Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
“ But I don’t believe for two seconds that you are truly confident about your strategy ”
Back at you, Rob.
I’m confident enough to argue for permitting both sides to post honestly re their beliefs. if Buy-and-Hold prevails over Valuation-Informed Indexing in a fair fight, then so bet it, you know? No one knows everything. So no one should go with Valuation-Informed Indexing just because I endorse it. But no one should go with Buy-and-Hold just because Lindauer and Greaney endorse it either. They need to be challenged too.
Part of the scientific process is adopting a skeptical attitude. You might think that you have it all figured out but you might be wrong. To remain in the realm of scientific investigation, you must always permit new research and new discussion of what the research shows. I love what the Buy-and-Holders set out to accomplish. It pains me that they betrayed their own vision when they determined that new research could not be considered just because finding that that research is valid would require them to acknowledge that they got it wrong back in the days when the research needed to get it right was not available.
I think that my attitude toward these matters is a more confident one than yours. No, I am not 100 percent certain of every single thing I believe. It wouldn’t be healthy to be 100 percent certain across the board. At some point that becomes an excessively dogmatic attitude. But I am not afraid to have people hear both sides. I believe that, once people are able to hear both sides, Valuation-Informed Indexing will begin gaining ground on Buy-and-Hold. I believe that there will come a day when it will surpass it in popularity. We’ll see.
Rob
Since you know the research and how things work, you don’t need us for anything, nor do you need access to our websites, conferences, etc. You should have millions upon millions in your accounts by now with all that superior knowledge.
None of that is so. Appreciating what the last 43 years of peer-reviewed research tells us all about how stock investing works puts about $300,000 in one’s account over the course of an investing lifetime (more in some cases, less in others, it depends on circumstances). Adding $300,000 is no small thing. It’s a big deal. But it’s not millions and millions. Saying that it has to add millions and millions to have any value is silliness.
And the most important benefits of Shiller’s research are not benefits experienced by the individual but benefits experienced by the entire society. The Buy-and-Hold Crisis of 1929 caused a Great Depression. Someone who invested perfectly experienced no losses on a personal level. But he saw his country brought to its knees. He is being perfectly reasonable to want millions of people to be spared that sort of pain now that we have the knowledge needed to make better decisions.
I would like to see a cure for cancer. I want that party for myself because I may get cancer someday. But even if I were assured that I will never need a cure for cancer, I would like to see one appear because it would help millions of other people. Irrational exuberance is the cancer of the personal finance realm. Valuation-Informed Indexing is the cure. I would like to see every site opened to honest posting so that we can spread the cure for personal finance cancer far and wide. I am not able to imagine any possible downside.
Rob
You said that your market timing scheme would do better vs buy and hold. Many of us have multiple millions in our retirement accounts. By that logic, you should have millions up millions in your account.
$300K is a small thing. At a 4% withdrawal rate, that is only $12,000/yr. I guess if someone is broke (like you), it sounds like a big thing, but for most of us that are in the investment forums, this type of outcome is a disaster. I am at the point now that I make that $300k a year just off my interest and dividend income.
It’s $300,000 MORE than Buy-and-Hold. That’s a very big thing.
Practicing price discipline when buying stocks always adds, it can never subtract.
Rob
“Appreciating what the last 43 years of peer-reviewed research tells us all about how stock investing works puts about $300,000 in one’s account over the course of an investing lifetime”
Can you point to the data that shows that?
Or are you afraid to allow this question to be posted?
It’s an estimate. It’s not a precise number. I have a calculator — The Investor’s Scenario Surfer — that uses the historical data to compare how Buy-and-Hold performs with how Valuation-Informed Indexing performs. I have performed hundreds of runs. Sometimes the benefit is far more than $300,000. Sometimes it is less. $300,000 is my rough estimate of the average benefit.
There’s an easy way to get more precise numbers. Open every site to honest posting and you’ll have thousands of people talking about this on a daily basis. I am comfortable that the consensus will be that practicing price discipline will provide an average benefit of more than $300,000 over the course of an investing lifetime. If you thought that there was any chance that it would be less than that, you wouldn’t be so strongly opposed to the idea of permitting honest posting re the peer-reviewed research.
It’s obviously a big plus, right? You obviously wouldn’t see this sort of behavior if it were not a big plus. You see a big threat to Buy-and-Hold. I see that too.
Rob
Thanks for accepting my comment.
” I have a calculator — The Investor’s Scenario Surfer — that uses the historical data to compare how Buy-and-Hold performs with how Valuation-Informed Indexing performs. I have performed hundreds of runs. Sometimes the benefit is far more than $300,000. Sometimes it is less. $300,000 is my rough estimate of the average benefit.”
The fact that it gives different results each time you run it shows that it is using some random factor to generate it’s output.
I would rather not trust my retirement to a random number generator.
That’s the stock market. It doesn’t generate the same return every year.
The more that we do to encourage rationality, the more consistent returns will be. It’s investor emotionalism that causes the stock market to become a crazy roller coaster ride. We are never going to be able to eliminate that altogether. But I believe that we can diminish the roller coaster effect significantly.
My best wishes.
Rob
“ It’s $300,000 MORE than Buy-and-Hold. That’s a very big thing.”
Which means that you should have millions upon millions since us buy and holders have multiple millions. Based on your comments, you should be better off financially vs the average buy and hold guy we see on the forums………yet you are not.
You didn’t have a group of internet Goons doing everything in their power to keep you from earning a living, Anonymous. The fact that you felt the need to do that shows the weakness of the case for Buy-and-Hold.
Rob
What did the goons do? They didn’t make you quit your job, according to your bio. Also, you don’t have any books or reports for sale, so how could they block you from earning a living?
The Goons suppressed the discussions that thousands of people indicated that they would like to have by injecting ugliness into them. I can generate books and reports and lots of other things in no time flat once every site has been opened to honest posting re the peer-reviewed research. Creating the materials to sell is 10 percent of the job. 90 percent of the job is opening every site to honest posting.
In theory, that’s no job at all because the published rules of every site already permit honest posting re the peer-reviewed research. The reality is that all of us humans have a Get Rich Quick/Buy-and-Hold impulse that makes us vulnerable to the games that you Goons like to play in suggesting that their might be some alternative universe in which the Greaney retirement study contains a valuation adjustment. I am not capable of crafting posts that only make sense in an alternative universe. I can only write about how things work here on Planet Earth and that is revealed in the peer-reviewed research.
So, yes, I face an obstacle. It’s an obstacle that would not exist but for the abusive and in some cases criminal behavior of you Goons. It has held me back for 22 years now. It has held all the people of the United States back for 22 years now. I don’t like it. But I have to accept it. That’s the reality that anyone who wants to do honest work in this field is facing today.
There’s a lot that’s sad about it. There’s also a lot that’s very encouraging and exciting about it. We can sit around and cry about our fate or we can do our best to take a sad song and make it better. I vote for following the latter course of action.
My best wishes.
Rob
Blocking you from a few websites has nothing to do with your ability to write a book, write a report or get a job. In fact, your only excuse for not finishing your current book has been emotional issues. Even your wife got fed up with your excuses of not working and she then decided to get a divorce. Stop blaming everyone else and take personal responsibility.
One of the first rules of journalism is not to make yourself the story. In this case, I have had to bend that rule a bit. The focus of the story I am telling is how a person should go about investing in the stock market. That has nothing to do with me personally. I discovered that a retirement study that was frequently discussed at the forum at which I participated lacked a valuation adjustment and I told my fellow community members and a good number of them expressed a desire to discuss how that mistake had come to be made and how it was that no one had pointed it out until I did. Another group insisted that, unless I was willing to ignore the error like so many others, I had to be removed from the forum. Now I was a part of the story, whether I liked it or not. There’s no getting around it.
There’s a question that I have asked on scores of occasions. You Goons never respond to it. The question is: “Do you think it would have been better if I had kept it zipped re the error in the Greaney retirement study (it lacks a valuation adjustment)?” You will sometimes (not often. but on occasion) acknowledge that the Greaney study lacks a valuation adjustment and will then claim that the real question is whether one is required. Well, that isn’t discussed either. There are thousands of markets. In every one. price discipline is practiced; markets cannot remain functional without price discipline being practiced. What possible reason could anyone have for thinking it might be different in the stock market?
There once was a possible reason — there was an academic construct called “the efficient market theory.” If the market were efficient, overvaluation would be a logical impossibility and valuation-based market timing would not be required. But of course it is that academic construct that was discredited by Shiller’s Nobel-prize-winning research. So those who follow the peer-reviewed research have known for 43 years now that valuation-based market timing is 100 percent required for every stock investor. There’s no legitimate controversy.
We’re in a fix as a nation of people. On an intellectual level, we now know how stock investing works. But there was a time when we did not and we have not yet worked up the courage to say out loud what we now know to be true. My job is to change that. I want to see every site on the internet opened to honest posting re the last 43 years of peer-reviewed research. I cannot pursue that goal without telling people in some detail how it is that we have spent 43 years in this crazy Twilight Zone where we both know and don’t know how stock investing works.
What happened to me is an important part of the story. In ordinary circumstances, I would be celebrated as a hero for pointing out the error in the Greaney study. There were people at the Motley Fool board who were using that study for help in planning their retirement. I helped those people in a very big way. I was indeed celebrated by some. That was nice. But I was also banned from the forum and Greaney went right back to pushing his loony-tunes retirement study that lacks a valuation adjustment! What’s a person to do in those circumstances?
He has to do what he can to make sense of a crazy situation. I am not the story here. But what happened to me certainly illustrates why it is that there are still people promoting Buy-and-Hold strategies 43 years after peer-reviewed research was published discrediting them. Yes, emotional issues have slowed down the completion of my book on these matters. Do you not think that you would experience emotional issues if you discovered an error in a retirement study and your reward for doing so was to be banned from every major board on the internet and to see your marriage fail? You would experience them. Anyone would. That’s why you don;t see other people in this field talking openly about the far-ranging how-to implications of Shiller’s amazing research. They don’t want what happened to me to happen to them. They don’t want to be social pariahs.
People LIKE Get Rich Quick/Buy-and-Hold “strategies. They LOVE them. When peer-reviewed research shows the dangers of going pure Get Rich Quick/Buy-and-Hold, they don’t necessarily want to hear what that research signfies (some do, but it’s a minority that wants to talk about these matters).
My job is to tell the story. What happened to me illustrates what is going on in a general sense. The peer-reviewed research tells us how stock investing works. That’s great. But stocks are today priced at two times their real value. As a nation of people we want to believe that today’s nominal prices are real. We don’t want to adjust for irrational exuberance. If we did adjust, stock prices would fall hard and we would experience a recession. There’s lots of pressures out there aimed at stopping people like me from telling the true story of how stock investing works. There’s a lot riding on keeping this cover-up going. People get hurt in recessions. In a theoretical sense, we all want to advance our understanding of how stock investing works. But what price are we willing to pay to make that happen, you know?
What happened to me is part of the story. It’s not normal. The normal thing would have been for Greaney to have corrected the error in his study on the afternoon of May 13, 2002. The normal thing would have been for every single community member to insist that he do so. It didn’t play out that way. As a nation of people. we need to come to terms with that reality. Do we want to know how stock investing works? We sort of do. We awarded Shiller a Nobel prize. We made his book a best-seller. Thousands of us expressed a desire that this Rob Bennett fellow be permitted to say his piece. But we seem to be okay with the Greaney study remaining uncorrected 22 years after the error in it became public knowledge.
So how do we really feel about these matters deep down? That’s what we’re in the process of finding out about ourselves as these discussions continue.
Rob
“ There’s a question that I have asked on scores of occasions. You Goons never respond to it. The question is: “Do you think it would have been better if I had kept it zipped re the error in the Greaney retirement study (it lacks a valuation adjustment)?”
There is no error and it has been answered thousands of times. The fact that you ignore this fact is just one of many reasons as to why you are rightly banned.
Okay.
Please mark me down as saying that there is an error (the Greaney study lacks a valuation adjustment) and that I was a coward to not point it out for the first three years in which I posted at the Motley Fool board and that Greaney should have corrected the error within 24 hours of the moment at which he became aware of it and that there should not have been one community member who felt that it was okay for the error to remain in place.
A world in which the market is efficient and valuation-based market timing is thus not required is not the same as a world in which valuations affect long-term returns. My sincere take.
Rob
Please mark me down as saying that people should take responsibility for their financial wellbeing and should not be blaming others for their own failures.
So marked.
Rob
You haven’t earned a dime in about 24 years and here you sit wanting to blame everyone else. Just sickening.
It’s true that I haven’t earned a dime in 24 years. I left my job at Ernst & Young on Aug. 1, 2000.
It’s also true that I ultimately blame all of us for creating the situation. We all love knowing the truth about stock investing or else we never would have made Shiller’s book a best-seller or awarded him a Nobel prize. And we all also love Get Rich QUick/Buy-and-Hold strategies or else we would have insisted that the error in the Greaney retirement study (it lacks a valuation adjustment) be corrected immediately and we never would have permitted the CAPE value to rise to the level where it resides today.
We’re mess-ups. But we have a lot of good in us too. Both things have been proven beyond any reasonable doubt during the first 22 years of our discussions.
Or so this Rob Bennett fellow sincerely believes, in any event.
Rob