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

Shocker!  Silly me thinking that you should have a book done since it has been over 10 years.

I believe that Greaney should have corrected the error in his retirement study (it lacks a valuation adjustment) within 24 hours of the moment it was brought to his attention (the morning of May 13, 2002). There’s obviously some strange forces at play here that are causing things to play out in ways in which they ordinarily do not play out.

Shiller discovered the secret of stock investing. Stocks are an amazing asset class that offers an average annual return of 6.5 percent real. What could be better? There’s one major flaw. The price of stocks is set by the people who own them. There is nothing to stop those people from setting the price of stocks at artificial levels, from creating irrational exuberance that will fool them for a time into thinking that their holdings are worth more than they really are worth. Shiller showed us how to overcome irrational exuberance, to engage in valuation-based market timing and thereby to avoid the crazy bull markets that you experience when you follow Buy-and-Hold strategies and the crazy bear markets that follow whenever you have crazy bull markets and the horrible economic collapses that follow whenever you lose the trillions of dollars of consumer buying power that you always lose in a crazy bear market.

On the surface, there doesn’t seem to be any downside to this amazing advance in understanding. But there is one. Since irrational exuberance is the cancer of the personal finance realm, adopting a strategy that makes it impossible for irrational exuberance to grow adds rationality to the investment advice field. If we were starting fresh, everyone would agree that that is super. But we are not starting fresh. Buy-and-Holders have been arguing against rationality, saying that there is no real need for market timing, for as long as there has been a Buy-and-Hold strategy. That “idea” is of course absurd. We have thousands of markets and price discipline is critical in every one. So it is a pretty out there idea to believe that the stock market is the sole exception. But the Buy-and-Holders did not have Shiller’s research available to them when they were developing their strategy and so they took a wild stab in the dark and their wild stab in the dark ended up being wrong. Now the only way forward is for the Buy-and-Holders to work up the courage to say the words “I” and “Was” and “Wrong.”

I think we are a fundamentally good people and I think that in the end we will do it. I believe that it’s going to take another Buy-and-Hold Crisis for people to come to terms with how horrible it is to follow a strategy that does not call for market timing when needed (a strategy that permits irrational exuberance to go insanely out of control and do great damage to millions of lives), but I think we’ll get there. I take confidence in the number of Buy-and-Hold who have expressed interest in coming clean and held back only because of the insane abusiveness of you Goons. When people want to do something that bad (Bernstein went so far as to say in his book that the Buy-and-Hold safe withdrawal rates calculations were off by a full two percentage points at the top of the bubble), they eventually work up the courage to do it. We’ll see, you know?

My best wishes to you and yours.

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:

Have haven’t discovered anything.  You have been too busy trying to spin a story in an attempt to gain fame on the internet that ended up blowing up in your face.  Early on, you positioned yourself as some kind of leader of the online financial community, when, in fact, you were simply the butt of many jokes.  You can try and blame others, but you brought it all on yourself.

Either the Greaney retirement study contains a valuation adjustment or it doesn’t.

I sincerely believe that it doesn’t.

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:

First of all, the buy of holder is just fine. Let’s use a typical 60/40 split, which is often a 60/30/10 split (stock/bonds/money market or CDs). That means that the retiree has 40% of their portfolio in something other than stocks. Downturns are always temporary. The Buy and Holder can simply start using the money market/CD portion of the portfolio and then move on to the bond portion after that. The buy and holder also has interest and dividend income coming from the portfolio as well as social security. The buy and holder can easily wait for stock prices to recover, should their be a downturn during retirement.

What people can’t do is wait to see how it all plays out. Look at what would have happened to people if they did as you suggested over the last few decades. When you reach 60 years old, you have to have it fully funded. People lose their jobs and have health issues. 70% of people retire before the age of 60.

If you want more security, just listen to Wade Pfau presentation from last week. Build yourself a bridge to 70, add on an asset buffer, etc. Telling people to follow a timing scheme that has never worked is dishonest at best.

Your first paragraph makes a certain amount of sense to me. I don’t entirely agree with it. But there is a core reality to it — that stocks are a good investment class in the long run and so a strategy that keeps you mostly in stocks is not going to be too terrible. What it misses is that you can do better by Staying the Course in a meaningful way (keeping your risk profile constant over time). But, if you keep that to one side, there is a bit of logic here. Stocks are indeed a great investment class.

The second paragraph I don’t get. What does it mean to be “fully funded”? If you are at the same risk profile that you determined was best for you when you started, why aren’t you fully funded. I think that you can’t get out of the habit of taking the numbers on your portfolio statement too seriously. If those numbers show you not to be fully funded, you’re not fully funded. It’s those official numbers that matter! Forget irrational exuberance!

I don’t forget it. I think that accepting irrational exuberance and doing what you can to overcome it is the key. That’s 70 percent of what it takes to invest successfully for the long term. Stock investing is a battle with irrational exuberance and the Buy-and-Holders don’t even put up a fight — they feel that they can avoid the fight by conceding before the fight begins. Some strategy!

I don’t think of Buy-and-Hold as a strategy, I think of it as a marketing gimmick. I believe that it started out as a strategy. But I think it stopped being a true strategy when the Buy-and-Holders decided “let’s ignore all research from 1981 forward” The thing that I loved about Buy-and-Hold in the days when I was a Buy-and-Holder was the respect for the peer-reviewed research. When I saw how committed many Buy-and-Holders were to blocking discussion of Shiller’s Nobel-prize-winning research, the appeal of the thing just went “Poof!” The Buy-and-Holders aren’t even true to their own core principles.

You either believe that peer-reviewed research has value or you don’t. You can’t say “I believe in all peer-reviewed research except for the research that shows that I didn’t know everything when I came up with the best strategy that I could come up with in the days before the most important research was published.” Valuation-Informed Indexing is what Buy-and-Hold would have been had Shiller published his amazing research in 1961 instead of 1981.

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:

No one takes dieting advice from a 600lb person.  No one takes sobriety advice from a drunk.  As such, it is a logical impossibility that a broke guy in his 60’s knows what he is talking about when it comes to investing.

No one says that calories don’t matter for someone trying to stay fit. Irrational Exuberance gains are the stock investing equivalent of empty calories. The Buy-and-Holders say that irrational exuberance gains are the same as economic-growth gains. I don’t buy it. I say that it is a mistake to treat empty calories as if they were real food.

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:

Then you should stop your abusive and criminal behavior.  I am also guessing that the fact that you haven’t worked in 25 years also has something to do with it.

My job for the last 23 years has been to open every site on the internet to honest posting re the last 44 years of peer-reviewed research in this field. Do you think it is going to happen by itself with no one working it. The history of the thing shows that you would be wrong to think that. Do you think that it is easy work? Try it for two days and see if that changes your mind.

In ordinary circumstances, there would be no need for me to take on this work. There would be universal agreement that posting re the peer-reviewed research would be permitted. The first 23 years of discussions shows that the Get Rich Quick urge residing within all of us is a very strong thing.

It doesn’t follow that we will never replace Buy-and-Hold with Valuation-Informed Indexing (Buy-and-Hod updated to reflect the last 44 years of research). I believe that we are a fundamentally good people. If we were 100 percent corrupt, we would never have permitted Shiller to publish his research in a peer-reviewed journal in the first place.

We’ll see.

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:

Gee, why did I follow the old system?  I am now burdened with millions of dollars when I could have followed the new system and be broke like Rob Bennett.  Silly me.

Irrational exuberance does put money in your account for a time, Anonymous. That’s how it works. That’s the appeal.

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:

No, you are not staying the course.  You can’t just keep making stuff up as you go.

Do you consider it Staying the Course to stick with the same stock allocation when valuations change dramatically?

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:

“ I don’t believe that anyone should place any confidence in any guesses that anyone makes as to what will happen. I believe that we agree on that.”

Yet that is what you are doing when you are timing the market. Meanwhile, you won’t watch anything or read anything that has data which proves you are wrong. It is all part of your pattern of not listening to anyone else. That is why you are broke. That is why people have all cut you off and/or ignore you. It is why your wife divorced you.

Not at all. The key goal in Valuation-Informed Indexing is to Stay the Course in a meaningful way. Since the research shows that stocks carry more risk when valuations are high, the investor lowers his stock allocation to keep his risk profile stable over time.

You can’t say that, because valuations are high, stock prices are going to fall over any specified period of time. The precise opposite could happen. It is irrationality that pushes stock prices up to crazy levels. Who is to say that that same irrationality would not push prices even higher?

High valuations certainly signify a price drop at some time in the future. That much is so. But I have never seen any evidence that the time at which this price drop will occur can be known in advance. I don’t think it can be, It’s possible that future research will provide some clues as to when the price change will take place. Personally, I am skeptical as to whether that will happen,.

My sense is that many people want to know this, These would be information bits that would be satisfying to man investors. I am not sure that we are ever going to see helpful research in this regard. We know some things and we do not know some things. We know that valuations matter. We know that risk is variable, not stable. We do not today know when price changes will come and it may be that we will never know that.

I believe that we should take advantage of what we know and not worry so much about what we don’t know. We know a great deal more than what we knew in the days before publication of Shiller’s Nobel-prize-winning research. Good for us, We don’t know everything that we would like to know. Such is life, you know. Maybe someday we will know more. maybe not.

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:

This video of Siegel and Shiller shows everyone once again that market timing if a failure:

Just look at the predictions from 2014 as to expectations for the following 10 years.

I don’t believe that anyone should place any confidence in any guesses that anyone makes as to what will happen. I believe that we agree on that.

But I believe that everyone should understand that valuation shifts indicate a change in risk. stocks are just not as valuable when they are priced high. To keep their risk profile constant, investors need to engage in market timing.

If you want to call it “risk management” rather than market timing, I’m fine with that. The important thing is that stock investing risk is not constant but variable. Given that risk is variable, the safe withdrawal rates (which is a risk management tool) cannot possibly be a constant number. The safe withdrawal rates VARIES. It changes with changes in the valuation level.

That’s where I’m coming from re this terribly important matter, in any event.

My best wishes to you.

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:

If you are saying that buy and hold failed every time, it should be easy for you to point out just ONE single example of where someone had a retirement failure with buy and hold.  So go ahead and give us a link to just one person that had such a failure.  You are the one making the claim, so let’s see you back it up.

There’s obviously been retirement failures. And every one that has taken place has been influenced by our lack of knowledge about how important it is to practice valuation-based market timing. Prior to 1981, we just didn’t know. From 1981 through today, there’s been this crazy ban on honest posting re the last 44 years of peer-reviewed research.

It’s possible that someone could just fail to save enough. In that case, Buy-and-Hold didn’t cause the retirement failure. But in most cases, Buy-and-Hold is going to have played a role. The failure of most investors to practice price discipline causes stocks to be overpriced and paying too much for the stocks he buys ends up hurting the person who suffers the failed retirement. Maybe he would have been okay if honest posting had been permitted and prices had been more stable.

The onus should not be on those who believe that honest posting should be permitted to show that Buy-and-Hold was the primary cause of a failed retirement. The onus should be on the Buy-and-Holders to show that some other factor was dominant in this particular case. We know what Buy-and-Hold/Get Rich Quick strategies do great long-term damage. So the default assumption should be that they played a significant role in any failed retirement.

Are you able to imagine any circumstance in which failing to exercise price discipline would not make a failed retirement at least a little bit more likely? If a guy was driving 60 mph on an icy road, would you ask for proof that driving at that speed in those conditions played a role in causing the accident? It’s obviously a foolish thing to do. Why do something so reckless? Why not just follow ordinary precautions?

Rob