Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
Is Greaney broke? No
Is Wade Pfau broke? No
Is Robert Shiller broke? No
Is Evidence broke? No
Is Rob Bennett broke? Yes………I wonder why? Hmmmmmmmm…………
I know why, I pointed out the error in the Greaney retirement study (it lacks a valuation adjustment). If the 4 percent rule goes down, the entire Buy-and-Hold strategy goes down. Shiller published the Nobel-prize-winning research discrediting it in 1981 and the cover-up has continued for 44 years now, doing a lot of harm to millions of people. So there is a strong feeling among a lot of wealthy and powerful and well-connected people that this thing has to be kept under wraps.
But that only makes it worse. It can only get worse and worse, never better. So I think it would have been better just to come clean on the afternoon of May 13, 2002. If Greaney’s study contained a valuation adjustment, he would have pointed us to it on the first day.
I don’t want to be broke. But I don’t want to stab my friends in the back either. And I don’t want anyone else to feel that they need to stab their friends in the back. LOTS of people would like to see every site opened to honest posting re the research. But someone has to lead the way. I guess I was elected. Once we get to the other side. no one is going to want to go back. It makes no sense to have one set of laws for every field of human endeavor other than the investment advice field and then a different set of laws for the investment advice field. I mean. come on.
If Buy-and-Hold were a real thing, there never would have been a single abusive post, much less 23 years of them.
Rob
You are broke, but tell us that you are someday going to be rich and at the same time, those that are buy and hold like me will go broke. You won’t tell us how you are going to rescue your retirement failure, so maybe you can tell us how we go broke. Go ahead and use me as an example. I will give you very specific numbers and let’s see you tell us all the scenario as to how I am going to go broke:
Age: Almost 62, married to 61F. Both in good health with good insurance. If I retire soon, I will pick up Cobra and bridge over to another plan before Medicare.
Current stock balance: $4.73 million.
Current bonds (mostly bond fund, but have TIPS and Tbills): $2.36 million.
Cash (Money market, CDs): $785K I am keeping on the side for a bridge to delaying Social Security to age 70.
Home: $1.7 million in current valuation. Will downsize in my 70’s, but we keep in now due wanting a big space for the grandkids. Will likely leave the house to the kids in estate.
Other: Still have an income as I am doing work for a small company to keep my mind active. I also have a nice stock position (big upside, but volatile, so I don’t count it).
Okay, Rob. As you can see, the largest chunk is in stock and you will also note with the balances, I have maintained the standard allocation that buy and holders have at my age. Now tell me how I go broke. Give me the scenario. Tell me how my cash and bonds don’t bridge a drop in stocks.
I’ve never said that you will go broke or that other Buy-and-Holders will go broke. I’ve said that it would be better to practice price discipline (valuation-based market timing) when buying stocks so that you can keep your risk profile stable over time. That way you will be able to invest with less risk while earning higher returns. That’s a win/win.
And the entire society will be better off if we all invested this way because we would not see bull markets or bear markets or economic collapses. We would get the good stuff associated with stock investing (the high returns that are backed by genuine economic growth) and avoid the bad stuff (the crazy roller-coaster ride of prices that results when many investors refuse to engage in market timing).
Some would go broke. When the safe withdrawal rate is 1.6 percent, as it was in January 2000, we should be telling people that it is 1.6 percent. If we instead tell people that it is always 4 percent, there is a chance that some people will believe us (we all carry a Get Rich Quick/Buy-and-Hold impulse within us — we all want something for nothing and we all want to believe that this is going to be the time when things are going to turn out in ways in which they have never turned out before) and will see failed retirements as a result. The obvious thing to do is just to permit honest posting re the peer-reviewed research and let people decide for themselves what to do with their retirement money. That way you’re not engaging in fraud.
We learned something important when Shiller published his Nobel-prize-winning research showing that valuations affect long-term returns. The next step is to permit honest posting re that research at every internet site. I am not able to imagine any possible downside. Stock investing matters. I believe that the same laws that apply in every field other than the investment advice field should apply in the investment advice field as well. I believe that the arc of history in the personal finance realm bends toward rationality. Taking price into consideration when buying stocks is the rational way to proceed. Ignoring price (Buy-and-Hold) is dangerous Get Rich Quick garbage.
My sincere take.
Rob
So what you are saying now is that I won’t go broke, which means my strategy worked. Which then means anyone that followed what I did would have gotten the same results.
Got it.
Sure. And the Greaney retirement study really does contain a valuation adjustment after all.
Truly outstanding!
Rob
I guess results don’t matter…..just YOUR opinions on Greaney, Shiller and Pfau…..who cares about what is actually in the investment accounts, right????
It’s not just my opinion. Wade Pfau said that he thought the Greaney retirement study was “dangerous.” People who were using it to plan their retirements needed to know that. Shiller was awarded a Nobel prize for his amazing research. Greaney doesn’t truly believe that he included a valuation adjustment in his study. He wouldn’t have behaved the way he did if he truly believed that.
It’s important what is in the investment accounts. But it’s not only the current-day number that matters. You need to know whether the amount in the account reflects genuine economic-growth gains or just irrational exuberance. That makes all the difference in the world. If we want to keep irrational exuberance to limited levels, we need to warn people of the dangers of Buy-and-Hold.
That’s my sincere take re these terribly important matters, in any event.
Rob
Wade Pfau is the guy who told everyone on a podcast last year that market timing doesn’t work. Shiller told you not to time the market with CAPE. You want people to listen to your interpretations of what you think they said, but you want everyone to ignore their actual words when it doesn’t fit your narrative. Funny how that works, right?
I want us to decide as a nation of people that we will not tolerate abusive posting or criminal behavior in discussions held re this matter, When there is no abusive posting or criminal behavior, people say what they truly believe.
Rob
Yes, we don’t want abusive posting or criminal behavior. That is why you had to be banned at all those websites.
Yeah, yeah.
Rob