Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
The thousands of comments we see on this board everyday speak volumes about your opinions.
The lack of comments show that Get Rich Quick strategies can achieve high levels of popularity before they are exposed as scams, Anonymous. There were people who knew that the Madoff fund was a scam before it was exposed. If those people had put up web sites pointing out the scam, how popular do you think they would have been?
I read an article published shortly after the Madoff scam was exposed that said that the lesson for investors was that, if it sounds too good to be true, it probably isn’t true. Does that apply to Buy-and-Hold? The Buy-and-Holders say that there is no price at which stocks are a poor investment choice. Stocks are best when selling at fair value and also when selling at two times fair value and also when selling at three times fair value and also when selling at ten times fair value. I can go for that! That sounds believable! The idea that one asset class is always the best choice is not too-good-to-be-true stuff!
Your “defense” of the most heavily promoted Get Rich Quick scheme in history is that it has remained popular for as long as prices have remained sky high. Let’s see how long it remains popular after prices have fallen hard. I have a funny feeling that that might be a better test. But I guess we will see, you know?
I wish you the best of luck with it, in any event. I hope that that helps at least a tiny bit.
Unpopular Rob
How goes the job search?
I’ve started it. The book is not finished. I have been having a major struggle with three chapters. I decided a few days ago to deal with that problems by doing a bit of a restructuring of the book, with some chapters broken into two and with a few chapters that I was not planning to include added into the mix. My new deadline for the book is April 1.
That affects the job search because my ideal situation would be to start a job at the moment that the book is finished. It is of course not possible to plan things that effectively. If I want to have a job to move to on April 1, I need to be sending things out now. And, if something that I send out now results in an offer to start a job on March 1, I need to be willing to accept that even though it means that I would start working at a job before the book is entirely finished.
So I am working on both projects simultaneously — looking for a job and finishing the book. Most of my time is going to be devoted to finishing the book. But I want to have some irons in the fire re the job search. There is one job possibility that would probably begin in early March. If that comes through, I will take it. But I don’t expect to be pursuing lots of leads until I make more progress on the book.
I hope that helps a bit.
Job-Searching Rob
How big of a book is this to cause such a delay?
It’s the most important book ever published in the field of personal finance, in my assessment. Under the dominant model for understanding how stock investing works (Buy-and-Hold), market timing is a bad thing. According to the last 39 years of peer-reviewed research in this field, market timing is the key to long-term success. Say that it costs us as a society $100,000 each time someone says “market timing might not work” instead of “market timing is price discipline and is always, always, always required,” That adds up to trillions of dollars in lost wealth over time. Yikes!
So I want to do a good job. I want to be sure to get it right. I am close. But it appears that it may take me another three months to have a book in hand that meets my standards.
Wish me luck!
Rob the Scribe
Well, if it is the most important book in personal finance and saves us Trillions of dollars, then it must be heading towards The New York Times best sellers list and then you won’t have to get a job.
What you are saying here makes perfect sense and that’s the logic that I have been going by for nearly 18 years now. Unfortunately, my experiences of the past 18 years suggest that logic is not the only factor in play here. I have come to believe that it is going to take another price crash for us to see a percentage of the population interested in learning the realities of stock investing rise high enough for us to overcome you Goons. It’s one thing for us to have 39 years of peer-reviewed research showing that it is a bad idea not to practice market timing. It’s something different for people to be able to see with their own eyes where persuading millions of people to follow a pure Get Rich Quick approach leads us once again.
The reality is as sad as sad can be. But the evidence that this is indeed the reality is as strong as strong can be.
I do want to get the book done right. That price crash is going to hurt lots of people in very big ways. We are going to need grounds for hope to get us through it. The story of how stock investing works in the real world as told by the last 39 years of peer-reviewed research in this field is an amazingly life-affirming story. So I want to be sure to do a good job of telling that story.
Best-Seller-List-Bound Rob
You don’t really need a crash. Just get Wade Pfau and Robert Shiller to recommend your book and then you are all set.
You’re right, Anonymous. By all the rules that ordinarily apply in our society, I am all set. In fact, I was all set a long, long time ago. It was about six days after I advanced my famous post of May 13, 2002, that John Walter Russell started a thread about how “Rob Is Really On to Something” and most of the Retire Early community at Motley Fool responded with great excitement about the discussion that I had launched. Had the published rules of the site been enforced, we would have as a community corrected the error in the Buy-and-Hold retirement studies in not too long a time and I would have been on my way to a hugely successful career in this field.
It didn’t happen then for the same reason that Wade Pfau and Robert Shiller are not going to recommend my book today and make it happen now. Shiller published in 1981 peer-reviewed research showing that the stock market is not efficient and that therefore there is precisely zero chance that a Buy-and-Hold strategy could ever work for a single long-term investor. The suppression of discussion of the implications of that research has been going on for 39 years now. So there are a lot of powerful people who very much do not want to see millions of investors learn the realities today.
I DO want the millions of investors to learn the realities. So I am treated as a whistle-blower, someone who must be destroyed so that the established powers can retain the status quo. Wade Pfau and Robert Shiller and lots and lots of others would love to be able to endorse my work in the strongest possible terms but aren’t so hot about the idea about being treated as whistle-blowers themselves. So for now they keep it zipped.
Will they continue to keep it zipped in the days following the next price crash? I think not. I think that at that time the pain that we will all be seeing will be too great for good people to continue to keep it zipped. I think that as a society we will get to the place where deep in our hearts we all want to be at that time. I hope and believe that my book will help us all to achieve the transition successfully. I have a funny feeling that not one of us will ever look back to the Buy-and-Hold Era with any fondness once we have made our way to a better place together.
We’ll see.
My best wishes to you.
All-Set (But Not Really, Not Quite Yet) Rob
If all you are doing is confirming Shiller’s work why would he have anything to fear? Why would Pfau have anything to fear if you are just confirming his famous paper?
It’s a perfectly reasonable question that gets right to the heart of things.
We are as a society living in a twilight zone. We know intellectually how stock investing works. We have known for 39 years now. Shiller’s book is carried in most libraries. His research was published in a peer-reviewed journal. The New York Times reported on the awarding of a Nobel prize to him. So Buy-and-Hold is in the past, right? There is no respectable person today who questions the merit of market timing, right?
Those things are not so. We know how stock investing works. But we do not want to know. The humans have ways of not knowing things that they do not want to know. Alcoholics know on one level of consciousness that their drinking is doing them harm. But they want to continue with the drinking. So they persuade themselves that they can quit at any time and, yes, they really believe that on one level of consciousness. Humans are not just the rational animal. They are also the rationalIZING animal.
The last 39 years of peer-reviewed research is a threat to the Buy-and-Holders/Get Rich Quickers. And to some extent that’s all of us. I was once a Buy-and-Holder. I once liked the feeling of pretending that my stock portfolio was worth more than it really was worth. We are fighting a battle of reason vs. emotion, Anonymous.
I believe that reason is going to prevail in the end. But I would, wouldn’t I? I believe that Buy-and-Hold/Get Rich Quick will not seem quite so magical after we have seen millions of failed retirements and hundreds of thousands of failed businesses and millions of people thrown out of work and increasing political tensions. But we’ll see, you know?
Shiller and Pfau both obviously both continue to do honest and good and important work. They are helping. But they don’t cross that line that causes the Buy-and-Holders to go nuts. There were people on our boards who believed that Shiller’s Nobel-prize-winning research was legitimate research and who were not banned. They did not point out that Greaney’s study lacked a valuations adjustment and thus got the numbers wildly wrong. So they were permitted to hang around. I crossed a line that cannot be crossed, in the eyes of the Buy-and-Holders. I explored the far-reaching IMPLICATIONS of Shiller’s research. The brings on the death sentence.
If Shiller was not afraid to cross the Buy-and-Holders, there would be a sentence in his book saying: “Given my research finding that valuations affect long-term returns, there is zero chance that the safe withdrawal rate is the same number at all times, so the Buy-and-Hold retirement studies should be corrected immediately before they cause more harm.” No such sentence appears in his wonderful, amazing, breakthrough book.
We are as a society working our way through a difficult transitional process. We have achieved some amazing advances over the past 39 years. But we would have achieved a lot more if we had been following in the investment advice field the procedures that we follow in all other areas of life endeavor. My job with my book is to tell the story of why it is so important that we all begin doing that. It is a win/win/win/win/win, with no possible downside. But, yes, it is hard even for great people like Shiller and Pfau to say out loud that “the numbers in those retirement studies are in error and should be corrected immeidately.” Saying that causes pain for the Buy-and-Holders and all of us feel a reluctance to cause our fellow humans pain.
The question is — Does the pain get better or worse as the length of the cover-up stretches to longer time-periods?
You know what I think.
Rob
So Shiller and Pfau are lying every day to investors?
They’re certainly not telling the full truth.
Was I a liar from May 1999 through May 2002 when I was aware that Greaney’s retirement study lacked a valuations adjustment and yet failed to speak up about it? I sure felt like a liar. I was ashamed of myself for my cowardice.
We humans are liars, Anonymous. We TRY to tell the truth. We are not completely corrupt. But we are not perfectly rational creatures, as the Buy-and-Holders presume.
The reason why Shiller’s work is viewed as important enough to merit a Nobel prize is that it points us in the direction of being able to see the truth about stock investing. Whenever we count gains that are the product of irrational exuberance as real, we are lying to ourselves. Shiller gave us the tool we need (CAPE) to identify the true, lasting value of our stock portfolio. That’s huge.
But do we want to know the true value of our portfolio? Only about 10 percent of us do in 2020, a time when stocks are priced at two times fair value. 10 percent is not enough to overcome the brutal abusiveness of you Goons. Will the number who want to know the truth rise to 20 percent or 30 percent in the wake of the next price crash? Will we be able to overcome you Goons then and start reaping the benefits of the most important 39 years of peer-reviewed research in the history of investment analysis?
I believe that we will. But then I would, wouldn’t I? We are just going to have to wait to see how it all plays out.
Truth-Telling (But Not From May 1999 through May 2002!) Rob