Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
“An irony of economic progress is that, the richer people are, the more vulnerable they are to setbacks.”
You couldn’t be more wrong. Rich people got where they are for a reason. They know what it takes to get rich. Further, they usually take steps to protect themselves through diversification. Once you hit a certain level of wealth, your goal is to then protect it.
People that have not done well financially will fall for get rich quick schemes, like market timing, playing the lottery, etc.
People could’t have known that Buy-and-Hold was a scam until 1981 because the Nobel-prize-winning research showing that market timing is required wasn’t published until then. So say that someone started following a Buy-and-Hold strategy in the 1980s and became very wealthy as a result. This happened to millions of people. You say that, once people achieve wealth. they want to protect it. That’s why we are where we are, Anonymous.
All of the people who achieved great wealth by pretending that irrational exuberance is real want to retain that wealth. If they permit someone like me to go around explaining why that wealth is not real, people will sell their stocks, prices will fall and the wealth will disappear. People who achieve wealth by treating irrational exuberance as real are highly vulnerable. All that it takes is honest and open discussion of the last 39 years of peer-reviewed research in this field for their wealth to disappear. Shiller’s amazing research has so far only convinced 10 percent of the population because 90 percent of the population views that research as a threat to their financial well-being.
Shiller’s research shows that 50 percent of the value of the stock market today is cotton-candy nothingness. That’s a big deal. A very, very, very big deal. Our nation will never be the same again once we open the internet up to honest discussion of Shiller’s Nobel-prize-winning research. In the short term, there will be great pain. In the long term, we will achieve a huge economic advance. Because once we all understand how stock investing works in the real world, we will never let one of these crazy bull markets get so out of control. But for now, a lot of us just want to protect the wealth that we are counting on to finance our retirements. That’s why we have seen the frictions that we have seen for the past 18 years.
If Shiller is right, the phony wealth is going to disappear no matter how hard we fight to hold off that day. At that point, there’s no longer much point in us lying to ourselves about it, is there? Once the phony wealth is gone, what are we protecting? That’s why I believe that we are going to see a huge advance in the days following the next price crash.
Rob
“Shiller’s research shows that 50 percent of the value of the stock market today is cotton-candy nothingness. ”
Really? Then why has Shiller continued to tell people, even as recently as last month, to keep buying stocks? Either he is lying or you are misrepresenting his work. Which is it?
I tell people to buy stocks. I say that the typical middle-class person should be going with a 30 percent stock allocation today. If that person is saving a portion of each paycheck, then he should be putting 30 cents of each dollar saved in to stocks. That’s buying stocks. So there is no contradiction there.
The better question is — Does Shiller believe that people should be going with a lower stock allocation today, when the CAPE value is 32, than they did in 1982, when the CAPE value was 8. I say with no hesitation whatsoever, that they should be going with a lower stock allocation today. The risk of owning stocks in 1982 was virtually non-existent. The risk today is off the charts. So the investor who wants to keep his risk profile constant over time MUST go with a lower stock allocation today. That is, he MUST practice market timing.
Does Shiller agree? We all should want to know the answer to that question. We all should be urging the launching of a national debate in which Shiller and thousands of others would be asked that question. Bogle agreed before he died that Valuation-Informed Indexing (market timing!) would probably work. I think that Shiller would say the same. Shiller would probably state the point more strongly. So let’s ask him!
He is not going to answer the question unless you Goons agree to drop the criminal stuff. No one likes to see their career threatened. No one likes to see the lives of their loved ones threatened. So you will have to leave that stuff behind if you hope to get Shiller to respond to your questions. But I am 100 percent sure that he will be happy to help you out of you simply agree to be constrained by the dictates of U.S. law. Do that, and everyone wins.
My sincere take.
I naturally wish you all the best that this life has to offer a person.
Rob
“I tell people to buy stocks.”
Why haven’t you bought stocks since 1996 if you are saying people should go with a 30% allocation? Are you telling them that their 30% is only worth 15%?
“He is not going to answer the question unless you Goons agree to drop the criminal stuff. ”
Who made threats against Shiller?
Yes, the 30 percent is only worth 15 percent. 50 percent of the value of the U.S. stock market today is comprised of irrational exuberance, not of anything possessing lasting economic signifiance.
I haven’t bought stock because I am trying to get an internet writing business of the ground and that is a high-risk endeavor. It does not make sense for me to go with the same risk level with my investments as is appropriate for most others. I need to go with a lower stock allocation, 0 percent at the prices that apply today.
I have not seen threats made against Shiller. But I have seen threats made against me and against Wade Pfau and against John Walter Russell and against FoolMeOnce anf against Wanderer and against Bill Shular and against lots of others. I have a funny idea that Shiller is aware of how Buy-and-Holders react when people speak clearly about what his research teaches us all about the dangers of the Buy-and-Hold strategy. So he makes it a practice to hold back on speaking too clearly about these matters.
I think we need to hear him speak clearly. I think we need to bring the intimidation stuff to a full and complete stop. It is killing all of us.
Rob
“Yes, the 30 percent is only worth 15 percent.”
So why make the recommendation? You are talking out of both sides of your mouth.
“I haven’t bought stock because I am trying to get an internet writing business of the ground and that is a high-risk endeavor.”
But that wasn’t your plan in 2002 or in 2005. You said that you were waiting for the drop to get back in.
“I have not seen threats made against Shiller.”
So you don’t have any proof of criminal stuff as relates to Shiller, yet you make the allegation above as well as in previous posts.
So why make the recommendation? You are talking out of both sides of your mouth.
I’m not. Stocks are an amazing asset class. Yes, you are today paying two dollars for every one dollar of stock value you obtain, That’s bad. But stocks are so great that even paying two dollars for each one dollar of stock value can pay off so long as you don’t do too much of that sort of thing. Going by what we know from the peer-reviewed research, a stock allocation of about 30 percent makes sense for the typical investor.
But that wasn’t your plan in 2002 or in 2005. You said that you were waiting for the drop to get back in.
Prices haven’t fallen. If prices were to fall to fair-price levels, I would buy stocks. I would go with a lower stock allocation than what I recommend for most others because of my particular circumstances. When 60 percent makes sense for most others, I would say that 30 percent makes sense for me. Today, 30 percent makes sense for most others. So 0 percent makes sense for me.
So you don’t have any proof of criminal stuff as relates to Shiller, yet you make the allegation above as well as in previous posts.
What I say is that Shiller has been influenced by the behavior that he has seen from the Buy-and-Holders. All that you need to do to see that is to read his book. There is not one paragraph in the book offering how-to advice. Huh? People buy investment books to find out what to do with their money. Why wouldn’t Shiller address that? It’s because it is when people point out how dangerous the how-to advice offered by the Buy-and-Holders is that the Buy-and-Holders go bonkers.
The Buy-and-Holders need to pull it back about 17,000 notches so that we can get thousands of people posting honestly and we can all enjoy an amazing learning experience. The criminal stuff is bad stuff.
Rob
“But stocks are so great that even paying two dollars for each one dollar of stock value can pay off so long as you don’t do too much of that sort of thing.”
If they are going to pay off, then the percentage doesn’t matter. You are talking out of both sides of your mouth.
“What I say is that Shiller has been influenced by the behavior that he has seen from the Buy-and-Holders.”
So now you say that he hadn’t been threatened. Where you lying before when you said he had been threatened?
” But I have seen threats made against me and against Wade Pfau and against John Walter Russell and against FoolMeOnce anf against Wanderer and against Bill Shular and against lots of others.”
Why are you the only one seeing these threats and why haven’t you posted the links to the threats as proof? Why do you choose to not post links to this, yet you will post private emails?
If they are going to pay off, then the percentage doesn’t matter. You are talking out of both sides of your mouth.
Even Bogle said that investors should lower their stock allocation as they get close to retirement. The reason is that stocks are a high-risk asset class. He didn’t say that near retirees should go to zero stocks. He said that they should lower their allocation because the risk changes when you are close to retirement and you need to make an allocation change to adjust for that. The risk of owning stocks when they are priced as they are today is a lot greater than the risk of owning stocks when you are near retirement. So you need to lower your stock allocation to keep your risk profile constant. You don’t need to go to zero stocks. But you do need to do something to adjust for the added risk.
So now you say that he hadn’t been threatened. Where you lying before when you said he had been threatened?
It’s threatening to all of us to see Buy-and-Holders commit criminal acts and to see nothing being done about it. If Buy-and-Hold were a real thing, we would not see any criminal acts. If Buy-and-Hold were a real thing, the Buy-and-Holders would want to correct any errors they made as soon as they were discovered. If Buy-and-Hold were a real thing, the Buy-and-Holders would thank those who brought their errors to their attention.
Why are you the only one seeing these threats and why haven’t you posted the links to the threats as proof? Why do you choose to not post links to this, yet you will post private emails?
It’s not exactly hard to figure out that there have been threats. I pointed out the error in the Greaney retirement study on the morning of May 13, 2002. The study has not been corrected to this day. Please explain how a discredited retirement study could go uncorrected for 18 years without threats being made. It’s not possible. In other fields, people correct errors in studies when they are discovered. People use retirement studies to plan retirements.
Rob