A Rich Life

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

Valuation-Informed Indexing #658: Is the Opposition to Market Timing Just a Marketing Gimmick?

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I’ve posted Entry #658 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Is the Opposition to Market Timing Just a Marketing Gimmick?

Juicy Excerpt: Market timing is a great strategy for achieving superior long-term results. But the marketing case for it is at times dubious. Could that be the reason why so many of the experts in this field are reluctant to endorse it?

Comments

  1. Remember when Wade said this: “ What is Step 2? There isn’t one. You will still be in the same position as you’ve been in for the last 10 years.”

    He was wrong. You are not in the same position as 10 years ago. You are in a much worse position. Your savings are now depleted, your wife divorced you and you lost your house. It is often said that drug addicts and alcoholics finally seek help when they hit rock bottom. You have hit rock bottom, yet your are so far gone that you can’t even deal with the reality of the situation. You have experienced a major failure and your future is bleak, unless there is some kind of miracle.

  2. Woe is me, Anonymous.

    The miracle is the learning process that is taking place in the background as we speak. It’s been going on for 42 years now. No, it has not yet come to full fruition. I obviously wish that it had. But for every negative thing that you can point to in “defense” of the suppression of discussion of the last 42 years of peer-reviewed research, I can point to 20 positive things that show why it is so important that we keep in mind why we permit honest posting re the research in every other field.

    We are not a bad people. We just are not. We are not a perfect people. But we are a fundamentally good people. So we all need to count our blessings (while not losing sight of the weaknesses that have been brought to our attention and that need to be addressed) and soldier on to the best of our ability. That’s where I am coming from re this thing in any event.

    Step Two is opening every site on the internet to honest posting re the past 42 years of peer-reviewed research in this field. We are close. I believe that it will happens in the days (it may take years of days, of course) following the onset of the next Buy-and-Hold Crisis. Given that today’s CAPE value is 31, there is good reason to believe that we are close. We are obviously not living in the promised land today. But we are close. So I solder on. I hope that that works for you.

    Saying that there is no Step Two is an expression of cynicism. If it really were so that there is no possibility that we could ever again as a nation of people advance in our understanding of how stock investing works, we should just shut down all the peer-reviewed journals. We haven’t done that. Why? Because we believe in some level of consciousness that further learning experiences are possible, that that excitement that Wade felt when he declared that “Yes, Virginia, Valuation Informed Indexing works!” is real and important. I want millions of people to be able to experience that flood of good feeling that I saw Wade experience when we were working on our research together.

    I believe that Wade will flip back in the days following the onset of the next Buy-and-Hold Crisis and that we will have more fun times together. If I were king of the world, he never would have felt even a tiny flicker of concern that anything bad would happen to him if he did honest research in this field. We need more people doing honest research, not fewer. The last thing we need is more people seeking to avoid having your abusiveness directed at us by doing what it takes to appease you Goons. So I make an effort not to go there.

    I believe in being polite. So I do that. But I continue to say that I believe that the retirement study posted at John Greaney’s web site lacks an adjustment for the valuation level that applies on the day the retirement begins. When everyone who works in this field feels 100 percent comfortable saying that at every site on the internet, we all will be in a far better place than we are in today. Getting safe withdrawal rates right matters. The people who use retirement studies for help in planning their retirements matter.

    That’s where I am coming from re this one, in any event. My best and warmest wishes to you and yours.

    Rob

  3. Wade sees the wall of abuse that a person faces if he seeks to speak honestly re the last 42 years of peer-reviewed research as an obstacle and concludes that it is not worth the personal cost that it would take to overcome that obstacle. I don’t like the personal cost that must be paid one tiny bit. So we are in agreement re that much. But I interpret the reality of the personal cost that must be paid in a different way. I see it as the EXPLANATION of why we have not advanced in our understanding of how stock investing works despite having Shiller’s amazing research findings available to us for four decades now. I see the wall of abuse as something that must be overcome if we all are to live better and fuller and richer and freer lives in the future.

    The abusive posting is part of the story of stock investing. It is the emotional part that the people who came up with the Efficient Market Theory overlooked and that Shiller focused on in producing his Nobel-prize-winning research. If we ignore the emotional stuff (which trsanslates into abusive stuff when the question on the table is whether we should permit discussion of the last 42 years of peer-reviewed research), we are missing out on understanding 70 percent of the stock investing story. That 70 percent is a big deal. It is because Shiller put that 70 percent on the table that his work was important enough for him to be awarded a Nobel prize.

    So Wade concludes: “It isn’t worth it.” And I conclude: “It is really, really, really worth it, the abusisve stuff shows why it is so important to explore this stuff.” I hate the absive stuff. I don’t like it one tiny bit. But it is a motivator for me because it points to something so important that is holding us all back, our desire to convince ourselves that the emotional element of the stock investing story can be ignored and that was can all just follow Buy-and-Hold/price indifferent strategies. I don’t believe that. I believe that price indifferent strategies end up causing an ocean of human misery. I believe that Buy-and-Hold as currently practiced is dangerous stuff. I believe that Buy-and-Hold needs to be modified according to what we have learned from the last 42 years of peer-reviewed resarch. I call that modified form of Buy-and-Hold “Valuation-Informed Indexing.”

    The mistake that the Buy-and-Holders made in the early days was leaving out the emotional stuff that so concerns Wade, that he cynically tells himself can never be overcome. I believe that it can be overcome. I sure hope so! I believe that the overcoming of that emotional stuff is the core job of anyone working in the investment advice field. To give up re the emotional stuff is to give up on the project of offering sound investment advice.

    If Wade truly believes that it is impossible to surmount that wall, he should be looking for another line of work. I believe that he will flip back in days to come and that he will at that time regret ever having flippeed to the Goon side. Wade is not a Goon at heart. He is just afraid of what you Goons can do to harm his career. And his decision to suppress the discussion of his own sincere beliefs is certainly not helping in that regard. Each time you Goons win one, it makes things harder for everyone possessing a desire to do honest work in this field.

    I naturally wish you the best of luck in all of your future life endeavors.

    Rob

  4. If there was a real step 2, it would have happened. You are living in a fantasy world, Rob.

  6. “ The miracle is the learning process that is taking place in the background as we speak.”

    You lost all your money, you lost your wife and you lost your home. What did you learn from all that?

  7. I learned that the Get Rich Quick/Buy-and-Hold urge is a very strong thing. It would be very easy to overcome it if investors were 100 percent rational, as was assumed by the people who concluded that there is no real need for market timing because the market is efficient. It’s not easy to overcome at all. Getting investors to appreciate the critical importance of market timing/price discipline is a big job. It’s a point that needs to be made daily if we are as a nation of people going to rein in irrational exuberance and avoid having to suffer another one of these horrible Buy-and-Hold Crises.

    Leave you Goons aside. You bring a lot of ugliness to the table. But the full reality is that you are extreme outlier personalities. In ordinary circumstances, you couldn’t get to first base with the 90 percent of Normals. So how the heck do you pull off what you have pulled off for 21 years running now? A lot of the Normals LIKE irrational exuberance. They want to believe in Buy-and-Hold. They count irrational exuberance gains as if they were real, just as you Goons do.

    It’s nice to have 42 years of peer-reviewed research showing us all the realities of stock investing. But having Shiller’s book carried in quality libraries everywhere doesn’t get the job done. We will need to open every discssion board and blog to honest posting if we want to get that CAPE level down to a reasonable level.

    Irrational exuberance isn’t hard to understand. It’s the oldest story in the book — humans have a desire within to get something for nothing. But it takes a lot of work to protect ourselves from the ocean of misery that inevitably follows once Get Rich Quick/Buy-and-Hold strategies become popular.

    Do you see?

    Rob