The Old Ideas on Saving & Investing Don't Work -- Here's What Does
"Valuation-Informed Indexing Is the Same Song We Sing. Glad You Belong to the Same Choir We Do."
"Retirees Now Frequently Base Their Retirement Decisions on the Portfolio Success Rates Found in Research Such as the Trinity Study.... This Is Not the Information They Need for Making Their Withdrawal Rate Decisions."
"The P/E10 Tool Could Drastically Change
How the Entire Investment Industry
Operates and Measures Risk."
"The Your Money or Your Life Book
for a New Generation."
"A Newer School of Thought Believes That the Safe Withdrawal Rate Depends on How Stocks Are Priced at the Time You Begin Making Withdrawals."
"A Fascinating Retirement Calculator."
"The Evidence is Pretty Incontrovertible. Valuation-Informed Indexing...Is Everywhere Superior to Buy-and-Hold Over Ten-Year Periods."
"Every Detail Shows Rob's Respect
for His Information and His Reader."
"You’ve Accomplished Something Radical
With Your Idea of Passion Saving."
"Big Moves Out of Stocks Should Not Be Done at All. But Strategic Asset Allocation Can Be Done At Very Rare Times, Maybe Six Times in an Investor’s Lifetime, Three Times When the Market Is Stupidly High and Three Times When Stupidly Low."
"Valuation-Informed Investing and Passive Investing
Share More of a Common Ancestry
Than It Might Appear at First."
"It Is Great to See a Finance Journalist Who Understands That Valuations Matter. Efficient Market Zealotry Is Rampant in the Journalism Community. I Just Love Your Valuation-Based Return Calculator."
"There Is Always An Unlimited Supply of Complainers Against Any Good Idea."
"Rob: This Has Been One of the Most Insightful and Helpful Comments I Think Anyone Has Ever Posted. Thank You for This Lesson and for Sharing Your Knowledge on This Subject!"
"There Is An Extensive Literature About the Predictability of Long-Term Stock Returns. There Is an Extensive Literature About Short-Term Market Timing. My Question Is About Long-Term Market Timing. The Literature Seems Slim."
"Your Ideas Are Sound."
"For Years, the Investment Industry Has
Tried to Scare Clients Into Staying Fully Invested
in the Stock Market at All Times, No Matter
How High Stocks Go. It's Hooey.
They're Leaving Out More Than Half the Story."
"There Are Time-Periods Where Stocks Are a Terrible Addition to That Portfolio. Yet Inexplicably, We As Planners STILL tend to Suggest That It Is 'Risky' to Not Own Stocks When in Reality the Only Risk Is to Our Business."
"Valuation-Informed Indexing Provides More Wealth for 102 of 110 of the Rolling 30-Year Time-Periods While Buy-and-Hold Did Better in Eight of the Periods."
"There Is a Growing Behavioral Economics Movement, But It So Far Has Had Limited Impact. Economists Are Not Fond of the Softness and Imprecision of Psychology. These Notions Are Considered Vaguely Unprofessional and Flaky."
"I Would Occasionally Get a Response Post
Saying I Was 'the Best Since Rob Bennett
Challenged Us to Think.'"
"This [The Stock-Return Predictor]
Is a Very Handy Little Tool."
"A Much Simpler Way to Bring
the Valuation Issue to Focus."
(Referring to The Stock-Return Predictor)
"It's Informative, It's Based on Solid Data and It Provides Useful Results." (Referring to The Stock-Return Predictor)
"Meet Three Couples Who Left the Corporate World to Do the Kinds of Work That Satisfied Them."
"A Very Solid Approach to Investing."
"Rob Bennett Has Been on a Tear With One Outstanding RobCast After Another."
"It’s Time for a Different Way to Look at Investing, and Rob Is Onto Something Here."
"My Afternoon Train Reading."
(Referring to Rob's Article titled
Why Buy-and-Hold Investing Can Never Work)
"What Is It With Guys Named Rob?
Longtime Index Agitator Rob Arnott Has Now
Been Joined on These Pages by a
Vanguard Diehard Agitator Named Rob Bennett."
"He Offers a Fresh New Perspective
that Will Motivate You to Get on Track
With a Solid Savings Plan."
"While Browsing at www.PassionSaving.com the Other Day, I Discovered an Article Featuring Ten Unconventional Money-Saving Tips. Each of These Offers a New Way to See Money."
"Rob Has Ideas About Investing That Many Bloggers Find 'Interesting.' His Posts Are Often Controversial and Always Thought Provoking."
"Is There a Way to Turn Saving Into Something Fun? If There Was, I Bet a Lot More of Us Would Do a Lot More Saving. I Found a Website Where This Basic Premise Is Explored in Great Depth."
"I Have Much More Confidence in My Ability to Understand What Is Happening....I Thank You for Your Public Service, and, In Another Dimension, for the Personal Courage It Took to Make It Happen."
"I Was Hooked on the Idea of [Passive] Index Indexing, But Something Inside Made Me Wonder "Too Good to Be True?" and "What's the Downside?" I Happened on to Your Site and Valuation-Informed Indexing Seems to Make Sense."
"Reads Like a Casual Conversation
with a Likable Guy Who Wants Nothing More
Than to Help Others Experience the Same Joy
and Happiness He Has Found."
"Your 'Secrets' Are Exactly Like Magic Tricks: Once Revealed, They Look So Simple, Yet You Need Somebody to Show You How It Works."
"Rob's Da Man! Never in the History of the Diehards Forum Has One Poster, Always Making Civil and Well Thought-Out Posts, Managed to Irritate So Many Without Anyone Being Able to Articulate a Good Reason As to Why."
"I’ve Been Surprised at How Controversial This Idea Is, but If Most People Are Buying and Holding, They Are Emotionally Invested in This Strategy."
"The Findings for [Long-Term] Market Timing Are So Robust That It Hardly Matters How We Do It."
"The Elegant Simplicity of His Ideas Throughout Warms the Heart and Startles the Brain."
"Mr. Bennett Evidences an Unusual Skill....
You'll Have to Buy a Copy....Extraordinary....
A Massive Heap of Crap."
"By Reading All the Information on Your Website I Was Able to Develop a Part of Me I Didn't Know I Would Be Able to Become."
"Innovative Financial Thinking."
"Knowledgeable."
""He Offers Down-to-Earth But
Nevertheless Eye-Opening Insights About
the Why and the How of Early Retirement."
"Challenges Unfounded Assumptions."
"It’s Always Good to Read Something New That Challenges Your Way of Thinking."
"Rob, Thanks for All of Your Articulate, Well-Written and Well-Reasoned Commentary."
"Although Rob and I Don’t See Eye to Eye
on Every Detail, His Site Is a
Valuable Resource for Research."
"Thanks, Rob. I Love Seeing So Many
Personal Finance Bloggers Who Offer Such
High Quality Content on Their Own Sites Come Here
to Weigh In [on Your Ideas]."
"A Ton of Tremendously Useful Content."
"Your Enthusiasm Is Infectious."
"I Woke Up at 4:00 am and Stared at the Wall for 20 Minutes....Thank You for Doing What You Do."
"It Might Just Give You
a New Way of Looking at Saving."
"'Staying Too Long in a Job Where You Don’t Feel Relevant Takes a Toll,' Said Rob Bennett, Who Worked for Years in a Well-Paying Corporate Communications Job Where He Didn’t Have Enough to Do."
"You Have Started One of the Most Interesting
and Stimulating Discussions This Board has Seen
in a Long Time."
"A Respected Author and Commentator, Mr. Bennett has Dedicated Himself to Educating Average Investors to Avoid the Most Common Errors."
"I've Gone from Shattered Dreams of Early Retirement to Glimpses of Hope to Reassurance from Quantitative Research."
"Some of the Most Helpful and Insightful Market Discussions on the Web Take Place on These Pages."
"Rob is the Only Person I Know (If Only via Message Board) Who has Completely Opted Out of Participation in the Stock Bubble. And You Know What? He Has Benefited Immensely from Doing So."
"Makes the Subject of Saving Edgy and Fresh."
"Rob Bennett, the Author of a Book Called Passion Saving, Thinks the Saving Problem Is Partly One of Packaging. So He Prefers to Couch it in the Language of Freedom."
"I LOVE This Article and
Am Proud to be Publishing It!"
"Rob Bennett: Some People Disagree With Him, and He Rubs a Lot of People the Wrong Way. But He Has Interesting Ideas About Valuation-Informed Indexing, and He Delves Into a Lot of What Makes a Successful Investing Strategy."
"Rob….Wow…..Your Response Sent Shivers
Up the Ol’ Pilgrim Spine."
"I Have Counseled My Clients to Allocate a Percentage to Equities Based Upon Market Valuations....I Feel Like I've Found a Kindred Spirit. Fascinating Web Site."
“A Simple Age-Based Asset Allocation Formula Is Not Appropriate, and Any Sensible Asset-Allocation Formula Should Combine Both Age/Investment Horizon and Market Valuation Levels.”
"Had a Guest Post This Week from Rob Bennett, Where He Discusses the Benefits of Value-Informed Indexing, Which I Find Very Intriguing."
"I Can Appreciate Rob's Comments.... Buy-and-Hold?
For the Most Part, a Long Obsolete Theory."
"Utterly Brilliant!"
"Your Website Is So Enjoyable That It Is Keeping Me From My Research As I Am So Excited That I Have Found Such a Valuable Resource."
"What We're Talking About Here Really
...Is Empowerment."
"The Return Predictor Is Based upon the Principle that Over the Long Term, Stock Market Prices Will Reflect the Ten-Years Earnings Growth of the Underlying Companies. Prices Return to a Common Growth Pattern."
"Rob’s Arguments in Favor of Value Investing Actually Make a Lot of Sense In a Way That Should Make Any Rational Buy-and-Holder Uncomfortable."
"What I Don't Understand Is How Rob Can Correspond in Such a Sweet and Polite Way
-- Yet He Irritates Me to No End!"
"You Go About It in a Manner that is Catastrophically Unproductive by Adding Missionary Zeal that Inflates Your Importance and Demeans Others. The Whole Idea That There is a New School of Safe Withdrawal Rates Reeks of Personal Aggrandizement."
"Inflammatory."
“What Warren Buffett Did Was Essentially Quite Close to What Rob Bennett Has Written. Buffett Has in Fact Been Cleverly Incorporating Long-Term Market Timing Based on Valuation of the Market in His Allocation of Money to Stocks.”
"This Report Offers A Fresh Perspective That Is Rarely Found In Other Financial Literature."
"Rob Bennett Says That Market Timing Based on Aggregate P/E Ratios Can Be a Far More Effective Strategy. This Claim Is Consistent With Shiller's Analysis and I Can See How It Might Be So."
"Retiring Early Was A Concept I Did Not Entertain. I Was Going to Retire at 65 After Putting in 40 Years. Now I Am Glad To Say That All That Has Changed."
"In a Couple of Days, I Had
Devoured the Entire Book."
"FIRECalc May Not Be the Last Word
on Safe Withdrawal Rates."
"It Seems to Me That Some on This Board Feel Threatened by the Arrival of Rob and His Ideas. They Feel a Threat to Their Perceived Elite Status."
"You've Got to Say One Thing for Rob. He Has NEVER Lowered Himself to Ad Hominen Attacks -- Subliminal or Otherwise -- on Any Other Person on This Board. Not Once. Ever. At Least Give Him Credit for That."
"I Have Never Seen Rob Show Incivility. No Matter What. Truly Amazing. Either He Is Really the Output of an Artificial Intelligence Program, or the Man's on the Way to Becoming a Saint!"
"You're the Politest Guy on the Internet.
Such a Soft Touch!"
"Props for Keeping Your Cool in the Married with Debt Article. Best of Luck Combating Buy-and-Hold."
"I Caught Up [at the Financial Bloggers Conference] With a Fairly Controversial Financial Blogger
Named Rob Bennett, Who Struck Me As the
Nicest Guy Around. There -- I Said It!"
"In Rob Bennett's Case, He Was Banned for No Known Listed Forum Policy. Except His Viewpoint Was Different From Other Bogleheads and [He Was Perceived As] a Threat."
"Mr. Bennett, You Are Spot on About Integrating Some Type of Valuation Filter to One's Stock Allocation. Astute Investors Have Incorporated Some Type of 'Valuation Timing' Into Their Investment Decisions Since the Beginning of Time."
"His Insights Into What Is Really Going On In The Stock Market Are Quite Compelling."
"It Was an Epiphany...Valuation-Informed Indexing Beats Buy-and-Hold Over Most Long-Term Holding Periods at Much Lower Volatility."
"I Am Intrigued By Your Ideas."
"I Read the Book and I Loved It.
The Philosophy Resonated with Me.
I Am a Believer in Your Concept."
"If Your Investment Ideas Can Do for Investing
What Weston Price’s Ideas Did for Food,
You’ve Got Our Attention."
"I Have Looked at His Website and Reviewed His Research and Find It Both Compelling and Completely Logical and Common-Sense-Based."
"If Investors Paid More Attention to Valuations, We Would Have Fewer Boom-and-Bust Cycles. The Investing Institutions Are Definitely Going to Avoid It Because It Affects Their Income."
"The Calculators on Your Site Are Great Resources. It Amazes Me How So Many People Can Say 'Valuations Matter' Yet, in the Next Breath, They'll Say That We Should Ignore Valuations."
"Must Read As Per My Viewpoint
For All Value Seekers."
"His Approach Is Both Mathematically Rigorous
and Easy to Understand."
"Difficult Subjects Can Be Explained to the Most Slow-Witted Man If He Has Not Formed Any Idea of Them. But the Simplest Thing Cannot Be Made Clear to the Most Intelligent Man If He Believes He Knows Already What Is Laid Before Him."
"I Am Not Afraid. I Was Born to Do This."
"I Certainly Have Seen the Academic Profession Squelching Unfashionable ideas and Have Often Been on the Wrong Side of It. Kuhn Shows How Most Pathbreaking Scientific Ideas Are Rejected at First, Usually for Decades.”
"First They Ignore You, Then They Ridicule You, Then They Fight You, Then You Win."
"We Cannot Assume the Existence of Predictability Just Because There Are No Studies That Fully Reject It."
"I Am Also Extremely Grateful to Rob Bennett for Motivating This Topic and Contributing His Experience and Encouragement."
"Rob Bennett Was an Early Pioneer in 3rd Generation Modeling by Advocating (Through Various Online Forums) that Withdrawal Rates Must Be Adjusted for Market Valuations Consistent with Research by Campbell and Shiller."
"I Am Fascinated by the Growing Body of Research that Revolves Around the P/E10 Ratio by Robert Shiller, Doug Short, Wade Pfau, Michael Kitces, John Hussman, Crestmont Research, Jim Otar, Mike Philbrick, Adam Butler & Rob Bennett."
"Rob Is an Enigma in the Personal Finance World. He Has Interesting Theories on Investing Based on Market Valuations. But He Weaves a Tale Which Makes the Stories of Alexander Litvinenko & Gareth Williams Seem Tame by Comparison."
"In Recent Years, the 4 Percent Rule
Has Been Thrown Into Doubt."
"A Safe Withdrawal Rate Is Very Dependent
on the Valuation of the Stockmarket
at the Retirement Date."
"I Have Read Everything I Can About Valuation-Informed Indexing. Buy-and-Hold Is Extremely Problematic. I Respect the Passion, Hard Work and Research That You Have Put Into This Very Important Issue. Your Work Has Huge Value."
"The World of Personal Finance Blogging Needs More Rob Bennetts. He’s Passionate. He’s Intelligent. He’s Writing Things That Go Against the Grain."
"Beyond Awesome."
"The Wealth Management Industry Seems Intent on Containing This Discussion for Fear Clients Might Discover that the Emperor Has No Clothes."
"Recommended Reading."
“All Who Are Still Holding Equities at Present Levels Because Their Financial Adviser Insists that Timing Market Cycles Is Impossible to Do -- Read This!"
"The Fact that Aggressive and Short-Term Market Timing Was Unproductive Did Not Mean That There Were Never Times When It Would Be Wealth-Maximizing to Get Out of the Market."
"The Amount of Return You Can Expect From a Diversified Equity Portfolio Is Inversely Correlated to the Market Valuation at the Start of the Holding Period. It Is One of the Most Robust Statistical Relationships in Modern Finance."
"Why Would Your Job Be Jeopardized
By Such a Sensible Claim?"
"Received Worrisome E-Mail from Rob Bennett. Warns of Risk with Buy-and-Hold Investing
-- I Have No Clue."
"As Attorney, Tax Expert and Financial Writer Rob Bennett Told Us, the Problem Is That, By the Time Shiller Published His Research, Many Big Names Had Already Endorsed Buy-and-Hold."
"This Seems to Me to Be a Fundamental Challenge to Some of the Most Basic Tenets of the Boglehead Paradigm."
"You Want to be Very, Very Wary of Anything Connected with Rob Bennett, the Most Infamous Troll in the History of Investing Forums on the Internet."
“I’ve Had My Fill of Those Long-Winded Posts that Include Distortions, Unsubstantiated Claims, Misquotes and Comments Taken Out of Context.”
"Haven't You Noticed Yet That NO ONE Discusses Your Ideas, NO ONE Mentions Your Name, NO ONE Goes To Your Web Site."
"I've Had Similar Experiences. I Know of Two Young Professors Who Wanted to Do Research on Fundamental Index and Reported to Me That Their Colleagues Advised Them That This Line of Research Could Derail Their Career Prospects."
"As with Drug Studies Funded by Drug Companies, It Would Be Churlish to Suppose that the Chicago School of Business Was in the Bag. But It Would Also Be Idealistic to Assume That There Was No Funding Bias at All."
"This Sort of Intimidation Is Not Acceptable. The Cigarette and Pharmaceutical Industries Found Research Supporting Their Products By Funding It. But That Was Big Money Supporting Outcomes, Not Dissuading Others."
"Financial Economists Gave Little Warning to the Public About the Fragility of Their Models. There Is No Ethical Code for Professional Economic Scientists. There Should Be One."
"The Situation [Referring to the Intimidation Tactics Used to Silence Academic Researcher Wade Pfau's Reporting of the Dangers of Buy-and-Hold Investing Strategies] Seems Well Below Any Professional and Academic Acceptable Standards."
Many Academics Can Become Quite Strident When Their Views Are Challenged. Academia Is Often Subject to Self-Serving Bias That Obliterates Ethical Bounds."
"I Don't Like Too Much the Conspiracy Idea. I Am Not Pressured By Anyone in My Research."
"This Is What Investing Should Be -- Calculated, Deliberate, Confident, Informed and Simple."
"It Is Obvious that Rob, in Attempting to Identify New Safe Withdrawal Rate Strategies...Is Goring Your Ox. If Rob Improves on [the] Safe Withdrawal Rate Methodology, the Implication Is Clear: You Are All, Metaphorically, Out of Business."
"I Applaud His Effort to Inject Another Piece of Objectivity Into a Very Complex, Highly Subjective Topic -- Making Money in the Market."
"Naturally, I Am Finding That Valuation-Informed Indexing Can Allow You to Reach a Wealth Target With a Lower Saving Rate and to Use a Higher Withdrawal Rate in Retirement Than You Could With a Fixed Allocation."
"A Careful Examination of Past Returns Can Establish Some Probabilities About the Prospective Parameters of Return, Offering Intelligent Investors a Basis for Rational Expectations About Future Returns."
"The Ability to Estimate the Long-Term Future Returns of the Major Asset Classes Is Perhaps the Most Important Investment Skill That An Indivisual Can Possess."
"The Stock Market Resembles Roulette. In Both Cases, the Accuracy of Sensible Forecasts Rises Over Time."
"Returns Are for the Most Part a Matter of Simple Arithmetic...Much of Our Industry Seems Fearful of Basic Arithmetic of This Sort."
"How Can It Be That One-Year Returns Are So Apparantly Random and Yet Ten-Year Returns Are Mostly Forecastable? In Looking at One-Year Returns, One Sees a Lot of Noise. But Over Longer Time Intervals the Noise Effectively Averages Out and Is Less Important."
"The Notion That Rich Valuations Will Not Be Followed By Sub-Par Long-Term Returns Is a Speculative Idea That Runs Counter to All Historical Evidence. It Is an Iron Law of Finance That Valuations Drive Long-Term Returns."
"It's January and the Temperature Is Below Freezing. If You Asked Me Whether It Will be Warmer or Cooler Next Tuesday, I Would Be Unable to Say. However, If You Asked Me What Temperature to Expect on April 9, I Could Predict "Warmer Than Today" and Almost Surely Be Right."
"If the Response Is "Who Knew?", It Won't Be Much Comfort for Retirees in the Employment Line at Wal-Mart. This is Especially True Since a Rational Understanding of History and the Drivers of Longer-Term Stock Returns Can Help Retirees To Avoid That Surprise."
"New of the Demise of the Random Walk Has Only Very Slowly Spread, In Part Because Its Overthrow Came as a Shock. If the Random Walk Hypothesis Were Correct, the Most Likely Return Would Be the Historic Average Return. The Evidence, However, Is Strongly Against This."
"I Don't Think We Can Debate the Merits of This Type of Forecasting [Referring to the Numbers Generated by The Stock-Return Predictor] Unless We Believe 'This Time It's Different.'"
"I've Seen Absolutely Nothing From You That I Can Use in a Tangible Fashion to Formulate an Investment Plan. Your Ideas Are So Mushy That It's a Complete Waste of Time to Even Consider Them."
"Do You Really Think Your Tool
[The Stock-Return Predictor]
Is 'Wiser' Than the Market?
If It Was That Easy,
Everybody Would Be Doing It."
"The Expected Return of Stocks [As Reported By The Stock-Return Predictor] Needs To Be At Least the Treasury Inflation-Protected Securities (TIPS) Rate for Stock Investing To Make Sense."
"I Have Used Valuations to Adjust My Asset Allocation For Many Years With Very Favorable Results."
"I Don't Care If You Do or Don't Believe That the Market Will Behave Similarly in the Future As It Has in the Past. Either Way, This [The Stock-Return Predictor] Is an Excellent Way to Understand What the Market Has Done In the Past."
"My Role Is To Give People Who Don't Like What the Historical Stock-Return Data Says About the Effect of Valuations on Long-Term Returns Somebody To Yell At On Internet Discussion Boards."
"It Really Is a Shame and Indefensible That So Many Feel the Need to Jump Into It With No Interest of Posting on the Topic But Just to Disrupt. Are You That Insecure? Some on the Forum Have an Interest in This Topic. If You Don't, Stay Out!"
"Irrational Behavior Does Follow Patterns. But How Many Experts in Behavioral Finance Believe That Such Knowledge Can Be Used to Predict Markets? Basically, None. Your Model Cannot Attain the Level of Predictive Value You Claim."
"The Safe Withdrawal Rate Studies Are Based on History. This [The Retirement Risk Evaluator] Shows, Based on the Same History, What the Probabilities Are for the Future at Various Starting Points. If the First Has Value, Then Surely This Does Too."
"There Are Hundreds of People Who Contributed to This. This Calculator [The Stock-Return Predictor] Demonstrates in a Compelling Way the Power of This New Internet Discussion-Board Communications Medium."
"A P/E10 of'26' Is Bad. Now Look at the 30-Year Return Predicted by the Calculator -- 5.4 Percent Real. That's Not Bad. There Are All Sorts of Strategic Implications That Follow From Understanding That Stocks Provide Different Sorts of Returns Over Different Sorts of Time-Periods."
"I Would Never Invest in Anything Without Having Any Idea What the Expected Return Is. For Instance, I Would Not Walk Into a Bank And Say "I'll Take One Certificate of Deposit, Please" WIthout Asking What Rate They Are Offering."
"I've Seen Things Said on Investing Boards That I Have Never Heard Said in Discussions of Any Non-Investing Topic. The Question of Whether Valuations Affect Long-Term Returns Is a Topic That Causes People More Emotional Angst Than Does Abortion or Impeachment Proceedings or the War in Iraq."
"It's Not Possible For Those Who Have Come to Believe That Stocks Are Always Best to Accept that Valuations Matter. The Two Beliefs Are Mutually Exclusive. If Valuations Matter, There Is Obviously Some Valuation Level At Which Stocks Are Not Best. The Two Paradigms Cannot Be Reconciled."
"The Great Safe Withdrawal Rate Is Over. Rob Bennett Has Won.The Technical Evidence Supporting This Assertion Is Rock Solid."
"I Am Afraid that the Emperor SWR [for "Safe Withdrawal Rate"] Has No Clothes."
"I Cite You and John Walter Russell in My Paper as the Earliest and Strongest Advocates of This Approach [New School Safe Withdrawal Rate Research]."
"Dear Rob -- I Just Became Aware of Your Past Research in September. Since Then, I've Read Archives From Many Discussion Boards and Websites, and I Always Find Your Writing to Be Very Interesting and Intriguing."
"I Think Rob Bennett Did Provide An Important Contribution in Terms of Describing a Way for P/E10 to Guide Asset Allocation for Long-Term Conservative Investors. I Also Think He Was Right on the Issue of Safe Withdrawal Rates."
"What Studies Show This [That Long-Term Timing Doesn't Work]? In Particular, Are There Some Academic Studies That I Haven't Found Yet? That's All I Want to Know."
"Because the Precise Timing of This Mean Reversion Is Not Known in Advance, Expecting the Result to Happen in the Short-Term Will Not Be Possible. But Long-Term Investors Who Can Be Patient Can Wait for This Mean Reversion and Will Eventually Come Out Ahead."
"Your Work Is at Odds with the Ethos of the Board -- Here the Theme is John Bogle's Philosophy, Which Eschews Market Timing. This Board Came Into Existence to ESCAPE One Individual, the Very Individual With Whom You Have Openly Aligned Yourself."
"The Problem With Long-Term Market Timing Is That It Takes Too Long to Find Out If You Are Right or Wrong."
"Why Is It Such an Odious Violation of the Tenets of Bogleheadism to Explore Whether Someone Who Has Enough Patience Might Be Able to Benefit from the Transitory Nature of Speculative Returns (the Idea That the P/E Ratio Eventually Ends Up Where It Started)?"
"Let Me Explain Why I Posted About This Here. Valuation-Informed Indexing Has Had Critics for Years. But Until Norbert Did It In 2008, Nobody Seemed to Have Provided a Serious Investigation of It. I Couldn't Understand Why. That Bothered Me."
"If You Really Don't Like Market Timing in Any and All Forms, You May Not See Any Point in an Empirical Investigation. You View Me as One of a Long Line of Hucksters Trying to Sell You Some Snake Oil. I Don't Want to Be Such a Person."
"Having a Completely Ineleastic Demand for Equities Is a Bit Bonkers. No One Acts That Way with Life's Other Important Commodities. Campbell Advocates a Linear Valuations-Based Strategy so That You Wouldn't Be Making Big Changes. This Would Be Like Rebalancing But More Flexible."
"The Whole Idea of Valuation-Informed Indexing Belongs to You. Do You Mind if I call the Paper 'Valuation-Informed Indexing'? I Would Give You Credit. I Have Been Toying With the Idea of Sending the Paper to the Journal of Finance, Which Is the Most Prestigious Journal in Academic Finance."
"I Definitely Need to Cite You as the Founder of Valuation-Informed Indexing, As I Have Not Found Anyone Else Who Can Lay Claim to That. Shiller Pointed Out the Predictive Power of P/E10 But Never Discussed How to Incorporate It Into Asset Allocation, As Far As I Know."
"I Tested a Wide Variety of Assumptions About Asset Allocation, Valuation-Based Decision Rules, Whether the Period Is 10, 20, 30 or 40 Years, and Lump-Sum vs. Dollar-Cost Averaging To Show That the Results Are Quite Robust to Changes In Any of These Assumptions."
"Yes, Virginia, Valuation-Informed Indexing Works!"
"I Wrote Up the Programs to Test Your Valuation-Informed Indexing Strategies Against Buy-and-Hold and I Am Quite Excited. You Say in the RobCast That VII Should Beat Buy-and-Hold About 90 Percent of the Time. I Am Getting Results That Support This."
"Never Underestimate the Power of a Dominant Academic Idea to Choke Off Competing Ideas, and Never Underestimate the Unwillingness of Academics to Change Their Views in the Face of Evidence. They Have Decades of Their Research and Academic Standing to Defend."
"There's So Much That's False and Nutty
in Modern Investing Practice."
"Following Conventional Wisdom Has Led a Generation of Investors Down the Road to Ruin."
"It Is Sad That the Idea That Price Doesn't Matter...Should Ever Have Been Seriously Considered".
"The Conventional Wisdom of Modern Investing Is Largely Myth and Urban Legend."
"Economics Is a Dog's Breakfast of Theoretical Ideas and Alleged Causal Relationships That Are At All Times Unproven and In Dispute."
"Since They Did Not Diagnose the Disease, There Is Little Popular Confidence That They Know the Cure. What If Economics Is, Actually, At the Same Level as Medicine Was When Doctors Still Believed in the Application of Leeches?"
"One of the Most Remarkable Errors
in the History of Economics."
"Everything Has Fallen Apart."
"We Wonder Why Funds and Banks, Full of the Best and Brightest, Have Made Such a Mess of Things. Part of the Reason Is That We Have Taught Economic Nonsense to Two Generations of Students."
"Perhaps Most Scandalously, the Theory [Behind Buy-and-Hold] Remained Received Wisdom Long After Empirical and Theoretical Arguments Had Demolished It Within the Academic Community."
"I Love the Humans Dearly (the Title of the Book I Am Writing Is Investing for Humans: How to Get What Works on Paper to Work in Real Life) But They Can Be a Trial at Times. Hey! Helping the Humans Learn What It Takes to Invest Effectively Is Not All That Different From Being Married!
"We Are Going to See Hearts Melt Following the Next Crash. I Will Be Working Side-By-Side With All of My Many Buy-and-Hold Friends to Rebuild Our Broken Economy."
"Wow, I Did Not Realize You Had Achieved This Much Success and Had Many Devoted Believers/Followers. That’s Great, Then Ignore the Opposition. It Is Great to Have Opposition: That Means You Are Doing Something Right."
"I Do NOT Believe I Know It All. I Believe That Shiller Discovered Something Very Important and It Appalls Me That More People Are Not Exploring the Implications of His Findings. My Aim Is To Launch a National Debate."
"I Can See How Many Readers Would Be Put Off by the Somewhat Sensational/Scandalist Tone and Would Not Persevere to Read, Thinking You Are Losing Your Mind."
"I LOVE Everything About Buy-and-Hold Other Than the Failure to Encourage Investors to Take Price Into Consideration When Setting Their Stock Allocations. That's a Mistake That Was Made Because Shiller’s Research Was Not Available at the Time The Strategy Was Being Developed."
"Valuation-Informed Indexing Sounds Like a Real Thing. If It Is and I Can Thoroughly Understand It, Then It Will End Up In My Classrooms and in My Students' Minds (Of Course, With References to You and Wade)."
"I Can Confirm Wade Pfau's Experience. Whenever I Send My Papers to the Financial Analysts Journal or Similar Traditional Journals, I Get Rejected."
"As a Fan of Thomas Kuhn's The Structure of Scientific Revolutions, I Know That Progress Can Be Frustratingly Slow and What Is Typically Needed Is Either a Crisis or the Ascent of a New Generation of Scientists Who Did Not Build Their Careers on the Old Models and Theories."
"We Trace the Deeper Roots [of the Financial Crisis] to the Economics' Profession's Insistence on Constructing Models That, By Design, Disregard the Key Elements Driving Outcomes in Real World Markets."
"Rob Gets Himself So Worked Up Over What Someone Else Is Doing With Their Own Money and Not Bothering Rob in the Least. As Long As They Aren't Knocking on Your Basement Door, What Do You Care? They Are Happy and Content. Leave Well Enough Alone and Focus on Your Own Account."
"I've Been on Forum Since the BBS Days and I Think Rob is Special. He Could Be an Internet Meme If He Put Some Effort Into It. Someday, He Will Realize That the Only Thing He's Good At Is Being an Epic Loser. He Just Needs to Embrace That Idea and Run With It. Watch Out, LOLCats, Here Comes Pathetic Guy!"
"Your Lies Are Not Even in the Realm of the Possible, Much Less Actually Credible, Much Less Actually True."
"I'm Your Friend. I Am Not a Boil on Your Ass."
"You Guys [the Greaney Goons] Are the Same Jokers Who Have Done This Before, Sparring with Rob Over Nonsensical Issues On This Site and Others, Leveling Personal Attacks, and You Don't Even Use Real Names! Rob Is Entitled to His Opinion, But the Fact That You Challenge Every Jot and Tittle of What He Says Makes It Clear You Have An Unholy Agenda. Please Take It Elsehwere."
"Rob, Take This As Friendly Advice. You're a Smart and Articulate Guy and You Could Be Making Valuable Contributions to This Discussion. I've Dealt with the Mentally Ill Before and I've Found That They Sometimes Can Be Reasonable If Gently Redirected."
"Always Remember Others May Hate You, But Those Who Hate You Don't Win Unless You Hate Them, and Then You Destroy Yourself."
"I’m a Numbers Guy. And I Believe I Understand Rob’s Thesis, that Future Returns, Over the Next Decade, Have a Tight Inverse Correlation to the PE10 for the Starting Point. Remember, Correlation Doesn’t Need to be 100%, Only That There’s a Bell Curve of Potential Outcomes that Shift Meaningfully Based on the Input."
"What a Difference a Threat to Get the Father of Two Small Children Fired From His Job Has on an Investing Discussion, Eh? Long Live Buy-and-Hold! It’s Science! With a Marketing Twist!"
"I Respect Rob and His Analysis. He's Bright, Energetic and Passionate. [The Goon Stuff] Is Really Nonsense. I Enjoy a Thought-Provoking Conversation With People I Respect."
"The Fact that Shiller is a Proponent of the Approach Takes it from a Fringe View to Mainstream, in my Opinion."
"I Have had Academic Researchers Tell Me That They Dream of the Day When They Will be Able to do Honest Research Once Again. I Have had Investment Advisors Tell me That They Dream of the Day When They Will be Able to Give Honest Investing Advice Again."
"Let’s Call a Spade a Spade, Shall We? Wade Pfau Stole Your Research and Put His Name on it, Throwing You Just a Tiny Crumb of Acknowledgement to Ward Off a Lawsuit. He’s Profiting Handsomely By His Theft, Leading a Charmed Life, Widely Published, Widely Respected. While Rob Bennett Continues to Toil in Total Obscurity. It’s So Incredibly Unfair, I Think If It Happened to Me, It Could Actually Drive Me Insane."
by Rob
I’ve posted Entry #549 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Solving Puzzles Can Yield Big Investing Insights.
Juicy Excerpt: There is nothing that can be bought or sold in this world that is not a bad buy at some price point. Yet the Buy-and-Holders say that stocks are worth purchasing at any possible price. It’s a puzzle.
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All my bad buys got me to $6 million+. I will take more of those bad buys.
If you are happy with Buy-and-Hold, you should stick with it.
And I of course wish you the best of luck doing so.
Rob
Do you somehow think I would have been better off with a VII account at $1 million versus my buy and hold at $6 million?
I think you should always adjust the numbers to reflect the effect of irrational exuberance. If you adjust the numbers, you will know the real and lasting value of your portfolio. Then you should consider the added risk attached to stocks at times of sky high prices. In setting your allocation, your aim should be to keep your risk profile roughly constant over time. That’s Valuation-Informed Indexing. The last 40 years of peer-reviewed research shows that that is the strategy that will give you the best risk-adjusted return over your investment lifetime. That’s been so for 150 years now, as far back as we have good records.
I believe that we should be sharing the exciting how-to implications of Shiller’s Nobel-prize-winning research with every investor on the planet. I am not able to imagine any downside.
Rob
“ I am not able to imagine any downside.”
I would have much less in my portfolio if I followed your advice. How is that not a downside?
Valuation-Informed Indexing is always the best strategy (measured on a risk-adjusted basis) over the course of an investing lifetime. There are often times when it is not the strategy that produces the best nominal results for a specific time-period. If it is a big deal to you to enjoy the best nominal results at times when prices are at insanely high levels, you could go with a Buy-and-Hold strategy. That’s your choice, It is not your choice to make that decision for others by suppressing discussion of what the last 40 years of peer-reviewed research says.
Rob
As pointed out in this forum, you and Shiller have a long track record of being wrong.
https://www.city-data.com/forum/economics/3273281-robert-shiller-worried.html
If Shiller is right about one thing, he is right about everything. The question that matters is — Is irrational exuberance a real thing?
If it is, then the nominal value of the stock market is not its real value. You have to adjust for the effect of irrational exuberance. That changes everything. It changes every single strategic consideration.
My sincere take.
Rob
“ If Shiller is right about one thing, he is right about everything”
As pointed out on the thread, he has been wrong the majority of times. You might want to reconsider your comment.
It all depends on what assumption you begin your assessment with. If you start with a belief that the market is efficient, your assessment shows that everything that Shiller has said is nonsense. If you start with a belief that irrational exuberance is a real thing, your assessment shows that Shiller has always been right. Your starting point determines your ending point.
Rob
You don’t start with any assumptions. You merely look at the predictions and then the outcome to measure accuracy.
If irrational exuberance is a real thing, then we should see a devastating price crash once we get to the price levels that have applied in recent decades. But it is not possible to say when that crash will come. You seem to believe that, because the price crash has not yet arrived, it never will arrive. If irrational exuberance is a real thing, you will be proven wrong in that thought in days to come. At that time, every person in the United States will be wishing that there had never been a Ban on Honest Posting I think that irrational exuberance is a real thing. But there is only one way to find out for sure, That is to wait and see how things play out.
My best wishes.\
Rob
We look at outcomes to see as to what was right and what was wrong. As noted by the discussion from the forum noted in the link, Shiller, just like you, has been wrong much more frequently than he has been right. That is just a factual observation.
Did you adjust the value of stocks downward by 60 percent to reflect the effect of irrational exuberance in determining the “outcomes” that apply today? If you failed to do that, then you made the same mistake that Greaney made in his retirement study, you failed to take the last 40 years of peer-reviewed research into consideration when performing your calculations.
Is it just a “factual observation” that the sun revolves around the earth? Ignore many years of scientific research and you can get your mind to a place where that does indeed appear to be a “factual observation.” Take the research into consideration and you of course arrive at very different “factual observations.”
I believe that Shiller’s Nobel-prize-winning research is legitimate research.
Rob
“Did you adjust the value of stocks downward by 60 percent to reflect the effect of irrational exuberance in determining the “outcomes” that apply today?”
You don’t risk adjust past numbers. You are measuring outcomes (things that actually happened). It is like saying “What percent chance Does the Tampa Bay Bucs have in winning the 2021 Super Bowl”. You wouldn’t discount the odds because it already occured.
The aim is to identify the correct value of the stock market TODAY. Do you go by the nominal numbers reported in the newspapers and on portfolio statements? Or do you adjust for the effect of irrational exuberance? The two procedures will give you very different numbers.
Rob
“The aim is to identify the correct value of the stock market TODAY. ”
You are ignoring what has already happened. There is no “do over”. If your predictions have been wrong, you can’t go back and change it. Instead, you have to acknowledge that you were wrong and then question your strategy. Your portfolio didn’t just stay stagnant for the past 20 years. People following different investing strategies are not as the same starting point. There becomes a point in which you can no longer catch up to guy that you like to think has only benefited due to your perceived “irrational exuberance”. Those are just words and not factual results (things that have now occured).
None of those words relate to what we are talking about.
I have never asked for any do-overs.
What I have asked for is accurate calucations.
If you adjust the nominal numbers for the effect of irrational exuberance, you get very, very different numbers.
If you make the necessary adjustments, you see that Shiller has always been right. If you fail to make the necessary adjustments, you can fool yourself into thinking he has been wrong. Whether you make the adjustment or not is the determining factor.
If adjustments for irrational exuberance are not needed, Greaney’s retirement study gets all the numbers right. If such adjustments are required, Greaney’s numbers are wildly off the mark.
None of this is new. Anyone who was paying a little bit of attention would have known all this going back to the morning of May 13, 2002.
Shiller changed our understanding of how stock investing works in a fundamental way. We need to update all of the textbooks and such to reflect this major advance.
My sincere take.
Rob
It has everything to do with what we are talking about. We are talking about what has really happened in the past versus what was predicted to have happened. If your predictions came true, you would be using those as proof of your predictions having come true. However, since things didn’t turn out how you said they would, you want everyone to ignore the results and say that it is all pretend money. You can’t change the past just to support your narrative.
There were predictions that Shiller made that did not prove out and there were predictions that I made that did not prove out. You are right that, if the predictions has proven out, I would cite that as evidence (not absolute proof) in support of Valuation-Informed Indexing. You are wrong that I do not want people to ignore the failure of the predictions. I think it is important that people know about that. I DO think that all stock gains above those that support a CAPE value of 16 are Pretend Money. The point of Valuation-Informed Indexing is to distinguish real economic gains, which can be used to plan one’s future, from phony irrational-exuberance gains, which do not have lasting value.
If those gains are really the product of irrational exuberance, as Shiller’s Nobel-prize-winning research indicates, they are still going to disappear into thin air. Knowing precisely when that will happen is less important in my eyes than knowing that it will sooner or later happen. If it turns out that Shiller is right (I believe he is), we are going to see millions of failed retirements and hundreds of thousands of failed businesses and millions of workers thrown out of their jobs and an increase in political frictions. None of that is required. If people had access to accurate, honest, research-based investment advice, we could never again see the CAPE value reach the level where it resides today. Stocks would be an amazing asset class offering annual returns of 6.5 percent real. All that would be lost if we permitted honest posting is the crazy ups and downs that have characterized the stock market in the pre-Shiller era. I can do without that stuff. A steady return of 6.5 percent real, without the economic crises that inevitably follow when large numbers of investors are persuaded to forsake market timing (price discipline!) sounds just fine to me.
That’s where I’m coming from, Anonymous.
Rob
“There were predictions that Shiller made that did not prove out and there were predictions that I made that did not prove out. You are right that, if the predictions has proven out, I would cite that as evidence (not absolute proof) in support of Valuation-Informed Indexing. You are wrong that I do not want people to ignore the failure of the predictions. I think it is important that people know about that. I DO think that all stock gains above those that support a CAPE value of 16 are Pretend Money.”
Now flip it around. If Buy and Hold did what you said would happen, you would have also said that it proved the points you made in the past. You are basically ignoring what happened by saying you think you are right regardless of the outcomes. Sorry, but that doesn’t work. We measure outcomes for a reason.
I don’t think that any one person is all knowing. I believe that Shiller’s research is legitimate. I promote Valuation-Informed Indexing. But I would be horrified if someone said that he was following a Valuation-Informed Indexing strategy solely on my say-so. I believe that we all should post what we believe, Valuation-Informed Indexers and Buy-and-Holders alike.
I think that you are kidding yourself if you really believe that we already know the “outcome” of this horrible bull market. Will you still be saying that if we all have to live through the Second Great Depression? Not this boy. Holy, moly!
Rob
It’s only a horrible bull market if you are over the age of 60 and you missed out on the bull run. At that point, it is too late for you.
If we see millions of failed retirements, it’s a horrible bull market. If we see hundreds of thousands of businesses go under, it’s a horrible bull market. If we see millions of workers lose their jobs, it’s a horrible bull market. If we see increased political frictions, it’s a horrible bull market.
And for what? We get the same 6.5 percent real return regardless of whether we play these games to push prices up temporarily or whether we permit honest posting and see prices remain at reasonable levels at all times. I don’t see the fantasy thrill ride as being worth the price attached to it.
Rob
We have seen ups and downs, yet we know that with each drop, it has always recovered. Once you have your nest egg and you are in your 60’s, the typical buy and holder will have a 60/40 or 70/30 portfolio. He/she will continue to rebalance and will have the bond portion to pull from during those years with drops. However, if you are in your 60’s and you missed out on the bull run and your nest egg is low, it is too late to fix things. Your timing scheme failed you.
There’s no question but that stock prices will eventually recover after any price drop (presuming that the economic system does not collapse altogether). That doesn’t justify pushing risk up to such extreme levels that you cause millions of failed retirements and hundreds of thousands of businesses to go belly up. Why not just allow investors to learn what is in their best interest and to act on that knowledge. That way you get the same great long-term returns without the economic crises that pushing the pure Get Rich Quick/Buy-and-Hold strategy inevitably bring on.
Rebalancing doesn’t do the job. Rebalancing is staying at the same stock allocation regardless of price/risk. Huh? What the f? Why would anyone want to do that? Why not engage in whatever amount of market timing is required to keep your risk profile stable over time? The peer-reviewed research that I co-authored with Wade Pfau shows that doing that would permit you to retire many years sooner while taking on far less risk. I can live with that. I don’t think that it is an accident that the Buy-and-Hold Goon Squads threatened to get Wade fired from his job when he went public with that message. When people begin learning what the last 40 years of peer-reviewed research shows, Buy-and-Hold begins losing much of its appeal. We should all be working to get the word out at every site on the internet, in my sincere assessment.
My best wishes to you, in any event.
Rob
“Rebalancing doesn’t do the job. Rebalancing is staying at the same stock allocation regardless of price/risk. Huh? What the f? Why would anyone want to do that? Why not engage in whatever amount of market timing is required to keep your risk profile stable over time? ”
There has never been a failure yet of buy, hold and rebalance over a 30 year period, yet we have never seen one successful market timing portfolio. The only thing you can offer up is to “see how things play out”. Sorry, but I go with what has always worked.
That’s not what the Bennett/Pfau research shows, Anonymous. The Bennett/Pfau research shows that Valuation-Informed Indexing has been superior to Buy-and-Hold for as far back as we have records. That’s why you Goons threatened to get Wade fired from his job if he continued promoting the research.
I believe that our research will be featured on every investing discussion board and blog on the internet in the days following the next price crash. We’ll see.
Rob
It is not true that we would ‘see the same 6.5%’. If stocks were not volatile and were risk free they would have the same returns as treasuries.
I don’t agree.Edge.
The return that you obtain on stocks is the result of the increase in the value of the companies. The increase in value is the same regardless of how much risk we add by failing to practice price discipline. Making stocks riskier is a negative, not a positive.
At least that is my sincere take re this question.
Rob