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 sellers are market timers because they don’t have enough dry powder. Someone sitting there with only a few hundred thousands has no ability to hang on for the long term. They will always bail during any perceived time of risk.
I have already shared some of my details. You probably remember that my portfolio generates $300K plus a year in interest and dividends. I also have other sources of income. I don’t need to sell and I just keep doing just like the rest of the top 10% in that I keep accumulating assets.
It is fine if you don’t want to hold stock. People like me will continue to buy. Remember the old saying: “The are two types of people with McDonald’s. One type is the customer that buys the burgers. The other type is the guy that owns McDonald’s (stock). Pick which one you want to be.
Valuation-Informed Indexers don’t count phony gains as real. So they don’t perceive risk in the disappearance of the phony gains. They are looking at the realities and the realities of stock investing are very reassuring — gains of 6.5 percent real annually.
It is the roller coaster ride created by the Buy-and-Hold mindset (no price discipline when buying stocks now!) that causes all the crazy ups and downs. All of that is optional today and has been for 44 years now, All we need to do at this point is to get the word out.
Irrational exuberance is the cancer of the personal finance world. Shiller’s Nobel-prize-winning research is the cure for cancer. We should permit people to partake in the cure.
Rob
“ Valuation-Informed Indexers don’t count phony gains as real. ”
If you can spend it, it is real. If you can’t spend it, it is phony. I can spend my millions. How much can you spend, Rob? Answer: Zero
If you can spend it, it is real, That says it all, Anonymous.
Irrational exuberance? What’s irrational exuberance?
Rob
“ Irrational exuberance? What’s irrational exuberance?”
It is when someone expects something that they didn’t earn………..like thinking they should get a $500 million windfall without doing anything to earn it, but pretending that they have uncovered some magical trading scheme and fighting some made up mass conspiracy.
Okay, Anonymous.
Hang in there, man.
Rob
This has to be the saddest corner of the internet. On one side, Rob writing the same inane 10 to 20 words over and over again. On the other side, one or two occasional guests throwing the same cold water in Rob’s face over and over again.
Rob, please get some help
So the top 10% that own 90+% of stock are all going to go broke, while the 90% that own less than 10% are all going to be wealthy……………really????
We all could use some help, Interested. If we were all thinking clearly, the question of whether every site on the internet should be open to honest posting re the peer-reviewed research would inspire zero controversy. I mean, why have peer-reviewed journals if you are not going to permit discussion of the research published in them?
Rob
So the top 10% that own 90+% of stock are all going to go broke, while the 90% that own less than 10% are all going to be wealthy……………really????
100 percent of us will be better off when every site is opened to honest posting re the last 44 years of peer-reviewed research,
Rob
And Rob Bennett decides what constitutes the last 44 years of peer reviewed research. Got it.
Shiller was awarded a Nobel prize for his research showing that valuations affect long-term returns. It must have taught us something that we did not know before he published it. What do you say that it showed?
I believe that it showed that valuations affect long-term returns. Call me madcap.
Rob
Rob Shiller would NEVER claim that anything he has written constitutes the last 44 years of peer-reviewed research. He also does not agree with your market timing scheme as he has stated that no one should use CAPE to time the market. Further, we can just look at the last 44 years of the stock market history and see that buy and hold has vastly outperformed market timing.
Shiller’s research showing that valuations affect long-term returns was published in 1981. No one has been able to show any problems with it in the time since. It has been 44 years of time.
I have suggested on scores and scores of occasions that you Goons will agree to drop the abusive stuff for one day so that he can appear at the Bogleheads Forum and we can all ask him questions aimed at find out out exactly what he believes about market timing. Zero interest on the part of the Buy-and-Holders. I wonder why.
Practicing price Discipline is not a “scheme.” It is common sense. There are thousands of markets and price discipline is absolutely critical to making them work. The only reason why anyone has ever suggested that it might be different with the stock market is that there is so much money that can be made pretending that Buy-and-Hold is a reasonable strategy. I mean, come on.
We’ll see which strategy is ahead in the days following the onset of the next Buy-and-Hold Crisis. If stocks continue to perform in the future anything at all as they always have in the past. we will see milllions of failed retirements. The good news is that those millions of failed retirements will all be “100 percent safe,” according to the Buy-and-Holders. Great strategy!
Rob
We have already seen it play out. You, the leader of the VII strategy, went broke. The buy and holders (top 10%), now hold over 90% of all stocks. Game over.
Okay, Anonymous.
I naturally wish you all the best that this life has to offer a person, in any event.
Rob
For the last 2 decades, you keep saying that we have to see how things turn out. That is not a valid statement for a large percentage of our population, including you and me. Right now, 1/3 of working adults are already retirement between the ages of 60 and 64 (my group) and 70% are retired between the ages of 65 and 69 (your age group). Clearly, people need to have a fully funded retirement when they turn 60 since it is too late to fix the short fall.
There is no way that people can keep sitting around for decades more to see if your VII strategy FINALLY works. They need to go with a system that has always worked. Buy and hold has worked over EVERY 30 year period. That is not even debatable. It is a fact as we can look at history.
Many Buy-and-Holders believe today that they have fully funded retirements but, if they took the last 44 years of peer-reviewed research into consideration, they would see that they do not. Today’s CAPE level is 38. We usually see the CAPE drop to 8 in a Buy-and-Hold Crisis. That’s a drop of more than 75 percent. Say that there’s a fellow who needs a portfolio of $1 million to have a fully funded retirement and that he has that today. Then we experience a Buy-and-Hold Crisis and he is left with a portfolio of less than $250,000. He no longer has a fully funded retirement.
Irrational exuberance is a real thing, Anonymous. Irrational exuberance is the cancer of the personal finance realm. You could have a guy who on the surface appears to be perfectly healthy but a terrible cancer is eating away at his insides. Would you say that this guy is in good health? I would not. To know whether our retirements are fully funded or not, we need to know how much of our retirement account is real and how much is just phony baloney irrational exuberance.
How much do you subtract from the number on your portfolio statement for the effect of irrational exuberance?
Buy-and-Hold has never worked. It’s not even logically possible that it ever could work. Buy-and-Holders don’t subtract for the effect of irrational exuberance. It is not possible to engage in effective financial planning if you are not even open to looking at what you need to look at to know how much wealth you have accumulated over the years. That’s the most important question. It is fundamental.
Rob
The markets go up and down every day. No 30 year period has ever failed. As such, your comments are not relevant.
To the opposite, if you are not fully funded by your 60’s, you have a failed retirement.
You are trying to make up a story about how a system that has always worked will potentially fail and at the same time talk about a system that has never worked will somehow magically become successful.
Every 30-year period has failed. Every 20-year period has failed. Every ten-year period has failed. Every five-year period has failed. Every one-year period has failed.
Stocks are an amazing asset class. They offer a 6.5 percent real average annual return. Is there any way to mess up such a great asset class. You could encourage investors to push prices up so high that you turn that 6.5 percent return into a negative number. That’s what the Buy-and-Holders did,
The trick to stock investing is to always, always, always practice price discipline and to always tune out the Wall Street Con Men who say that they have a funny feeling that it’s all going to turn out different this time. What if it doesn’t turn out different? What it it turns out the same> That’s the one that keeps me up at night.
I believe that we should permit honest posting re the peer-reviewed research at every site. It solves a lot of problems and it creates a lot of exciting opportunities. Yes, it means that the people who developed the Buy-and-Hold strategy in the days before Shiller’s Nobel-prize-winning research was published to say the words “I” and “Was” and “Wrong.” Who cares, you know? I can live with that.
Rob
Every 30-year period has failed. Every 20-year period has failed. Every ten-year period has failed. Every five-year period has failed. Every one-year period has failed.“
That is factually incorrect. When you make statements like that, it tells people that you are either lying or you have no ability to even look at numbers. With the comments you make, it is not surprising that you are completely broke and the investment community has shunned you.
Say that someone eats three ice-cream sundaes for dinner seven nights a week. And for a long time he lives. Then at age 45 he has a massive heart attack and dies. Do you say that his diet worked for all those years? I say that he was engaging in high-risk behavior and that the diet failed the first time he employed it because it did damage to his long-term health. It would have been better if he had been eating sensibly.
Rob
Say that someone makes a claim that is not supported by return rates that everyone can see on the internet. Do we say that anyone can just go ahead and make up numbers to support their agenda?
I think you should look at the peer-reviewed research. People have all sorts of opinions. The peer-reviewed research reveals the long-term realities.
Rob
The peer reviewed research does not agree with you. Your current financial situation tells us all we need to know.
Um….
Rob
How long are we all supposed to wait for things to play out. We have already waiting more than 2 decades. Right now, both you and I are in our 60’s. Based on actuary tables, I have around 20 years left. You have only 17 years left. In that remaining time, you are telling me that we will eventually see this dramatic crash, followed by articles in the New York Times, Congressional hearings, etc. You then expect to get your $500 million windfall after all that happens. How is all this to take place in time for you to have all this happen as well as enjoying a successful retirement? It is quick to see that the game is over. It is too late. Your plan failed. You are broke.
I am not able to imagine any circumstance in which I would feel comfortable saying that I believe that the Greaney retirement study contains a valuation adjustment. I would put the odds of that at 50 million to one.
I believe that we will see another Buy-and-Hold Crisis because the entire historical record shows that that’s how the stock market works. Investors gradually push stock prices higher and higher and eventually their confidence that they can continue to do that diminishes and we see a price crash and an economic collapse. I don’t think it is possible to say when it will happen. I am in complete agreement with the Buy-and-Holders re the guessing game approach to market timing.
Does that help?
You are of course free not to wait to see how things play out if that is your preference. It is 100 percent up to you.
Rob
“I don’t think it is possible to say when it will happen. ”
That is a very strong point
You had better make sure that you don’t base a retirement plan on hoping that it will happen in time to bail you out.
It is certainly an important point.
I believe in the Valuation-Informed Indexing strategy. There is no hoping required with this strategy. The investor aims to keep his risk profile constant over time (to Stay the Course in a meaningful way). So he lowers his stock allocation when prices rise to insanely high levels and increases it when prices drop to insanely low levels. This is the only difference from the Buy-and-Hold strategy. Valuation-Informed Indexing is Buy-and-Hold updated to reflect the last 44 years of peer-reviewed research in this field (Robert Shiller was awarded a Nobel prize for his “revolutionary” [this word appears in the subtitle of Shiller’s book] research showing that valuations affect long-term returns).
Rob
What is the risk profile of a guy in his 60’s with no retirement savings? It is obviously game over. That person will forever be relying on someone else to pay the bills (the governement, friends, family, food pantry, etc).
I’m not just a guy, Anonymous. I’m a journalist. I’ve been handed the biggest journalism opportunity in the history of the United States. Buy-and-Hold was developed in the 1960’s. Shiller’s Nobel-prize-winning research had not yet been published. Now it is available to all of us. It promises to enhance our lives in a huge way. All that we need to do is to talk about it and to come to understand it. What group of people helps us to understand new stuff. Journalists!
I’ve got a tiger by the tale re this thing. The behavior of you Goons shows that If you thought that this was no big deal, you wouldn’t have devoted 23 hours of your lives to suppressing discussions of the new research, much less 23 years. I want to get the word out re the peer-reviewed research for precisely the same reason why you want to suppress discussion of it. It changes the world in a very big way. You don’t want to see that change, I do. That’s the only difference.
Sure, I expect to see a nice payday for my efforts. But that’s not my main driver. The main driver is that I want to leave the world a better place than what it was when I entered it. This does thagt in a way that I did not imagine was possible for me when I was a young m,an. The more you fight me., the more I know that I did the right thing whenI worked up the courage to point out the error in the Greaney retirement study (it lacks a valuation adjustment).
I hope that helps, at least a tiny bit.
Rob
Who said you are a journalist? You are some guy in the internet that tells a story to push an agenda.
Yeah, Yeah.
And Greaney’s retirement study really does contain a valuation adjustment after all. He just can’t show it to us because he put it on a page in which everything is written in invisible ink.
Rob
Greaney did a study. You claim to be a journalist, but you can’t even finish a book in 10 years (and the book is just repeats of what is on this website. You claim to know how the stock market works, yet you went broke. You claim that buy and holders would go broke. All of your forecasts never happened and the buy and holders are even more rich. See the trend?
I pointed out the error in the Greaney retirement study on May 13, 2002. It wasn’t corrected in 2002. Or 2003. Or 2004. Or 2005. Or 2006. )r 2007, Or 2008. Or 2009. Or 2010. Or 2011. Or 2012. Or 2013. Or 2014. Or 2015. Or 2016. Or 2017. Or 2018. Or 2019. Or 2020. Or 2021. Or 2022. Or 2023. Or 2024. Or 2025.,
See the trend?
Rob
Yes, the trend says that Greaney’s study never needed an adjustment and you have been wrong all those years. That is why you are broke and why the investment community has ignored you
Okay, Anonymous.
Woe is me, you know?
Rob