Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
Shiller showed that long-term timing ALWAYS works and is ALWAYS 100 percent required.”
Direct quote from Shiller: “It’s not a timing mechanism.”
Oh right, he was lying. Or intimidated. Or he doesn’t mean “long term” timing. Or he doesn’t understand his own research.
What do you think Shiller would say about someone who sold out twenty years ago, and has been waiting for a suitable re-entry point ever since?
a) “Gee, that’s swell! He really gets me!”
b) Some variant of “That’s not so swell.”
You are asking an intelligent question, Anonymous.
The obvious answer is — We should all want to ask him! We should all want to hear how Shiller responds to these questions.
I want to launch a national debate. When we have a national debate, people like Shiller will be answering all kinds of questions that they have not answered to date. That’s a 100 percent good thing. It’s by struggling with the sorts of questions that you have raised that societies advance in their knowledge of a subject matter.
Shiller has indeed said that P/E10 is not a timing mechanism. You are right about that. And I am right that Shiller has recommended various forms of timing on numerous occasions. He recommended long-term timing (the kind that I recommend) in the wake of the 2008 crash. He has recommended short-term timing ( which I do not believe works) in more recent comments. Shiller is all over the place re the timing question. Every investor alive should want to pin him down. We all need to know what he thinks.
Shiller is of course in good company re his mountain of self-contradictions. Bogle too talks out of both sides of his mouth re all sorts of investing questions. ALL THE TIME. We all should want to know what Bogle really thinks. We all should be trying to pin him down. We all should favor the launching of the national debate that will supply clear answers to all these legitimate and thus far unanswered questions. We all should be looking forward t enjoying the great learning experience that will follow the announcement of your prison sentence.
That’s my sincere take re these terribly important matters, in any event.
Rob
Anonymous says
Shiller quite clearly said don’t time the market. Unless you can produce a quote that contradicts that (and you never have) there’s no need to keep asking him the same question.
Anyway, here’s a new peer reviewed paper: “Shiller’s CAPE: Market Timing and Risk”
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2876644
Juicy excerpt:
“We find that stocks outperform 10-year U.S. Treasurys regardless of CAPE, except when CAPE is very high (as mentioned above, the reference point is 27.6). In other words, consistent with market efficiency, ‘buy and hold’ is generally a good strategy even when stock valuations appear to be high by historical standards. Despite the strong negative relationship between CAPE and long-horizon stock returns documented by prior researchers, it is difficult to take much advantage of this apparent market inefficiency. The stock market as a whole appears closer to being efficient than not.”
Comments?
Anonymous says
So Bogle, Shiller, the goons, etc., are either lying, misunderstood, don’t care, ignore and/or suffer from cognitive dissonance and only Rob Bennett has been able to clearly see all of the issues and has the only clear understanding as to how the market dies or should act. Have I got that right?
Rob says
That’s much for the link to the research paper, Anonymous. That’s obviously a huge help.
There’s a good chance that I will write a column re this paper. The comments below are in response only to the abstract. So this is just an initial reaction.
I don’t agree even a tiny bit that the results shown here are consistent with market efficiency. If the market is efficient, there cannot be ANY overvaluation. “Efficiency” means that all factors are being considered. If all factors are being considered, the market is properly priced. If there is any overvaluation at all, the market is not properly priced. So I don’t get that statement at all.
It’s an analytical mistake to make the comparison to 10-year Treasuries. That greatly biases the result. TIPS were paying 4 percent real in 2000. That was the risk-free return at the time. No investor would have chosen Treasuries as an alternative to stocks at a time when a 4 percent real risk-free return was available. Make the comparison to the rational alternative to stocks and you of course get a very, very different result.
However, I do agree with the general point that the valuation level for stocks has to be very high for stocks to be beat by a risk-free asset class. John Walter Russell did research at the SWR Research Group showing this. He showed that an investor who went with a heavy stock allocation whenever the P/E10 level is below 20 would do fine.
That doesn’t mean that all investors should follow that strategy, only that it is one reasonable option. But it does show how powerful the long-term value proposition is for stocks in ordinary circumstances. One of the reasons why the benefits of long-term timing (price discipline) have remained hidden from many of the experts in this field for so long is that it is a rare event for the P/E10 value to go above 20. So there have not been many circumstances in which long-term timing was required or even that beneficial.
Recent years (the time-period from 1996 forward) has very much been an EXCEPTION. This is the first time in the history of the U.S. market in which we have seen so long a time-period in which going with a low stock allocation was a good idea according to the peer-reviewed research in this field. It doesn’t change the reality to point out that today’s reality is an unusual one. But it does go a long way toward explaining why lots of good and smart people have had a hard time recognizing this important (and otherwise easy to understand) reality.
I of course very much disagree with the conclusion that it is not possible to take advantage of market inefficiency. But it appears to me that this is an important study, one that everyone who works in this field needs to take a look at. I am most grateful to you for having brought it to my attention, Anonymous,.
Please take good care.
Rob
Rob says
So Bogle, Shiller, the goons, etc., are either lying, misunderstood, don’t care, ignore and/or suffer from cognitive dissonance and only Rob Bennett has been able to clearly see all of the issues and has the only clear understanding as to how the market dies or should act. Have I got that right?
Bogle has brought scores of critically important investing insights to the table.
The same is true of Shiller.
I wouldn’t put yo Goons in the same class as Bogle or Shiller. But I have no problem saying that you have helped me to see many things that I would not have seen absent your contributions and that there are a good number of cases in which you helped me see things that I did not see just by reading the articles or books of Bogle or Shiller.
I have made contributions that neither Bogle nor Shiller nor you Goons have made. I certainly offer no apologies for my genuine contributions (while of course noting that I could not have made them but for the contributions made by Bogle and Shiller and you Goons). But I wouldn’t feel even a tiny bit comfortable saying that I “see all of the issues.” I give my best shot to answering every question put to me in a reasonable and hopefully accurate way. I struggle mightily to be honest even when enormous pressures are imposed to me to compromise my integrity as to price of being permitted to participate at the various discussion boards and blogs that have been compromised as the result of the insanely abusive posting practices of you Goons. But I find it more than a little hard to believe that I have not made mistakes along the way. And of course I have not even attempted to address many issues. So the idea that I “see all of the issue” is flat out nuts.
Does that help?
Rob
Anonymous says
” I wouldn’t put yo Goons in the same class as Bogle or Shiller”
Would you put yourself in the same category as Bogle and Shiller?
Perhaps you would put yourself at a level above them?
Rob says
I would put myself in the same class as Bogle and Shiller.
Bogle laid the foundation. Bogle got everything but valuations right (according to the peer-reviewed research available to us today).
Shiller supplied the missing piece of the puzzle, the biggest piece of the puzzle, valuations. The peer-reviewed research shows that the effect of valuations is 80 percent of the stock investing story. Getting everything but valuations right is getting the entire story 80 percent wrong. In a numbers-based model (both Buy-and-Hold and Valuation-Informed Indexing are numbers-based models), getting the story 80 percent wrong is a catastrophe. When you get the numbers wildly wrong, a numbers-based model offers objective support for doing the wrong thing, which is the OPPOSITE of what sound investing advice does.
I have spent the past 14 years exposing the 35-year cover-up and exploring the practical aspects of the Shiller model, a side of the story that he has been afraid to address because he has seen what Goons like you do to anyone who writes about the implications of his “revolutionary” (Shiller’s word) findings with full and complete and plain and helpful honesty.
Just to say “valuations matter” is not quite a revolutionary advance. It suggests a revolutionary advance. But, for that advance to have effect in the flesh-and-blood world, someone needs to create the sorts of calculators that I have presented at this site and to produce the sorts of insights that I have been offering at the column at the Value Walk site for over six years now. Shiller did not do any of that. He generated the hugely important research-based finding and then stepped back, waiting for someone else to come along and see where that hugely important research-based finding would take us. I saw that opportunity in August 2002, when Greaney advanced his first death threat (abusive behavior of that nature had been blocking progress for 21 years at that time) and picked up the ball and ran with it.
We couldn’t have gotten to where we all deep in our hearts want to be without Jack Bogle’s many contributions, we couldn’t have gotten to where we all deep in our hearts want to be without Robert Shiller’s many contributions, and we couldn’t have gotten to where we all deep in our hearts want to be without Rob Bennett’s many contributions.
That’s my sincere take re this terribly important matter in any event, Anonymous. I hope that helps a bit.
Rob
Anonymous says
Then why haven’t you had the same level of success and acclaim as well as wealth, in comparison to Bogke and Shiller?
Rob says
I am on my way, Anonymous. It’s a process that is playing out before our eyes. It’s a drama that can only end one way. The trick is not to get scared when it looks like the bad guys are close to shutting it down.
If it had been up to me, it would have been done the other way, the normal way. But if this situation had been normal all along, the opportunity wouldn’t have been available to me on the morning of May 13, 2002, would it have been? It is what it is. There’s 50 times more good here than bad. That’s not a bad ratio at all.
I will continue to give it my best shot. I can do no more and I can do no less. I remain 100 percent confident that, following the next price crash, we will all make it to the other side of The Big Black Mountain, the place where we all have long wanted to be. Bogle will get the credit he deserves, Shiller will get the credit he deserves and Bennett will get the credit he deserves.
No one said that achieving huge advances in a society’s understanding of how stock investing works would come without a good fight. My guess is that my good friend Jack Bogle had demons that he had to slay before achieving the things he achieved and that my good friend Robert Shiller had demons that he had to slay before achieving the things that he achieved. I have slayed a good number of demons over the past 14 years and there are one or two that continue to block my path today. I continue to fight with all my strength. The bottom line is that that is the only part of it that is left entirely to me to decide. How it turns out is decided by Someone at a higher pay grade. I will accept whatever path that Someone takes us down.
I love you, man. It makes me happy that I can say that today, after all the adventures that we have been through together. The good stuff we will remember forever. The bad stuff will fade from memory with time.
My sincere take.
Rob
Anonymous says
Hey Rob. Here is your chance. According to this link on Bogleheads, Jack Bogle looks at the letters that are sent to him. Perhaps you can write him a letter and send it to him. You can then post the letter and response here:
https://www.bogleheads.org/forum/viewtopic.php?f=9&t=203980&sid=3d5ca916ec62bc7ba172d38949fbb871
Rob says
Bogle is working a con, Anonymous. Con men rarely turn themselves in.
I wrote to Bogle years ago. As you know. And a good number of others at the Bogleheads Forum wrote to him at that time. When he says that he responds to letters, he is telling a lie. He responds to letters that do not expose his con. He ignores those that ask him why he lies about what the last 35 years of peer-reviewed research tell us about how valuations affect long-term returns.
I don’t believe that Bogle started out as a con man. I believe that he was sincere in believing that the market is efficient in his early days. Perhaps you are cynical enough to believe that he was a con man going back to the first day. Your tone suggests that. I don’t believe that. I believe that he made a mistake and that he fell victim to cognitive dissonance when his mistake was discovered by the publication of Robert Shiller’s “revolutionary” (Shiller’s word) research findings in 1981. Then, as the number of people whose lives have been destroyed by the relentless promotion of the Buy-and-Hold lies grew larger and larger, Bogle felt that he had no choice but to engage in a cover-up to keep people from discussing openly how things really work in the stock market. At some point, he became desperate enough to associate with the sorts of individuals who have put up posts in “defense” of Mel Linduaer and John Greaney. And here we are.
I love the man. I am grateful for the hundreds of powerful insights that he developed that have helped us all to develop a stronger understanding of how stock investing works. There would be no Valuation-Informed Indexing today were it not for the fine work that Bogle put forward a good number of years back. In fact, it was by reading Bogle’s book that I learned about the errors in the Buy-and-Hold retirements studies that I posted about in my famous post of the morning of May 13, 2002.
I will continue posting honestly on safe withdrawal rates and on scores of other critically important investment-related topics. I will continue to praise my friend Jack Bogle to the skies re every subject except where it would constitute financial fraud to pretend not to know about the mistake he made and has covered up for so long that has put millions of middle-class Americans at grave risk of suffering failed retirements. I am 100 percent confident that things will work out for the best following the next price crash. This is exciting stuff. The good news here is 50 times more good than the bad news here is bad.
I naturally wish you all the best that this life has to offer a person, my good friend.
Rob
Anonymous says
Maybe you send send himm a letter letting him know he has a chance to reduce his prison sentence and a lower settlement amount if he responds by close of business.
Rob says
That’s the approach that I’ve tried with you Goons, Anonymous. It hasn’t done the trick. Surprise! Surprise!
People don’t like to go to prison AT ALL, you know?
I get it. I wouldn’t want to go to prison. If I were going to go to prison when people learned the realities of stock investing, I might want to block people from learning the realities of stock investing too. I hope that I wouldn’t do something like that. But I think it would be fair to say that I would be temped. Nobody likes to go to prison.
What do you propose that I do about it? I didn’t create this situation. It developed over time and it was well in place long before I showed up on the scene. I have on many occasions offered to do anything in my power to help out the Wall Street Con Men and you Goons so long as it does not require me to travel to the wrong side of the Felony Line myself. I am obviously not willing to do that. You can certainly understand why I would not want to go to prison myself, right?
You tell me something that I can do that would help Bogle out and that would help you Goons out and I will be on it in two seconds, Anonymous. I ask for nothing in return. It’s the right thing to do and it’s what I want to do. So all you have to do is to tell me what you want and it’s as good as done. The problem is that there is nothing that you can suggest. Bogle and you Goons have made such a mess of things that there are no 100 percent good solutions available to us at this point in the proceedings.
All that I can do is all that I can do. While there is no perfect path available to us, there are better paths and worse paths. You identify the path that Bogle and you consider the best path possible given where things stand today, and I am on it. That’s the best offer that I can make. It is not possible for the rational human mind to imagine how someone in my position could offer you a better deal than that. The most appealing deal that can be imagined by the human mind is the one that I offer you.
And I of course wish both Bogle and you Goons all the best that this life has to offer a person as well.
Rob
Anonymous says
You could help out Bogle and the goons by not filings charges and by not trying to after them for settlement payments. Then all would be well. What do you think about that? Consider it a Christmas gift.
Rob says
I am going to post honestly about what the last 35 years of peer-reviewed research says. If I do anything else, I am committing financial fraud myself. So long as I do that, the word is going to get out about the 35-year cover-up. Probably not today or tomorrow. But following the next price crash. I am not the United States. When you commit a crime, you are committing the crime against the people of the United States. I don’t personally have much to do with it.
The criminal acts are detailed at my site, that’s pretty much the extent of my involvement re the criminal side of this. But even if my site did not exist, this would get out. Shiller’s book is still out there. The research that I co-authored with Wade Pfau is still out there. Shiller’s Nobel prize is still out there. The massive act of financial fraud is eventually going to be written up on the front page of the New York Times regardless of anything I do.
The full reality is that it is probably a plus that I have detailed the criminal acts at this site. I make an effort to put the criminal acts in the best possible light. I say that Bogle’s mistake was the product of cognitive dissonance. How many people do you think there will be saying that following the next price crash. I have said it on numerous occasions. And you can point to time-stamped posts in which I said it and you can say “this is a fellow who had no reason to be biased in favor of the Wall Street Con Men or the members of their various Goon Squads who was saying this.” So my posts have a high degree of credibility. And I think you can point to some of the things that you Goons said to show that there really was cognitive dissonance at play.
The cognitive dissonance play is the best play you have. And the materials at this site help you make that play. The materials at this site do not really hurt you. They reveal the truth. The truth has certain aspects that put you in a bad light. But the truth also has certain aspects that put you in a good light or at least in a not-so-bad light. You can use the materials at this site to develop a defense that I think might cause a good number of reasonable people to react in a moderate way. And I am 100 percent happy to encourage people to look at things in that sort of way, in a way that works to your favor.
Look at Wade Pfau. He is a very smart guy. He holds a Ph.D. in Economics. He was skeptical about a lot of things that I said in the early days. Even today I believe that he is skeptical about some things I say. You can point to someone like him and argue that, if that guy didn’t get it, how could we be expected to get it. You can point to John Walter Russell. John asked that we use phony numbers on the Risk Evaluator because he found the real numbers too shocking. John is as honest as the day is long. But he felt enough social pressure that he asked that we use phony numbers.
You can even look at my history. I was a proud Buy-and-Holder at one time. I once speculated that the SWR at the top of the bubble was probably somewhere around 3 percent. This stuff is not easy. It is easy in a way. It is intellectually easy. But it is very, very, very hard emotionally. That is your defense. You tell people that “we really did believe in it and we did not want to see people hurt and so we did some things that might seem wrong looking back but that seemed to make sense to a lot of us at the time we did them.” I am not saying that that gets you off 100 percent. But I believe that it is best you can do at this point in the proceedings. It is not a crazy position. And it is something that I can back you up on. If someone in my position feels okay backing you up, lots of people will feel okay backing you up.
We are looking at something very big here. It’s hardly possible for the human mind to let in how big this is. Again, look at Wade Pfau. He was AMAZED when this stuff started to click for him. This is like harnessing the power of the silicon chip. The goal is not to put people in prison. That’s petty. The goal is to get the word out, to improve everyone’s life in a very big way. Our problem is to figure out how we do that without having people go to prison for a long time. The answer is to focus on the good being done and thereby try to get the focus away from the 14-year delay, which is a big deal but perhaps is not as big a deal as it at first seems when you put things in perspective and consider how huge an advance it is we are looking at here.
Unlike the criminal actions, the civil suits are my thing. It is my aim to approach those in a generous spirit. I obviously expect to be paid for my work and this is very, very important work that caused me a lot of trouble for a long time. I am going to be paid very well. I don’t know how much Steve Jobs or Bill Gates ended up with but I am sure that we are talking about a numbers in the hundreds of millions. This is a lot bigger. So the $500 million figure that I have advanced is not at all out of line.
And I have offered to direct 10 percent of that to helping get the word out (by promoting my site and by funding blogs that would explore different aspects of the VII question). I can understand people not wanting to go to prison. I cannot understand the Wall Street Con Men being too worried about a payment of $500 million. These people have lots of money. Paying the $500 millions will revitalize the entire industry. It helps everyone. And it puts them in a good light. I don’t see much of an issue there.
We cannot go back in time. If I could push a button and take us back in time, I would push the button. We have to deal with the world as it exists and make choices that work the best for every single person involved. That’s my aim. The good here is 50 times more good than the bad here is bad. So if we all approach this in the right spirit I am 100 percent confident that we will all end up in a very good place.
The entire thing is a Christmas gift. We need to start looking at it that way. Learning new things is wonderful. This is an advance. There is nothing even a tiny bit bad about it. We all just need to let that in.
Rob
Anonymous says
Actually, Rob, you would have to push for criminal charges, because no one else is. As for the civil part, you would need to file the lawsuits. It is all in your hands.
Steve Mobs had a net worth of over $10 Billion and Bill Gates has a net worth over $80 Billion. Shouldn’t you adjust your expectations?
Rob says
You’re making my point, Anonymous. $500 million is a mountain of money. But given what we are talking about here, it is a 100 percent reasonable number.
If you truly didn’t believe that anyone was going to be bringing criminal charges when this gets written up on the front page of the New York Times, you have nothing to worry about. I hereby promise NOT to take any action whatsoever to bring criminal charges or to encourage others to bring criminal charges.
I’ll tell the truth about what happened, to be sure. But if no one else pushes for criminal charges, there will be no criminal charges. I talk about criminal charges because I want to bring the nasty side of this to a full and complete stop before the lengths of the sentences grow even greater. That’s my part in this. I would be 100 percent happy if there were no prison sentences. I don’t believe that it is going to play out that way. But it is fine with me if it does.
Rob
Anonymous says
Since you won’t be pressing charges and you haven’t filed a lawsuit, I guess no one has to worry then. I guess it will be a Merry Christmas after all……….except you won’t get your $500 million since you haven’t taken action.
Rob says
I hope indeed that you enjoy a merry Christmas, Anonymous. It makes me happy to hear that that appears to be in the cards for you.
Please take good care, my old friend.
Rob
Anonymous says
Yes, I should have a great Christmas. The market has been doing great, so there will be many presents under the tree this year.
Rob says
Sounds good.
Rob
Anonymous says
When you wrote to Bogle, did you tell him he was a con-man?
Rob says
I played it with Bogle the same way that I played it with Greaney, Anonymous.
When I first pointed out that Greaney’s retirement study does not contain an adjustment for the valuation level that applies on the day the retirement begins, I didn’t call him a “Goon.” It was when he responded by threatening to kill my wife and children that I began referring to him as a “Goon.”
So it was with Bogle. My assumption was that he would correct his error when it was pointed out to him. He didn’t. That’s what made him a con man. So that’s when I started referring to him as a con man.
Are you able to suggest any better way of proceeding in circumstances like this?
Have you considered that you wouldn’t be worried about a prison sentence today had Bogle come clean back in 1981? Each day that the cover-up continues, more people get hurt. Including Goons like you.
There’s no charity in covering up an act of financial fraud. The charitable thing to do is to INSIST that the fraud be brought to a full and complete stop. It’s also charitable to take the circumstances into account, to try to understand that someone can get caught up in something and make a mistake without meaning to. But there’s no charity in permitting the mistake to go uncorrected. That’s a negative for every single person concerned.
No?
Rob