Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
As Wade Pfau said, Greaney gave you your answer the same day:
“I’m not aware of anyone who has been successful in timing when stock prices are high or low over the long-term. If you possess this unique ability that others lack, perhaps the easiest thing to do is to adjust the safe withdrawal rate by the amount that you consider stocks to be higher than they have ever been. If stocks are 25% higher, drop the 4% withdrawal to 3%. If you feel stocks are 50% higher than they have ever been, then drop the 4% down to a 2% withdrawal.”
Think of all the time you wasted over the last 20 years.
That’s not an answer to the question that I put on the table.
My question is: Can we talk about this stuff in civil and reasoned discussions?
I say that we should be able to do that. It is by talking things over that we all learn. I wanted to hear what thousands of my fellow community members had to say about these matters, not just what Greaney had to say. I knew what Greaney had to say before I advanced the post.
Rob
The people over at WadePfau’s firm have confirmed that Rob Bennett is wrong and his market timing strategy is one big scheme.
https://retirementresearcher.com/occams-cant-time-markets/
This is a good statement of the standard Buy-and-Hold line. It is well-written and every statement taken in isolation is accurate.
Of course, the problem is that, while the individual statements are accurate, the overall impression left by the article — that market timing is not always 100 percent required and in some circumstances might not even work — is entirely false and exceedingly dangerous.
This line gives away the game: “Unless you can predict the future (or are substantially better at extrapolating trends than pretty much anyone else), there’s no way to tell how the markets will move in the short to medium term. As you can imagine, this makes it incredibly difficult to successfully time the markets.”
IN THE SHORT TO MEDIUM TERM!
Yes, that’s so. But in the long term market timing always works! There’s 40 years of peer-reviewed research showing that. So why leave that part out? The answer is — If you tell people about that part, the entire Buy-and-Hold house of cards comes tumbling to the ground. There are lots of wealthy and powerful and well-connected people who do not want to see that happen., These people built well-paying careers learning about and then pushing the conventional wisdom of 1980 and, then, when Shiller revolutionized our understanding of how stock investing works in 1981, elected to pretend that he hadn’t done that and to continue pushing the same old Buy-and-Hold garbage, discredited or not.
The entire theme of the article is that investors are rational. And, if that were so, it would all hold up. Timing wouldn’t work and the safe withdrawal rate would always be the same number. But of course it is not so. Shiller’s Nobel-prize-winning contribution was to show that there are times when investors become insanely irrational and that irrationality inevitably leads to the destruction of millions of lives. It has never turned out otherwise. There is not even any way that the rational human mind could ever imagine it turning out otherwise.
Irrational exuberance is dangerous, It is a poison., It is a cancer. There’s only one way to rein in irrational exuberance — with market timing, I think it would be fair to say that market timing is 70 percent of what it takes to achieve long-term investing success. If that’s the case, then 70 percent of the advice in this field should be advice aimed at encouraging market timing. That’s obviously not what we have today. Which explains why today’s CAPE value is a national scandal.
Is there a place for articles explaining for the 5,000th time why short-term timing doesn’t work? Sure. There are some who missed the first 4,999 iterations or who need a reminder. But there is no excuse for devoting as many words as this fellow devoted to explaining why short-term timing doesn’t work without devoting any to the point that is 50 times more important — that long-term market timing always works and is always 100 percent essential.
Please mark me down as PRO market timing. All the way. I see the prohibition on discussion of the 40 years of peer-reviewed research showing how important it is that all stock investors always practice market timing as the most important public policy issue facing the United States today.
My best and warmest wishes to you.
Rob
“ But in the long term market timing always works! ”
It has never worked for anyone, including you and that is why you are broke.
It’s been 20 years and never once have any of you Goons put forward an explanation of how market timing could ever not work. i presume that we agree that valuations affect long-term returns. So stock investing risk is not stable but variable (risk is greater when valuations are higher). So market timing is REQUIRED for any investor seeking to keep his risk profile constant over time. You’re able to imagine some circumstance in which it could be a bad thing to keep one’s risk profile constant. I am not.
That said, I naturally wish you all good things regardless of what investment strategy you elect to follow, in any event.
Rob