A Rich Life

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

“We All Possess a Sincere Desire to Invest Effectively for the Long Run. But the Get Rich Quick/Buy-and-Hold Impulse That Resides Within All of Us Compromises Our Efforts. We Need Open Discussion of the Peer-Reviewed Research to Strengthen Our Resolve.”

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 and Holders, by definition, continue to buy regardless of the daily swings of the stock market.  The failures you describe are clearly market timers.  These are the people that make emotional responses to the daily fluctuations and THEIR perception of the stock market valuation.  This is why the top 10% continue to consolidate ownership of stock.  You are a market timer, Rob.  You are broke.

Do Buy-and-Holders adjust their stock allocation in response to changes in valuations? That’s the question on the table, Anonymous. Do Buy-and-Holders Stay the Course in a meaningful way? Valuation-Informed Indexers do that. We engage in valuation-based market timing. That’s the only difference between Buy-and-Hold and Valuation-Informed Indexing. VII is Buy-and-Hold updated to reflect the last 44 years of peer-reviewed research in this field.

It’s a big difference. As long as most investors are Staying the Course in a meaningful way, irrational exuberance, the cancer of the personal finance world, cannot get out of control. Stock prices are self-regulating so long as honest posting re the peer-reviewed research is permitted at every internet site. We all possess a sincere desire to invest effectively for the long run. But the Get Rich Quick/Buy-and-Hold impulse that resides within all of us, compromises our efforts. We need open discussion of the peer-reviewed research to strengthen our resolve.

My sincere take.

Rob

“It Is the Roller Coaster Ride Created By the Buy-and-Hold Mindset (No Price Discipline When Buying Stocks Now!) That Causes All the Crazy Ups and Downs. All of That Is Optional Today and Has Been for 44 Years Now, All We Need To Do At This Point Is To Get the Word Out.”

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:

The sellers are market timers because they don’t have enough dry powder. Someone sitting there with only a few hundred thousands has no ability to hang on for the long term. They will always bail during any perceived time of risk.

I have already shared some of my details. You probably remember that my portfolio generates $300K plus a year in interest and dividends. I also have other sources of income. I don’t need to sell and I just keep doing just like the rest of the top 10% in that I keep accumulating assets.

It is fine if you don’t want to hold stock. People like me will continue to buy. Remember the old saying: “The are two types of people with McDonald’s. One type is the customer that buys the burgers. The other type is the guy that owns McDonald’s (stock). Pick which one you want to be.

Valuation-Informed Indexers don’t count phony gains as real. So they don’t perceive risk in the disappearance of the phony gains. They are looking at the realities and the realities of stock investing are very reassuring — gains of 6.5 percent real annually.

It is the roller coaster ride created by the Buy-and-Hold mindset (no price discipline when buying stocks now!) that causes all the crazy ups and downs. All of that is optional today and has been for 44 years now, All we need to do at this point is to get the word out.

Irrational exuberance is the cancer of the personal finance world. Shiller’s Nobel-prize-winning research is the cure for cancer. We should permit people to partake in the cure.

Rob

“The Idea Behind Valuation-Informed Indexing Is to Take the Emotion Out of the Stock Investing Project. All That We Need To Do To Stop the Horrible Losses Is To Stop the Insane Highs.”

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:

Yep. Market timers are selling there stock and just look at how everything has been consolidated at the top. Not surprising and it is not just stock. Take a look at real estate holdings and how that has changed over the years. You can decide if you want to follow those that have been successful or you can go with the 90% that struggle.

The people who you are calling “market timers” are just Buy-and-Holders who have lost confidence in their strategy. Buy-and-Hold is a confidence game. Excessive confidence causes prices to go to crazy high levels and excessive pessimism causes prices to go to crazy low levels.

The idea behind Valuation-Informed Indexing is to take the emotion out of the stock investing project. Those times of low prices are horror stories. We should all want to bring an end to them. To do that, we need to focus on what causes them. It’s high prices that cause the insane price drops. All that we need to do to stop the horrible losses is to stop the insane highs. That’s done with valuation-based market timing. Valuation-based market timing is the key to long-term investing success.

Irrational exuberance is a snare and a delusion, Anonymous. It is not real. It hurt us. We should all work together to to keep it from getting out of control. We should all work to keep the CAPE level at a reasonable levels.

My sincere take.

Rob

“Say That the Alcoholic Beverage Industry Con Men Didn’t Want to Acknowledge Their Mistake. They Might Say That the Explanation for the Millions of Deaths That They Caused Is That Six Beers Isn’t Really Enough, That People Need to Drink a Minimum of Eight Beers Before They Can Drive a Car Safely.”

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 do not intend to write fresh material.”

When did you ever write fresh material? I have never seen anything new.

Valuations affect long-term returns. That’s the story. It’s a pretty darn simple message.

But it’s important. Say that that the alcoholic beverage industry got control of all the driving schools and put out a message that the key to safe driving is always to drink six beers before getting behind the wheel. That would be a catastrophe equal to the catastrophe that we have seen in the investment advice field with this garbage about how there might be some alternate universe in which valuation-based market timing might not be 100 percent required for every investor.

Say that that the alcoholic beverage industry con men didn’t want to acknowledge their mistake. They might say that the explanation for the millions of deaths that they caused is that six beers isn’t really enough, that people need to drink a minimum of eight beers before they can drive a car safely. And on and on like that.

When you make a mistake this big, the best thing to do is to acknowledge it and move on. Covering it up just makes things worse.

My sincere take.

Rob

“Maybe It’s Okay to Believe It So Long As You Don’t Give Voice to What You Believe in a Public Place.”

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:

No, we are all not victims.  Reasonable people know that they are responsible for their own well being.  Making up these silly posts are not helping anyone.  It seems your therapist has his work cut out for him.

Anyone who believes that the Greaney retirement study lacks a valuation adjustment must be nutso.

Or maybe it’s okay to believe it so long as you don’t give voice to what you believe in a public place.

Rob

“Unfortunately, There Is a Feeling Among Some Buy-and-Holders That They Will Not Be Perceived as Super Duper Experts If People Come to Learn That They Didn’t Always Know It All. “

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:

You are always the victim, aren’t you Rob.  The whole world has orchestrated a mass conspiracy against you and even your ex-wife is in on this scheme.  Poor Rob.

We are all victims of this massive act of financial fraud, Anonymous. We all would be living richer and freer and happier and better lives if every site on the internet had been opened to honest posting re the peer-reviewed research in this field on May 13, 2002, as I proposed at the time. I is not possible for the Rational human mind to imagine any possible downside, I mean, come on.

Learning is this world one true free lunch. There was a time when we didn’t know all that we needed to know to invest in stocks successfully for the long run. Now we do. Shiller was awarded a Nobel prize for his research because it represented such a huge advance over what came before. Unfortunately, there is a feeling among some Buy-and-Holders that they will not be perceived as super duper experts if people come to learn that they didn’t always know it all. Well, they didn’t. I don’t think that the mistake they made was that big a deal. But the cover-up of the mistake has hurt millions of people and hurts more each day that it continues. We all need to pull together and insist that every site be opened to honest posting re the peer-reviewed research so that we can all move forward together into a better tomorrow.

Where I’m coming from.

Rob

“Say That There’s a 1 in 100 Chance That What I’ve Been Saying for 23 Years Now — That the Greaney Retirement Study Lacks a Valuation Adjustment — Is Accurate. After 23 Years of This Stuff, I Personally Would Put the Odds at 99.9999 Percent. But Let’s Say for Purposes of Discussion That There’s Only a 1 Percent Chance That Greaney Got the Numbers Wrong in His Study. If There’s a 1 Percent Chance, Then We Should Be Talking About It at Every Site on the Internet.”

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 did many things to help her. She owns her own home today. That came from money that I provided”

From what money? You haven’t worked in 25 years. Meanwhile, your ex-wife has been working multiple jobs the whole time. Notice you even admit in your last post, like you have done before that she needed you to bring in an income. There is zero excuse for ANYONE to not support his family if you are physically able.

I don’t think that there’s any excuse for anyone who knows about the 44-years cover-up not to do everything in his or her power to bring it to an end. It affects the retirement accounts of millions of people. I couldn’t sleep at night knowing that I was aware of the problem and just let another Buy-and-Hold Crisis take place.

Say that there’s a 1 in 100 chance that what I’ve been saying for 23 years now — that the Greaney retirement study lacks a valuation adjustment — is accurate. After 23 years of this stuff, I personally would put the odds at 99,9999 percent. But let’s say for purposes of discussion that there’s only a 1 percent chance that Greaney got the numbers wrong in his study. If there’s a 1 percent chance, then we should be talking about it at every site on the internet. Greaney isn’t the only person who advanced that loony-tunes 4 percent rule. There are millions of people who put together their retirement plans thinking that that was something real and who need to be advised that it was all just a scam. How do you think that word is going to get out if no one works up the courage to stand up to you Goons. There’s no other way that it could happen.

And look at today’s CAPE level. It’s pretty darn scary. If we had opened every site to honest posting re the research on the afternoon of May 13, 2002, as I proposed at the time, we would obviously never again have to endure such an insanely dangerous CAPE level. We would have people explaining why valuation-based market timing is the key to long-term stock investing success at every site. How do you think we are going to get to that place if we all live in fear of the abusive and sometimes criminal behavior of you Goons? Knowing what I know, I do not feel it would be responsible to fail to do whatever I can do.

I do wish you all good things, in any event.

Rob

“The Thing That Is Really Off in the Investment Advice Field Is That the Non-Experts — the People Who Will Be Suffering Huge Losses in the Event That the Stock Market Continues to Perform in the Future Somewhat As It Always Has in the Past — Tolerate the Cover-Up. That’s Nuts. But They’ve Got That Get Rich Quick Impulse Residing Within Them That Makes Them Like Buy-and-Hold, that Makes Them Think That This Might Be the First Time in History When It Doesn’t End in Tears for Everyone.”

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:

Did you care about what happened to your ex-wife’s retirement account?

Very much so. If we experience another Buy-and-Hold Crisis, she is one of the millions and millions of people who will get hurt by it. I obviously don’t want to see that happen.

The question is — Why do we not apply the same rules that apply in every field other than the investment advice field in the investment advice field as well. That’s what makes sense. In every other field, we apply laws that show that we understand that experts can make mistakes and that those mistakes need to be corrected over time. So we permit honest posting re new research and thereby provide a means for the experts to come to terms with the mistakes that they have made and to develop stronger ideas.

The thing that is really off in the investment advice field is that the non-experts — the people who will be suffering huge losses in the event that the stock market continues to perform in the future somewhat as it always has in the past — tolerate the cover=up. That’s nuts. But they’ve got that Get Rich Quick impulse residing within them that makes them like Buy-and-Hold, that makes them think that this might be the first time in history when it doesn’t end in tears for everyone.

Can we overcome it? I believe that we are working up to that magic moment. I believe that the arc of history in the personal finance field bends toward rationality. I believe that opening up one large site to honest posting re the peer-reviewed research will get us over the line will get us there. At that point, my ex-wife and millions and millions of others will be able to have some confidence that the numbers on their portfolio statements are accurate. I see that as being a huge step forward.

We’ll see.

Rob

“Buy-and-Hold Fails Every Time There Is a Change in Valuations and There Is an Investor Who Fails to Change His Stock Allocation”

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;

Just because you say something, it doesn’t make it true. Buy and hold has never failed and you cannot point to one single person with a buy and hold failure. To the opposite, you can’t point to even one single successful outcome with market timing. You are broke, Rob. You lost the game. You got everything wrong. Everyone abandoned you. You fail to acknowledge your long list of mistakes.

Buy-and-Hold fails every time there is a change in valuations and there is an investor who fails to change his stock allocation. I mean, come on.

Even the Buy-and-Holders say that investors should seek to “Stay the Course.” Well, an investor who stays at the same stock allocation when the CAPE value has changed is not exactly staying the course, is he?

The Buy-and-Holders got it right about staying the course and about following the peer-reviewed research. They got it wrong about there not being a need to practice valuation-based market timing. Price discipline is critical in all markets. We now have 44 years of peer-reviewed research showing that the stock market is not the sole exception to the common-sense rule.

Buy-and-Hold is a marketing gimmick. It’s what sells. Valuation-Informed Indexing (Buy-and-Hold updated to reflect what we’ve learned from the last 44 years of peer-reviewed research) is what works. I would permit honest posting re the peer-reviewed research at every site and see what happens.

Rob