A Rich Life

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

“That Part Is Hard to Write. It Involves Being Somewhat Critical of My Readers. Generally Not a Great Promotional Strategy.”

by

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

Do you plan to use any ink to comment about Internet Goon Squads?

Certainly I need to address the phenomenon. And certainly I need to take care to be fair-minded in what I say.

This is the aspect of the thing that makes it difficult to write about. The Goon part of the story is the relatively unimportant part of the story. Sure, there was a lot of abusive stuff that went down. That’s hardly a shocking news development when it comes to discussions that were held on the internet. It happens every day in hundred of different places. The shocking part of the story is the tolerance of Goon behavior that we have seen on the part of the Normals. That’s the driver of the high CAPE value.

That part is hard to write. It involves being somewhat critical of my readers. Generally not a great promotional strategy. And, for the stock buying process to become more rational over time (the core goal of the entire project), things need to be said in such a way that they avoid the protective radar of the Normals. That’s a very difficult business. Sometimes I get it just right. Sometimes I see that it is going to take more work to get it just right. My job is to take as much time as it takes to get the entire thing just right. no more and no less.

Rob

“Let’s Say That the Next 20 Years Are the Same As the Past 20 Years in That No One Believes Your Story, No Crash Happens, You Are Still Broke, Etc. Will You Then Admit You Wasted All Your Time?”

by

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

Let’s say that the next 20 years are the same as the past 20 years in that no one believes your story, no crash happens, you are still broke, etc.  Will you then admit you wasted all your time?

That alone would not do it. It would cause me to experience doubts. I would explore those doubts and see what people I respected were saying about the matter.

If there were still a Ban on Honest Posting re the peer-reviewed research, that would make it hard for me to develop confidence in Buy-and-Hold. I view the Ban on Honest Posting as a very negative sign for Buy-and-Hold. It’s not the way that people behave when they have confidence in their ideas.

Rob

“There Is Not a Single Reference to Safe Withdrawal Rates in Shiller’s Paper”

by

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

“Shiller’s research shows that a valuation adjustment is required to calculate the safe withdrawal rate accurately”

“It’s the entire study. It shows that valuations affect long-term returns.”

There is not a single reference to safe withdrawal rates in his paper.

If there was you could point us to it.

Um….

Rob

“I Agree With You That Many More Used the Trinity and Bengen Studies.I Would of Course Like to See Those Studies Corrected as Well. It Would Have Been Easy to Get Those Studies Corrected Once We Had Gotten the Greaney Study Corrected. We Would Just Go As a Group to the Various Boards and Tell the Story and We Would Have Lots of Good People Helping Out. I Cannot Imagine Such Efforts Not Being Successful.”

by

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 is possible that there were a few at Motley Fool who used his study as one of many pieces of information when planning a retirement.

However it is likely that many more people used the Trinity or Bengen studies as they are much better known.

You talk about the Greaney study a lot, you have made no meaningful attempt to engage the authors of the Trinity and Bengen studies.

I agree with you that many more used the Trinity and Bengen studies.I would of course like to see those studies corrected as well. It would have been easy to get those studies corrected once we had gotten the Greaney study corrected. We would just go as a group to the various boards and tell the story and we would have lots of good people helping out. I cannot imagine such efforts not being successful.

It’s not like I work up one morning and said to myself: “I know what should do with my life, I should become the retirement study corrector!” I posted at the Motley Fool board for three years before I pointed out the error in the Greaney study. I was friends with Greaney at that time (I still consider him a friend but the feeling is obviously not mutual) and with a number of the regular participants at that board. We discussed the Greaney study there on a daily basis (I rarely did, I limited myself to posting on saving strategies).

Greaney became abusive when stock prices dropped a bit and was in the process of causing our best posters to leave the board. I felt that the only thing that I could do to save the board was to point out the error in the study. My thought was that that might cause him to be a bit less arrogance in his dealings with others. I also thought that we would all learn a lot about safe withdrawal rates. I had always felt like a bit of a creep for not having the courage to point out the error, which I had known about from the first day I posted there.

When I saw the reaction to my post, I realized that I had a tiger by the tale. This isn’t just a story about safe withdrawal rates. It’s about the entire Buy-and-Hold Model. Getting the Greaney study corrected would be a huge step forward toward getting the entire Buy-and-Hold Model corrected. Greaney didn’t make the error because he is dumb. He just followed the model. I don’t think that the people who followed the model were dumb either. They didn’t have Shiller’s research available to them when they were developing the model. They took a shot in the dark on the issue of valuation-based market timing and they made a mistake.

So what, right? It happens. The trouble is the cover-up of 43 years. Because there are lots of powerful and wealthy and well-connected people who will “look bad” when the cover-up is revealed, there’s a lot of pressure to continue the cover-up. But that of course makes things worsr, not better. I naturally would like to take things to a place where we can all begin making things better and better and better.

Rob

“I Don’t Believe That You Have a Mental Illness. But I Do Believe That You Suffer From Irrational Exuberance. It’s a Form of Addiction. I Believe That the Primary Focus of Investment Advice Should Be to Help People Avoid Irrational Exuberance and to Recover From It Once They Fall Prey To It.”

by

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

I sincerely believe you have a mental illness.

I don’t believe that you have a mental illness, Anonymous. But I do believe that you suffer from irrational exuberance. It’s a form of addiction. I believe that the primary focus of investment advice should be to help people avoid irrational exuberance and to recover from it once they fall prey to it.

Rob

“Most People Are Intimidated By the Subject of Stock Investing.”

by

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 bet I sound at least somewhat like some people in your real life. Is there anyone online or, most especially, in your real life who still supports what you have been doing for the past 22+ years?

There are a number of people who are supportive. There is no one who is intensely supportive. I get asked about the investing stuff on a regular basis. Probably once a month someone will ask about it. The reactions are very similar. People are definitely interested. Nearly everyone seems to have some concerns re investing, they feel that they don’t know enough about it and are worried about what may happen to their money. So people want to know more. But people have a hard time grasping the story.

The issue is that it is just so darn big. It doesn’t sound plausible. You Goons have on occasion used the term “conspiracy theory.” I don’t claim a conspiracy. But I believe that people have a hard time accepting how 43 years of peer-reviewed research could be covered up without a conspiracy. It doesn’t sound possible. So people do not feel 100 percent comfortable with what they are hearing.

That’s my job with the book. I have to explain it in a way that makes sense to people. The core problem is that it’s just so big. Shiller took us to the undiscovered continent of stock investing — the psychological side of the story. People completely accept that there’s a psychological side to the story. But they have no idea how big it is. And they don’t understand how ignored it is in the advice that they hear. Shiller looked at the 70 percent of the story that has been hidden from all of us for a long time. It’s a very big advance and big advances are hard to grasp.

Big advances upset the apple card. This is a lucrative area for those who have acquired expertise. So there are lots of powerful people who would prefer that the apple cart not be upset.

People are definitely interested. And they don’t doubt that there are things being kept from them that it would be good for them to know. But they are generally not intense about this issue. They are 1/50th as intense as you Goons. They don’t feel confident re their ability to understand the issues. Most people are intimidated by the subject of stock investing. And it makes them uncomfortable to imagine that our system of government is not handling things. They feel that there should be people taking care of things.

And of course they don’t really want to think too much about their portfolios not being worth what they have been led to believe they are worth. That part of the story is of course highly distressing. They hear the words and they tune them out at the same time. Cognitive dissonance is very much a factor.

People have a complacency over it, a lack of urgency. Prices are of course high today. That makes people feel satisfied with their circumstances. People rarely get super worked up over something at a time when a situation seems positive. But there is definitely an undercurrent of concern.

Rarely do I have someone dismiss what I say out of hand. I have had that happen. When it happens, it’s because the person has a strong loyalty to the Buy-and-Hold Model. Then I get a “who do you think you are?” reaction. That’s not at all a common reaction.

That was a good question.

Rob

“It Defies Common Sense to Believe That There Is No Price at Which Stocks Are Not Worth Buying. I View That Claim As a Marketing Gimmick. It Can’t Be True. So I Personally Very Much Doubt That It Is True.”

by

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

Buy & Hold is “good stuff on top of good stuff”, as some might say. I can see some of my stocks are down today. BRB I’m gonna go buy more.

I certainly wish you the best of luck with it.

It defies common sense to believe that there is no price at which stocks are not worth buying. I view that claim as a marketing Gimmick. It can’t be true. So I personally very much doubt that it is true. And of course there’s the 43 years of peer-reviewed research showing us that what common sense tells us must be so really us so.

Rob

“I Went to the Grocery Store Today. When I Went to Check Out, the Cashier Asked Me for My Peer-Reviewed Research Papers to Pay for the Groceries.”

by

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 went to the grocery store today.  When I went to check out, the cashier asked me for my peer-reviewed research papers to pay for the groceries.  I tried to use some money from my almost $8 million in savings, but she said that due to the current CAPE ratio, she would only accept a market timing opinion of Robert Shiller’s work.   Woe is me.  How will I ever survive this financial nightmare.

Should we shut down all the peer-reviewed journals, Anonymous?

Rob

“Stocks Are an Amazing Choice RIGHT NOW.”

by

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

Stocks are an amazing choice RIGHT NOW.

I’d say that they are worth owning today. But I would not say that they are an amazing choice.

We have as a nation of people permitted the Buy-and-Hold stuff to get out of hand and stocks are priced dangerously today. I would like to see us all pull together to get that horrible CAPE value down.

Do you consider today’s CAPE value of 35 acceptable? I do not.

Rob