Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
Have you found a job yet? Aren’t you worried? If the collapse you speak of is coming, those open jobs all go away, right?
I haven’t started looking. I have made clear in my earlier comments re this matter that I do not intend to start looking until I finish the book, which I expect will be at the turn of the year.
I am more worried about the economic collapse than I am about not finding a job. It is certainly true that it will be harder to find a job if there is an economic collapse. So I suppose that I am worried about that a little bit. But I am far more worried about the many ways in which an economic collapse will affect the lives of all of us for many years to come.
I wish that there was more that I could do to help us all avoid the collapse. I have been working that one hard for 17 years now. Shiller’s biggest breakthrough is that he showed us how to avoid economic collapses. That’s a huge advance. And I have written about it and tried to get the word out about it. You Goons have obviously done a lot to keep the word from getting out. I would rather be doing what I am doing than what you are doing. By a factor of 500.
The collapse is going to be horrible. I cannot bear to think about it. But I strongly believe that the positive here is 20 times more positive than the negative here is negative. I believe that the collapse will cause a greater number of people to question Buy-and-Hold and to stand up to you Goons. Once we open the entire internet up to honest posting re the past 38 years of peer-reviewed research, we won’t have to worry about these economic collapses anymore. So we will all be living better lives than we ever imagined possible in the Buy-and-Hold Era.
Do I like it that we will need to endure a great deal of pain to get to a better place? I do not. I hate it, hate it, hate it, hate it, hate it. But I am not running things. My job is to play the cards that I am dealt to the best of my ability. I happened to be born into a time when the peer-reviewed research showing us all how stock investing works in the real world would be published and when a group of internet Goons would work very, very, very hard to suppress discussion of it long enough to bring on an economic collapse. Whachagonna do?
I am happy that we have Shiller’s Nobel-prize-winning research available to us today. I am proud to have been leading the effort to get word of it out to every investor on the planet for 17 years now. I am sad that I have run into so much resistance. But I am just going to continue giving it my best shot.
There are always things to be worried about. And there are always things to be excited about. I think that we are a good people and I think that we will turn this into something very good in the final chapter of the saga.
We’ll see.
Worried and Excited Rob
Where did Shiller say that he could help everyone avoid an economic crash?
Here are some words from his book:
“If, over some interval in the first decade or so of the twenty-first Century, the U.S. stock market is going to follow an uneven course down, as well it might – back, let us say, to its levels in the mid-1990s or even lower – then individuals, foundations, college endowments and other beneficiaries of the market are going to find themselves poorer, in the aggregate by trillions of dollars. The real losses could be comparable to the total destruction of all the schools in the country, or all the farms in the country, or possibly even all the homes in the country.”
That’s the 2008 economic crisis.
It happened because of price indifference. In all other markets, people consider price when making a purchase. If we all did that when buying stocks, we would never see another out-of-control bull market. As prices rose, people would reduce their stock allocations. That would being prices back to reasonable levels. Stock prices are self-regulating in a world in which investors understand the long-term dangers of going with a pure Get Rich Quick/Buy-and-Hold strategy.
The only reason why Buy-and-Hold even exists is that there was once a time when academics believed that the stock market was “efficient” (that is, rationally priced). Shiller showed that that is not so. He showed that valuations affect long-term returns. If valuations affect long-term returns, then the market is not efficient and risk is not stable but variable. Investors seeking to keep their risk profile constant over time MUST practice price discipline. There is no other way to pull it off.
Buy-and-Hold was a mistake. It urges price indifference. Price indifference causes bull markets. And bull markets cause bear markets (because prices have to sooner or later return to fair-value levels for the market to continue to function). And bear markets cause economic crises (because the trillions of dollars of spending power lost cause people to spend less and cause the economy to contract). It would be better for every last one of us for us just to permit honest posting re the last 39 years of peer-reviewed research at every discussion board and blog on the internet. The only reason why we haven;t already done it is that it makes the experts in this field who have built careers around promoting Buy-and-Hold look really bad for people to learn about the 39-year cover-up, including all the criminal behavior that was employed to keep it going so long.
I believe that the next price crash will be the turning point. The human misery caused by price indifference will be too obvious to too many people at that time for the cover-up to continue. But I would think that, wouldn’t I? We are just going to have to wait to see how it all plays out to find out for sure.
My best and warmest wishes to you and yours.
Fan-of-Bringing-Economic-Crises-to-an-End Rob
I did not see anything in what you posted that answered the question. Again, wheredid Shiller say that he could help everyone avoid an economic crash?
The words are from his book.He obviously wrote the book with the hope that people would read the words set forth in it.
If you didn’t think that Shiller’s Nobel-prize-winning research was a big deal, you wouldn’t have devoted 18 years of your life to blocking millions of people who want and need to know about it from learning about it. I mean, please give me a freakin’ break.
My best wishes.
Irrational-Exuberance-Fan (the Book, Not the Phenomenon!) Rob
I don’t see anything in his book that says that he could help save us from an economic collapse.
You can count on seeing those words in my book, Anonymous.
My best and warmest wishes to you.
Plain-Speaking Rob
Like other points, these are just YOUR words.
I obviously don’t say that every word that ever came out of my mouth previously came out of Shiller’s mouth. But I do say that the words below appear in Shiller’s book, which was published in March 2000:
“If, over some interval in the first decade or so of the twenty-first Century, the U.S. stock market is going to follow an uneven course down, as well it might – back, let us say, to its levels in the mid-1990s or even lower – then individuals, foundations, college endowments and other beneficiaries of the market are going to find themselves poorer, in the aggregate by trillions of dollars. The real losses could be comparable to the total destruction of all the schools in the country, or all the farms in the country, or possibly even all the homes in the country.”
The idea that market timing might not always be required was a mistake. We should have corrected the mistake 39 years ago, when Shiller published his peer-reviewed research discrediting the Efficient Market Theory, which is the only reason why even one person ever believed that it might not be required for all investors to practice long-term market timing (price discipline!).
Correcting big mistakes promptly matters.
My best wishes.
Mistake-Correcting-Advocate Rob
There is nothing there that says Shiller can stop an economic collapse.
The paragraph quoted appears in a book titled “Irrational Exuberance.” If there are times when a large percentage of our stock gains is comprised of irrational exuberance, then stock investing risk is obviously not static but variable. If stock investing risk is variable, then we we obviously should all be practicing market timing in an effort to keep our risk profile constant over time. If we all practiced market timing, then stock prices obviously could never get to the levels that caused Shiller to write that paragraph.
Millions of investors would be happy to invest pursuant to the lessons taught us by the last 39 years of peer-reviewed research in this field if they could only be given access to honest and informed discussions of what the research says. We have academic researchers for a reason. We do not know everything there is to know about stock investing and they teach us new things. For us all to benefit from their research, we need to permit them to do honest work. That means no death threats, no extortion, no financial fraud.
That’s my sincere take re these terribly important matters, my dear Goon friend. If you feel that you must engage in criminal acts to “defend” your favorite investment strategy, it might be time for you to go on the look-out for a new favorite investment strategy.
Free Wade Pfau!
Rob
Again, it is just you making the claim.
Are you okay with waiting to see if that changes in the days following the next price crash, when you Goons will be placed in prison cells and the rest of us will be free to engage in the discussions that we have been trying to hold amongst ourselves for 18 years now?
Rob
We have all waiting long enough. You should wake up to that.
I love my country, Anonymous. When it comes to protecting our economic system (and ultimately our political system too — every economic crisis that we have suffered has caused an increase in political frictions), I am willing to wait as long as it takes to get the job done.
I am just glad that we live at a time when we have 39 years of peer-reviewed research available to us showing us all how stock investing works in the real world. It obviously makes me sad that discussion of that research is banned today at every large investing site on the internet. But the good news here is 50 times more good than the bad news here is bad. Prior to 1981, we did not have peer-reviewed research showing us what works. So today we are very close to getting to the place where deep in our hearts where we all want to be. It’s just a question of giving ourselves permission to accept emotionally the realities that we acquired intellectually four decades ago.
I have a funny feeling that there will not be one among us who will not agree when we get to the other side of The Big Black Mountain that it was all very very very much worth the wait!
Hang in there, my dear friend. It gets better. A LOT better.
Patient Rob
“ I am just glad that we live at a time when we have 39 years of peer-reviewed research available to us showing us all how stock investing works in the real world.”
You have not even considered the research. To you, it’s just manufactured talking points.
Okay, Anonymous.
Please take good care.
Talking Points Rob
Of course, you are free to correct me by giving us a comprehensive list of all the research that has been conducted over the last 39 years and then give us an overview of the retrospective study that analyzed all of this work and the methodology of coming to the conclusions.
Here’s a link to the Wikipedia entry on Shiller:
https://en.wikipedia.org/wiki/Robert_J._Shiller
Here are some words that appear in that entry:
“In 1981 Shiller published an article in which he challenged the efficient-market hypothesis, which was the dominant view in the economics profession at the time.[15] Shiller argued that in a rational stock market, investors would base stock prices on the expected receipt of future dividends, discounted to a present value. He examined the performance of the U.S. stock market since the 1920s, and considered the kinds of expectations of future dividends and discount rates that could justify the wide range of variation experienced in the stock market. Shiller concluded that the volatility of the stock market was greater than could plausibly be explained by any rational view of the future. This article was later named as one of the “top 20″ articles in the 100-year history of the American Economic Association.”
My best wishes to you, Anonymous.
Rob
So you only considered one Shiller article from 1981 as the entire body of research over the last 4 decades.
To make sense of what’s happened, you have to consider where the idea that market timing is not requited came from. The intuitive idea would be that market timing is absolutely required. In every other market that exists, price discipline is key. Price discipline is what makes markets work. In the stock investing realm, it is by engaging in market timing that investors practice price discipline. So, in ordinary circumstances, you would think that everyone who works in this field would have always urged investors to practice market timing, that there never would have been a single dissenting voice. But there clearly are many, many dissenting voices. Why?
The answer is — the Efficient Market Theory. The Efficient Market Theory is an academic construct. It has never been proven. That’s what it is called a “theory.” It comes from Adam Smith economics. Adam Smith economics is rooted in the idea that consumers make decisions about purchases through a thinking process in which they engage in the rational pursuit of their self-interest. Eugene Fama (who was awarded a Nobel prize on the same day that Shiller was) took the Rational Man concept and applied it in the stock investing realm. How would the stock market work if investors made decisions about purchases through a thinking process in which they engage in rational pursuit of their self-interest?
If the market were efficient, Buy-and-Hold would be the ideal strategy. If the market were efficient, stocks would always be priced at as close to their proper price as it was possible to determine, based on the information available to investors at the time. Risk would be constant. Investors would not know in advance in which direction prices were going to move. The default best-guess as to what the annual return would be would always be the 6.5 percent real average historical return and there would be a realistic understanding that the odds that the return would be greater than that or less than that would always be the same. Returns would determined by economic developments. Since economic developments cannot be predicted, stock returns could not be predicted. They would play out in the form of a random walk.
The Efficient Market Theory was a real thing. Thousands of smart and good people believed in it. Economists wrote about it and talked about it all the time. They believed in it. So Buy-and-Hold, the academic model for understanding how stock investing works, became the dominant model. Then Shiller blew that world up in 1981, with his “revolutionary” (his word) Nobel-prize-winning research showing that the market is not efficient. If the market is not efficient, then Buy-and-Hold is no more, It does not make sense not to engage in market timing (price discipline). Stock investing risk is not constant, it is variable. The safe withdrawal rate is not one number, it is a number that changes depending on the valuation level that applies on the day the retirement begins.
Humans are not Vulcans. They have emotions. So huge scientific breakthroughs are not always awarded immediate acceptance. There is often a process that the humans need to work through to overcome the cognitive dissonance that interferes with their ability to process a big change in their understanding of a subject of huge importance to them. So not everyone gave up on Buy-and-Hold and became a Valuation-Informed Indexer in 1981 But, going by the science of the thing, that’s what they should have done. The Efficient Market Theory died in 1981. So Buy-and-Hold died in 1981. It should have been replaced by Valuation-Informed Indexing, which is the academic model for understanding how stock investing works that incorporates all the things that we believed about stock investing in 1980 except for the belief that market timing is not required, which was discredited by the research that Shiller published in a peer-reviewed journal in 1981.
Now we know how stock investing works. Good for us. The next step is to get the word out so that we can bring an end to the economic crises that the widespread promotion of strategies that do not call for market timing always bring on sooner or later. Getting the word out should be easy. Lots of people want to know how stock investing works, for obvious reasons. And lots of people want to help those people learn what they need to learn because there’s a lot of personal fulfillment to be obtained by doing so and because there’s a lot of money to be made by doing so.
There’s one thing that stands in our way: You Goons. People do not want to see their loved ones threatened with physical violence. People do not want to see their careers destroyed. People do not want to see their reputations destroyed. People do not want to see any of that garbage. So, to move forward as a society in our understanding of how stock investing works, we need to put you Goons in prison, where you belong, so that the rest of us can enjoy the amazing learning experience that awaits us when we put all the smelly Buy-and-Hold garbage behind us and get about the business of developing the first true research-based model for understanding how stock investing works, Valuation-Informed Indexing.
There has never been any research supporting the idea that market timing is not required. Wade Pfau researched that question very carefully. He spent months on the project. He was astounded. He had heard so many times that market timing is not required (or is not even a good idea!) that he started out believing that there must be research saying so. But no. There is none. The Efficient Market Theory was an ASSUMPTION. No one ever checked on its validity until Shiller did in 1981 and he of course found that the assumption does not stand up to scientific scrutiny. It turns out that investors are humans, not Vulcans. It turns out that stock investing risk is variable, not constant. It turns out that the safe withdrawal rate is a number that varies from 1.6 to 9.0, not a number that is always 4 percent. It turns out that market timing always works and is always 100 percent required. It turns out that Buy-and-Hold is the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind.
Does everyone know this and accept this today? No, not by a long shot. About 10 percent of the population knows it and accepts it today. But, once the laws of the United States are being administered in a reasonable way in the investing advice realm, that 10 percent will grow to 20 percent and then to 40 percent and then to 80 percent. We need as a people to insist on reasonable enforcement of the law if we are to tap into the amazing benefits that follow from knowing at last the realities of stock investing. The research goes all one way. There is no legitimate intellectual debate here, just the need to correct an unfortunate misunderstanding that was developed in the 1960s and that was exposed nearly four decades ago. We should be permitting honest discussion of the last 39 years of peer-reviewed research at every internet site and I believe that we will be soon after the onset of the next price crash,when we will all see with our own eyes just how destructive a force the idea that market timing is not required always turns out to be in the long run.
I hope that that helps at least a tiny bit, dear Goon friend.
Scientific-Minded Rob
There is no science or research involved. It is just your opinion on an article from 1981. Period.
Please mark me down as saying that Shiller’s Nobel-prize-winning research is science and that your death threats and acts of extortion are not.
And please feel free to spread the word all over the internet that that is indeed my take.
My best wishes to you.
Opinionated Rob
Have you looked at Wade a Pfau’s website. Notice it lacks any recommendation for VII and/or market timing. Notice there is no mention of goons, death threats, job threats or prison. Same goes for Shiller’s website. Why is that?
What about the research that refutes your conclusions from work done more recently than Shillers 1981 paper and concluded the following:
“Our search over economic relations that us to study the price divided by 30-year moving average of earnings may have stumbled upon a chance relation with no significance. In other words, the relation studied here might be a spurious relation, the result of data mining. Neither the statistical tests nor the monte carlo experiments take account of the search over other possible relations.
It is also dangerous to assume that historical relations are necessarily applicable to the future. There could be fundamental structural changes occurring now that mean that the past of the stock market is no longer a guide to the future.”
Have you looked at Wade a Pfau’s website. Notice it lacks any recommendation for VII and/or market timing. Notice there is no mention of goons, death threats, job threats or prison. Same goes for Shiller’s website. Why is that?
You know why it is.
Wade recommended Valuation-Informed Indexing in the strongest possible terms. His career was threatened when he did so. He needs to support a family. He doesn’t say these things that he believes because he has to support a family. He needs to be able to work in the field that he has trained all his life to work in.
This is why we have laws against extortion. We don’t want to see these sorts of things happen.
The laws against extortion are not self-enforcing. There have to be people who care enough about getting the truth out there to stand up to you Goons for it to happen. Today most people are too afraid of you to speak up. But will that change when they lose 50 percent of their retirement money. I believe that it will change. But we are just going to have to wait and see to find out for sure.
That’s the deal. We are at a moment in time when the criminal stuff is effective. But I don’t think that moment is going to last forever. It all depends on whether Shiller’s Nobel-prize-winning research is legitimate research or not. If Shiller’s research is legitimate, then we will all be paying a price for ignoring his message for so long. When we have paid that price, I believe that more of us will work up the courage to speak up. An investment strategy that can only be defended through criminal acts is an investment strategy that is headed to the dustbin of history.
My sincere take.
Non-Criminal Rob
What about the research that refutes your conclusions from work done more recently than Shillers 1981 paper and concluded the following:
“Our search over economic relations that us to study the price divided by 30-year moving average of earnings may have stumbled upon a chance relation with no significance. In other words, the relation studied here might be a spurious relation, the result of data mining. Neither the statistical tests nor the monte carlo experiments take account of the search over other possible relations.
It is also dangerous to assume that historical relations are necessarily applicable to the future. There could be fundamental structural changes occurring now that mean that the past of the stock market is no longer a guide to the future.”
There are millions of good and smart people who still believe in Buy-and-Hold. Those people obviously need to be heard as well. When those people share their thoughts, they are helping. Those people are our friends.
But every last person on the planet should agree that the criminal stuff needs to be brought to a full and complete stop by the close of business today. There is no legitimate controversy re that one. The debate cannot produce good fruit until as a society we insist that both sides follow the laws of the United States in making their case. There is no place for death threats or for demands for unjustified board bannings or for thousands of acts of defamation or for threats to get academic researchers fired from their jobs.
Obviously.
I should add that those words sound like Shiller’s words to me. I am not sure. But it would not surprise me even a tiny bit if that turned out to be the case. That’s Shiller’s spirit — humble, willing to acknowledge that he does not know it all.
Think where we would all be today if Greaney had that spirit, if Greaney included a paragraph in his study noting that there is 39 years of peer-reviewed research showing that the market is not efficient and that therefore the safe withdrawal rate may be a number that varies and that all the numbers in his study may be wildly off the mark. If Greaney’s study had included such language on the morning of May 13, 2002, there would have been no hysterical reaction to my famous post, the Buy-and-Holders would have just said “oh, Rob must be one of those Shiller guys” and we all would have enjoyed an amazing learning experience. That’s the way it it supposed to work in these United States. That’s the way in which I believe it WILL work in the days following the next price crash, when millions of people will have suffered horrible life setbacks as a result of Greaney’s unwillingness to evidence Shiller’s wonderful humble spirit in his own work.
Captain Obvious Rob
“ I should add that those words sound like Shiller’s words to me. I am not sure. But it would not surprise me even a tiny bit if that turned out to be the case. That’s Shiller’s spirit — humble, willing to acknowledge that he does not know it all.”
All of that shows that the research says something different than what you say.
“ Wade recommended Valuation-Informed Indexing in the strongest possible terms. His career was threatened when he did so. He needs to support a family. He doesn’t say these things that he believes because he has to support a family. He needs to be able to work in the field that he has trained all his life to work in.”
Wade doesn’t recommend VII and he says he was not threatened. You just can’t accept that. That’s your problem.
“ I should add that those words sound like Shiller’s words to me. I am not sure. But it would not surprise me even a tiny bit if that turned out to be the case. That’s Shiller’s spirit — humble, willing to acknowledge that he does not know it all.”
All of that shows that the research says something different than what you say.
It shows the opposite. It shows that Shiller is confident enough in what his research shows to be able to acknowledge the possibility that he is wrong. He COULD be wrong. It is a good thing that he acknowledges that. You Goons show a LACK of confidence when you engage in criminal behavior to “defend” Buy-and-Hold. You follow it. But it drives you nuts when it is questioned. That’s not good. That’s the worst of all worlds.
It makes me happy to see how confident Shiller is in his research. I find his humble spirit admirable. It is one of many things that I like about him.
I could be wrong about Valuation-Informed Indexing. I say that all the time. And I believe it. But I also believe strongly that Valuation-Informed Indexing is the future. The reason why I say that it is possible that I am wrong is that is that I know that I am human and that the humans get things wrong from time to time. Just because it is possible that I am wrong does not make it right for me to post dishonestly. The best combination is to say what I truly believe in my posts but then also to note that it is of course possible that I am wrong.
Again, all of this would be 100 percent obvious if we were talking about any subject other than investment advice. It is because it is so important not to get investment advice wrong that it is so hard to acknowledge our fallibility in this field of endeavor.
It’s not that investing is a somewhat emotional topic. It is a wildly emotional topic. It’s critically important to get it right. But the humans are not capable of always getting it right and we all know from our experience in other fields of endeavor that that is so. This is emotionally painful stuff. Shiller pointed us in the right direction with his amazing, Nobel-prize-winning research.
Or so Rob Bennett, flawed human that he is, sincerely believes, you know?
My best wishes to you, dear friend.
Sympathetic Rob
Wade doesn’t recommend VII and he says he was not threatened. You just can’t accept that. That’s your problem.
You’re the one going to prison, Anonymous. You’re the one with a big problem.
I have a relatively small problem. I need to overcome you Goons to be able to spread the word to millions of people re what the last 39 years of peer-reviewed research teaches us all about how stock investing works in the real world. But that’s s small thing compared to going to prison. I mean, holy moly!
Not-Accepting-of-the-Idea-of-Committing-Felonies Rob
“ It shows the opposite.”
No, it doesn’t. Shiller doesn’t say what you want him to say, so you just make it up.
“ You’re the one going to prison, Anonymous. You’re the one with a big problem.”
No one is afraid of your threats or land of make believe comments.
“ I have a relatively small problem”
A small problem? You wasted all these years on hocomania and now you have to go back to work, when most are retiring. That is small?
“ It shows the opposite.”
No, it doesn’t. Shiller doesn’t say what you want him to say, so you just make it up.
Shiller has never said “The Buy-and-Hold retirement studies need to be corrected by the close of business today before they do more harm.” I’ll give you that one.
But he has said that valuations affect long-term returns. That finding is his entire life’s work in a nutshell. He was awarded a Nobel prize for saying that. And, if it is true that valuations affect long-term returns, then there is precisely zero chance that the safe withdrawal rate is the same number at all times. If valuations affect long-term returns, then realistic expectations of long-term returns CHANGE when valuations change and it is realistic expectations of long-term returns that determine safe withdrawal rates.
Shiller SHOULD be saying that the errors in the Buy-and-Hold retirement studies need to be corrected by the close of business today. It’s Rob Bennett saying that. And I ofer no apologies whatsoever. It is the reluctance of people like Shiller to speak plainly about the far-reaching implications of his Nobel-prize-winning research that has put us in this jam. We all should be speaking plainly and honestly and boldly and charitable, in my sincere assessment.
Making-It-Up Rob
No one is afraid of your threats or land of make believe comments.
You have no cause to be afraid of me. But you should certainly be afraid that the laws against extortion and threats of physical violence and financial fraud will be enforced in the days following the next price crash. As a true friend, I have an obligation to point out from time to time where your behavior is taking you. It’s too sad.
A small problem? You wasted all these years on hocomania and now you have to go back to work, when most are retiring. That is small?
In relative terms, yes, it is small. I have a line in the book that I am writing that states that “this is the most important book ever published in the field of personal finance.” That’s an incredible claim but I back it up. It shouldn’t be in me to write the most important book ever published in the field of personal finance. This is an absurd reality. But here we are, you know? I got here by working up the courage to advance my famous posting of the morning of 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. I would have a much bigger problem had I failed to work up the courage to advance that post.
Do I like all the bans and all the threats of physical violence and all the deceptions and acts of intimidation? Obviously not. Do I like it that many fine boards were destroyed in the process of Greaney “defending” his study? Obviously not. But we have learned amazing things over the past 18 years and we will be able to share all that we have learned with millions of people in the days following the next price crash. I wish that I could experience more “problems” of this nature
The criminally abusive stuff is obviously a big problem for all of us. But more for you than for me. I am taking a constructive approach by helping people to learn what caused the problem. You are just setting yourself up for a long prison sentence by destroying millions of lives. Huh? What the f?
If learning how stock investing works in the real world is a problem, please grace me with more such problems. If facing a long prison sentence is not a problem, I think that the true problem here might be that you keep using that word but that you don’t understand what it means.
My sincere take, Anonymous.
And my best wishes to you.
Problem-Solving Rob