Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
“ 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 tried 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
Postings like this is why people don’t believe you. You haven’t worked in over 20 years and blame it on the time it takes to write a book. It doesn’t take all that look and providing for the family always comes first. Secondly, we all know buy and hold works. Just look at the 30 year returns on the S&P 500 as an example. In fact, you can’t even name one buy and hold failure despite being asked many times. Third, you highlight your real issue for acting the way you do by mentioning emotional issues.
In the event that Shiller’s Nobel-prize-winning research is legitimate research (I believe it is), every Buy-and-Hold portfolio that was ever constructed was a failure. If stock investing risk is not constant but variable, then any investor who failed to engage in market timing (the Buy-and-Holders advise against this) is going to see his risk profile jump all over the place. It’s impossible to imagine how that could ever be a good thing.
Stocks are an amazing asset class. So there are some circumstances in which an investor could go with a Buy-and-Hold “strategy” and still end up with less-than-terrible result. But of course there are other circumstances in which the investor gets wiped out. And it is never a good idea to put yourself at risk of getting wiped out. The smart thing would be just to engage in whatever amount of market timing is needed to keep your risk profile roughly constant over time.
That puts the percentages in your favor. As is always the case with probabilities, the more rolls of the dice there are, the more likely it is that the person playing the percentages will end up on top in the end. It is entirely possible for a Buy-and-Holder to do well for a number of years. But the longer an investor elects to continue with a pure Get Rich Quick strategy, the greater are the odds that he will come to experience the awful downsides of electing to do so. Not this boy, you know?
I naturally wish you all the best that this life has to offer a person regardless of what investment strategy you elect to follow, Anonymous.
Rob
“ In the event that Shiller’s Nobel-prize-winning research is legitimate research (I believe it is), every Buy-and-Hold portfolio that was ever constructed was a failure. ”
There hasn’t been a failure. We can look at the data. Thus, your interpretation is wrong.
The data shows that increasing risk while lowering return is a bad combination. There’s 150 years of data supporting Shiller’s Nobel-prize-winning research findings. The stock market is mot efficient. Any investment strategy rooted in a belief that it is is going to do long-term harm to the investors who follow it.
That’s my sincere take re these terribly important matters, in any event.
Rob
You risk forward looking assumptions. You don’t risk adjust actual outcomes. As you said, you are not a math person.
I’m certainly not a math person. No argument there.
You don’t need to be a math person to read Robert Shiller’s book on “Irrational Exuberance.” If Shiller’s Nobel-prize-winning research is legitimate, then stocks are a lot more risky when irrational exuberance is sky high (when the CAPE value is off the charts) than they are when irrational exuberance is under control (when the CAPE value is at moderate or low levels).
Shiller published a paper in 1996 telling investors that, given the insane CAPE value that applied at the time, stock investors who failed to lower their stock allocation would live to regret that decision in 10 years. As things turned out, today’s CAPE level is even more insane that the one that applied in 1996. When you say that you don’t risk-adjust actual outcomes, it seems to me that you are saying that, now that we know how things turned out, we should not be saying that the many stock investors who ignored Shiller’s advice (Buy-and-Holders) did not take on a crazy amount of risk by doing so. Is that what you are saying?
If it is, I certainly do not agree. I think those investors were nutso. I acknowledge that things have not yet turned out too bad for them. But, if they continue to take on insane levels of risk, sooner or later they are going to get burned. That’s certainly how it has been playing out for 150 years now, which is as far back as we have good records of stock prices. No one can say precisely when a price crash is going to come. So investors can get away with following Buy-and-Hold strategies for a time. But not indefinitely. Prices always sooner or later return to fair-value levels. The market could not continue to function if they didn’t. The core purpose of a market is to set prices properly. The relentless promotion of Get Rich Quick/Buy-and-Hold strategies slows down that process but it does not do away with it.
My advice is that investors always engage in the amount of market timing needed to keep their risk profile constant over time. I would never tell an investor that because he got away with a high-risk strategy for a time that it made sense to continue following it. The aim should be to never take on more risk than one can handle. Those following price-indifferent (Buy-and-Hold) strategies thereby ensure that sooner or later their risk profile will be a wildly inappropriate one for someone with their risk tolerance. For what purpose, you know?
Rob
“ My advice is that investors always engage in the amount of market timing needed to keep their risk profile constant over time. I would never tell an investor that because he got away with a high-risk strategy for a time that it made sense to continue following it.”
A buy and hold strategy with a 4% SWR has never failed, yet there has never been one successful outcome with market timing. It hasn’t worked for you. Why will it work for others?
A retirement calling for a 4 percent withdrawal has never failed. But there are some valuation levels at which such a retirement would be super, super, super safe and there are other valuation levels at which such a retirement would be extremely risky. Why not tell people that? Why the deception?
A good number of the people who posted at the Retire Early board had become friends of mine over the years.
Rob
You said buy and hold has never worked. Now you say it has. You push a market timing strategy that has never had a successful outcome. If you needed heart surgery, would you go to a guy that has had hundreds of successful outcomes or would you go with the guy that has never performed surgery?
Buy-and-Hold was not working when it encouraged people to take on far more risk with their retirement plans than they intended to take on. Getting the numbers wrong in retirement studies is not working, it is failing. Big time.
If I was in need of heart surgery, I would want to find a doctor who was up to date with the peer-reviewed research in the medical field.
Rob
You can’t even show one buy and hold failure, nor one successful market ting case. If you were a doctor, you would be charged with malpractice.
We disagree, Anonymous.
But I do wish you all the best that this life has to offer a person, in any event.
Rob
“ We disagree, Anonymous.”
All you have to do is show just one failure. It is just like the death threat claim and the job threat claim. You can never back it up with actual proof.
I have answered your question. Every case in which someone fell for the 4 percent rule was a failure. The idea is to offer accurate and honest investment advice. Getting the numbers wildly wrong in retirement studies is not a good thing.
If we were all thinking clearly, there wouldn’t be one person who would disagree. It is the Get Rich Quick attitude toward stock investing that Buy-and-Hold encourages that is responsible for this crazy way of looking at things. Buy-and-Hold is a strategy that puts emotion above reason. I believe in playing it just the other way (it is because Buy-and-Holders claimed to believe in following the peer-reviewed research that I was a Buy-and-Holder myself at one time).
Rob
Wrong again. You have never provided any proof to back up your claims. You don’t even have to show me all. Just show one failure.
You don’t provide proof of your claims because it exposes your lies.
Okay, Anonymous.
Rob
“A retirement calling for a 4 percent withdrawal has never failed.”
“Every case in which someone fell for the 4 percent rule was a failure.”
Yes.
If someone drove a car on tens of thousands of occasions and never had a single accident but had accidents that didn’t quite kill him on each of the three occasions on which he drove drunk, he would be wrong to conclude from that set of experiences that “driving drunk is 100 percent safe.”
It is correct to say that a retirement calling for a 4 percent withdrawal has never failed. It is false and dangerous to say that a retirement calling for a 4 percent withdrawal is “100 percent safe” regardless of the valuation level that applies on the day the retirement begins. We should all be permitted to tell the truth about these matters. The deception and the bullying that stop people from calling out the deception serve no good purpose.
If we were all thinking clearly about these matters, there wouldn’t be one person who would object to permitting honest posting at every site on the internet. The problem is that there is 4o years of peer-reviewed research showing that valuations affect long-term returns (that market timing/price discipline is always required). If we permit honest posting on safe withdrawal rates, where is it going to stop? Next we will be permitting honest posting on asset allocation. Then we will be permitting honest posting on risk management. The next thing you know it, the entire Buy-and-Hold house of cards will come tumbling to the ground.
Which would be a very good thing for the people of the United States. But the people who have high-paying jobs pushing the pure Get Rich Quick approach to stock investing don’t see it that way. There is zero intellectual support for the “idea” that market timing is not always required. But there is huge institutional support for his “idea.” So for the time being we continue to see the dangerous Buy-and-Hold stuff promoted morning, noon and night, bringing our CAPE value even higher and putting us all at more and more danger of seeing another Buy-and-Hold Crisis.
Will some people work up the courage to speak out following the next price crash? I believe so. I sure hope so. But we’ll see, you know?
My best and warmest wishes to you and yours.
Rob
“ It is correct to say that a retirement calling for a 4 percent withdrawal has never failed. ”
Yet you previous said it failed.
If a person is seeking to construct a safe retirement and he is misled by some internet goon about what’s safe and he instead constructs a wildly risky retirement, that’s a failure. Could anything be more clear?
If we were all thinking clearly, we would all support the idea of opening every discussion board and blog on the internet to honest posting re the last 40 years of peer-reviewed research.
My sincere take.
Rob
“ If a person is seeking to construct a safe retirement and he is misled by some internet goon about what’s safe and he instead constructs a wildly risky retirement, that’s a failure. Could anything be more clear?”
Yet you haven’t been able to construct a safe retirement for yourself, while others have. Why should anyone listen to you?
Thousands have listened to me and thanked me for being the first to tell them the truth about how stock investing works.
If that weren’t so, you Goons would never have engaged in a single criminal act.
Either it will all come out in the days following the next price crash or it will not. I believe it will all come out. But we’ll see, you know?
My best wishes.
Rob