Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
“Today’s CAPE value is the issue.”
It is the issue for you. Stock prices have been too high for you since the mid 90s.
And that is OK. No one should be forced to pay more for stocks than they are willing to pay. As long as you are willing to accept the lower returns from which ever investment classes you are currently invested in.
I, on the other hand, realize that I will need to pay the market price for goods and services that I wish to purchase. If I want to buy a new BMW or a 15 year old Ford Focus I will need to pay the market price. I may wish that market price to be half what it currently is, but that wish won’t get me a car at a 50% discount from the market price.
The issue is whether people should be permitted to discuss the last 43 years of peer-reviewed research at every investing site. That research shows that the CAPE value that applies on the day one purchases stocks affects the long-term value proposition obtained from the purchase. If everyone adjusted his or her stock allocation in response to price changes for the purpose of keeping his or her risk profile constant over time, we could never see the sort of CAPE value that applies today and we could all live richer and fuller and happier and less stressful lives.
You are of course correct that we all need to pay the market price for stocks. The market price is affected by the information to which stock investors have access. Permit honest posting re the peer-reviewed research and investors are going to become better informed than what it was possible to be back in the days when the Buy-and-Hold strategy was being developed. Better informed investors would set stock prices are more reasonable levels and we would all benefit. It’s not even possible to imagine any downside.
Rob
I think my neighbors house if 50% too high in price. He needs to reduce his price by 50% so that I can buy it at that level.
If you know things about the house that would cause it to be valued at x and he is hiding these things from potential buyers so that he can obtain a price of 2x from them, that’s fraud.
If Greaney truly believed that his study contained a valuation adjustment, we never would have seen a single abusive post.
Rob
I think it is overvalued. I demand that he lower his price. No one should be buying houses at this current price. We need to make everyone sell us there homes for 50% off the asking price.
Do you believe that overvaluation exists?
Do you believe that stocks are equally risky at all times?
Rob
Do you believe it is risky to not have any retirement savings in your 60’s? Do you think it is risky to not have a job or other source of income when you have no savings?
Um….
Rob
Isn’t what all this is about………having a fully funded retirement? So if you are in your 60’s, broke and have no income, then shouldn’t the goal be to fix that situation by changing what you are doing?
No. It’s about letting people know that the Greaney retirement study lacks a valuation adjustment. There were people at the Motley Fool board who were using the Greaney study for help in planning their retirement.
Rob
“It’s about letting people know that the Greaney retirement study lacks a valuation adjustment.”
Is there anyone who thinks the Greaney study does contain a valuation adjustment?
That’s a good question.
There’s no one who has looked for one and found one. People don’t think it through.
Greaney says that a 4 percent withdrawal has always worked. That’s an accurate statement. Then he concludes that a 4 percent withdrawal is safe. That doesn’t follow. At times when valuations were high, a 4 percent withdrawal BARELY worked. It worked because there was a lucky returns sequence, not because that is a safe withdrawal rate for retirements that begin at times of high valuations. The claim is a false one. But it sounds PLAUSIBLE to people who haven’t thought things through carefully.
I argued that we should think things through carefully. When people did that, they began to lose confidence in the claims of the Greaney study. Greaney ddin’t like that. So he went into freak-out mode.
No one truly believes that Greaney included a valuation adjustment in his study. And no one truly believes that valuation-based market timing is not 100 percent required for every investor. There’s a tension between two desires possessed by every investor. We all want to invest rationally, for obvious reasons. And we all want to get something for nothing because that’s a universal human weakness. Buy-and-Hold serves the second desire; that’s why it is so popular. Valuation-Informed Indexing serves the first desire; that’s why it works in the long term.
I want to tell people what works. That makes me a threat to those who want to push what sells. Is it all about turning a quick buck? Or should there be some concern about what happens to the lives of the people who follow the investment strategies that do the best job of turning a quick buck?
I asked a question. Should we be looking at valuations when we calculate the safe withdrawal rate? Lots of community members thanked me profusely for starting the most exciting discussion ever held in the history of that board. The answer to the question was a resounding “yes!” Of course we should be taking valuations into consideration. We just hadn’t done it until then because people were afraid to invite Greaney’s wrath by doing so. No one was asking the question before I raised it.
It’s a con, Evidence. A lot of cons make no sense once you’ve see through them. What usually happens with a con is that you fall for something stupid because you very much want to fall for it. There’s deception on the part of the person working the con. But the bigger factor is the self-deception of the people who long to believe in the con. Anyone could have checked the Greaney study and saw that it lacked a valuation adjustment. But most people didn’t want to know. They wanted to believe the nonsense. By raising the question, I made it very hard or impossible for them to remain in the dark.
That’s what I wanted to do. Greaney and you want people to remain in the dark. We are working at cross purposes.
Rob
So that is a long winded way of saying that there isn’t anyone who thinks the Greaney study contains a valuation adjustment.
And yet you spend your time pointing out that it doesn’t contain a valuation adjustment.
What’s next, pointing out that the I-95 doesn’t go to California?
The problem is that there were people at the Motley Fool board who were using the Greaney study for help in planning their retirement. What do you propose that we do about that?
I propose that we point out that it lacks a valuation adjustment at every site at which they study is cited. The way to make people lose confidence in the study is to point out the error and explain to them how dangerous it is to take the study’s claims seriously.
Do you think it would be better if I just didn’t mention the error?
Have you thought about asking Greaney why he didn’t just correct the study within 24 hours of the moment that the error was pointed out to him? That’s the weird one. That’s the development that is outside of our social norms.
Rob
Other than you, who claims that there is an error? Answer: No one. Meanwhile, everyone believes that being in your 60’s and having no savings is a bad thing. Why is it that you ignore this and do nothing to fix your problems while blaming everyone else?
How many people would be saying that there’s an error if there had been no abusive or criminal behavior? Thousands and thousands of people. The abusive and criminal behavior keeps the cover-up going. To the benefit of no one.
Bill Bernstein said that the safe withdrawal rate at the top of the bubble was 2 percent. He didn’t use the word “error.” But to say that the safe withdrawal rate was 2 percent when Greaney was saying that it was 4 percent is to say that Greaney was in error. If there had been no abusive behavior, Bernstein would have been happy to work with us all to get all the Buy-and-Hold retirement studies corrected and we all would be living better and richer and fuller and happier lives today.
I want to see that happen. I want to see us all reap the benefits of Shiller’s amazing research findings. For that to happen, we all need to feel free to speak openly and honestly about these matters are every site. We need to bring all abusive and criminal behavior to a full and complete stop. I’d like to see that happen by the close of business tomorrow, if not a good bit sooner.
My best wishes to you.
Rob
Who says there is criminal behavior? Only you. Funny thing is that it is only you making all these claims on every topic and no one with any credibility will back you up. So it either the largest conspiracy to ever occur in the history of the world……….or Rob Bennett is wrong and making all of this up. Which is most likely?
It’s certainly an exceedingly strange set of circumstances. I give you that one. Lots of people with lots of credibility have backed me up. That’s never been a problem. But, if we want to hear those people speak up in clear and complete and direct terms, we need to make them feel safe doing so. So we need to bring the intimidation stuff to a full and complete stop. I’ve been saying that since the first day. The short way of saying it is that we need to apply the same laws in the investment advice field that we already apply in every field of life endeavor outside of the investment advice field.
I call it a conspiracy of ignorance. We did not know how stock investing worked prior to the publication of Shiller’s Nobel-prize-winning research in 1981, So there was no conspiracy prior to that. And we have not had the discussions needed for us to come to terms with the far-reaching how-to implications of Shiller’s findings until this day. So I don’t think it is possible to say precisely how much of a conspiracy there is. There are lots of people who want to speak up. Nothing could be more clear. There have been lots of intimidation tactics employed to stop them from doing so. That’s also super clear. The cover-up has been successful in the sense that Buy-and-Hold is still heavily promoted today and the Greaney retirement study has not been corrected. But I certainly do not believe that all of the people who promote Buy-and-Hold are knowingly participating in a conspiracy. The vast majority believe in it. So I think we need to be careful how we state things.
Is Bill Berntein participating in a conspiracy. He said as clearly as it can be said that the safe withdrawal rate at the top of the bubble was 2 percent. So he believed that the Greaney study is in error.So on the most important question he has been working to expose the conspiracy for 22 years now. But he was awful quiet about the need for Greaney to correct his study while the discussions were raging at Bogleheads In that sense he helped the conspiracy survive. I cannot say in precise detail what is going on in his mind, What I say is that we need to bring the intimidation tactics to a full and complete stop so that he will feel free to speak his mind openly and we will all learn the details. That benefits everyone. I am not able to imagine any possible downside.
It’s a bad scene in lots of ways, But it’s also a good scene in that this is the biggest advance in our understanding of how stock investing works in the history of personal finance. Shiller waan’t awarded a Nobel prize because he has a nice haircut. So I vote for opening every site to honest posting. It’s true, though, that the longer the cover-up continues, the less comfortable people feel about speaking up. The 43-years cover up looks really, really, really bad. That’s what I always say that we need to bring it to an end by the close of business today. Letting it continue for another day just makes things that much worse.
The set of laws that applies in every other field is a good set of laws. It works. We need to decide as a nation of people to apply that good set of laws in the investment advice field as well. That’s where I’m coming from. I sincerely believe that the Greaney retirement study lacks a valuation adjustment. I should be permitted to say that wherever I please. It should not be a controversial question.
My best wishes.
Rob
ValueWalk informed me this morning that they will no longer be running my weekly column on Valuation-Informed Indexing. This makes me sad. I have learned a great deal and had a lot of fun writing the column.
I am grateful to ValueWalk for running it as long as they did. It’s been going for 15 years.
Rob
I am only surprised it took this long for Valuewalk to dump you. There was nothing to learn from your content and it was all just repeats of the same old lines.
Okay, Anonymous.
Rob
Have you any columns that you submitted to value walk that will not now be published? Will you publish them here?
I have two that I have prepared but not submitted, No, I will not be posting them here.
They say that valuations matter! Surprise! Surprise!
Rob
I don’t understand your aversion to publishing your writing here. With the demise of your Value Walk column, which was your last remaining column elsewhere (you used to have others), your blog will now just consist of links to other posts (which were links to previous posts) starting with “Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:”
You claim to have written some article but you won’t post it here and use have never shared any juicy excerpts of the book that you have spent the better part of two decades on.
At least George RR Martin has published the occasional sample chapters from the Winds of Winter.
I appreciate the feedback, Evidence.
The primary purpose of the column was the learning experience it provided. I wrote over 700 columns and each time I wrote one I learned some tiny thing about the subject. I learned from writing the two columns that I did not submit. So they served their purpose.
I believe that there will come a day when we all will feel free to post honestly re the peer-reviewed research at every sit on the internet. In will be able to take advantage of the learning experiences that I enjoyed writing the column at that time. I won’t submit the columns as they were written the first time. But the learning experiences that I enjoyed will inform every word I wrote re these matters from the day on which I wrote those columns.
It’s the learning experiences that matter. most to me,.
Rob
Just think. You don’t have one single obligation. You are not writing a book. You are not writing an article. You no longer married. You are no longer raising a family. Look at all the free time you now have to get a job and bring in an income. Good luck getting that job.
Just think. Opening every internet site to honest posting re the peer-reviewed research is a win/win/win/win/win for every person who lives in the United States. If Shiller’s Nobel-prize-winning research is legitimate research, we would all enjoy an amazing learning experience. If it is not, that would inevitably come out in the discussions. It’s not possible for the rational human mind to imagine any possible downside.
Rob
The problem for you is that the American public wants “honest posting” to be truthful posting.
10 percent of the American public loves my stuff. I have had more effusive praise directed at me over the past 22 years than any other poster in any of our communities that I can think of. Now, the other side of the story is that most of those other posters have only rarely had negative words directed at them while I have seen ten negative ones for every positive one. I am banned at every large site and these others are celebrated at most sites.
Those realities tell me that Buy-and-Hold is the past and Valuation-Informed Indexing is the future. I don’t enjoy hearing the negative comments. But they are not a good sign for Buy-and-Hold. We wouldn’t see harshly negative comments if Buy-and-Hold inspire true confidence in its followers. We would see a desire to engage in calm, thoughtful debate. That sure ain’t what we have seen from the Buy-and-Hold side. So what I have seen tells me that I am sitting on the right side of the table.
Yes, the American public has sympathies with Buy-and-Hold. That’s clear. But the American public also has sympathies with the idea of permitting civil and reasoned discussion of the peer-reviewed research. The laws that apply (and that the members of the various Buy-and-Hold Goon Squads ignore) show that. It’s an unstable situation to have 43 years of peer-reviewed research showing that the dominant investment strategy is gravely flawed and for us not to be able to talk about this at even a single large site. Unstable situations change as the instability brings on more and more problems.
We’ll see, you know?
Rob
“ 10 percent of the American public loves my stuff. I have had more effusive praise directed at me over the past 22 years than any other poster in any of our communities that I can think of.”
None of that is real. You live in an imaginary world.
Yeah, yeah.
Have you ever had an academic researcher who was so impressed by your stuff that he elected to devote 16 months of his life to researching it in depth and then concluded that it all checked out? On the morning of May 13, 2002, I would have told you that such a thing was impossible. But here we are.
Rob
Yes, this is the academic researcher that made a recent statement that market timing with CAPE failed based on the most recent data.
It is.
If the Buy-and-Holders were confident in their strategy, they would want to find out what he would say in an environment in which there were no intimidation tactics being practiced.
And they would want to find out the same re everyone else who works in this field.
Rob