A Rich Life

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

“It Seems Like You Have Pretty Much Given Up on Most Everything.”

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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:

It seems like you have pretty much given up on most everything.  No work going on with the book.  No job.  Blog activity dropping off.  I guess you are not really worried about your perceived buy and hold crisis.

I remain worried. I haven’t given up.
There’s only so much that one person can do. I believe that I’ve done everything that one person could be expected to do. I’m at peace with that.

I work on the book every day. Progress has been exceedingly slow. But I am seeing slow progress. I remain highly confident that I will get there. That’s my primary project today.

When I talk to normal people about this matter, they have no difficulty accepting the basic realities. What’s lacking is a sense of urgency. People have never experienced the level of abusiveness that we have seen for 23 years from those posting in “defense” of Mel Lindauer and John Greaney. They often wish me luck. But they don’t feel confident of their abilities to say for sure how stock investing works. And they have zero desire to see that abusiveness turned on them. They don’t want to get involved. So they are okay with letting others solve the problem. They are complacent about it. I am not even a tiny bit complacent about it. But most people are (to the extent that they think about the matter at all). That’s where things stand.

I believe that a huge price drop followed by an economic crisis (which is inevitable sooner or later if Shiller’s Nobel-prize-winning research is legitimate research) may change that. But we’ll have to wait and see to find out for sure. If/when we see another Buy-and-Hold Crisis, I’ll do what I can to help us get out of it and to insure that we never see another one. I can do no more and I can do no less.

I am of course frustrated that we are not today seeing the benefits of such a wonderful advance in our understanding of how stock investing works. It’s painful to think about the lost opportunities. But the other way of looking at it is that we might have never achieved that advance in the first place and we did. So there’s much more good here than there is bad. We don’t need to adopt any new laws to get every discussion board and blog on the internet opened to honest posting re the last 44 years of peer-reviewed research. All we need to do is to give ourselves permission to talk about this amazing advance so that we can all reap the benefits of it. I remain confident that that change will take place.

I take comfort from the fact that so many on the Buy-and-Hold side of things have expressed a desire that honest posting be permitted at every site. We need them to do a little more. But their hearts are already in the right place. So I think there are grounds for optimism. We will experience the next Buy-and-Hold Crisis together as a nation of people. I think it may cause us to pull together and to take this to a positive place. We’ll see, you know.

I know what side I am on. I believe that each investor should be able to hear both sides of the story and to decide from himself what to do with his retirement money. I believe that the Greaney retirement study lacks a valuation adjustment and that people considering using it to plan a retirement need to know that. That’s pretty much it.

My best wishes to you.

Rob

“There’s One Major Flaw. The Price of Stocks Is Set By the People Who Own Them. There Is Nothing to Stop Those People From Setting the Price of Stocks at Artificial Levels, From Creating Irrational Exuberance That Will Fool Them for a Time Into Thinking That Their Holdings Are Worth More Than They Really Are Worth.”

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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:

Shocker!  Silly me thinking that you should have a book done since it has been over 10 years.

I believe that Greaney should have corrected the error in his retirement study (it lacks a valuation adjustment) within 24 hours of the moment it was brought to his attention (the morning of May 13, 2002). There’s obviously some strange forces at play here that are causing things to play out in ways in which they ordinarily do not play out.

Shiller discovered the secret of stock investing. Stocks are an amazing asset class that offers an average annual return of 6.5 percent real. What could be better? There’s one major flaw. The price of stocks is set by the people who own them. There is nothing to stop those people from setting the price of stocks at artificial levels, from creating irrational exuberance that will fool them for a time into thinking that their holdings are worth more than they really are worth. Shiller showed us how to overcome irrational exuberance, to engage in valuation-based market timing and thereby to avoid the crazy bull markets that you experience when you follow Buy-and-Hold strategies and the crazy bear markets that follow whenever you have crazy bull markets and the horrible economic collapses that follow whenever you lose the trillions of dollars of consumer buying power that you always lose in a crazy bear market.

On the surface, there doesn’t seem to be any downside to this amazing advance in understanding. But there is one. Since irrational exuberance is the cancer of the personal finance realm, adopting a strategy that makes it impossible for irrational exuberance to grow adds rationality to the investment advice field. If we were starting fresh, everyone would agree that that is super. But we are not starting fresh. Buy-and-Holders have been arguing against rationality, saying that there is no real need for market timing, for as long as there has been a Buy-and-Hold strategy. That “idea” is of course absurd. We have thousands of markets and price discipline is critical in every one. So it is a pretty out there idea to believe that the stock market is the sole exception. But the Buy-and-Holders did not have Shiller’s research available to them when they were developing their strategy and so they took a wild stab in the dark and their wild stab in the dark ended up being wrong. Now the only way forward is for the Buy-and-Holders to work up the courage to say the words “I” and “Was” and “Wrong.”

I think we are a fundamentally good people and I think that in the end we will do it. I believe that it’s going to take another Buy-and-Hold Crisis for people to come to terms with how horrible it is to follow a strategy that does not call for market timing when needed (a strategy that permits irrational exuberance to go insanely out of control and do great damage to millions of lives), but I think we’ll get there. I take confidence in the number of Buy-and-Hold who have expressed interest in coming clean and held back only because of the insane abusiveness of you Goons. When people want to do something that bad (Bernstein went so far as to say in his book that the Buy-and-Hold safe withdrawal rates calculations were off by a full two percentage points at the top of the bubble), they eventually work up the courage to do it. We’ll see, you know?

My best wishes to you and yours.

Rob

“Anything Good That Seems to Come About Because of Buy-and-Hold Comes Not From the Strategy But From the Productivity of the U.S. Economy.”

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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:

Half of Americans have no retirement savings, just like. Yet here you are, telling a bunch of successful millionaires that you are right and they are all wrong.

Who is dishing out the empty calories???

Anything good that seems to come about because of Buy-and-Hold comes not from the strategy but from the productivity of the U.S. economy. Buy-and-Hold encourages people to invest in stocks and stocks are an amazing asset class because of the productivity of the U.S. economy.

The thing that is distinctive about Buy-and-Hold is that it encourages the creation of irrational exuberance to the max and that only subtracts and never adds. Irrational exuberance makes it impossible for people to know how much genuine wealth they have accumulated and that makes effective financial planning impossible. It would be better to let people know what the research says. Then they could practice price discipline re their purchases of stocks as they do with the purchases of everything else they buy. In a world in which most investors acted in their self-interest and practiced price discipline, stock prices would be self-regulating. That would mean no more bull markets and no more bear markets and no more economic collapses.

All of the good associated with stocks and none of the bad. Investor heaven.

Rob

“Everybody Doesn’t Give Up One Way of Thinking About a Subject in the 24 Hours After Amazing Breakthrough Research Is Published. People Need Time to Talk Things Over and Think Things Over. In Time, the New Ideas Spread. That’s Where Things Went Haywire.”

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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:

“Yes, it all has to be a mass conspiracy since rich people are always wanting to get investment advice from a broke guy.”

We didn’t know all there was to know about how stock investing works when Buy-and-Hold was being developed in the 1960s. Shiller didn’t publish his amazing research showing that valuations affect long-term returns until 1981. So I would chalk up the error that the Buy-and-Holders made to an understandable mistake rather than to a mass conspiracy.

Everybody doesn’t give up one way of thinking about a subject in the 24 hours after amazing breakthrough research is published. People need time to talk things over and think things over. In time, the new ideas spread. That’s where things went haywire. At some point a number of Buy-and-Holders began engaging in intimidation tactics aimed at suppressing discussion of the new research. That’s how we got to where we are today, with 44 years of peer-reviewed research ignored in almost all discussions of stock investing.

That’s what needs to change. we need to open every investing site to honest posting re the research. That way we can all get up to speed in time. I would have voted to open every site to honest posting re the research on the afternoon of May 13, 2002. I said so at the time. That way, we would be 23 years farther along in our development of the Valuation-Informed Indexing concept. We would all be living richer and freer and better lives today.

Rob

“It’s Not Like We Would Need to Publish New Research or Enact New Laws or Persuade People to Care About Their Retirements to Make All the Good Stuff Happen. We Already Have All That. We Need Only One Thing — to Have the Courage to Stand Up to the Buy-and-Hold Goon Squads and Say What We Believe.”

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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:

That is B.S., Rob.  But it is not really the question.   How is this helping you with your situation?  Is it just an outlet to help you mentally cope?  Is it something that helps you provide a cover for laziness?

I believe that everyone who comments in any way on stock investing should be advancing his or her sincere thoughts and I believe that those thoughts should be rooted in what the peer-reviewed research shows. That’s how we learn. I don’t believe that there should be any penalty whatsoever for expressing one’s sincere thoughts. It is because people have been intimidated into keeping it zipped that irrational exuberance (which benefits no one in the long run) has gotten so out of control.

Think where we would be as a nation of people if everyone who believed that Shiller’s Nobel-prize-winning research was legitimate research had said that that was what he believed going back to the day in 1981 when that research was published. We sure wouldn’t have a CAPE today of 38. We wouldn’t have experienced that horrible Buy-and-Hold Crisis of 2008. We wouldn’t have seen all of the political frictions (the Tea Party Movement and the Occupy Wall Street Movement) that followed from it. We wouldn’t today be living under the cloud of seeing millions of failed retirements and hundreds of thousands of failed businesses and millions of people thrown out of work in the next Buy-and-Hold Crisis. Irrational exuberance is seriously bad stuff, you know?

I wish that I had a magic wand and that I could make all the resistance to permitting discussion of the peer-reviewed research go away and thereby permit us all to live better and fuller and richer and freer lives. I don’t have a magic wand. But it’s not like we would need to publish new research or enact new laws or persuade people to care about their retirements to make all the good stuff happen. We already have all that. We need only one thing — to have the courage to stand up to the Buy-and-Hold goon squads and say what we believe. I am asking everyone who lives in the United States to do that.

It doesn’t sound like I am asking much. But, if I don’t have the courage to do myself what I am asking others to do, that’s pretty darn lame, is it not? So I do what I am asking others to do. The hardest thing with this story is explaining how things could be the way they are. We all care about getting stock investing right. We have 44 years of peer-reviewed research showing us how to do it. We have a book that explains it all. We have an internet communications medium that permits us to get the word out to millions overnight. We have the 16 months of effort that Wade Pfau put into determining whether there had ever been any research supporting this loony-tunes idea that maybe there are some circumstances in which valuation-based market timing is not 100 percent required of every investor. And yet this is where we are?

This is where we are. The Get Rich Quick/Buy-and-Hold urge that resides within all of us is a very, very, very, very strong urge. That’s the story here. We are 95 percent of the way there toward overcoming it and we very much need to overcome it. But we very, very much would like to find some way to avoid having to overcome it. That’s the story. We have as a nation of people adopted a taboo against discussion of the 44 years of peer-reviewed research showing that valuations affect long-term returns and insuring that we continue to suffer from our ignorance of how stock investing works. All that we need to do to overcome that taboo is to apply the same laws and social norms that govern every field of human endeavor other than the investment advice field in the investment advice field as well. Can we do it?

I think we can do it. I think we are going to do it. I think we are too close not to take the few final steps required to begin living happier lives together. But I need people to stand up to you goons, I need people to express their sincere views and to speak up in support of the right of others to express their sincere views. I ask others to do this magic thing. Am I willing to do it myself?

I like to think that I have what it takes to do it myself. I sincerely believe that the Greaney retirement study lacks a valuation adjustment. So that’s what I say when the subject of safe withdrawal rates turns up in discussions of stock investing held on the internet. That’s pretty much it.

I believe that the arc of human history bends toward the use of rationality in investment analysis. I believe that deep in our hearts we want to get there and I believe that we will get there. I believe that there is 20 times more good in this story than there is bad. I believe that we are fundamentally a good people. So we are going to find a way to leave the Get Rich Quick/Buy-and-Hold stuff behind and help people to learn about and follow research-based stock investing strategies. I like us. I want to see us enjoy the benefits of the amazing research that Shiller provided for us 44 years ago.

Does that help?

Rob

“The Buy-and-Holders Themselves Often Talk About Learning From the Peer-Reviewed Research. That’s Where I Picked Up the Idea. But You Can’t Consider Only Research That Supports Your Original Ideas. Sometimes Research Teaches You New and Unexpected Things.”

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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:

Why do you keep wasting your time with this Rob?  No one believes your delusions.  Is it to help you cope with your problems?

I think it’s an important issue. People need access to honest accounts of the what the peer-reviewed research reveals about how stock investing works.

Lots of people have spoken with great enthusiasm about Valuation-Informed Indexing. Not a majority, certainly. It’s about 10 percent of those who are exposed to the concept who speak positively about it. What if there were no abusive posting or criminal behavior on the part of the Buy-and-Holders? The 10 percent would have turned into 20 percent and the 20 percent would have turned into 40 percent and the 40 percent would have turned into 80 percent.

There’s not one person alive who doesn’t want to know how stock investing works. So permitting honest posting re the research is a win/win/win/win. The Buy-and-Holders themselves often talk about learning from the peer-reviewed research. That’s where I picked up the idea. But you can’t consider only research that supports your original ideas. Sometimes research teaches you new and unexpected things. That’s the story with Shiller’s Nobel-price-winning research showing that valuations affect long-term returns.

I believe that Buy-and-Hold is the past and that Valuation-Informed Indexing (which is Buy-and-Hold updated to reflect Shiller’s amazing research findings re valuations) is the future.

We’ll see.

Rob

“In 23 Years, There Has Not Been One Post Arguing That Shiller Got Something Wrong.”

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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:

Disagreeing with you is not abusive or criminal

I pointed out the error in the Greaney retirement study (it lacks a valuation adjustment) on May 13, 2002. It has not been corrected to this day. 23 years.

If there had been claims that Shiller’s Nobel-prize-winning research showing that valuations affect long-term returns is not legitimate research, that would be fine. People can listen to both sides and decide for themselves what to do with their retirement money. We haven’t seen that. In 23 years, there has not been one post arguing that Shiller got something wrong. What we have seen are death threats and demands for unjustified board bannings and acts of defamation and extortion. Not kosher.

I don’t believe that Buy-and-Hold can stand long-term if that’s the best that its advocates can offer. There needs to be open discussion so that people can make up their own minds. The problem with open discussion is that we have all seen that, when there is open discussion, Valuation-Informed Indexing grows and Buy-and-Hold diminishes. I don’t see any other way that things can play out. The abusive stuff just delays the inevitable.

I believe that the next Buy-and-Hold Crisis will be a turning point. But we’ll see, you know? I know for certain that I don’t want to be on the side telling people that the safe withdrawal rate is the same number at all possible valuation levels. That never should have been a thing in the first place. It’s a marketing gimmick, a money-making thing.

Is it possible that people really believed that the market was efficient back in the days when Buy-and-Hold was being developed? I think it’s possible. Shiller’s research was not available to us at that time. But that’s no excuse for letting 44 years pass without opening every site to honest posting re the peer-reviewed research.

I sincerely believe that the Greaney study lacks a valuation adjustment. So I say that. There should be zero controversy on the question of whether I should feel 100 percent free to state my honest views. The issue today is that, if people are permitted to post honestly (even Bill Bernstein said that the safe withdrawal rate was 2 percent at the top of the bubble), the 44-year cover-up is exposed. We are arguing over whether the biggest act of financial fraud in the history of the United States should come to an end or should be permitted to continue destroying people’s live. I vote enthusiastically for bringing it to an end.

Rob

“If You Drop the Abusive Stuff and the Criminal Stuff, I Will be Able to Get the Percentage of Investors Following Valuation-Informed Indexing Strategies Up From 10 Percent to 20 Percent Within Six Months.”

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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:

If people love hearing what you say, they would be commenting on this board.

If you drop the abusive stuff and the criminal stuff, I will be able to get the percentage of investors following Valuation-Informed Indexing strategies up from 10 percent to 20 percent within six months.

Rob

“There’s No Such Thing as an Expertise That Remains Forever. It Was One Thing to Believe in Buy-and-Hold in 1980. It’s Something Very Different to Believe in it 44 Years After Shiller Published His Nobel-Prize-Winning Research. What Kind of Expert Can Someone Be Who Is 44 Years Behind in His Reading of the Peer-Reviewed Research? “

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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:

So you think it is a good thing to not have a degree. Okay, that means you have to throw out anything from Shiller and Pfau if that is the way you want to position it.

I guess we should avoid medical advice from people that have degrees as well, right?

Shiller and Pfau showed a lot of courage in doing honest work. We should encourage that, not threaten the people who do it.

There was a time when medical experts encouraged the use of leeches. Yes, we needed non-“experts” to encourage people to consider new approaches.

There’s no such thing as an expertise that remains forever. It was one thing to believe in Buy-and-Hold in 1980. It’s something very different to believe in it 44 years after Shiller published his Nobel-prize-winning research. What kind of expert can someone be who is 44 years behind in his reading of the peer-reviewed research? I mean, come on.

A true expert would acknowledge that the Greaney retirement study lacks a valuation adjustment. The very fact that I had to say it shows that a lot of funny business has been going on during the Buy-and-Hold Era.

It’s not just about turning a quick buck. Fraudulent investment advice hurts people.

Rob