Set forth below is the text of a comment that I recently post to the discussion thread for another blog entry at this site:
I put credibility in having actual proof. Secondly, I put credibility behind the person directly impacted (Wade), as he would know if he was actually threatened.
He obviously knows that he was threatened. He is also obviously EMBARRASSED and ASHAMED that he let the threat influence his behavior.
The real question is — Why did you feel a need to threaten him?
Shiller published his “revolutionary” (his word) research showing that valuations affect long-term returns in 1981. Buy-and-Hold has not been updated to reflect the new research findings for 37 years now. That’s the problem.
That’s the problem for you. That’s the problem for me. That’s the problem for Bogle. That’s the problem for Shiller. That’s the problem for Pfau. That’s the problem for everyone.
Did I cause that problem? I had nothing to do with it. I have been arguing for 16 years that we should open every discussion board and blog on the internet to honest posting on the last 37 years of peer-reviewed research in this field. That would solve the problem for everyone. Everyone would say what they truly believe and over time Buy-and-Hold would be updated. There would be no further need for cover-ups. There would be no further need for threats.
I even suggested that we might be able to get by just acknowledging that there are two schools of academic thought re how stock investing work. I don’t view that as ideal. It is my belief that Shiller discredited Buy-and-Hold. So I think that we should be saying that it is Valuation-Informed Indexing that is the first true research-backed model. But I believe that cognitive dissonance is a real thing. So I have suggested that, if my Buy-and-Hold friends just feel too much pain in the idea of giving up on their strategy, they could acknowledge that there are two schools of thought and let those who believe in Buy-and-Hold promote Buy-and-Hold and those who believe in Valuation-Informed Indexing promote Valuation-Informed Indexing. I believe that that would get us all on the right side of the felony line. If people choose to use a 4 percent safe withdrawal rate even after they have been informed that a study that includes a valuation adjustment generates a very different number, I think that most juries would say that that is on them. So just doing that much would be a big advance.
Where is the Bogle speech acknowledging that there are two schools of academic thought re how stock investing works? I wrote to him about this on several occasions. Has he given that speech? Had it been written up on the front page of the New York Times?
Why not?
Your beef is with Bogle, Anonymous, not with me. I have done all that I can do. I love the man and I have bent over as far backwards as I can with that suggestion. If he hasn’t given the speech yet, your beef is with him. Have you written him? If not, can you please explain? There are millions of people who put together retirement plans at least in part in reliance on the long-discredited Buy-and-Hold retirement studies, the ones that Wade Pfau characterized as “dangerous.” A failed retirement is a serious life setback.
The threats will stop when Bogle gives his speech and it is written up on the front page of the New York Times. Wade will on that day return to saying all the wonderful things that he was saying in the 16 months before you threatened him. The ball is in your court, my dear Goon friend.
Highly Credible (Since He Stopped Pretending that He Believed There Was a Valuation Adjustment in the Greaney Retirement Study) Rob
Anonymous says
Rob, do you have a sense of where the US stock market is headed in the next 2-3 years?
Rob says
The CAPE value today is 30. The fair-value CAPE value is 16. So risk is very high, That’s one of the highest CAPE values ever seen on record. It was a CAPE value of 33 that brought on the Great Depression.
That said, it is investor emotion that determines stock price changes. Emotion is by definition an irrational phenomenon. So we can not say with certainty that we will see a big price drop within two years or within three years. Short-term timing doesn’t work.
The question that the investor needs to ask is: Is the possibility that I will obtain a higher return from stocks worth the risk that I will suffer a big loss by investing in stocks? I believe that the typical investor should be going with a stock allocation of about 30 percent when stocks are at these prices. With that allocation, you get to enjoy to some extent any price increase while being protected from the worst aspects of any big price drop.
This is one of the worst times in history to own U.S. stocks. But U.S. stocks as a general rule offer a great value proposition. Both things are so and the investor should be keeping both realities in mind when setting his or her stock allocation. Stocks are priced at very dangerous levels today. But that doesn’t mean that emotion-filled investors won’t push them to even more dangerous price levels a month from today or six months from today. I would not recommend going with a high stock allocation at today’s prices.
It helps to keep in mind that stocks will be offering an amazing value proposition following a big price drop. If we go to a CAPE value of 8, as we have at the end of every earlier bull/bear cycle, the most likely 10-year annualized return from that point forward will be 15 percent real. Any money that you protect from loss today will be available for investment in stocks when that long-term return is available. Rational, research-based investment strategies pay off big time in the long run.
Stock-Skeptical (At These Prices!) Rob
Anonymous says
“If we go to a CAPE value of 8, as we have at the end of every earlier bull/bear cycle, the most likely 10-year annualized return from that point forward will be 15 percent real.”
Similarly, if we wait until bonds are yielding 17%, with inflation at 2%, we can get 15% real returns there too.
It’s just a question of waiting for that wonderful day to come, no?
Rob says
It’s a question of being rational.
Stocks are in general an amazing asset class. So, if the question is, should most investors generally be going with a high stock allocation, the answer is “yes.” I certainly don’t say different re that one.
But, when stocks are priced as they were in 2000, the most likely 10-year annualized return is a negative 1 percent real. TIPS were paying 4 percent real at the time. We should tell people that. We should be trying to help people invest more effectively. What’s the downside?
There’s no waiting necessary. If you don’t feel like waiting, don’t wait. But there are lots of people who would like to know what the last 38 years of peer-reviewed research teaches us all. Those of us who believe that Shiller’s Nobel-prize-winning research is legitimate research should feel free to tell people what they want and need to hear. If some are not interested, they should go their own way. But no one should feel free to engage in criminal acts to suppress discussion of the last 38 years of peer-reviewed research. That’s over the line. That’s not acceptable.
Wait if you want to wait and don’t wait if you don’t want to wait. But take care to stay on the right side of the felony line at all times.
That’s my sincere take, in any event.
My best wishes to you.
Super Tolerant Rob