A Rich Life

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

“Over the Past 20 Years You Have Shown a Lot More Interest in My Personal Financial Status Than in Getting the Error in the Greaney Retirement Study Corrected. I Wonder Why.”

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

So who is financially supporting you now?

Over the past 20 years you have shown a lot more interest in my personal financial status than in getting the error in the Greaney retirement study corrected. I wonder why.

Rob

Comments

  1. First of all, there is no error, as thousands have told you time and again. Secondly, this is all about a successful retirement, right? Asking you and everyone else about their retirement funding and status is the key measure. This is how we determine who is right. If a buy and holder had gone broke with his strategy, you would be the first to point it out. You seem to want to avoid this topic. I wonder why?

  2. There are lots of Buy-and-Holders who went broke during the Buy-and-Hold Crisis of 1929. There were lots of Buy-and-Holders who suffered serious losses in the Buy-and-Hold Crisis of 2008. Our entire economic system suffered a near collapse in the Buy-and-Hold Crisis of 1929. And we saw political damage both in the crisis of 1929 and in the crisis of 2008.

    Now that we have 42 years of peer-reviewed research showing us how to avoid future Buy-and-Hold Crises (encourage market timing whenever irrational exuberance begins to get out of conrol), we should all work together to reap the benefits of that research by permitting honest posting at every discussion board and blog, without a single exception. That’s my sincere take, Anonymous.

    Buy-and-Hold/price indifference always subtracts, it never adds. It is a logical impossibility that price indifference could ever be a good thing. All that Shiller’s Nobel-prize-winning research really did is to show that things work the same way in the stock market as they do in every other market that has ever existed. Buy-and-Hold is the past, Valuation-Informed Indexing is the future.

    Rob

  3. There was no such thing as buy and hold back in 1929. Here is a history lesson for you:

    https://www.studentsofhistory.com/black-tuesday-the-stock-crash

    Nothing today is the same as 1929. We did not have the level of financial disclosure, we did not have the same level of Federal oversight (SEC, etc.), financials did not have the level of rigor as today (audited financials), earnings were not calculated the same way (GAAP), etc.

    We have asked you many times to open up your website to honest posting, but you refuse.

  4. The Buy-and-Hold concept has been around for as long as there has been a stock market. The only difference between what you believe about stocks and what I believe about stocks is that I believe we should always adjust for irrational exuberance. So, when you calculate the safe withdrawal rate, you come up with the same number (4 percent) at all times. I say that we should adjust for irrational exuberance. So you get 1.6 percent when stocks are priced as they were in 2000 and 9.0 percent when stocks are priced as they were in 1981. That’s the only thing we have been talking about for 21 years now. That’s the cause of the death threats and the acts of extortion and all the rest. I say that we all should be working together to rein in irrational exuberance (through market timing!) and you say that we should just let it run wild.

    The only difference today is that we have 42 years of peer-reviewed research showing that irrational exuberance is a real thing and that it is very dangerous. We didn’t have that in 1919. So you could argue that the Great Depression was just one of those things. We didn;t understand in 1929 that the widespread promotion of a pure Buy-and-Hold/Get Rich Quick approach to stock investing would eventually lead to a Great Depression. Now we do. We can today avoid future bull markets and future bear markets and future economic crises by openng every site to honest posting re the last 42 years of peer-reviewed research. Given that we now have that amazing option available to us, I believe that we should do it.

    Rob

  5. “ The Buy-and-Hold concept has been around for as long as there has been a stock market.”

    Wrong, there has only been market speculation since the beginning (which is also market timing). By accident on your part, you are actually making the case of why marketing timing has been a failure. People in 1929 were buying heavily on margin. Sorry, but we have no interest in ending up like you.

  6. We disagree.

    You are suggesting that you oppose speculation. But what could be more speculative than treating irrational exuberance gains as if they were real economically supported gains. We have 150 years of stock market history available to us to study. Not once in that time have irrational exuberance gains ever lasted. They always disappear into thin air in time. And yet the Buy-and-Holders say that it is okay to count those gains when calculating the safe withdrawal rate. They advise people to count irrationanl exuberance when determining whether they have accumulated enough assets to be able to hand in a resignation from a high-paying job and begin an early retirement. It would be “100 percent safe” to do that, according to our favorite Buy-and-Holders, John Greaney.

    Not this boy.

    I wish you all good things, Anonymous.

    Rob

  8. I strongly disagree.

    An investor determines what his asset allocation should be, based largely on his risk tolerance. Then the CAPE level changes because the community of stock investors has become more irrational. In a world in which valuations affect long-term returns (the world we live in, according to Shiller’s Nobel-prize-winning research), the investor must engage in market timing to Stay the Course in a meaningful way. If he stays at the same stock allocation, he is permitting his risk profile to get wildly out of whack for no good reason whatsoever.

    It’s the Buy-and-Holder who is engaging in speculation, He is implicitly saying “maybe stocks will behave differently this time than they ever have in the past. maybe I will not suffer that big a penalty for failing to engage in market timing, who the heck knows?” That’s speculation. Valuation-Informed Indexing is sticking to the same risk profile no matter how exuberant or depressed the rest of the market gets. Valuation-Informed Indexers tune out all of the Buy-and-Hold/Get Rich Quick stuff with the thought that the market may continue behaving somewhat the same as it has always behaved in the past, as revealed by the past 42 years of peer-reviewed research in this field.

    I don’t believe that there is any speculation involved in believing that stocks will continue to perform in the future somewhat as they always have in the past. It’s theoretically possible that stocks will today begin performing in entirely new ways, in ways that would make Buy-and-Hold a sound strategy. I cannot see into the future. I cannot say with absolute certainty. But given that the entire historical record shows that market timing/price discipline is essential, I consider Valuation-Informed Indexing the far safer bet. I don’t consider it speculation to use the peer-reviewed research for guidance. I consider it speculation to ignore what the peer-reviewed research says.

    Rob

  10. If you fail to make the necessary adjustments re irrational exuberance and the $500 million settlement that I will receive in the days following the next Buy-and-Hold Crisis, your portfolio is doing better. If you make the adjustments, mine is doing better.

    The research does not show that Valuation-Informed Indexing strategies will always work immediately. It shows that they will always produce higher returns at less risk in the long term.

    Rob

  11. The grocery store accepts my money. Can you buy groceries with any of that $500 million windfall?

  12. I cannot.

    But I have the peace of mind that comes from following a research-based strategy. If I was counting irrational exuberance gains as real, I couldn’t sleep at night knowing that my retirement plan could collapse at any moment when those pretend gains went “Poof!”

    I believe that there’s a good chance that the stock market will continue in the future to perform at least somewhat as it always has in the past. The Bennett/Pfau research shows that in the long term those who followed research-based strategies have always ended up being able to purchase a lot more groceries than those who went with a pure Get Rich Quick/Buy-and-Hold “strategy.”

    Rob

  13. I prefer a plan that can pay for groceries and all the other bills. Fairytales are for children.

  14. Buy-and-Hold does a better job at helping pay for the groceries for so long as the CAPE value remains where it is today. That’s the entire appeal of the strategy. If it weren’t for the funny money aspect, everyone would want to know the true value of his or her portfolio and not one person would favor a ban on honest posting re the peer-reviewed research.

    Rob

  15. You have been telling everyone for over 20 years that they would have a failed retirement due to a crash and each of your predictions never come true. Meanwhile, you haven’t collected a dime of your anticipated $500 million windfall. You and I are both at the age of retirement, which means that we have “all seen in play out”.

  16. I disagree. Every bull market in history has eventually produced a bear market and every bear market in history has eventually produced a Buy-and-Hold Crisis. We have seen a very long bull market. We have not yet experienced the Buy-and-Hold Crisis that will inevitably follow from it.

    Do you believe that irrational exuberance is a good thing? I believe that it is a bad thing. If it were a good thing, Shiller would have put an exclamation point at the end of the phrase. The book’s title is not: Irrational Ecuberance!

    Rob

  17. You keep making a good case for buy and hold. No one, including you, has been able to time the market. We all know that markets go up in the long term, so if we avoid the mistakes of timing, we always make money in the market.

  18. I 100 percent agree with you that the market will go up over the long term. I 100 percent disagree with you that timing is not of critical importance. Stocks are more risky when prices are high than they are when prices are moderate or low. Investors should want to Stay the Course in a meaningful way. Since risk changes with changes in valuation levels, investors need to adjust their stock allocation to keep their risk profile constant. The Bennett/Pfau resarch shows that for the entire history of the market timing has been increasing returns and diminishing risk. That’s investor heaven!

    Rob

  20. For the reason that I advanced when I offered them. It is a change in investor psychology that brings on a price crash. No one is able to tell when such a change is going to take place. It is a guessing game.

    Predicting that a crash will take place sooner or later is NOT a guessing game. It is the core job of the market to set prices properly. So sooner or later it is going to do that. If investors go nuts, they can set prices at all sorts of crazy places and keep them there for a long time. But those prices cannot remain in effect indefinitely. Prices always eventually return to fair-value levels.

    Long-term market timing always works. Short-term market timing never works (except by pure happenstance).

    Rob

  21. Yet it hasn’t worked for you or anyone else, will buy and hold has always worked. Have you read the millionaire next door? Have you read the millionaire survey of 10,000 conducted by Ramsey solutions? Notice that there are plenty of buy and hold successes by zero market timing successes.

  22. Those people were not exposed to Valuation-Informed Indexing. Prior to 1981, we didn’t have the Nobel-prize-winning research showing that market timing/price discipline is always required when buying stocks. And, from 1981 through today, we have had the cover-up, which has kept the number of investors who understand the importance of market timing to 10 percent of the population. I am seeking to change that. If we opened every site to honest posting, we could get that percentage up to 20 percent and then to 40 percent and then to 80 percent.

    The Bennett/Pfau research shows that adding market timing to the mix always increases return dramatically while also always dramatically reducing risk. It doesn’t get any better than that. If those people were able to achieve good results with Buy-and-Hold, can you imagine what they would have been able to do with Valuation-Informed Indexing?

    There was a time when people did not have a polio vaccine. People lived good lives in those days. But you know what? We are better off with a polio vaccine. We are lucky to be living at a time when Shiller’s Nobel-prize-winning research showing that market timing is always 100 percent required for every investor is available to all of us. Progress makes it possible for us all to live better, fuller, richer lives. There is no downside.

    Rob

  23. You say that the research says something, and I believe it says something different than that. In the end, we just look at results. My plan worked. Your plan failed.

  24. Each investor should be able to hear those on both sides make their best case and decide for himself or herself. There should never have been an iota of intimidation, much less any of the criminal stuff.

    That’s my sincere take.

    Rob