Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
“If I have heard the phrase “timing doesn’t work” one time, I have heard it 10,000 times.”
Because it’s in response to the 10,000 times you shrieked “buy and hold doesn’t work!” The repetition is yours. Years and years of mindlessly regurgitating the same talking points. That, more than anything else, is what got you banned from all those sites. You will never accept that life has more than one topic.
I very much accept that life has more than one topic, Anonymous. I posted at the Retire Early board from May 1999 through May 2002 without once saying that “Buy-and-Hold doesn’t work” and I had a great time doing it. There’s no belief on my end that the only topic worth discussing is valuations.
But, yes, valuations is the only topic that I have written about for the past 15 years. That much is so. That’s not because I personally believe it is the only topic of importance. It is because I care deeply about our communities and because I learned through personal experience that valuations is a topic that causes us trouble in a way that no other topic causes us trouble. We need to talk about hundreds of other topics in constructive and effective and positive and life-affirming ways and we do. We do not today talk in constructive and effective and positive and life-affirming ways about valuations. That needs to change.
That’s why I have made this topic my focus. We all need to pull together to get our discussions of this particular topic on the right track. We need to follow the same rules when discussing valuations that we follow when discussing every other topic that we discuss.
You believe in Buy-and-Hold. You believe that the number on your portfolio statement reflects the true value of your portfolio. You believe that a withdrawal rate of 4 percent is perfectly safe at all times.
I believe in Valuation-Informed Indexing. I believe that, at a time when stocks are priced at two times fair value, I need to divide the number on my portfolio by two to know the true, lasting value of that portfolio. I believe that there are some valuation levels at which the safe withdrawal rate is 1.6 percent and some where it is 9 percent and some where it is something between those two.
Can we be friends despite our differences re these matters?
It’s the fact that I even need to ask that question that shows why the valuations issue is different from all the others. If one person on our boards said “I would never retire at age 50, I would get bored” and someone else said “Oh, I think retiring at age 50 would be amazing, I would retire at age 40 if I could,” they could remain friends despite their differences. Some people on the board would agree with the first statement, some would agree with the second and some would hold an opinion somewhere in the middle of those two. But we would see no death threats or board bannings or any of the other stuff in response to an expression of either of those two points of view re an important Retire Early issue.
When it comes to discussions of valuations, a good number of us put our friendships aside and go on the attack when other community members express different points of view. That needs to stop. Valuations isn’t the only important issue but it is certainly an important issue. So we all need to learn what we can about it when opportunities to do so present themselves. To create learning experiences, we all need to express our sincere views on the subject every time it comes up. Those who sincerely believe that the safe withdrawal rate is always 4 percent need to say that. And those who believe that the safe withdrawal rate varies with changes in valuation levels need to say that. And those on both sides need to always be sure to post in warm and friendly and humble and open-minded ways, ways that encourage others to step up to the plate and express their views as well.
There is not one school of academic thought as to how stock investing works. There are two. There is Buy-and-Hold, which is based on the peer-reviewed research of Nobel-prize-winning economist Eugene Fama. And there is Valuation-Informed Indexing, which is based on the peer-reviewed research of Nobel-prize-winning economist Robert Shiller. Both points of view need to be given daily expression on our boards and blogs. Never should any members of either camp be made to feel unwelcome. We all should be 100 percent united in dealing with the problem if ever there should come a time when one of the members of either camp is made to feel unwelcome. We are all here for the same purpose — to learn. To learn, we all need to be open to hearing the views of every other community member.
I really have heard the phrase “timing doesn’t work” thousands of times. And, no, I didn’t only hear it in response to my phrase “Buy-and-Hold doesn’t work.” I heard it thousands of times in the years before I dared to give voice to my belief that Buy-and-Hold doesn’t work. Buy-and-Holders comprise 90 percent of our board communities. I get the sense that you don’t often think about how dogmatic your phrases sound to the 10 percent of us who hold very, very different views as to how stock investing works.
I don’t want you to say things you don’t believe. That’s the last thing in the world that I would ever want. But I do think that you need to work harder to tolerate the expression of minority views that are sincere and that are rooted in decades of peer-reviewed research. We learn more when our views are challenged than we do when they are supported. All new ideas start out with only one supporter. That was true of Buy-and-Hold once upon a time. There was a time when there was only one person in the world who believed in Buy-and-Hold. Today, the number is in the millions. It might be that that is what is going to happen with Valuation-Informed Indexing. You need to show the idea the respect that it merits despite your personal disagreement.
That’s the deal here. I need to show your ideas respect too. It’s not always easy. I believe strongly that Buy-and-Hold is a big pile of smelly garbage. It is hard at times to resist the urge to say it precisely as I believe it. Perhaps I should pull back a bit when a phrase like that comes to mind. I have friends who believe strongly that Buy-and-Hold is the answer and I might alienate them by using such a phrase.
The tricky part is that these are both number-based strategies. I could make a practice of using soft words when referring to Buy-and-Hold out of deference to my many friends who believe that that strategy is the answer. But what happens when someone asks me what the safe withdrawal rate is at a time when the P/E10 level is 44? If I say “1.6,” that is going to hurt. That’s not a soft number. I cannot talk about a numbers-based strategy without ever mentioning numbers and I obviously need to report the numbers that apply honestly and accurately. So there is a certain amount of hurtful stuff that just comes with the territory here. We all need to be mindful of the sensitivities and do all we can not to upset our fellow community members while also being true to ourselves and doing all in our power to bring about a learning experience for all.
I’m up for the challenge if you Goons — er, you Guys and Gals! — are.
I love my Buy-and-Hold friends, Anonymous. That’s a deep reality here. I go to battle with you in the spirit in which two old dogs who have been fighting each other in fun for their entire lives go to battle with each other. It’s what we do, it’s how we show affection for each other. I get the sense at times that that is not the spirit in which you go to battle with me. Are you my friend? Do you respect my contributions to the various board and blog communities? Are you grateful for the learning experiences that I have facilitated for you?
If the answer to these questions is “no,” then it is not me causing the repetition, it is you. If the answer to these questions is “no,” you are the one causing the problem by using your words not to encourage discussion of important Retire Early stuff but to shut such discussions down. If that’s the case, you should be ashamed of yourself, man. I mean, come on.
If the answer to these questions is “yes,” then let’s get it on! Let’s work it out. Let’s move forward. Tell me what you need to make it happen and I’ll be there for you. Buy-and-Hold believer or no Buy-and-Hold believer, I am always there for a friend.
I hope that helps a small bit.
Rob
Shiller keeps talking. https://www.marketwatch.com/story/4-steps-to-financial-success-from-nobel-prize-winning-economists-2017-11-24
“In fact, even on Black Monday, Shiller’s broker told him not to worry. “The market began rising later that week, and in retrospect, stock charts show that buy-and-hold investors did splendidly if they stuck to their strategies,” writes Shiller.”
Shiller says “buy-and-hold”? Uh oh. I thought you said he advocated “long term” timing. Well, not exactly, but he didn’t not say not to not do long term timing. Which is just as good.
Yes, Shiller does confirm what we all know. Buy and hold helps to keep you clear of the dangers of the get rich quick schemes by the market timers.
This chart
http://www.multpl.com/shiller-pe/
indicates that the P/E10 level was below 20 before the 1987 crash. So the last 36 years of peer-reviewed research was telling investors of the time that any crash that took place was not justified by the economic realities and was likely to be short-lived. Good for the last 36 years of peer-reviewed research for telling us that, you know?
Today the same research is telling us that, following a 50 percent price crash, stocks would be priced at fair-value and that the most likely scenario is that it would hold that value for the long term. So the 50 percent of each investor’s stock portfolio that would have disappeared into thin air would be gone for good.
Why not tell those investors that today while they still have the opportunity to do something to protect their life savings? I favor opening every discussion board and blog on the internet to honest posting re safe withdrawal rates and scores of other critically important investment-related topics.
Are you able to imagine any possible downside?
Rob