A Rich Life

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

Valuation-Informed Indexing #660: Market Timing Advice Will Improve When More Investors Become Aware of How Important It Is

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I’ve posted Entry #660 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Market Timing Advice Will Improve When More Investors Become Aware of How Important It Is.

Juicy Excerpt: It’s a rare thing to see an article explaining how best to engage in market timing. Most of today’s investors either don’t believe that market timing is necessary or don’t even believe that it works. So the demand for such articles is weak. I hope that that soon changes.

Comments

  2. I think it was. I would rather be broke and be able to sleep at night.

    The part that gives me pause is the divorce. That was the worst experience of my life and it is not even a remotely close call. But even there I believe that in the long term it will be clear that it was worth it.

    One of the primary responsibilities of a husband is to protect his wife. If stocks continue to perform in the future anything at all as they always have in the past, we may see another Buy-and-Hold Crisis within the next year or two or three. It was my job as a husband to protect my wife from the pain of living through that time in U.S. history or at least to do what I could to limit the suffering that she will endure during it. I obviously would perfer to have the marriage intact. But it is important to me to know that I did what I could to protect her from the next Buy-and-Hold Crisis whether we remained married or not.

    We can’t get everything we want in this world. Sometimers we have to make choices. I think it would be fair to say that advocating pure Get Rich Quick/Buy-and-Hold investment strategies is never a good choice.

    That’s where I am coming from re this one in any event, Anonymous.

    My best and warmest wishes to you and yours.

    Rob

  3. Isn’t it ironic how you told all these buy and holders that they would someday go broke and get divorced. Instead, they have done well and you have gone broke and have gotten a divorce. Doesn’t that seem like Karma? Wishing people harm is not a good thing.

  4. The fact that you perceive an effort to initiate discussion of the laat 42 years of peer-reviewed research in this field as “wishing people harm” is the entire problem. That’s why today’s CAPE value is “30”. It is that misperception (and it is held by Normals as well as by Goons, just to a lesser extent) that needs to change before we can all advance in our understanding of how stock investing works enough to live better and richer and freer lives than we could even imagine living in the Buy-and-Hold days. That misperception is in the process of killing us as a society, in my assessment. The need to overcome that misperception is the most important public policy issue facing our nation today.

    It is my job to understand the misperception to the greatest extent possible so that I can write about it fairly and comprehensively and effectively in my book and in the discussions held before larger segments of the population of stock investors in the days following the onset of the next Buy-and-Hold Crisis. There’s a lot of leverage achieved in overcoming that misperception. Instead of ignoring the CAPE value (it is rarely referenced in discussions of stock investing held on the internet today), we will as a nation of people someday in the not too distant future be working together to do everything in our power to never again permit the CAPE value to reach levels where it threatens to detroy the lives of millions of people.

    We don’t suppress the discussion of incoming hurricans because it might distress some people to have their ordinary routines interrupted. I don’t believe that we should be suppressing discussion of the 42 years of peer-reiewed research showing that the people who developed the Buy-and-Hold strategy made a mistake (this was in the days before Shiller’s research was published) in thinking that market timing/price discipline is not always 100 percent required for every stock investor.

    I naturally wish you all the best that this life has to offer a person, regardless of what investment strategy you elect to follow.

    Rob

  5. Sorry, but you don’t have a job, nor are your opinions considered to be peer-reviewed research. Look at the threats you made against board owners who would not turn over their boards to you. For example, just Google your comments over at the freemoneyfinance board where you told John (the board owner) that you wanted him to let you have a guest post. After he repeatedly told you that you could just answer the questions in the comment section vs having a guest post, you threatened him with going to prison. How is that normal?

  6. I didn’t threaten him. It’s the laws of the United States that threatened him. Properly so. The retirement money of millions of people is at stake here,

    I pointed out the error in the Greaney retirement study (it lacks an adjustment for the valuation level that applies on the day the retirement begins) on the morning of May 13, 2002. It has not been corrected to this day. That’s the clearest case of financial fraud in the history of the United States. An error in a retirement study should be corrected within 24 hours of the moment that the author of the study becomes aware of the error.

    If you want to say that Greaney was and is suffering from cognitive dissonance, I am fine with that. I believe that cognitive dissonance is a real thing and I believe that Greaney follows a Buy-and-Hold strategy himself. But there is no excuse for him not adding language to the study noting that it lacks a valuation adjustment and that thousands of our fellow community members over the course of 21 years have indicated a desire to be able to hear discussions of why Shiller’s Nobel-prize-winning research showing the valuations affect long-term returns requires the inclusion of a valuation adjustment in a safe withdrsawal rate study. I would still believe that the study was in error but I think that an argument could be made that inclusion of such language would take you to the right side of the felony line since people reading the study would then be aware of the risk they were taking following it. To make a deliberate choise not to even make readers of the study aware of the research showing it to be in error is evidence of bad intent which puts you on the wrong side of the felony line in my sincare assessment.

    Please don’t argue that the error in the Greaney study is no big deal because it has only influenced the retirement planning decisions of the thousands of people who happened to come across his site or the Motley Fool board. There are lots of people who have advanced the 4 percent rule. There are millions of retirement plans that were structured with the 4 percent rule in mind, The error that Greaney made is a very big deal,

    I don’t recall all of the conversations that I had with John at the Free Money Finance site. My vague recollection is that I liked the guy Whether he is going to prison or not is not for me to decide, I intend to do everything in my power to keep him out of prison. I intend to do that same thing re Greaney and you Goons. I intent to tell people who are mad at Greaney in the days following the onset of the next Buy-and-Hold Crisis that there are a lot of people at the Motley Fool board who would have been using HIGHER (even more dangerous) withdrawal rates if they had not been exposed to the Greaney study. I will do the same thing re John. I will point out the good things he did, It is my vague rellection that he did a lot of good things. I am going to say that.

    But there are going to be a lot of pissed-off people in the days following the onset of the next Buy-and-Hold Crisis. If stocks continue to perform in the future anything at all as they have always performed in the past, we will be looking at millions of failed retirements, hundreds of thousands of businesses going under, millions of people being thrown out of work, a significant increase in political tensions. I am going to say that Bob did good things because he did, But I am required in conscience to say that he could have done a lot more by running a guest blog entry by me and by encouraging his blogger friends to launch a discussion of whether the Greaney study contained a valuation adjustment or not and of whether it should be promptly corrected or not. Anyone who hosts a blog in this field has an obligation to get behind an effort to launch a discussion of such an urgently important matter of business. It’s up the people of the United States to determine what happens to people who failed to honor their obligations in this regard, not me. It is my obligation to let people know of the possibilities while there is still time for them to do something about the errors in judgment that they have made.

    That’s where I am coming from re this one in any event, Anonymous.

    My best and warmest wishes to you and yours,

    Rob

  7. John is just one example of people you have threatened. It is easy to Google, as I mentioned before. All these people you talk about (Greaney, Pfau, Shiller, etc.) are doing just fine. They all have worked jobs and have been successful in the investment community. You are broke and unemployed, yet you sit here and act as if you are the expert. Fix your own problems and stop asking people to do things for you.

  8. Anyone who works in the investment advice field and who has not spoken out about the error at the core of the Buy-and-Hold strategy (Buy-and-Holders discourage market timin/price discipline g and there is now 42 years of peer-reviewed research showing that valuations affect long-term returns) is not “successful.”Success isn;t just about turning a quick buck. In ordinary circumstances, success does indeed involve bringing in lots of money. That’s part of the story. But the most important element of the story is HELPING PEOPLE. It is because successes help so many people that they earn so much money. Somone who earns money by encouraing a Get Rich Quick/Buy-and-Hold/Price Indifferent approach to stock investing is not a success in the true and complete sense of the word.

    That’s my sincere take, in any event. I have hopes of becoming a HUGE success in this field. But not by promoting Buy-and-Hold. I think that the Buy-and-Holders made a lot of important contributions and I have inciorporate all of the wonderful stuff that they did into the Valuation-Informed Indexing concept. But I left out the loon tunes idea that there might be some alternate universe 500 millions light years away in which everything works the opposite of how it has always worked here on good old Planet Earth and where market timingprice discipline..price awateness is not always 100 percent required for every investor. I want to achieve a version of success that permits me to hold my head up high and look into the eyes of the people listening to my stuff without me feeling that I am screwing them over just to turn a quick buck.

    I believe it will happen. I don’t think I can say for certain because there has never been a situation like this before. But I have confidence on the funfantal goodness and decency of the American people. So I am optimisitc. The next big test is going to come at the onset of the next Buy-and-Hold Crsiis. It will be interesting to see how things play out in the days and years to follow.

    Hang in there, old friend.

    Rob

  9. In your twisted world, you believe that a person who works a REAL job for 30+ years, who consistently saves in the same way with each paycheck, stays married and builds a substantial retirement nest egg is somehow not successful and made a “quick buck” (that took over 30 years). Really?

    Meanwhile, you think you are successful by avoiding getting a real job and trying to come up with some silly cover story about what you think is peer-reviewed research (merely your opinions). Do you think your ex-wife considers you to be successful?

    There is nothing for you to “hold your head up high” on. Instead, you owe a large number of people a big apology.

  10. If that person believes that it makes sense to go with the same stock allocation when a regression analysis of the historical return data shows that the most likely 10-year annualized return on stocks is a negative 1 percent real as he does when it shows that the most likely 10-year annualized return is a positive 15 percent real, then, yes, I believe that that person has permitted the Get Rich Quick/Buy-and-Hold/Price Indifferent “idea” to influence his thought process. I think it is a national tragedy that, 42 years after peer-reviewed research was published showing us all a far, far better way, there are still many smart people following and recommending Get Rich Quick/Buy-and-Hold/Price Indifferent strategies. The only thing that I could see that could help is for us to decide as a nation of people to open every discussion board and blog on the internet to honest posting re the last 42 years of peer-reviewed research.

    That’s where I’m coming from re this one, Anonymous.

    Rob

  12. All of those comments relate to short-term timing. Short-term timing really doesn’t work. It’s not hard to figure out why. Short-term timing is a guessing game. No one has the ability to know when prices will shift. So short-term timing really doesn’t work.

    Long-term timing is the form of market timing that always works and is always required for investors seeking to keep their risk profile stable over time. The Bennett/Pfau research shows that long-term timing has been working for as far back as we have records of stock prices. Long-term timing is price discipline. How could price discipline ever be a bad thing The idea that that could ever be reality is absurd.

    We should be spreading the word about long-term timing at every discussion board and blog on the internet.

    Rob

  13. Not a single one of them refers to short term vs long term. Even Wade Pfau has recently commented about not timing the market. If you listened, you wouldn’t be broke.

  14. If everyone distinguished short-term timing from long-term timing every time tha commented on timing, there never would have been a problem. All of the evidence available to us shows that shrort-term timing doesn’t work and all of the evidence available to us shows that long-term timing always works and is always 100 percent required for investors who want to keep their risk profile constant over time.

    When people say that “timing doesn’t work” when they should be saying that “short-term timing doen’t work” it makes it more likely that investors will fail to engage in long-term timing because their Get Rich Quick/Buy-and-Hold urge makes them want to believe that maybe this will be the first time in history when long-term timing will not be absolutely necessary.

    Wade couldn’t have been more clear that his research showed that long-term timing always works until you threatened to get him fired from his job if he kept saying that. People say different things when you threaten them. Gee, I wonder why.

    My best wishes to you.

    Rob

  15. Timing has never worked, as we have never seen even once successful outcome. If what you said was true, you would not be broke.

    Wade also made it very clear in the most recent podcast. He said that since Shiller’s paper came out, timing has clearly not worked.

  16. “ If everyone distinguished short-term timing from long-term timing every time tha commented on timing, there never would have been a problem.”

    These are experts. If they wanted to distinguish between short term and long term, they would. These experts are all successful. You are not. Now we know why. Outcomes matter.

  17. Timing has never worked, as we have never seen even once successful outcome. If what you said was true, you would not be broke.

    Wade also made it very clear in the most recent podcast. He said that since Shiller’s paper came out, timing has clearly not worked.

    Shiller’s paper came out in 1996. I agree that timing hasn’t worked from 1996 through today. The world hasn’t come to an end as of today, Anonymous. If stocks continue to perform in the future anything at all as they have always performed in the past, we will be seeing another Buy-and-Hold Crisis in the not-distant-future. Then we will be able to say that timing has worked once again,

    It all comes down to whether irrational exuberance is a real thing or not. If the market is efficient/rational, as the Buy-and-Holders believed at the time they were developing their strategy, then staying at the same stock allocation at all times makes perfect sense. Shiller’s research showed that the market is NOT efficient, that there are times when stock investors become insanely emotional about stocks and push prices up to crazy, unsustainable levels. At those times, stocks offer a poorer long-term value proposition than they do when they are priced more reasonably. So investors who want to keep their risk profile constant over time need to lower their stock allocation at such times.

    You are suggesting that stocks may perform in the future in ways in which they have never performed in the past. I don’t buy it. I cannot prove that it will not happen. The only thing that I have to go on is the historical record and that shows that valuations have always affected long-term returns. There are no exceptions in the record.

  18. These are experts. If they wanted to distinguish between short term and long term, they would. These experts are all successful. You are not. Now we know why. Outcomes matter.

    We have seen expert after expert after expert evidence a desire to be able to state their sincere views and then pull back when they see the behavior of the Buy-and-Hold Goon Squads. If you want to know what the experts really think, you are going to have to pull the abusiveness back about 5,000 notches.

    Bernstein said in his book that the safe withdrawal rate dropped to 2 percent at the top of the bubble. That’s what I was saying (1.6 rounds out to 2 percent). Did that slow you Goons down for two seconds? He never mentioned what he said in his book while The Great Safe Withdrawal Rate Debate was raging all around him at the Bogleheads Forum. He would have had he felt safe doing so. In ordinary circumstances, he would be 100 percent happy to expound on what he said in his book.

    And it’s the same story with every expert who has commented on these matters. Death threats and acts of extortion and acts of defamation and all the rest affect what people say. That’s why we have laws against that stuff that apply in every field other than the investment advice field.

    I believe that we will be seeing those laws applied in the investment advice field as well in the days and years following the onset of the next Buy-and-Hold Crisis. I’m looking forward to it. I think that the insanely emotional behavior (which supports Shiller’s finding that stock investing is at times a highly emotional endeavor) has been holding us back for far too long. It’s not my particular cup of tea.

    Rob

  19. It is funny how only you can see all these threats made, yet no one else can.

    You are a grown man. Don’t you think it is time to stop making up stories like a child?

  20. Everyone sees them to some extent, Anonymous. No one else sees them as clearly as I do because no one has been engaged in this stuff for as long as I have been (21 years now).

    You see them. If you were not aware on the morning of May 13, 2002, that the Buy-and-Holders had not yet incorporated Shiller’s amazing research findings into their thinking, you would never have advanced a single abusive post. You would have welcomed any challenges to Buy-and-Hold, confident of its ability to prevail in civil and reasoned discussion. The manner in which you behaved showed that you held doubts about the strategy within you, concerns that Shiller’s research had raised questions that Buy-and-Hold could not answer.

    We all are aware of the issue to one degree or another. My job is increase awareness to the degree necessary to get every discussion board and blog opened to honest posting re the research, without a single exception. Once we get to that place, we are home free. We are all in this together. We all want the same things, But we cannot obtain the benefits of the most important 42 years of peer-reviewed research in the history of investment analysis until we give outselves permission to talk about it at every site on the internet. Shiller’s research doesn’t benefit us just by exisitng in a journal somewhere. We need to explore all of its exciting and far-reaching how-to implications for it to be able to make our lives richer and fuller and freeer.

    Wish us luck!

    Rob

  21. No. There are thousands of posts where people have asked you to show those threats and you refuse. The only posts we see making these claims are from you. It is simple for you to prove your point.

  22. How about you take a look at the retirement study posted at John Greaney’s web site and determine for yourself whether or not it contains an adjustment for the valuation level that applies on the day the retirement begins? It won’t take you 21 years to do that, Anonymous, You could probably pull it off in a lot less than 21 minutes.

    Rob

  23. How about you read all the comments from people that tell you that Greaney’s study doesn’t need a valuation adjustment. How about you stop making up stories about death threats, criminal acts, etc. How about you get a job and actually make some money versus being a big mooch?