I’ve posted Entry #368 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Stock Price Booms Rarely Lead to Stock Price Crashes.
Juicy Excerpt: Valuations tell us a lot about how the u.s market works. But they do not tell us everything. Investors hoping to use an understanding of valuations to enhance their long-term investing results need to be as aware of the limitations of valuation analysis as much as they need to be aware of its power.limitations
Anonymous says
It looks like you will have to wait even longer for that crash, which means it will take longer to get the $500 million windfall.
https://nypost.com/2017/12/30/market-analysts-see-booming-stock-growth-in-2018/
Rob says
Fama showed in research published in 1965 that short-term timing doesn’t work, Anonymous. According to the peer-reviewed research, these analysts are just making guesses. If there were reasons to believe that stock prices would be booming in 2018, they would already be incorporated into the price. If there were reasons to believe that stock prices would not be booming in 2018, they too would already be incorporated into the price. These analysts are working in the field of speculation and marketing, not research.
The only stock market prices that can be predicted are long-term prices, according to the research. That’s because those are determined not by all the economic factors that are incorporated into the current price but by investor emotion, which is revealed by the P/E10 level and which affects prices in a highly predictable way in the long term.
Rob
Anonymous says
Of course we remember your predictions:
“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”
So that means the research was wrong and we should question VII………..just using your words.
Rob says
I think it is both fair and helpful for you to point out that I said that, Anonymous. I do think that the length of time for which prices have remained high offers grounds for questioning Valuation-Informed Indexing.
I would not say that “the research was wrong.” I would be okay with saying that the research does not tell us everything that we wish the research told us. But I would say that the research is very valuable and will become even more valuable as we come to a better understanding of it.
Rob
Anonymous says
“But I would say that the research is very valuable and will become even more valuable as we come to a better understanding of it.”
Or another way of saying it is that you don’t really know what you are talking about.
Rob says
I’m still learning, Anonymous.
To your way of thinking, anyone who is still learning doesn’t already know everything, which is just another way of saying that he doesn’t know what he is talking about.
To my way of thinking, the person who says he already knows everything that there is to know or that there ever will be to know who is in trouble. I don’t believe that we humans can ever know everything that there ever will be to know about a subject.
I acknowledge that I am still learning. I don’t apologize for it. I certainly do not say that I know everything there is to know about the subject of stock investing.
Rob the Unknowing
Anonymous says
“I certainly do not say that I know everything there is to know about the subject of stock investing.”
No. You just say you know more about it than Bogle, or Shiller, or pretty much anyone else. Funny though, none of those guys followed the catastrophic path of dumping all stocks in 1996 and staying out. That’s why they are the acknowledged experts, and you are Rob.
Rob says
I put a post to the Retire Early board at the Motley Fool site on the morning of May 13, 2002, saying that John Greaney got the numbers wrong in the retirement study he had posted to his web site because he failed to include a valuations adjustment in it.
Did Bogle say that before I did?
Did Shiller say that before I did?
I have no problem saying that I learned things from Bogle and from Shiller. So there were things they said before I said them. But I am the one who first said that Greaney got the numbers wrong in his retirement study. And that’s just the plain fact of the matter.
Some people get some things right and some other people get some other things right. I got the safe withdrawal rate thing right a long time before either Bogle or Shiller got it right. Bogle hasn’t publicly called for corrections to the Buy-and-Hold retirement studies to this day. Nor has Shiller.
I offer no apologies for getting the safe withdrawal rate thing right before Bogle or Shiller did, Anonymous. A failed retirement is a serious life setback.
And I am happy to be able to say that both Bogle and Shiller got important things right before I got them right. I only wish that they could both say today that I got the safe withdrawal rate thing right before they did. We would all be a lot better off in my assessment if they could say that today.
I think they will say it in the days following the next price crash. But there’s going to be a lot of people hurting in very serious ways because it took them until then to say it. I think that’s a darn shame.
These are my sincere thoughts re these terribly important matters, in any event.
I naturally wish you the best of luck in all your future life endeavors, my good friend.
Rob
Anonymous says
“But I am the one who first said that Greaney got the numbers wrong in his retirement study. And that’s just the plain fact of the matter.”
The plain facts of the matter are a) neither Shiller nor Bogle ever heard of Greaney, b) Greaney didn’t get the numbers wrong, and c) even if he had gotten the numbers wrong, it’s irrelevant, as Greaney is nobody. Your idiotic claim is akin to saying that Stephen Hawking doesn’t know who you went to the prom with, so you know more than Stephen Hawking.
Rob says
Greaney wasn’t a nobody to the people who believed that he was shooting straight and who are in the process of suffering failed retirements because Bogle and Shiller didn’t have the courage to call him out on his b.s. And Greaney wasn’t the only one who failed to include a valuations adjustment in a retirement study. If Bogle and Shiller didn’t know about him, they knew about others who did the same thing.
I wish you all good things in any event.
Rob
Anonymous says
So, if you know more than Greaney, Bogle, Shiller and the rest of us, why are you not one of the wealthiest investors today? You should have been able to take your superior investment knowledge and skills and parlay all of that into one of the most successful portfolios known to man. Afterall, the goal here is to maximize our returns, right?
Rob says
You are asking a question that you have known the answer to for 15 years now, Anonymous.
Valuation-Informed Indexing permits an investor to dramatically increase his long-term return while also dramatically diminishing the risk he takes on to earn that return. But even a doubling of what would have been a $1 million return would only put me ahead by $1 million. People who follow riskier strategies (like picking individual stocks rather than investing in index funds) would obviously have a chance of doing better (while also obviously having a chance of doing worse)
I am doing fine so far. I am a ahead of where I would have been had I followed a Buy-and-Hold strategy. I will go farther ahead following the next price crash. And then I will go even farther ahead in the decades that follow as I earn compounding returns on the differential. There are millions of investors interested in learning about a strategy that permits them to earn far higher returns while taking on greatly reduced risk. And, when those millions are able to learn about what the last 36 years of peer-reviewed research teaches us, our entire economic system will function far better because those millions will be able to make more purchases of good and services and thereby help us avoid the economic crises that the widespread promotion of the Buy-and-Hold strategy inevitably brings on.
The good news here is 50 times more good than the bad news here is bad. And we are on our way. We are very close. Hang in there, man. It gets better and better and better.
I am sure.
Rob
Anonymous says
“I am doing fine so far. I am a ahead of where I would have been had I followed a Buy-and-Hold strategy. I will go farther ahead following the next price crash. And then I will go even farther ahead in the decades that follow as I earn compounding returns on the differential. There are millions of investors interested in learning about a strategy that permits them to earn far higher returns while taking on greatly reduced risk. And, when those millions are able to learn about what the last 36 years of peer-reviewed research teaches us, our entire economic system will function far better because those millions will be able to make more purchases of good and services and thereby help us avoid the economic crises that the widespread promotion of the Buy-and-Hold strategy inevitably brings on.”
That sounds much like the average guy that plays the lottery and tells you about how he will become rich some day.
Rob says
That makes sense, Anonymous. Following 36 years of peer-reviewed research is the same thing as playing the lottery.
Take good care, man.
Rob
Anonymous says
“That makes sense, Anonymous. Following 36 years of peer-reviewed research is the same thing as playing the lottery.“
I think lottery players have a better chance at a windfall than you do.
Rob says
It will be interesting to see how it all plays out.
Feelin’ Lucky Rob
Anonymous says
“It will be interesting to see how it all plays out.”
We have watched it play out. The words “ train wreck” come to mind.
Rob says
Okay.
Please take good care in any event.
Rob
Anonymous says
“Okay.
Please take good care in any event.
Rob”
What else would you expect us to say? We have watched all of your predictions fail, lies upon lies, exaggerations, failed retirement and investing plans and assorted bad behavior. How else can we describe it other than a “train wreck”?
Rob says
I’d say that we are living at the most exciting time to be a stock investor in the history of the planet.
In 1981, we discovered the missing piece of the puzzle. We now know how to reduce risk dramatically while also increasing returns. And we know how to avoid the economic crises that have given capitalism a bad name in the eyes of millions. The only thing holding us back is that the advance we have achieved is so great that lots of people just cannot let it in. The news is too darn good to be true.
One more price crash should pull us over the line. We have already seen thousands of our fellow community members work up the courage to stand up to you Goons and at least on one or two occasions express a desire that honest posting be permitted at every discussion board and blog on the internet. Following the next crash, we will obviously see a good number of those people INSIST that you Goons be placed in prison cells, where you belong. At that point, all the rest of us are on our way.
Could we end up in the Second Great Depression? We could. Are we in scary circumstances despite the amazing advances that we have achieved on an intellectual level? We are indeed. But I think it would be fair to say that the good news here is at least 50 times more good than the bad news here is bad. The bottom-line reality is that as a society we have been for 36 years now working our way through a process that will take us from a highly flawed understanding of how stock investing works to the first true research-based strategy, one that will permit us all to live richer lives (in every sense of the word). How often does something like that happen?
I wish we had played it straight, Anonymous. Obviously. But I love my country. And I think that it would be fair to say that it is all the great things about this country that are in the process of turning the ugly stuff that you Goons have been throwing at us for 15 years running now into something real and good and amazing and life-enhancing.
I put the odds of us all (including you Goons, believe it or not!) making it successfully to the other side of The Big Black Mountain at 100 percent.
Could I be wrong?
It’s been known to happen. If it were happening again, I probably would be the last to know.
But that’s my sincere take re these terribly important matters all the same.
Let’s sit back and watch how it all plays out, you know? It’s not as if we had any other realistic options available to us at this point in the proceedings.
The good guys win on the last page, my old friend. I am 100 percent sure.,
Does all of that not sound at least roughly right?
Rob
Anonymous says
“Could I be wrong?”
I have never seen anyone else that has been so wrong and for so long as you. Just a disaster.
Here you are saying you want to see how it plays out, but we have seen it play out.
Rob says
That’s like saying that we had seen how the Bernie Madoff fraud had played out in the days when his investors were all bragging about how ignoring their common sense and investing with him had made them millionaires. You’ve never seen the full story of a Get Rich Quick scheme until it destroys the lives of the people who fell for it. To form your assessment at a time when there are trillions of dollars of Pretend Gains influencing people’s emotions is just not scientific.
My sincere take.
Rob
Anonymous says
“That’s like saying that we had seen how the Bernie Madoff fraud had played out in the days when his investors were all bragging about how ignoring their common sense and investing with him had made them millionaires. ”
That Bernie guy sounds a lot like this guy that thinks he will be getting a $500 million windfall.
Rob says
Okay, Anonymous.
Rob
Anonymous says
Have you ever noticed that people like Bogle, Shiller, Pfau, Bernstein, etc never talk about their accomplishments? Instead, it is other people that talk about how good these people are at what they do. To the opposite, there is no one saying these things about you Rob, yet you like to tell everyone else what you think you have accomplished.
Don’t you think that this is an interesting observation?
Rob says
I’ve had thousands of people talk about my accomplishments, Anonymous. I think it would be fair to say that never in the history of the internet has there been anyone who has received as many kind statements of gratitude re the work he has done as I have received over the last 15 years.
If you Goons didn’t threaten to kill the loved ones of those who have posted kind words about me or to threaten to destroy the careers of those people, we would be seeing those sorts of comments at every site on the internet today. So there would be no need for me to say anything positive about myself. I would of course be happy to let other people say those things.
The odd thing here is the Campaign of Terror against our board communities led by you Goons. I need to bring the Campaign of Terror to a full and complete stop to spread the word re what the last 36 years of peer-reviewed research teaches us. The thousands of acts of defamation that you Goons have directed at me are obviously a big part of the story. I obviously need to make the point that the vast majority of community members are not Goons and have repeatedly said very kind things about my work product.
You Goons would be tearing into Bogle and Shiller and Pfau and Bernstein if they posted with 100 percent honesty. That’s obviously why they don’t do it. I think they should insist on their right to do honest work. They should take whatever hits you Goons deliver and then stick up for each other’s right to post honestly. You Goons would then get sent to prison and that would be the end of the problem. By acting to appease you, they encourage you to continue with your criminally abusive behavior. Which helps not one of us and which hurts every single one of us.
Our laws against financial fraud are good and necessary laws, Anonymous. All of us who love our country should be doing everything in our power to see that those laws are enforced in reasonable ways. Or so Rob Bennett sincerely believes in any event, you know?
My best wishes to you.
Rob
Anonymous says
“I’ve had thousands of people talk about my accomplishments, Anonymous.”
Yet none of these “thousands” will post here in the comments section or anywhere else on the internet, despite their ability to do so anonymously, which would keep them safe from any alleged retribution by a “Goon”.
Rob says
That’s an unfortunate reality, Anonymous.
We should all be working together to change that unfortunate reality. When we change it, LOTS of people will be speaking up about the dangers of widespread promotion of the Buy-and-Hold strategy. That’s where I want to take things.
You want to keep Buy-and-Hold going. I want to expose its flaws and bring it down. We are working at cross purposes. Do you see that?
Rob
Anonymous says
“That’s an unfortunate reality, Anonymous.”
Really? This doesn’t seem to be the case with anyone else and on any other topic. Yet you would have us believe all these “ thousands” are just to afraid to make an anonymous post in your unique case.
Rob says
In 61 years of life on this planet, I have never seen another situation like this one. If the point you are making is that this situation is extraordinary to the 10 billionth degree, we are in complete agreement.
That doesn’t change the realities. I said on the morning of May 13, 2002, that the retirement study posted at John Greaney’s web site lacks an adjustment for the valuation level that applies on the day the retirement begins. Thousands of people have looked at the study in the 15 years since. Not one has been able to identify a valuation adjustment in the study. I am beginning to develop a funny feeling that what I said on the morning of May 13, 2002, may really be so — it may just be that Greaney’s study really does lack a valuations adjustment.
If there were not so much money in Buy-and-Hold, the study would have been corrected years ago. If there were not so much money in Buy-and-Hold, the study never would have existed in the form in which it exists in the first place — the studies from which Greaney took his methodology would have been corrected long before Greaney even came on the scene.
We have to correct the error that the Buy-and-Holders made and that Shiller uncovered with his “revolutionary” (Shiller’s word) research findings of 1981. The error is killing us. It has already caused the second biggest economic crisis in our nation’s history and it threatens to bring on the Second Great Depression in the event that we don’t pull together as a nation and get you Goons placed in prison cells promptly after the onset of the next price crash.
I acknowledge that this is all crazy as all get-out. I wouldn’t believe it myself if I hadn’t had a front-row seat to all the developments of the past 15 years. But here I am, you know? I love my country. I think it would be fair to say that someone who loves his country can only respond to these realities in one way. And of course that is what I am doing.
You propose “moving on.” Which means letting my country do down. Not freakin’ interested, you know? If you were thinking clearly, you wouldn’t even suggest such a thing. You are better off going to prison than seeing your country go down. Are you joking?
Rob
Anonymous says
“In 61 years of life on this planet, I have never seen another situation like this one. If the point you are making is that this situation is extraordinary to the 10 billionth degree, we are in complete agreement.”
Or perhaps the most logical conclusion is that you are living in a fantasy world.
Rob says
Are we to believe that it is the fellow who is living in a fantasy land who noticed 15 years ago that the retirement study posted at John Greaney’s web site lacks a valuations adjustment?
Rob
Laugh says
Yes it appears clear that you live in a fantasy. No one cares about John Greaney or his study.
Rob says
People care. Take your abusiveness out of the picture and people would be talking about the errors he made in his study at every discussion board and blog on the internet. The right way to say it is to say that no one cares ENOUGH about the errors in Greaney’s study to be willing to take on the abusiveness of you Goons. So, yes, you have silenced people through your use of death threats and all your other Goon garbage posting tactics.
But what happens in the days following the next price crash. At that point people will be sufficiently pissed off about what has happened that they will post about the errors in the Greaney study and about the flaws in the Buy-and-Hold Model in general at every discussion board and blog on the internet. Lots of people are willing to say things about the Madoff fund today that they were not willing to say in the days before the Madoff fraud was exposed.
I don’t see how that reality helps you in any ultimate sense. It PUTS OFF your prison sentence, it does not do away with it. After the crash people will be angry that they cannot go back in time and save their investment portfolio by acting on what they then will learn that the last 36 years of peer-reviewed research teaches us about how stock investing works. They will see the thousands and thousands and thousands of pre-crash posts in which I urged that they be permitted to have access to the discussions they needed to have access to to invest effectively and become angry at the internet Goons who blocked them from attaining access to those discussions. The more angry those people are, the worse off you Goons are.
It is my sincere belief that you are following a short-term strategy, Laugh. Your hate is an irrational hate. You are not just hurting me, whom you (falsely) see as your enemy. You are also hurting millions of middle-class investors, both Valuation-Informed Indexers and Buy-and-Holders. And finally of course you are hurting yourself in very serious ways. Huh? What the f?
This sort of behavior is not my particular cup of tea, Goon friend.
It is not a close call.
Rob
Anonymous says
Don’t like a particular tv show? Change the channel. If you don’t like John Greaney’s work, then you can choose to ignore it and do your own things. Everyone is entitled to an opinion.
Rob says
If those who advocate research-based strategies are subjected to death threats and demands for unjustified board bannings and thousands of acts of defamation and threats to get the academic researchers they work with fired from their jobs and those who advocate Get Rich Quick strategies are not, the Get Rich Quick strategies are going to prevail.
If we follow the laws of the United States, people will be able to hear both sides and decide for themselves. In that event, the best strategy will prevail. I favor following the laws of the United States.
I have zero problem with Greaney expressing his opinion.I have a very big problem with him violating the laws of the United States. I love my country, I believe that the laws against financial fraud are good and necessary laws and I intend to continue to advocate for reasoned enforcement of those laws. I am 100 percent sure that, the days following the next price crash, I will have lots of company.
We’ll see.
Rob