A Rich Life

The Old Ideas on Saving & Investing Don't Work -- Here's What Does

“The Only Threat Is to the Buy-and-Hold Model for Understanding How Stock Investing Works.”

by

Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

You are the only one making threats and calling people names.

You Goons consider it a threat when I say that I do not believe that the retirement study posted at John Greaney’s web site contains a valuation adjustment.

The only threat is to the Buy-and-Hold Model for understanding how stock investing works.

Rob

Comments

  1. “ The only threat is to the Buy-and-Hold Model for understanding how stock investing works.”

    You say you know more about how investing works, yet you have stayed out of stocks for over 25 years and you are broke.

  2. The last 25 years have been the worst time to own stocks in the history of the United States. It’s not me who says that. It is the CAPE values that have applied over that time that say that.

    We should all want stocks to be an appealing asset class. To do that, we need to open every discussion board and blog on the internet to honest posting re the past 41 years of peer-reviewed research in this field.

    Have you considered that stocks may continue to perform on the future somewhat as they have always performed in the past. What do we do in that event? I think that we should all be working together every day to get that CAPE value down. Irrational exuberance is the cancer of the personal finance world. We shouldn’t be playing around with cancer. We should be getting rid of it so that we can all obtain higher returns while taking on less risk.

    Vote no on cancer! Vote no on high CAPE values!

    Rob

  3. “You Goons consider it a threat when I say that I do not believe that the retirement study posted at John Greaney’s web site contains a valuation adjustment.”

    Repeatedly saying that Greaney’s study doesn’t not contain a valuation adjustment when no-one has ever claimed that it has, simply illustrates that you are incapable of debating investment issues and would rather discuss non issues.

  4. “ The last 25 years have been the worst time to own stocks in the history of the United States. It’s not me who says that. It is the CAPE values that have applied over that time that say that.”

    Wrong, shall we compare investment accounts to see who is right? Last I checked, the only thing you had left was a Dream of getting a $500 million windfall fitting for a new chapter in a fairytale book.

  5. Repeatedly saying that Greaney’s study doesn’t not contain a valuation adjustment when no-one has ever claimed that it has, simply illustrates that you are incapable of debating investment issues and would rather discuss non issues.

    It’s a very important issue. I pointed out the error in the study on the morning of May 13, 2002. It hasn’t been corrected to this day, 20 years later. What does that say about the investment advice field, that someone can get a number wrong in a retirement study and get away with not correcting it for 20 years? It doesn’t say anything good.

    A failed retirement is a serious life setback.

    Rob

  6. Wrong, shall we compare investment accounts to see who is right? Last I checked, the only thing you had left was a Dream of getting a $500 million windfall fitting for a new chapter in a fairytale book.

    And you count irrational exuberance as if it were real money. Use real numbers and you will get very different results. What if stocks continue to perform in the future somewhat as they have always performed in the past?

    Rob

  7. “that someone can get a number wrong in a retirement study”

    You have admitted that Greaney (and Trinity and Bengen) got the number right by correctly calculating the inflation adjusted withdrawal rate that survived every period in the historical record.

  8. That number is not the safe withdrawal rate at many valuation levels. There are some where it is safe There are others where it is wildly risky. Don’t you think that people putting retirement plans together need to know the real numbers? You cant get the real numbers right without taking the valuation level that applies on the day the retirement begins into accounr.

    Yes?

    Rob

  9. “ And you count irrational exuberance as if it were real money. Use real numbers and you will get very different results.”

    Real numbers? Real money? You mean like basing all of your hopes on a $500 million windfall?

  10. How is it a windfall if I open every discussion board and blog on the internet to honest posting re the last 41 years of peer-reviewed research in this field, without a single exception? When that goal is achieved, we will all be able to retire many years sooner while taking in far less risk with our investments. We will all be living better lives.

    I earned that money many times over by standing up to you Goons. Do you see anyone else doing that? Money earned many rimes over is not a “windfall.” That’s Goon talk.

    Rob

  11. “ I earned that money many times over by standing up to you Goons. Do you see anyone else doing that? Money earned many rimes over is not a “windfall.” That’s Goon talk.”

    By the same logic, I earned Trillions of dollars warning people of timing schemes. But we all know that nothing is earned until the other party has agreed that this is a value they will pay. You have just invented a story and numbers. Heck, we can all do that. What counts is the number on your financial statement.

  12. How have earned anything when no one agreed to pay you anything. Until someone says they will pay you, it is all made up.

  13. By the same logic, I earned Trillions of dollars warning people of timing schemes. But we all know that nothing is earned until the other party has agreed that this is a value they will pay. You have just invented a story and numbers. Heck, we can all do that. What counts is the number on your financial statement.

    I don’t agree that the number that counts is the one on your financial statement. Irrational exuberance is a real thing. You have to adjust the number on your financial statement for the amount of irrational exuberance present in the price of stocks at the time to identify the real and lasting value of your portfolio.

    There is a reason why Shiller was awarded a Nobel prize. He wasn’t saying the same thing as the Buy-and-Holders who came before him.

    Rob

  14. “You have to adjust the number on your financial statement for the amount of irrational exuberance present in the price of stocks at the time to identify the real and lasting value of your portfolio.”

    The only number that matters is the market value I receive for stocks when I sell them.

  15. How have earned anything when no one agreed to pay you anything. Until someone says they will pay you, it is all made up.

    You are describing the ordinary situation. In the ordinary situation, Greaney would have correcred his study on the afternoon of May 13, 2002. After we got the Greaney study corrected, we would have gotten all the other Buy-and-Hold retirement studies corrected. Then we would have turned to all the other issues — asset allocation, risk management, retirement planning in general, etc. All of the textbooks would have been corrected. We would have gotten the CAPE value brought down to a reasonable levels. We would have had thousands of people posting here every day and that would have brought money into me in hundreds of ways, certainly more than $500 million over the past 20 years. There would have been speeches and tape sets and books and on and on from the fellow who discovered the error in the Buy-and-Hold retirement studies.

    That entire process was put on hold when you Goons engaged in first abusive and then criminal behavior to stop people from hearing first about the error in the study and then about all the othjer problems associated with the relentless promotion of Get Rich Quick/Buy and-Hold. If Buy-and-Hold were a real thing, none of that would have happened. If it were a real thing, every Buy-and-Holder alive would want to get the numbers in retirement studies right.

    We are living in a strange Twilight Zone world. We know how stock investing works today. Shiller snapped that last critical puzzle piece into place with his Nobel-prize-winning research of 1981 showing that valuations affect long-term returns, that going pure Get Rich Quick/Buy-and-Hold just ain’t the way. But the Buy-and-Holders did not want to acknowledge their error. So we still have people saying that market timing (price discipline!) is not always required 41 years later. Stocks are today priced to bring on yet another Buy-and-Hold Crisis. But people in this field just walk around as if it is no big deal, as if it is business as usual. Presumably, it will all work out somehow, some way.

    I don’t think it is all going to work out. I think we should have started work to get that CAPE value down on the afternoon of May 13, 2002, or., better yet, in 1981, when we learned how important it is to keep the CAPE value stable. There was no need to get it down in 1981 because stock prices were already insanely low. But we should have been trying to get it up so that we could have gotten out of the recession that we were in at that time. We all should have been working together on that project given that we are all affected by the Buy-and-Hold Crisis that we see when stock prices get to the levels we saw prior to the 2008 Buy-and-Hold Crisis and today.

    Stock prices don’t get to the right place automatically. It’s investors who set them. And investor cannot make rational choice unless they have access to accurate and informed reports on the peer-reviewed research in the field. That’s why I say that we should open every site to honest posting. Then there is no problem. But that step is absolutely critical. It is worth a lot more than $500 million to our society to have a functioning stock market.

    Are there going to be people who work up the courage to stand up to you Goons in the days following the next Buy-and-Hold Crisis? I believe that there will be. We already have 10 percent of the population that believes that Shiller’s Nobel-prize-winning research is legitimate research. I believe that the next Buy-and-Hold Crisis will bring that percentage up to 20 percent. Then we are all off to the races. Research-based advice on stock investing will just spread and spread and spread. We will experience the greatest economic surge in our nation’s history (after experiencing a very scary Buy-and-Hold Crisis, to be sure).

    I think we are a good people at heart. I think we are going to get there. I think that there will come a day when the Greaney retitrement study will either be corrected or taken down altogether. I believed that the pure Get Rich Quickl/Buy-and-Hold “strategy” has had its day in the sun and will be no more in the days following the next Buy-and-Hold Crisis. But we will all just have to be patient and let things play out how they will play out to be sure.

    My best wishes.

    Rpb

  16. The only number that matters is the market value I receive for stocks when I sell them.

    If Shiller’s Nobel-prize-winning research is legitimate research, that market value will be changing with the next Buy-and-Hold Crisis. I think we should permit people to learn what the peer-reviewed research says so that the market value would not get so far out of whack as to cause an economic crisis.

    I am not even able to imagine any downside.

    Rob

  17. “that market value will be changing with the next Buy-and-Hold Crisis.”

    There have been market crashes and declines throughout recorded history. I have experienced two 50% crashes in my investing career. It will not shock me if I experience a couple more.

    If you are unwilling to stomach the volatility that goes along with stock ownership then a 0% stock allocation probably makes sense for you.

  18. The more that people know about what the last 41 years of peer-reviewed research teaches us all about how stock investing works, the less volatility in prices we will see. In a world in which honest posting re the peer-reviewed research was permitted, stock prices would be self-correcting. The Get Rich Quick/Buy-and-Hold impulse that resides within all of us would push them up a bit. But then consideration of what the peer-reviewed research teaches us about how it is necessary to engage in market to keep our risk profile constant over time would pull them back down to reasonable levels again. Stock prices are self-regulating in a properly functioning market. And, if investors had easy access to accurate reports on which the last 41 years of peer-reviewed research says, they would be able to make the rational choices that are needed for the market to function properly.

    Yes, we have survived earlier Buy-and-Hold Crisies. But just barely in some cases. The Buy-and-Hold Crisis of 1929 ruined millions of lives. The Buy-and-Hold Crisis of 2012 caused a lot of the political frictions that we are still struggling with today. The Buy-and-Hold Crisis of the 1970s caused stagflation and hyper inflation. I could do without all of that sort of thing. Telling the truth about how stock investing works will not eliminate price volatility altogether. But it will bring it dwn to much less dangerous levels. I believe that we could see a situation where we never again see the CAPE value drop below 12 or rise above 22. The key is that we all pull together and word toward the goal of getting as much accurate information on how stock investing works to as many stock investors as possible.

    I would open every site on the internet to honest posting re the peer-reviewed research. I am not able to imagine any downside.

    Rob

  19. And everything has worked out just great for you, right? Market timing for you, just like everyone else, has been a disaster.

  20. I have a great idea! Why don’t you create some YouTube videos. I am sure they will go viral!

  21. And everything has worked out just great for you, right? Market timing for you, just like everyone else, has been a disaster.

    Yes, it has worked out great. The criminal behavior of you Goons has been a huge negative. But that’s been the only negative.

    I have learned things about stock investing over the past 20 years that I would not have believed possible before undergoing the experience. It all started by me working up the courage to point out the error in the Greaney retirement study (it lacks an adjustment for the valuation level that applies on the day the retirement begins). You have to have the courage to deal honestly with a single issue. And then all sorts of doors open up. It’s amazing.

    The Bennett/Pfau peer-reviewed research shows that market timing has worked on a risk-adjusted basis for every investor who has ever tried it (with the exception of short-term timing — that really never works, just as the Buy-and-Holders say). How could it not work? Market timing is price discipline? Is there any other market in which exercising price discipline doesn’t always pay off? When you think about it a bit, you realize that the idea that there might be some circumstance in which long-term market timing wouldn’t work is absurd. The research shows that it always works. Common sense tells us that it always MUST work. The research really just confirms that what must be so really is so.

    Rob

  22. I have a great idea! Why don’t you create some YouTube videos. I am sure they will go viral!

    I believe that they will go viral in the days following the next Buy-and-Hold Crisis, The big benefit of peer-reviewed research is that it gets you out of the present day and permits you to see what works in the long term. Most people believe that stocks will continue performing as they have in recent years. The research shows that when we see insane price increases, insane price drops are up ahead. When people see those insane price drops with their own eyes, I believe that that will make them question the relentless promotion of the pure Get Rich Quick/Buy and Hold “strategy.

    At that point, research-based strategies will become much more popular. We have to put Buy-and-Hold behind us before we can move on to true research-based strategies. The Buy-and-Holders can’t stand it when people talk about what the last 41 years of peer-reviewed research shows.

    Rob

  23. What do you really have to say? What would you have to sell? You have about 4 lines that you just repeat over and over again. Just look at this thread and how many times you have already repeated yourself in the same thread. Then compare it to all your other posts on this website. Repeat, repeat, repeat, etc.

  24. “Permit honest posting re the past 41 years of peer-reviewed research at every discussion board and blog on the internet, without a single exception” is a pretty darn important line, Anonymous. Do that and in not too much time you will have thousands and thousands of good and smart people contributing helpful insights re how stock investing works. The is enormous leverage to be had in opening the entire interest to honest posting. Off the charts.

    Rob