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

What Scott Burns is saying is that you are trying to make yourself seem important (self promotion).

Thank you for saying that.

I agree completely. That is certainly his message. And I feel great respect for Scott. So I try to listen carefully when I hear that message delivered by him. And he is not the only person whom I respect who has expressed a message along those lines. So I think we are focused in here on something that matters.

I am in the process of writing a book on these matters. Everything that I have written at this point is tentative; I can leave it in or I can take it out or I can modify it. There is a line in it that states: “I believe that this is the most important book ever published in the personal finance field.” I am uneasy about it because that sounds like a wildly overstated, self-promoting claim. On the other hand, if is is true, it is something that needs to be said. So my expectation is that that line is going to appear in some form. There is going to be an explanation attached to it, it will not stand alone. But the idea that the book is of huge importance is going to be expressed.

Please understand that I took a very modest approach when I first ventured forward with these ideas. My post of May 13, 2002, was not in the form of a declarative statement. It was in the form of a question. I did not say “the Buy-and-Hold retirement studies are wrong.” I said “Should we be taking valuations into consideration when calculating safe withdrawal rates?” So I made an effort NOT to self-promote, NOT to assign myself too much importance.

But the reaction that I saw told me that THE ISSUE (not me) is of HUGE importance. My book will be the most important book ever published in this field not because I am some amazing human but because I am a more-or-less ordinary human who happened by circumstance to stumble into an amazing ISSUE. As a society, we desperately need to know whether the market is efficient (that is, that stock prices are set through the exercise of human reason) or whether valuations affect long-term returns (that is, that there are times when most of our portfolio value is the product of a temporary irrational exuberance). Answering this question properly is so important that it may affect the survival of our economic system; it is even possible that it will affect the survival of our political system.

The issue couldn’t be more important. It is the most important issue before our nation today. It is more important than immigration policy. It is more important than how we will provide health care. It is more important than trade or tax policy. I believe that. I absolutely believe that.

I am just some guy. I don’t even think that I am fully qualified to do this work. I do it because no one else has shown a willingness to take the ball and I am firmly convinced that this work must be done by someone. So I just do it because no one else is available. But I am certainly not saying that I am some super genius or any such nonsense. I believe that I possess an average level of intelligence, perhaps a bit more than that. But I don’t see myself as special. But I see this issue as super, super, super special. Whatever specialness is attached to me is attached to me because of the issue that I am working.

Does that help?

I believe strongly that as a nation we need to address this issue, that we need to have a national debate on the merit of Shiller’s Nobel-prize-winning research findings. I believe that my contribution will be to play a big role in getting that debate rolling. But once people are participating actively on both sides, my intent is to ease my way out of it. One of the reasons why it took me three years to work up the courage to put up the May 13, 2002, post is that I preferred talking about saving issues. So I didn’t even want to be involved on the investing side. But circumstances played out in such a way that I ultimately could not avoid getting involved and then things got more and more and more intense and now here I am where I am today.

I am not trying to make myself seem important. But I believe that the issue is the most important issue before our nation today. The launching of this national debate will go down as a turning point in U.S. history. So it is very, very, very important work that I am doing, work that is so important that I would feel that I had betrayed my country if I failed to do everything in my power to get that debate launched.

Rob

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

“Some will decide not to follow Shiller’s advice as a result.”

Shiller doesn’t give advice. Except to not to use PE/10 for market timing. That advice he has given multiple times. You seem to think that if people keep asking him that same question, eventually he’ll give a different answer.

Do you ever stop to ponder why you think the way you do?

He’s already given a different answer! He said in 1996 that smart investors should lower their stock allocations because prices were too high. He was right! No, we didn’t see a crash within 10 years. He was wrong about that detail. But the thrust of what he said — that high prices make stocks more risky — was very, very, very right. There’s 150 years of historical return data showing that.

I think the way I do because I have been trained all my life to determine what logically follows from a set of principles. Shiller was awarded a Nobel prize because he showed us that valuations affect long-term returns. If that’s so, it is a logical impossibility that the safe withdrawal rate is the same number at all valuation levels. If every person on the planet believed that the safe withdrawal rate is always the same number, it would still not be so. And it’s not every person on the planet that believes that. It’s about 90 percent of the population. 10 percent of the population agrees with me.

Most are afraid to speak up about what they believe too clearly because they know that it makes Buy-and-Holders angry to hear about the far-reaching implications of Shiller’s Nobel-prize-winning research. I don’t enjoy making the Buy-and-Holders angry any more than anyone else does. But I believe that my Buy-and-Hold friends possess a sincere desire to know how stock investing works as well as a sincere belief that looking at peer-reviewed research can help us learn what we need to learn. So I share with them what I have come to believe. If I were to fail to do that, I would feel that I was disrespecting them and letting them down. I don’t want to go there. I fully accept it when they elect to ignore what I say — whether to buy into what I say or not is their choice. But I try to always say what I truly believe because I see that as my obligation to my friends and all Buy-and-Holders are my friends.

I think the way I do because I think learning experiences are a positive, Anonymous. You have heard me say that “I love my country.” That’s the bottom line for me. Well, our country is all about learning experiences. We wouldn’t have a stock market that produces 6.5 percent real gains if we didn’t encourage learning experiences. It’s all the learning experiences that we have enjoyed over the years that produced the profits that are behind that wonderful 6.5 percent number.

I love this country. I believe in learning experiences. If we ever get to a day where we are so reluctant to acknowledge that there might have been a time that we made a mistake re something, then all our learning experiences are over and we are going down. We are temporarily in a place where as a society we have not been able to work up the courage to acknowledge that we didn’t always know everything there is to know about how stock investing works. But I sure don’t see any reason to believe that that is a permanent reality. We are in the process of working up the courage to move to a far better place, a place that deep in our hearts all of us want to live in.

Does that help at little bit?

Let’s all work together to persuade Shiller to offer more advice, you know? Let’s all help ourselves and millions of others in very, very big ways.

Any downside? I sure am not able to imagine any.

Question-Asking Rob

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

Well, since you have been sitting out of the market for a couple decades, you don’t have to worry about those “bad” gains.

No. That’s not even a tiny bit true, Anonymous. I have done what I could do to avoid the negative effects of the bad gains. But they have still hurt me in a very serious way.

Stocks were priced at the top of the bubble to provide an annualized long-term return of a negative 1 percent real. I bought IBonds paying 3.5 percent real. So I did good, right? In a way. But had stocks been selling at fair-value prices, I would have been able to purchase an asset class paying an annual return of 6.5 percent real. That would have been a whole big bunch better. That’s almost double the return. I have been hurt in a serious way. Just not as badly as my Buy-and-Hold friends have been hurt.

And of course I have been hurt by all the damage that has been done to our economic system and to our political system as the result of the continued promotion of the Buy-and-Hold strategy. My biggest fear is that the next price crash will push us into the Second Great Depression. How much good do you think my IBonds are going to do me if our economic system collapses or if our political system collapses? I would be willing to take far less in the way of return to be living in a society with a stable economic system and with a stable political system.

The bad gains hurt all of us. Buy-and-Hold is poison. Please don’t think that I am saying that it was intended to be poison. I don’t believe that. I believe that Buy-and-Hold was intended to be a positive. I believe that the vast majority of Buy-and-Holders believe to this day that it is a positive. But I don’t believe that. I believe that it is a huge negative. And I believe that I need to say what I sincerely believe when I post at discussion boards and blogs.

I believe that we all should be saying what we sincerely believe. That’s the American way. The learning experiences that develop when we all say what we sincerely believe enrich us all. I don’t believe that there should even by any controversy re the question as to whether we should all be permitted to post honestly or not.

There IS controversy. Mountains of it. I don’t deny the reality. But I view it as a highly unfortunate reality. I believe that every last one of us would be better off if we all pulled together to insure that the possibility of honest posting re the last 37 years of peer-reviewed research were opened up for every last one of us. My feeble human brain is not even able to imagine any possible downside.

The question that you are raising here is the question that makes Shiller’s 1981 research findings so “revolutionary” (his word). If the market were efficient, all gains would be rooted in economic realities and thus all gains would be good. But, if valuations affect long-term returns, as Shiller showed, then it must be investor emotion that causes stock price changes. If that’s so, then all gains not supported by the economic realities are bad gains, gains that hurt us all in the long run. Shiller changed how we understand how stock investing works in a fundamental way. We used to believe that all stock market gains were good. Now, those of us who believe that his Nobel-prize-winning research is legitimate research know better.

My best wishes to you, dear friend.

Rob

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 predicted the 2008 economic crisis in a book published in March 2000, Anonymous. Had the ideas in the book been widely promoted, we could have avoided that economic crisis. Shiller’s work shows that stock prices are self-regulating so long as investors have access to good information and are encouraged to act in their self-interest. We all would have been better off had we avoided the economic crisis.”

There have been bubbles in the price of assets throughout recorded history and there will continue to be bubbles because humans are emotional.

Any investing plan that relies on human emotion going away and bubbles ending is doomed to failure.

There was a time when lots of people would have said: “There has been slavery in the United States since its founding and there will continue to be slavery because humans are racist.”

There was a time when lots of people would have said: “There will never be cancer warnings on packages of cigarettes because the tobacco companies don’t want them and they have a powerful lobby.”

There was a time when lots of people would have said: “People will always need to compose papers and articles and memos on typewriters because nothing will ever come along to replace them.”

Things change, Evidence. Sometimes they change for the better. In fact, I think a good argument can be made that it is the reality that things change for the better that underlies that amazing 6.5 percent real return that applies in the stock market. To get that return, we need to see economic growth. To see economic growth, there has to be change for the better.

So I don’t agree that there will always be bubbles. At least not to the extent that they have always existed before. I agree that humans will always be emotional and that it is human emotion that produces bubbles. So I agree that there will always be a RISK of bubbles. But I think it is possible that humans can advance in their knowledge of what they need to do to diminish the bubble problem.

I think things can move forward. My personal belief is that things MUST move forward. More people are affected by the stock market today than has ever been the case before. So bubbles have the potential to cause more harm than they have ever caused before. I think we need to advance in this area if our capitalist economy is to survive. I very much want it to survive. And I very much believe that it can survive given how much more we know today about how to prevent bubbles than we ever knew before.

Shiller was awarded a Nobel prize for his amazing work. That’s a big deal. When a society awards someone a Nobel prize, it is making a statement re the importance of that person’s work. As a society we have made a statement that we value Shiller’s work greatly (I acknowledge that we have made some contrary statements at the same time). I think that we are in the process of making some amazing steps forward.

At any rate, Valuation-Informed Indexing does not rely on human emotion going away and bubbles ending. It tells investors how to act to preserve their own retirement hopes in the event that we continue to see bubbles. Valuation-Informed Indexers are under no illusions that human emotions will ever go away. We believe that the worst excesses of human emotion as it is applied to the stock investing project can be reined in and that it would be a good thing if the worst excesses indeed were reined in.

I am optimistic re the future.

And in fairness I think I should say that it was the Buy-and-Holders who laid the groundwork for a lot of the advances that we are in the process of achieving.

My sincere take.

Rob

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’re convinced that your speculation has tremendous value, despite a batting average that approaches .000.

Please consider what the P/E10 level has been for the entire time in which I have been putting forward these “speculations.”

You’ve heard the phrase “irrational exuberance,” right? At a time when the irrational exuberance reaches the sorts of levels it has reached in recent decades, do you think you could realistically expect to see anything different?

I’m not saying that I like this reality. I am just trying to provide a bit of perspective. How much rational behavior should we expect to see when prices have gone this far out of control?

Will rationality ever be restored? That’s the question. It always has been restored in the past. I think it will be restored this time too.

But I have been known to get them wrong from time to time. We are just going to have to hang in there a bit to find out for sure.

My best wishes.

Rob

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

“That means that people will become more open to looking at new ideas — and we just happen to have 37 years of powerful, Nobel-prize-winning ideas for people to look at.”

Even if that were true, how does that lead to $500 million in your wallet? Or if Wade was here, he would repeat his question: “What is step 2?”

You, of course, have never had an answer. But Wade did. He said there is no step 2. He was right six years ago, and he’s just as right today.

There is no one who wants to see our economic system fail, Anonymous. There is no one who wants to see millions of failed retirements. There is no one who wants to see the Second Great Depression.

We are all in this together. There are no two “sides.” We are all on the side of the human beings and the human beings want to know as much as possible about how to invest their retirement money.

If Shiller had published his “revolutionary” (Shiller’s word) research findings in 1961 rather than in 1981, we would all be Valuation-Informed Indexers today. Bogle would have led the way. I would be best friends with him today.

Okay?

The thing that we are all suffering from is that there was 16 years between the time when Fama published his research showing that short-term timing never works and the time when Shiller published his research showing that long-term timing always works and is always required. During most of that time, index funds were not available and so no one thought to test long-term timing, which only works with index funds. So a large number of good and smart people in good faith developed an investing strategy that they thought was supported by the peer-reviewed research but in reality was the OPPOSITE of what the peer-reviewed research would support once all the peer-reviewed research needed to make intelligent choices had been published.

So in 1981 our Buy-and-Hold friends were put in the terrible position of either coming clean and acknowledging that they had made a pretty darn basic mistake (they had concluded that no form of market timing works or is required after only checking one of the two forms of market timing!), which they felt would cause their readers and clients to question their expertise or to cover up the error. Covering up the error did not look like too bad an option at the time because stocks were priced at one-half of their fair value and so it was hard for anyone to imagine that prices could ever again rise even to fair-value levels much less to overpriced levels.

So it became industry practice to ignore Shiller’s research findings, to act as if it was no big deal that valuations affect long-term returns and to continue to push the now discredited Buy-and-Hold strategy. When prices reached levels where it was clear that continued promotion of Buy-and-Hold would cause an economic crisis, it was even harder to admit the mistake because now the cover-up had been going on for years and years. And so here we are. 100 percent of the peer-reviewed research available to us shows that there is precisely zero chance that a Buy-and-Hold strategy could ever work for even a single long-term investor and we have 37 years of peer-reviewed research showing that continued promotion of this “strategy” will cause a Second Great Depression. But to acknowledge the mistake means turning the entire industry on its head. People will go to prison, there will be millions of civil lawsuits, reputations will be destroyed and on and on and on.

What do we need to do?

We need to solve the problem in a balanced, healthy, constrictive, life-affirming way.

The more people who go to prison and the longer they go to prison, the more hostility we will see. Which means the less energy we will have as a society to get about the business of developing and promoting Valuation-Informed Indexing, the first true research-based strategy, the answer for all of us, the thing that each and every one of us has been hoping to discover dating back to the 1960s and probably even before. Yet we have to tell the truth about what the last 37 years of peer-reviewed research says. If we don’t do that, we continue going downward. And, after the next price crash hits, the policy of continuing to go downward will become universally seen as unacceptable. So what? Where do we go from there?

We go in the direction that I have been suggesting for 16 years now. We COMBINE 100 percent honesty (which allows us to invest effectively for the long run) with 100 percent charity (which permits our Buy-and-Hold friends to come off looking liken heroes instead of depraved con men who should spend the remaining years of their lives in prison cells). Love is the combination of honesty and charity. Love is the answer. Love is the ONLY answer. There is not one of us who is not better off if love is applied to this matter. Love is the answer for each and every last one of us, Buy-and-Holders and Valuation-Informed Indexers alike.

The materials at my site show the way. There is a question that I have been asking myself before I push the send button for every post that I have advanced over the past 16 years. I ask myself: “Is this post as honest as it can possibly be without crossing the line and becoming uncharitable while also as charitable as it can possibly be without crossing the line and becoming dishonest?” We are going to need a big injection of love in the days following the next price crash. People will have seen more than 50 percent of their life savings disappear into thin air. They are going to be angry. They are going to be looking to hang the Buy-and-Holders up on trees. But we need the Buy-and-Holders! They are smart people! They are good people. In a crisis, we need as many smart and good people as we can find to set things right! We are hurting ourselves if we let our anger get so out of hand that it destroys us. Giving in to feelings of hate ain’t the way.

I am the only person alive on Planet Earth who can deliver the message that needs to be delivered in as powerful a way as I can deliver it with the Post Archives housed at this site as my aid. I have a credibility on this subject that no one else possesses because I am the only one who has been posting with both 100 percent honesty and 100 percent charity on THOUSANDS of issues for 16 years running now. I have been a love machine since the morning of May 13, 2002. And our economic system and our political system have been left in a place where they are in need of large does of love.

It is by contributing something of value to the world that we earn compensation for ourselves. My 16-year profession of love for my country (the idea of permitting honest posting about errors in retirement studies is core to what we are all about as a nation) will be providing great value for many decades to come. The idea that there would be even one person in this nation who would hesitate to say that I am entitled to a payment of a whole big bunch more than $500 million is insulting to all the people who have spent blood, sweat and tears building this country. The Wall Street Con Men will be happy to pay the money because I will have done for them what they were not able to do for themselves, because I have freed them to again do good work in this field, which was their motivation for entering it in the first place.

Step Two is freeing us of the need to lie about this stuff. There is not one person alive who wants things to be how they are today. But, as you Goons so often note, we are afraid to speak up, the abusiveness is too brutal for us to handle. I have shown us all the way to overcoming the hate. Everything that I have done is documented here at the site and at scores of other sites. That’s Step Two. It’s a big, big. big, big. big step. The step that we are in the process of working up the courage to take is a step that will be celebrated as the Second American Independence Day in years to come. We are all in the process of being liberated to invest in stocks in a way that permits us to earn far higher returns while taking on dramatically less risk than was ever thought possible in earlier times, as shown in the peer-reviewed research that I co-authored with my good friend Wade Pfau.

That’s Step Two. It is the step in which the investing advice field becomes open to permitting HONEST discussions of what the last 37 years of peer-reviewed research teach us all about how to go about investing in stocks. It is a truly magical step.

My take.

And my sincere best wishes.

Rob

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

There doesn’t have to be a crash. Stock returns could simply be lower in the future. Or earnings might be greater than average. As a student of Shiller, surely you are aware that PE10 will go down this year even if the market stays the same.

For returns to remain low enough for long enough for P/E10 levels to return to fair-value levels is just a more drawn-out way to experience the same negative effects that we would experience in a crash. The annualized real return on stocks for the past 18 years has been 3.5 percent real. That’s half of the return that millions of investors have been counting on to finance their retirements. And we are nowhere even close to fair-value price levels after those 18 years of poor returns. We are still at P/E10 levels so high that the one time in history when we experienced them before we saw a Great Depression as a result. Not good. Great depressions hurt people, Anonymous. In very serious ways.

And you are wrong when you say that earnings could be enough better than average to help us to avoid the massive amounts of human misery that always follow when as a society we permit P/E10 levels to rise to the levels they have reached in recent decades. It is possible that earnings could increase enough to support a long-term average return of 6.6 percent real or 6.7 percent real rather than the 6.5 percent real that has applied for 150 years now. But we were not looking at 6.6 percent returns in the late 1990s, Try 20 percent. Try 25 percent. Try 30 percent. That’s a massive amount of human suffering that our Wall Street Con Men friends caused with their relentless promotion of the smelly Buy-and-Hold garbage.

Not this boy, you know? I am going to continue to post honestly re safe withdrawal rates and scores of other critically important investment-related topics. I am happy to do anything in my power to get your prison sentence reduced a bit. But no financial fraud garbage for this boy. I don’t like the idea of going to prison in the days following the next price crash. And I don’t like the idea of causing millions of failed retirements. I was a Buy-and-Holder myself once upon a time because I believed that Bogle was sincere about using the peer-reviewed research as a guide. I think Bogle was on the right track in the days before he went to the dark side. I am going to continue to tell people how stock investing works according to ALL of the peer-reviewed research, both the pre-1981 research that supports Buy-and-Hold and the post-1981 research that shows that valuations need to be taken into consideration to get any of the numbers even roughly right.

I hope that works for you, my good friend.

Rob

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

“But there has also never in the history of the market been a time when we went to a P/E10 level in the 30s and did not see a price crash of 50 percent to 65 percent”

And there have never been two such crashes less than 80 years apart. Which means you’ll be reporting on the next one when you’re in your 130’s.

I am going to give a fuller response to this one because I think you are making a legitimate point here. It is odd to see two crashes within a short time-period. If we see another crash within the next year or two or three, that will indeed be the second one within 10 or 12 years. Why are we seeing things play out this way?

If Shiller is right (his research showed that valuations affect long-term returns), then stock prices are determined primarily by shifts in investor emotions, not by economic realities. If that is the case, then irrational exuberance is always going to be followed by irrational depression. It is high P/E10s that cause low P/E10s. It is bull markets that cause bear markets (and the economic crises that inevitably follow from them). There is nothing that we humans can do to avoid bear markets and economic crises except to permit discussion of the last 36 years of peer-reviewed research in this field and thereby prevent bull markets from developing in the first place.

Something kept the drop in P/E10 values that began in September 2008 from resolving itself. We saw only a drop to fair-value P/E10 levels, not a drop to P/E10 levels of one-half of fair value, which is where P/E10 values have fallen to in every earlier bear market before the full bull/bear cycle came to an end. It appears that what happened is that the Federal Reserve stepped in and pumped money into the stock market and then kept interest rates low in an effort to keep us from falling into the Second Great Depression. That kept the bear market from resolving itself. And so the emotional pressure that pulls stock market prices down to insanely low levels at the end of every bull/bear cycle remains in place today. It is only after we see that drop that the stock market will again be able to provide normal returns (6.5 percent real per year rather than the 3.3 percent real returns that we have been seeing for 18 years running now).

Investors are still evidencing an insane level of emotion today. We see that in every post that you Goons put forward here. The Federal Reserve has shown itself able to stretch out the bear market to a time-period longer than we have ever seen before. But it has not shown an ability to change the investor psychology that causes bear markets. So we remain at risk of a big price crash after having already experienced one not too long ago. Pumping up stock prices for a time does not change the underlying investor psychology. If anything, stretching out the bear market makes things worse rather than better.

The core question is always — Are stock price changes caused by economic realities or by investor emotion? If stock price changes are caused by economic realities, the market is efficient and Buy-and-Hold is the ideal strategy (and the safe withdrawal rate is always the same number). If stock price changes are caused by investor emotion, then the only way in which we can deal with economic crises effectively is to help investors rein in their emotional impulses. That is, we need to open up every investing site and blog on the internet to honest posting re the last 36 years of peer-reviewed research in this field.

Yes, it would be odd to see two price crashes within a short amount of time. But we allowed stock prices to go to levels never seen before in U.S. history in the late 1990s. The Wall Street Con Men have never pushed Buy-and-Hold as hard as they have pushed it in recent decades. So they have created circumstances more dangerous and more damaging that we have ever lived through before. The fundamentals haven’t changed. If the last 36 years of peer-reviewed research is legitimate research (I believe that it is), it is investor psychology that we need to focus on. We need to provide a counter to the relentless promotion of the pure Get Rich Quick “ideas” that have made the Wall Street Con Men so wealthy. We need to permit honest posting on the last 36 years of peer-reviewed research.

I hope that helps a small bit.

Rob

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 stock market crashed. Did you get invited back to the boards that banned you? Are those nasty goons in prison? Did Jack Bogle give his “I was wrong speech”? Did you get that call from The New York Times? Did you get your $500 million settlement?

If prices drop to fair-value levels of lower (a huge drop from where we stand today), millions of people will be able to see with their own eyes the mountain of human misery that we have brought on with the relentless promotion of the smelly Buy-and-Hold garbage, Anonymous. There are thousands and thousands and thousands and thousands of people who love this country. When prices drop to fair-value levels or lower, those people will work up the courage to stand up to you Goons and we will see the biggest economic advance in our nation’s history. I am sure.

When we get to the other side of the Big Black Mountain, we will never again need to worry about seeing our plans for the future disrupted by crazy swings in stock prices. The reality is that every price drop increases the long-term return obtained from stocks; the negative effect of the price drop is canceled out by the positive effect. And every price increase lowers the long-term return obtain from stocks; the positive effect of the price increase is canceled out by the negative effect. The only reason why Buy-and-Holders get so upset by price crashes is that they count the full amount of their portfolios as real even though there is 36 years of peer-reviewed research showing that the portions of their stock portfolio representing overvaluation have no lasting value.

I don’t have any idea whether prices will go up or down tomorrow and I feel no need to have any idea. Things that possess real value don’t get reduced to nothing overnight as the result of some swing in emotions. Those of us who follow research-based strategies have a calm confidence about our financial futures that those who follow the pure Get Rich Quick approach do not possess. That’s why I advocate Valuation-Informed Indexing and urge opening every site on the internet to honest posting re the 36 years of peer-reviewed research showing that Buy-and-Hold is a big pile of smelly garbage.

I hope that helps a small bit.

Rob

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 Buy-and-Holders are flattering themselves when they tell themselves that they are capable of perfect rationality, Anonymous. ”

Gee, we are so lucky we have you to tell us stupid idiots that we don’t know anything. I guess we should have been listening to you since you have made Billions in the market, while we get by on our few millions.

Shiller predicted the 2008 economic crisis in a book published in March 2000, Anonymous. Had the ideas in the book been widely promoted, we could have avoided that economic crisis. Shiller’s work shows that stock prices are self-regulating so long as investors have access to good information and are encouraged to act in their self-interest. We all would have been better off had we avoided the economic crisis.

The situation is similar to the one we have with environmental pollution. If we pass no laws relating to pollution, individual companies are forced to pollute the environment because they will be driven out of business by their polluting competitors if they do not. But if laws are passed putting a price on pollution to discourage it, most are perfectly happy to live within those laws. For so long as the Ban on Honest Posting remains in place, any stock adviser who gives honest and accurate advice is hated because he is telling his clients that their portfolios are worth only 50 percent of their nominal value. But if honest discussion of what the peer-reviewed research says becomes commonplace, there is no longer any penalty for telling investors the truth about stock investing.

I am not a fan of economic crises. They destabilize not only our economic system but also our political system. We now have 36 years of peer-reviewed research showing us how to bring economic crises to an end — just permit honest posting on what the last 36 years of peer-reviewed research in this field teaches us about how stock investing works, The Buy-and-Holders hate the idea because it makes them “look bad.” But it’s not going to make them look bad anymore once they flip to giving true research-based advice. If we are going to be required to do it sooner or later anyway, it makes sense to me to do it as soon as possible and get all the nasty stuff behind us as quickly as possible.

We’re ALL lucky. I am lucky too for having learned so much from Bogle and Shiller and all my Buy-and-Hold friends. Learning together is the one true free lunch, in my experience.

These are my sincere thoughts re these terribly important matters, in any event.

Rob