time frame and ?felt that that was a reasonable thing to demand of me. So I gave it my best shot. I said that, if we do not see a crash by the end of 2015, that would be grounds to question this VII stuff. I think that is fair. We cannot say when it will come but there are lots of reasons to believe that it should come by the end of 2015. If it doesn’t, that would suggest that we are missing a big piece of the puzzle and I think it would be fair for my critics to point that out. That’s all I can say on the matter.
I can give the reasons why I view the end of 2015 as being an outside date. But they don’t matter. You’ve heard them before. The bottom line is that we cannot give a precise date. Emotions are not predictable to that extent. But the entire historical record indicates we should see the crash by the end of 2015. I don’t have a crystal ball. I am just reporting what the data tells us. WHICH WAS THE ENTIRE IDEA OF THE BUY-AND-HOLD PROJECT ONCE UPON A TIME.
ROB”
Is this another one of those “174 years of data proves it could never happen but it just did” scenarios?
When a market triples in a short amount of time, that’s a clear sign that emotion is driving that market.
A P/E10 of 20 signals emotion. So the signal was correct in this case.
A high P/E10 value often proceeds a big price jump. Big price jumps are more likely when the P/E10 is high than when it is low (because it is emotion that fuels big price jumps).
This is what short-term timing does not work. The P/E10 value in the U.S. market was high in 1996. And we saw four years of amazing price jumps.
Short-term timing doesn’t work.
Long-term timing ALWAYS works and is ALWAYS 100 percent required. Long-term timing is price discipline. It is impossible for the rational human mind to understand how exercising price discipline could ever be a bad thing.
Short-term timing (guessing where emotion will take us in the next year or so) is dumb. Long-term timing (price discipline) is 80 percent of the stock investing story. The only think worse than engaging in short-term timing is failing to engage in long-term timing.
I hope that helps a bit.
Rob
Do you have any evidence, facts or links to back up this assertion? Changes in P/Es can be caused by all sorts of things, from interest rates to projected economic conditions going forward.
The entire historical record backs up the assertion. This is what the Bennett/Pfau research shows. The statistical odds against valuations determining long-term returns for 145 years running must be at least one-million to one. You can’t intimidate the historical record. It just says what it says. That makes it very different from human investment advisors, who must remain on the right side of the Wall Street Con Men to be able to feed their families.
Changes in P/Es can be caused by all sorts of things, from interest rates to projected economic conditions going forward.
Anything that affects investor emotion affects P/E10. But not directly. The way in which the development affects prices is determined by the emotion in place at the time the development takes place. The same development (an interest rate hike) can cause stock prices to go up or to go down, depending on the emotional realities that apply at the time.
So just saying “interest rates were increased” doesn’t tell you what you need to know. You need to know the P/E10 level. And even that doesn’t tell you what you need to know to engage in effective short-term timing. The P/E10 level only lets you predict LONG-TERM price changes. Long-term price changes are highly predictable, short-term price changes are not predictable at all.
Emotion is irrational. So it cannot be predicted. But in the long-term prices must return to reasonable levels or the market could not longer exist. So you CAN predict long-term price changes. The long-term trend is always in the direction of fair value. If the market is only a little bit off the mark, you can’t make good predictions. But as it goes farther and farther off the mark, the predictions get better and better. Because the pressure to return to the mean gets stronger and stronger.
When the P/E10 is 44, there is only one way prices can go in the long term — down very hard.
When the P/E10 is 8, there is only one way prices can go in the long-term — up very hard.
Rob
Do you remember these words?:
I remember those words and I stand by them.
I wish that there had been no Ban on Honest Posting and that everyone had heard them.
If they had, we wouldn’t be in an economic crisis today. We would be rebuilding our broken economy.
I believe that those words WILL be heard following the next price crash, whenever it comes. Then we will begin the rebuilding process. We will all feel 10,000 times better about ourselves at that time.
Once we begin rebuilding, we are on the other side of The Big Black Mountain. Today we look to each coming day with dread, not being sure if that will be the day the crash will come. Once we are rebuilding, we will be taking advantage of the fact that we are the luckiest generation of investors that ever walked Planet Earth.
That’s truly good stuff. It’s good stuff piled on top of good stuff piled on top of good stuff.
I wish we had made that transition 13 years ago, or, better yet, 34 years ago. But I still would prefer to do it today rather than tomorrow or the day after. I LIKE good stuff! Call me madcap. Sue me.
I hope that helps a bit, my insanely emotional investor friend.
Rob
If you stand by those words, then it looks like we have about 7 months left to see if your 65% crash materializes.
No. We have 7 months left to see if the key Valuation-Informed Indexing principle that short-term timing never works is proven correct yet once again. That one has been coming though for us for 145 years running now (that’s as good a track record as the track record for the other key VII principle, that long-term timing always works and is always 100 percent required).
I hope that helps a bit.
Rob
You have been repeating your comments for well over a decade. That is not “short term”. Besides, we are just reminding you of what you said and now today you stand behind it. At the end of 2015, we will see who is right. 7 months to go.
Whatchagonnnadoaboutit?
The entire historical record backs up the assertion. This is what the Bennett/Pfau research shows. The statistical odds against valuations determining long-term returns for 145 years running must be at least one-million to one. You can’t intimidate the historical record. It just says what it says.
OK, I’ll take that as big No, then. You have no have no facts, links, or evidence that emotions affect stock prices. Historical numbers say nothing about emotions or feelings.
The long-term trend is always in the direction of fair value.
So if Japanese interest rates were “always” around 6%, they can’t stay at 1%, but must rise to 6%, correct? Simple question. The future must “always” obediently repeat some past data set, right?
A P/E10 of 20 signals emotion. So the signal was correct in this case.
So my stock investments tripled (while rebalancing and taking money off the table), while you got a 1% bond return. I’ll take the former.
You have been repeating your comments for well over a decade. That is not “short term”.
Yes, it is. The typical investor starts investing at age 25 and dies at age 85. That’s 60 years. The Buy-and-Holders focus on the short term because it’s easy to turn a buck exploiting people’s Get Rich Quick impulse doing that. Research-based strategies are very different. Research-based strategies are what work in the long term.
At the end of 2015, we will see who is right. 7 months to go. Whatchagonnnadoaboutit?
If I am proven wrong re that one, I will say publicly that I was wrong re that one.
I’m not going to say that Greaney’s retirement study contains an adjustment for the valuation level that applies on the day the retirement begins. I’m not going to commit any felonies. I’m not going to set myself up for a prison sentence following the next price crash. I mean, come on.
I hope that helps a bit.
Rob
Historical numbers say nothing about emotions or feelings.
I strongly disagree.
If it were unforeseen economic developments that determined stock price changes, stock prices would fall in the pattern of a random walk both in the short term and in the long term. Never in 145 years of stock-market history has this happened.
If it were shifts in investor emotion that determined stock price changes, stock prices would fall in the pattern of a random walk in the short term but would move in the direction of fair value in the long term. It’s been turning out that way for the entire 145 years of stock-market history available to us today.
We don’t know anything with absolute certainty. It is a theoretical possibility that someone is going to come along tomorrow and show that gravity is not real. But I wouldn’t bet on it. When all of the evidence points to one conclusion and there is zero evidence pointing to the other conclusion, the safe bet is to presume that the thing that all the evidence shows is probably so.
That’s even more so when the people arguing for the conclusions with zero evidence behind it engage in financial fraud to block people from hearing the evidence-backed conclusion. That behavior shows that even those following the strategy with zero evidence behind it have doubts whether it will all turn out different this time. If they were confident in their “belief” that it will all turn out different this time, they would feel no need to engage in criminal behavior to stop people from learning what the peer-reviewed research says. I mean, come on.
Rob
The future must “always” obediently repeat some past data set, right?
No.
But we can use evidence to learn how things work.
When we see the sun rising in the east day after day, month after month, year after year, we can make a tentative conclusion that that is so. Then we can investigate with the aim of learning WHY it is so. Eventually, we learn that the earth is not the center of the universe, that the earth revolves around the sun. Now we have advanced our knowledge of the world.
So it is with stock investing. There was a time when we thought that stock-price changes were caused by unforeseen economic developments. Then someone checked the validity of this theory by looking at whether stock prices fell in the pattern of a random walk not only in the short term but also in the long term. He found that stock prices NEVER fall in the pattern of a random walk in the long term. So the old theory was 100 percent discredited. That happened 34 years ago.
For those 34 years we have been involved in the project of figuring out how stock investing DOES work. We now have 34 years of research showing that it is shifts in investor emotion that cause stock-price changes. Knowing that, we know that Buy-and-Hold is the purest and most dangerous investing strategy ever concocted by the human mind. We now know (intellectually at least) that all investors must ALWAYS practice price discipline to have any realistic hope whatsoever of seeing their investing strategy work in the long term. Good for us.
We have been held back in our efforts to spread the word to every investor on the planet because of the criminal behavior of the Wall Street Con Men and their Internet Goon Squads. Boo, baby! Fortunately for us, we enacted laws making financial fraud a felony long before the Wall Street Con Men and their Internet Goon Squads showed up on the scene. So we can throw them in prison following the next price crash. Problem solved! Investor Heaven Begins! Good for us!
No one is going to advocate Buy-and-Hold following the announcement of your prison sentence, Anonymous. Why the heck would they? Do you see anyone recommending that people invest in the Madoff fund today? No one likes Get Rich Quick schemes after they have destroyed thousands of human lives (in the Madoff case) or millions of human lives (in the Buy-and-Hold case). I mean, come on!
I hope that helps a bit.
Rob
So my stock investments tripled (while rebalancing and taking money off the table), while you got a 1% bond return. I’ll take the former.
The people who invested in the Madoff fund were winners. They outsmarted us all.
I forgot.
Rob
What is your definition of “long term” in number of years?
If it were unforeseen economic developments that determined stock price changes, stock prices would fall in the pattern of a random walk both in the short term and in the long term.
Again, as every freshman economics student knows, stock prices merely reflect economic conditions, which move in cycles.
Do I have links, facts, or evidence to back up this assertion? Yep:
http://en.wikipedia.org/wiki/Business_cycle
What is your definition of “long term” in number of years?
Anything more than 10 years out is long-term, in my view.
Rob
Again, as every freshman economics student knows, stock prices merely reflect economic conditions, which move in cycles.
Shiller didn’t win the Nobel prize in Economics by repeating what he read in a freshman economics textbook.
The textbooks need to be rewritten to reflect what Shiller showed. Shiller showed that it is the shifts in investor emotion and stock prices that causes the changes in economic conditions, not the economic conditions that change the shifts in investor emotion and stock prices.
There are thousands of economists who want to get credit for explaining the implications of what Shiller showed in 1981. The only thing holding them back today is the Campaign of Terror led by the Wall Street Con Men and their Internet Goon Squads. Once your prison sentence is announced, all the ugliness comes to a quick stop and all the wonderful stuff starts happening for everybody, Anonymous. Good for us!
My best and warmest wishes to you.
Rob
The textbooks need to be rewritten to reflect what Shiller showed. Shiller showed that it is the shifts in investor emotion and stock prices that causes the changes in economic conditions, not the economic conditions that change the shifts in investor emotion and stock prices.
Shiller showed current valuations had some correlation with long term returns, just like current interest rates have some predictive power over bond returns. He didn’t prove anything about investor emotions. If you can prove otherwise, provide evidence.
Shiller in fact emphasizes the opposite of your opinion that the future must repeat the past. Do I have facts, links or evidence to back that up? Again yes:
“Things can go for 200 years and then change. ”
http://www.businessinsider.com/robert-shiller-shiller-pe-ratio-2012-4
“Anything more than 10 years out is long-term, in my view.”
No, no, no, no, NO. I distinctly remember you saying that bailing from stocks in 1996, and having missed out on all the subsequent gains, didn’t matter. Because 19 years was short term. Your long term strategy ALWAYS beats buy and hold. So either you were wrong about that (gasp!) or “long term” means way more than ten years.
“Things can go for 200 years and then change. ”
I obviously agree that things can go one way for 200 years and then change.
We don’t have 200 years of good data. We have 145 years of good data.
For those 145 years, Valuation-Informed Indexing have performed DRAMATICALLY better than Buy-and-Hold. There has never been a single exception.
Given that reality, I don’t feel comfortable joining an effort to ban honest posting. You will be going to prison following the next crash because of the role you played in leading that effort. Going to prison is not on my bucket list. Call me madcap. Sue me.
I hope that helps a bit.
Rob
Your long term strategy ALWAYS beats buy and hold. So either you were wrong about that (gasp!) or “long term” means way more than ten years.
I consider 10 years “long term.”
Valuation-Informed Indexing has beat Buy-and-Hold on a risk-adjusted basis in every 30-year time-period in the historical record.
The turn usually starts in 10 years. VII is not always ahead at the end of 10 years. It is always ahead at the end of 30 years.
That sounds good to me. Most of us have an investing lifetime of roughly 60 years. To know that I am going to be ahead after 30 years is good stuff. The amount by which I am ahead then grows over the following three decades by the power of compounding returns.
If Buy-and-Hold were ahead in a single time-period, you would be shouting it from the rooftops. If Buy-and-Hold were ahead in a single time-period, you wouldn’t feel a need to engage in criminal behavior.
I mean, come on.
Rob
So long term means 10 years, except when it means 30 years. Whatever.
But you said any 30 year period? Fine. I’ll simply take the current 30 year period, May 1985 – May 2015. Holding the S&P 500 the entire time, counting dividends, has produced an annualized return of just under 11%. If you did better, please explain exactly how. (I ask only out of boredom, not under the illusion that I’ll get any kind of rational response.)
So long term means 10 years, except when it means 30 years. Whatever.
Yes. 10 years is the minimum time that would have to pass for me to call something “long term.” But I would also call “30 years” long-term. The time-period doesn’t become “short-term” just because it extends beyond 10 years.
I’ll simply take the current 30 year period, May 1985 – May 2015. Holding the S&P 500 the entire time, counting dividends, has produced an annualized return of just under 11%. If you did better, please explain exactly how.
From 1982 through 1996, VII and BH gave the same good results because both strategies called for high stock allocations. From 2000 forward, BH has provided a return of 2 percent real and VII had provided 4 percent real. From 1996 through 1999, BH was far superior. That happens. From 1996 through today, the real return for BH is about 5.3 percent real. For VII it is about 4 percent real. In a nominal sense, that’s better for BH. But you need to subtract 2 points of return for the higher risk associated with owning stocks. On a risk-adjusted basis, VII is ahead today.
I don’t have a problem with someone saying that BH and VII are a draw today. But stocks are priced for a 65 percent price drop. That will put VII far ahead. Then the VII investor will see compounded returns on the differential for decades to come. In the end, as always, going with a research-backed strategies puts you far, far ahead.
Is that really any surprise? Ins’t that just what you would expect? The enemy of the long-term stock investor is his Get Rich Quick emotional urge. Buy-and-Hold is the “strategy” that pushes the Get Rich Quick urge to places it has never gone before. Those who are familiar with the research in this field would expect BH to perform poorly. And that’s just what we see in real life.
My sincere take.
Rob
So to get anywhere near the 30 year B&H returns, VII requires buying risk-free investments paying 4% real. If you could explain how that is done today, that information may actually be worth $500 million.
VII requires that you act in your self-interest. You know how you do when you buy bananas and sweaters and cameras? That’s what you do when you tune out the b.s. Buy-and-Hold mumbo jumbo pushed so relentlessly by the Wall Street Con Men. You act in your self-interest. It’s that simple. Everyone is better off that way. That’s what makes markets work. People acting in their self-interest.
You can’t get 4 percent real in a safe investment choice today. You sure could get it back in early 2000. You know what the Buy-and-Holders were saying about people who were recommending TIPS paying 4 percent real back at that time? They were saying that they were losers because they hadn’t jumped on the Get Rich Quick gravy train like all the Wall Street Con Men were advising them.
Anyone who says that stocks are worth buying at any price is a con man, X. That statement shouldn’t be even a tiny bit controversial. Anyone who tells you that ANYTHING is worth buying at any possible price is a con man. Give me a friggin’ break.
You would rather make excuses for the Con Men that invest effectively. I would rather play it the other way. I would rather invest for ME. You are mad at me because I post honestly about what the peer-reviewed research says. I think you should be mad at the Con Men for NOT posting honestly about what the research says.
The bottom line here is that you feel ashamed because you fell for a con. I didn’t do that to you. If you want to learn how to invest effectively, there’s 34 years of peer-reviewed research to show you what works. But no one can force you to look at it. So long as you make excuses for the Con Men, they will continue to take your money. That’s what they’re good at.
Rob
“Never in 145 years of stock-market history has this happened.”
I think you mean the US stock market. Does this measurement work at all out of sample? Otherwise it is just mindless back-testing for correlation.
I think you mean the US stock market. Does this measurement work at all out of sample? Otherwise it is just mindless back-testing for correlation.
Shiller has a chapter in his book on non-U.S. markets. John Walter Russell spent some time on this question. There were several threads at the FIRE board are non-U.S. markets and the question came up at the Bogleheads Forum. The evidence we have today indicates that all non-U.S. markets are driven by the same realities as the U.S. market (although they of course are affected by the particular circumstances that apply to them).
The U.S. market is the best market to use in research because it is the most stable. The principles that are discovered of course apply to all markets. You don’t just go market by market and test each one any more than you would develop a theory of gravity by doing separate tests in every geographic region of the world. It makes sense to test more than one place. But the purpose of the tests is to develop principles that apply everywhere.
We need more research on non-U.S. markets. This is one of the reasons why we all should be working together to have you Goons placed in prison cells by the close of business today. Once your prison sentence is announced, no one will be afraid to do the research that needs to be done. Even you Goons benefit from having the laws of the United States enforced in a reasonable manner. You are better off in prison in country whose economic system is stable than free in a county with an economic system in collapse.
That’s my sincere take re these terribly important matters, in any event.
Rob