I’ve posted Entry #402 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Early Retirees of 2000 Were Burned Badly By Our Collective Irrational Exuberance.
Juicy Excerpt: Say that you are an aspiring retiree who in January of 1996 holds $700,000 in your account. You look at this 4 percent rule being pushed by most of the experts in this field and you see that you are $800,000 short of what you need to finance a retirement that permits annual withdrawals of $60,000. “Oh, well,” you think to yourself, “”early retirement was a pretty dream but it does not appear to be a viable option for me.” For the next four years, you give up on the goal, spend all of your earnings on fun stuff and save not one additional penny.
Then you happen to do a quick check on the status of the crazy dream in January 2000. Lo and behold, the stock market has produced a return of 126 percent over the four years. You had less than half of what you needed to retire safely in 1996. But four years later, after saving not one additional penny, you have $1.58 million in your account, more than the $1.5 million needed for a “100 percent safe” retirement, according to the 4 percent rule (one study that was cited daily at the discussion board I frequented in those days used that precise phrase without irony). By magic, you went from being a guy with nowhere close to enough to one with more than enough to do so with perfect safety.
Lots of my friends fell for it.
Anonymous says
Not that this will resonate with you, since nothing ever does, but this newsletter says it well:
http://static.fmgsuite.com/media/documents/3bedc079-47b8-45b7-91fc-75364dd49a5b.pdf
“They (market timers) have selective memory or instead view (missing out on gains) as collateral damage in the mission to avoid getting walloped by another steep decline. It never resonates that a few episodes of missing 10% or 20% gains by getting out and back in at the wrong time results in the same loss of wealth as participating in a bear market. There is an important difference—losing money in a bear market has always been temporary. Incorrectly timing the market has usually led to a permanent loss of wealth because markets go up more often than they go down and typically never revisit previous levels.”
I especially like the part about selective memory.
Rob says
Thanks for advancing the link, Anonymous. I certainly believe that people should be exploring these issues from many different angles. I also certainly believe that millions of good and smart people are today Buy-and-Holders. We need to hear what they have to say about this stuff.
Where we get on different tracks is when you argue that we should ONLY hear from the Buy-and-Holders. I believe that the last 37 years of peer-reviewed research in this field is very important research. I believe that we should be permitting honest posting re that research at every discussion board and blog on the internet. I believe that Shiller’s Nobel prize was well-deserved. I believe that we should all be encouraging a DEBATE between the Buy-and-Holders and the Valuation-Informed Indexers so that we can figure out whether it is Fama or Shiller who truly is giving us the right take on how stock investing works in the real world.
I certainly oppose short-term timing. There is no one alive on Planet Earth who is a greater opponent of short-term timing than I am. All that I really see this guy showing is that short-term timing is a bad idea. Is he right? 100 percent. Is it an important insight? It is a profoundly important insight. Is it news? Not really — those who follow the peer-reviewed research have known for over 50 years that short-term timing doesn’t work. Is it still necessary for experts to make this point? It is very much still necessary. A lot of us are still drawn to short-term timing despite the 50 years of peer-reviewed research showing that it never works. Is is dangerous to conflate short-term timing and long-term timing, to suggest that because short-term timing never works it might be possible to avoid long-term timing as well and not suffer too much as a result? It is as dangerous as all get-out. The entire historical record shows that, when Buy-and-Hold strategies become popular we always experience a huge bull market, followed by a huge bear market and then an economic crisis. Huh? What the f? I prefer a world without bull market and without bear markets and without economic crisis, a world in which we all feel 100 percent free to post honestly re what the last 37 years of peer-reviewed research teaches us about how stock investing works in the real world.
Long-term timing is price discipline. The peer-reviewed Bennett/Pfau research paper shows as clearly as anything could ever be shown how important it is for investors to exercise price discipline when buying stocks. The response of the Buy-and-Holders to publication of that paper in a peer-reviewed journal. They threatened to send defamatory e-mails to Wade Pfau’s employer in an effotrt to get him fired from his job if he continued doing honest work in this field. Huh? What the f? Not this boy, you know? There’s no prison sentence in my future, Anonymous. I would be grateful if you would try to find somebody else.
Am I grateful that the Buy-and-Holders discovered that short-term timing doesn’t work. I could’t be more grateful. I think Valuation-Informed Indexing is the future and we wouldn’t have Valuation-Informed Indexing but for the wonderful work done by the Buy-and-Holders in their early years. But one of the basic rules of the scientific process is that you always need to be open to learning new things. We all learned something very unexpected and very important when Shiller published his “revolutionary” (his word), Nobel-prize-winning research in 1981. It is only by incorporating Shiller’s critically important findings into the mix that the Buy-and-Holders can get back to a place where they no longer feel a need to 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. Valuation-Informed Indexing is today what Buy-and-Hold was in 1980. Valuation-Informed Indexing is Buy-and-Hold updated to incorporate the critically important research findings of the past 37 years.
That’s my sincere take re these terribly important matters, in any event.
I do wish you all good things, dear Goon friend.
Selective Memory Sufferer Rob
Anonymous says
You’ve been out of the market for 22 years. In that time, the total real return of the S&P 500 has been 282%. Which is what he means by a permanent loss of wealth.
Does that resonate with you?
Rob says
I am happy that I am ahead on a risk-adjusted basis of where I would have been had I stayed in stocks when prices got insanely dangerous. I have earned 3.5 percent real on my TIPS and IBonds. The return on stocks has been higher but the difference is not enough to make up for the added risk that I would have been taking on all those years. I got a better deal by going with the research-based strategy over the Get Rich Quick approach.
And think where I will be following the next price crash. Stock prices always drop to 50 percent of fair value in the wake of a huge bull market. When stocks are priced at 50 percent of fair value, the most likely annualized 10-year return is 15 percent real. I will obviously have a lot more money to invest in stocks at that time than I would had had had I lost most of my life savings in a crash. So I will be able to take advantage of those great returns to a far greater extent than any of my Buy-and-Hold friends. And then on top of all that, I will enjoy decades of compounding on the differential.
How will I ever bear up under pain of suffering the consequences of questioning whether the pure Get Rich Quick approach might pay off just about as well this go-around as it has ever since the day the stock market opened for business?
Buy-and-Hold sells, Valuation-Informed Indexing works.
My sincere take.
And my best wishes to you, dear friend.
Rob
Anonymous says
3.5% compounded over 22 years is only a 113% gain. No one (besides Rob Bennett) would prefer that to a 282% gain.
And that’s assuming you actually still have any of those bonds. Which, given your zero income for so many years, and given your abundantly documented lack of veracity, is a hugely generous assumption.
Anonymous says
You don’t risk adjust past returns, only future expectations. The point of measure is actual performance (outcomes). As you say, we need to see how “things turn out”. We have seen it and you were wrong.
End of story.
Rob says
3.5% compounded over 22 years is only a 113% gain. No one (besides Rob Bennett) would prefer that to a 282% gain.
Everyone would prefer a greater lifetime return an a smaller short-term return, if he thought things through carefully, Anonymous. I certainly have never said that Buy-and-Hold cannot offer a better short-term return. That’s the appeal of all Get Rich Quick schemes. The investors in the Mafoff fund laughed at all the investors who were not smart enough to match their great returns. Until the fund collapsed.
I offer no apologies for following a research-based strategy. None whatsoever. And the inner anger that you reveal in just about every post that you put forward suggests strongly that you hold doubts re how much longer the pure Get Rich Quick approach will be giving you results that you can live with.
I believe that you will flip in the days following the next price crash. We will be working together then (once you have finished serving your prison term). That will be nice. I think that’s the way it should have been all along. I have learned a lot from you over the years. I think that it would be fair to say that you have been given an opportunity to learn an equal amount from me but that you have pissed it away because you let your anger at the message of the peer-reviewed research get in the way. That makes me sad, you know.
No apologies for following the research, in any event. It is my belief that there is a good chance that stocks will continue to perform in the future at least somewhat as they always have performed in the past.
My best wishes to you.
Veracity Challenged Rob
Rob says
You don’t risk adjust past returns, only future expectations. The point of measure is actual performance (outcomes). As you say, we need to see how “things turn out”. We have seen it and you were wrong.
So you count temporary gains that are the product of irrational exuberance the same as permanent gains that are the product of economic realities? Huh? What the f?
That’s the difference between us distilled down to its essence right there, Anonymous. When I am engaging in financial planning, I like to know the true value of my stock portfolio. Using phony numbers doesn’t get me to where I am trying to go.
Irrational Exuberance — What does that phrase suggest to you? Do you think it is something that you should be celebrating? Do you think it is smart to hand in a resignation to your job because of numbers that you see on piece of paper that are the product of irrational exuberance?
Past-Returns-Adjusting Rob
Evidence Based Investing says
“I have earned 3.5 percent real on my TIPS and IBonds. ”
What percentage of your portfolio is in TIPS and Ibonds earning 3.5% real?
Rob says
Just about all of it. I have a tiny bit in silver and a tiny bit in gold. And the house is fully paid-up. I think that the typical middle-class person should go with 30 percent stocks even at times of extreme overvaluation. But I don’t think that makes sense for someone in my circumstances.
I hope that helps a small bit, Goon pal.
Rob
Evidence Based Investing says
The annual limit for iBonds purchase is $10,000 I believe so I assume that vast majority is in TIPS.
Rob says
The majority is in TIPS. But there’s more than $10,000 in IBonds. Some are in my wife’s name.
I tried to encourage people to lock in those amazing returns back when they were available. The Buy-and-Holders of course argued that it wasn’t worth even considering anything other than stocks. This at a time when a risk-free asset class was paying 4 percent real and the high-risk stock class was paying a negative 1 percent real (that’s the likely annualized return when stocks are priced as they were at the top of the bubble). An investor who moved $100,000 out of stocks gained $50,000 on the transaction at the end of 10 years. The horrors!
Buy-and-Hold is a scam, Evidence. Please give me a freakin’ break.
I am not better than anybody else. I was scammed too. I should have gotten that 4 percent return for myself. I told my friend Brian how great a deal it was at the time it was available. He was a Buy-and-Holder. He told me that I was nuts. I was looking for social affirmation of my beliefs and I didn’t have the guts to pull the trigger without it. So I missed out. Once the return dropped to 3.5, I got my act together and locked that in. Brian was man enough to send me an e-mail years later telling me that I has been proven right.
Scam Victim Rob
Anonymous says
“So you count temporary gains that are the product of irrational exuberance the same as permanent gains that are the product of economic realities? Huh? What the f?”
You have been telling us about the stock crash and all your predictions went bust. We are still waiting for your “I was wrong speech”.
Rob says
I’ve said that I was wrong about my stock crash prediction about 50 times.
Has Greaney even once acknowledged that he failed to include a valuations adjustment in his safe withdrawal rate study?
Rob
Anonymous says
“Has Greaney even once acknowledged that he failed to include a valuations adjustment in his safe withdrawal rate study?”
As Wade Pfau pointed out, that was answered a long time ago in a thread that resulted in your apology.
Rob says
I suggested at the time that he correct the study within 24 hours of the moment that he learned of the error that he made in it. Had he followed my advice, he would not today be looking forward to spending the remaining years of his life in a prison cell.
That’s a friend, Anonymous. That’s how true friends respond to such circumstances.
My best wishes.
Famous Apology Giving Rob
Anonymous says
“I suggested at the time that he correct the study within 24 hours of the moment that he learned of the error that he made in it. Had he followed my advice, he would not today be looking forward to spending the remaining years of his life in a prison cell.”
The error was made by you and here we are many years later and you have yet to correct it.
Rob says
I’m the one who said that the safe withdrawal rate is always 4 percent, regardless of the valuation level that applies on the day the retirement begins. That makes sense, Anonymous.
What was I thinking?
4-Percent-Rule Rob
Anonymous says
“I’m the one who said that the safe withdrawal rate is always 4 percent, regardless of the valuation level that applies on the day the retirement begins. That makes sense, Anonymous.
What was I thinking?”
I think Wade Pfau has already covered where you went wrong. If you have a problem with it, then complain to Wade.
Rob says
Wade made many, many, many honest statements over a long period of time and then made one dishonest one when you Goons threatened to destroy his career and when he saw that Bogle was not going to do anything about it.
What does it tell us about Buy-and-Hold that you felt that your only hope of “defending” it was to engage in criminal behavior?
And what does it tell us about Buy-and-Hold that the only one who spoke up in opposition to this criminal behavior was me? And it’s not because no one knows. I put up numerous tweets reporting on the situation. People don’t respond because they are afraid to respond. The fact that Buy-and-Hold can only survive though the use of intimidation tactics tells a tale.
Will the intimidation tactics continue to do the job in the days following the next crash? I don’t think so. But we will have to wait a bit to find out for sure.
My best wishes.
Rob
Anonymous says
“Wade made many, many, many honest statements over a long period of time and then made one dishonest one when you Goons threatened to destroy his career and when he saw that Bogle was not going to do anything about it.”
Wade has said that his career was never threatened and that you made it up. Wade has credibility. You do not.
Rob says
We’ll see what he says when he is under oath.
At that time the public opinion of Buy-and-Hold is going to be very different from what it is today. So I have a strong hunch that I know what he is going to say. But we will obviously just need to wait a bit to find out for sure.
I wish you the best of luck with it, if that helps at all.
Non-Credible (Until Prices Drop!) Rob
Anonymous says
“And it’s not because no one knows. I put up numerous tweets reporting on the situation. People don’t respond because they are afraid to respond.”
99.999999% of people didn’t respond to your tweets because they never saw them. The rest didn’t respond because you’re a nut.
“Everyone would prefer a greater lifetime return an a smaller short-term return”
When did 22 years become “short-term”? And what risk adjustment formula makes a 113% gain preferable to a 282% gain? Perhaps the “Bennett blind terror adjustment”, which has no formula. Much like VII.
Rob says
99.999999% of people didn’t respond to your tweets because they never saw them. The rest didn’t respond because you’re a nut.
You’re wrong. There are many cases in which people who did not respond have told me that they think my work has great value. There are cases that I have written about on the blog in which people who BANNED me told me that they thought my work has great value. That’s not the normal situation, Anonymous. It is because those people are afraid to speak up that we have this problem.
You are of course right that the vast majority of people don’t see a tweet. And it is also true that, when someone makes a claim that seems out there, most people are going to be highly skeptical even though they do not know the facts. That’s normal too. But it was not normal for Motley Fool to ban me when I was the most popular poster there in the days before I pointed out the error in Greaney’s study and when it was Greaney putting forward death threats and not me. And it was not normal for Wade Pfau to thank me profusely for teaching him more about how stock investing works than anyone he had run into before and to tell me how much he couldn’t stand you Goons and then to flip to the other side when you threatened (with Bogle’s implicit approval) to destroy his career. It’s not normal for someone like Bogle not to speak up when he sees threats of violence and career destruction at a discussion board with his name on it and not to do anything about it. None of this is normal.
People are skeptical of all new ideas. That’s normal and healthy. But the discussion of new ideas is permitted in this country. So while we should expect support for new ideas to grow only slowly in the early days, we should expect support for new ideas with merit to grow gradually over time. Shiller’s idea has so much merit that he was awarded a Nobel prize for it. And that idea has been public knowledge for 37 years now. And honest posting re the many far-reaching implications of that idea is not today permitted at a single large web site. That ain’t normal. It’s not a close call.
That’s where the financial fraud comes in. That’s where the criminal stuff comes in. The criminal stuff has blocked Shiller’s idea from gaining the level of support that it needs to attain for more and more people to get involved helping us to learn more about it. That has to change. Valuation-Informed Indexing will probably remain at a disadvantage to Buy-and-Hold for as long as prices remain high. We all have a Get Rich Quick urge within us and so Buy-and-Hold comes to the table when prices are where they are today with a big marketing advantage.
But the criminal stuff has to go. Get Rich Quick urge or no Get Rich Quick urge, there are lots of people who want to know what the peer-reviewed research says about how stock investing works. Those people have a right to be able to talk with others on the internet about what they want to learn. And, when we get to a point where they feel free to do that, support for Shiller’s work and interest in exploring Shiller’s work will grow dramatically. The hard part is getting the level of support up to a place where at least the criminal stuff is no longer a viable option for the Buy-and-Holders. We will all be living better lives once we get to that place. And a lot of people who today consider themselves confirmed Buy-and-Holders will begin rethinking their ideas about how stock investing works in those days. Hearing the ideas discussed by more people makes a difference. We may well be working on the same side in those days, Anonymous. I look forward to that.
We are in an ugly place today, Anonymous. I wish we weren’t. But we are on our way to a very magical place. We are close to making the transition. And all we need to do is to insist on compliance with the laws of the country we live in. People like me who believe that Valuation-Informed Indexing is the future need to work up the courage to stand up to you Goons no matter how brutal you are with your intimidation garbage. That’s what it takes to get us all to this much better place where we all would want to be were we only thinking clearly and sufficiently informed to know what is in our best interest. So I try to remain steadfast.
Why did the opposition to this one particular new idea become so intense? Because the change is so darn important. We all need to know how to invest our retirement money effectively and Buy-and-Hold and Valuation-Informed Indexing are about as different as it is possible for any two ideas to be different. So the people who advocate Buy-and-Hold feel a lot of shame and embarrassment over the idea of having their mistake exposed to the world. Their shame gets worse the longer the cover-up goes on. So none of us are doing them a favor by keeping our mouths shut. Things just get worse the longer the cover-up continues. The life-affirming thing to do here is to EXPOSE the cover-up and thereby to bring it to an end and thereby to help out our Buy-and-Hold friends as well as our Valuation-Informed Indexing friends.
The criminal stuff is over the top. It never should have been tolerated by even a single person for even a single day. That is not how we do things in this country. It is a shame that our Buy-and-Hold friends turned to criminal stuff in desperation and it is a shame that a good number of us Valuation-Informed Indexers failed to quickly work up the courage to call out those who had wandered onto that dark path in clear and firm language. This sort of thing is a lose/lose/lose/lose/lose/
When did 22 years become “short-term”? And what risk adjustment formula makes a 113% gain preferable to a 282% gain?
Everything is relative. Most of us invest over roughly a 60-year time period, from age 20 to age 80. 22 years is not a super long time-period considered in the context of a 60-year investing lifetime. It is how you do over the 60-year investing lifetime that matters, not how you do over any 22-year time period. It is the losses suffered over a 22-year time-period in which you go with a Get Rich Quick approach that can cause you to miss out on the progress that you could have made on obtaining strong lifetime numbers by following a more sensible (and research-based!) approach.
If you thought that the lifetime numbers didn’t matter, you wouldn’t be so angry, Anonymous. If you truly believed that all that mattered was putting up good-enough numbers for 22 years, you would be okay with letting others do as they pleased while you did what you thought was best for you. The rage comes from the part inside you that entertains doubts whether that really is the answer. You hate me because I stir up those doubts.
If I don’t do it, who is going to do it, you know? Someone has to stir up the doubts while you still have time to do something about them. Would you rather that I wait until after the crash and start telling you then how you could have protected yourself from it? My bet is that we will see a lot of people doing that and a lot of others complaining that waiting until after the crash hits to talk about this stuff was a pretty darn lame way of proceeding. I am proud that I had the courage to say some things when people still had time to put the knowledge to good use if they cared to (and of course to ignore it if they preferred to play it that way instead).
My best wishes to you and yours.
Recognized Tweeting Nut Rob
laugh says
Your work does have value. It is a cautionary tale of the wrong way to invest.
Rob says
If Fama is right, that’s a good statement.
If Shiller is right, it’s the other way around.
Rob
Anonymous says
“If Fama is right, that’s a good statement.
If Shiller is right, it’s the other way around.
”
No, we just look at your results to know you were wrong.
Anonymous says
“Most of us invest over roughly a 60-year time period, from age 20 to age 80. 22 years is not a super long time-period considered in the context of a 60-year investing lifetime. It is how you do over the 60-year investing lifetime that matters, not how you do over any 22-year time period.”
Well then, you’re over 40 years through your 60 year investment lifetime. How many of those years have you actually owned any stocks?
Also, you left out the simple but oh-so-powerful thing called “compounding”. Probably because it’s beyond your grasp of arithmetic, but here it is in a nutshell: Investments in the first 10 years matter WAY more than those in the last 10 years.
Rob says
No, we just look at your results to know you were wrong.
When people look at your results in the days following the next price crash, they will draw the opposite conclusion (presuming that Shiller is right that 50 percent of your stock portfolio is the product of irrational exuberance).
All Wrong (or All Right?) Rob
Rob says
Well then, you’re over 40 years through your 60 year investment lifetime. How many of those years have you actually owned any stocks?
Also, you left out the simple but oh-so-powerful thing called “compounding”. Probably because it’s beyond your grasp of arithmetic, but here it is in a nutshell: Investments in the first 10 years matter WAY more than those in the last 10 years.
We’ve all been hurt by the prices that have applied in recent years, Anonymous. Prices went nuts in 1996 and they are still nuts today. I love stocks. Stocks are my favorite asset class. So I hate it that the long-term value proposition has been poor in stocks for 22 years running now. It’s certainly not my doing, you know? I have been speaking out about the down side of high stock prices for a long time now.
If we all pulled together, we could get people the information they need to get prices down to reasonable levels. Then we all live better lives from that point forward. Are you in?
How about directing some of your anger at the Buy-and-Holders? They are the ones who told people that there’s no need to exercise price discipline when buying stocks. That’s what caused prices to rise to such crazy levels. It wasn’t Shiller’s research that did that.
I’ve lost out. I don’t say different. I did as well as a person could do given the circumstances in which I was placed. But the circumstances were very unfortunate. Those circumstances are determined by the community of investors. Why don’t we all start investing more intelligently, you know? That’s my quest. I urge that we open every discussion board and blog on the internet to honest posting re the last 37 years of peer-reviewed research so that we all can start living better lives. We don’t have to continue hurting ourselves this way.
It’s like knowing that cigarettes cause cancer and not telling anybody, just letting them die. I am glad that we learned that cigarettes cause cancer. It took us awhile to get the message out. But we eventually got the job done. I think we will get the job done that needs to get done re stock overvaluation too. I sure hope so.
If you love stocks (as I do), you should want them to be priced properly. The better stocks are priced, the better the deal they offer. If you want stocks to be priced properly, you should want every investor alive to have easy access to information about what the last 37 years of peer-reviewed research in this field teaches us about how stock investing works in the real world. We should all be working together to get the word out, in my sincere assessment.
Why don’t we? We are afraid to accept that our portfolios are only worth one-half of what the Buy-and-Holders have led us to believe they are worth. As a people, we are trapped. As a people, we have been conned. I don’t like being trapped. I don’t like being conned. So I am doing what I can to expose the Buy-and-Hold Con. Overprice stocks, and you don’t change the value of them. You just change the temporarily PERCEIVED value of them. By fooling yourself, you make effective financial planning impossible and hurt yourself in the long run.
We would all be better off today had more of us spoken up about the dangers of the out-of-control bull market of the late 1990s. Those high prices are addictive. Once you start counting on the pretend money, you don’t want to give it up and you find yourself going down deeper and deeper into a hole. We could all earn 6.5 percent real on our stocks and be just fine without all of this Buy-and-Hold garbage causing millions of failed retirements and economic crises and all the rest.
Yowsa!
Economic Justice Warrior Rob
Anonymous says
“presuming that Shiller is right that 50 percent of your stock portfolio is the product of irrational exuberance”
Shiller would be very surprised to hear that he said that. Because he never did. You interpret Shiller like a terrorist interprets Islam. Using and perverting a good name to suit your own foul agenda.
Rob says
His entire book says that. The title of the book is “Irrational Exuberance.”
If Shiller is saying precisely what Fama is saying, then why did the New York Times article reporting on awarding of Nobel prizes to both of them on the same day comment on how strange it was that two economists saying opposite things about how stock investing works were both being given the highest honor in the field on the same day?
Shiller is a friendly guy. Bogle could invite him to a session at the Bogleheads Forum where you could ask him what he thinks re all these matters. Does Shiller think that the safe withdrawal rate is always the same number or does he think that it is a number that varies with changes in valuation levels? Does Shiller think that the loss of trillions of dollars in spending power caused by the crash of 2008 (which was caused by the bull market of the late 1990s) was the primary cause of the economic crisis? Does Shiller believe that we will be returning to fair-value P/E10 levels in the not-too-distant future?
ASK HIM! That’s the best way to find out if you really want to find out.
You’ll have to ditch the death threat garbage for a few days. I doubt very much that he is going to tolerate that garbage. If you want to know the answers to your questions, you will treat him with a measure of respect. And, if you treat him with a measure of respect, he will be willing to answer your questions.
You don’t want to know, Anonymous. That’s been the bottom line here going back to the first day. You want to believe that the numbers on your portfolio statement are real. So you don’t want to know about the 37 years of peer-reviewed research showing that overvaluation is the product of irrational exuberance, not economic realities. You hate me because I make that point over and over again in clear and simple ways. I don’t do it to hurt you. I think you are better off knowing the realities. I accept that you are free to disregard anything that I say — that’s up to you. But I insist on my right (and the right of all my fellow community members) to say what I believe without first having to ask “Mother May I?” of the Buy-and-Holders.
I say that Shiller was awarded a Nobel prize because he showed the stock overvaluation is caused by irrational exuberance, not economic realities, and because that finding stands everything that we once thought we knew about how stock investing works on its head. Why do you believe Shiller was awarded a Nobel prize, Anonymous? Please identify how in your view he changed our understanding of how stock investing works in a significant enough way to justify the awarding of a Nobel prize in economics.
Rob
Anonymous says
I spoke to Shiller. He says you are wrong and should move on with your life.
Rob says
I spoke to Bogle. He says that he is grateful for the show of support for Buy-and-Hold but wonders if going to prison for it might be taking things a bit too far.
Moving Up (Not On!) Rob
Anonymous says
“Does Shiller believe that we will be returning to fair-value P/E10 levels in the not-too-distant future? ASK HIM!”
You ASK HIM. I couldn’t care less what Shiller thinks. His 1996 paper proves he’s a lousy market timer.
Why do you still hitch your star to that loser? He ruined your financial life. If you had never heard of Shiller or listened to Greenspan’s speech, you would have a lot more money today. I listened to Bogle. He kept saying just buy the Total Stock Market Index Fund and forget it.
Bogle was right.
Rob says
I love Bogle and Shiller for the same reason. I have learned from them.
I have learned from you too, Anonymous. I didn’t learn as much from you as I learned from Bogle and Shiller. But I have learned some things from you. I am grateful to you for that. And I have warm feelings toward you as a result.
I care what Shiller thinks. And I care what Bogle thinks. And I care what you think.
Rich-in-Knowledge Rob
Anonymous says
“I have learned from you too, Anonymous. I didn’t learn as much from you as I learned from Bogle and Shiller. But I have learned some things from you. I am grateful to you for that. And I have warm feelings toward you as a result.”
I learned that if I did the opposite of Rob Bennett, I would be successful.
Rob says
Okay, Anonymous.
I do wish you all good things, in any event.
Unsuccessful Rob
Anonymous says
“I spoke to Bogle. He says that he is grateful for the show of support for Buy-and-Hold but wonders if going to prison for it might be taking things a bit too far.”
If you are still planning on sending Jack to prison, you better hurry up. The guy is 89 years old and probably doesn’t have too many years left.
Rob says
I hope he lives forever. I love the man. I rate him as a Hero to the Middle Class.
It sure won’t be me sending him to prison. I have zero power to do any such thing and zero desire to ever acquire such power.
I will tell the story honestly. I am required to say that Bogle was made aware of the Lindauer Matter by numerous posters at the Bogleheads Forum and did nothing about it. That’s a stone cold fact and that is what I am going to say. Financial fraud is a crime in the United States. That’s a stone cold fact too. The act of fraud does not cancel out the many good things he has done. But it is in the process of doing very serious harm to millions of people. So it is something that everyone in the nation needs to know about and come to terms with.
I have learned many important things from Jack Bogle. There would be no Valuation-Informed Indexing without the many valuable contributions of Jack Bogle. I hope to be working closely with him in the days following the next price crash, when I am 100 percent certain that he will make a full and complete break with Mel Lindauer and with all those who have posted in “defense” of him. I think of Jack as a friend and always will.
I think of you as a friend too, Anonymous. I haven’t learned as much from you as I have learned from Jack Bogle. But I have indeed learned things from you over the years and I am grateful for that.
I naturally wish you all the best that this life has to offer a person.
Bogle-Loving (But Not Financial Fraud Loving) Rob
Anonymous says
“It sure won’t be me sending him to prison. I have zero power to do any such thing and zero desire to ever acquire such power.
I will tell the story honestly. I am required to say that Bogle was made aware of the Lindauer Matter by numerous posters at the Bogleheads Forum and did nothing about it. That’s a stone cold fact and that is what I am going to say. Financial fraud is a crime in the United States. That’s a stone cold fact too. The act of fraud does not cancel out the many good things he has done. But it is in the process of doing very serious harm to millions of people. So it is something that everyone in the nation needs to know about and come to terms with.”
You are the only one talking about fraud and prison, so you would have to be the one driving it for it to happen.
Rob says
No.
I’ve spoken about the possibility on several occasions. But all of my energies for 16 years running now have been directed to avoiding the possibility that Bogle or anyone else will ever go to prison because of the mistakes that were made in the design of the Buy-and-Hold strategy. I find the prospect of Bogle or anyone else going to prison HORRIFYING.
If you see a friend of yours driving drunk and you become worried that he is going to go through a red light and kill someone and end up in prison for reckless manslaughter, would it be fair to say that, if you take him aside and warn him of that possibility, that shows that you are pushing for him to be put in prison? I sure don’t see how. It seems to me that the reality is just the opposite. You are doing all that is in your power to keep your friend OUT of prison. You are being a true friend.
I sent an e-mail to Motley Fool in June 2002 asking that John Greaney be removed from the Retire Early board for his insanely abusive posting practices, which were causing all of our best posters to leave the site. The response of Motley Fool’s site administrator was to thank me for my “thoughtful” e-mail and to pass along the observation that it would be “ideal” if Greaney were to permit honest posting re retirement planning at that retirement planning board. Motley Fool liked the money that Greaney brought in with his relentless promotion of his Get Rich Quick retirement study.
It’s Motley Fool that started Greaney down the road where he is now looking forward to a long prison sentence in the days following the next price crash. Had Greaney been banned, I would have put up a post six months later asking that our old friend be permitted to post again, everyone in the community would have endorsed it, and Motley Fool would have granted the request. By playing it the way that he played it, the site administrator made it almost inevitable that Greaney would be going to prison somewhere down the line. He couldn’t deny that he knew about the errors in the study at that point. So things just got worse and worse and worse for him. In time he found himself threatening to send defamatory e-mails to Wade Pfau’s employer in an effort to get him fired from his job.
Greaney is responsible for his own behavior. I am not saying that anyone else is responsible for him going to prison. But it is a reality that we live in communities and that we all have responsibilities to others who live in those communities with us. Greaney made a mistake. That sort of thing happens. Greaney gave in to a temptation to cover up the mistake rather than acknowledge it. That sort of thing happens too. The proper thing to do when something like that happens is to EXPOSE the cover-up so that it is brought to a full and complete stop before it can do more harm. Fail to expose a cover-up and it grows and grows and grows and the person at the center of the cover-up can never be free again because he now needs not only to cover up the original mistake but also the cover-up and the cover-up of the cover-up of the cover-up of the cover-up.
I acted like John Greaney’s friend when I asked that he be banned. That was the proper response to his insanely abusive posting. You hurt him in a very serious way by aiding his cover-up, Anonymous. You were no friend to him at all.
And of course the same basic realities apply with Bogle as well, just on a much bigger stage. In an ideal world, Bogle would have in 1981 made the changes in Buy-and-Hold required by Shiller’s publication of his “revolutionary” (Shiller’s word) research findings. If cognitive dissonance blocked him from doing that (which I believe is the case), then his friends would have insisted that he at a bare minimum acknowledge that there were now two schools of academic thought re how stock investing works and that no more would he act as if there were only one. That would have been enough to keep Bogle on the right side of the law. And that would have been enough for all of us to have learned amazing things over the past 37 years about how stock investing works and to be living far richer (in every sense of the word) lives today.
It didn’t happen. So now we have this huge mess to clean up. A mess that appears likely to get my friend John Greaney tossed in a prison cell in days to come. And a mess that may even possibly get my friend Jack Bogle thown in a prison cell in days to come. My voice has been the strongest and the firmest and the loudest and the clearest speaking in OPPOSITION to continuation of the massive cover-up of the errors in the Buy-and-Hold retirement studies for 16 years running now, Anonymous. There is no one else even in a close second place.
Are you joking?
I am the one who has been doing everything in his power for a long, long time now either to see that there are no prison sentences or that, if it is too late for that, that the prison sentences that we will be seeing in days to come will be as short as they can possibly be given the circumstances that prevail today. Please given me a freakin’ break.
My best and warmest wishes to you and yours, dear Goon friend.
Prison-Sentence Opponent Rob
Anonymous says
“I am the one who has been doing everything in his power for a long, long time now either to see that there are no prison sentences or that, if it is too late, that the prison sentences that we will be seeing in days to come will be as short as they can possibly be given the circumstances that prevail today. Please given me a freakin’ break.”
No, you are the only one making these preposterous claims and they are all a fantasy.
Rob says
It’s my view that the preposterous claim is the one about there being a valuations adjustment in the retirement study posted at John Greaney’s web site.
But I do wish you all good things in any event, dear friend.
Hang in there, man.
Preposterous Claim Maker (Or Taker?) Rob
Anonymous says
“It’s my view that the preposterous claim is the one about there being a valuations adjustment in the retirement study posted at John Greaney’s web site.”
Wade Pfau already pointed out how you were wrong on this issue. You just can’t accept it.
Rob says
I promise to accept what he says when he is testifying under oath.
Does that work for you?
WadeHead Rob
Anonymous says
“I promise to accept what he says when he is testifying under oath.”
Which is never, because your fantasy about jury trials, prison, etc is all made up.
Rob says
So you say.
I wish you all good things, in any event.
Fantasy Man Rob
Anonymous says
“So you say.”
It is fact.
Rob says
Oh, I believe you.
No — Really,
Rob