A Rich Life

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

“Yes, I Have Some Concerns About My Failure to Provide Financially for My Family for Many Years. I Do Not Say That That’s Not a Concern. I Have Spoken to More Than One Priest re That Matter. I Have Had Long, Searching Conversations/Confessions With Them About it. I Have Had Two Who Felt That I Have Behaved in a Way That Is More Wrong Than Right and I Have Had Two Who Have Felt That I Have Behaved in a Way That Was More Right Than Wrong.”

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

So your fine with being disobedient to God’s word.

I believe that, when I die and have to stand before God, I will be held to account for my behavior her on Planet Earth. Yes, I have some concerns about my failure to provide financially for my family for many years. I do not say that that’s not a concern. I have spoken to more than one priest re that matter. I have had long, searching conversations/confessions with them about it. I have had two who felt that I have behaved in a way that is more wrong than right and I have has two who have felt that I have behaved in a way that was more right than wrong. I have been referred to books and Bible passages and things like that and I have read those books and Bible passages in the most open and humble spirit that I was able to muster. Nothing that I have read or heard has persuaded me that it would be okay for me to know about the horrible suffering that millions of souls are likely to experience in the event that stocks continue to perform in the future somewhat as they have always performed in the past and to do nothing to help.

The most basic commandment of all is to do unto others as you would have them do unto you. If the tables were turned and there we someone out there who had the knowledge needed to help me avoid that kind of pain, I would want that person to go to a little bit of trouble to get the message to me. So I do what little I am able to do to get the message out to the millions of lives that are today in the balance presuming that Shiller’s Nobel-prize-winning research is legitimate research.

There’s a chapter in my book with the title “My Mother Speaks From the Grave About the Horrors of Buy-and-Hold Investment Strategies.” My mother was born in 1917. So the Great Depression had a big effect on her life. She had to drop out of school in the eighth grade so that she could go to work in a factory and her family would have money for food. She went on a date when she was at the age where she should have been a senior in high school an d the boy was a freshman in college and he asked her what school she attended. When she told him the real story, she had to experience the look of disappointment and shock in his eyes.

That’s Buy-and-Hold! That’s the science of stock investing, according to our Wall Street Con Men friends. It’s all about putting the possibility of turning a quick buck above the lives and hopes and dreams of millions of people. I can’t live with myself if I find myself in circumstances in which I can do something about it (I didn’t ask to be placed in these circumstances!) and I fail to do anything about it. I am the one who has to be able to live with my conscience, not you. I do what I have to do. As I have observed before, I can do no more and I can do no less. I can’t control whether people listen or not. That’s up to people. But it’s up to me whether I work up the courage to say something or not. I wouldn’t be able to go to sleep at night if I didn’t work up the courage to say a little something in these circumstances. So that’s what I do. The rest of it is out of my hands.

I am far from the most religious person in the world. I believe in God. I go that far. I believe that God gave me the mother He gave me in preparation for this experience. I believe that He wanted me to hear her stories so that I would know what to do when the time came for me to make my decision. I can’t prove it. But it is hard for me to accept that it is just coincidence that I had the mother that I had and that then the day came when I was required to make the choice that I have been required to make.

I believe that God knows everything that is in my heart. He knows how much I have thought about this matter so that I would know the choice that is in accord with His wishes for me. He knows whether I am acting out of selfishness or pride or out of a desire to use my talents to carry out His will. I believe that I will be okay in His eyes when my day comes. I feel confident that I would not be okay in His eyes if I came up with some rationalization for letting down millions of good people and putting my own personal comfort above the need to do something to help them. So I play it the way I play it. I can do no more and I can do no less.

My best and warmest wishes to you and yours.

Rob

Buy-and-Hold Goon to Rob: “You Can’t Risk Adjust Past Results”

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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 are not asking the right question.  The Greaney study does not need it, just like my car doesn’t need a microwave oven.  As we all learned in statistics class, you don’t risk adjust past results.

So you’re saying that if someone drives drunk three times in his life and gets in a serious accident on each of those three occasions but doesn’t quite die on any of them that it becomes reasonable to conclude that driving drunk is “100 percent safe.” Hey! You can’t risk adjust past results!

I don’t buy it. Once we learned that valuations are the most important risk factor (Shiller showed this in peer-reviewed research published in 1981), it became imperative to take valuations into consideration in any risk assessment analysis. So please mark me down as saying that we should open every internet site to honest posting re the past 40 years of peer-reviewed research.

No drunk driving for this boy. Call me madcap!

Rob

“Cuz All Us Moooorons Are Jez Too Stoopid, Right?”

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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:

“ Those people wouldn’t be having the same thoughts if we permitted honest posting re the last 40 years of peer-reviewed research at every site on the internet. ”

……..Cuz all us moooorons are jez too stoopid, right?

I knew about the error in the Greaney retirement study when I put my first post to the Retire Early board. I didn’t say anything until three years later. I guess I must be pretty darn stoopid too.

A bull market is a liar’s market. When a large number of humans get together and say “why don’t we all pretend that we have a lot more money saved than we really do,” they call that a bull market. And the humans all have something inside them that makes them want to go along with the funny joke and not call out the b.s.

Yes, the humans are stoopid in some important ways, Anonymous. But Shiller helped us advance in a huge way in our understanding of how stock investing works when he published his Nobel-prize-winning resesrch. I think we should give ourselves permission to talk about it and begin living far richer and better lives as a result. Sue me, you know?

Rob

“Investors Are Not Exposed to the Information They Need to Make Informed Stock-Buying Decisions. So the Market Has Become Dysfunctional. A Market Is an Information-Transmitting System. When Death Threats and Acts of Extortion Enter the Picture, Information Cannot Be Transmitted Effectively. So Eventually the Market Collapses and We All Suffer the Consequences.”

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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:

“When the price that was offered me was too far above the fair price, I walked away. “

Was the type of car you were looking for available at any dealer at a price you though fair?

Yes. That’s because the automobile market is FUNCTIONAL.

A market sets prices by trying different possibilities and seeing which one attracts buyers. If an automobile dealer tried to get away with charging an insane price, he would be put out of business. Buyers would learn that he was offering bad deals and would avoid him.

That’s how I would like things to work in the stock market. If we permitted honest posting re the peer-reviewed research, investors would understand that they need to lighten up on their stock allocation a bit when prices get out of hand. That lightening up would pull prices down until they were again at reasonable levels. So investors would always be able to purchase stocks are good prices.

It is the criminal behavior of you Goons that has brought on the insane CAPE level that applies today. Investors are not exposed to the information they need to make informed stock-buying decisions. So the market has become dysfunctional. A market is an information-transmitting system. When death threats and acts of extortion enter the picture, information cannot be transmitted effectively. So eventually the market collapses and we all suffer the consequences.

We all should want a functional stock market. We all should be speaking up in favor of the idea of opening every large investing site to honest posting re the past 40 years of peer-reviewed research in this field.

My sincere take.

Rob

 

Valuation-Informed Indexing #595: The Most Important Choice That a Stock Investor Makes

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I’ve posted Entry #595 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Most Important Choice That a Stock Investor Makes.

Juicy Excerpt: So I am largely in agreement with the claim that it is her stock allocation that is the most important choice made by an investor. But I am not in complete agreement. I think that there is another choice that is even more important. The most important choice that an investor makes is how much she is going to engage in market timing in response to valuation shifts.

Valuation-Informed Indexing #594: Before His Death, John Bogle Relaxed His Opposition to Market Timing

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I’ve posted Entry #594 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Before His Death, John Bogle Relaxed His Opposition to Market Timing.

Juicy Excerpt: Bogle offered some comments in an interview with the IndexUniverse.com site in the Summer of 2009 indicating that he had mellowed on the subject quite a bit. Bogle stated that: ““Big moves out of stocks should not be done at all….But tactical asset allocation — I should say strategic asset allocation rather than tactical — can be done at very rare times, so rare and so difficult to observe, maybe six times in an investor’s lifetime, three times when the market is stupidly high and three times when stupidly low.”

Buy-and-Hold Goon to Rob: “If Only There Was Someone Who Could Put Together a Convincing Argument That a Valuation Adjustment Is Required”

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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:

“Now we just need to work out whether a valuation adjustment is required to calculate the safe withdrawal rate.”

If only there was someone who could put together a convincing argument that a valuation adjustment is required.

If valuations affect long-term returns, as Shiller showed in his Nobel-prize-winning research, then it’s a logical impossibility that the safe withdrawal rate is the same number at all valuation levels.

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

I naturally wish you all good things.

Rob

“No, the Market Is Not Efficient, No, Investors Are Not 100 Percent Rational, No, Stock Investment Risk Is Not Stable But Is Variable, and Yes, Market Timing Is Always 100 Percent Required for Every Investor Who Wants to Keep His Risk Profile Constant Over Time.”

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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:

“Say that there is a one-in-a-hundred chance that the Greaney retirement study really does lack a valuation adjustment”

There is a hundred-in-a-hundred chance that the Greaney retirement study really does lack a valuation adjustment

We are 100 percent on the same page re that one, Evidence.

Now we just need to work out whether a valuation adjustment is required to calculate the safe withdrawal rate. To do that, we need to open every discussion board and blog on the internet to honest posting re the far-reaching implications of Shiller’s amazing, Nobel-prize-winning research showing that, no, the market is not efficient, no, investors are not 100 percent rational, no, stock investment risk is not stable but is variable, and yes, market timing is always 100 percent required for every investor who wants to keep his risk profile constant over time.

I naturally wish you all the best that this life has to offer a person regardless of what investment strategy you elect to follow.

Rob

“Had Greaney Corrected His Study on the Afternoon of May 13, 2002, We Would Have Put the Get Rich Quick/Buy-and-Hold Stuff Behind Us a Long Time Ago.”

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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 it’s so obvious, why hasn’t the study been corrected to this day?”
No correction was needed. You have been told that. Why do you keep asking the same question when you already know the answer?

Say that there is a one-in-a-hundred chance that the Greaney retirement study really does lack a valuation adjustment — just as I indicated in my famous post of the morning of May 13, 2002. If that’s the case, then we should be discussing the matter at every discussion board and blog on the internet. It’s not even possible to imagine a public policy concern of greater import. This affects every last one of us.

The next Buy-and-Hold Crisis is 100 percent avoidable. Not today, i suppose. We are going to experience a big recession any way you look at it (presuming that Shiller’s Nobel-prize-winning research is legitimate research). But, had Greaney corrected his study on the afternoon of May 13, 2002, we would have put the Get Rich Quick/Buy-and-Hold stuff behind us a long time ago.

And, even now, we could diminish the horrors of the next Buy-and-Hold Crisis by opening every site to honest posting by the close of business today. Prices don’t usually drop only to fair-value levels at the end of a bull/bear cycle. Irrational exuberance is replaced by irrational depression and prices drop to one-half of fair-value levels. If that happens, we are all in the soup. But if we get the word out about the last 40 years of peer-reviewed research, people will know that they should be buying stocks like crazy when prices drop to such insanely low levels and that could very well be the thing that turns the situation around. But we need to begin getting the word out now if we are going to expect people to act on it in the days following the next price crash.

My feeble human brain is not able to imagine any downside.

Rob

“Today’s CAPE Is 35. That’s an Obvious Threat to the Smooth Functioning of Our Economic System. But How Many of the Experts in This Field Are Actively Involved Today in Getting That CAPE Value Down?”

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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:

“One, you have only said that within the last few months. You could have saved lots of people a lot of time by saying it in May 2002. Why didn’t you.”

Because it was obvious to everyone taking part in the conversation that there was no valuation adjustment.

If it’s so obvious, why hasn’t the study been corrected to this day?

Today’s CAPE is 35. That’s an obvious threat to the smooth functioning of our economic system. But how many of the experts in this field are actively involved today in getting that CAPE value down?

Sometimes it is the most obvious things that are most important. For an alcoholic, the most obvious thing that he needs to do to make his life better is to start attending A.A. meetings. The fact that this is obvious doesn’t mean that you shouldn’t say something if you think of this person as a friend.

Rob