Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
Let’s say that the next 20 years are the same as the past 20 years in that no one believes your story, no crash happens, you are still broke, etc. Will you then admit you wasted all your time?
That alone would not do it. It would cause me to experience doubts. I would explore those doubts and see what people I respected were saying about the matter.
If there were still a Ban on Honest Posting re the peer-reviewed research, that would make it hard for me to develop confidence in Buy-and-Hold. I view the Ban on Honest Posting as a very negative sign for Buy-and-Hold. It’s not the way that people behave when they have confidence in their ideas.
Rob
Nothing has worked out like you said it would for the last 25 years. You are 65 years old and broke. You are saying you don’t have any doubts yet?
I have tiny doubts because prices have remained high for so long. Prices have remained high longer than at any prior time in U.S. history. That shakes my confidence a little.
The other side of the story is that the Buy-and-Holders evidence almost no confidence whatsoever. You Goons evidence bravado, That’s not the same thing, Say that you possessed a deep belief in Buy-and-Hold. Then you would be fine in hearing people who believe that Shiller’s research is legitimate have their say. You would present your side from time to time and many people would agree with you while some would not. So what, you know?
That would be normal. That’s not even a tiny bit what we see. What we have been seeing for 22 years running is that Goon portion of the Buy-and-Hold community goes completely nutso is anyone suggests that Shiller might have a point. The defensiveness is off the charts. That’s not the majority of Buy-and-Holders., It’s about 10 percent. But the others tolerate the strange behavior. They might speak up against it once or twice. Then they fade into the background. They go along to get along.
That tells me that Shiller is very much onto something,. Buy-and-Hold is rooted in the Efficient Market Theory, the idea that investors act in their self-interest, that they are rational. Shiller is saying “no, at times investors are not rational at all, at times they are highly emotional.” If that’s so, we need to be studying the ways in which investors become emotional and what to do to help them hold into their rationality. The Bennett/Pfau research indicates that investor emotionalism is 70 percent of the stock investing story, that overcoming one’s inclination to emotionalism is the most important thing that one needs to do to achieve long-term investing success. That learning to practice price discipline can permit one to retire five years sooner while taking on far less risk. That’s no small thing, That’s investor heaven.
I wasn’t sure on the morning of May 13, 2002, I was reasonably confident that Greaney got the number wrong but I wanted to hear what other people had to say because I was not 100 percent sure. I couldn’t identify any flaws in what I was saying. But it seemed too incredible to be true. So I wasn’t entirely sure, It made me happy when Wade Pfau described himself as experiencing the same sort of feelings. He was so excited about our research that he said he couldn’t sleep at night. But he was asking himself: “Did I miss something?” Because it all seems so impossible. Most of the Buy-and-Holders are very smart people. So it’s hard to imagine that you would be right and they wouod be wrong about so important a matter.
In some ways, I am much more confident today than I was on the morning of May 13, 2002. So many pieces of the intellectual puzzle have snapped into place during the first 22 years. But we haven;t had a price collapse. We had that one short-lived one in late 2008. But that didn’t last long enough to break the bull psychology. Buy-and-Hold is just as popular today as it was in 2002. Witness today’s CAPE value. So I wouldn’t say that I am entirely free of doubt.But i just have no explanation for the Goon behavior outside of Shiller’s contention that investors are capable of high levels of emotion. So in an overall sense I remain confident.
The most important thing to me is that we explore these questions. If Shiller is wrong,let’s find that out. Let’s talk about it and identify where he is wrong and where he is right, It is only Buy-and-Holders (and really only a small percentage of the Buy-and-Hold population) that wants to suppress discussion of the peer-reviewed research. That speaks volumes to me. I cannot imagine ever overlooking that one, It’s just not the way that humans behave when they believe in what they are saying.
I am 100 percent confident in saying that we need to open every site to honest posting re the research. I am highly confidence but not 100 percent confident re my belief that Shiller’s Nobel-prize-winning research is legitimate research.
My best wishes, etc.
Rob
If buy and holders did not have confidence, they would have done something different. It is obvious you spin a story to try and cover up the embarrassment of your failure.
And the do do something different. Every time. They tell themselves that the stock market is the only market that ever existed in which price discipline is not 100 percent required. Over that, that creates a mountain of irrational exuberance. Eventually, they lose confidence in the project and we have a long bear market that causes misery for millions.
Not this boy. I believe that the economic-based return of 6.5 percent real is just fine. I don’t see any need for irrational exuberance or bull markets or Get Rich Quick or Buy-and-Hold. None of that garbage. Stocks are good enough without adding the roller coaster ride feature that comes with failing to engage in valuation-based market timing.
Rob
No, they are not doing a thing different. They continue to just buy and hold like always. You even state that. You don’t like the fact that they keep buying and holding.
I would like to see every U.S. investor working together to get the CAPE value down to a less scary level. I think we should have public service announcements telling people that “only you can avoid Buy-and-Hold Crisis.’ I don’t see a Great Recession or a Great Depression as being any less of a national tragedy than a hurricane. So I think we should be united in opposition to bull markets as much as we are to hurricanes. We should protect people from them.
So it’s fair to say that I don’t like it that many investors keep buying and holding. But, in the market continue to perform in the future anything like it always has in the past, they will indeed stop doing that. How do you think price crashes happen? Millions of people who swore on a hundred Bibles that they will always hold see something that causes their inner doubts to break through and they sell like mad. Then all their friends (also self-decribed Buy-and-Holders) follow their lead. You look up one day and see that $10 trillion of wealth has been destroyed. Then, surprise, surprise, the economy contracts and collapses. Who ever would have thunk it?
I would just permit honest posting re the peer-reviewed research and skip the rollar-coaster ride to poverty. I don’t see that the irrational exuberance garbage adds anything, It helps our Wall Street Con Men friends to turn a few extra bucks. Yippie, you know? They could make a perfectly fine living in a world in which honest posting re the peer-reviewed research was permitted. I personally think they would do better in the long run. People would love a stock market that didn’t blow up the economy every 40 years or side. The roller coaster ride is a huge waste of time and effort (and MONEY), in my assessment.
Get Rich Quick! Buy-and-Hold! Irrational Exuberance! The 4 Percent Rule! Economic Crises!Failed Retirements! Bull Markets! Big, Big Gains, A Lot More than 6.5 Percent Real! Board Bannings!
Yucko.
Rob
I’m not scared. Why should I be? I’m a 40 year old millionaire!
I’m scared that today’s CAPE value may bring on the same sort of consequences for millions of people that it has always brought on in the past. There’s no amount of money that would make me not be afraid of that possibility. Those millions of people are not plastic pieces on a chess board.
Where I’m coming from.
Rob
You are scared for the small percentage of us millionaires, but not scared for all the broke people like you. That doesn’t compute.
I’m scared for everyone who lives within reach of the Buy-and-Hold hurricane, Anonymous. When people come to believe that we can push stock prices up above their real-value level and not have to suffer consequences down the line, they get hurt. There has never been an exception to the rule. I have a funny feeling that this is not going to be the first exception.
I believe that a return of 6.5 percent real is just fine. I see no need for the relentless promotion of the pure Get Rich Quick/Buy-and-Hold stuff. You’re not a millionaire because of the fantasy irrational exuberance stuff. If you think you are, you’re just not thinking straight. Buy-and-Hold doesn’t create wealth, it destroys it.
Everyone who has ever posted to our boards had to click an “I Agree” button promising that they would never engage in the sorts of behavior that the members of the Buy-and-Hold Goon Squads employed to suppress discussion of the last 43 years of peer-reviewed research. That’s the good in us evidencing itself. Yes, we all have a Get Rich Quick/Buy-and-Hold urge. We all also have a desire to know the realities. Peer-reviewed journals didn’t spontaneously burst into existence. They exist because we all have a desire to know how this stock investing business works and we appreciate thet having research available to us might help.
Where I’m coming from.
Rob
There is no buy and hold crisis because the vast majority of people do not own any/enough stock to impact their net worth. When stocks crash, it mainly impacts the top 10% and the drop does not alter their ability to still pay their bills. The median household net worth in America is just under $200K. Regardless of what percentage of that amount is in stock, the typical household has a savings issue and not an investment issue. Americans, on average have a problem of not owning enough stock (and other assets) instead of owning too much stock.
When we experience a Great Recession or a Great Depression, it affects everyone, stock holders and non-stock holders alike. I mean, come on.
I’m in favor of people owning more stock. That’s why i believe that posting about Valuation-Informed Indexing should be permitted at every site, without a single exception. Valuation-Informed Indexers enjoy greater lifetime returns because they OWN MORE STOCK over the course of their investing lifetimes. When you stick with the same stock allocation when prices reach insanely dangerous levels, you lose more in the inevitable price crash. Those who follow research-based strategies have more money to invest in stocks when they are available at reasonable and super reasonable prices.
Buy-and-Hold is a marketing gimmick. People would be better off being satisfied with the 6.5 percent real return that is supported by the economic realities. Going full Get Rich Quick in one’s thinking about how the stock market works always subtracts and never adds. It puts a few extra dollars in the pockets of our Wall Street Con Man friends at the cost of destroying millions of hard-working people’s lives. No wonder the Buy-and-Holders feel a need to suppress discussion of the last 43 years of peer-reviewed research in this field!
My sincere take.
Rob
Look up the description of a recession. It has nothing to do with the current level of the stock market price. It is based on negative GDP. VII investors do not own more stock. It is owned by the top 10% who keep accumulating. These are just simple facts that anyone can look up.
If irrational exuberance is a real thing (I believe that it is), then there’s a tight connection between high stock prices and recessions. Today’s CAPE value is two times the fair-value CAPE level. If half of the value of today’s stock market is illusory and fated to disappear into thin air at the onset of the next Buy-and-Hold Crisis, that’s trillions and trillions of dollars of spending power that are going to disappear from our economy in a short amount of time. It’s not possible for the rational human mind to imagine circumstances in which that would not bring on a recession, And, sure enough of you look back at times when stock prices reached insanely high levels, you always see a recession down the road a bit.
Not this boy.
Rob
Show us the academic studies that say that stock prices cause recessions. Guess what, Rob. The studies do not show that. The problem is you just make statements without any facts to back it.
I am highly confident that, six months after we have opened every discussion board and blog on the internet to honest posting re the last 43 years of peer-reviewed research in this field, we will have numerous big names (including some who are today viewed as Buy-and-Holders saying the permitting stock prices to reach insanely high levels does indeed cause recessions. We’ll see.
There’s a reason why Shiller’s amazing research showing that valuations affect long-term returns caused him to be awarded a Nobel prize. Shiller’s research changes everything we once thought we knew about how stock investing works. It takes us from the dark ages to an enlightenment.
My sincere take.
Rob
We’re adding more than $50k per year, contributions not reinvestment, into the market mostly in tax advantaged accounts. We aren’t greedy, we give 10 percent of our net income away to charities mostly church. We give some more to you extended family. The kids are in private school and other activities including piano and drum lessons, swimming, soccer, and now Trail Life and American Heritage Girls. We travel internationally every year and between now and January 1 we will take two small trips, one to Washington DC and the other to Southern California. We’ve added over $200k to our net worth year to date, mostly in stock market gains and contributions. I’m only 40. I am winning. I’m not suffering from irrational exuberance, if anything I am exceptionally rational!
Not in my book.
You are indeed greedy if you are counting the entire amount indicated in your portfolio statement as real 43 years after pee-reviewed research was published showing that you need to subtract the effect of irrational exuberance to get the numbers right. What other possible motivation could you have for doing something like that. I mean, please give me a freakin’ break.
My best wishes, etc.
Rob
So now it is greedy for someone to responsibility save for retirement and provide for his family, right? I guess that is why you did the opposite?
Um….
Rob
Of course it is not greedy for some guy to expect to be paid $500 million for doing nothing, right?????
No, it isn’t greedy at all.
I didn’t put up my post of the morning of May 13, 2002, pointing out the error in the Greaney retirement study for the purpose of making money. I did it because I was part of a community and there were people in that community who had been taken in by the Greaney study, who were putting together retirement plans based on a belief that the numbers in the study were accurate. I knew from reading John Bogle’s book (Bogle said that Reversion to the Mean in stock prices is an “Iron Law” of stock investing) that the study was in error (the Greaney study lacks a valuation adjustment). So I had an obligation as a member of that community to point out the error.
Did I expect to make money from doing so. In a vague sort of way, I did. Clearly it was a big deal that there were smart people using a retirement study that got the numbers wildly wrong. After we got the Greaney study corrected, I intended to take the issue to other sites and get all the other Buy-and-Hold retirement studies corrected. That would greatly increase my popularity as a personal finance journalist across the internet and would certainly translate into money down the line a bit Buy $500 million? Please give me a freakin’ break. That’s nuts.
The $500 millions thing came later. You Goons didn’t want people learning about the error. So you engaged in all sorts of abusive behavior and even a good bit of criminal behavior to suppress the discussion that thousands of our fellow community members and a number of experts in the field very much wanted to see go forward. And you would brag about how much financial harm you have done to me with your abusive and in some cases criminal behavior. I needed responses to that. One natural response was to explain that the abusive and criminal behavior could only succeed for so long, that at some point the guy who pointed out the error was going to be rewarded financially for what he had done.
How big would be those rewards. Under our system, what I would have to do (with the help of lawyers) is show how much I would have earned had there never been any abusive or criminal behavior. The answer is that I obviously would have earned a very big muliiple of $500 million. The shift from Buy-and-Hold to Valuation-Informed Indexing is the biggest advance in the history of personal finance. It will permit millions of people to live richer and fuller and freer and more fulfilled lives. That’s clearly worth a whole big bunch more than $500 million. You Goons obviously believe that or else you never would have behaved in the ways you have. I didn’t suggest a number larger than $500 million only because that number is so insanely high that it seems silly to me to use a higher number, So I went with that.
That doesn’t mean that I did this primarily for the money. I didn’t. I did it because I care about the people I got to know at the old Motley Fool board and I like the idea of being able to help those people and millions and millions like them. That’s my driver, helping people and being able to use my life energies to do highly meaningful work. But I sure don’t plan to turn down the $500 million. I earned it. It’s been a hard road. Have you seen anyone else doing what I’m doing? So I earned it.
And it makes some very positive statements for me to receive that $500 million. When it is announced that I have received the $500 million, you are going to see THOUSANDS of people rush in to begin giving honest, accurate, research-based investment advice. Money provides an incentive for behavior in our country. One of the things that has kept Buy-and-Hold going (not the only thing, but surely one important thing) is that it permits the people hawking it to bring in so much money. It’s a healthy development for us to demonstrate as a nation of people that it is possible to make huge amounts of money in this field doing honest, research-based work. That’s the best possible statement. I am honored to play a role in making that sort of statement.
It is a healthy development. It has nothing to do with greed. It’s one of the reasons why our system works well in the end, despite its imperfections. We reward merit with financial incentives. And there’s about 10 billion times more merit in getting the safe withdrawal rates right than in getting it wildly wrong. Accurate safe withdrawal rate calculations help people rather than destroy their lives. So I offer precisely zero apologies for accepting the $500 million. I will be grateful for it, I will say “thanks.” I am grateful to live in a nation of people that created a system of government that permits this sort of thing to happen. We all should be. We all benefit from the merits of that system.
That’s where I’m coming from re this terribly important matter, in any event.
My best wishes, etc.
P.S. If you truly believed that getting the Greaney retirement study corrected was “nothing,” you never would have insisted on a ban on honest posting re the peer-reviewed research at every site. I mean, come on.
Rob
You haven’t done anything to earn a cent. No one has done anything to you. It is all made up. If you really wanted to post more of your opinions, you would be doing so on the largest platforms on the internet, but you can’t even lift a finger to do that. All you do it sit around and tell people what you want them to do for you and then you expect for people just to do your bidding.
Fix your own problems, Rob.
Yeah. yeah.
The Greaney study has not been corrected to this day, Today’s CAPE value is 36. Those two realities tell the tale.
Rob
And Greaney doesn’t have to change a thing for you just because you. Further, the rest of us know that you made the error and not Greaney.
You need to be listening to those of us that are successful so that you can correct your errors and find solutions to your current dire financial situation.
Will do, Anonymous.
Take good care, my old friend.
Rob
“ That alone would not do it. It would cause me to experience doubts. I would explore those doubts and see what people I respected were saying about the matter.”
So you would be 45 years into your VII journey, aged 85 and broke and that still wouldn’t convince you that you were wrong and wasted all of your time…….really?????
Say that it was 1965 and someone had opposed racism for 45 years and yet he could see that racism was still a big problem and he was advised to give up the battle. In the mid-60s, major civil rights legislation was passed and a few decades later a black man was elected President of the United States. 1965 was not the time to be giving up.
The time to give up is the day that I see that there really is a valuation adjustment in the Greaney retirement study after all. That has not happened during the first 22 years of our discussions. Each day that it doesn’t happen is more reason to believe that I have been right all along — the Greaney study is in error and should have been corrected within 24 hours of the moment at which the error was brought to his attention. If we all were thinking clearly, there would not be one person encouraging Greaney to continue delaying the correction.
My sincere take. Getting the numbers right in retirement studies matters.
Rob
Say it was 1965 and some guy tells you that the moon is made of green cheese. He was told he was wrong, but he stilll insisted that he was right and that we should all see how things turn out. 45 years later, he still says that the moon is made of green cheese and that if everyone else was thinking clearly, they would believe him.
The reason why Shiller was awarded a Nobel prize for his research is that it was so extraordinary, Research helps us to learn things that we didn’t know before the research was published. You can’t just say “Oh, there was a time when people didn’t think that, so it must not be so.” Advances in understanding are achieved over time. The last 43 years of research in this field represent a major advance.
If we discover the cure for cancer, we shouldn’t say “oh, we cant let people know because that would mean shutting down the chemotherapy centers. Chemotherapy served a purpose when we didn’t have a cure for cancer. The Buy-and-Holders were right that the guessing game approach to market timing doesn’t;t work. So that’s fine. That one stood the test of time. But the idea that valuation-based market timing might not always be 100 percent required for all investors had been discredited by peer-reviewed research.
That was just a wild shot in the dark. There was never any evidence to support the idea. So we need to move on from that one. The science has advanced. So the advice offered by experts need to advance. Buy-and-Hold is the past. Valuation-Informed Indexing is the future.
Rob
Your opinions of Shiller’s work are just that. Shiller has never agreed with you and has never endorsed VII. In fact, he has said just the opposite. He specifically told you and everyone else not to time the market with CAPE. You wouldn’t listen and that is why you are broke.
The title of Shiller’s book is “Irrational Exuberance.”
Rob
It is your fault you wouldn’t listen to Shiller. He told you and the rest of us told you, but you wouldn’t listen. Now you are broke.
I’m bad. Anonymous. That’s why I don’t listen. It’s a trait of bad people.
Rob
I am sure your ex-wife would agree with your last statement.
There’s nothing worse than someone who tells the truth about stock investing at a time when prices are insanely inflated. I mean, come on.
Rob