Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
<i>What specific information is missing from the internet?
Answer: none</i>
There is lots of information missing from the internet. All of the discussions of why Buy-and-Hold is such a dangerous investing strategy, all of the discussions of why market timing is the key to long-term investing success are mssing.
I put forward my famous post pointing out the error in the retirement study posted at John Greaney’s web site on the morning of May 13, 2002. The Retire Early board exploded when I advanced that post. There were lots of posts thanking me for starting the post exciting discussion in the history of the board. And there were lots of posts saying that I must have forgotten to take my meds. That post put both sides in an uproar.
Why?
I didn’t say anything that a person with an average I.Q. could not have figured out on their own. I pointed out that the Greaney study lacked an adjustment for the valuation level that applied on the day the retirement began. Why would that cause a commotion?
There are two reasons.
One, it is an obviously important point. A seven-year-old understands that you cannot calculate the safe withdrawal rate without taking valuations into account.
And, two. it was a point with far-reaching implications. If the Buy-and-Holders got the safe withdrawal rate wrong, then why else did they get wrong? The answer is — everything. If the safe withdrawal rate was only 1.6 in January 2000, then stocks were not a good buy in January 2000. But everybody on that board had been buying stocks in January 2000. If all of those people were going to accept what I was saying in that post, then they had to accept that they made a mistake to continue buying stocks to the same extent in January 2000. That hurts. Who wants to make a mistake with their retirement money?
So I made a point that was obviously true and that was very hurtful to lots of people.
Which is what Shiller did. For 40 years now, we have as a society been stumbling around with the question of to what extent are we going to let Shiller’s breakthrough findings about how stock investing works penetrate our consciousness. I am saying that we should let them in. Some others are saying, no, that’s too painful, no can do.
That’s the story. Will out decision as a society change when prices fall hard? I believe so. But there is only one way to find out for sure. None of us can see into the future. None of us can say with 100 percent certainty how it will go.
But I believe that there is a lot of information re stock investing lacking from the internet today. I am doing what I can to fill the gap.
When the gap is filled, prices will change. It is what people believe about stocks that determines the price for which stocks sell. I have something different to say about how stock investing works from what my Buy-and-Hold friends have been saying for years now. When my information is available at every site on the internet, the CAPE value will no longer be in the mid-30s. It’s a physical impossibility. In a world in which honest posting re the peer-reviewed research is permitted, there can never be a CAPE value in the mid-30s.
Rob
The Greaney issue has been addressed. You just don’t like the answer. Why do you still keep repeating it? It isn’t helping. If fact, it just continues to hurt you because people have long grown tired of having to repeat themselves over and over again, while you hijack and fill up threads. It is a huge waste of time. It is just one of many reasons why you get banned.
The 19-year cover-up of the error in the Greaney retirement study is a public policy matter of critical importance. Say that there is a one-in-a-hundred chance that I was right in what I said in my famous post from the morning of May 13, 2002. The odds are a lot higher than that. More like a 99.999-in a hundred chance. But let’s just say that the odds are one-in-a-hundred for purposes of discussion, If that’s so, then we should be discussing the question on every discussion board and blog on the internet.
The 4 percent rule is not something that Greaney made up himself. That rule was cited in thousands of newspaper articles. Hundreds of thousands of investment advisers cited that rule in retirement planning advice that they advanced to their clients. Millions of retirement plans were constructed with the 4 percent rule in mind. If it really is so that that rule was constructed without the effect of valuations being considered, we are looking at the biggest act of financial fraud in the history of the United States. BY FAR. If you added together the dollar losses caused by every act of financial fraud in the history of the United States, the number wouldn’t come close to being equal to the dollar losses caused by this one 19-year cover-up.
Fair enough?
Rob
I have read your post from May of 2002. I have read all the responses as well. The whole history is different versus your portrayal. If you feel there is some error in the math, it is up to you to show the math and your correction.
All you have really done is tell people you think there is a problem, how great you think you are (telling us you think you and the post are famous), how people tell you that they support you (which we can’t find) and how you think there is some massive fraud and cover-up (which is also made up).
So, if you really want to convince people, here is what you can do:
Post the link to the thread with your post from 2002. Show the error and your mathematical corrections. Invite people to comment and debate. Very simple.
What I say is that the Greaney retirement study lacks an adjustment for the valuation level that applies on the day the retirement begins. It shouldn’t take 19 years to determine whether that is so or not. Greaney should have corrected the study within 24 hours of the moment that he learned of the error he made in it.
Rob
You should have corrected your errors over 19 years ago. Funny how you won’t even allow a link to the thread you say is famous.
If the study had been corrected 19 years ago, we wouldn’t be having this discussion today, Anonymous.
There are two ways to do stock investing. You can go rational or you can go emotional. The only explanation for failing to correct errors in retirement studies is that you have gone emotional. There is no rational reason not to practice market timing at all times. The only possible reason for that choice is it permits irrational exuberance to take over.
I don’t like irrational exuberance. So I vote for market timing. That’s the difference between us. That’s the difference between Buy-and-Hold and Valuation-Informed Indexing. That’s the entire shebang.
Do you want to know the true and lasting value of your portfolio? Or do you want to be comforted by the pretty lies supplied by irrational exuberance? Fail to practice market timing and you transform Buy-and-Hold — which in other respects is a research-based approach — into a pure Get Rich Quick approach. Not this boy, you know?
I favor Buy-and-Hold with market timing added. That’s Valuation-Informed Indexing.
My best and warmest wishes to you and yours, dear Goon friend.
Rob
How have things worked out for you? Have you received backing by the financial experts? No. Do you have successful outcomes supporting VII? No. Has your retirement plan been successful? No. Did your crash predictions come true? No. Did you finish your book on time? No. Did you get a job at the beginning of the year as you previously said? No.
What have been your successes? Setting a record for board banning? Longest streak of repetitive posts? Avoiding real work?
It was a huge success to work up the courage to point out the error in the retirement study posted at John Greaney’s web site.
It was a huge success to have thousands of our fellow community members express gratitude to me for starting the most exciting investment debate in the history of the internet.
It was a huge success to have a Ph.D. in Economics ask me to co-author research with him showing the superiority of Valuation-Informed Indexing over Buy-and-Hold and for him to conclude after 16 months of in-depth explorations that “Yes, Virginia, Valuation-Informed Indexing works!”
The biggest success will come in the days following the next price crash. We are going to have to rebuild our broken economic system at that time, are we not? I think it would be fair to say that we are not going to rebuild it with even more promotion of the pure Get Rich Quick/Buy-and-Hold “strategy.” We are going to need to open every discussion board and blog to honest posting re the last 40 years of peer-reviewed research in this field. I think it would be fair to say that we will all enjoy the greatest surge of economic growth in our nation’s history and that there will not be one person looking back with longing to the Buy-and-Hold days. For someone who has a deep love for his country, that is going to feel like a big success.
Do I wish that Greaney had corrected his study within 24 hours of the moment he learned of the error he made in it? Obviously. Of course.
Do I believe that the good we have seen over the past 19 years has been 50 times more good than the bad that we have seen over the past 19 years has been bad? Obviously. Of course.
My best and warmest wishes to you and yours.
Rob