A Rich Life

The Old Ideas on Saving & Investing Don't Work -- Here's What Does

“There Is No Such Thing As ‘Cheap’ If the Market Is Efficient. If There Is Such a Thing As Cheap, There Is Such a Thing As Expensive. If There Is Such a Thing As Expensive, We All Should Be Timing the Market. We Should Be Buying More Stocks When They Are Cheap Than We Do When They Are Expensive.”

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Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

“ We’ll see how the millions of middle-class people who see the size of their stock portfolio diminish by 50 percent feel about it in the days following the next crash, Anonymous.”
We already know the answer to that as we see what happened in 2008/2009. They will keep buying more stock because they are happy they can get it so cheap.

I saw people begin to question Buy-and-Hold in a serious way in the days when the CAPE had dropped to 13. There were people at the Bogleheads Forum flat-out calling Taylor Larimore a liar. That was unimaginable in the days before the crash.

That development never gained much momentum because prices recovered quickly. We will see whether having prices remain low for a long time makes a difference with the next Buy-and-Hold crisis.

There is no such thing as “cheap” if the market is efficient. If there is such a thing as cheap, there is such a thing as expensive. If there is such a thing as expensive, we all should be timing the market. We should be buying more stocks when they are cheap than we do when they are expensive.

Rob

“If At That Time We Gave the Manufacturers of Typewriters the Power to Destroy Any Company That Tried to Manufacture a Computer, We Would Not Have Computers or Cell Phones Today. You Have No Idea How Much Richer We All Would Be Today If We Had Been Permitting Honest Work to be Done in the Investment Advice Field Going Back to 1981.”

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Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

There are many websites that tell us how people became millionaires. Here is just one example:

https://esimoney.com/category/millionaires/

Further, there are books, like “The Millionaire Next Door” that also tell us about how people became millionaires.

Consistently, we see that these people are either into real estate, business owners and/or buy and hold investors. We never see a single VII investor. Why, then, would anyone follow your investment scheme.

There was a day when you could have said “not one person has ever become a millionaire by selling computers or smart phones” because those things didn’t exist. If at that time we gave the manufacturers of typewriters the power to destroy any company that tried to manufacture a computer, we would not have computers or cell phones today. We achieve huge advances as a society step by step. You cannot see the final amazing steps when the first tentative steps are achieved. You have no idea how much richer we all would be today if we had been permitting honest work to be done in the investment advice field going back to 1981 because you are too afraid to test the idea.

I say that we need to test the idea. I believe that Shiller’s Nobel-prize-winning research is legitimate research. After we have as a society made the transition from Buy-and-Hold to Valuation-Informed Indexing, I am willing to bet that there will not be one person who will vote for going back to the Buy-and-Hold years. That includes you Goons. I believe that you Goons will be glad that we finally elected to move forward after we have done so. We’ll see.

Rob

Valuation-Informed Indexing #554: It’s a Logical Impossibility That Buy-and-Hold Could Ever Offer Good Risk-Adjusted Results

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I’ve posted Entry #554 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called It’s a Logical Impossibility That Buy-and-Hold Could Ever Offer Good Risk-Adjusted Results.

Juicy Excerpt: To understand why this is so, you need to consider why it is that the idea that market timing is a bad idea ever caught on in the first place. Market timing has always worked. That’s been so for 150 years, which is as far back as we have good records of stock prices. The tricky part is that market timing often produced poor results over time-periods of one or three or five years. It is only in the long term that the magic of market timing evidences itself. In the end, it always pays off.

“You Have Spent the Last 40 Years Living in Denial As to What the Peer-Reviewed Research Tells Us All About How Stock Investing Works in the Real World and Insisting That As a Society We Must Never, Never, Never Acknowledge That We Once Made a Mistake in Thinking That Market Timing Is Not Always 100 Percent Required.”

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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 have spent the last 20+ years telling everyone else as to how you think you are right and everyone else is wrong and that the world needs to change.  In the end, nothing will change for you.

You have spent the last 40 years living in denial as to what the peer-reviewed research tells us all about how stock investing works in the real world and insisting that as a society we must never, never, never acknowledge that we once made a mistake in thinking that market timing is not always 100 percent required. In the end, we will acknowledge as a society that Robert Shiller’s Nobel-prize-winning research is legitimate research.

We all should be doing everything in our power to see that every site on the internet is opened to honest posting so that we all can begin enjoying an amazing learning experience. That’s my sincere take, Anonymous.

Rob

“If You Want to Know Why Nothing Has Been Done About the Death Threats, Ask Yourself Why Nothing Has Been Done About the Error in Greaney’s Retirement Study. That’s the Story That Matters. If We Cannot Get Errors in Retirement Studies Corrected, We Are in a Fix.”

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Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

Can you explain why you make allegations of criminal acts, yet refuse to provide proof that they even exist?

Can you explain why Greaney has not corrected an error in his retirement study that was brought to his attention 19 years ago?

The two things are the same thing. Greaney doesn’t want to correct the error. So he was left with no alternative but to engage in criminal acts to suppress discussion of it. The criminal acts obviously do not serve their purpose if they are acknowledged. So discussion of the criminal acts too is suppressed.

The root question is — Why do so many people (experts and ordinary investors alike) let him get away with it? The answer is — because they do not want to know the truth about how stock investing works. Buy-and-Hold/Get Rich Quick is a fantasy. Investors work together to create phony wealth (irrational exuberance). They sense on some level of consciousness that permitting discussion of the scam will cause it to unravel. So they insist that those who talk about these matters pretend that there is some reason to believe that market timing (price discipline!) is not required. Those who claim otherwise are disappeared.

But sooner or later the irrational exuberance disappears anyway. That is what Shiller’s Nobel-prize-winning research shows. So this suppression of honest posting business is a temporary strategy. It won’t work forever. When it fails, then what?

We will have the choice as a people to educate ourselves re the first true research-based investment strategy (Valuation-Informed Indexing, which is Buy-and-Hold without the no-market-timing business). We can move forward or we can refuse to move forward and suffer the consequences, which according to Shiller’s research will be severe. I of course vote for moving forward.

If that is the choice that we make as a society, we will be able to talk about all aspects of the question at that time — safe withdrawal rates, market timing, allocation percentages, risk management, and yes, the death threats and other criminal acts that helped us to remain in the dark when we so desperately wanted help in doing that. My job is to tell the story in a balanced and clear and complete way. I intend to give it my best shot.

If you want to know why nothing has been done about the death threats, ask yourself why nothing has been done about the error in Greaney’s retirement study. That’s the story that matters. If we cannot get errors in retirement studies corrected, we are in a fix. And it has been 19 years now. I still say to this day that Greaney’s study lacks an adjustment for the valuation level that applies on the day the retirement begins.

I believe that as a society we are in the process of working up the courage to hear the truth about how stock investing works. I believe that we are going to make it to the other side. Not until after the next price crash. But I believe that we will then make it. But then I would, wouldn’t I?

My best and warmest wishes you you and yours, my dear Goon friend.

Rob

 

“In Ordinary Circumstances, the Words “Valuations Affect Long-Term Returns” Should Have Been Enough to Persuade Every Person on the Planet That There Is Precisely Zero Chance That the Safe Withdrawal Rate Is the Same Number at All Valuation Levels. Things Obviously Did Not Play Out That Way. If We Are to Be Certain That We Will Never Need to Go Through Something Like This Again, We Need to Know Why.”

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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 difference is that all of the ideas will be advanced in one place. ”

Which can be easily done by creating a single page with links to every point you want to make. Much easier and more focused versus a book.

No.

The 40-year ban on discussion of Shiller’s Nobel-prize-winning research has hurt millions of people in very serious ways. We need to come to terms as a society of people with what we have done as a society of people. To come to terms with this, we need to work through each aspect of the question carefully and completely. That takes a book-length treatment of the story.

In ordinary circumstances, the words “Valuations affect long-term returns” should have been enough to persuade every person on the planet that there is precisely zero chance that the safe withdrawal rate is the same number at all valuation levels. Things obviously did not play out that way, If we are to be certain that we will never need to go through something like this again, we need to know why. There’s not a one-page answer to that one. That one is going to take 150,000 words to answer properly.

We all need to come to terms with what has happened so that we can all move on to better things. There are no shortcuts. It’s taking shortcuts that got us to where we are today, with a CAPE level in the mid-30s. Not this boy, you know? I intend to do all that it is in my power to do to take us all to a far better place. I intend to give it my very best shot. I can do no more and I can do no less.

My best and warmest wishes to you.

Rob

Valuation-Informed Indexing #556: Stocks Are More Risky Today Than They Were in January 2000

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I’ve posted Entry #556 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Stocks Are More Risky Today Than They Were in January 2000.

Juicy Excerpt: Stock prices were most an illusion in January 2000. But prices had only reached dangerous levels in 1996. So the illusion had not been in place for too terribly long a time. That means that the shock that would have been felt by investors if prices returned to fair-price levels would not have been as great as the shock that will be felt if the market returns to fair-price levels in the not-too-distant future.

“The Thing That Is Consistent About Buy-and-Holders Is That They Always Do the Emotional Thing. Buy-and-Holders Hate the Peer-Reviewed Research Because the Research Supports the Reason-Based Approach (Practicing Price Discipline!) and Letting Reason Become a Factor Makes It Very Hard to Continue Following a Purely Emotional Approach (No Market Timing!).

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Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

Anyone selling as you described is market timing. Show me the link to posts by Taylor indicating he sold off in the crash.

As for Bernie, he was not buying stocks, just like you.

The thing that is consistent about Buy-and-Holders is that they always do the emotional thing. When prices are insanely high, they insist that they will never sell. When prices fall, they say that anyone who continues to hold stocks is nuts. We know that they sell because the CAPE always drops to 8 at the end of a bull/bear cycle. That couldn’t happen unless the people who were bragging about their great results following Buy-and-Hold didn’t sell after they saw that it had failed.

It’s a question of reason vs. emotion. Buy-and-Holders hate the peer-reviewed research because the research supports the reason-based approach (practicing price discipline!) and letting reason become a factor makes it very hard to continue following a purely emotional approach (no market timing!).

It’s reason and research for me. Call me madcap.

Rob

“Research Takes You Out of the Emotion of the Moment”

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Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

“ I saw people begin to question Buy-and-Hold in a serious way in the days when the CAPE had dropped to 13. There were people at the Bogleheads Forum flat-out calling Taylor Larimore a liar. That was unimaginable in the days before the crash.”

Those are market timers. We can just look at history and see that Buy and Holders have done extremely well as the held their stock and continues to buy.

These were ardent Buy-and-Holders before prices fell.

Are you saying that Taylor Larimore is a market timer? Before prices fell, he said that he would never sell. Then after prices fell he said that he needed to reconsider. Get Rich Quick strategies are not nearly as appealing after the pretend money disappear.

Check with the people who bought into the Bernie Madoff fund. They said that their strategy performed “extremely well” too before his fraud was exposed.

This is the benefit of looking at peer-reviewed research. Research takes you out of the emotion of the moment and helps you to focus on what works best in the long term.

Rob

“There Is a Process to Learning the Truth Over Time. Part of the Process Is Permitting Challenges to Things That Were Once Widely Believed to Be the Truth.”

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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 problem is that us normal people believe that the word “honest” also means “truthful”.  You obviously have a different definition and that is why you are banned.

I don’t believe that any of us has sole possession of the truth. I believe that, if we all post honestly, the truth will reveal itself over time.

There is a process to learning the truth over time. Part of the process is permitting challenges to things that were once widely believed to be the truth.

Rob