Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
And your peer reviewed research opinion, along with your magical market timing system, gave you such a great retirement plan, right Rob? Gee, we wish we could be totally broke like you.
That’s emotion, Anonymous.
That’s what Shiller was getting at when he used the term “IRRATIONAL Exuberance.” The rational thing would be to want to get the numbers right in retirement studies, not to strike out at those who point our errors in the studies.
Rob
I think you might want to rephrase the way you are pitching VII. What you are trying to say is that if the stock market worked the way you wanted it to work, then VII would actually work. This will involve a series of events to be successful. First you need all the board owners across the world to allow you to post whatever you want to post. Next, you need the stock market to crash, so that everyone would see the need to have a new investment strategy and that you have the strategy that works. You then need to have the New York Times pick up your story so that it is brought to the attention of Congress. Congress then investigates the cause as well as what could have prevented all this. It is then discovered in the investigation that a coordinated team of goons kept all of your information away from the entire world. This newly found fame brings you into full public view. You then become the most sought after key note speaker on investing. Further, this leads to a large number of legal settlements flowing to you. Since it was too late for you to save your retirement through investing, it really doesn’t matter because you are one of the richest men in the world based on all the income you receive from speaking, books, consulting and also the vast number of legal settlements.
Did I sum all this up correctly?
My way of saying it is that the same social norms and laws that apply in every field of human endeavor other than the investment advice field should apply in the investment advice field as well. Why have peer-reviewed journals if we are not going to permit people to discuss the findings of the research published in the peer-reviewed journals?
What makes it hard is the “irrational” part of the irrational exuberance phenomenon. Failing to exercise price discipline when buying stocks is irrational. People don’t want to hear that. At a time when the official numbers overstate their stock wealth by a factor of two, people don’t want their confidence in the official numbers to be undermined. But we do like research as a general rule! If we really hated research as much as the behavior of you Goons suggest, there would be no peer-reviewed journals. They wouldn’t exist. And they do exist. I see that as cause for optimism.
The way that I say it is that the arc of history points toward rationality in stock investing. We obviously are not there today. But we are closer than we were in the days before we had Shiller’s amazing research available to us. We have made progress. We just need to all pull together and continue doing what we need to be doing to advance further. I see as many optimistic signs as pessimistic ones (I don’t deny that the pessimistic ones exist).
Rob
My way of saying it is that we should all obey the laws, behave properly on the discussion boards and take responsibility for our own financial matters. Grow up, Rob.
I agree with every word of the first sentence. All of that says that on the morning of May 13, 2002, I needed to work up the courage to point out the error in the Greaney retirement study. Pointing out an error in a retirement study is not bad behavior, it’s good behavior.
There were people at the Motley Fool board who were using that study for helping go put together their retirement plan. I know this. I was there.
Rob
What a joke! Look at how successful those who followed Greaney’s advice were compared to you.
That’s not my definition of success, Sensible. A successful person can acknowledge a mistake when it is brought to his attention and correct it. Advancing death threat is a sign of failure, not of success.
That’s where I’m coming from re this matter.
There is no valuation adjustment in the Greaney study. It took a lot of courage for me to advance that claim. It’s a claim that has stood the test of time.
Once you find yourself advancing death threats, you know that you are on the wrong side of the history train, That’s a sign of desperation, not confidence. The side that advances death threats is to the side that has lost. It’s just a question of the rest of the nation of people catching up to what is going on. The battle of ideas ended on the evening of August 27, 2002.
My sincere take.
Rob
I don’t know what I was doing on the evening of August 27th, 2002 but I do know that I was not at the Motley Fool discussion board. I’ve never seen anyone post a death threat against you!
You keep going on about stocks being over-valued. What about individual stocks? Check out Nestle and Hershey. Cocoa is super expensive because of bad weather and because of a lack of new plantings during COVID. This is putting downward pressure on these stocks. New plantations are being planted all over the world by farmers looking to take advantage of high cocoa prices. Eventually the price of this raw material will crash and my individual stocks will rise. Also, in a less exciting but also good opportunity, there’s Brown Forman (maker of Jack Daniels). I don’t invest that much to begin with, and most of what I invest goes into index funds. Lots of money goes to kids, church, extended family, and charity. If I was a more selfish person I’d have millions more already. It’s not difficult out there! You should try investing for a change! Go ahead, take my ‘hot stock tip’ and buy as much Hershey as you can afford to lock up for an extended period of time.
Stocks are great. I think they are the best investment choice for the typical middle-class person. You’re saying that you like stocks too. So there is no dispute between us re that point.
Go stocks! But not to the point where they get overpriced. All of us who love stocks should be working together to keep stock prices reasonable at all times (it’s done though valuation-based market timing). If you love stocks, you should want them to remain an amazing choice at all times.
That’s where I’m coming from re this thing, in any event.
Rob
Stocks are an amazing choice RIGHT NOW.
I’d say that they are worth owning today. But I would not say that they are an amazing choice.
We have as a nation of people permitted the Buy-and-Hold stuff to get out of hand and stocks are priced dangerously today. I would like to see us all pull together to get that horrible CAPE value down.
Do you consider today’s CAPE value of 35 acceptable? I do not.
Rob
I choose to live in reality and not in make believe, Rob. The stores around me prefer cash and not made up stories.
The reality of stock investing is that there are times when make-believe plays a big role. Being able to distinguish one from the other determines how much cash you end up with.
Rob
I wound up a Millionaire Next Door, just in time to kick off my 40s. I can completely stop investing and have more than enough to retire at any “normal” age whether that’s 59.5, 62, 65, or even later. Of course I do not plan to stop. I’m taking all the “free money” I can between 401k matches, HSA seeds and matches, and ESPP match and discount. Plus we go a little over the match on my wife’s 401k and I dump half my annual bonus (10-15% of total salary) into the 401k. I raided my Roth IRA for most of the down payment on the house, and I was selling off company stock to pay for living expenses while I was the sole breadwinner. Had we done things differently and my wife worked while the kids were young we’d probably have at least double saved up. Hardly anything winds up in Roth IRAs these days, but we’re well ahead with over three hundred thousand in those accounts and we’re nearing the 24% tax bracket.
I think I know what I’m doing wrt investing and that my results prove it. I still think you don’t know how investing works. These are my sincere thoughts on this important topic, in any event.
You are of course entitled to your opinion, Sensible. I don’t think you’re entitled to deny millions of others from having access to the information and discussion they need to be able to form their own opinion.
Shiller must have showed something with his Nobel-prize-winning research. He wouldn’t have been awarded a Nobel prize if he just repeated thing that everyone had known for a long time. What is that something? What did he show that was new, that wasn’t known in the days when Buy-and-Hold was being developed? I believe that he showed that valuations affect long-term returns? Can you say what you believe Shiller showed?
It is my belief that we should all be discussing what we believe Shiller showed at every investing site on the internet. If it turns out that he really did show that valuations affect long-term returns, that’s a very big deal. That’s a huge change from the belief that was widespread at the time that Buy-and-Hild was developed, the belief that the market is efficient/rational. I believe that we all need to talk about this huge advance that we have achieved and come to terms with all of its far-reaching implications.
Rob
Go to reddit and tell others what you think about investing. No one is stopping you!
I’ve told lots of people, Sensible. The problem is not me telling people that we need to open every site to honest posting re the research. I’ve been doing that for 22 years now. Doing more of that is just going to get me banned at more place. For what purpose?
For 43 years now, we have had the research that we need to know about to understand how stock investing works available to us. Shiller’s book is available in most public libraries. This does not need to be even a tiny bit hard. But you can’t learn something that you do not want to learn! No one is going to force us to live better and richer and and fuller and freer lives. That is the option before us. But it is not going to happen for us until we want it to happen for us.
I believe that the next Buy-and-Hold Crisis may make a difference. We’ll see, you know? Maybe not. But that seems to me to be a thought that follows from Shiller’s research. If stock investing is largely emotional, then our thoughts re investing could change when we experience all of the emotions associated with a Buy-and-Hold Crisis. If our thoughts change enough for us to open every site to honest posting re the peer-reviewed research, we are on our way to a far better place. I don’t know what could possible hold us back at that point.
That’s where I’m coming from re this matter, in any event.
Rob
If you really believed everything you say, you would post on EVERY major internet site, yet you don’t. You only go where you think you control the narrative so that others won’t learn the truth.
I have never once been at a place where I controlled the narrative. There is no such place. Buy-and-Hold was firmly established before Shiller published his amazing research. I believe that Valuation-Informed Indexing will one day become the dominant strategy. But for it to get there, we are going to need to find a site owner who will protect those who believe in research-based strategies from those who use abusive posting to intimidate Valuation-Informed Indexers into silence.
There are thousands who expressed an interest in learning more about Valuation-Informed Indexing. But there are few who are willing to stand in the fire in the face of death threats and other forms of intimidation. I believe that, once we get to 20 percent support, we will be on our way. The big question is — will a price crash make a difference? If it does, then that price crash will be the most beneficial price crash in history.
Rob