A Rich Life

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

“I Reported on the Errors in the Buy-and-Hold Retirement Studies on the Morning of May 13, 2002. Neither Shiller Nor Bogle Has Reported on the Errors in Those Studies TO THIS DAY. So There Obviously Are Some Things That I Am Seeing That Those Two (and Lots and Lots of Other Good and Smart People) Are Not Yet Seeing.”

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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:

Are you saying:

A) You know more than Shiller
B) Shiller is just wrong in his analysis
C) Shiller is purposely giving the wrong answer to appease the goons
D) All of the above

I’m saying that I know more than Shiller re some aspects of the question. Shiller also knows more than me re some aspects of the question. Bogle knows more than me re some aspects of the question. And I know more than Bogle re some aspects of the question.

I reported on the errors in the Buy-and-Hold retirement studies on the morning of May 13, 2002. Neither Shiller nor Bogle has reported on the errors in those studies TO THIS DAY. So there obviously are some things that I am seeing that those two (and lots and lots of other good and smart people) are not yet seeing.

We all bring a different perspective and a different set of life circumstances to the table. We need to permit honest posting re the last 37 years of peer-reviewed research both for those who believe that Shiller is right about how stock investing works and for those who believe that Bogle is right about how stock investing works. Those on both “sides” have important things to offer and we all benefit from hearing from those on both “sides.” It is by permitting honest posting that we achieve a true learning experience for everyone and protect our board communities from becoming corrupt enterprises.

It’s also possible that Shiller is a little off in his analysis. Shiller is not a perfect being. That could happen. And it could be that to some extent he is trying to appease those who don’t want to hear that we have a day or reckoning coming because we have permitted stock prices to rise so high. I’ve certainly seen things like that happen from time to time! However, in this particular case I (flawed human that I am) see the first possibility that you list as being the most important influence.

My sincere take.

Smarter Than Shiller (and Dumber Than Shiller Too!) Rob

“What Happened at the Retire Early Board Should Have Been Written Up at Every Investment Discussion Board and Blog on the Internet. The Violent Reaction of the Buy-and-Holders to My Showing That Greaney’s Study Got the Safe Withdrawal Rate Numbers Wrong Is EVIDENCE As To Whether It Is Shiller or Bogle Who Is Right About How Stock Investing Works.”

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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:

Uh oh, Rob. Shiller just said you are wrong yet again. We aren’t gone to see that 50-60% drop that you say we are going to see.

https://www.marketwatch.com/story/housing-market-now-reminds-me-of-2006-robert-shiller-says-2018-10-30

Notice he says the following:

“The drop in home prices in the financial crisis was the most severe drop in the U.S. market since my data begin in 1890,” Shiller said. “It could be that we’re primed to repeat it because it’s in our memory and we’re thinking about it but still I wouldn’t expect something as severe as the Great Financial Crisis coming on right now. ”

So it oops likeyou don’t really know what Shiller’s data really says. Further, it means your dreams of a big crash leading towards your $500 million windfall will not materialize since your logic is all based on what Shiller says.

Of course, you will say that the goons got to Shiller and he is being controlled.

I’m grateful for the link, Anonymous.

Shiller is expressing an opinion when he says that he does not think we will see a repeat of the Great Financial Crisis anytime soon. He could be right. He’s certainly an informed person and I certainly think that people trying to figure out what is going on should be taking his opinion into consideration. I obviously hold a different opinion. And my opinion is every bit as much rooted in Shiller’s research as Shiller’s is. Stock prices are today at two times fair value. If we see a drop to fair-value price levels, that’s going to wipe out the retirement hopes of millions. I sincerely believe that the consequences could be devastating.

Is Shiller being controlled by you Goons? He is. I say that we should open every discussion board and blog on the internet to honest posting on safe withdrawal rates and scores of other critically important investment-related topics. Are you able to say what Shiller’s views re his own research would be today had the entire internet been open to honest posting for the past 16 years? You cannot. It’s a hypothetical. We had a chance to find out and we blew it by failing to work up the courage to stand up to you Goons. We don’t get the benefits of open debate for so long as we do not permit open debate.

On the morning of May 13, 2002, I was a Buy-and-Holder. I am obviously not that today. What changed? What changed is that I saw John Greaney advance his first death threat on the evening of 17, 2002 and then I saw 200 of people who long had been friends of mine endorse that death threat. Huh? What the f? When you see something like that, your mind forces you to try to come up with an explanation. My explanation is that Buy-and-Hold is not science at all, that it is a purely emotion-based strategy. It parades as science because the Buy-and-Holders want to persuade both themselves and others that it is real. But the science stuff is a cover. The reason why the Buy-and-Holders ignore the 37 years of peer-reviewed research showing that valuations matter is that they possess an emotional desire to believe that the numbers on their portfolio statement are real and lasting. It is the Get Rich Quick component of the strategy that is the driver of the strategy, the primary source of its widespread appeal.

Shiller wasn’t there at the Motley Fool’s Retire Early board on the evening of August 27, 2002. So he didn’t see what I saw. My personal circumstances caused me to be exposed to a type of “research” to which Shiller has probably never been exposed, The thing that is “revolutionary” (Shiller’s word) about Shiller’s research is that he showed that it is investor emotion that drives stock prices, not economic realities. What better way to test whether that premise is valid than to talk about Shiller’s research at a discussion board at which people are hoping to begin early retirements because of the numbers they see on their portfolio statements? If you get an insanely emotional reaction, that shows that Shiller is right. If the aspiring early retirees respond with a calm confidence that their strategy is rooted in research, that would support the Buy-and-Hold claims.

What happened at the Retire Early board should have been written up at every investment discussion board and blog on the internet. The violent reaction of the Buy-and-Holders to my showing that Greaney’s study got the safe withdrawal rate numbers wrong is EVIDENCE as to whether it is Shiller or Bogle who is right about how stock investing works. That evidence should have been considered at every site at which stock investors congregate. It was not. 90 percent of today’s investors are Buy-and-Holders and they become embarrassed for people to learn about the death threats and the career threats and all the other garbage that their fellow Buy-and-Holders have dumped on us all in their effort to keep us all from learning how stock investing really works.

So Shiller is probably not aware of a lot of things that have influenced my thinking. I am certain that he has seen his own share of abusiveness. I believe that he could probably write a book on what he has seen. But I doubt that he has seen Buy-and-Hold abusiveness as up front and in-person and for as long a time as I have seen it. He doesn’t interact with you Goons on a daily basis, as I do! I have seen evidence that Shiller has never seen. And that evidence has influenced my thinking on how all this stuff works.

Could I be wrong? Sure. If Bogle could be wrong, I could be wrong. And I certainly believe that Bogle is wrong about some important things. So I have to acknowledge that it is possible that I am wrong about some important things. That’s the fate of us poor humans. We can believe something with all of our hearts and minds and still end up being wrong about that something. It’s a humbling reality.

I think that’s why we have laws protecting us from the sorts of tactics that you Goons employ to keep us all from learning things we very much need to learn. Since any of us can be wrong about anything, we permit honest discussion on all subjects other than stock investing. That way, we learn about those subjects over time as different people coming at things from different perspectives offer their sincere thoughts and we come to discover our mistakes and fix them. Shiller has not learned all that he would have over the past 16 years because that learning experience got cut off on the day when I pointed out the error in Greaney’s study and he went into freak-out mode and lots of good and smart people failed to work up the courage to stand up to him and demand that he take a chill pill. Nor has Bogle learned all that he should have learned. Not have I. Not have you Goons. The Ban on Honest Posting has hurt each and every one of us in very, very serious ways.

I hope we don’t see anything as severe as the Great Financial Crisis. I hope that Shiller is right. I am not personally convinced. I think it is entirely possible that we will see something WORSE than the Great Financial Crisis (I presume that he is referring to the 2008 crash with these words). There was talk at the time that the 2008 crash might bring on the Second Great Depression. When stock prices headed back upward in not too long a time, the panic subsided. I am worried that it will be harder to address the panic the next time stock prices crash. But I certainly hope that Shiller and all others taking a more optimistic view turn out to be right and that I turn out to be wrong. My biggest fear is that we will all need to live through a Second Great Depression before we are able to open up every site on the internet to honest posting and reap all the benefits of the last 37 years of wonderful peer-reviewed research in this field.

As I have noted on many earlier occasions, it will be interesting to see how things play out.

And, as I have also noted on many earlier occasions, I naturally wish you all the best that this life has to offer a person, my dear Goon friend.

Non-Dogmatic Shillerite Rob

“It’s When Investors Respond to Overvaluation By Lowering Their Stock Allocations That They Exercise Price Discipline and Thereby Help Pull Prices Back Down to Where They Should Be. That’s the Only Way It Can Be Done. That’s the Way It Is Done in Every Other Market That Exists.”

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

“I am not going to say that I believe that Greaney’s study contains a valuation adjustment. If I did that, I would be at risk of going to prison myself. So no freakin’ thanks, you know?”

The question had nothing to do with Greaney. No one ever asks you about Greaney. In fact you completely missed the point of the comment, which was that Bogle said the market is overvalued. You should have found that encouraging. Instead you spiraled off yet again with your standard deranged angry rant. So “Bogle f’d up”? Chill, dude.

I’ve never advanced death threats. I’ve never advanced demands for unjustified board bannings. I’ve never advanced thousands of acts of defamation. I’ve never advanced threats to get an academic researcher fired from his job. It’s not me who needs to chill. It’s the people who have put up posts in “defense” of Mel Lindauer and Jack Bogle and John Greany who need to chill. I mean, please give me a freakin’ break.

All questions that relate to stock investing have something to do with Greaney. Greaney got an important number wrong in a retirement study that he posted to his web site. That error will directly cause thousands of failed retirements, in the event that stocks continue to perform in the future anything at all as they always have in the past. Indirectly his behavior may well cause MILLIONS of failed retirements because it was my intent to share with the entire world what we learned at that board about safe withdrawal rates and that would have helped the MILLIONS of investors who followed other Buy-and-Hold retirement studies that got the numbers wrong because they did not include an adjustment for the valuation level that applies on the day the retirement begins.

Now —

That’s news, right?

The discovery of an error in a retirement study that saves millions of people from suffering failed retirements is big news in this field. The primary purpose of investment advice is to help people plan their retirements. And we have discovered an error that has hurt millions of investors. So we should have seen that error written up at every investing site on the planet within a few days, right? There’s never been a bigger story in this field than the discovery of the error in Greaney’s study that I wrote about in my famous post from the morning of May 13, 2002.

Why hasn’t that story been written up at every site? Bogle’s attitude toward the development is a big part of the explanation. I wrote to Bogle asking him to deal with the Lindauer Matter. Did you see him do anything? I sure didn’t. That’s why that board was destroyed. That’s why that board became a corrupt enterprise. That’s why the best posters at the Bogleheads Forum were either banned or driven off the board. Those of us who were trying to use the board for the purposes for which it was created asked Bogle for his help in dealing with the Lindauerheads and he sat on his hands.

Bogle is a leading figure in this field. People watch how he reacts to determine how they are going to act themselves. Wade Pfau loved doing honest work in this field. Loved it, loved it, loved it. When Lindauer started defaming him and threatening him, Wade watched how Bogle reacted. Bogle did nothing. That’s one of the things that made Wade afraid that his career would be destroyed if he continued doing fully honest work. I liked it when Wade was doing fully honest work. I learned a lot from him. And I know that lots of others did too. Bogle should have spoken up for him and in opposition to Lindauer. He did not. That’s why things are what they are today.

I guess that I am a tiny bit encouraged that Bogle acknowledged that the market is overvalued. That’s a step in the right direction. It’s better than the alternative. But has Bogle said how much today’s valuation levels pull down the safe withdrawal rate? Has he said how much investors should be lowering their stock allocations to keep their risk profiles where they want them to be? People need that practical, how-to information. It’s not enough for them to know that stocks are overvalued. They need to know WHAT TO DO ABOUT IT.

It’s when investors respond to overvaluation by lowering their stock allocations that they exercise price discipline and thereby help pull prices back down to where they should be. That’s the only way it can be done. That’s the way it is done in every other market that exists. It’s because we don’t provide investors the information they need to practice price discipline when buying stocks that prices go to such insane levels and wreck our economy as well as our personal retirement dreams. I don’t like seeing people’s retirement dreams destroyed. I don’t like seeing our economy destroyed. So I like to see Bogle tell people WHAT TO DO about today’s crazy stock prices. And I am not seeing that. I am not seeing that AT ALL. An acknowledgment that stocks are overpriced just doesn’t get the job done. So, yes, I believe that Bogle f’d up. Big time.

We are looking at things from different perspectives, Anonymous. We are working at cross purposes. I love you as a person. But I don’t agree with you that it is okay that Greaney’s retirement study remains uncorrected 16 years after he became aware of the error in it. If we were all thinking clearly, there wouldn’t be one person on the planet who did not agree with me that Greaney needs to correct his study by the close of business today if not sooner. But clearly there is at least one. Otherwise, it would have happened by now. Clearly there is more than one. A LOT more.

I would like to see the same ethical standards that apply in every other field of human endeavor apply in the investment advice field.

Oops! I went and said something controversial again!

I believe that the people who work in the investment advice field are in many respects like the people who work in all other fields. I believe that deep in their hearts they also would like to see the same ethical standards that apply in all other fields apply in the investment advice field too. But they don’t feel safe asking for change. They see what has been done to me and to all others who stuck their necks out trying to make this much needed change take place and they elected to keep quiet about the corruption that has come to dominate this field in the Buy-and-Hold Era. It’s someone else’s problem. it’s someones else’s fight.

Well, it became my problem and my fight when Greaney got down to the business of driving every intelligent poster off the Retire Early board because it was the intelligent ones who often challenged his Buy-and-Hold/Get Rich Quick views in one way or another. So, yes, for me Greaney is the issue. Not Greaney himself. The all-encompassing corruption that permits people to watch Greaney destroy millions of lives and not speak up about it because discussing the last 37 years of peer-reviewed research has become “controversial” in the Buy-and-Hold Era. I don’t like the corruption, Anonymous. I have seen it hurt too many people. So I want to expose it and to thereby end it.

Bogle’s silence in the face of the corruption that he has witnessed when he visited the Bogleheads Forum hurts me in my efforts to clean up this field. People respect Bogle, for one thing. His name is a much bigger name than my name. So they tend to think that he is probably right and that I am probably wrong. And Bogle has a lot more power and influence and money that I have. So he has those things going for him too. I have a big job in front of me cleaning up this field. I could use Bogle’s help. With Bogle’s help, I could make enormous strides in very little time. But I have not received much help from this great man thus far. His acknowledgment that stocks are overpriced today is a small plus. But it does not by itself offer much in the way of help at a time at which we all very much need to see the Buy-and-Hold corruption cleaned up big bunches.

That’s where I am coming from, in any event. Does that help at all?

Greaney-Obsessed, Bogle-Disappointed Rob

Ask Bogle Why He Has Not Made a Public Statement Asking That the Errors in the Buy-and-Hold Retirement Studies Be Promptly Corrected. That Would Be Discussed at That Board and Everyone Would From That Day Forward Feel More Comfortable Talking About the Realities. Had Bogle Made a Statement in 1981 Acknowledging That There Were Now Two Schools of Academic Thought re How Stock Investing Works, We Never Would Have Seen Any of These Problems.”

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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 haven’t made any decision to join that board”

You’ve said many times that spreading the word about VII is your job. Was that a joke? Not a very funny one.

Ask Bogle why he has not made a public statement asking that the errors in the Buy-and-Hold retirement studies be promptly corrected.

That would be discussed at that board and everyone would from that day forward feel more comfortable talking about the realities.

Had Bogle made a statement in 1981 acknowledging that there were now two schools of academic thought re how stock investing works, we never would have seen any of these problems. If he made a statement today, that would help. That’s the sort of thing we need. When there’s 37 years of peer-reviewed research showing that the Buy-and-Hold retirement studies are in error, it shouldn’t be left to me to point that out at some discussion board. The big-name Buy-and-Holders should be letting everyone know about their mistake and about what they are going to do to provide damages to those who have been hurt by it.

Sincere Rob

“None of the Things That You Ask About Are Problems Once They Have Been Exposed. The Problem Is That People Are Embarrassed About Them. And So People Are Reluctant to Bring Them Up and People Are Reluctant to Discuss Them When They Are Brought Up. They Are Now Part of Our History. Once Death Threats and Job Threats Were Used to Stop Us From Learning About What the Last 37 Years of Peer-Reviewed Research Teaches Us About How Stock Investing Works, They Became a Part of Our History As a Nation.”

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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:

Okay, so you will be covering the death threats and job threats. How about the prison sentences, jury trials and settlement payments. Will we see that as well over at the new board?

I’ve never said anything about participating at any new boards. All of that is in your head.

The story will be told on the front page of the New York Times. Once it is told there, it will be common knowledge at all boards, old and new.

None of the things that you ask about are problems once they have been exposed. The problem is that people are embarrassed about them. And so people are reluctant to bring them up and people are reluctant to discuss them when they are brought up. They are now part of our history. Once death threats and job threats were used to stop us from learning about what the last 37 years of peer-reviewed research teaches us about how stock investing works, they became a part of our history as a nation. I did not do that and I cannot change that. My hope is that I can keep the prison sentences to a length shorter than they would otherwise be by exposing all the criminal stuff sooner than it might be exposed. That’s how I can play a positive role and so I hope that I can do that.

You’ll know everything that you need to know about the prison sentences at an appropriate time. For obvious reasons. If you want to help get things exposed, then help. If not, then watch to see how things play out. I will do everything in my power to help you out. But I will never cross the felony line myself.

But you of course knew all that.

Hang in there.

Prison-Sentence-Shortener Rob (and He Could Use Some Help With This Project!)

“As a Society We Have to Deal With the Death Threats and Job Threats Before the Substantive Stuff Can Get Widely Known.”

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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 we count on you for discussing the death threats and job threats over on this new board as well?

I never lead with the death threats and the job threats. The substantive stuff is what matters most and people hate to hear about the death threats and the job threats.

But as a society we have to deal with the death threats and job threats before the substantive stuff can get widely known. Shiller published his “revolutionary” (his word) research 37 years ago. The obvious question that anyone asks when someone tells them about the realities of stock investing is: “Why haven’t I heard about this before?” It’s not possible to explain the 37-year cover-up without making reference to the death threats and job threats. It’s not possible to pull something like this off without death threats and job threats.

There are other things that help to explain the 37-year cover-up. Cognitive dissonance is a big one. The counter-intuitive nature of some of the realities. Just the fact that we don’t know it all. Ignorance. That’s a factor that should not be overlooked. I talk about that stuff. I don’t talk only about death threats and job threats. I never have and I never will.

My job is to tell the story. Death threats and job threats are part of the story. So I will tell about them when necessary and to the extent necessary. I try not to put too much emphasis on them. Because they are not the entire story. I try to give them the right amount of attention, not too much and not too little.

I wish that there had never been any death threats or job threats. But that’s not the world we live in. That’s not the reality.

We don’t get fewer death threats and fewer job threats by ignoring them, by never talking about them. Ignoring them causes us to see more death threats and more job threats. I am 100 percent sure. Our problem has not been that we have talked too little about death threats and job threats. By not talking about those that have taken place, we have caused more of them to take place. Which is of course not the way that any of us want to take this. Which of course does not help any of us and which hurts every last one of us.

You can count on me to tell the story. It is always my aim to be as honest as possible without ever crossing the line and becoming uncharitable while also being as charitable as possible without ever crossing the line and becoming dishonest.

I hope that helps a small bit, dear Goon friend.

My best wishes to you.

Death Threat and Job Threat Discusser (But Only to the Extent Necessary to Tell a Story Important to All of Us) Rob

Valuation-Informed Indexing #418: The Shiller Revolution Is About Shifting the Focus from Economics to Emotions

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I’ve posted Entry #418 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Shiller Revolution Is About Shifting the Focus from Economics to Emotions.

Juicy Excerpt: The Shiller investor would have been frightened by those gains. He would not have seen them as something to celebrate; he would likely have characterized them as “out of control.” All investors want the market to be as rational as possible; we have our retirement money invested in it. The difference, though, is that Buy-and-Holders see nothing concerning about big price gains — they are caused by economic developments as much as are small gains. Valuation-Informed Indexers, in contrast, see bull-market gains as emotion-generated gains. Times of high valuations are times of irrational exuberance. The times in which the market delivers big gains are the most dangerous times for stock investors.

“The Problem Stems From the Fact That We Didn’t Always Know Everything There Is to Know About How Stock Investing Works, and When Shiller Published His Nobel-Prize-Winning Research, the Buy-and-Holders Elected to Ignore It Rather Than to Work Up the Courage to Say the Words ‘I’ and ‘Was’ and ‘Wrong.’ Now We Are in a Trap. It Is Now 500 Times Harder for Bogle and the Other Buy-and-Holders to Say Those Words Than It Would Have Been to Say Them 37 Years Ago.”

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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 hope that helps a bit. I have heard of the Coffeehouse Portfolio. I don’t know what the Cowards Portfolio is. I obviously get it that a three-fund portfolio would include three funds but I couldn’t tell you what those three funds would be. These questions don’t interest me too much.”

So you don’t really know what is in all those portfolios as well as their strategy, yet you say that they will all lose 50% of their value and that VII is superior.

I don’t say that. It’s the last 37 years of peer-reviewed research in this field that says that. I REPORT it. I am a reporter. That’s the kind of thing we do. We don’t just push smiley-face marketing slogans. We REPORT realities.

What if these funds went by the name of “The Irrational Exuberance Portfolio”? Do you think that would sell? Why do you think they don’t do it that way? It’s because they want to turn a quick buck. Valuation-Informed Indexing is what works. Buy-and-Hold is what sells.

It can’t all be about marketing. When millions of middle-class people see their lifetime savings wiped out, they are going to get angry. When they learn that there were people trying to tell them what the last 37 years of peer-reviewed research teaches us about how stock investing works in the real world, their anger is going to intensify. The Buy-and-Hold marketing slogans will be spoken as obscenities in those days. Not a good thing.

There’s plenty of money to be made in this field telling the truth. You could have all these funds and still tell people the truth about the need to practice price discipline (long-term timing) when buying stocks and the funds would actually work and people would like them. The problem stems from the fact that we didn’t always know everything there is to know about how stock investing works, and when Shiller published his Nobel-prize-winning research, the Buy-and-Holders elected to ignore it rather than to work up the courage to say the words “I’ and “Was” and “Wrong.” Now we are in a trap. It is now 500 times harder for Bogle and the other Buy-and-Holders to say those words than it would have been to say them 37 years ago.

Am I responsible for any of that? I was a Buy-and-Holder myself on the morning of May 13, 2002. I was just trying to point out an error in a retirement study because I had come to care about my fellow community members at a discussion board at which I posted and I didn’t want to see them get hurt. I gave up on Buy-and-Hold on the evening of August 27, 2002, when Greaney advanced his first death threat and 200 Buy-and-Holders endorsed it. Huh? What the f? Does that sound like science to you? I became a Buy-and-Holder because it was promoted as being rooted in peer-reviewed research and I believe in science. Death threats ain’t science. Endorsements of death threats ain’t science. No way, no how. It’s not a close call.

Part of the scientific process is learning new things and acknowledging your mistakes when you do. That’s how human knowledge advances over time. Shiller didn’t hurt the Buy-and-Holders when he published his “revolutionary” (his word) research findings. He helped them. He gave them a chance to avoid all of the embarrassment that they are feeling today. That’s what I did for Greaney when I pointed out the error in his retirement study. He should have thanked me. He didn’t. But he should have. If your aim is to help people with a retirement study, you want to know if you have made a mistake. Greaney has made it look like he INTENDED to cause millions of failed retirements, that he was working a con from the first day. It is Greaney who is making Greaney look bad, not Bennett. I have described his study as a big advance over what came before that happened to include an error because lots of people in the field had not come to terms with Shiller’s findings at the time that Greaney prepared his study. I was Greaney’s best friend. And I still am. I am still trying to help him out 16 years later, whether he is able to see that or not.

If you invest in any of those funds without exercising price discipline, you are going to hurt yourself. I am 100 percent sure. Of course that’s true of any good or service that you could possibly buy. If you buy cars or sweaters or bananas without exercising price discipline, you are going to hurt yourself. The idea that stocks are the one exception to the otherwise universal rule was a MISTAKE that in an ideal world would have been corrected when it was uncovered by the peer-reviewed research in 1981. Shiller has described the intellectual leap from the finding that short-term price changes are unpredictable to the Buy-and-Hold belief that the market sets prices properly as “one of the most remarkable errors in the history of economics.” That’s the story here. When you make a mistake re an important matter, you need to correct it. The Buy-and-Hold claim that there is no need to exercise price discipline (engage in long-term timing) is the biggest mistake ever made in the history of personal finance. It is hurting us all. It is in the process of potentially bringing our economic system to its knees.

That’s my sincere take re these terribly important matters, in any event, Anonymous.

I naturally wish you all the best that this life has to offer a person.

Mistake Correcting (and Proud of It!) Rob

“When I Am Going Over the Case for Valuation-Informed Indexing in My Head to Determine Whether I Might Have Gotten Something Wrong, This Is the Question That My Mind Turns To. I Have Explanations for Why It Has Taken So Long for Prices to Crash. However, I Am Not Sure That I Can Say That All of Them Added Together Are Completely Satisfying.”

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

And you want us to wait, even if it takes 73 to 86 years more for it to play out, right?

I’ve asked myself that question, how long would I wait? Shiller predicted in 1996 that those going with high stock allocations would regret it within 10 years. That would have been 2006. We are now 12 years past that. This is the longest that we have ever gone with stocks at crazy high prices and not seen them crash (they crashed in 2008 but prices went back up after the passage of only a few months, so that crash didn’t turn out to be terribly consequential). Does there come a point when you just say “this has continued for so long that it just doesn’t make sense to continue to expect a crash?”

The long wait is a point against Valuation-Informed Indexing, in my assessment. I can see someone saying “if stock prices had just recently risen to crazy high prices, I would listen to Shiller and Bennett and lower my stock allocation but this has gone on so long that I feel that they are like the boys who cried wolf, I just do not have confidence that what they are saying will happen will actually take place.”I don’t agree with that view. But I don’t see that view as being entirely unreasonable. So I don’t say that someone who concludes that “it has taken too long for prices to crash” and therefore rejects Valuation-Informed Indexing is crazy.

The problem that I have with that view is that we all need to invest our money. If you are considering making a bet on the World Series but you can’t figure out whether the Red Sox or the Dodgers are the better baseball team, you can just elect not to place a bet either way. You can opt out of the choice. You can’t do that as an investor. You can’t say “Valuation-Informed Indexing beats Buy-and-Hold for about 10 different reasons but I am concerned about how long it has taken for the crash to arrive so I am just going to opt out of making a decision re how to invest my money because I don’t want to get it wrong.” You’ve got the money, so you have got to make a choice. There is no opt out.

I think the case is so strong for Valuation-Informed Indexing and so weak for Buy-and-Hold that I could not bear to elect to go with Buy-and-Hold. So I still go with Valuation-Informed Indexing even though it has taken a long time for the crash to come. What if it took another 100 years for the crash to come? Would I still opt for Valuation-Informed Indexing in those circumstances?

I don’t see how I could opt for Valuation-Informed Indexing in those circumstances. That would just be too crazy.

But where do you draw the line? At what point do you say “it has taken too long for the crash to come” and abandon the concept? I cannot answer that question. If there were a great alternative, if would make sense to move to it. But there’s not. If some brilliant researcher came up with a third model that seemed to make sense, I would be inclined to investigate that third model and see if it might be a better answer than the two existing models. But there are no signs of that happening. I could see eventually moving in the direction of a middle ground, changing my stock allocation in response to what the last 37 years of peer-reviewed research shows but not changing it as much as that research suggests because of a concern that the crash hasn’t arrived in the time that you would expect it to arrive based on what has happened through history. That will probably be my path if the crash does not come for a long time.

But I cannot see going with Buy-and-Hold. It just doesn’t stand up to scrutiny. Price discipline is key in every market that exists and the Buy-and-Holders have never given any reason for their belief that it isn’t needed in the stock market. Wade Pfau spent months searching the literature for studies showing that it is not necessary to practice long-term timing when buying stocks and he came up empty-handed. So I just do not feel comfortable going there. It seems at least possible to me that there might be some way to practice price discipline (long-term timing) other than what the peer-reviewed research available to us today teaches us. I don’t think that we know all the answers. But I cannot see going backwards. Buy-and-Hold has failed. Shiller checked whether its premise (that the market is efficient, that prices fall in the pattern of a random walk both in the short term and in the long term) held up to scientific scrutiny and Buy-and-Hold failed the test. I cannot see going back to it unless the Buy-and-Holders offer some explanation for why their model failed the test that it must pass for the model to be valid.

I believe that the case for Valuation-Informed Indexing is 100 percent rock-solid GOING BY THE EVIDENCE AVAILABLE TO US TODAY. Not all of the evidence is available to us today. You are raising a hypothetical where we see another 73 years pass without a price crash. I agree that that would change things. But I cannot say precisely how many years it would take for me to change my views. 73 years would certainly bring a change (but probably not to Buy-and-Hold, I would need to look for some third option), five years would certainly not bring a change, given how strong the case is for Valuation-Informed Indexing today. Somewhere in the middle of those two scenarios, I would experience enough doubts that I would begin to shift away from Valuation-Informed Indexing and perhaps somewhat in the direction of Buy-and-Hold.

The question you are asking is a good one. Skepticism is part of the scientific process. If people are not skeptical toward Valuation-Informed Indexing, we will not learn of its flaws and that would be a negative for all of us. So the skepticism is good. I wish that you would direct some of that skepticism toward Buy-and-Hold. In addition to asking how many more years Valuation-Informed Indexing advocates can go without seeing a crash, you should be asking how many more years of price-return data Buy-and-Holders need to see in which valuations affect long-term returns before they are willing to acknowledge that the market is not efficient and that price increases that take stock prices beyond fair-value levels do not represent economic realities but only the effect of an irrational exuberance on the part of stock investors.

You are with this question pointing to the weak spot in the case for Valuation-Informed Indexing. I think that the overall case is very, very strong. But, when I am going over the case in my head to determine whether I might have gotten something wrong, this is the question that my mind turns to. I have explanations for why it has taken so long for prices to crash. Valuation-Informed Indexers need to try to answer that question if they are to retain their intellectual integrity. It is not a question that can be ducked. So I have explanations that are partly satisfying in my mind. However, I am not sure that I can say that all of them added together are completely satisfying. This aspect of the question troubles me a bit. If there were completely satisfying models available, I would be at least checking them out at this point in the proceedings.

So thanks for asking the question.

Somewhat Questioning But Generally Steadfast Rob

“I’m Not Willing to Create New Accounts to Be Able to Post Again at Boards that Banned Me. If I Used My Real Name, I Would Just Be Banned Again. If I Didn’t, I Would Essentially Be Lying.”

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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:

Your analogy is flawed, not to mention stupid, not to mention horribly insulting to sexual assault victims.

Cosby’s victims really did do all they could. You haven’t. You could create new accounts on every single board you were banned from TODAY. You could start writing your next book TODAY. You could start making a difference TODAY. No one is stopping you. You simply choose not to. As you should have realized by now, society doesn’t have much sympathy for someone who chooses to be a helpless victim.

I’m not willing to create new accounts.

If I did that, would I use my real name or not? If I used my real name, I would just be banned again. If I didn’t, I would essentially be lying. I would be appearing at a board that banned me under another name, knowing that I would be banned if I appeared under my true name. Huh? What the f?

I have done nothing to justify a ban. Not once. I have nothing to be ashamed of. I have helped people. I have pointed out the errors in the Buy-and-Hold retirement studies. People need to know about those errors. A failed retirement is a serious life setback.

I am happy to lend my efforts to any board that will have me and where I can help out. But I don’t approve of games-playing re these matters. I am Rob Bennett. I pointed out the error in the Buy-and-Hold retirement studies in a post that I put to the Motley Fool board on early retirement on the morning of May 13, 2002. The post generated a huge reaction, some insanely positive and some insanely negative. I am happy to answer any questions that anyone has, both those advanced by my supporters and those advanced by my critics. But I am not interested in pretending to be someone other than who I am. I am the fellow who put forward that famous post, I am proud of it, and I see no reason to make an effort to appear anywhere under another name.

I hope that helps a small bit, my dear Goon friend.

The True Rob Bennett (and No One Else)