Set forth below is the text of a comment that I recently posted to the thread for another blog entry at this site:
Quoting Robert Shiller: “It has come down into the low 30s,” he said. “It kind of puts us where we were in other times in history that were relatively extreme.”
“But you know, the stock market has performed very well over the last 100 years,” he added. “I like to look at long-term time horizons. And so when it’s highly priced, it doesn’t necessarily make it a horrible investment.”
What would he be saying if on the afternoon of May 13, 2002, we had opened every site to honest posting re the peer-reviewed research and today we had 40 percent of the investing population practicing market timing/price discipline instead of just 10 percent? I think he would still say something along the lines of what he said in the words you quoted. But I think he would balance those words with descriptions of the horrible life setbacks that we have experienced on every earlier occasion when we permitted the CAPE value to rise to where it is today. And that would make a big difference. People need to hear both sides of the story.
Greaney could have told people that 4 percent if the Historical Surviving Withdrawal Rate, not the Safe Withdrawal Rate. That’s obviously so and that would have solved the entire problem because then he would have been making an accurate statement. All of the abusiveness is because he wants to trick people into believing that the two are the same thing and that there is no need to consider the dangers of using the Historical Surviving Withdrawal Rate in one’s retirement plan at a time of high valuations.
We all have a Get Rich Quick/Buy-and-Hold impulse within us that makes us want to fool ourselves in that way and, when people are afraid to post about the peer-reviewed research, that Get Rich Quick/Buy-and-Hold impulse gets so out of control that we end up with a CAPE value of 32. We need to permit honest posting to keep our Get Rich Quick/Buy-and-Hold impulse in check.
That’s where I’m coming from, Anonymous. When Bernstein says that, to get higher returns, you need to take on more risk, he is repeating a Buy-and-Hold dogma. Shiller discredited that dogma. If valuations affect long-term returns, there’s a way to increase returns while also diminishing risk — keeping valuations in mind at all times.
That’s Valuation-Informed Indexing. That’s the first true research-based approach to stock investing. What the Buy-and-Holders missed is that investors are highly emotional creatures and are not capable of making purely rational choices without a lot of help.
Emotional investors are capable of confusing the Safe Withdrawal Rate and Historical Surviving Withdrawal Rate concepts. They are not at all the same but we humans are capable of tricking ourselves into believing that they are. We need to permit honest posting re the research to become capable of doing better.
Rob
From today’s New York Times
https://www.nytimes.com/2024/04/05/business/inflation-stock-market-peak-shiller.html
“This reminds Professor Shiller of the rallies of the 1920s and the dot-com boom, which both ended badly. When prices get too far ahead of earnings, there will eventually be a reckoning — and, he says, there’s a good chance that U.S. stock market returns will be lower over the next decade than the last one.”
Doesn’t look like there is any ban on discussing Professor Shiller’s ideas.
There’s certainly a ban. I pointed out the error in the Greaney retirement study (it lacks a valuation adjustment) on the morning of May , 13, 2002. It has not been corrected to this day. Please explain.
Rob
It’s not a TOTAL ban. That much is so. If it was a total ban. Shiller wouldn’t have gotten his research published in a peer-reviewed journal and his book wouldn’t have been a best-sellter and he wouldn’t have been awarded a Nobel prize. If it had been a total ban, we wouldn’t have seen thousands of our fellow community members put up posts expressing a desire that honest posting be permitted and I wouldn’t have a research work with me for 16 months to develop research showing that my ideas check out and all that sort of thing.
I am not able to think of another case where things are sufficiently open that we have a mountain of evidence that an existing model is false while not permitting the new model to be openly discussed and thereby developed to the point that it can effectively replace the now-discredited model. That is exceedingly strange stuff. But that’s where we stand in the investing advice field. There has never been an iota of evidence that valuation-based market timing might not work or might not be required. But woe to the individual who dares to say that openly on any discussion board or blog on the internet. Holy moly!
I said it. I love what the Buy-and-Holders were trying to do. That’s why I was a Buy-and-Holder myself for a time. And I view the mistake they made as trivial in the grand scheme of things. They didn’t have Shiller’s research available to them. So they took a wild shot in the dark and made a mistake. So what. you know? The only people who never make mistakes are people who never try to accomplish anything of consequence. So the mistake was nothing.
But the 43-year cover-up of the mistake has hurt millions of people in very serious way. The cover-up is responsible for today’s loony-tune CAPE value. The cover was responsible for the Great Recession of 2008. The cover-up has made effective financial planning impossible for 43 years now. Not good. Our discussions show that 10 percent of the population of stock investors believes that Shiller’s Nobel-prize-winning research is legitimate research. If we all had been speaking up in clear and firm terms for 43 years now, we could as a nation of people have buried the smelly Buy-and-Hold garbage 30 feet in the ground, where it could no longer hurt humans and other living things, a long, long time ago.
I have a funny feeling that continuing to keep it zipped, as I did from May 1999 through May 2002, is not going to get the job done. That’s why I play it the way that I do. I show respect and love for my Buy-and-Hold friends and for all of the great contributions that they really did make. But I am pretty darn insistent in saying that I sincerely believe that the Greaney retirement study (and ALL Buy-and-Hold retirement studies) lacks a valuation adjustment. Call me madcap, you know?
My best wishes,.
Rob
You have spent over 20 years making all these silly posts and look at what you have left. Nothing. You are broke, you lost your wife and you lost your home. People have all rejected you and the remnants of your legacy on the internet paint the picture of a fool.
So, you can go on and keep doing the same stupid things and blocking 99.9% of posts, like you always do and you will still be broke, divorced and alienated from the normal people in the world.
What a legacy, Rob.
Woe is me, Anonymous.
Rob
You don’t think being broke and divorced is a bad thing?
Of course it’s a bad thing.
Bad things happen in life. There’s not one person who has lived who has not had some bad things happen to him or her. Bad things happen in this world.
I say “woe is me” because, while the Goon stuff that has happened to me is bad, there are a lot of good things that have happened to me that balance it. I prefer to focus on the good stuff.
I was faced with a choice of betraying my friends and pretending that I believed that the Greaney retirement study contains a valuation adjustment and I elected to post honestly re the error in the study. I feel good about the choice that I made. Sure, I wish that there had never been any negatives associated with it. But I very much believe that I made the right choice. And I believe that my life has had more good in it than bad and I am grateful for that. So, yes, I make light of the thought that I should just sit around and complain about my circumstances.
There’s a lot of good in this story. A mountain of good. I prefer to focus on that side of the story. I believe that Buy-and-Hold is the past of investment analysis and that Valuation-Informed Indexing is the future. I am honored to have been able to play a part in bringing about the transition. That’s my focus. I see the Goon stuff as a very unfortunate part of the story. I don’t deny it. But I don’t think it would serve any positive purpose to make it my focus.
I wish you all good things.
Rob
No one is buying your story about goons. Everyone warned you about not working for the past 20+ years. You admitted is was the cause of your divorce. You talk about retirement failure being a bad thing and how it might happen to buy and holders. Instead, the buy and holders have all done extremely well, while YOU failed miserably. The problem has been and continues to be YOU.
I’m the one who got an important number wrong in a retirement study posted at my web site.
That makes perfect sense, Anonymous.
Truly outstanding!
Rob
Who is the expert that agrees with you?
My impression is that just about everybody in the field agrees. Not entirely. But you wouldn’t expect that. The Rob Bennett who existed on May 13, 2002, wouldn’t agree with the Rob Bennett who exists today. I have learned a lot by asking questions and exploring this stuff and talking it over with interested parties for 22 years. So I don’t say that everyone agrees 100 percent. But just about everyone agrees that Shiller’s research taught us all something important and that honest posting re Shiller’s research should be permitted at every site.
Bill Bernstein obviously agrees on the basic question. He said that the safe withdrawal rate in January 2000 was 2 percent, not 4 percent. That’s what I say. John Bogle largely agreed. He put up that post at the Bogleheads forum saying that he could see how valuation-based market timing could work in some circumstances. That was not a full-throated endorsement. But it was a far cry from the Goon position. I think it would be fair to say that Bogle was hoping that he could get a productive discussion started by making that admission (which was a change from things he had said at earlier times). And of course there are lots and lots of others.
People don’t want to be threatened. If you want people to say clearly that they agree, you are going to need to rein in the abusive stuff. People just won’t speak clearly as long as they are subjected to the kind of abuse that you Goons dish out for doing so. But my sense is that just about everyone in the field agrees on the basics, they are just afraid to say it. I am not able to recall even a single time where anyone (this includes you Goons) made a case that Shiller’s Nobel-prize-winning research is in error. That’s a remarkable reality. The fact that that has never once happened in 22 years should tell us all something.
My best wishes.
Rob
Your impression? We are to go off of that? You don’t have any expert saying this and we are just to go with your impression?
I am not aware of a single expert who says that the Greaney retirement study contains a valuation adjustment. Full truth be told, I cannot recall Greaney himself ever saying precisely that. He has not corrected the study in the 22 years since I brought the error to his attention. He has responded abusively to all efforts by his fellow community members to warn people about the error. But I do not recall him ever saying directly that the study contains a valuation adjustment. Evidence-Based Investing, who is a general in Greaney’s army of Goons, has said that “nobody” truly believes that Greaney included a valuation adjustment in the study, “including Greaney himself.” That’s not precisely the same thing as Greaney saying it but it’s close.
I have not spoken to every expert in the field. But not one that I have spoken to has said that the Greaney study contains a valuation adjustment. So, yes, it is my impression that everyone agrees. We will know for certain once every internet site has been opened to honest posting re these matters and each and every expert in the field feels comfortable advancing an honest statement re his or her views. I have been saying that we need to open every site to honest posting since the afternoon of May 13, 2002.
I naturally wish you all the best that this life has to offer a person.
Rob