Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
Sorry, but Shiller says you are wrong. You just haven’t listened. He has said this before. Larry Swedroe also said you were wrong back in 2018:
You didn’t listen to him either.
Wade Pfau said you were wrong about John Greaney. He wrote whole article on this back in 2010. You ignored Wade as well.
I guess that is why The New York Times won’t write a story on you. They are worried that all these facts will come up and that they will then be blamed for fake news.
If you run a search for Google on the question “What is Modern Portfolio Theory?”, the following words will appear on your computer screen:
What is the portfolio theory assumption?
The Portfolio Theory of Markowitz is based on the following assumptions: (1) Investors are rational and behave in a manner as to maximise their utility with a given level of income or money. (2) Investors have free access to fair and correct information on the returns and risk.
Shiller discredited the premise of Modern Portfolio Theory when he published research showing that investors are NOT rational, that they are at times highly emotional and that they at times create lots of irrational exuberance in stock prices. This is why he was awarded a Nobel prize.
Had we all been thinking clearly back in 1981 when he did that, we would have launched a national debate on the far-reaching implications of Shiller’s research. Unfortunately, we are humans. We are flawed creatures. We were not expecting Shiller’s findings. We were shocked by them. We experienced cognitive dissonance re them. We just kept on recommending Buy-and-Hold strategies and suggesting that they were supported by the peer-reviewed research even though that was no longer the case. As the years passed, it got harder and harder to come clean because the harm done by the cover-up grew larger and larger.
None of the people you mention truly believe that John Greaney included a valuation adjustment in the retirement study posted at his web site. Robert Shiller doesn’t believe that, Larry Swedroe doesn’t believe that, Wade Pfau doesn’t believe that, the editor of the New York Times doesn’t believe that. Freakin’ John Greaney himself doesn’t truly believe that. If Greaney truly believed that he had included a valuation adjustment in his study, we never would have seen a single death threat or a single demand for a single unjustified board banning or a single act of defamation or a single threat to get a single academic researcher fired from a single job. I mean, come on.
So if everyone gets it that the Greaney study is in error, how is it that 18 years have passed since I advanced my famous post and the study has not been corrected to this day?
Getting the numbers right in retirement studies is what investment analysis is all about. If all of these people (and everyone else who works in this field) acknowledges that the Greaney retirement study and indeed all Buy-and-Hold retirement studies need to be corrected, where is it going to stop? The entire Modern Portfolio Theory will need to be corrected. Which means that every textbook in this field will need to be corrected. And every article written about stock investing over the last 39 years will need to be corrected. Modern Portfolio Theory is the language that people in this field speak and Shiller was awarded a Nobel prize for showing that that language is flawed in a very serious way.
So people go along to get along.
And knowledge does not advance.
And investors get hurt.
And we move ever closer to the next economic crisis.
Not this boy, you know?
If Greaney’s study truly does not include a valuation adjustment, it should have been corrected within 24 hours of the moment when he learned of the error. And we then should have moved on to correcting everything else that those who believe in Modern Portfolio Theory got wrong. The idea of being an “expert” is endeavoring to get things right, not deliberately getting them wrong.
That’s my sincere take, Anonymous. I think that everyone in this field should be endeavoring to get things right. I do that. And I encourage all others to do that. I say that we all need to stand up to you Goons when you threaten us so that we can get things back on track.
People do not want to see their loved ones threatened. People do not want to see their careers destroyed. So it takes a good bit of courage today to speak up about this stuff. But I believe that more people will work up the courage in the days following the next price crash, when they will be able to see how much human misery has been caused by the cover-up.
We’ll 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.
My best wishes to you and yours.
Theory Correcting Rob
Every article? Every text book? How can anyone take you seriously.
How many science textbooks do you think had to be rewritten when it was discovered that the earth revolves around the sun rather than the other way around?
Humankind learns new things over time. That’s not a bad thing, it’s a good thing. But the people whose careers are tied to the old understanding sometimes PERCEIVE it as a bad thing. It is the job of the society as a whole to help them understand that progress is a plus and must be pemitted.
Rob
“ How many science textbooks do you think had to be rewritten when it was discovered that the earth revolves around the sun rather than the other way around?”
Zero. They didn’t have textbooks back then. We are in modern times now. Timing has not worked out, so it would be in error to make any changes.
They had their ways of spreading the accumulated knowledge of the time and the old message had to be changed to the new message. There was a lot of resistance. There were people who believed that God himself had revealed that the earth is the center of the universe (because there are lines in the Bible indicating this). So it was not an easy thing to make that transition.
That’s what we are dealing with in trying to make the transition from “market timing never works” to “market timing is absolutely essential, if enough of us fail to engage in market timing, we will eventually bring on an economic crisis.” Buy-and-Holders have their entire world view riding on their belief that market timing doesn’t work. They take pride in having secured their financial future. It is very hard to have to acknowledge at some point that that financial future that you thought you had secured is rooted in irrational exuberance, not in anything real and lasting.
Timing ALWAYS works. The Bennett/Pfau research shows that beyond any doubt whatsoever. We should be discussing that research at every investing site on the internet. You saw how it persuaded people in the days when Wade felt comfortable posting his honest thoughts re the matter. If you thought that it wasn’t a big deal, you would not have engaged in criminal acts to suppress discussion of it. People do not risk prison sentences for no good reason. They just do not. It doesn’t happen.
You continue to fight to suppress discussion of the last 39 years of peer-reviewed research in this field because you cannot bear to think that will happen if all investors are permitted to hear both sides of the story and make up their own minds re these matters. I want people to be able to make up their own minds. That’s the conflict. I understand that many would vote for Buy-and-Hold regardless and of course that is fine. But I want people to be able to hear both sides because I believe that over time Valuation-Informed Indexing would win more support if people heard the case for it and were able to ask questions about it and all that sort of thing.
We will have to decide as a society where we are going to go with this. I know what I hope. I know what I expect. But we are just going to have to let things play out to find out for sure. I believe that a price crash that brings on an economic crisis will open up some minds a bit, both the minds of experts and the minds of ordinary people. But we will see.
You say that it would be in error to make any changes. Would it be in error to permit the discussions that must precede a decision to make any changes? I say “no.” I say that discussions should be permitted. And the laws of the United States support that position.
There are good reasons why we have laws against financial fraud and against extortion and against threats of physical violence. Those laws protect all of us from getting into situations like this. I believe that we will see reasonable enforcement of those laws in the days following the next price crash and that we will all achieve together the biggest advance in the history of personal finance and that looking back we will have a hard time understanding what all the “controversy” was about. Nobel-prize-winning research breakthroughs help each and every one of us to live a better life. There is no downside associated with them. The full reality is that even our Wall Street Con Men friends will be better off when we all make it safely to the other side, once we get through a short transition period in which they will need to learn some new skills.
I naturally wish you all the best that this life has to offer a person, in any event.
Rob
You are comparing modern times vs time periods in which knowledge, learning and communications are limited. We now know the dangers of market timing and claims that are unproven and made up…….hint, hint, hint.
There are still many things that we do not know in modern times about how the world works. We still have much to learn and Shiller’s Nobel-prize-winning research findings represent a huge advance that we should be discussing on every site on the internet. We didn’t know everything about smoking until research was published showing that it causes cancer. The people who profited from smoking went to a great deal of trouble to stop people from learning about that research. And they did indeed slow things down. But in the end the people of the United States overcame them and we all live better lives today as a result. Some smoke, some don’t. But everyone knows that smoking causes cancer.
I believe that we will see similar things happen re the obviously false claim that long-term market timing (price discipline!) is not absolutely essential. Perhaps this claim was not so obviously false in an earlier day. But with 39 years of peer-reviewed research, it is obviously false to anyone paying attention today. This is why Buy-and-Holders fear honest discussion of the peer-reviewed research so much. If the Buy-and-Holders thought that there was even a 10 percent chance that they would prevail in civil and reasoned discussions, we never would have seen a single criminal act. One thing that we all agree on is that there would be zero chance that Buy-and-Hold would remain dominant if the internet were opened to honest posting.
I want to see Buy-and-Hold go down. So I favor the idea of permitting honest posting. You want it to remain dominant. So you oppose that idea with your heart, mind and soul. That’s the dispute. That’s always been the dispute That’s always been the only dispute. If honest posting were permitted, there would still be differences between us on substantive matters. But we never would have seen any ugliness. All of the ugliness comes from the fact that banning honest posting is unAmerican and you do not want to acknowledge that “defending” Buy-and-Hold today required you to go outside the law. My view is that, once you discover that there is no way within the law to make the case for the investment strategy that you favor, it is time to go looking for a new investment strategy.
Buy-and-Hold was discredited by the peer-reviewed research in 1981. The last 39 years has been a Twilight Zone time-period in which as a nation we have been working up the courage to launch the discussions that we need to have to make the transition to Valuation-Informed Indexing, the first true research-based investment strategy.
My best wishes to you.
Rob