A Rich Life

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

“You Suggest That There Is Something ‘Utopian’ About Everything Being Perfectly Valued. The Reality Is That There Is Only One Thing Standing in Our Way. The Thing Standing in Our Way Is You Goons.”

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

If that risk goes away because everything is ‘perfectly valued’ as in your utopia

I can bring in my good friend Eugene Fama to argue my case re this one, Laugh.

You suggest that there is something “utopian” about everything being perfectly valued.

Are you familiar with Fama’s work?

His core claim is that things should ALWAYS be perfected valued. He says that the market is “efficient.” That means it processes all information quickly. All that is known about stocks is almost immediately incorporated into the price of stocks. That’s perfect valuation, is it not? There is no better price than the one that incorporates all known information bits.

There is nothing even a tiny bit utopian about a world in which stocks are properly priced.

The reality is that there is only one thing standing in our way.

The thing standing in our way is you Goons.

Wade Pfau wants to tell the truth about stock investing very, very much. He made that clear in his e-mails to me over and over again.

Wade is obviously going to get the Nobel prize for the research that I co-authored with him once he feels free again to post honestly, right?

THOUSANDS of academic researchers are going to follow Wade’s lead once he wins the Noble prize. So we are soon going to have THOUSANDS of academic researchers telling the truth about stock investing.

You don’t think that is going to make a difference?

I think it is going to make a HUGE difference.

They key is getting your prison sentence announced, Laugh.

That will go viral. When every web site is talking about your prison sentence, Bogle is going to feel pressured to give his “I Was Wrong” speech. Once Old Saint Jack gives that speech, no one is ever again going to be afraid of what the Wall Street Con Men and their Internet Goon Squads will do to them if they dare to “cross” them by telling the truth about what the last 32 years of peer-reviewed academic research says about how stock investing works in the real world.

Laugh going to prison is Utopia realized for all of us. No?

It really is. Even for Laugh. Because the sooner you go to prison, the less damage your Campaign of Terror against us will have caused. And the less damage you end up causing, the shorter your prison sentence will end up being.

Does that not make sense, my old friend?

Rob

“The Problem Is That Smoking Really Does Cause Cancer. And Buy-and-Hold Always Brings on a Financial Wipeout for Every Investor Who Comes to Believe in It. So We Have to Do Something About the B.S.”

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

Most people understand that this gap is the equity risk premium and is compensation for the increased risk of owning equities.

Stocks pay higher returns that most other asset classes. We agree on that.

And it is true that the primary reason is that people PERCEIVE stocks as more risky. We agree on that.

We do NOT agree that stocks are significantly more risky. Stocks are more risky for Buy-and-Holders, but not for Valuation-Informed Indexers. The risk is that you will fall for the arguments of those promoting Buy-and-Hold strategies (people who make a living selling stocks). So long as you buy stocks in the same manner as you buy everything else (ALWAYS taking price into consideration when making purchase decisions) stocks purchased through index funds are a low-risk asset class.

Yet stocks still pay higher returns. Why?

Because most people don’t understand the implications of Shiller’s research.

We need to be spreading the word. We need this stuff written up in every newspaper, on every blog, at every discussion board, on every investing-related television show.

We knew from research that smoking caused cancer a long time before people began cutting back on smoking. Why didn’t we cut back sooner?

Because the people who made money selling cigarettes were happy to see millions of people die from cancer so long as it meant that they made an easy buck. That’s how it is with the Buy-and-Holders today. There has OBVIOUSLY never been a single study showing that Buy-and-Hold can ever work for even a single long-term investor. But so long as the penalties imposed for telling the truth are great enough, you can still get very rich promoting the smelly Buy-and-Hold garbage, no?

Did the people who financed advertising campaigns saying that everyone should be sure to take up smoking because of all the wonderful health benefits enjoyed by smokers “know” that their lies were causing huge amounts of human misery?

They did and they didn’t. They obviously knew that it was all b.s. That’s why they were so defensive when questioned about the “studies” that they said backed up the absurd claims. But they didn’t focus on the millions of deaths. They rationalized. They told themselves “oh, smoking probably isn’t that bad, everyone has to make a buck in this world.” They smoked themselves, you know? They said “I am not trying to persuade anyone to do anything that I don’t do myself!” And that was true.

So it is with the Buy-and-Holders. There obviously has never been a single study published showing that long-term timing is not 100 percent required of all long-term investors. The idea is absurd. It would defy common sense for such a thing to be so. But there sure is a LOT of money to be made pretending that you believe that such a study exists, is there not?

So people say they believe this baloney. And they rationalize. They say “oh, we survived the First Great Depression brought on by the promotion of Buy-and-Hold, who is to say that we will not survive the Second?” And they tell themselves that they follow Buy-and-Hold strategies themselves, so they are not really horrible people. And they do follow Buy-and-Hold strategies themselves. That part really is true.

The problem is that smoking really does cause cancer.

And Buy-and-Hold always brings on a financial wipeout for every investor who comes to believe in it.

And the collective losses caused by the widespread promotion of Buy-and-Hold “strategies” are always large enough to cause an economic crisis in the society that permits the relentless promotion of this Get Rich Quick garbage.

So we have to do something about the b.s..

We need to open the entire interest to honest posting about safe withdrawal rates and many other critically important investment-related topics.

That’s my sincere take in any event, Laugh.

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

Rob

“The Interests of the Wall Street Con Men Are Directly Opposed to the Interests of Millions of Middle-Class Investors. The Con Men LOVE, LOVE, LOVE Buy-and-Hold. Why Wouldn’t They? It Had Made Them Millionaires. But, When You Rape the Middle-Class, You Cause an Economic Crisis. People Cannot Buy Things When They Have No Money!”

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

If the US economy grows at 3% and the stock market returns 6.5% real (which is even higher in nominal terms), how do you explain this 3.5%+ gap?

Most people understand that this gap is the equity risk premium and is compensation for the increased risk of owning equities. If that risk goes away because everything is ‘perfectly valued’ as in your utopia, why would stocks maintain any kind of premium?

Shiller’s “revolutionary” findings do not change just our understanding of stock investing, Laugh. They change our understanding of Economics as well. That’s why the guy won the Nobel prize.

You are citing ideas that are part of the Efficient Market/Rational Man/Buy-and-Hold Model. Those ideas have been discredited. I pointed out above how the idea of a risk premium has been proven absurd. Stocks were the most risky they have ever been in U.S. history in 2000 and the risk premium at the time was a negative number. You have’t even TRIED to explain that one. That’s because it is 100 percent impossible to explain. Our old ideas re how economics (and stock investing) work are WRONG.

Many people in the economics profession see that as a bad thing. They have made a good living for themselves pushing all this discredited nonsense. So they fight people who present legitimate research or who explore the implications of legitimate research. I take it just the other way. I LOVE it that we have learned amazing things about economics and about stock investing in the past 30 years. These advances will make us all rich beyond our wildest dreams once we give ourselves permission to talk about them openly on the internet. I am the leading figure arguing for honest posting on safe withdrawal rates and LOTS OF OTHER CRITICALLY IMPORTANT INVESTMENT-RELATED TOPICS.

If you really want to know where the 6.5 percent real return comes from, do a Google search for Bogle speeches on that topic. He does a fine job of breaking it down. Bogle is honest in a good part of his writings. It was by reading one of Bogle’s books that I learned about the errors in the Old School safe withdrawal rate studies.

Where Bogle turns dishonest (whether intentionally or not) is when he says that a Buy-and-Hold strategy can work. The thing that distinguishes a research-based strategy from a Get Rich Quick strategy is the extent to which the investor is willing to change his stock allocation in response to price changes. Buy-and-Holders say that it is okay to not make any changes at all. That’s the farthest you can go in the direction of Get Rich Quick. Valuation-Informed Indexing is the farthest you can go in the direction of research-based. VII says that you should make whatever changes are required to keep your risk profile constant and not any more and not any less.

Buy-and-Holders and Valuation-Informed Indexers have no difference of opinion on where the 6.5 percent comes from. You can read Bogle’s speeches on that question and know that I am happy to sign on to what he says 100 percent.

We have a big difference of opinion of what the Buy-and-Holders call the risk premium. There is 140 years of historical return data showing that the risk premium (as the Buy-and-Holders imagine it) DOES NOT EXIST. Risk was the highest it has ever been in 2000 and return was the lowest it has ever been in 2000. Risk was virtually non-existent in 1982 and returns were off-the-charts high.

There IS a connection between risk and return. So the Buy-and-Holders were sort-of on the right track. The mistake they made was ignoring investor perceptions. Risk was sky high in 2000. But the PERCEPTION of risk was very, very low. Risk was virtually non-existent in 1982. But the PERCEPTION of risk was sky-high.

There is a perception-of-risk premium. But there is no true risk premium.

Why did the Buy-and-Holders get it so wildly wrong? As always, they ignored INVESTOR EMOTION. It is investor emotion that causes the perception of risk to be so wildly off from the actuality of risk.

What is the answer here?

PERMITTING HONEST POSTING.

The interests of the Wall Street Con Men are directly opposed to the interests of millions of middle-class investors. The Con Men LOVE, LOVE, LOVE Buy-and-Hold. Why wouldn’t they? It has made them millionaires.

But in the long run their relentless promotion of the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind hurts them as much as it hurts all of the unfortunate people who listen to their advice thinking that perhaps they are telling the truth. When you rape the middle class, you cause an economic crisis. People cannot buy things when they have no money! When you have an economic crisis, you have a political crisis. When you have a political crisis, all the money you obtained by pushing Get Rich Quick strategies is not of much value because you have no stable political system in which to spend it. Get Rich Quick is bad news!

That’s my sincere take in any event, Laugh. I believe that we should be permitting honest posting on safe withdrawal rates and on many other critically important investment-related topics at every board and blog on the internet.

My best and warmest wishes to you and yours.

Rob

“You Cannot Touch Investor Emotions. You Cannot Hold Them in Your Hands. They Are Not Tangible. But They Have the Same Effect on the World as Anything That IS Tangible.”

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Set forth below is the text of a comment that I recently posted to the Goon Central board:

Rob, you’re confusing a casual observation with a physical constant. 

No, I’m not, Yip. I am accepting that it is investor emotion that is the primary cause of stock price changes and then reporting on what follows from that. If the market is efficient (as Fama believes), Buy-and-Hold is the ideal strategy. If valuations (emotions) affect long-term returns, Buy-and-Hold is the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind.

It’s not casual observation that says that. It’s 32 years of peer-reviewed academic research (based on 140 years of historical return data).

Is investor emotion a physical constant?

It IS, in its way.

You cannot touch emotions. You cannot hold them in your hands. They are not tangible.

But they have the same effect on the world as anything that IS tangible.

Investor emotion ALWAYS determines long-term stock returns. There has never been one exception in 140 years.

And changes in stock returns affect millions of lives in very tangible ways.

Tens of thousands of businesses have failed as a result of the relentless promotion of Buy-and-Hold strategies. Is that tangible enough for you?

Thousands of people who posted at the Motley Fool board have seen their lives destroyed because they thought Greaney was shooting straight in his “study”. Is that tangible enough for you?

Millions of people have lost their jobs in the economic crisis brought on by the relentless promotion of Buy-and-Hold strategies. Is that tangible enough for you?

Confidence in our system of government was shaken in the First Great Depression caused by the relentless promotion of Buy-and-Hold strategies back in the 1920s. Is that tangible enough for you?

You cannot SEE investor emotions.

But you can MEASURE them.

You can PROTECT yourself from them.

You can PROFIT from them.

You can help millions of middle-class people by sharing with them the realities we have learned about them from the last 32 years of peer-reviewed academic research.

I am certainly not dealing with casual observation. I root every word I say in 32 years of peer-reviewed academic research.

And I am certainly reporting on something that is constant, given that it has applied for 140 years without a single exception.

The thing I am reporting on is not VISIBLE like most other physical forces. But it is a force that has tremendous power over what happens in this mixed-up world of ours.

Are you saying that because we cannot SEE investor emotion or hold them in our hands that we should IGNORE them when setting our stock allocations?

I don’t buy it.

Why?

What positive purpose would be served by doing so?

Please tell me the downside of bringing the economic crisis to an end and reducing the risk of stock investing by 70 percent while enjoying dramatically higher returns, returns higher enough to let us all retire five to ten years sooner than we ever imagined possible in the Buy-and-Hold Era.

I LIKE early retirement.

How about you, Yip?

Rob

 

 

Valuation-Informed Indexing #167: The Mathematics of Investing Is Overpowering — and Hated!

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I’ve posted Entry #167 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Mathematics of Investing Is Overpowering — and Hated!

Juicy Excerpt: One of the slides quotes Former Financial Analysts Journal Editor Rob Arnott as saying something to the effect that it is easy to determine what stock returns are going to be if you know simple math and that it is amazing that there are so many smart people working in this field who do not seem capable of performing that simple math.

He’s making a point not too far removed from the point made by my blogger friend. Arnott is saying that there is no intellectual problem here — we could all know far more about how stock investing works he we cared to. We just don’t care to!

Why?

Because it causes us emotional pain to do the math he talks about.

If you want to be popular in this field, you hit fewer home runs. People don’t want to see you offer the best investing advice possible. That would be too “overpowering” to take. They want you to play dumb.

Valuation-Informed Indexing #165 — How Much Do You Need to Retire? Perhaps Less Than You Think!

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I’ve posted Entry #165 for my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called How Much Do You Need to Retire? Perhaps Less Than You Think!

Juicy Excerpt:  Risk reduces return. Buy-and-Holders don’t get this. Buy-and-Holders think of risk as a good thing. They believe that only risky asset classes can provide good returns. it follows that investors should seek out risk rather than avoid it.

I couldn’t possibly disagree more. I believe that investors should be perusing dual goals of always increasing return to the greatest extent possible while always also reducing risk to the greatest extent possible. Risk is bad. Where there is risk, there will eventually be losses. Losses are setbacks. You want to avoid setbacks. You want to avoid risk.

Now that we know how to reduce risk dramatically, we know how to increase returns dramatically. That follows.

So we can all use higher return assumptions on a going forward basis. If you are willing to take valuations into consideration when setting your stock allocation, you will avoid the losses that send others reeling backwards. Your higher portfolio amounts will compound more quickly. You will reach your retirement goals sooner.

“Investors Will No Longer Have a Bias in Favor of Stocks Once We Permit Honest Posting and It Is Possible for Them to Become Educated as to the Realities. This Means That They Will Demand That Banks Offer Higher CD Rates or They Will Refuse to Buy CDs. The Banks Will Comply.”

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

and stocks would be indistinguishable from bonds.

The returns on non-stock asset classes ARE generally determined by market forces (rather than by the productivity of the U.S. economy).

So there is a legitimate point to be made that, if the risk of stock investing was reduced by 70 percent and the long-term return on stocks remained stable, there would need to be some adjustment in the returns paid by asset classes like certificates of deposit.

If stocks carry little risk and CDs carry little risk, you can’t have stocks paying 6.5 percent real and CDs paying 3 percent real. Those numbers need to move closer to each other.

Please note, though, that it is not the stock number that is likely to move. Our economy is an established one. The productivity of established economies is generally stable. The stock number might move down to 6 percent or so. It is not likely to move much lower than that.

So for the numbers to come closer together, the return on CDS must INCREASE.

The banks that sell CDs offer as low a return as they can get away with and still sell the CDs. Today, they can sometimes get away with paying very low rates of return because the relentless promotion of Buy-and-Hold strategies has made investors so emotional about stock investing. All that changes once we open the internet up to honest posting on safe withdrawal rates and scores of other critically important investment-related topics.

Investors will no longer have a bias in favor of stocks once we permit honest posting and it is possible for them to become educated as to the realities. That means that they will demand that banks offer higher CD returns or they will refuse to buy CDs. The banks will comply.

We will all not only enjoy far higher returns from stocks at greatly reduced risk following the end of the Ban on Honest Posting. We will also enjoy higher CD returns. It’s a win/win/win/win/win.

Rob

“Look at Where Things Stood in 2000. You Took on More Risk Than Any Stock Investor Before You Has Ever Taken on and Your Compensation is a Negative Return? There Was a Risk PENALTY in Place in 2000, Not a Risk Premium.”

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

If stock markets level out and volatility falls, then to my mind the equity risk premium would dry up and stocks would be indistinguishable from bonds.

You are trying to make sense of things through the use of concepts developed by people who believed in the Buy-and-Hold Model, Laugh. This cannot be done.

Stock prices are determined by the productivity of the U.S. economy, not by market forces. The idea that stock returns are high because stocks are a volatile asset class is part of the Buy-and-Hold mythology. There is zero support in the academic research for this “idea.” Volatility is risk. Volatility is a bad thing. Volatility adds nothing. We will all be better off when volatility is greatly reduced. A big reduction in volatility will be the greatest free lunch we have ever enjoyed.

Look at where things stood in 2000. Stocks were the riskiest they have even been in history. So there should have been a huge risk premium, right? Investors should have been looking forward to long-term returns of 15 percent or 20 percent real as their reward for being willing to take on that sort of risk, according to the risk-premium advocates. Yet the research tells us that the most likely annualized long-term return in 2000 was a negative number. Huh? You take on more risk than any stock investor before you has ever taken on and your compensation is a negative return? That makes sense? There was a risk PENALTY in place in 2000, not a risk premium.

The error that the Buy-and-Holders continually make is to ASSUME investor rationality. Rational investors would demand a risk premium. That much is certainly so. Like everything else in the Buy-and-Hold Model, the risk premium is 100 percent logical. That is the problem.

Stock investing would be 100 percent logical if only the human investors who buy and sell stocks were 100 percent logical. They are not. So the idea that any model for understanding investing that ASSUMES 100 percent logic could ever work in the real world is of course 100 percent nonsense.

You MUST incorporate investor emotion into the mix. That’s what P/E10 does. P/E10 tells you how irrational investors are being at any given moment.

The magic of permitting honest posting on what the academic research says is that the humans can CORRECT their irrational behavior by looking at the research. It was an insane act to go with a high stock allocation when the likely long-term return for stocks was a negative number. Now consider how the Buy-and-Holders and the Valuation-Informed Indexers cope with this reality. The Valuation-Informed Indexers let investors know what the research says, that they are destroying their hopes of being able to retire when they want by giving in to the Get Rich Quick urge that says that price means nothing, to just go ahead and buy stocks no matter how dangerously overpriced they are. The Buy-and-Holders take it just the other way. They say that there is some magic pixie dust that they are sprinkling in the air to make stock investing work 100 percent the opposite of how it has always worked throughout history, that it is JUST FINE to stay at the same stock allocation when prices go to insanely inflated levels.

That’s why those who listen to the Valuation-Informed Indexers always end up so far ahead. VII is HONEST. Honest investing advice helps the investor more than does the Get Rich Quick garbage pushed so heavily by the Wall Street Con Men.

Or at least that is my sincere belief re these important matters, Laugh.

Please take good care.

Rob

“There Is No Honest Argument That Can Be Made That the Research That Discredited the Idea That the Market Is Efficient Did Not Change Things in Very Big Ways If It Is Ultimately Found to Be Valid. We Should Be Talking About Whether Shiller Is Right or Not, Not About Whether He Said What He Said. I Am Exploring Something NEW.”

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Set forth below is the text of a comment that I recently put to the Goon Central site:

Even those investors who favor a valuation based investing strategy are not so extreme to suggest that the strategy is a complete replacement for buy & hold.

Many don’t say this. Many don’t even personally acknowledge it. That much is so. The reason why they either don’t personally acknowledge it or don’t say it out loud publicly is because they are AFRAID to do so given the reactions they have seen from Buy-and-Holders when others have spoken honestly about what the research says. Did I say that Buy-and-Hold was a big pile of smelly garbage on the morning of May 13, 2002, Yip? I did not. I was a Buy-and-Holder on that day. I knew that the SWR had been calculated improperly. So what? Everyone makes mistakes. I didn’t see it as a huge, big deal. I LOVED Buy-and-Hold. Buy-and-Hold was the research-based strategy. Why would I abandon that because of one mistake made re the calculation of retirement numbers?

It was the fact that 200 Buy-and-Holders endorsed the Greaney post saying he would kill my wife and children if I continued to “cross” him by posting honestly on safe withdrawal rates that persuaded me that Buy-and-Hold was a big pile of smelly garbage. It was on the night of August 27, 2002, that I knew that never again could I feel comfortable advocating this “strategy.”Even then, I rarely said the words in a clear and firm and simple and bold way. I WANTED to believe in Buy-and-Hold. I wanted to work out some compromise with the Buy-and-Holders so that I could again be one of them, so that I would not be outside the crowd. I am a social being, like all the humans. I wanted to belong. I didn’t want to violate the Social Stigma that tells us all that we must pretend to believe in Buy-and-Hold even if we see some flaws in it.

I don’t believe anymore, Yip.

I’ve seen too much to ever be able to believe again.

I LIKE the Buy-and-Holders.

I admire them.

I respect them.

I have zero problem saying that they made huge contributions to our understanding of how stock investing works and that we all should be grateful to them for that.

I can say that they are good people.

And smart people.

And hard-working people.

I can say that they practice what they preach.

I can say that they are trying to help others when they advocate Buy-and-Hold strategies.

But I cannot believe myself.

Because I have seen too much ugly stuff to ever again feel good about what Buy-and-Hold has done to us as a people.

Buy-and-Hold was a mistake.

There was no bad intent present when the mistake was made.

But it was a mistake all the same.

The idea that long-term timing (price discipline) is not required is the biggest mistake that was ever made in the history of personal finance.

We need to FIX the mistake.

We don’t fix it by calling each other names.

We fix it by working together to achieve the goal we all hold in common (becoming effective long-term investors).

But we cannot fix anything if we are not honest about what we are dealing with.

The idea that long-term timing is not required was not some little mistake that can be ignored or discounted. It was a wrong turn that over the course of 30 years has taken us to a very, very dark place.

If you believe in Buy-and-Hold, you should say that you do. If you believe, you have not only a right to say you do, you have a responsibility to do so.

But don’t say that the differences between a world in which long-term timing is required and a world in which long-term timing is not required are not stark.

These two worlds are opposite worlds.

If long-term timing is not required (that is, if the market is efficient), Buy-and-Hold is the ideal strategy and VII is nonsense. It’s not Mel Linduaer that says that, it’s Rob Bennett.

The other side of the story is that if the market is NOT efficient (that is, if long-term timing is required for any investor hoping to keep his risk profile stable), then Buy-and-Hold is the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind.

At least Buy-and-Hold has an intellectual basis to it. That intellectual basis has been discredited by subsequent research, in my assessment. But I can say that the Buy-and-Hold pioneers were honest people. They said what they said because they really believed that the research supported what they said.

There is ZERO intellectual support for the idea that there is not much difference between a world in which the market is efficient and a world in which valuations affect long-term returns. Those worlds are OPPOSITE worlds in every possible way.

Acknowledging this is the key to everyone being able to get along.

I talked about this stuff with my friend Brian from Ernst and Young every day years before I put up my famous May 13, 2002, post. Brian often said I was “nuts,” just like you Goons do. But he said it in a friendly and warm way. And when the Wall Street Journal reported that I was right about safe withdrawal rates, he was able to call me and acknowledge that the “nut” had been vindicated.

You should be able to do that.

You can’t because your pride is caught up in your belief in Buy-and-Hold.

That needs to change.

If you believe, you believe. You are in good company if you believe.

But if you believe that there is not much difference between a world in which the market is efficient and a world in which valuations affect long-term returns, you are dishonest. Those are OPPOSITE worlds.

People can be friends while believing opposite things. There are people who say the Beatles were the best group and people who say the Rolling Stones were the best group and who remain good friends despite their differences. I can be your friend even if you continue to believe in Buy-and-Hold.

But I will have to say things that will sound unfriendly to your ears if you say that there is little difference between a world in which the market is efficient and a world in which valuations affect long-term returns. If you do that, I will be required to say that you are dishonest because no honest claim that those worlds are roughly the same can possibly be made. When I call you dishonest, I am saying something 100 times worse than saying that I believe you have a mistaken understanding of how stock investing works. So you should knock off that funny business.

I believe in VII. There are other good people who believe in Buy-and-Hold.

So be it.

There are not good people who say that Shiller’s findings do not carry “revolutionary” implications. People who say that are dishonest people.

Shiller may be right or Shiller may be wrong. I think he is right. Millions think he is wrong.

But there is no honest argument that the research that discredited the idea that the market is efficient did not change things in very big ways if it is ultimately found to be valid.

We should be talking about whether Shiller is right or not, not about whether he said what he said. Shiller said that the conventional ideas about how stock investing works are wrong. There is no other possible honest interpretation of his life’s work.

And I have spent 11 years of my life exploring the implications of Shiller’s work. Right or wrong, I am NOT exploring the conventional ideas. I am exploring something NEW.

Rob

“There Will Be Follow-Up Studies to the Study that I Co-Authored with Wade Pfau (Ph.D., Princeton) for Decades to Come. That’s What Makes it Nobel-Prize Quality. It Is the Research Upon Which All Future Research in This Field Will Be Rooted.”

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Set forth below is the text of a comment that I recently posted to the Goon Central board:

Rob, something totally revolutionary could still be seen as an incomplete solution to any and every situation! 

I say that permitting honest posting on safe withdrawal rates and scores of other critically important investment-related topics is the FIRST step, not the last step, Drip Guy.

I think it would be fair to say that the peer-reviewed research that I co-authored with Wade Pfau (Ph.D., Princeton) is the most important research published in this field in the past 30 years. Reducing the risk of stock investing by 70 percent is a very big deal.

I fully expect that there will be follow-up studies to that study for decades to come. That’s what makes it Nobel-prize quality. It is the research upon which all future research in this field will be rooted.

The scores of amazing insights that we have developed together over the first 11 years of our discussions are the beginning point, not the end point.

The shift from Buy-and-Hold to Valuation-Informed Indexing is the biggest advance in the history of personal finance and there’s nothing else in even a remotely close second place. It doesn’t follow that there will not be many important advances to come. I believe there will be.

It’s the announcement of your prison sentence that gets things going. That announcement will go viral. And there will not be one person advocating GRQ after we all see where it leads. After your prison sentence is announced, Jack will give his “I Was Wrong” speed and the rest of us will all be off to the races.

Do you see?

Rob