I’ve posted Entry #585 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called If Irrational Exuberance Is Real, Then It’s Appeal Will Diminish When Stock Prices Drop.
Juicy Excerpt: Stock prices have not been at low levels since the earlier 1980s. So there has never yet been a time when we had available to us Shiller’s Nobel-prize-winning research showing that irrational exuberance is a thing and when we saw the price that is paid for paying it no mind while it grew to a fearsome size. I believe that the combination of those two realities will deal a lethal blow to the Buy-and-Hold project.
If irrational doom is real, market timers will be left with depleted savings.
We are all hurt by any form of irrationality that becomes widespread. This is why I believe that we should all permit (and encourage!) discussion of the peer-reviewed research (all of it, not just the research that existed as of 1980). The purpose of research is to help us to see through irrationality.
None of us is perfectly able to do so individually. Some of us are irrational in our exuberance, some of us are irrational in our doom. I believe that permitting widespread discussion of the research would help us to collectively work our way to a calmer, better informed place.
Buy-and-Holders understand things that Valuation-Informed Indexers do not and Valuation-Informed Indexers know things that Buy-and-Holders do not. We are all in this together. We all want the same things. So we should all we happy to help those with difference perspectives and in turn to be helped by them.
That’s where I am coming from, in any event, Anonymous..
Rob
Is it irrational to base your retirement plan on the hope of getting a $500 million windfall?
Sure. When you’ve done the work to earn that $500 million. When you’ve pointed out an error in a retirement study that millions of people need to know about because lots of other retirement studies contain the same error and the study has remained uncorrected for 20 years because lots of good and smart people who work in the field want to tell the truth and help people but are afraid to do so because the error has caused so much human misery that the people who made it can’t bear to sat the words “I” and “Was” and “Wrong.” When that’s the situation, someone has to work up the courage and do what it takes to earn the $500 million. And, once he has earned it, why shouldn’t be plan his retirement on it?
Do you think it would have been better if I had kept my mouth shut about the error in the Greane retirement study?
Have you considered that over the years I had become friends with a good number of the people who posted at the Motley Fool’s Retire Early board?
Rob
At what point do you finally admit that you were wrong when you don’t have a dime of that $500 million? 65 years old? 70 years old? 80 years old? I am guessing you will never admit it.
I would have to see the page of the Greaney study that contains the valuation adjustment.
I agree with you that it is very, very, very unlikely that it is ever going to happen. Perhaps 1 in 250 billion at this point. They say “never say never.” But this one comes close.
Rob
“ I agree with you that it is very, very, very unlikely that it is ever going to happen. Perhaps 1 in 250 billion at this point. They say “never say never.” But this one comes close.”
So now that you admit that it is very unlikely to get any of that $500 million, what is the back up plan?
I think that I’ll get the $500 million. I doubt that I ever will see the valuation adjustment that would require me to say that I was wrong.
It’s all going to come down to how people feel about things in the days following the next price crash. If people want to know where most of their retirement money went, we have 40 years of peer-reviewed research we can point to to how them how it all works.
If people don’t care to know where most of their retirement money went, them people don’t care to know where their retirement money went. I cannot post dishonestly re the numbers that my friends are using to plan their retirements in any event. It’s important to me that I be able to sleep at night.
My best wishes.
Rob
“ If people don’t care to know where most of their retirement money went, them people don’t care to know where their retirement money went. I cannot post dishonestly re the numbers that my friends are using to plan their retirements in any event. It’s important to me that I be able to sleep at night.”
So you say you are worried about people with insufficient retirement accounts, but that is where you are right now. Doesn’t that seem ironic?
There are lots of ironies associated with this matter.
It is ironic that it was the Buy-and-Holders who came up with the idea that investors should use the peer-reviewed research to guide their investment choices but then either supported or tolerated a ban on honest posting re the peer-reviewed research from 1981 forward.
It is ironic that it was John Bogle, not Robert Shiller, who played the primary role in helping me to understand that it is a logical impossibility that the safe withdrawal rate could be the same number at all times (Bogle wrote in “Common Sense on Mutual Funds” that “Reversion to the Mean is an iron law of stock investing.”
It is ironic that each of you Goons was required to agree to follow posting rules that prohibit your most abusive posting practices before you were permitted to post at any of the boards but the site owners who crafted those rules have never removed you from those boards but only the posters whom you attack for posting honestly about the peer-reviewed research.
It is ironic that, in the years since Shiller showed the horrors that follow from us permitting irrational exuberance to get out of control and gave us the tools we need to contain it, we have seen more irrational exuberance than at any earlier time in the stock market’s history.
Yes, it’s ironic that I have’t been able to earn a dime in 20 years because I provided my fellow community members with information that thousands of them have praised in the most effusive terms imaginable.
Ironies abound.
There’s nothing that I can do about it. I am happy to help out in whatever way I can. I believe that circumstances will change in the days following the next price crash. I sure hope so, We are all going to need a lift in those days and I think that it would be fair to say that opening the entire internet to honest posting re the past 40 years of peer-reviewed research in this field will provide one. We’ll see, you know?
My best wishes to you, Anonymous.
Rob
“ There’s nothing that I can do about it.”
Really? You can’t just get a job? Why not?
Because there are millions of people’s lives riding on this.
When I have finished the book, I will feel comfortable getting a job because I will have supplied the complete statement that people are going to need to make sense of what has happened to them. But I am not going to devote time to some comparatively trivial matter until I have supplied that statement. The one matter is 500 times more important than the other.
Why do you fight the idea of permitting honest posting so hard? Because you see how important it is. Well, just as important as you see it being to deny people the chance to hear the truth about how stock investing works, I see it as being just that important to provide people that chance. We are working at cross purposes. We have been for 20 years now.
Rob
“ Why do you fight the idea of permitting honest posting so hard?”
I am trying hard to push for honest posting, but you keep blocking it.
Why can’t you work a job and do a book on the side? You have been working on this book for well over 10 years, so you are obviously not spending that much time on it. Everyone else can work a job and still do other necessary task after the work day.
If I spend 40 hours per week at a job, that’s 40 hours that I am not spending on the book. I could work on the book on nights and weekends while holding a job. But holding a job would definitely slow down progress.
I have been working on the book full-time for three years (it was when I completed the “Buy-and-Hold Is Dangerous” article that I gained confidence that my understanding of the subject matter was broad and deep enough to permit me to write a compelling book about it). I have been achieving advances in my understanding of these matters not for 10 years but for 20 years. But that’s not the same thing.
I agree that I do not spend as much time on the book as would be ideal, even over the past three years. I chastise myself a bit for that. But in fairness to myself I note that NO ONE ELSE HAS WRITTEN THIS BOOK IN THE 40 YEARS SINCE SHILLER PUBLISHED HIS NOBEL-PRIZE WINNING RESEARCH SHOWING THAT THERE IS PRECISELY ZERO CHANCE THAT A PURE BUY-AND -HOLD STRATEGY COULD EVER WORK FOR A SINGLE LONG-TERM INVESTOR. If no one else was able to complete the task in 40 years, maybe it should not be so shocking that I have not been able to do so in three years.
The reason why no one else has been able to do it is not that the task is so intellectually difficult. The intellectual side of this is 20 percent of the job. The hard part is the emotional side. When you tell people that gains that result from irrational exuberance are not real and lasting and should not be counted when preparing for retirement, you are telling people something that they very, very, very much do not want to hear. You are telling addicts that they need to give up the addiction to become able to live better and richer and fuller lives. If you have ever had a friend with a drinking problem that you tied to help, you know how well that sort of thing often goes over.
I might have a day when I spend five hours on the actual writing of the words of the book and ten hours dealing with the emotional fallout that I have experienced as a result of me having worked up the courage to stand up to Greaney and point out the error in his study back in April 2002. Is that a day in which I put in five hours toward completion of this project or a day in which I put in 15 hours toward completion of this project? I think it is a day in which I put in 15 hours. Because it is the reluctance to take on the emotional work that has been holding everyone else back. The book that the world needs will not ever come into existence if no one takes on the emotional side So I have made a decision to do that and I don’t want the time demands of a 40-hour job holding me back from bringing the thing to completion as soon as possible.
That’s where I am coming from re this thing, Anonymous. I do wish you all good things.
Rob
You have said before that you were working on this book almost 15 years ago, but now you say three. You also talk about emotional issues holding you back. Why not get counseling? It seems your emotional issues are keeping you from seeing things from a rational standpoint and that you have lost all sense of reality.
I have explained numerous times now that I took a stab at writing the book a long time ago but learned that my understanding of the subject matter was not at that time deep and broad enough to produce an outstanding product. So I put the project aside until it was clear that I was able to do the subject justice. That was when I managed to successfully complete the article on why “Buy-and-Hold Is Dangerous.” That article was a short version of the book. It tells the entire story in one clear statement, just not in as much detail and depth as a book-length treatment will bring to it.
I am not the one who needs counseling. It is the nation of stock investors who have pushed the CAPE value up to 38 who need counseling. That’s higher than the CAPE value that brought on the Great Depression. If I was trying to persuade an alcoholic friend of mine not to get behind the wheel of a car, it would not surprise me to hear him say that I needed counseling to suggest that he was not able to drive in his state. That’s what addicts do.
Your addiction provides you with the rationalization that you need to avoid civil discussions of the last 40 years of peer-reviewed research in this field. My job is to help you and millions of others to see through those rationalizations, to recover enough rationality to be able to discuss these matters in a constructive manner.
My best and warmest wishes to you and yours.
Rob
“I am not the one who needs counseling.”
Yes, you do. Consider the following:
– You admit to emotional issues
– You have rationalized a story that keeps you from employment
– You see death threats that no one else sees
– You have delusions of grandeur ($500 million payouts, fame, etc)
– Your spouse, son and priest have appealed to you in seeking employment, but you refuse
– You have been banned at all major investment boards, yet feel as if you are only a victim
– Everyone in the community has abandoned you
– People have tried to tell you the harm you have caused, yet you cannot see it
Now, consider who is suffering. You and your family. That’s it. It won’t impact anyone else. All the rest of us don’t have any skin in the game. We have nothing to gain or lose in what happens to you. Given we have no vested interest, there is nothing behind your accusations of the “goons” are out to get you. Our retirement will be a result of what we have decided. We will all just go with what we are doing. Meanwhile, you will still being locked in your mental prison and continue wasting your remaining days doing the same thing over and over again and then your family will pay the price.
Consider that in 20 years no one has been able to point to the page in the Greaney retirement study that contains the valuation adjustment. Including you Goons! Evidence is general in Greaney’s goon army. And Evidence now says that “nobody” truly believes that Greaney included a valuation adjustment in his study. He says that that includes Greaney himself!
You say that “we all will just go with what we are doing” following the next Buy-and-Hold Crisis. I don’t see it. It is a criminal act to advance death threats. It is a criminal act to engage in extortion aimed at silencing academic researchers. Financial fraud is a criminal act. If Buy-and-Hold were a real thing, you wouldn’t be willing to go to prison to block people from hearing what the last 40 years of peer-reviewed research tells us all about how stock investing works in the real world.
That’s my sincere take, Anonymous.
I naturally wish you all good things, regardless of what investment strategy you elect to follow.
Rob