Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
There is nothing wrong with the statement by Evidence. Without stocks, you are not able to participate in the upsides of growth that beat inflation. Your own track record of failure is proof of that alone.
Evidence is saying that, since stocks were risky in the past, they will always be risky in the future. i strongly disagree. We learned something very important about stocks in 1981. We learned that irrational exuberance is a thing and that they key to successful long-term stock investing is to always, always, always practice valuation-based market timing and to always tune out the market pitch advanced by our Wall Street Con Men friends that there might be some alternate universe 50 billion light years away in which everything works the opposite of how it has always worked here on good old Planet Earth and valuation-based market timing (price discipline!) is not 100 percent required. Huh? What the f?
I think it will continue to be required. And I think that over time more and more of us will become aware of the importance of valuation-based market timing. The Bennett/Pfau research shows that we can reduce stock investing risk by nearly 70 percent just by being willing to practice price discipline when buying stocks. Stock investing risk is not a given. It was a product of our ignorance of how stock investing works in the days before Shiller published his Nobel-prize-winning research. Shiller’s research is an advance that makes all of our lives better. Good for us for being able to live in the better world that that advance makes possible.
I was a Buy-and-Holder once. The thing that drew me to it were the statements that Buy-and-Holders made that investors should look to the peer-reviewed research guidance for guidance on how to invest in stocks. I think that the Buy-and-Holders were right re that one. I only wish that they listened to their own advice!
Research is a plus. It is a plus because it teaches us things we didn’t know before the research was available to us. Shiller’s research was the biggest plus in the history of personal finance. It taught us the most important lesson about stock investing — that investors must never, ever forget to engage in valuation-based market timing. Once we get past you Goons, we all get to enjoy the far-reaching benefits of that advance from that day forward.
Research is good! Research works! Research is the future!
Stock investing risk is optional.
My sincere take.
Rob
Recent Morningstar research found that “valuation aware” investing always underperforms.
https://www.morningstar.com/portfolios/staying-invested-beats-timing-marketheres-proof
I, for one, try to be “valuation aware” re: my individual stocks but I also don’t like to keep money sitting around. There always seems to be a very good company selling for a fair or better price. Usually you can buy them for better than fair prices. Of course I also understand that I’m not Warren Buffett, which is why the bulk of my contributions go into accounts where I buy and hold index funds where I’m not “valuation aware” in any meaningful respect.
That article should be part of the conversation, Sensible. So should the comments of people who believe that Shiller’s Nobel-prize-winning research is legitimate research.
Rob
People are having conversations everyday. They don’t need to allow people on their boards if they can’t behave. In fact, they can block people, just like you block posts Rob.
Is it proper to block somebody for pointing out an error in a retirement study? Do you consider that bad behavior?
The Greaney retirement study lacks a valuation adjustment. There were people at the Motley Fool board who were using that study to plan their retirement. I had become friends with a number of those people. Do you think it would have been better if I had kept it zipped re the error in the study?
Rob
You have had your error about Greaney responded to thousands of times. Is it okay for you to block people for their opinions, yet expect that you can post anything you want anywhere at any time?
I wish you all the best that this life has to offer a person, Anonymous.
Rob
Is your ex-wife a Valuation Informed Indexer? Your kids? I don’t see anyone following you online.
Are you okay with waiting to see how things play out in thee days and years following the onset of the next Buy-and-Hold Crisis?
Rob
What will happen during the next price crash is some will panic sell, some will be forced to sell to pay their bills, some will get margin called. Some will dump part of their emergency funds into the market, some will cut back on day to day expenses to buy more stocks, some may even buy items in different assets classes. Whales like Buffet will go on shopping sprees. As always there will be a mix of reactions and outcomes. Just as in 2008/09 and 2020 no one will become a follower of you. I guarantee it.
I don’t have a crystal ball, Sensible. Perhaps it will play out as you say.
I believe that at some point the pain will become sufficiently intense for millions of people that some brave soul will work up the courage to permit honest posting re the last 43 years of peer-reviewed research at his site. If that happens, we will never see another bull market. If people are able to see how much the overpricing of stocks harms their long-term value proposition, people are not going to want to go with the same stock allocation when stocks are insanely overpriced as they do when stocks are priced reasonably. So the stock market will be able to function like other markets. Prices will become self-regulating.
If we never see another bull market, we will never see another bear market. If we never see another bear market, we will in all likelihood never see another economic crisis. I can live with all that. We will still get those amazing annual returns of 6.5 percent real because they are justified by the economic realities. All that we will lose will be the thrill-ride aspects of the stock investing experience. That would mean we would not see millions of failed retirements or hundreds of thousands of businesses going under or millions of people being thrown out of their jobs or an increase in political frictions.
I think that the thrill-ride aspect of the stock investing experience has always been greatly overrated. The thing that has made stocks an amazing asset class is that annual 6.5 percent real return, which I think is plenty. All of the Get Rich Quick/Buy-and-Hold stuff is smelly garbage, in my sincere assessment. I would be happy to see all of that stuff go and the last 43 years of peer-reviewed research points the way to us achieving just that. So I am on board with the idea of opening every site to honest posting re the peer-reviewed research.
The root question is whether we are or are not fundamentally a good people. I believe in us. I don’t know precisely why. I just do. I have seen a lot of good stuff. Each one of those thousands of our fellow community members who expressed a desire that honest posting be permitted brought a smile to my face. I believe that we are close to crossing a threshold that will permit us all to live fuller and freer and richer and happier lives from the day we open every site to honest posting forward.
It will be interesting to see how it all plays out.
Rob
Only buy and holders get the real return. People like you who sit on the sidelines lose.
Rob, have you acknowledged your error about Tesla’s not having microwave ovens? We must post honestly about Tesla’s not having microwave ovens. It is as much of a crisis as your position on Greaney and the buy and hold crisis.
Adjusting one’s stock allocation to keep one’s risk profile constant over time is not sitting on the sidelines. It is Staying the Course. If you fail to change your stock allocation in response to a dramatic change in the CAPE level, you are permitting your risk profile to get wildly out of whack. To what purpose?
Do you believe that today’s CAPE level of 34 is a good thing, Sensible? I believe that we should all be working together to pull that CAPE level down to a more reasonable level. It’s not going to happen without a good amount of valuation-based market timing. Do you have some thought as to another means by which that critically important goal could be achieved?
Rob
Rob, have you acknowledged your error about Tesla’s not having microwave ovens? We must post honestly about Tesla’s not having microwave ovens. It is as much of a crisis as your position on Greaney and the buy and hold crisis.
The state of Buy-and-Hold in the year 2024.
Stay the Course! Peer-reviewed research! Focus on the long run! Rationality over emotion! The Efficient Market! 100 percent safe withdrawal rates!
Rob
The markets are not perfectly efficient, but that doesn’t make buy and hold a bad strategy. It does make value investing a sound strategy. Most people are best off just buying index funds and not thinking too hard about this stuff. You would have been better off if you were in the market from the mid to late 90s boom onward to today. You’d probably be a multimillionaire!
Rob,
If you think the CAPE is too high, don’t buy stocks. It is like anything else. There is a price tag on anything and you can buy it or not. Simple as that.
My belief is that the market is efficient on the micro level but not on the macro level. Efficiency requires rationality and irrational exuberance is by definition not rational. I love everything about Buy-and-Hold except for the loony-tunes “idea” that valuation-based market timing (price discipline!) is not always 100 percent required for every investor. I incorporated every aspect of Buy-and-Hold except for the loony-tunes thing that has been discredited by 43 years of peer-reviewed research into the Valuation-Informed Indexing concept.
I agree that it would be best for the typical investor to buy index funds and not think too much about this stuff. But they need to check the CAPE value once per year to see if they need to adjust their stock allocation. They will only need to make a change once every 10 years or so on average but the change will mean that they will be able to retire perhaps five years sooner than they would if they went with a pure Get Rich Quick/Buy-and-Hold “strategy.” It’s worth it!
And of course the entire roller-coaster ride aspect of the stock investing experience would be gone. I believe that the vast majority of middle-class investors would be just fine with that. I think that the only “benefit” of the roller-coaster ride thing is that it is a powerful marketing Gimmick for our Wall Street Con Men friends. Even many of them would be perfectly happy to give research-based advice if they felt they could get away with it. In the days and years following the onset of the next Buy-and-Hold Crisis, perhaps they will be!
Rob
If you think the CAPE is too high, don’t buy stocks. It is like anything else. There is a price tag on anything and you can buy it or not. Simple as that.
It’s not as simple as that. I and everyone else who believes that today’s insanely high CAPE value poses a serious danger to everyone who lives in the United States should be permitted to comment on the dangers of that CAPE value and on how we can all work together to pull it down and to insure that it never gets that high again.
What you’re saying is that, if people don’t want to get lung cancer, they should just stop smoking cigarettes but that it is just fine for the tobacco industry to argue that smoking is good for people’s health and that no one should be permitted to call them out on their b.s. If people don’t hear about the dangers of smoking, they are more likely to engage in it. If people don’t hear about the error in the Greaney retirement study, they are more likely to use it to plan a retirement.
Permitting honest posting re the peer-reviewed research in this field is a public policy issue of urgent importance.
The truly simple thing would be to permit honest posting re the research at every site. The truly simple thing would be for there never to be a single abusive post. It is the abusive posting and the criminal behavior that have complicated matters. The simple thing would have been for Greaney to have corrected his study within 24 hours of the moment that the error he made in it was brought to his attention.
Rob
Who determines what is honest posting about peer-reviewed research? You have your opinions and others have their opinions. Who decides if something is priced too high? You are not the leader. You are not the dictator. You are not in a position to demand anything. You do not decide for other people. Everyone can make up their own minds.
“ It’s not as simple as that.”
Yes it is. We all decide for ourselves. You do not dictate what is considered to be “peer-reviewed research”. You are not an expert in this field. In fact, your track record suggest5s that you should be on the learning end to figure out what all you did wrong.
My call would have been to open every discussion board and blog to honest posting re the peer-reviewed research starting on the afternoon of May 13, 2002. I believe that the laws that apply in all fields of human endeavor outside of the investment advice field should apply in the investment advice field as well.
As things now stand, the people of the United States will have to decide the matter in the days and years following the onset of the next Buy-and-Hold Crisis.
Everyone should make up their own minds. To do so everyone needs access to both sides of the story.
Rob
Yes it is. We all decide for ourselves. You do not dictate what is considered to be “peer-reviewed research”. You are not an expert in this field. In fact, your track record suggest5s that you should be on the learning end to figure out what all you did wrong.
I sincerely believe that the Greaney retirement study lacks a valuation adjustment.
Rob
You have made all these points for over 20 years. All your predictions failed. You went broke. Your wife left you. Not one single expert will stand in support of you, let alone any community members. That is a 100% failure.
With those as the facts, why would anyone want to believe you or follow you. It would be like the New York Yankees keeping someone on the roster that has struck out in every game for the last 20 years.
I sincerely believe you have a mental illness.
I’m pretty sure that Greaney and everyone else involved would agree that his study lacks a valuation adjustment. The reason is, as Anonymous tried to explain, the same reason why Tesla automobiles lack a built-in microwave oven. You have ruined your life over this nonsense.
People can check whether or not the Greaney retirement study contains a valuation adjustment.
If we all had been thinking clearly, everyone participating at the various boards would have begun checking on the afternoon of May 13, 2002. Some did Thousands did, Those thousands were not enough to overcome you Goons. More may elect to check in then days following the onset of the next Buy-and-Hold Crisis I believe that they will. We will just have to wait and see if I am right about that or not/.
Rob
I sincerely believe you have a mental illness.
I don’t believe that you have a mental illness, Anonymous. But I do believe that you suffer from irrational exuberance. It’s a form of addiction. I believe that the primary focus of investment advice should be to help people avoid irrational exuberance and to recover from it once they fall prey to it.
Rob
I’m pretty sure that Greaney and everyone else involved would agree that his study lacks a valuation adjustment. The reason is, as Anonymous tried to explain, the same reason why Tesla automobiles lack a built-in microwave oven. You have ruined your life over this nonsense.
I’m happy to hear your say that, Sensible. I wish that you had begin saying it on the afternoon of May 13, 2003. I haven’t heard Greaney say it to this day. Having you say it comes close but it is not precisely the same thing.
When Evidence has brought up the Tesla thing, I have asked him whether he believes that Shiller’s Nobel-prize-winning research showing that valuations affect long-term returns is legitimate research. He has not responded. Are you willing to respond to that one?
Rob
I had no idea who you were in 2002, 2003, even 2010. No one disputes your claim that there is no valuation adjustment in Greaney’s study. As far as I know, no one has ever disputed this. The problem is that there is no need for a valuation adjustment.
“When Evidence has brought up the Tesla thing, I have asked him whether he believes that Shiller’s Nobel-prize-winning research showing that valuations affect long-term returns is legitimate research. He has not responded. Are you willing to respond to that one?”
I didn’t bring up the Tesla thing, that is someones else’s analogy.
You have accused me before of not answering your question about Shiller, I pointed out that I had and included a link to the response and responded again. However the search function on this site is so bad that it is impossible to find my previous reply.
“He has not responded”
I have responded however you simply ignore inconvenient answers and bring up the subject again without displaying any evidence that you have considered previous answers.
Just so you don’t miss it.
Shiller’s research on valuations is legitimate research.
However I suspect you will continue to lie about what I have and haven’t said on this site, or delete comments that you find inconvenient.
I am glad to hear that no one disputes it, Sensible. That takes us one step closer to arriving at a very, very, very good place.
Do you believe that Shiller’s Nobel-prize-winning research showing that valuations affect long-term returns is legitimate research? I believe that it is legitimate research.
Rob
I’m happy to hear that you believe that Shiller’s research is legitimate, Evidence.
Given that you believe that Shiller’s research showing that valuations affect long-term returns is legitimate research and that you agree with me that the Greaney study lacks a valuation adjustment, I am not able to identify any point of substance on which we disagree.
My sense is that you don’t want me to say those two things on any of the boards because then Greaney would have to correct his retirement study and you don’t want that. I do want that. People who I consider friends used his study to plan their retirement. I know this. I was there.
Do you deny that there were people who used the Greaney study to plan their retirement?
Rob
It is possible that there were a few at Motley Fool who used his study as one of many pieces of information when planning a retirement.
However it is likely that many more people used the Trinity or Bengen studies as they are much better known.
You talk about the Greaney study a lot, you have made no meaningful attempt to engage the authors of the Trinity and Bengen studies.
I agree with you that many more used the Trinity and Bengen studies.I would of course like to see those studies corrected as well. It would have been easy to get those studies corrected once we had gotten the Greaney study corrected. We would just go as a group to the various boards and tell the story and we would have lots of good people helping out. I cannot imagine such efforts not being successful.
It’s not like I work up one morning and said to myself: “I know what should do with my life, I should become the retirement study corrector!” I posted at the Motley Fool board for three years before I pointed out the error in the Greaney study. I was friends with Greaney at that time (I still consider him a friend but the feeling is obviously not mutual) and with a number of the regular participants at that board. We discussed the Greaney study there on a daily basis (I rarely did, I limited myself to posting on saving strategies).
Greaney became abusive when stock prices dropped a bit and was in the process of causing our best posters to leave the board. I felt that the only thing that I could do to save the board was to point out the error in the study. My thought was that that might cause him to be a bit less arrogance in his dealings with others. I also thought that we would all learn a lot about safe withdrawal rates. I had always felt like a bit of a creep for not having the courage to point out the error, which I had known about from the first day I posted there.
When I saw the reaction to my post, I realized that I had a tiger by the tale. This isn’t just a story about safe withdrawal rates. It’s about the entire Buy-and-Hold Model. Getting the Greaney study corrected would be a huge step forward toward getting the entire Buy-and-Hold Model corrected. Greaney didn’t make the error because he is dumb. He just followed the model. I don’t think that the people who followed the model were dumb either. They didn’t have Shiller’s research available to them when they were developing the model. They took a shot in the dark on the issue of valuation-based market timing and they made a mistake.
So what, right? It happens. The trouble is the cover-up of 43 years. Because there are lots of powerful and wealthy and well-connected people who will “look bad” when the cover-up is revealed, there’s a lot of pressure to continue the cover-up. But that of course makes things worsr, not better. I naturally would like to take things to a place where we can all begin making things better and better and better.
Rob
“It would have been easy to get those studies corrected once we had gotten the Greaney study corrected.”
The first thing you need to do is explain why you think it needs to be corrected and produce the numbers to back up your claim.
It has been 20 years and you have still not done so.
We went through that below, Evidence. Shiller’s research shows that a valuation adjustment is required to calculate the safe withdrawal rate accurately and Greaney’s study does not include one.
Rob
“Shiller’s research shows that a valuation adjustment is required to calculate the safe withdrawal rate accurately ”
If that was true you would be able to point to the place in his study that shows that.
It’s the entire study. It shows that valuations affect long-term returns. People didn’t know that in the days when Buy-and-Hold was being developed. That’s why Shiller was awarded a Nobel prize — his findings represented a huge advance from the earlier understanding.
Rob
Nobody owes you anything. If you don’t like Greaney’s study, do your own. If you don’t like what is on someone else’s website, post on your own website. If you want money, get a job and earn it. Stop asking for everyone else to do something. Stop expecting something for nothing. Stop demanding people agree with you.
I have never seen a single person as lazy as you.
Okay, Anonymous.
I wish you all the best.
Rob
“Shiller’s research shows that a valuation adjustment is required to calculate the safe withdrawal rate accurately”
“It’s the entire study. It shows that valuations affect long-term returns.”
There is not a single reference to safe withdrawal rates in his paper.
If there was you could point us to it.
There is not a single reference to safe withdrawal rates in his paper.
If there was you could point us to it.
Um….
Rob