I’ve posted Entry #603 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Is Stock Investing Gambling?
Juicy Excerpt: I remember my parents having a conversation at the breakfast table when I was eight years old. My mother claimed that stock investing was a form of gambling because you can gain money or lose money and you never know in advance which it is going to be. My father strongly disagreed. He said that investors are buying shares in real companies when they purchase stocks and that the fortunes of the companies are determined by economic realities. Today I believe that both of them were accurately describing a significant part of the stock investing experience.
Your mother and you are wrong, when you gamble, it is allot nothing. With stock, you own a piece of a company. While it can go up or down, you still own something. There is risk in everything. Holding cash has risk. Inflation is eating up those few dollars you have stuffed under your mattress. Tips, bonds and CDs have risk. An even bigger risk is not having an income stream. You have avoided the bigger issues and complexities.
We agree that there is risk in all inverstment classes, Anonymous. But at a time when the return on cash-like investment classes is 4 percent real and the likely long-term return on stocks is a negative number, I think it would be fair to say that the risk of investing in stocks is far greater.
Part of the job of people who write about investing is to help people to manage risk. People cannot manage their risk if they don’t even know the true and lasting value of their holdings. So we have to permit honest posting on the last 41 years of peer-reviewed research. I don’t see any other way to go.
Don’t you turn stock investing into gambling when you ban the honest discussion of 41 years of peer-reviewed research? It sure seems so to me.
Rob
You would be wrong. Bonds have just as much risk as stocks. Right now cash has huge risk to inflation. Not having an income is even more risky.
I think the biggest risk of all is committing criminal acts that will likely get you sent to prison in the days following the next Buy-and-Hold Crisis.
Call me madcap.
Rob
I think the biggest risk is making up stories as part of avoiding getting a job.
Okay, Anonymous.
Please take good care.
Rob
Your wife and priest agree with me.
Not entirely. On some points, yes. On other points, no.
Two priests that I spoke with told me that they thoight that I was doing the right thing. Two oihers said that I should put providing for my family financially first. That’s a draw.
My wife is definitely on the side of me putting providing for my family first. But she is repulsed by the bahavior of you Goons. She is sympanthetic to the circumstances in which your criminal behavior has placed me. But, yes, she strongly believes that I should put providing financially for the family first.
My view is that as a nation we need to get beyond this. Once every site has been opened to honest posting re the peer-reviewed research, we all will be living better lives. I see that as the priority. It’s never going to happen if those of us who believe that Shiller’s Nobel-prize-winning research is legitimate research forver live in fear of the Buy-and-Hold Goon squads. Someone has to stand up you if we all are going to be freed to live better lives. I think it would be fair to say that I was elected.
I watched a PBS documentary on Rachel Carson (author of “Silent Spring”) the other day. She started the encironmental movement. No one worried about the environment before she came along. That’s journalism! There are times when a message is so important that a person just needs to speak up. I believe that the finding of Shiller’s Nobel-prize-winning research (that valuations affect long-term returns and that, therefore, market timing is always required for every investor if the market is to remain functional) is such a message.
My best wishes to you.
Rob
Neither your wife or your priests have heard the other side of the story. Even without hearing it, most say you need to get a job.
Everybody has heard about Buy-and-Hold. We wouldn’t have a CAPE value of 30 today if everyone hadn’t heard about Buy-and-Hold.
And, yes, everyone agrees that a person needs to earn an income. I of course agree with that as well. But I am aware of the unusual circumstances that apply here. The Buy-and-Holders made a terrible mistake back in the 1960s in coming to believe that market timing (price discipline!) is not always 100 percent required for every investors and then that mistake was uncovered in 1981 by Robert Shiller’s Nobel-prize-winning research and rather than admit the mistake and fix it the Buy-and-Holders have been covering it up for 41 years now, putting millions of middle-class retirements at grave risk. All of the oeople who agree that everyone needs to earn an income would agree that that story needs to be told. Because it is the life savings of these millions of people who earned incomes for msny years so that someday they would be able to retire safely that is at risk here. People need to be able to provide for themselves. That’s why they need to earn an income. And that’s why we need to permit honest posting re the peer-reviewed research at every site. It’s the same principle at stake. If you believe, as you say that you do, that people need to earn an income, then you should also agree that honest posting re the peer-reviewed research should be permitted at every site.
My sincere take.
Rob
“ And, yes, everyone agrees that a person needs to earn an income. I of course agree with that as well. But I am aware of the unusual circumstances that apply here.”
No there is nothing special. You can still waste your time doing whatever you want, yet there is still plenty of time to work a job as well. Funny how you won’t admit that.
This is the most important public policy issue in the United States today. Everyone who works in this field should make it their top priority until every site on the internet had been opened to honest postingt re the last 41 years of peer-reviewed research in this field. It shouldn’t take 20 years to get an error corrected in a study that people use to plan their retirements. It shouldn’t take more thsn 20 hours.
Rob
“ This is the most important public policy issue in the United States today.”
No it is not. Just saying it doesn’t make it so. Providing for your family is a biblical imperative.
My family lives in the United States, Anonymous, An earlier Buy-and-Hold Crisis caused a Great Drepression. The CAPE value was even higher this time. We are here looking out the wipe-out of millions of families, not one. We can’t have a functioning nation and tell people that they need to provide for their own retirement and then not permit them any access to honest discussion of the peer-reviewed research. The ban on honest posting was a very, very, very bad idea.
Rob
You are not saving anyone and as said before, you have plenty of time to work a job AND continue with your internet nonsense. One does not keep you from the other.
Any time spent doing something other than the investing work takes away time that could have been devoted to the investing work. If someone spent 40 hours every week on an effort to open every internet site to honest posting re the last 41 years of peer-reviewed research and another 40 hours to income-producing work, he could have been spending 80 hours on the investing project.
To devote some portion of one’s time to income-producing work is to make a personal decision that that is one’s priority for that amoint of time. It’s hard for me to see how a person could make that decision knowing what I know — how many people will be hurt if the internet is not opened to honest posting, how many of the people who work in tbis field would like to see the internet opened to honest posting and so on. The one scenario I can see where it could make sense is, if the person feels that having an income would permit him to do the investing work for a longer amount of time. That doesn’t quite apply to me. I saved enough money earlier in life that I have been able to go 20 years without an income. But I am okay with the idea of taking on full-time paid enmployment so long as I have first producted my book on stock investing so that that will be available to the world when more people see the need for it. I see it as entirely possible (not certain but possible) that I will accept paid employment after I have completed the book.
Does that help?
Rob
You can work on a book and work a job. There are plenty of hours in a day. Millions of people work on more than one thing. There is nothing special in your case.
There is something special. Say that stocks continue to perform in the future at least somewhat as they have always performed in the past. That means that we will be going to a CAPE of 8. From a CAPE of 30. That’s a loss of something in the neighborhood of 70 percent. Not for one person. For millions and millions of people. All at the same time. Collective losses that big will cause a severe economic contraction (because people will react to the huge losses by cutting back on spending). So we will see hundreds of thousands of businesses go under and millions of people thrown out of work. We will see political frictions dramatically exacerbated. Especially when people find out that all of this was 100 percent avoidable, that peer-reviewed research was published 41 years ago pointing us all to a better way but that they have never seen it discussed because these Buy-and-Hold goon squads will not permit it.
Would you say that people should contiue sitting at their desks and doing their ordinary jobs when there is a bomb threat in the building? I say “no,” they should take quick action. They should make the removal of the bomb threatening everyone’s life a top priority. Our economic system is at risk. Even our political system is at risk. Our way of life cannot continue unless we find some way to make people aware of what Shiller’s Nobel-prize-winning research teaches us all about how stock investing works in the real world. Opening the entire internet to honest posting re the peer-reviewed research is not just a nice idea. It is an absolute imperative. We need to achieve this goal by the afternoon of May 13, 2002, if not a good bit sooner. We are already far, far behind schedule.
Have you considerd what it would mean for all of us and our futures if it turns out that I was right in what I said in my famous post from the morning of May 13, 2002 — that Greaney’s retirement study really does lack a valuation adjustment, just like I (and, in recent days, Evidence as well) said? Yikes! Holy moly! Yowsa! The proper thing to do when one learns that one got an important number wrong in a retirement study is to correct that darn study!
Do you see?
Rob
You have created a story by pulling bits and pieces together, along with a number of made up situations (like made up death threats) to give you cover for avoiding work. You are not a husband or father when your don’t support your family.
I’d say that you are not much of a citizen of your country if you are not willing to stand up to a gang of internet goons in defense of her.
Rob
Your wife doesn’t believe one bit of it and that is why she pleads with you to get a job.
She accepts that I have tapped into something important. She has told me that. But her focus is on the practical side. She feels that there needs to be money coming in. I am sympathetic to that position. But my focus is on the public policy side of the story.
In the normal state of affairs, people would have openly debated the merits of Buy-and-Hold versus the merits of Valuation-Informed Indexing going back to 1981. There never would have been any “controversy” over the need for the debate. In this particular case, things got off track early on. People who give investment advice need to be recognized as experts and it is a bit problemmatic to tell people that you are an expert while also telling them that there is another point of view on all the important qiuestions that would generate very different advice. So discussion of the minority point of view was suppressed. Then people came to feel that that suppression would come to be seen as a cover-up and the perceived need for further suppression great stronger and stronger.
I didn’t ask to be the leader of the effort to open every site on the internet to honest posting re the peer-reviewed research. I am just a journalist who discovered that there was some funny business going on when I told people about the error in the Greaney study and then witnessed this mass freak-out aimed at keeping the cover-up going. I was dragged into this. But, knowing that is affects millions of people in very serious ways, I don’t feel that I can just walk away. I need to give the effort of setting things straight my best shot. I couldn’t live with myself if I didn’t do that much. I believe that I will make plenty of money from this. But money is not my primary driver.
Rob
You have plenty of hours in the day to work a job and play out your little fantasy. You know that as well, but your goal is different than you state. Your goal is to avoid work.
An easy way to test that theory is to stop terrorizing board communities. Permit every discussion board and blog on the internet to allow honest posting and see what happens. I predict that I soon would be making so much money that there would be no need for me ever to look for other paid employment. In any event, I certainly would not need to spend any time trying to open the internet to honest posting. The job would be done, to the benefit of every single person living on the planet.
Rob