Buy-and-Hold Goon to Rob: “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?”

Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

“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