A Rich Life

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

“I Didn’t Know That Anything Was Going On On the Morning of May 13, 2002. So Everything Written in the Book will Be Things That I LEARNED By Having the Courage to Say What I Believe and Then Watch the Reactions.”

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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:

“ And where would today’s CAPE value be? Probably precisely where it is.”

Which means you wasted your time.

What was that phrase that President Carter had when the helicopters went down in the desert? It’s been “an incomplete success.”

One person can only do so much, Anonymous. A year from now, I will have a printed book in my hands with my name on it that describes everything going on in great depth and detail. I didn’t know that anything was going on on the morning of May 13, 2002. So everthing written in the book will be things that I LEARNED by having the courage to say what I believe and then watch the reactions.

I think there’s great value in learning. We’ll see, you know? But that’s what I believe. I wouldn’t have made a decision as a young man to devote my life to journalism if I didn’t see value in it.

My best wishes to you.

Rob

“How Is It That There Are Site Administrators Who Agreed to Ban Me Because I Pointed Out an Error in a Study That People Were Using to Plan Their Retirements? That’s an Issue of Huge Public Policy Significance.”

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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:

You could have continued to make all the nonsensical posts you wanted to make about Greaney AND still work a job to support the family and you know that.  Do you think everyone posting on the boards has to choose between posting on boards and working?  How stupid do you think we are?

On most questions that come up on a discussion board, you don’t have to write a book to explain to people what is going on. This issue is different. Leave the Goon stuff aside for a minute. You Goons don’t have the power to ban anyone. You can demand it. But you don’t have access to the button that makes someone go away. How is it that there are site administrators who agreed to ban me because I pointed out an error in a study that people were using to plan their retirements?

That’s an issue of huge public policy significance, Anonymous. As a nation of people, we have to have some means of getting the word out about what the last 42 years of peer-reviewed research teaches us all about how stock investing works out to millions of people. That’s the job. That’s absolutely imperative. We should all be united on that one. If we were all thinking clearly, there would not be one person who did not see why that is so important.

I would peefer not to be writing the book. I would prefer that there had never been a single abusive post. I was still a Buy-and-Holder on the morning of May 13, 2002. I would prefer to still be a Buy-and-Holder. That’s not the way it played out. My job is to play the cards that are dealt to me. I don’t control what cards are dealt. Perhaps you’ve noticed.

Rob

“The Price That Is Set at a Time When Honest Posting re the Research Is Banned Is Obviously Not the Price That Would Apply If Honest Posting re the Research Were Permitted.”

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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:

We don’t have to sell you cheap shares just because you don’t want to pay the price.  If you don’t want to buy a stock at its current price, you don’t have to.  Just don’t expect anyone to sell to you at a lower price just because you say so.

The market sets the price, not me. I am saying that we should permit each investor to become informed as to what the research shows. Informed investors are going to practice price discipline because the benefits of doing so are so great. That would solve the problem.

The price that is set at a time when honest posting re the research is banned is obviously not the price that would apply if honest posting re the research were permitted. We should all want to see the market become empowered to perform its core purpose of getting prices right.

Rob

“Do You Think That the Buy-and-Holders Support This Cover-Up? I Surely Do Not Think That.”

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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:

How risky it it to have a depleted retirement account when you are over the age of 60?  How safe is that person?  Should a person like this be giving investment advice?

Everyone should be in favor of having the same laws that apply in every field other than the investment advice field apply in the investment advice field as well. There’s nothing controversial about that statement. It’s obviously true. Only a Goon could suggest otherwise.

People make mistakes. That’s a reality of life on Planet Earth. The people who developed the Buy-and-Hold strategy made a terrible mistake when they decided that, since there was solid research showing that short-term timing (which is a guessing game) doesn’t work, long-term timing (which is price discipline) might not be required either. We are all suffering from that mistake and the 42-year cover-up of that mistake today. We have laws that permit the mistake to be exposed. We should be grateful that we have those laws and be 100 percent united in seeking to have every internet site opened to honest posting re the peer-reviwed research.

Do you think that the Buy-and-Holders support this cover-up? I surely do not think that. I have seen Buy-and-Holder after Buy-and-Holder evidence a desire to do honest work and then pull back when they saw what the consequences would be if they did so. I don’t think that you Goons would engage in the cover-up if you had it to do over. If we could go back to the morning of May 13, 2002, and play it over, you would behave very differently from how you behaved historically. I cannot go back in time and permit you a do-over. The best that I can do is to suggest that we open every site to honest posting today so that whatever consequences you ultimately face are not as severe as they will be if the cover-up continues for another day or another week or another month or another year. I mean, holy, moly!

I don’t believe to this day that the retirement study posted at John Greaney’s web site contains an adjustment for the valuation level that applies on the day the retirement begins, If it were not for the 42-year cover-up, that statement would inspire zero controversy. I mean, come on. It can be checked by anyone interested in determining the reality of the matter.

My best wishes to you.

Rob

“Shiller’s Research Does No Good If We Are Not All Free to Talk About It At Every Site.”

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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:

You claim that your timing scheme can help make people money, yet it doesn’t.  This has been the basis of why you think you should get $500 million.  However, you also state that Shiller and Pfau say people should time the market.  If that is the case, then why should anyone pay you anything.  It would be from their work right?  Shouldn’t they get paid?  You didn’t come up with the idea.  Also, since Pfau pointed out that your timing scheme has worked since Shiller’s work.  Does that mean that you owe people money for peddling a failed scheme?

Humankind did not arrive on Planet Earth with a manual on how stock investing works. We are learning as we go. The Buy-and-Holders made many amazing contributions. I 100 percent recognize them for that and am grateful to them for that. They made a mistake on market timing. They got it right re short-term timing — the evidence shows that that does not work. But they failed to distinguish short-term timing (which is just a guessing game) from long-term timing (which is price discipline. They made their mistake because they were working under a false belief that the market is efficient. Shiller discredited the Efficient Market Theory. which means that long-term market timing must work.Price discipline works in every market in which it has been employed. There has never been any reason for believing that it is not 100 percent essential in the stock market as well except for the Efficient Market Theory, which has now been discredited, freeing us all to explore what really works.

My contribution will be to open every site to honest posting re the last 42 years of peer-reviewed research. Shiller’s research does no good if we are not all free to talk about it at every site. We all have a Get Rich Quick/Buy-and-Hold impulse residing within us which causes us to want to believe that perhaps it will all turn out different this time, that perhaps this will be the first time in history when a pure Get Rich Quick/Buy-and-Hold “strategy” does not cause widespread human misery. Id we are going to overcome our Get Rich Quick/Buy-and-Hold urge, we need to be able to hear from thousands of our fellow investors helping is to tune out the noise of the Wall Street Con Men, who continue to advocate Get Rich Quick./Buy-and-Hold “strategies to this day, re years after they were discredited by the peer-reviewed research.

Today’s CAPE value reveals how much good it does us to have Shiller’s book carried in all of the libraries but not being able to explore the far-reaching how-to implications of Shiller’s Nobel-prize-winning research at every site. Without the discussion, the research and the book do not help. To have the book carried in libraries but not to permit all investors to talk over the meaning of Shiller’s amazing research is like mentioning one time that gaining too much weight can lead to heart disease but banning all discussions of how to develop good eating habits and not permitting people to share recipes for healthy meals. The follow-up implementation stuff is of hugre value. Once every site has been opened to honest posting re the research, we will be getting mountains of the follow-up implementation stuff.

I proposed that we start down that road on the morning of May 13, 2002. The work that I have done would obviously have brought in a very big multiple of $500 million ir it had not been for the absusive and in some cases criminal bahevaior of you Goons and of the site owners who encouraged your behavior by banning honest discussion of the peer-reviewed research. I have said that I would be willing to settle my legal claims for $500 million because it is such an absurdly big number that I don’t see any great need to seek more and because I would like to put the ugliness of lawsuits behind us so that we can all work together to get the word out about Shiller’s amazing research findings to every investor on the planet.

Does all of that not make perfect sense?

Rob

“The Odd Thing, of Course, Is That Shiller Never States in His Book in a Clear and Direct Way That All Stock Investors Should Be Engaging in Market Timing at All Times. Why Wouldn’t He Say That?”

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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 have a series of important questions to ask you Rob.  Hopefully, you won’t delete them like you usually do.  First question, does Robert Shiller and Wade Pfau recommend timing the market with CAPE?  Yes or no?

For the 16 months in which we worked together on our research, Wade certainly believed that CAPE can be used for long-term market timing. That was the entire point of the research, that is the question that we were looking at. He was a little unsure in the beginning. He was intrigued by the idea. But it was a big change from what he had been taught, So he proceeded carefully. When our research continued to show that timing ALWAYS works and that the difference it makes is very big, he could no longer resist acknowleding what the historical return data so clearly shows. That’s why he declared: “Yes, Virginia, Valuation-Informed Indexing works!”

All of this was before he was threatened, of course. Threats affect human behavior. They cause people to say things that they don’t really believe. That’s why we have laws against making threats to get people to say things they don’t believe. I would like to see those laws enforced in the investment advice field in the same way that they are enforced in every other field of human endeavor.

I am highly confident that Shiller believes that CAPE can be used to engage in long-term market timing. First of, his entire life’s work shows that that is the case. Shiller showed that valuations affect long-term returns. If that’s so, then stock investing risk is a variable and not a constant. If risk changes with changes in valuation levels, then investors who want to keep their risk profile constant over time (we all should want to do this) MUST engage in long-term timing. There is no other way to pull it off. Second, we have the paper that Shiller published in 1996 urging market timing because of the dangerous CAPE value that applied at the time. So, yes, I very much believe that Shiller believes in market timing.

The odd thing, of course, is that Shiller never states in his book in a clear and direct way that all stock investors should be engaging in market timing at all times. Why wouldn’t he say that? People buy books on investing for the how-to insights. They want to know what to DO. The most important how-to insight that follows from Shiller’s research is that long-term market timing is always 100 percent required. In ordinary circumstances, an editor would read that book and send back a note to the author that: “You MUST address the market timing question, that’s the most important advance achieved by your research and that is the advance that we need to publicize to market this book.”

Shiller feels intiminated in much the way that Phau and many, many others feel intimidated. The proble is that the discover that market timing is always required is the biggest advance in the history of personal finance. Yes, it would make all of our lives much better than we ever imagined they could be back in the dark ages of our belief that Buy-and-Hold might be an acceptable strategy. But to let people know how stock investing works in the real world would upset ten-thousands applecarts. Every text book ever written on the subject of stock investing would need to be rewritten. Every calculator would need to be rejiggered. The Buy-and-Holders would need to accept the blame for being the primary cause of the economic crisis. Buy-and-Hold was not around as an official strategy in 1929 but the Buy-and-Holders would have to acknowledge that the same “idea” that they push today (that market timing/price discipline is not always 100 percent required) was the primary cause of the Great Depression.

So, while permitting honest posting re the peer-reviewed research would make everyone’s life better, there are a lot of wealthy and powerful and well-connected people who would like to see discussions of this amazing advance in understanding suppressed. So lots of good people self-censor. Their consciences require them to tell people as much of the real story as they can get away with telling without losing their positions. But they say things in fuzzy ways that they hope will not get them in too much trouble. Every investor has a Get Rich Quick/Buy-and-Hold impulse residing within him; we all want something for nothing, as irrational as it is to think that that is possible. So, without clear and direct statements that market timing/price discipline is absolutely required, lots of us are just going to ignore the research. That’s how we end up with the sort of CAPE value that applies today.

Does that help, at least a tiny bit?

Rob

Buy-and-Hold Goon to Rob: “You Didn’t Want to Discuss Investing Matters. You Wanted to Make the Discussion About You and Your History at Other Sites.”

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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:

“The trouble started when I tried posting at his site, I pointed out in some of my comments that other sites continued to report the safe withdrawal rate inaccurately and described some of the abusive tactics that had been employed to keep the people who read these sites from being informed about the errors in the Buy-and-Hold studies.”

In other words you didn’t want to discuss investing matters at Todd’s site.

You wanted to make the discussion about you and your history at other sites.

The ban on honest posting re the peer-reviewed research is an investing matter, Evidence. In two important ways.

One. There were people at the Motley Fool board who believed that the Greaney study was legitimate. There shouldn’t be one person on the planet who doesn’t want them to be informed of the error in his study (it lacks an adjustment for the valuation level that applies on the day the retirement begins). There were people in that board community who used the Greaney study as guidance in planning their retirement. I was there.

Two. The publication of Shillers research launched a revolutionary advance in our understanding of how stock investing works. We should all want knowledge to advance as qucickly as possible since every advance achieved helps every laat one of us to live a better and fuller and richer and freer life. There are a lot of smart people posting at all of the sites at which honest posting re the research is now banned. There is huge leverage to be gained by opening all of those sites to honest posting by thje close of business today, if not a good bit sooner.

That’s where I am coming from re this one, in any event.

Rob

Valuation-Informed Indexing #674: The Stock Market Craves Information It Has Been Denied

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I’ve posted Entry #674 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Stock Market Craves Information It Has Been Denied.

Juicy Excerpt: Prices should slowly go up or slowly go down with none of the sudden, bold leaps and drops that we all think of as being characteristic of the stock market as it now exists. It’s because investors are human that we have this strange inclination toward violent and erratic movements in stock prices.

Valuation-Informed Indexing #673: The Stock Market Is an Information Processing Machine

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I’ve posted Entry #673 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Stock Market Is an Information Processing Machine.

Juicy Excerpt: What if the information is in error.? Bad information is a thing, is it not? Given that the market has this magic ability to spin information into gold, what’s to stop it from misinterpreting information bits into gold when they don’t merit the gold treatment?