Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
Your only quibble with Greaney is the definition of “safe”. His definition for the purpose of his study is objective and precise. Your definition, near as anyone can tell, is subjective and squishy, and therefore unmeasurable. It boils down to “I don’t know what safe is, I only know that Greaney is wrong.” Which is useless hot air.
Perhaps your precise definition is in your book, which you said would be done by the end of the year. Yet another missed deadline?
My definition of “safe” is the dictionary definition of the word. I don’t consider my difference with Greaney to be a “quibble.’ People use retirement studies to plan retirements. A failed retirement is a serious life setback. We all should want to numbers reported in retirement studies to be accurate.
Gresney obviously doesn’t consider my objection to the methodology used in his study to be a “quibble.” He wouldn’t threaten to murder my loves ones over something he viewed as a quibble. He wouldn’t engage in extortion to silence an academic research who worked with me for 16 months and concluded from his research that “Yes, Virginia, Valuation-Informed Indexing works!” Greaney gets it that Valuation-Informed Indexing and Buy-and-Hold are very, very different models for understanding how stock investing works
The difference is that one is a pure Get Rich Quick approach and the other is the first true research-based model. Buy-and-Hold treats irrational exuberance as if it were something real, something that you could use to finance a retirement. Valuation-Informed Indexing treats irrational exuberance as empty air and counts economic-based gains as something real.
That’s a very big difference. The reason why many Buy-and-Holders get so upset when someone cites the last 40 years of peer-reviewed research in this field is that spreading knowledge of Shiller’s Nobel-prize-winning research to every investor on the planet will cause the Buy-and-Hold house of cards to tumble to the ground. I see that as a very good thing. Greaney wants to maintain confidence in Buy-and-Hold. Greaney and I are working at cross purposes.
I consider us friends. I had a lot of good times with Greaney in the days prior to May 13, 2002. And I believe that his study caused a lot of people at the Retire Early board to take lower withdrawal rates than what they would have taken if he had not prepared the study. But once it became clear that I was not buying into the core Buy-and-Hold dogma that market timing is not always 100 percent required for every investor, he could see that we were working at cross purposes. The fact that thousands of our community members reacted positively to what I said freaked him out completely.
I have fond feelings for the guy. But I do not believe to this day that his retirement study contains an adjustment for the valuation level that applies on the day the retirement begins. I didn’t believe that on the morning of May 13, 2002. I really, really, really don’t believe it after seeing the past 20 years of behavior of Greaney and his Goon pals. Buy-and-Hold is rooted in emotion. The “idea” that irrational exuberance gains are real is the product of an emotional Get Rich Quick impulse, nothing more. Buy-and-Hold is what sells, Valuation-Informed Indexing is what works.
That’s my sincere take re these terribly important matters, in any event.
My best wishes to you and yours, Anonymous.
Rob
“I don’t consider my difference with Greaney to be a “quibble.’”
Bengen and Trinity use the exact same methodology
I have the same differences with Bengen and Trinity. This is why I say constantly that we need to open every discussion board and blog on the internet to honest posting re the last 40 years of peer-reviewed research in this field. If we did that, someone would object every time someone else brought up Bengen or Trinity. The discussion that followed would help people to think through these matters. In time I believe that Bengen and Trinity would be discarded, which would be a very good thing in the event that they really do not contain valuation adjustments (Hint: They do not).
It is a national scandal that Trinity passed peer review. Shiller’s research was publicly available at that time, The entire point of the peer-review process is to see that earlier research findings are taken into account in newly developed research. If valuations affect long-term returns, as Shiller showed, there is precisely zero chance that the safe withdrawal rate can be determined without taking the valuation level that applies on the day the retirement begins into consideration. I mean, come on.
Rob
But Bengen and Trinity are much better known. However you direct your anger towards Greaney and also Bogleheads.
The reason for that is that you were banned at Motley Fool and M* Diehards/Bogleheads
This entire 18 year vendetta is about you, not about the actual studies. If it was about the studies you would be trying to convince Bengen and Trinity that they were wrong. You have made virtually no effort to contact Bengen or the Trinity authors. In fact you rant about Greaney goons and Lindauer goons repeatedly demonstrating that this is all about you getting banned.
I don’t have any anger. I have a belief that honest posting re the last 40 years of peer-reviewed research should be permitted at every site on the internet. Lindauer and Greaney hate that idea with an intense passion (they want Buy-and-Hold to remain popular) I point that out in an effort to get others to stand up to them (which is the only way that the world’s knowledge of hoe stock investing can advance beyond where it stood in 1980) and you call that “anger.” I have positive feelings about Greaney. We had a lot of good times together. My feelings toward Lindauer are not as strong. But I don’t have anything against him personally. A lot of people that I respect like him.
I contacted Bengen and we engaged in conversations. I did not contact the Trinity authors directly. But I encouraged Wade Pfau to do so and he did so.
I certainly agree that the Bengen and Trinity studies need to be corrected as well. But that needs to be a group effort. I was a prominent member of the Retire Early Board community. So it made perfect sense that I would note my concerns about the 4 percent rule there. It was always my intent, that, once the Greaney study was corrected, we would do what we could as a community to get the Bengen and Trinity studies corrected as well. We should all want to see those studies corrected as the errors in them affect all of us. So we should all be working together to make that happen.
It’s not just about me getting banned. It’s about honest posting re the last 40 years of peer-reviewed research getting banned. Motley Fool should want people to be able to learn what works in stock investing and in fact they describe it as their mission statement to help in this regard. So they should have jumped at the opportunity when hundreds of people at the Retire Early board expressed a desire that honest posting re the last 40 years of peer-reviewed research be permitted there. It’s the same with Morningstar.com. and with the Early Retirement Forum. And with the Get Rich Slowly blog. And on and on and on. If we were all thinking clearly, there wouldn’t be one person on the planet who opposed the idea of permitting honest posting re the peer-reviewed research at every board and blog on the internet.
If it by permitting honest posting re new research findings that we all come to learn new things about how stock investing works. How else could it happen. So long as everyone feels afraid to point out the dangers of Buy-and-Hold, people are going to continue promoting it. Buy-and-Hold is a pure Get Rich Quick approach and Get Rich Quick approaches are huge money-makers in the short term. That’s why as a society we have enacted laws against the use of the tactics that you Goons have employed to keep millions of people in the dark re the stock investing realities. I believe that we need to work up the courage to stand up to you and thereby turn this thing around. I try to encourage others to do that by setting a good example myself.
Make sense?
Rob
“Buy-and-Hold is a pure Get Rich Quick approach”
If you think that Buy and Hold is a get rich quick approach then you must believe that stock investing is a get rich quick approach.
Because stock investing is buy and hold.
Lets imagine a group of investors called “The investors”. The investors hold 100% of publicly tradable stocks. Investor A may sell to Investor B, Investor C to Investor D and so on but collectively the investors own 100% of stocks at the start and end of any period. My buy and hold return will match the collective return of the investors.
All your VII market timing stuff will not improve the collective return of the investors by a single dollar.
I disagree, Evidence.
The price of U.S. stocks goes up by 6.5 percent real per year. It’s been doing that since the market opened for business. The Valuation-Informed Indexers accept that as a core reality of stock investing. So we don’t engage in any efforts to pump the price up higher than what is justified by the economic realities. We disdain irrational exuberance because we know that it is an illusion that has been doing harm to stock investors for as long as there has been a market. The peer-reviewed research that I co-authored with Wade Pfau shows that we can reduce the risk of stock investing by 70 percent just by being willing to engage in market timing (price discipline!).
The Buy-and-Holders walk a very different path. The treat irrational exuberance as if it were not something real. I see you Goon do it all the time. You report your portfolio value without making any adjustment for the valuation level that applies at this point in time. I have seen you do this thousands of times. You say that you favor “Staying the Course,” But if Shiller’s Nobel-prize-winning research is legitimate research (I believe that it is), then risk is not constant but variable and an investor who refuses to engage in marker timing in response to valuation shifts is causing his risk profile to change dramatically for no good reason. That’s the opposite of Staying the Course!
Whenever Buy-and-Hold becomes popular, we see millions of failed retirements and hundreds of thousands of failed retirements and millions of workers being thrown out of their jobs. That’s not stock investing in a sane world. That’s what stock investing BECOMES in a world in which people are prohibited from talking about the realities of how stock investing works. That’s a form of stock investing that is so upside-down that it inevitably causes an ocean of misery for millions of people. I prefer investment strategies that help the people following them.
Rob
“The price of U.S. stocks goes up by 6.5 percent real per year. ”
Bill Bernstein explains why you are wrong better than I possibly could
The Returns Fairy. . . Explained http://www.efficientfrontier.com/ef/403/fairy.htm
And you haven’t really addressed my point that stay the course/buy and hold is the same as stock investing.
Over any given period my Stay the Course/Buy and Hold return will be the same as the return of investors as a whole, no matter what the return is in that period.
The price of U.S. stocks goes up by 6.5 percent real per year. ”
Bill Bernstein explains why you are wrong better than I possibly could
The Returns Fairy. . . Explained http://www.efficientfrontier.com/ef/403/fairy.htm
Bernstein is agreeing with me in that article. The valuation level that applies when you make a purchases determines your long-term return.
Rob
And you haven’t really addressed my point that stay the course/buy and hold is the same as stock investing.
Over any given period my Stay the Course/Buy and Hold return will be the same as the return of investors as a whole, no matter what the return is in that period.
Destroying millions of lives is not the same as not destroying millions of lives.
There were people at the Retire Early board who thought that Greaney’s retirement study was legitimate. I had become friends with a number of those people. Would it have been better if I had kept my mouth shut about the error in the study?
Not this boy, you know? If Greaney had been thinking clearly, he would have corrected the error within 24 hours of the time I pointed it out to him.If his friends had been thinking clearly, they all would have encouraged him to do so.
My sincere take.
Rob
“Would it have been better if I had kept my mouth shut about the error in the study?”
It would have been better if you had been honest at the time and admitted that Greaney had accurately calculated the withdrawal rate that had survived in the past.
I was. BenSolar suggested early on that Greaney just say that he calculated the Historical Surviving Withdrawal Rate rather than the Safe Withdrawal Rate. I said that that would solve the problem. Greaney didn’t say anything.
Rob