I’ve posted Entry #366 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Investors Who Lower Their Return Expectations At Times of High Valuations Should Lower Allocations Too.
Juicy Excerpt: Bogle stated on Page 33 of his book Common Sense on Mutual Funds that: “This analysis takes into account my conviction both that the performance of individual securities is unpredictable, and that the performance of portfolios of securities is unpredictable on any short-term basis. While the long-term performance of portfolios is also unpredictable, a careful examination of the past returns can establish some probabilities about the prospective parameters of return, offering intelligent investors a basis for rational expectations about future returns.”
That’s not Buy-and-Hold! That’s Valuation-Informed Indexing!
…which is why, when you say “Bogle got it wrong”, we’re wondering what you’re talking about.
“That’s Valuation-Informed Indexing!”
Is that something that involves a 100% bond allocation, and predicting a 60% stock market crash right before the market doubles? Because I’ve never heard Bogle (or any expert) say such a thing.
I put a post to the Motley Fool’s Retire Early board on the morning of May 13, 2002, pointing out that the Buy-and-Hold retirement studies do not include an adjustment for the valuation level that applies on the day the retirement begins, Anonymous. Did Bogle point out that error before I did? Did he endorse my post and ask that the authors of the studies correct them as soon as possible? Did he speak up when he saw the people “defending” the studies advance death threats and demands for unjustified board bannings and thousands of acts of defamation and threats to get academic researchers fired from their jobs?
Bogle got some very important stuff wrong. And you are not making things easier for him by covering up for him. A true friend would urge him to come clean by the close of business today. That’s what I have done on hundreds of occasions. No?
Rob
Uh oh, Rob. The research shows you can’t use CAPE to time the market.
https://earlyretirementnow.com/2017/12/06/sky-high-stock-prices-how-to-cope-with-cape-fear/
It looks like the $500 million windfall just went up in smoke.
Oh noes!
Take good care, man.
Rob
That article and its 38 comments basically say that VII is an ignorant crock of shit. And you don’t even have passion left to go over there and simply comment “I disagree.”
Sad. There’s just nothing left in the tank, is there?
I only learned about the article when you linked to it here. So I have not had an opportunity to comment until now. I have read the article (which I find a solid piece of work) but not the comments.
I don’t have time today either to read the comments or to comment there. I will try to find some time in the next few days. My guess is that it won’t be this week. I have a busy schedule in my personal life this week because of the holidays. But time will open up early next week. If the comments that have been filed thus far are as reasonable in tone as the article itself, then I will certainly add my thoughts. I love to have opportunities to help out in that way. If the comments are excessively hostile, it is possible that I may not. If they are mostly reasonable and only occasionally hostile, I would vote for adding a comment of my own and hoping that it is taken in the right spirit.
There’s plenty left in the tank, Anonymous. If that guy wants to have an ongoing debate, I would love to be part of it. There’s nothing that I would enjoy more. But, yes, there has to be some evident desire for the debate to be a constructive one for me to want to participate at this point. I have seen a lot of non-productive debate with Buy-and-Holders over the past 15 years and I don’t believe at this point that a good purpose is served by participating in more of it. Discussions should be civil and respectful and reasoned and human and warm. That’s how it is in all other fields of human endeavor and that’s how it should be in the investing advice field as well, in my sincere assessment.
Your comment that “VII is an ignorant crock of shit” is the type of comment that reflects poorly on all Buy-and-Holders. Shiller was awarded a Nobel prize for his work. So the last 36 years of peer-reviewed research in this field is valuable and important stuff. There is room for reasonable differences of opinion re these matters. There is no room for those sorts of ugly, ignorant comments. I doubt very much that all of the comments over there are of that type. But it wouldn’t shock and amaze me if there were a few of that type or if, when some of that type were advanced, the majority of community members who avoided stooping that low failed to speak up in opposition to the ugliness out of fear or what would be dished out to them if they expressed their sincere views. That’s the problem. That’s what needs to change. When we change the process side of the story, we will see progress on the substantive side. We need to restrain our ugliest impulses enough to pass for humans to achieve the benefits that are possible by engaging in reasoned debate on important matters re which we are currently in disagreement.
My sincere take.
Rob