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

“That means that people will become more open to looking at new ideas — and we just happen to have 37 years of powerful, Nobel-prize-winning ideas for people to look at.”

Even if that were true, how does that lead to $500 million in your wallet? Or if Wade was here, he would repeat his question: “What is step 2?”

You, of course, have never had an answer. But Wade did. He said there is no step 2. He was right six years ago, and he’s just as right today.

There is no one who wants to see our economic system fail, Anonymous. There is no one who wants to see millions of failed retirements. There is no one who wants to see the Second Great Depression.

We are all in this together. There are no two “sides.” We are all on the side of the human beings and the human beings want to know as much as possible about how to invest their retirement money.

If Shiller had published his “revolutionary” (Shiller’s word) research findings in 1961 rather than in 1981, we would all be Valuation-Informed Indexers today. Bogle would have led the way. I would be best friends with him today.

Okay?

The thing that we are all suffering from is that there was 16 years between the time when Fama published his research showing that short-term timing never works and the time when Shiller published his research showing that long-term timing always works and is always required. During most of that time, index funds were not available and so no one thought to test long-term timing, which only works with index funds. So a large number of good and smart people in good faith developed an investing strategy that they thought was supported by the peer-reviewed research but in reality was the OPPOSITE of what the peer-reviewed research would support once all the peer-reviewed research needed to make intelligent choices had been published.

So in 1981 our Buy-and-Hold friends were put in the terrible position of either coming clean and acknowledging that they had made a pretty darn basic mistake (they had concluded that no form of market timing works or is required after only checking one of the two forms of market timing!), which they felt would cause their readers and clients to question their expertise or to cover up the error. Covering up the error did not look like too bad an option at the time because stocks were priced at one-half of their fair value and so it was hard for anyone to imagine that prices could ever again rise even to fair-value levels much less to overpriced levels.

So it became industry practice to ignore Shiller’s research findings, to act as if it was no big deal that valuations affect long-term returns and to continue to push the now discredited Buy-and-Hold strategy. When prices reached levels where it was clear that continued promotion of Buy-and-Hold would cause an economic crisis, it was even harder to admit the mistake because now the cover-up had been going on for years and years. And so here we are. 100 percent of the peer-reviewed research available to us shows that there is precisely zero chance that a Buy-and-Hold strategy could ever work for even a single long-term investor and we have 37 years of peer-reviewed research showing that continued promotion of this “strategy” will cause a Second Great Depression. But to acknowledge the mistake means turning the entire industry on its head. People will go to prison, there will be millions of civil lawsuits, reputations will be destroyed and on and on and on.

What do we need to do?

We need to solve the problem in a balanced, healthy, constrictive, life-affirming way.

The more people who go to prison and the longer they go to prison, the more hostility we will see. Which means the less energy we will have as a society to get about the business of developing and promoting Valuation-Informed Indexing, the first true research-based strategy, the answer for all of us, the thing that each and every one of us has been hoping to discover dating back to the 1960s and probably even before. Yet we have to tell the truth about what the last 37 years of peer-reviewed research says. If we don’t do that, we continue going downward. And, after the next price crash hits, the policy of continuing to go downward will become universally seen as unacceptable. So what? Where do we go from there?

We go in the direction that I have been suggesting for 16 years now. We COMBINE 100 percent honesty (which allows us to invest effectively for the long run) with 100 percent charity (which permits our Buy-and-Hold friends to come off looking liken heroes instead of depraved con men who should spend the remaining years of their lives in prison cells). Love is the combination of honesty and charity. Love is the answer. Love is the ONLY answer. There is not one of us who is not better off if love is applied to this matter. Love is the answer for each and every last one of us, Buy-and-Holders and Valuation-Informed Indexers alike.

The materials at my site show the way. There is a question that I have been asking myself before I push the send button for every post that I have advanced over the past 16 years. I ask myself: “Is this post as honest as it can possibly be without crossing the line and becoming uncharitable while also as charitable as it can possibly be without crossing the line and becoming dishonest?” We are going to need a big injection of love in the days following the next price crash. People will have seen more than 50 percent of their life savings disappear into thin air. They are going to be angry. They are going to be looking to hang the Buy-and-Holders up on trees. But we need the Buy-and-Holders! They are smart people! They are good people. In a crisis, we need as many smart and good people as we can find to set things right! We are hurting ourselves if we let our anger get so out of hand that it destroys us. Giving in to feelings of hate ain’t the way.

I am the only person alive on Planet Earth who can deliver the message that needs to be delivered in as powerful a way as I can deliver it with the Post Archives housed at this site as my aid. I have a credibility on this subject that no one else possesses because I am the only one who has been posting with both 100 percent honesty and 100 percent charity on THOUSANDS of issues for 16 years running now. I have been a love machine since the morning of May 13, 2002. And our economic system and our political system have been left in a place where they are in need of large does of love.

It is by contributing something of value to the world that we earn compensation for ourselves. My 16-year profession of love for my country (the idea of permitting honest posting about errors in retirement studies is core to what we are all about as a nation) will be providing great value for many decades to come. The idea that there would be even one person in this nation who would hesitate to say that I am entitled to a payment of a whole big bunch more than $500 million is insulting to all the people who have spent blood, sweat and tears building this country. The Wall Street Con Men will be happy to pay the money because I will have done for them what they were not able to do for themselves, because I have freed them to again do good work in this field, which was their motivation for entering it in the first place.

Step Two is freeing us of the need to lie about this stuff. There is not one person alive who wants things to be how they are today. But, as you Goons so often note, we are afraid to speak up, the abusiveness is too brutal for us to handle. I have shown us all the way to overcoming the hate. Everything that I have done is documented here at the site and at scores of other sites. That’s Step Two. It’s a big, big. big, big. big step. The step that we are in the process of working up the courage to take is a step that will be celebrated as the Second American Independence Day in years to come. We are all in the process of being liberated to invest in stocks in a way that permits us to earn far higher returns while taking on dramatically less risk than was ever thought possible in earlier times, as shown in the peer-reviewed research that I co-authored with my good friend Wade Pfau.

That’s Step Two. It is the step in which the investing advice field becomes open to permitting HONEST discussions of what the last 37 years of peer-reviewed research teach us all about how to go about investing in stocks. It is a truly magical step.

My take.

And my sincere best wishes.

Rob

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 doesn’t have to be a crash. Stock returns could simply be lower in the future. Or earnings might be greater than average. As a student of Shiller, surely you are aware that PE10 will go down this year even if the market stays the same.

For returns to remain low enough for long enough for P/E10 levels to return to fair-value levels is just a more drawn-out way to experience the same negative effects that we would experience in a crash. The annualized real return on stocks for the past 18 years has been 3.5 percent real. That’s half of the return that millions of investors have been counting on to finance their retirements. And we are nowhere even close to fair-value price levels after those 18 years of poor returns. We are still at P/E10 levels so high that the one time in history when we experienced them before we saw a Great Depression as a result. Not good. Great depressions hurt people, Anonymous. In very serious ways.

And you are wrong when you say that earnings could be enough better than average to help us to avoid the massive amounts of human misery that always follow when as a society we permit P/E10 levels to rise to the levels they have reached in recent decades. It is possible that earnings could increase enough to support a long-term average return of 6.6 percent real or 6.7 percent real rather than the 6.5 percent real that has applied for 150 years now. But we were not looking at 6.6 percent returns in the late 1990s, Try 20 percent. Try 25 percent. Try 30 percent. That’s a massive amount of human suffering that our Wall Street Con Men friends caused with their relentless promotion of the smelly Buy-and-Hold garbage.

Not this boy, you know? I am going to continue to post honestly re safe withdrawal rates and scores of other critically important investment-related topics. I am happy to do anything in my power to get your prison sentence reduced a bit. But no financial fraud garbage for this boy. I don’t like the idea of going to prison in the days following the next price crash. And I don’t like the idea of causing millions of failed retirements. I was a Buy-and-Holder myself once upon a time because I believed that Bogle was sincere about using the peer-reviewed research as a guide. I think Bogle was on the right track in the days before he went to the dark side. I am going to continue to tell people how stock investing works according to ALL of the peer-reviewed research, both the pre-1981 research that supports Buy-and-Hold and the post-1981 research that shows that valuations need to be taken into consideration to get any of the numbers even roughly right.

I hope that works for you, my good friend.

Rob

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

“But there has also never in the history of the market been a time when we went to a P/E10 level in the 30s and did not see a price crash of 50 percent to 65 percent”

And there have never been two such crashes less than 80 years apart. Which means you’ll be reporting on the next one when you’re in your 130’s.

I am going to give a fuller response to this one because I think you are making a legitimate point here. It is odd to see two crashes within a short time-period. If we see another crash within the next year or two or three, that will indeed be the second one within 10 or 12 years. Why are we seeing things play out this way?

If Shiller is right (his research showed that valuations affect long-term returns), then stock prices are determined primarily by shifts in investor emotions, not by economic realities. If that is the case, then irrational exuberance is always going to be followed by irrational depression. It is high P/E10s that cause low P/E10s. It is bull markets that cause bear markets (and the economic crises that inevitably follow from them). There is nothing that we humans can do to avoid bear markets and economic crises except to permit discussion of the last 36 years of peer-reviewed research in this field and thereby prevent bull markets from developing in the first place.

Something kept the drop in P/E10 values that began in September 2008 from resolving itself. We saw only a drop to fair-value P/E10 levels, not a drop to P/E10 levels of one-half of fair value, which is where P/E10 values have fallen to in every earlier bear market before the full bull/bear cycle came to an end. It appears that what happened is that the Federal Reserve stepped in and pumped money into the stock market and then kept interest rates low in an effort to keep us from falling into the Second Great Depression. That kept the bear market from resolving itself. And so the emotional pressure that pulls stock market prices down to insanely low levels at the end of every bull/bear cycle remains in place today. It is only after we see that drop that the stock market will again be able to provide normal returns (6.5 percent real per year rather than the 3.3 percent real returns that we have been seeing for 18 years running now).

Investors are still evidencing an insane level of emotion today. We see that in every post that you Goons put forward here. The Federal Reserve has shown itself able to stretch out the bear market to a time-period longer than we have ever seen before. But it has not shown an ability to change the investor psychology that causes bear markets. So we remain at risk of a big price crash after having already experienced one not too long ago. Pumping up stock prices for a time does not change the underlying investor psychology. If anything, stretching out the bear market makes things worse rather than better.

The core question is always — Are stock price changes caused by economic realities or by investor emotion? If stock price changes are caused by economic realities, the market is efficient and Buy-and-Hold is the ideal strategy (and the safe withdrawal rate is always the same number). If stock price changes are caused by investor emotion, then the only way in which we can deal with economic crises effectively is to help investors rein in their emotional impulses. That is, we need to open up every investing site and blog on the internet to honest posting re the last 36 years of peer-reviewed research in this field.

Yes, it would be odd to see two price crashes within a short amount of time. But we allowed stock prices to go to levels never seen before in U.S. history in the late 1990s. The Wall Street Con Men have never pushed Buy-and-Hold as hard as they have pushed it in recent decades. So they have created circumstances more dangerous and more damaging that we have ever lived through before. The fundamentals haven’t changed. If the last 36 years of peer-reviewed research is legitimate research (I believe that it is), it is investor psychology that we need to focus on. We need to provide a counter to the relentless promotion of the pure Get Rich Quick “ideas” that have made the Wall Street Con Men so wealthy. We need to permit honest posting on the last 36 years of peer-reviewed research.

I hope that helps a small bit.

Rob