I’ve posted Entry #381 to my weekly Valuation-Informed Indexing column at the Value Walk site.It’s called The Stock Market Cannot Tell Us Which Economic Policies Are Best.
Juicy Excerpt: The benefit of citing the stock market’s verdict on his policies is that he is citing what most people view as a neutral source. Policymakers are viewed as biased, economists are viewed as biased, journalists are viewed as biased. The stock market? Stock prices are determined through a process in which incredibly smart people make ruthlessly self-interested, rational decisions. The stock market is not biased. The stock market is objective and hard-nosed. What the stock market concludes re a policy affecting the economy counts.
It’s not so.
Rob,
With your VII strategy, you should be at the top of this list:
https://directory.rockstarfinance.com/blogger-net-worth-tracker
Why aren’t you listed here so that all can see your successes and jump on the VII bandwagon!
We’ll have to see what happens following the next crash, Anonymous.
The 37-year cover-up is the biggest case of financial fraud in the history of the United States. All of us have friends who are Buy-and-Holders. It hurts to point out that this is a strategy that was discredited by the peer-reviewed research 37 years ago and that it has taken a massive act of financial fraud to keep it going. The longer the cover-up goes on, the harder it is to tell the story because the more people you are hurting when you do so.
But what happens following the crash? What do we do then? We won’t have much choice but to speak out about this stuff then. I think we are ALL going to be speaking out in those days. Jack Bogle will be speaking out then. And, when Bogle comes clean, that sends a signal to everyone else that it is safe for them to come clean too.
I could be wrong. I’ve been wrong before. But that’s what I expect to see. It’s going to be the biggest advance in our understanding of how stock investing works in history. We will see 37 years of powerful investing insights opened to us in the space of a few days because we will finally be able to speak openly about what we have learned over the past four decades at every discussion board and blog on the internet.
I wish we wouldn’t wait for the next crash. I wish we would do it today. Better than that would have been to have done it on the morning of May 13, 2002. Even better would have been to have done it back in 1981, when Shiller published his “revolutionary” (his word), Nobel-prize-winning research. Still, the good news here is 50 times more good than the bad news here is bad. We all end up living better lives than we ever before thought possible. That ain’t nothing, economic crisis or no economic crisis.
There are going to be LOTS of Rock Star Bloggers telling the truth about how stock investing works in the real world in the days following the next price crash, Anonymous. I am 100 percent sure. But, as I noted above, we will have to wait and see to know for certain.
As always, my best and warmest wishes to you and yours.
Future Rock Star Rob
“We’ll have to see what happens following the next crash, Anonymous.“
Why do we have to wait? You said you have done better than the buy and hold crowd, so you should be at the top of the list. Once people see your results, they will all follow VII because they want to make $$$.
If investors were 100 percent rational, as the Buy-and-Holders assume them to be, that is indeed what would have happened.
But it’s not so, Anonymous. Investors are humans. Humans are not 100 percent rational. If humans were 100 percent rational, there would be no drug addiction. If humans were 100 percent rational, there would be no Gamblers Anonymous. If humans were 100 percent rational, disco would never have been a thing.
Humans are not 100 percent rational. It’s not a close call. But we like people to tell us we are. So it’s a great marketing gimmick to tell investors that they are 100 percent rational and that their portfolio values are real no matter how inflated they are by overvaluation. There are a lot of Rock Star Bloggers who got there by flattering their readers, by telling them lies that will hurt them in the long run. I don’t want to go there. I want to become a Rock Star Blogger by telling people the real story, the true story, the research-based story.
It will be interesting to see how things play out.
I naturally wish you the best of luck with it, my dear Goon friend. I hope that helps a small bit.
Rob
“We’ll have to see what happens following the next crash”
You said that before the last crash. And you’ll say it after the next crash. Nothing changes except your age.
“Humans are not 100 percent rational.”
So people don’t listen to you because they aren’t rational. If they were rational, they would call you a rock star. You, a person who:
1. Admits to owning no stocks for over two decades.
2. Admits to not earning a dime for nearly that long.
3. Refuses to discuss his portfolio, but in all likelihood is living in miserable poverty.
4. Makes no attempt to clearly explain or measure the results of his so-called strategy.
5. Ventures out nowhere beyond his own blog.
No, that’s not a rock star. Maybe a one-hit wonder. If you ever get that one hit.
We’ll see what happens, Anonymous.
We did see things starting to turn following the 2008 crash. But prices did not remain at fair-value levels for long enough for things to turn in a serious way. If prices were to shoot back up within a few months following the next crash, you are right, it would be the same thing again. But there has never in history been a secular bear market that ended before we got to valuation levels well below fair value and stayed there for a long time. That’s what I believe will cause people to rethink. When prices shoot back up quickly, people feel that Buy-and-Hold has not hurt them that much. So they go right back to believing in it. If prices stay down for a long time, people will ask more questions. Or so Rob Bennett believes, in any event.
The bottom line is that either I was right when I said on the morning of May 13, 2002, that the retirement study published at John Greaney’s web site lacks a valuations adjustment or I was wrong to say that. I don’t believe that even Greaney truly believes that he included a valuations adjustment in his study. If he truly believed that, he would simply point to the section of the study that contains the valuation adjustment and we never would have seen a single death threat or a single demand for a single unjustified board banning or a single act of defamation or a single threat to get a single academic researcher fired from a single job. I mean, come on.
Yes, people don’t listen to me (and Shiller, and thousands of our fellow community members who have expressed a desire that honest posting be permitted at every site on the internet) because they are not rational. Get Rich Quick strategies are rooted in emotion, not reason. Buy-and-Hold is the ultimate Get Rich Quick strategy. It’s not just in their retirement studies that Buy-and-Holders fail to consider valuations/emotions. They fail to consider valuations/emotions in every strategic recommendation they make. That’s what the Buy-and-Holders are saying when they say that it is not necessary to time the market. The only way in which investors can exercise price discipline is to go with lower stock allocations when prices reach insanely dangerous levels. The Buy-and-Holders discourage that. So the Buy-and-Holders discourage the exercise of price discipline. Huh? What the f? Could there be anything more emotional than that?
Valuation-Informed Indexing is rooted in research. It is a reason-based strategy. We recommend that all investors practice price discipline, we recommend that all investors practice long-term market timing, just as the last 37 years of peer-reviewed research in this field shows they must if they are to have any hope of maintaining a consistent risk profile as the riskiness of stocks waxes and wanes with changes in valuation levels.
The Buy-and-Holders have provided us with a beautiful car with a powerful engine but no brakes. The car looks great riding down the highway at fast speeds. But, once large numbers of investors come to believe that there is no need to practice price discipline when buying stocks, there is no way to apply brakes to the out-of-control price increases. We need to put brakes on the stock market car. It is the last 37 years of peer-reviewed research that constitute the brakes that we all need. That research shows the rewards of practicing price discipline and the penalties that apply for those who fail to exercise it. Once we open up every web site to honest posting, every investor alive will be exposed to the case for practicing price discipline and we will have a beautiful car with a powerful engine AND the brakes that it needs to insure that the powerful engine doesn’t kill us all, We all will be better off in about 50 different, important ways.
I favor tolerance of honest posting re the peer-reviewed research. I favor the exercise of price discipline when buying stocks. I favor the use of reason when investing for one’s retirement. Sue me, you know? It would be dishonest of me to fail to say that I favor those things and this subject is too important for me to engage in dishonesty when I talk things over with my friends on the internet.
I wish you the best of luck in all your future life endeavors, dear friend.
If I go down in history as a one-hit wonder, I hope it’s something big like “These Boots Are Made for Walking” or “Don’t Walk Away, Rene” or “Classical Gas.” Sometimes one hit is big enough to make a powerful impact. I am beginning to develop a funny feeling that this “valuations matter” thing might end up being something like that. If it weren’t truly far-reaching stuff, you Buy-and-Holders wouldn’t feel so threatened by the idea of permitting honest posting.
My sincere take.
One-Hit-Wonder Rob
“Yes, people don’t listen to me … because they are not rational.”
People don’t listen to you because you are so obviously and disastrously unsuccessful at what you presume to give advice on. People don’t take diet advice from Rosey O’Donnell (or you.) They don’t take marital advice from Bill Cosby (or you.) They don’t take psychiatric advice from Donald Trump (or you.) They don’t take legal advice from O.J. Simpson (or you.) And they don’t take investment advice from you.
So you say, Anonymous. And it is certainly so that 90 percent of investors today believe in at least the general principles of Buy-and-Hold.
But 10 percent do not. And 10 percent of all investors is millions of people. I haven’t spoken to millions. But I have had thousands thank me for my work. That’s extremely gratifying. And I believe that I owe those people honesty in my comments. So I intend to continue giving it to them.
I believe that you personally do not find value in my investing advice. But you sure do worry a lot about those thousands who have expressed great interest in hearing more of it. If you truly thought that my investing advice were equal to diet advice from Rosie O’Donnell, you never would have advanced a single death threat. If you Goons see enough power in these ideas to risk going to prison trying to stop people who have expressed a desire to hear my message from doing so, there must be truly great power in the message.
That’s my sincere take, in any event.
I do wish you all good things.
Rosie O’Robell
“But you sure do worry a lot about those thousands who have expressed great interest in hearing more of it. If you truly thought that my investing advice were equal to diet advice from Rosie O’Donnell, you never would have advanced a single death threat. If you Goons see enough power in these ideas to risk going to prison trying to stop people who have expressed a desire to hear my message from doing so, there must be truly great power in the message.”
I worry about the fact that you actually believe that bullshit.
“But I have had thousands thank me for my work. ”
I have read those comments on your board. I think most would disagree with your interpretation of those comments you believe are thanking you for your work.
I worry about the fact that you actually believe that bullshit.
Okay, Anonymous.
Bullshit-Believing Rob
I have read those comments on your board. I think most would disagree with your interpretation of those comments you believe are thanking you for your work.
There are two basic viewpoints. One is that the market is efficient. The other is that valuations affect long-term returns. There are THOUSANDS of different takes held by the millions of people who hold (more or less) one of those two basic viewpoints. I agree with lots and lots and lots of stuff that Jack Bogle believes. But not with everything that he believes. Bogle agrees with lots and lots and lots of stuff that I believe. But not with everything that I believe. And it’s the same re Shiller and re Bernstein and re Swedroe and re Shultheis and re Kitces and re Pfau and re thousands of others. We all share lots of commonalities and we all have at least some differences with just about everyone else in the field.
The thousands who have thanked me for my work do not agree with everything I say. But they each benefited enough from one thing that I said that they went to the trouble to express gratitude for what they learned from me. That’s super! That’s amazing! That’s how our system works. If someone learned one important thing from me and thinks that 20 other things I have said are of no value whatsoever, I helped that person in a big way. And I am happy to have done it. I want to do more of it. I want everyone in this field to do more of that. That’s how we all enjoy a great learning experience. You don’t have to agree with everything that a person says to learn from that person. It would be a rare event for it to go that way.
There should have been no controversy whatsoever when I put up my famous post of the morning 0f May 13, 2002, pointing out 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. Shiller’s “revolutionary,” Nobel-prize-winning research had already been available to everyone in this field for 21 years on the day when I put forward that post. The people who were promoting Buy-and-Hold during those 21 years believed in it; they were following it themselves. But they knew about Shiller’s research findings. And, given how important it is to get this investing stuff right, they should have been telling their readers every time they put forward a comment promoting Buy-and-Hold that of course there was also this peer-reviewed research showing that there is precisely zero chance that a Buy-and-Hold strategy could ever work for a single long-term investor and that ultimately each investor has to decide for himself or herself where he or she comes down on the Buy-and-Hold vs. Valuation-Informed Indexing continuum.
If it had been handled that way from the start, there would have been a “ho-hum” reaction to my famous post. The reaction would have been: “Oh I get it, Rob is one of those people who believe that Shiller’s research is legitimate research, he’s one of those Valuation-Informed Indexers.” And those who wanted to know more about my thoughts on how Shiller’s research affects our understanding of how safe withdrawal rates work would have asked their questions and had them answered. And the Buy-and-Holders would have continued with their separate conversations rooted in a belief that the market is efficient and thus the safe withdrawal rate is always the same number. And there never would have been any problems, just good stuff piled on top of good stuff piled on top of good stuff piled on top of good stuff.
The reason why Buy-and-Holders go into freak-out mode when their views are challenged is that they have not heard them challenged before. So they react with shock when it happens. That’s a shame. All of us who believe that Buy-and-Hold is a big pile of smelly garbage should be telling our Buy-and-Hold friends that all the time. That’s how they learn. And of course it is when our Buy-and-Hold friends respond to our statements along those lines with comments rooted in their own perspective that we Valuation-Informed Indexers learn. So, again, played properly, this situation where there are two schools of academic thought re how stock investing works is a win/win/win/win/win for each and every one of us.
The problem is that humans are vulnerable creatures given to feelings of fear. Investing is very important stuff. So, once we elect to follow a particular school of thought, we become emotionally invested in insuring that that school of thought is 100 percent perfect with no flaws whatsoever and we feel an inclination to strike out at anyone who challenges our beliefs. That’s where our social norms protect us from destroying ourselves. If we are ever going to learn anything new, we need to be open to letting the other guy have his say. All of our boards and blogs have published rules meant to insure that we do not strike out in those circumstances, that we let new ideas be voiced. But in this case the fear of having made a mistake was just too strong on the part of the Buy-and-Holders and the published rules of all our sites — and indeed the laws of our country — were not enough to rein in the base emotional impulses of our Buy-and-Hold friends. That’s the story.
The thousands of people who have expressed gratitude for the work I have done do not agree with everything that I have said. And that is of course fine. I am helping when I post honestly. And they get that. And they are entitled to hear what I say regardless of how much emotional distress my words cause our more emotional Buy-and-Hold friends. Our more emotional Buy-and-Hold friends need to dial back the insanely and indeed criminal emotional stuff back about 17,000 notches. That’s the answer, Anonymous. That’s our system. That’s what works. That’s how we all learn more about how investing works in the real world over time.
That’s my sincere take re this terribly important matter, in any event.
I don’t have to show that I am right to gain permission to speak. It is by speaking that I show that I am right. The speaking part has to come first. The speaking part is guaranteed by the published rules of every site and indeed by the laws of the United States. The very first thing that we need to do is to open every discussion board and blog on the internet to honest posting on safe withdrawal rates and scores of other critically important investment-related topics. Mountains of good stuff will follow from that. That is the first and most important step. In an ideal world, there wouldn’t be one of us who had the slightest doubt as to whether we should all take that critically important and powerfully positive step by the close of business today.
My best wishes.
Rob