Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
The prices are what people will pay for them.if a Junior Bacon Cheeseburger at Wendy’s costs $3 then I consider it overpriced, but if other people think it’s a fair enough value at a fair enough price then Wendy’s will still sell their cheeseburgers. If I don’t like it I can go to their competition, make my cheeseburger at home, or not but a cheeseburger at all. What you’re doing is like not buying the cheeseburger and getting mad at everyone else for not agreeing with you about the price of the cheeseburger.
No. What I am saying is that, if Wendy’s says in a commercial that their Junior Bacon Cheeseburger costs $3 but then charges you $6 for it, all of the people who are hurt by this dishonest practice should be permitted to call them out on their dishonesty. That’s how the dishonesty gets fixed. Greaney said that the safe withdrawal rate is 4 percent at a time when it was really 1.6 percent. That hurt people. All of us who knew about the error in the study should have felt free to call it out. None of us should have been made to feel afraid to call out the error.
When people in the community noticed that no one was calling out the error, they came to believe that the study was probably accurate. When I called out the error, people lost confidence in the study. That’s why Greaney freaked out. He wants people to continue to have confidence in the study and he has seen that that is not possible in a world where people feel free to call out the error in it. I want to see the study corrected. So I naturally support the idea of permitting honest posting re the research.
Rob
“ No. What I am saying is that, if Wendy’s says in a commercial that their Junior Bacon Cheeseburger costs $3 but then charges you $6 for it, all of the people who are hurt by this dishonest practice should be permitted to call them out on their dishonesty”
What? We all know the stock price when we are buying it. It is not like I put in an order to buy a stock at $3/share and find out that they took out $6/share from my account. We all know what the stock price is and make our choice to buy it or not buy it. If you don’t like the price, it is simple. Just don’t buy it.
Your comment highlights the “irrational” part of irrational exuberance, Anonymous. Yes, people “know” on some level of consciousness that the numbers on their portfolio statement are wrong at times of massive overvaluation of stocks..The tricky part is — they don’t want to know it! They want to believe in the Buy-and-Hold fantasy. Letting them look at what the peer-reviewed research says undermines their ability to place their confidence in the Buy-and-Hold fantasy. So the Buy-and-Holders want to suppress discussion of the last 43 years of peer-reviewed research. The question on the table is — Should people be permitted to hear the case against Buy-and-Hold even though we know from experience that that would cause fewer people to follow Buy-and-Hold strategies? Buy-and-Hold is a money-maker for the people who push it.
There was a day when discussion of the research showing that smoking causes cancer was suppressed. Do you think that people in this days thought that smoking was perfectly healthy? I don’t think that. I think that there were lots of people who suspected that smoking was not so hot an idea long before they started putting a skull and crossbones on the package. People knew. And they also didn’t know. Because they very, very much didn’t want to know. Today information about the dangers of smoking are everywhere. Everyone knows the truth in a good bit of detail. And fewer people smoke. I think it’s a better world. I think it would be fair to say that there are people who make their living selling cigarettes who don’t agree, who were just fine with the idea of people knowing and not knowing at the same time.
We all know that overpriced stocks are dangerous. We all get it. But at times when there are overpriced stocks in our portfolio that we are counting on to finance our retirement, we don’t want to get it. There are always going to be people who enjoy hearing the Buy-and-Hold lies. It’s human nature. It makes a difference if we give ourselves permission to talk about those lies, to examine up close how much horror they have brought on over the years, to let people see what the research shows. That’s the entire benefit of research, that it permits us to see lies like that for what they are. Please remember that in an official sense the Buy-and-Holders are in favor of looking at the peer-reviewed research. I got the idea from reading one of John Bogle’s books.
Humans are rational creatures. That’s a true statement. Humans are also self-destructive creatures who harm themselves when they ignore what their reasoning ability tells them. That’s also a true statement. I title my book “Investing for Humans” because Valuation-Informed Indexing takes into consideration both sides of the human personality. Yes, we want to invest more effectively. We all do. But we also very, very,very much do not want that. We want to believe that the numbers on our stock poprtfolio are real,n even at times when the CAPE value is in the 30s. There’s something inside us that makes us want to believe in Buy-and-Hold. That’s the thing that has been making stock investing risky for as long as there has been a stock market.
I vote for permitting honest discussion of the peer-reviewed research at every site.
Rob
No, it is irrational to think people are going to believe you when the facts say otherwise. Smart people are going to read for themselves and not just take your word for it and that is why you have failed.
I naturally wish you all good things in any event, Anonymous.
Rob
It would be better to show your readers how to have a successful retirement plan. I am happy to show my plan and then you can give your critique and/or your plan. Here goes:
I am almost 61 years old. I now have well over $7 million in combined retirement and after tax savings. I have a paid off home and no debt. My last child is going through college and the other 3 have finished. Tuition was all paid in cash (no loans). I have a 70/20/10 split with my portfolio. Estimated interest and dividend income is close to $300k/yr. I have equity in a company that has a several million upside that will just go to the kids (buy homes, etc). I don’t anticipate having to sell shares during retirement because of investment income, but should I need to pull from them I can decide what makes most sense based on the market. The 10% in cash equivalents gives me flexibility/safety to ride out market changes. I don’t need social security, do my wife and I will wait until 70 to maximize the benefit. Current projections show that we can expect $80k/yr is social security (in today’s money) at that age.
How did I get here? I have been working since I was 10 years old. Started on a farm and took on a “real” job when I turned 16. Paid my way through college and focused on growing my career to maximize my income. I paid myself first with putting a consistent amount in savings. With the emergence of vanguard and the proven track record of buy and hold, I was able to build a solid retirement portfolio. While my wife worked early in or marriage, she ended up staying home with the kids when we started our family. We can now enjoy a safe and fully funded retirement and take our excess to set up our kids for success. Our youngest child is 18 and she already has close to $100k in her Vanguard account.
What do you think, Rob?
Would love to hear how your plan is doing.
Does your plan include doing everything in your power to get every discussion board and blog on the internet opened to honest posting re the last 43 years of peer-reviewed research? If it doesn’t, then the Get Rich Quick/Buy-and-Hold impulse that resides within every investor (we’re all humans) will sooner or later bring on another Buy-and-Hold Crisis and you will suffer through it along with everyone else, plan or no plan.
I believe that honest posting re the research should be permitted. I’m not a Buy-and-Holder. I once was. But not today.
Rob
Board owners would be happy to have you and anyone else to participate if you post TRUTHFULLY.
I truthfully believe that the Greaney retirement study lacks a valuation adjustment.
That’s the thing that cannot be said. Permit people to say that and the entire Buy-and-Hold house of cards come crashing to the ground.
Permit people to say that and we would never again see a CAPE value of 34. Permit people to say that and we would all begin living fuller and freer and richer and happier lives.
Can’t have that.
Rob
I truly believe nothing will change for you if you continue to play in the land of make believe.
Okay, Anonymous.
Rob