Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
Notice that Robert Shiller has never said one negative thing about Buy and Hold, yet he has warned against market timing on a consistent basis.
Notice that John Bogle put up a post at the Bogleheads Forum in which he said that he believed that Valuation-Informed Indexing can work. That’s market timing, Anonymous. Bogle has said both positive and negative things about market timing, just as has Shiller.
If irrational exuberance is real, market timing MUST work. In a world in which irrational exuberance is a real thing, stock investment risk is not constant but variable. So any investor seeking to keep his risk profile constant over time MUST engage in market timing. And yet, as you say, Shiller does not openly state that all investors need to engage in market timing. Shiller’s public statements are as confused as Bogle’s were.
No one can speak clearly about this stuff for so long as they are putting on this charade that Shiller’s Nobel-prize-winning research did not change our understanding of how stock investing works in a fundamental way. We all need to be talking about the Shiller Revolution at every investing discussion board and blog on the internet. That’s the only way that we can all learn what we need to learn. It’s the only way out of this mess.
I don’t know it all, Anonymous. I don’t claim that I do. But I sincerely believe 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. So I need to say that. If I fail to say that, I am committing financial fraud. If I fail to say that, I am betraying my fellow community members.
Bring all the abusive stuff to a full and complete stop and Shiller will begin saying things that he has never said before. So will just about everyone else who works in this field. There is not one school of academic thought re how stock investing works today. There are two. Everyone needs to acknowledge that so that we can all feel comfortable posting honestly and learning together.
I think that Shiller will heartily endorse market timing if we do what we have to do to make him feel comfortable to share his sincere thoughts re these matters with us. I could be wrong. I don’t think that I am. But it is possible. I am not wrong that we should all do everything in our power to make him and everyone else feel comfortable sharing his sincere take. I am not wrong re that one, Anonymous. We all need to be working for that. That’s the only way to take this thing to a positive place for every single person concerned.
That’s my sincere take.
I wish you all good things.
Process-Oriented Rob
Who says there are only two? I have seen hundreds of different schools of thought.
No. There are hundreds of takes on particular questions. Those are not hundreds of schools of thought re the fundamental understanding of how stock investing works. Buy-and-Holders and Valuation-Informed Indexers disagree re the most basic question there is — how much money do I have in my account? Buy-and-Holders just look at the number on the portfolio statement. Valuation-Informed Indexers take that number and adjust it for the effect of valuations/irrational exuberance. When you disagree on that one, you disagree on everything. If you don’t agree on how much money you have in your account, you can’t even find common ground on whether or not your approach has been working well in recent years or not.
That’s why the 18 years of discussions have been so contentious. If valuations affect long-term returns, everything that the Buy-and-Holders have ever said about stock investing is wrong. They never consider valuations. So, if valuations matter, they always get it wrong. The Buy-and-Holders obviously got a lot of things right. That’s why I incorporated everything that the Buy-and-Holders came up with but for the one exception of valuations into Valuation-Informed Indexing. But that one issue affects every calculation. So it has been very, very, very hard for the Buy-and-Holders to acknowledge their mistake re that one.
I put up a post on the morning of May 13, 2002, saying that I didn’t believe that the retirement study posted at John Greaney’s web site contained a valuation adjustment. Could anything be more non-controversial? You check the study, see whether in fact it contains a valuation adjustment of not, and you move one. But here we are 18 years later with the study uncorrected to this day. The problem is that the Buy-and-Holders see that you can’t just correct that one error and move on. If you correct that one error, you are essentially acknowledging that Shiller’s Nobel-prize-winning research is legitimate research. Acknowledge that and you need to correct hundreds of things, you need to rewrite every textbook. That’s been too much for our Buy-and-Hold friends to swallow for 18 years now, errors in the safe withdrawal rate studies be darned.
There are only two schools of thoughts re the fundamental question of how stock investing works. Either the market is efficient or valuations affect long-term returns. Which school you belong to determines everything you believe about how stock investing works. I am in the Valuation-Informed Indexing school. You are in the Buy-and-Hold school. That’s why you hate me so much. People sincerely believed that Buy-and-Hold was the answer and they built their lives around it. Then this Shiller fellow comes along and blows the entire thing to kingdom come. That’s a threat supreme, Anonymous The Buy-and-Holders feel that they need to fight to the death to block discussion of the last 39 years of peer-reviewed research in this field.
I wish they felt differently. And of course the vast majority do. But there is a group that feels so threatened that they will burn down the house before they will permit honest discussions between people belonging to the two schools of thought. So here we are. I believe that the next price crash will cause so much human misery that enough of us will work up the courage to stand up to you Goons and we will all live better lives from that day forward. But we are just going to have to wait a bit to see if it really plays out that way or not.
My best and warmest wishes to you and yours.
Buy-and-Hold Fan (But Not of the One Big Thing They Got Very, Very Wrong!) Rob
Wrong again. Until you decide to open your eyes and actually listen to what others are saying, you will continue to sit here day after day wasting your time. It is no wonder that your comments section lacks any support when you make uninformed comments like this.
I pointed out the error in the Greaney retirement study 18 years ago, Anonymous. It has not been corrected to this day. I am not the one who needs to open his eyes and listen to what others are saying.
My sincere take.
Eyes Wide Open (At Least re the Error in the Greaney Retirement Study) Rob
Wade Pfau pointed out your error on the John Greaney issue and you still have no corrected anything on your website. That proves the previous point made.
Wade never pointed out any error. He said that Greaney advanced a comment in the thread in which pointed out the error in his study that anyone who wanted to was free to take a lower withdrawal rate. That’s so. But of course I never said different. So there was no error on my part.
What I said was that we all needed to talk about the error in the Greaney study. Otherwise, people will be taken in by the false claims in the study. When everyone is silent about the error, people come to the perfectly natural conclusion that there probably is no error. If we all felt free to talk about the error, people could make up their own minds. So we all should do everything we can to make sure that people on both side feels free to say precisely what they believe.
Wade agrees with me that Greaney failed to include a valuation adjustment in his study. Wade called the study “dangerous.” Wade should be working to get the study corrected. And there was a time when he was doing just that. Wade sent an e-mail to the authors of the Trinity study (the study on which the Greaney study was based) asking them to correct their study. He stopped doing that kind of thing when you Goons threatened to send defamatory e-mails to his employer in an effort to get him fired from his job. The fact that you felt that you had to resort to criminal acts to defend Buy-and-Hold shows that even you Goons don’t believe that this strategy can be successfully defended in civil and rational debate.
The question that remains on the table is whether more of us will work up the courage to stand up to you in the days following the next price crash. I believe that we will. But I believed that Motley Fool would ban Greaney when he advanced his first death threat. So what do I know, you know?
My best wishes, etc.
Wade Phau Fan (the One Who Stood Up to You Goons, Not So Much the One Who Flipped to the Dark Side When His Career Was Threatened) Rob
Still blaming Greaney and Pfau for your failures. Unbelievable.
I definitely blame Greaney. And I definitely blame Pfau.
I also definitely blame Bennett. I knew about the error in Greaney’s study in May 1999. And I didn’t speak up until May 2002. Huh? What the f?
And I blame Shiller and Bogle and Bernstein and Arnott and lots and lots of others. If everyone else had begun speaking up in 1981, when Shiller published his research showing that valuations affect long-term returns, the Trinity study would not have passed peer review. Had the Trinity study not passed peer review, Greaney would never have used it as the basis for his own study. And the entire problem would have been averted.
I blame the humans. Why couldn’t we have arrived in the universe knowing everything that ever could be known about stock investing?
It just didn’t work out that way. We knew some things in 1980. And we have supplemented that knowledge in a huge way over the past 39 years. What makes it difficult is that, the bigger the advance, the more resistance there is to it from people who got used to thinking about things the old way. Going by the reaction to my post pointing out that the Greaney study lacks a valuation adjustment, I think it would be fair to say that Shlller’s Nobel-prize-winning research brought us the biggest advance in our understanding of how stock investing works ever achieved in the history of personal finance.
Oh, my!
Take care, man.
Self-Blaming (But Blaming Greaney and Pfau and All Humanity As Well!) Rob
The only person to blame for your failures is you. We are all to take responsibility for our own situations.
So I caused the economic crisis of 2008?
I had nothing to do with it.
It was the Buy-and-Holders who caused that crisis. They told people that there was no need to engage in market timing no matter how high stock valuations went. So valuations just kept going up and up and up. Eventually they had to come down because it is the market’s core job to get prices right. When prices dropped sharply, trillions of dollars in consumer buying power disappeared overnight. Hundreds of thousands of businesses failed and millions workers lost their jobs.
I didn’t cause that. I have been speaking out in OPPOSITION to Buy-and-Hold for 18 years. I am the one saying that we need to open every discussion board and blog on the internet to honest posting re the last 39 years of peer-reviewed research in this field, without a single exception.
Blame-Free (Except for Those Three Cowardly Years from 1999 Through 2002) Rob
The only crisis that matters is your own financial crisis. Did you cause your own crisis or did someone else cause your crisis?
The criminal behavior of you Goons caused it. And the failure of authorities to take appropriate action in response to your criminal behavior played a big role too.
What I did was wonderful. People use safe withdrawal rate studies to plan retirements. They need accurate numbers. If we were all thinking clearly, there wouldn’t be one person on the planet who would disagree with that for one second. I think it would be fair to say that we are not all thinking clearly re the subject of stock investing in the year 2020.
But we are close, you know? We have all the good stuff that the Buy-and-Holders did prior to 1981. And then we have Shiller’s peer-reviewed research and his book and his Nobel prize. And we have the thousands of community members that have expressed a desire that honest posting be permitted at every site on the internet. We are closer to knowing how stock investing works in the real world than we have been at any earlier time in history. That’s amazing. That’s very, very, very, very cool.
We won’t get to that next step if the 10 percent of the population that believes that Shiller’s Nobel-prize-winning research is legitimate research doesn’t work up the courage to stand up to you Goons. It took me three years, but, once I crossed the line, I have never for two seconds looked back. I see a day when we all get there. I believe that that day is coming in the not-too-distant future. We’ll see, you know?
And I believe that the economic crisis that we suffered in 2008 mattered a great deal. And I believe that the economic crisis that we will suffer in the next year or two or three in the event that Shiller’s Nobel-prize-winning research is legitimate research will matter too. I believe that all of us who believe that Shiller’s research is legitimate should be doing what we can to help protect people from the effects of that crisis. So I do what I can. I couldn’t live with myself if I did otherwise.
My best wishes to you and yours, Anonymous.
Clear Conscience (At Least From May 13, 2002, Forward) Rob