Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
There are no goons. Just people that don’t agree with you. If and when there is a drop in the market, it will not be blamed on buy and hold. Every day, there are predictions of drops that are tied to some particular reason. Here is another example:
You are wasting your time.
Buy-and-Holders are going to offer rational explanations of any price changes. That is what they do. The premise of the strategy is that investors are rational. If investors are rational, then it is not possible that prices could fall for any but a good reason.
But that’s not what Shiller’s research shows Shiller showed that gains that push prices above the prices we would have if the CAPE were 16 are the product of irrational exuberance. I believe that Shiller’s Nobel-prize-winning research is legitimate research. So I don’t have any option but to say that the Buy-and-Holders are wrong. Shiller’s research cannot be reconciled with the research that was once thought to support Buy-and-Hold (and that still is in the minds of millions of Buy-and-Holders).
I don’t think that I am wasting my time. But, given that it is a physical impossibility for me to post dishonestly re these matters, we will just have to wait to see how it all plays out. We do not need to have every Buy-and-Holder change his mind on the day of the price crash. We already have 10 percent who believe that Shiller’s research is legitimate. If that number goes above 20 percent, I believe that we will be on our way. Once we get to 20 percent, people will be speaking up when they see criminal behavior and more and more of us will feel free to post honestly and knowledge of how stock investing really works will just spread and spread. Once we are all living better lives in about 20 ways, there is not going to be anyone who is ever going to want to go back to the Buy-and-Hold garbage. We will work together as a society to bury that smelly garbage 30 feet in the ground, where it can do no further harm to humans and other living things.
Or maybe not. I thought that Motley Fool would give Greaney the boot when he advanced his first death threat. That was on the evening of August 27, 2002. So I obviously was proven to be wrong re that one. It is at least within the realm of the possible that it is happening again and that I just cannot see it. But given that I am physically incapable of saying that I believe that Greaney’s retirement study contains an adjustment for the valuation level that applies on the day the retirement begins. we will just have to wait to see how it all plays out. Maybe I am wasting my time and maybe I am leading the people of the United States to the biggest advance in our understanding of how stock investing works ever achieved in our history.
I naturally wish you all the best that this life have to offer a person, on any event, my dear Goon friend.
Rob
“I don’t think that I am wasting my time.”
If a buy and holder was wrong for 24 years, you would say that he/she wasted their time. Why do you hold yourself and VII to a different standard?
First of all, it’s not 24 years. Shiller said in 1996 that we should expect to see a price crash by 2006. We haven’t yet seen one that remained in place for a good length of time. So you could say that he was off by 14 years. But not 24 years. And there are explanations for why he was off by 14 years. I have written several articles on that topic. Others who believe that valuations matter have done the same. It is up to each investor to consider the points made in the articles and decide for himself or herself whether they are persuasive or not, But you can’t just say that the crash is now 14 years overdue, so forget about everything that Shiller showed in his research.
According to the research, the Buy-and-Holders have wasted their time for 150 years. Wade Pfau examined all the literature in this field and never was able to identify one iota of research indicating that long-term market timing might not work. Even there, I don’t conclude that we should ban discussion of Buy-and-Hold. The Buy-and-Holders may see something that Wade Pfau missed, so I want to hear what they have to say. But I do find it a very impressive reality that a man who makes his living doing research in this field could not find one iota of evidence supporting the core Buy-and-Hold claim that market timing is not required, That’s a highly counter-intuitive claim. In every other market, price discipline is absolutely critical and long-term market timing is the means through which price discipline is practiced in the stock market. And, if it turns out that the Buy-and-Holders are wrong and that Wade Pfau and Robert Shiller and Rob Bennett (and lots of others) are right, and the claim that market timing is not required (or that it might not work!) is going to go down in history as a very, very damaging claim, then the Buy-and-Holders should have been very careful about making that claim. I don’t think they were at all careful. They based the claim on a finding that short-term timing doesn’t work. They never even looked into long-term timing before advancing the claim. It was that failure to exercise some caution before making that highly counter-intuitive claim that caused all the trouble we have seen in the years since (including the 2008 economic crisis).
We will not know whether the Valuation-Informed Indexers were wrong about anything until we see the end of this bull/bear cycle. That will tell the tale. We have witnessed the Get Rich Quick part of the Buy-and-Hold experience. We have not yet seen the human devastation that in the past has always followed. I believe that it is going to follow again this time. But I don’t have a crystal ball, We are going to have to wait to see how things play out to find out for sure. But I sure am not going to say that I approve of the Ban on Honest Posting. If things turn out as they always have in the past, you Goons will be going to prison. Huh? What the f? How is that a good thing? Permit honest posting and you take that possibility off the table. The laws of our nation permit people to have different views on these sorts of questions. Permit people to express different views and permit other people to hear those different views and everything works. If Buy-and-Hold really is best, that will be revealed. If it is Valuation-Informed Indexing that is best, that will be revealed. But there will be no prison sentences or any of the other awful stuff if you just follow U.S. law (no death threats, no extortion, etc.).
That’s my sincere take, Anonymous. I think it is an important reality that the price crash has been deferred for 14 years now. That is a very strange reality and we all need to come to terms with it. I would never make any effort to hide that reality from anyone. If someone said that, because of that reality, he was going to go with Buy-and-Hold, I would say that I understood that choice. I have not taken that path myself. I see too much evidence going the other way to take that path. But I don’t know everything and neither does any of the other Valuation-Informed Indexers. Despite our best efforts to get it right, it is always possible that we got it wrong. So each and every investor needs to look at the evidence on both sides and make his or her choice as to which model to follow,
The thing that I feel strongly about is that the evidence for both sides should be presented at every site on the internet. There should not be a ban on honest posting at a single site. We cannot make sound and informed choices unless we hear both sides. And today we are not hearing both sides. The Buy-and-Holders have been suppressing discussion of the far-reaching implications of Shiller’s Nobel-prize-winning research for a long time and that needs to come to a full and complete stop by the close of business today.
My sincere take.
Rob
The 24 years refers to your plan. You are the promoter and advocate of VII, not Shiller. You have failed to show even one successful person that has implemented VII and have also failed to show one failure with buy and hold. Like I said, just one big waste of time.
The 2008 economic crisis is a HUGE failure associated with Buy-and-Hold. Permit honest posting and we would never again see a CAPE value high enough to cause an economic crisis like that. Stock prices are self-regulating in a world in which honest posting re the peer-reviewed research is permitted. When prices go up, the value proposition of stocks goes down. So people sell. That brings the price back to reasonable levels. When Buy-and-Hold is pushed relentlessly, rational investing decisions become impossible. Investors are not able to see how much damage they are doing to themselves by following a pure Get Rich Quick/Buy-and-Hold approach. So the only way that the market can get prices down (getting prices right is the core function of any market) is to crash them. A price crash takes trillions of dollars of spending power out of the economy, causing hundreds of thousands of businesses to go under and causing millions of workers to be thrown out of their jobs and causing political frictions to increase dramatically.
No Get Rich Quick/Buy-and-Hold for this boy. I am a big-time believer in letting people learn about what the last 39 years of peer-reviewed research teaches us about how stock investing works in the real world.
My best wishes to you, Anonymous.
Rob
“ The 2008 economic crisis is a HUGE failure associated with Buy-and-Hold.”
Wrong. It was only a HUGE failure for market timers. Buy and holders didn’t sell and not only seen the market return, but went on to new highs.
Most people see it that way. But if those new highs are comprised of irrational exuberance, they will not be lasting. They will make Buy-and-Holders feel good for a time and then they will disappear. The point that needs to be examined is whether gains that cause the CAPE value to go above 16 are real, economic gains, the same as gains earned when the CAPE is below 16, or whether gains achieved when the CAPE is above 16 are just irrational exuberance and should not be counted. If we all stop counting those gains as real (as Shiller’s Nobel-prize-winning research shows we should), that changes the investment advice field in a dramatic and very positive way.
Also, the fact that prices recovered doesn’t mean that the promotion of Buy-and-Hold did not cause great damage. There were still hundreds of thousands of businesses that went under. There were still millions of workers thrown out of jobs. There was still an increase in political tensions. Economic stability is a plus for all of us. And we will all see more economic stability in a world in which honest posting re the last 39 years of peer-reviewed research is permitted at every discussion board and blog on the internet, without a single exception.
My sincere take.
Rob
The 2008 crash was not a result of buy and hold or any other investing strategy. It was because of a banking crisis resulting from sub-prime mortgage backed securities, which went through massive defaults. Even Shiller acknowledges that. Further, Shiller has always said that the market is unpredictable an$ that you shouldn’t time the market. Stop making things up to fit your story.
I think it was the relentless promotion of the Buy-and-Hold concept (No market timing! No matter how high prices go!) that was the primary cause of the 2008 economic crisis, Anonymous. Here are some works that appeared in Shiller’s book, 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.”
I naturally wish you all the best that this life has to offer a person.
Rob
“ I think it was the relentless promotion of the Buy-and-Hold concept (No market timing! No matter how high prices go!) that was the primary cause of the 2008 economic crisis, Anonymous. ”
And you would be wrong. Buy and hold had nothing to do with the sub-prime mortgage debacle. Even Shiller indicates the cause of the crash.
https://www.investopedia.com/news/why-housing-market-wont-crash-2008-robert-shiller/
Here is a sentence from that article:
“This, in turn, led to a severe decline in liquidity, a stock market collapse, and a collapsing economy worldwide.”
That stock market collapse produced a loss of consumer buying power of $8 trillion. You don’t think that that loss contributed to the business failings and the job losses and the increase in political frictions? I sure do. When $8 trillion of consumer buying power is removed from the economy, there are horrible consequences everywhere and to everyone. Buy-and-Hold is killing us.
The only way in which I would take issue with the article is that I would put the Buy-and-Hold stuff up in the headline. I don’t always call it “the 2008 economic crisis.” I often refer to it as “the Buy-and-Hold Crisis.” That puts the blame where it belongs.
And, yes. we need to see Shiller (and lots and lots of others) do that. We all should be asking him to address himself to the question. He predicted the crisis in his book. Why not take credit for the prediction when it comes true and put the focus of the blame where it belongs, on the “idea” that there is no need for investors to practice market timing? We are going to continue having these crises if we all don’t begin speaking a lot more clearly about these matters.
It’s the same old story. It makes the Buy-and-Holders look bad to take note that it is their long-discredited investment strategy that served as the primary cause of the economic crisis. And the Buy-and-Holders are powerful and wealthy and well-connected people. So most of us keep out mouths shut. That of course makes it that much worse when Buy-and-Hold causes its next crisis.
The only way around this mountain is through it. Shiller noted in his book that we would have an economic crisis in the first decade of the new century unless we did something about this crazy idea that is not 100 percent necessary for all investors to practice market timing/price discipline when buying stocks. Fail to do that and the only way that the market can get prices back to reasonable levels (which is the market’s core job) is to crash them. When prices crash, trillions of dollars of consumer buying power are removed from the economy and tens of thousands businesses go under. It happens every time!
I would like to see it stop happening. So I continue to post honestly re these matters. I consider Shiller a hero for predicting the crash in his book. So I point out that he was proven right. He should do that same. Everyone who works in this field should do the same. Anyone who has any doubts whether Buy-and-Hold is killing us as a society should ask whatever questions they need to ask without engaging in any criminal behavior to silence people who post honestly re these matters.
We are all in this together. We all need to know how stock investing works in the real world.
My sincere take.
Rob
“ This, in turn, led to a severe decline in liquidity, a stock market collapse, and a collapsing economy worldwide.”
Thanks for proving my point. The cause was decline in liquidity, not buy and hold. Shiller agrees with me.
I disagree strongly.
All that you are showing is that the decline in liquidity was the precipitating event. It is the $8 trillion loss of consumer buying power that did the most damage. That’s like saying that, when someone is driving a car without brakes and gets to a toll booth and crashes, it is the toll booth that caused the crash. The presence of the toll booth was the precipitating event. But, whenever someone drives a car without brakes, there is going to be a car crash sooner or later. Just as, whenever a large number of investors comes to believe that Buy-and-Hold (No market timing required!) is an acceptable investment strategy, we are going to experience an economic crisis sooner or later. There is no other way that the massive promotion of a pure Get Rich Quick approach could ever turn out.
Shiller predicted the crash and it happened. How did he do it? He has studied the history of the market and has seen that it happens every time. The way to get it to stop happening is to stop promoting Buy-and-Hold and to stop telling investors that market timing/price discipline is not always 100 percent requireed.
That’s Rob Bennett’s sincere take re these terribly important matters, in any event.
My best and warmest wishes to you and yours.
Rob
“I disagree strongly.”
And you would still be wrong. We are talking about the cause, not the result. You keep saying that buy and hold caused the recession. Your exact words above were:
“I think it was the relentless promotion of the Buy-and-Hold concept (No market timing! No matter how high prices go!) that was the primary cause of the 2008 economic crisis”
Further, the buy and holder was still not hurt by the downturn as the market returned and went on to new heights. Meanwhile, you never got into the market and have fallen way behind. You keep hoping for a crash to try and make up some gap, but it is way to late and the gap is way too large.
To the extent that the gains are produced by irrational exuberance and are not real, there is no gap. Only lasting, economic-based gains matter. The temporary, irrational exuberance stuff doesn’t. You keep counting it. But that doesn’t make it real.
The Buy-and-Holders WERE hurt if they were fooled by the irrational exuberance. It’s not possible to do effective financial planning if you do not know how much money you have. We should be permitting honest posting so that we can all get on top of this stuff.
Yes, I am saying that Buy-and-Hold caused the economic crisis. It was the loss of that $8 trillion in irrational exuberance that was the most devastating thing, There is always some development that is the precipitating event for a price crash. But it is not right to call that event the cause of the crash. It is overpricing that causes crashes. Once stocks are overpriced by $8 trillion, you are going to see a crash and an economic crisis. It might be Event A that is the precipitating event or Event B or Event C. But none of those events would have caused much trouble if you didn’t have the $8 trillion in overpricing. That’s the killer.
And it is the promotion of the Buy-and-Hold strategy that causes that sort of overpricing. If we just let people learn what the last 39 years of peer-reviewed research says, we could never have the sort of overpricing again. It is when investors come to believe that market timing is not always 100 percent required that you see that sort of thing. Market timing is price discipline, Price discipline is absolutely essential. So you never want to suggest that market timing might not be 100 percent required.
That’s my sincere take, in any event, Anonymous.
My best wishes to you.
Rob
Buy and holders were only hurt if they turned into market timers. By definition, they do not sell. If they did, they are not really buy and holders. Further, the buy and holders have been richly rewarded since that time as we experienced on of the largest bull markets of our lifetime.
As all experts, including Shiller, have explained that they 2008 recession and stock drop was due to the sub prime mortgage debacle and related liquidity issues. You haven’t provide one single expert or fact to refute that. Seems like you don’t really listen to what Shiller says, only what you want him to say (and he doesn’t).
Buy-and-Holders are obviously hurt when they fail to adjust for the effect of irrational exuberance, Anonymous. All investors need to know the amount of their savings. It’s not possible to engage in effective financial planning if you don’t know the basic numbers.
Bull markets are not a good thing for investors. They are a very bad thing. Economic productivity supports an annual gain of 6.5 percent real. That much counts. But not anything above that. Above that, you are talking about irrational exuberance. They don’t call it a bull market when the gains are 6.5 percent real. It’s only when there is irrational exuberance that they call it a bull market. And irrational exuberance is never good for anyone.
It is only Buy-and-Holders who view bull markets are a positive, not Valuation-Informed Indexers. Buy-and-Holders think of bull market gains as real. If the market were efficient (that is, if there were no irrational exuberance), those gains would be real. But the market is not efficient. Shiller was awarded a Nobel prize for showing that with his research. Buy-and-Hold should have been updated to reflect the new findings immediately Then there would never have been any problem. We would all be learning together, as we do in every field other than the investment advice field.
Shiller predicted the 20008 economic crisis in his book, which was published in March 2002. He knew nothing about any sub-prime mortgage debacle at the time. He knew what he needed to know. The widespread promotion of a pure Get Rich Quick/Buy-and-Hold approach ALWAYS ends in an economic crisis. What else could happen once a large number of investors came to believe that price discipline (market timing!) was not required? I mean, come on.
Shiller titled his book “Irrational Exuberance.” I have a funny feeling that he believes in the concept.
My best wishes.
Rob