Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
All your crash predictions failed. You have no idea what you are talking about.
I have never made any precise crash predictions. I have never said “prices will crash on Day X or in Month X or in Year X.” I call that the guessing game approach to market timing. I don’t believe that it can be done. I am in complete agreement with the Buy-and-Holders re that one.
I have put forward general time frames in which I said I believed the price crash would come. Those predictions did indeed fail. Those predictions were based on what has happened in the historical record. In recent history, prices have remained high longer than than they did at any earlier time in history. We are in uncharted waters. No one could have anticipated that.
I don’t think it follows that I don’t know what I’m talking about. My claim that the Greaney retirement study lacks a valuation adjustment has stood the test of time. I feel more confident re that one today than I did on the morning of May 13, 2002. Because we have not yet seen a crash (other than the 2008 crash, which only lasted for about 12 months), Greaney’s study has not yet caused failed retirements. But it will in the event that stocks continue to perform in tjhe future anything at all as they always have in the past.
I don’t think it would be proper to wait until people have suffered failed retirements to point out the error in the study. I think that the time to do that was the day when the error was identified. I actually waited a number of years because I was afraid of what Greaney would do to me and to the Motley Fool discussion board. I knew about the error on the first occasions on which I looked at the study (I knew from reading Bogle’s book that the safe withdrawal rate changes with changes in valuations levels). I was the first, though, to point out the error in a public way. I am proud of that. I didn’t get that one wrong.
And it’s important. Getting the numbers right in retirement studies is important.
Rob
“I have put forward general time frames in which I said I believed the price crash would come. Those predictions did indeed fail. Those predictions were based on what has happened in the historical record. In recent history, prices have remained high longer than than they did at any earlier time in history. We are in uncharted waters. No one could have anticipated that.”
And did you learn anything from the failure of these predictions that weren’t really predictions?
I learned that we need to stress that the guessing game approach to market timing doesn’t work. I didn’t believe that it worked on the morning of May 13, 2002. I feel stronger re that point today.
We need to ask WHY short-term timing doesn’t work. It doesn’t work because stock investing is such an emotional endeavor. When prices are too high, they SHOULD be lower. But investors don’t care what they should be. Investors WANT prices ton be high. So they push them up even when there is no economic justification to do so.
Opening every site to honest posting re the peer-reviewed research will solve the problem. Investing will become a more rational endeavor. So prices will correct quickly. Investors will be encouraged to act in their self-interest. Prices will never again get so out of hand. So there will never again be such resistance to valuation-based market timing. All of these issues are connected.
Rob
You say you are concerned about people having a failed retirement. Have you looked in the mirror lately? YOU have a failed retirement. It means you were WRONG about everything. Why should anyone listen to you?
People should listen to me because I cite peer-reviewed research in support of what I say. Peer-reviewed research gets you outside of your own emotions. Within your own mind, you can rationalize anything, Your thinking goes around and around in circles. Peer-reviewed research is outside of you. It’s a check on your own emotionalism. Using peer-reviewed research as a guide permits rationality into the process.
This is a battle between emotionalism (we all have a desire to obtain something for nothing — counting irrational exuberance as real is obtaining something for nothing) and rationality (employing the discipline of checking what the peer-reviewed research says about your strategy). I believe that the arc of history in investment analysis bends toward rationality. We’ve been working toward Shiller’s research findings for a long time.We are not quite there yet. But we are very close today. All that we need to do is to open one large site to honest posting re the research and the rest wil be downhill sledding.
In any event, each investor should get to choose for himself or herself who to listen to. You Goons can decide for yourselves. You don’t get to decide for everyone else. When you cross the line and attempt to suppress discussion of the last 44 years of peer-reviewed research, you engage in fraud. That shows that you don’t really believe in Buy-and-Hold yourselves. I believe you follow it. Your belief goes that far. But you lack the confidence it would take to engage in civil and reasoned discussions of the merit of your strategy. Your behavior shows that you do not have confidence, only bravado. Not this boy, you know?
Rob
No you don’t. You just give your opinion on what one guy said. Shiller has even said that you should not time the market with CAPE.
No one with half a brain would take financial advice from a broke guy.
Shiller made an offhand comment once that could reasonably be interpreted in the way in which you are interpreting it. But that interpretation goes against the thrust of his entire life’s work. So I don’t think that’s what he was saying.
But I would sure like to hear him explore the question in depth. In everyone were thinking clearly, everyone on the planet would want that. Shiller was awarded a Nobel prize for his research. I have asked you scores of times to identify ways in which you have changed how you invest because of what you learned from Shiller’s research. You have never responded. That’s scary. That’s a problem.
Shiller added to our knowledge of this subject IN SOME WAY. What is it? What did he do? I think he showed that valuations affect long-term returns, If you think something different, you should be able to say what that different belief is. You can’t. You just want people to pretend that Shiller’s research doesn’t exist because Buy-and-Hold came first and, if we all pretend that Shiller’s research doesn’t exist, Buy-and-Hold can continue.
I want to get to the bottom of this, I want to open every site to honest posting re the peer-reviewed research. There’s nothing bad that can come from discussing the research. That’s how we learn.
We didn’t know that valuations affect long-term returns when the Buy-and-Hold strategy was being developed. How does knowing that change things? I think it changes things in a very big and very positive way. I think we need to discuss it. Lots of people won’t talk unless we knock off the funny business that we have seen coming from the Buy-and-Hold side of the table for 23 years now. We need to bring that awful stuff to a full and complete stop. I am not able to imagine any possible downside.
Rob