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 think you would be able to get even one person to agree with any of what you just posted.

You might be right that I couldn’t get one today. But I believe that there will come a day when you won’t be able to get even one person to disagree with any of what I just posted.

It all comes down to whether Shiller’s Nobel-prize-winning research is legitimate or not. If Shiller’s research is not legitimate, then stock prices are set by the rational acts of millions of investors pursuing their self-interest and Buy-and-Hold is the ideal strategy.If Shiller’s research is legitimate, then stock prices are set by shifts in investor emotion. When prices are at the crazy levels where they reside today, we should be seeing an insane amount of emotionalism. You would expect to see death threats and demands for unjustified board bannings and thousands of acts of defamation and threats to get academic researchers fired from their jobs, stuff life that. But only if Shiller is right. Hmmm….

And what do you think is going to happen to investor emotions if millions of people see most of their life savings wiped out in a price crash? Then you would see the OPPOSITE of irrational exuberance, you would see irrational depression. What’s the opposite of death threats and demands for unjustified board bannings and thousands of acts of defamation and threats to get academic researchers fired from their jobs? Prison sentences and $500 million settlement payouts, that sort of thing, right?

We’ll see. It all depends on whether Shiller’s Nobel -prize-winning research is legitimate research or not. I believe that it is legitimate research. I’m not God. I don’t know everything. It is possible that I am wrong. But that is what I truly believe. So that is what I am going to go with.

I naturally wish you all the best that this life has to offer a person.

Shiller Believer 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:

People can advance death threats for all sorts of reasons other than ‘Rob Bennett is doing important work’. They could just find you extremely unpleasant and/or annoying.

Why would the statement “I believe that the last 38 years of peer-reviewed research is legitimate research” be sufficiently annoying as to provoke a death threat unless there were some concern that that research is important? The death threat arises in response to the pain experienced when a reality that you want to suppress is given clear and persistent expression.

I understand that I make you feel pain. I am saying that the fact that my words make you feel pain is significant. The pain evidences itself because there is a part of your brain that wonders whether the stock market might work like every other market that exists — price might matter big time, exercising price discipline might be essential. To go on about your daily business without making any change in your investment strategy, you need to silence discussions causing you to doubt your strategy of price indifference. If you had complete confidence in that strategy, the possibility of advancing a death threat would never even occur to you. If you were as sure about Buy-and-Hold as you pretend to be, you would not find my words so annoying. You would ignore them.

The fact that you and a good number of others find my work so distressing suggests that my work is of great importance. You don’t respond to all words with which you have some disagreement with death threats. What is it about my words that make them so annoying to you that you respond with death threats? Why does Valuation-Informed Indexing bother you so much? Why can’t you walk away from a statement that ” the safe withdrawal rate is a number that varies, depending on the valuation level that applies on the day that the retirement begins” without feeling a need to respond in some way? Why does my stuff bother you so darn much?

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, hold and rebalance investor knows that you cannot time the market. Secondly, there is yet to be even one documented successful VII person. Third, you are not the sole arbiter as to what constitutes the entire universe of research. Lastly, there is zero evidence to support your claims of threats.

In the end, we don’t need to take anyone’s word for anything. We merely look at outcomes. Case closed.

Long-term timing is price discipline. Price discipline has been working for stock buyers for as long as stock have been available for purchase. The Bennett/Pfau research paper shows that beyond any reasonable doubt whatsoever. That’s why Wade declared at the end of his research efforts that: “Yes, Virginia, Valuation-Informed Indexing works!” And that’s why you Goons threatened to get him fired from his job in the event that he continued doing honest work in this field. And that in turn is why you will be going to prison in the days following the next price crash.

I naturally wish you the best of luck in all your future life endeavors. But no financial fraud for this guy, no prison term for this guy. There are limits.

It will be interesting to see how it all plays out.

Price-Discipline-Believer 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 problem is that you are starting with false presumptions.

Backatcha, Anonymous.

There is only one difference between Buy-and-Hold and Valuation-Informed Indexing. Buy-and-Holders believe that stock price changes are caused by economic developments. If that’s so, risk is a constant and investors should be sticking with the same stock allocation at all times. Valuation-Informed Indexers believe that stock price changes are caused by shifts in investor emotion. If that’s so, risk is a variable and investors who want to maintain the same risk profile over the years MUST be willing to make adjustments to their stock allocation in response to big valuation shifts.

The place where you start determines the place where you end up. Shiller is not saying what Bogle had long said. There are today two academic models for understanding how stock investing works, not one.

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

Correct Presumption (I Think!) 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:

Wade’s firm says you should avoid all timing and just rebalance.

https://retirementresearcher.com/occams-should-you-try-timing-to-avoid-bad-markets/

Bottom line: Avoidall these get rich quick timing schemes.

Thanks for the link, Anonymous. I am not personally persuaded. But I think the guy does a good job of making the case. I think that anyone considering going with a Valuation-Informed Indexing strategy should read that article, think it over and discuss it with people from both sides of the table to come to a better understanding of the issues. If there are flaws in the VII concept, you want to identify them before you put money on the line. When someone goes to the trouble to present a reasoned argument against your strategy, he is helping you out in a big way. So I like this one.

Here’s the sentence where I think his logic chain breaks down: “They’ve priced in that information, and the current prices are the market’s best estimate of the value of the stock market.” If investors were 100 percent rational beings, that would be so. But what if most investors are humans, in which case they would be highly emotional beings. If investors were humans, we should expect to see a lot of abusive posting on all investing discussion boards and blogs at times when prices reach the level where they are today. We should expect to see death threats and demands for unjustified board bannings and thousands of acts of defamation and threats to get academic researchers fired from their jobs. Investors are not able to price in information that they do not even know about or that they are not able to discuss, are they? If the market (which is really just all investors acting collectively) is not even able to gain access to the information it needs to estimate the value of the market, how the heck can it do so effectively?

This guy is helping us. I 100 percent support the idea of permitting him to post his honest views. But I also 100 percent support the idea of permitting all others to post their honest views, including those of us who believe that Shiller’s Nobel-prize-winning research is legitimate research.

My bottom line? Always, always, always practice long-term timing, which is just price discipline going by a different name. Price discipline is key to the functioning of every market that ever existed. When we discourage people from exercising price discipline when buying stocks, we set up circumstances in which the stock market crashes because it cannot figure out any other way to get prices down to where they should be for the market to continue to function. That hurts all of us in very, very big ways.

Market Timing Advocate (and Buy-and-Hold Critic) 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 CAPE value of 16 is the long-term CAPE value. ”

You tell us repeatedly that the SWR is not always the same number but you seem to think that the fair value CAPE number is always the same.

Yes. That’s very good. I like that comment a lot.

The Buy-and-Holders and the Valuation-Informed Indexers have different ideas as to what is stable and as to what changes.

Buy-and-Holders and Valuation-Informed Indexers agree that the average long-term return is 6.5 percent real. There’s no dispute re that one.

The Buy-and-Holders believe that risk is constant. This is why they believe that stocks are always worth buying. Stocks are generally an amazing asset class. If stocks are generally an amazing asset class and if risk is stable, then you should always go with a high stock allocation. The logic follows. And that of course if why Buy-and-Holders believe that the safe withdrawal rate is always the same number. The safe withdrawal rate is a risk-assessment tool. If risk is stable, the safe withdrawal rate is indeed always the same number.

Valuation-Informed Indexers believe that risk VARIES. So we of course believe that the safe withdrawal rate varies.

Identifying the fair-value CAPE number is just a math exercise. 16 is the median of all the CAPE values we have seen. Sometimes it goes higher and sometimes it goes lower. It always ends up at 16.

You are suggesting that there might be some economic circumstances in which the CAPE value would change. If our economic system became more productive, the fair-value CAPE value would be higher. That’s certainly fair to say. There’s no law that says that it will always be 16.

But of course there is no way to know in advance whether any portion of today’s scary CAPE value is attributable to increased productivity. It is possible that that is so. I certainly don’t have any problem with someone saying: “I think productivity has increased, so I am going to use a fair-value CAPE value of 18. That’s up to the investor. That’s fine.

But please note that that is subjective. Some investors may think that productivity has increased ans some may think that it has declined. They are all entitled to their opinions. But no one can state definitively that they are right on that question. “16” is my effort at identifying a neutral number. It is the average CAPE in the historical record. I don’t object if someone uses 18 or 14.

I have a problem when someone says that there is no need to make a CAPE adjustment when determining the value of their portfolio. Stock prices increased 126 percent from 1996 through 1999. Huh? What the f? Is there any reasonable person who thinks that all of those gains were the product of economic growth? I sure don’t. I think that the vast majority were the product of a runaway irrational exuberance.

That affects the determination of the safe withdrawal rate. If you believe that that 126 percent price increase was the product of economic growth, then you believe that the safe withdrawal rate in 2000 was 4 percent. If you believe that most of that 126 percent price increase was the product of irrational exuberance, then you believe that the safe withdrawal rate in 2000 was 1.6 percent.

Again, there are two schools of thought. One school believes that the market is efficient and thus risk is constant and there is no need for investors to practice price discipline (long-term timing). The other believes that valuations affect long-term returns and that risk is thus variable and it is essential for investors to practice price discipline (long-term timing) if they are to have any hope whatsoever of keeping their risk profile roughly constant over time.

Ironically, it is the promotion of Buy-and-Hold strategies that causes prices to get so out of whack as to make Buy-and-Hold dangerous. If investors were encouraged to practice price discipline, prices would never stray so far from the fair-value CAPE value and investors would rarely need to change their stock allocations. It is a widespread belief that Buy-and-Hold can work that makes Buy-and-Hold dangerous. Telling investors that it is okay not to exercise price discipline is like ripping the brakes out of a fast-moving car. Valuation-Informed Indexing puts the brakes back in and makes for a much more enjoyable long-term ride.

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:

“It’s following a research-based strategy for investing in my favorite asset class.”

Your favorite asset class, which you haven’t owned in 23 years. Did that tidbit of information make its way into the article that you’ve been scattering far and wide? Or was there just no way to squeeze it into that tight 11,000 words?

Note: The comment as it appeared in the thread from which it was taken contained errors in the numbers showing annualized real returns for January 2000 through January 2019. I corrected those errors when preparing this blog entry. The points that were being made in the comment remain valid with the correct numbers applied.

I don’t mention that in the article. It’s not my intent to hide it. If I were hiding it, you wouldn’t know about it. But you are right in your suggestion (which you advance in a sarcastic tone) that it was hard to find room for all of the essentials of this story in a single article. There were other things that had to be said, so that got left out. My #1 project for 2019 is to take that article (which I am extremely pleased with — I view it as the finest piece of journalism that I have ever produced) and to blow it up to full-book length. I will certainly be discussing the fact that I got out of stocks in the Summer of 1996 in the book. So people who are hearing my case in the place in which I put the entire story forward in one telling will know that.

You want them to know because you know that most people will find it offputting. People’s minds have been saturated with Buy-and-Hold thinking. So most people think that the idea that TIPS or IBonds could do better than stocks for 23 years running is absurd. The reality is that that is what has happened. If there had been no Ban on Honest Posting, if we had been talking about these issues at every discussion board and blog for the past 17 years, all investors would understand why they should expect TIPS and IBonds to beat stocks when as a society we permit stock prices to reach the levels that we have permitted them to reach during the Buy-and-Hold Era.

Here is the annualized real return, with dividends reinvested, for stocks starting from the various, relevant starting points:

January 1996 — 6.2 percent

January 1997 — 5.4 percent

January 1998 — 4.6 percent

January 1999 — 3.4 percent

January 2000 — 3.0 percent

I was getting big raises in those years. So I was able to save a lot more in the later years than in the earlier years. So it is the numbers for the later years that are most relevant. My 3.5 percent return beats the number for stocks in 2000 and in 1999. It comes close in 1998. It gets beat in 1997 and 1996. But if you adjust for risk (I think it would be fair to say that an investor should be compensated two additional points of return for taking on the much greater risks associated with stocks), the TIPS/Ibonds number wins in 1997 and gets beat by only a little in 1996.

Factor in the effect of a 50 percent price crash, and the TIPS/Ibond numbers are ahead across the board. Then consider that stocks will probably be offering a 10-year annualized return of 15 percent real after the crash, and that differential grows a lot bigger after the Valuation-Informed Indexer is able to take advantage of the fact that, by lessening his participation in the stock market when it offers a poor value proposition, he is able to increase his participation in it when it is offering a strong value proposition.

The Valuation-Informed Indexer comes out ahead in the long run. I have run many hundreds of scenarios on the Scenario Surfer. There are lots of variations re the details of the various return sequences. But the bottom-line reality is always the same. Practicing price discipline when buying stocks pays off big time in the long run. Surprise! Surprise! Who’d a thunk it?

Stocks have performed HORRIBLY for the past 19 years. You should be ashamed of that 3.0 percent number. Millions of people depend on the magic of compounding to finance their retirements. The magic is reduced considerably when the annualized return is reduced from the normal 6.5 percent real to a shocking 3.0 percent real for 19 years running. That number is killing us as a nation. We are all hurting because of that number.

What caused that number? It was that insane 126 percent price jump that we saw from 1996 through 1999. We are still paying for that. And what caused those four years of insanity? Buy-and-Hold. People thought those phony gains were real. So they didn’t bother to exercise price discipline. And we are all still paying the price for that horrible mistake 19 years later.

Yes, people are shocked to hear that I have been out of stocks for nearly 23 years. Most people have never heard the case against Buy-and-Hold. What people should be shocked about is that I have been out of stocks for nearly 23 years and I am ahead today because of my decision to go with the peer-reviewed research instead of the marketing slogans of our Wall Street Con Man friends. And I will be farther ahead following the next price crash, which will bring more devastation to millions of middle-class people. Again, courtesy of everybody’s favorite Get Rich Quick scheme.

We should all be striving to invest rationally. Our common sense tells us that price discipline must work when buying stocks because it works in every other market that has ever existed. We now have 28 years of peer-reviewed research confirming that what our common sense tells us must be so really is so.

We have as a society spent millions of dollars promoting the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind. I think it would be a good idea to now spend an equal amount of money promoting the first true research-based approach, the first strategy developed after the research needed to get it right was available to us all.

Valuation-Informed Indexing is what Buy-and-Hold was intended to be. We should fix the mistake and move forward as a people. There is no good reason to deny ourselves the benefits of Shiller’s Nobel-prize-winning research any longer. Knowing how to invest effectively for the long run is a good thing. Learning how to pronounce the words “I” and “Was” and “Wrong” gets us to the place that deep in our hearts we all really want to go. Those three words have an incredible liberating power.

Stocks are my favorite asset class. And yet I have been out of stocks for close to 23 years now. Huh? What the f? It says something about us as a people that a person who believes that the lessons of the past 38 years of peer-reviewed research should be acknowledged has had to stay out of stocks for 23 years as a result. That’s freakin’ crazy. But it is not the investor who follows the research who is off his meds, as you Goons like to suggest. It is the people still advocating Buy-and-Hold strategies 38 years after the peer-reviewed research in this field showed that there is precisely zero chance that such strategies could ever work out well in the long run who are off their meds.

No society as rich as ours should ever have to endure an annualized stock return of 3.0 percent real for 19 years running. That number is a summation of the horrors of what the widespread promotion of Buy-and-Hold has done to us as a people. It’s a national scandal. That never could have happened in a world in which we permitted honest posting re the peer-reviewed research.

I should be able to invest in stocks and earn a return at least somewhat approaching 6.5 percent real doing so. We all should. Once we open every discussion board and blog on the internet to honest posting re the last 38 years of peer-reviewed research in this field, we all will be able to do so from that point forward. It is Buy-and-Hold holding us back and Buy-and-Hold can be corrected by a society of people with enough concern for its future to enforce the laws against financial fraud.

My sincere take

Beating-3.0-Percent-Real-for-19-Years-Running 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:

PETA??? Really???

Maybe you can somehow link VII to 2-ply toilet paper.

You are obviously being sarcastic. But the point that you are making in your sarcastic tone is right on. Valuation-Informed Indexing is linked to everything.Absolutely everything.

The money that people have in their retirement accounts is what they have to show for decades of work in our economic system. People go to work each day knowing that there will come a time when they will not be able to do it anymore and so they put money aside into a retirement account to provide for that day. We show great disrespect to them if we lie to them about how much money they have in that account. Their futures depend on it. They cannot plan their futures effectively unless we talk straight with them.

The Buy-and-Holders have a theory as to how much money people have in their retirement accounts. The strategy was developed in the days before Shiller published his “revolutionary” (his word) peer-reviewed research. The popular idea at the time was that the market is efficient. If that were so, it would mean that the stock price is the product of millions of rational assessments of the value of the market. We would all be able to trust the numbers on our portfolio statements as reflecting something real and lasting. We would all be able to plan our futures effectively making use of the investment advice available today at hundreds of different discussion boards and blogs.

But what if Shiller’s research if legitimate research? What is Shiller merited that Nobel prize of his? What if the Yale Economics professor is on to something?

Shiller tells a very different story about the real value of portfolio statements. He says that the stock price is set by humans, who are emotional creatures. So, when prices are as insanely high as they are today, close to half of the amount purporting to be in a stock portfolio is really the product of irrational exuberance, nothing more. People who are misled into believing that those numbers reflect a real and lasting value are going to be hurt in very serious ways in days to come.

I believe that Shiller is on to something. And I care about the people who read my stuff. So I feel a need to post honestly re safe withdrawal rates and re lots of other critically important investment-related topics. The Buy-and-Holders don’t want to learn how to pronounce the words “I” and “Was’ and “Wrong.” So they don’t like the idea of permitting me or anyone else to post honestly re the last 38 years of peer-reviewed research at even a single board or blog. Yucko, you know? I call “foul!” But there’s not too much that I can do about for so long as prices remain at these insanely high levels. I think it would be fair to say that much at this point in the proceedings.

I love my country. That means that I believe in the goodness of my country. People support PETA out of the goodness inside them. So, yes, PETA supporters might well be drawn in time to support my cause of opening every discussion board and blog on the internet to honest posting re safe withdrawal rates and lots of other critically important investment-related topics. I certainly plan to give it a try, in any event. I can do no more and I can do no less.

It will be interesting to see how it all plays out.

I wish you the best of luck with it. I hope that that helps at least a tiny bit.

My best wishes to you, dear Goon friend.

2-Ply 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 think Rob already ranked himself above Bogle, so he didn’t really move up a notch.

What I say is that my work completes Bogle’s work by making it effective in the real world.

Buy-and-Hold is a numbers-based strategy. He developed it before Shiller published his “revolutionary” (Shiller’s word) research findings of 1981. And in the 38 years since, Bogle has never updated the Buy-and-Hold strategy to reflect the Nobel-prize-winning research showing that a valuation adjustment must be made to every calculation. So all of the calculations generated by the Buy-and-Holders are in error!

Huh? What the f?

The purpose of investment advice is to help people, not to ruin their lives. If we were all thinking clearly, there wouldn’t be one voice of dissent to my proposal that we open every discussion board and blog to honest posting re the last 38 years of pee-reviewed research by the close of business today.

I mean, come on.

True Boglehead 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:

“What’s the alternative? Not send things?”

Almost anything would be a better alternative as you have completely wasted your time. Flip burgers, deliver newspapers, clean toilets, etc. all of these things would have been a much more productive use of your time.

So you say, Anonymous.

But I am not convinced.

If you believed deep in your heart that I have wasted my time for the past 17 years, you would have stopped commenting on my blog entries a long, long, long, long time ago.

You personally think that Buy-and-Hold is a good strategy. I believe that much. But I think you have doubts, doubts that you are afraid to face up to just yet, My words drive you crazy because my words stir up those doubts. You are not able to walk away and ignore my words. You feel a need to crush them when they appear before you.

It’s not just you, of course. There are millions of people following Buy-and-Hold strategies today. Few are as intense in their hate of Shiller’s work as you. But most Buy-and-Holders feel at least a little uncomfortable when their investment strategy is questioned. I think that we need to get to the bottom of why that is so. I think that that’s a big deal. I think that the emotional side of the stock investing experience is the great unexplored continent of our time. It’s hard and scary work exploring it. But the benefits that stand to be gained from putting in the effort are immense.

I wish you all good things. I hope that that helps at least a small bit.

Rob