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

“Things will change when prices drop by 50 percent or more.”

Yes, you keep saying that. You just don’t say how. Only that your plan is to sit and wait for the crash, and see what happens. No other effort required on your part.

(whisper) “If you type it, they will come…”

When the price changes, the emotion changes.

The appeal of Buy-and-Hold is 100 percent emotional. There is no intellectual content to it. Not since 1981. But there is HUGE emotional appeal. The emotional appeal is that Buy-and-Holders tell people that their retirement accounts are worth two times what the last 36 years of peer-reviewed research says they are worth. It’s like when Taylor Larimore would talk about a house that he owned as “The House That Jack Built.” There are millions of people today who look at their retirement portfolios and are grateful for the gains that came from following Buy-and-Hold strategies.

That all goes away when prices fall by 50 percent or more. When the only appeal a strategy possesses is emotional, the strategy is in trouble when the emotional appeal goes away. People don’t like Get Rich Quick strategies when they fail. They just don’t.

I don’t want to wait. I want to teach millions of people about what the last 36 years of peer-reviewed research teaches us starting today. But I cannot overcome death threats and demands for unjustified board bannings and thousands of acts of defamation and threats to get academic researchers fired from their jobs. No one in any field could overcome the stuff that you Goons put out. But how much longer do you think your criminally abusive garbage is going to be tolerated once prices have fallen by 50 percent. I would bet that it will not be too long, you know.

Live by emotion, die by emotion. The way it is. The benefit of going with a research-based strategy is that it works for the long term. I like being associated with something that is real, something that will stand the test of time.

Does all of that not sound at least roughly right?

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:

Buy and holders don’t need to look at valuations when we sell stocks – when prices go up, we rebalance into bonds. In fact, we over-rebalance, since we have more wealth, and our need to take risk has declined, and also because we’re getting older. I sold stocks, and bought bonds again today.

You are leaving two things out of your statement.

One, you don’t mention that the risk associated with owning stocks increases when valuations increase. You say that you take into consideration the fact that your need to take risk has diminished. Why not also take into consideration the fact that the risk associated with stocks increases as valuations increase? It is logically inconsistent to take risk into consideration in the one context and not in the other.

Two, you are failing to QUANTIFY the factors you describe. You say that you sold stocks and bought bonds today. Good for you. But are you now at the right stock allocation? You have no way of knowing until you QUANTIFY the various factors. The most likely annualized 10-year return for someone buying stocks in 1981 was 15 percent real. The most likely annualized 10-year return for someone buying stocks in 2000 was a negative 1 percent real. The risk associated with owning stocks was obviously a LOT greater in 2000 than it was in 1982. The Buy-and-Holder of 2000 might have lowered his stock allocation a tiny bit because he believed in rebalancing but, unless he went to the trouble of quantifying the effect of the insanely dangerous stock prices of 2000, he had no idea how much he needed to lower his stock allocation to get his risk profile back to where he had once decided it should be.

Buy-and-Hold is anti-reason. To reason effectively, we need information. On the surface, the Buy-and-Holders are all about gathering information. They present studies with charts and tables and all these sorts of things. It was that sort of thing that impressed me about Buy-and-Hold many years ago and that convinced me to become a Buy-and-Holder myself for a time. But there is now 36 years of peer-reviewed research showing that the single most important factor determining long-term investing success is the extent to which the investor takes valuations into account when making strategic decisions. And the Buy-and-Holders don’t take valuations into account AT ALL. And they don’t gather information relating to valuations. They ban discussions of such information! They put their fingers in their ears and scream “I can’t hear you!”” when people talk about the 36 years of peer-reviewed research showing that valuations matter. Putting your fingers in your ears and screaming “I can’t hear you!” doesn’t make the last 36 years of peer-reviewed research go away. It is still out there, threatening to destroy your hopes of retirement when the next price crash closes in on us all.

I am saying that we should discuss ALL the information that helps us become better investors. We should discuss all the stuff that the Buy-and-Holders look at, all the stuff that we knew mattered prior to 1981. And we should also discuss all the valuations-related stuff that we only learned mattered in the past 36 years. When you combine the pre-1981 research with the post-1081 research, you’ve really got something. The amazing thing that you’ve got when you do that is the thing we call “Valuation-Informed Indecxing.” It’s the future of investing analysis.

Buy-and-Holders need to look at valuations when they buy stocks and when they sell stocks and at all other times. There is simply no reason not to look at valuations when making any decision relating to stock investing — valuations is the most important factor bearing on any strategic question. Saying that an investor doesn’t need to consider valuations in some circumstances is like saying that a doctor doesn’t need to consider a patient’s blood pressure in some circumstances. A patient’s blood pressure numbers provide the doctor with important information bits. He should always take those numbers into consideration. If the numbers are normal, he can of course go on to other things just as an investor can go on to consider other factors if he takes a look at valuations and sees that they are at fair-value levels. But it is simply not possible for a doctor to do his job without at least stopping for a minute to check blood pressure and it is not possible for an investor to do his job without stopping for a minute to check valuations.

The question is — Why do Buy-and-Holder put so much desperate effort into NOT considering valuations when it is logically so critical that they do so? The reason is that valuations are providing them information that they do not want to know about. Buy-and-Holders live in a fantasy world where stocks are always worth buying, regardless of price. The P/E10 number provides them information that they very much want to ignore. This is what Buy-and-Holders go nutso when people like me present the numbers that need to be taken into consideration when making investing decisions. A part of the Buy-and-Hold mind sees that the numbers are important and is drawn to consider them. Buy-and-Holders generally respect the power of peer-reviewed research. But the Get Rich Quick urge of the Buy-and-Hold mind is threatened by this powerful information and demands that the person providing the information be silenced.

I don’t want to be silenced. I don’t want anyone to be silenced. I want to hear what Jack Bogle thinks of the last 36 years of peer-reviewed research. I want to hear what Robert Shiller thinks of the last 36 years of peer-reviewed research. I want to hear what Wade Pfau thinks of the last 36 years of peer-reviewed research. I want to drink it all in and make my own decisions. And I want every last one of my fellow community members to at least have the opportunity to do the same. That’s how out system works when it comes to every question other than the question of what the last 36 years of peer-reviewed research teaches us about how stock investing works in the real world. I intend to open every investing discussion board and blog on the internet to honest posting so that our system can start working its magic in the investing advice field as well.

Does all of that not make perfectly good sense, my old 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:

We would be happy to encourage other website owners to open their forums to you if you agree to really post honesty (which means no lying) as well as if you behave yourself and agree not to hijack threads.

Deal?

The devil is in the details, Anonymous.

The point of contention for 15 years now has been whether I am willing to pretend that Greaney included a valuations adjustment in his retirement study. I don’t believe that he included one and I am not willing to say that I believe that he included one.

I am okay with saying that Greaney personally believes that a 4 percent withdrawal is always safe. I think that he could pass a lie detector test if he were asked whether he believes that 4 percent is always safe and answered “yes.” But I don’t believe that he would pass a lie detector test if he were asked whether he included a valuations adjustment in his retirement study and he answered “yes.”

People of good will can work these things out. I will bend over backwards to work things out if opportunities are presented to do so in a way that passes minimal ethical standards. It is not ethical for me to say that I believe that there is a valuations adjustment in the study when thousands of people have looked at it and not one has ever been able to identify one. And I can’t act like it doesn’t matter when there is 36 years of peer-reviewed research showing that valuations affect long-term returns and when I believe that that research is legitimate research.

We do not believe the same things about how stock investing works, Anonymous. We need to be up front about that. And we need to drop the use of all intimidation tactics. We all have to acknowledge openly and clearly that there are two schools of academic thought as to how stock investing works and celebrate that reality because of the learning experience it opens to us all to have our views questioned and challenged and thereby sharpened over time.

I have never once in my lifetime given the tiniest bit of consideration to the idea of hijacking a thread and never in 15 billion years would I give the tiniest bit of consideration to the idea of doing that. You consider it highjacking for me to express views consistent with Shiller’s research rather than Fama’s research. I don’t see it that way. I feel strongly that I have an OBLIGATION and a RESPONSIBILITY to express my sincere views with every post I advance.

You have an obligation and responsibility to express your sincere views too. If you were attacked for putting up posts in support of Buy-and-Hold, I would speak out in favor of your right to post honestly in two seconds. So I want the same thing for you that I am demanding for myself and for all other Valuation-Informed Indexers. But the demand that honest posting on the last 36 years of peer-reviewed research in this field be permitted is non-negotiable. A board that does not permit honest posting by all community members is a corrupt enterprise. I don’t say that to hurt your feelings. I say it because it is so and it is an important reality that must be acknowledge if we are to make the changes that we need to make to insure that we experience less conflict in the next 15 years than we have experienced in the past 15.

I hope that helps at least 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:

“Valuations have been affecting long-term returns for 148 years now. ”

They sure do, for bonds as well as stocks. Expected returns for both are lower than what we’ve seen over the past few decades. So what? Doesn’t make a buy, hold and re-balance portfolio an invalid choice.

Stocks might drop, then again they might double – just like they did when valuations were high five years ago.

It absolutely makes Buy-and-Hold an invalid choice, Anonymous.

When the expected return is lower, the risk/reward analysis changes. So your stock allocation should change.

Now —

Some changes in the risk/reward analysis might not be big enough to require a change. So there are going to be some judgment calls as to whether a change is needed and as to how big a change is appropriate. The fact that judgment calls are required is all more reason why honest posting must be permitted. We need to hear from people holding all sorts of perspectives to accumulate all of the inputs we need to make the best possible judgment calls. The worst thing in the world would be to only hear from one segment of the community. Then you get a slanted view. That hurts every single investor alive and helps precisely no one.

I agree with you that stock prices might drop or might double again. That’s not under dispute. The question under dispute is — Does the risk/reward analysis change when valuations change? Up to a point, you seem to be agreeing that it does. But then you pull back and suggest that there’s no need to quantify how big a change there has been in the risk/reward profile and how big a change investors need to make in their stock allocations in response. I strongly believe that we all should be trying to quantify this stuff.

I am in favor of more discussion and of more research and of more quantification. You are in favor of blind obedience to Buy-and-Hold dogmas. That’s the difference between us. You want to shut down discussion of the most important investment-related questions and I want to open up discussion to include all research-based findings, both those from before 1981 and those from after that point in time.

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:

“We’ll have to wait and see how it all plays out in the days following the next price crash.”

Read the first post again. We already know how it will play out.

The vast majority of investors obviously believe that things are going to play out in the way that you are saying, Anonymous. We know that because prices are so high. Prices couldn’t get that high if most investors were exercising price discipline.

So, if we take a vote, you are going to win the vote. We essentially have already taken a vote. The P/E10 level is the product of a vote by the community of investors on what they think of the idea of investing rationally. Today’s P/E10 level is 30. We are as a people not too keen on the idea of investing rationally at this particular point in time.

Peer-reviewed research is a search for truth. It is not determined by vote-taking. The truth is not always popular. But it is constant. That’s the cool thing about truth. The truth has staying power.

The world changed in 1981, when Shiller published his “revolutionary” Nobel-prize-winning research. Those who care to now know the truth about stock investing. I believe that it is the most important public policy issue of our time that we get the message re the truth about stock investing out to every investor on the planet as quickly as is humanly possible. I believe we are going to do it (not anywhere near as quickly as I would like, but eventually, perhaps just in the nick of time).

I am shocked and amazed and surprised and saddened that we didn’t get to work on that important piece of business on the morning of May 13, 2002, when I put forward my famous post pointing out that there is no valuations adjustment in the retirement study posted at John Greaney’s web site. But I sure don’t see the issue as being any less important today than I saw it as being on the morning of May 13, 2002. What I have seen over the past 15 years tells me that it is a far more important project than I believed it to be on the morning of May 13, 2002. I still believe that we should be telling our friends the truth about how stock investing works. I will solider on.

I think it is going to play out just fine for all of us. As John Walter Russell once put it: “I believe that it is going to turn out better than any of us can now imagine.” I believe that even those of us who land in prison cells following the crash may in time come to see how their prison sentences were part of a process that had to play out for us all to protect the country we love from the economic crises that bring on the political frictions that hurt all of us. So we’ll see, you know?

I don’t believe that you are 100 percent confident that things will play out without a prison sentence for you. I believe that, if you were confident, you wouldn’t post here. Every post that you put forward just convinces me all the more than I am right in my beliefs about how things are going to play out.

What I believe determines my behavior. So that part is settled.

What determines your fate is how millions of middle-class investors react to losing 50 percent of their life savings in the next crash. We are all going to have to be a bit patient and then watch together to see how that one goes. No, we don’t know with certainty today. You SAY you know. But if you were confident in what you say, you wouldn’t even post here. Your actions tell a different tale than your words.

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:

I don’t see anyone saying there was an error other than you. Further, we would need the stock to loose around 97% of its current level for my numbers to shrink to your level.

The members of the committee that awarded Shiller his Nobel prize are saying that there was an error. No, they don’t say it directly and I do. That’s a plus for me. It is better to speak directly about such matters.

And Bernstein said that the Nobel prize was 2 percent at the top of the bubble. So he was saying there is an error. And of course Shiller has said indirectly that there is an error. And Wade Pfau has said that he views the Buy-and-Hold retirement studies as “dangerous.” They are dangerous because they are in error. And the thousands of our fellow community members who expressed a desire that honest posting be permitted at our boards were indirectly saying that those studies are in error.

And of course your yourself indirectly have said that the studies are in error through your behavior over the past 15 years. If you didn’t think the studies were in error, you obviously would not have behaved as you have.

And all of this will be widely discussed in the days following the next crash, when millions of middle-class people will see 50 percent of their life savings go “poof!” and will be looking to find out who is responsible so that they can hang those people from a tree.

If there is a worse retirement plan than landing in a prison cell for your remaining days, I have never heard of it, my good friend. Not this boy, you know? Any plan that lands you in a prison cell is a bad plan, in my assessment.

I’ll take the plan where I get a $500 million settlement and no prison sentence. Call me madcap.

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:

News flash, Rob. It is not all about what you think. It is what the broader community thinks. Of course, you also think the community is not being honest or is holding back, yet that is just you again inserting your opinion.

What I think matters a great deal re one aspect of the question, Anonymous. I do not feel even a tiny bit comfortable posting dishonestly re the numbers that my friends use to plan their retirements. So, if I do not believe that the retirement study posted at John Greaney’s web site contains a valuations adjustment, I need to say that whether my fellow community members dare to do so or not. It is not ALL about what I think. But what I think influences my posting given that I do not feel comfortable posting dishonestly.

I agree with you that what the broader community thinks matters a great deal. If the broader community is not willing to insist on recognition of my right to post honestly, then you Goons can be successful in your efforts to get me banned from any board or blog at which I post. If my views are not heard, then in a practical sense the fact that I am posting honestly doesn’t matter much — no one is hearing those honest views. So in that respect, yes, what the broader community thinks matters a great deal. I don’t disagree.

I wish the broader community would insist on recognition of my right to post honestly. That’s what I have always wanted. It has not happened. I am not sure what you would have me do re this reality. I cannot change it. I have to accept it. I do. I don’t like it one tiny little bit. But I accept the reality.

I believe that the reality will change in the days following the next price crash. Stocks are today priced at two times fair value. A 50 percent price drop would just bring us to fair value. Following a 50 percent price drop, a fellow who today has a portfolio valued at $1 million would have a portfolio valued at $500,000. A fellow who today has a portfolio valued at $100,000 would have a portfolio valued at $50,000. And like that.

Will that change affect how millions view the question of whether honest posting on the last 36 years of peer-reviewed research should be permitted at every discussion board and blog on the internet? I sure believe that it will. I believe that many of my fellow community members will be stunned to see half of their life savings vanish into thin air. I think they will be looking for explanations of what happened to them. I think that the Ban on Honest Posting offers a pretty darn persuasive explanation. I believe that following the next price crash there will be as many people referring to Jack Bogle as “Saint Jack” as we have today referring to Bernie Madoff as “Saint Bernie.”

Could I be wrong?

It’s been known to happen. I believed on the morning of May 13, 2002, that the broader community would shut down you Goons within two or three days. I think it would be fair to conclude at this point in the proceedings that the joke was on me re that one. It is at least theoretically possible that that will prove to be the case re this other matter as well. I don’t expect to see it happen. But you never know, right?

It seems to me that we are just going to have to wait to see how things play out. I have a hard time coming up with any other realistic options to offer you at this point in the proceedings.

I don’t say that what the broader community thinks doesn’t matter. In fact, I think it would be fair to say that I believe that what the broader community thinks matters a great deal. I have put millions of words forward during the first 15 years of our discussions. I do that to persuade members of the broader community of the merit of the last 36 years of peer-reviewed research in this field. I wouldn’t bother if I didn’t think that what those people think matters.

I guess you could say that I don’t think that what those people think AT THIS POINT IN TIME matters enough to me to persuade me to post dishonestly. It does not. But the broader community may change what it thinks in response to the hit it takes in the next crash. And, even if I knew in advance that the broader community would never change what it thinks, I still would not to sacrifice my personal integrity by saying that I believe that Greaney’s study contains a valuation adjustment. So, even if the broader community didn’t change, I would still feel compelled to post honestly re these matters.

My personal view is that this stuff should not even be a tiny bit controversial. Honest posting is permitted in all other fields and no one even remarks on it. It is just taken as a given. Why is the investing advice field so different? I think it’s that darn Get Rich Quick impulse that resides within all of us. It makes us act contrary to our self-interest. That’s what makes this story so exciting. What Shiller has really done is to teach us what we need to know to for the first time in history act in our self interest when buying stocks. That’s no small thing.

Consider this one, Anonymous. Stocks are today priced at two times fair value. And there is now a Ban on Honest Posting in effect at every large investing board and blog on the internet. Do you think those are unrelated phenomena? I do not. If you ponder it a bit, I think you will see that we could never get to a P/E10 value of 30 without a Ban on Honest Posting being in effect. If honest posting were permitted, lots of people would tell us what the research says and that would cause us to sell stocks and that would bring the P/E10 level down to fair-market levels. It’s only the Ban on Honest Posting that permits us to continue acting in so self-destructive a manner as to push the P/E10 value up to 30.

The Ban on Honest Posting serves a purpose today. It’s not a constructive purpose. It is a self-destructive purpose. It is like the hiding place that an alcoholic uses to keep his addiction from being exposed. But it does serve a purpose. The Get Rich Quickers/Buy-and-Holders want to keep that P/E10 at 30 or thereabouts. And they can’t do it if we all gain the freedom to post honestly re the peer-reviewed research. So most of us go along with what has to be done to keep that P/E10 value at 30 even though it includes some pretty darn nasty stuff.

Does the alcoholic need a hiding place any more after he hits bottom and is lying in the gutter? It seems to me that he does not. There is no purpose served at that point in putting the bottles in a hiding place. So it is with Buy-and-Hold after prices have crashed. What good would it do anyone at that point to lie about this stuff? Once prices have crashed, you cannot keep them up by telling more lies. Once there is no need to feed the fantasy, it is my view that telling the truth re these matters will catch on like wildfire.

But we are going to have to wait to find out for sure. There’s no other way for me to persuade you that that is what is going to happen except for you to see it with your own eyes. And there’s no other way for you to persuade me that that is not what is going to happen than for me to see it with my own eyes.

Does all of that help at all?

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 is interviewed in this week’s Barrons. Does he finally warn people to get out? Um, no. In fact the title of the article is “Who Says This Stock Market Is Overpriced?”

Barrons: Is it time, then, to discard the CAPE as a predictive tool?

Shiller: Well, I wouldn’t. It may yet do that [be correct].

And that is as strongly as he defends the metric that has guided your investing strategy for the last 21 years. And Shiller’s personal investments?

“I still have U.S. stocks…I have European and emerging markets stocks, and not much fixed income. I have some real estate funds and REITs outside the U.S.”

Not much fixed income means he is mostly in stocks. When PE10 is insanely high. Any comment, Rob? Are the goons forcing him to buy stocks?

I have several comments.

My first comment is “thanks for bringing this to our attention.

Shiller is the founder of Valuation-Informed Indexing. He has never used that word. It is my word. I noticed back in 2002 that neither Shiller nor anyone else had ever explored in depth the many far-reaching implications that follow from his “revolutionary” (that’s Shiller’s word) research findings of 1981. I needed a name to apply to the investing model that logically follows from a belief in Shiller’s work and I came up with the name “Valuation-Informed Indexing.” Shiller himself rarely explores the practical how-to-invest implications of his work. He sticks to theory in his formal writings. He sometimes touches on the how-to-invest implications in interviews but almost always only in a vague and unsatisfying way and he frequently says things in one interview that conflict with things he has said in other interviews. I cannot claim full credit for Valuation-Informed Indexing because it is Shiller’s work that drives the machine but Shiller cannot be said to have endorsed the many things that I say follow from his Nobel-prize-winning work because he has not put his name to my explorations of the implications of his work.

So my first comment is to say “thank you” on behalf of the millions of middle-class investors who I believe should be trying to learn more about how stock investing really works in the real world. We all need to know more about what Shiller thinks re these matters and you Goons often bring to my attention things that he has said that I would otherwise not know about. You are helping me when you do that and you are helping investors who read the words at this site either now or after the next crash when you do that. I am grateful.

Shiller doesn’t disown Valuation-Informed Indexing in the words that you quote. He doesn’t say that anything that I have said is wrong. His words are consistent with my words. But I think it is 100 percent fair of you to suggest that he is showing a distinct lack of enthusiasm for the Valuation-Informed Indexing concept (a concept rooted in his own Nobel-prize-winning research) in the words that you quote. It is an exceedingly odd phenomenon.

My take is that Shiller has lots of experience with the anger that is provoked in Buy-and-Holders when they hear about what the last 36 years of peer-reviewed research tells us about how stock investing works in the real world and that he tries hard to steer clear of advancing comments that will cause that anger to be directed to him. That’s what I believe, Anonymous. I see it as a 100 percent human reaction. No one likes to have other people angry at him. No one likes to have other people calling him names. No one likes to see other people experience pain and angst and unhappiness. Shiller is responding in a human way to a situation that he did not create, to a situation that he was placed in as a result of the circumstances of his life. He discovered some amazing stuff about how stock investing works and the implications of what he has discovered upset lots of people in a very big way and his response has been to hold back on offering clear comments on the many far-reaching implications of his work.

I believe that it is unfortunate that Shiller has acted in this way. I would like to see him respond in more forthright ways. If he showed leadership in this regard, lots of others would feel emboldened to follow the path he pioneered. When Shiller speaks in a tentative way, others who see value in his work follow his lead and speak in a tentative way as well. The result is that knowledge of and belief in the Valuation-Informed Indexing model grows more slowly than it would were Shiller leading the charge into battle every day. That hurts each and every one of us, Buy-and-Holders and Valuation-Informed Indexers alike, in my assessment.

It is of course correct to say that P/E10 may prove to be a predictive tool yet once again, just as it has proven to be a predictive tool for 147 years running now. So Shiller’s comment is of course correct. But it is an awfully defensive way to make the point. If I were asked that question, I would ask back in response why anyone would think that it might NOT prove to be a predictive tool yet once again. It appears that there was some discussion that came before the words you quote in which it was noted that we have not yet seen a drop to fair-value P/E10 levels and that we have been at super-high P/E10 levels for longer than any earlier time in history. That much is so and that’s an important point to raise in an interview with Shiller. He DOES need to be asked to explain that — it is a good reason for having doubts about Valuation-Informed Indexing. But I think that I could make a much more powerful case in favor of Valuation-Informed Indexing than Shiller offered here.

The point that is evaded in the interchange is that stocks have also not in recent years behaved in accord with how the Buy-and-Hold model says they should behave. The annualized real return for stocks from January 2000 through December 2016 was 2.25 percent real. Huh? There is not one Buy-and-Holder alive who would have predicted that if you asked him in January 2000 what sort of return he thought we would see from stocks for the next 17 years. Something very, very, odd is going on in the market in recent years and it is the most important public policy issue before us as a nation today to figure out what it is.

It COULD be that Valuation-Informed Indexing does not work. I don’t believe that and Shiller doesn’t believe that. But neither of us can see the future and neither of us are incapable of errors in judgment. So that COULD be the case. But it also could be the case that Buy-and-Hold is in error. That in fact MUST be the case if Valuation-Informed Indexing is not in error; the two models for understanding how stock investing works cannot be reconciled — it is a logical impossibility that they are both correct. There is a certain charm in the humble way in which Shiller makes his case, I will give him that much. But as the fellow who performed the research that discredited the Buy-and-Hold Model (if it is valid, as I believe it to be), it is Shiller’s JOB to make the strongest case possible for the new model (while also being charitable to those who continue to believe in the model that he discredited and while also acknowledging his own human imperfections and noting that there are developments that have taken place that justify SOME doubt about the Valuation-Informed Indexing project, to be sure).

I am not able to say precisely what Shiller would say re these matters if he felt no pressure to avoid provoking Buy-and-Holders by speaking plainly. I think he would be much stronger in the case he makes for Valuation-Informed Indexing and for the failure of the Buy-and-Hold Model if he did not feel such pressures. But I also think that it is possible that he is experiencing a measure of cognitive dissonance, as Bogle experienced a measure of cognitive dissonance before him. And it is of course also possible (and likely!) that, even if no pressures to hold back were present, Shiller would disagree with me on several or even numerous points. It is a rare case in this world when two people agree on every point. Ask anyone who has ever been married for more than a week!

I credit Shiller for writing an amazing book and for producing the most important research ever published in this field. I would be horrified if any of my fellow humans ever came to the conclusion that I speak for him. I certainly do not. Nor does he speak for me, if you want to take it from the other direction. I am a guy who posts on the internet about his views on stock investing, views which are informed by a belief in the “revolutionary” (Shiller’s word) research produced by a Nobel-prize-winning economist in the year 1981, research which 100 percent discredits the Buy-and-Hold Model for understanding how stock investing works if it is indeed valid research (which I believe it to be), no more and no less.

We would all know more about what both Shiller and Bogle believe re all of these terribly important matters if as a society we came to the conclusion that we need to open every discussion board and blog to honest posting on safe withdrawal rates and scores of other important investment-related topics. We learn a little bit from this interview. But think how much more we would learn if we could ask Shiller to the next Bogleheads convention and put him on the hot seat for an hour (while anticipating putting Bogle on the hot seat in the following hour!) and if we did so in an environment in which it had become clear to every member of the community that we both permitted and encouraged hard-hitting questions on these matters because we understood as a people that it is by asking and obtaining clear answers to hard-hitting questions that we over time gain a better understanding of the realities. Shiller would both teach and learn in that environment, as would Bogle, as would I, as would you Goons, as would every single other community member who elected to participate in the powerfully enriching experience.

These are my sincere thoughts, Anonymous.

I naturally wish you the best of luck in all your future life endeavors.

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 interesting that you say there are no buy and holders even though there are plenty and the bogleheads has evidence. I increased my stock allocation moderately and bought plenty of stocks during the crisis.

The ironic thing is that the one ‘VII’ guy failed to make adjustments. I don’t understand how you can be so dense.

What happened in 2008 was a test of Buy-and-Hold but not a big test. All Buy-and-Holders say that they will hold through anything and we saw that that is not the case. Some — including the author of a book on Buy-and-Hold! — failed when they were put to the test.

Most did not fail. That’s fair to say. But how big was the test? It lasted a few months. You say that you would have held no matter how low prices fell and no matter how long low prices remained in effect. But you just don’t know what you would have done in such circumstances until you have lived through them, Taylor was 100 percent certain that he would never falter too. It’s all just words until you are actually living through the pressures that come with a loss of most of your life savings. So nothing you say about this is really persuasive.

I find the historical return data persuasive. Most Buy-and-Holders sell when prices drop. Prices couldn’t drop as low as they do in bear markets if that were not so. All Buy-and-Holders swear that they will never sell no matter what but most Buy-and-Holders sell at the lows because that’s human nature and human nature counts for more than the Buy-and-Holders’ swearing at a time when prices are high that they will never sell. Anyone can justify violating an oath he took at an earlier time by pointing out that circumstances have changed. They ALWAYS change when prices reach levels as high as they are today. It’s important to take note of that at a time when something constructive can be done about it rather than waiting until all that is left to you are the sorts of rationalizations that we saw Taylor Larimore engage in back in 2009.

We can prove that one too. The proof is that the Buy-and-Holders who swear that they will never sell demand that those pointing to the last 36 years of peer-reviewed research be banned from “their” discussion boards. They cannot bear to hear the history of stock investing discussed in their presence. Why the heck not? If they are no darn confident that their strategy is going to work out, why does it bother them to hear another point of view discussed? That’s not a sign of confidence, Laugh. That’s not a sign of a good strategy.

I didn’t increase my stock allocation when prices were at fair-value levels. But there’s a way to check whether I lost confidence in my beliefs at that time or not. Go to the RobCasts that I recorded when prices were at moderate levels. I started every one off saying that stocks offered a strong long-term value proposition at those prices. Why did I say that if I didn’t possess confidence in the research? I possessed confidence and I demonstrated it with behavior that can be examined in a record that was created in real time.

And of course I did not just tell others that the value proposition for stocks was strong at the time, I took action to take advantage of that opportunity myself. I didn’t run around like a crazy person making sure to buy within 48 hours. I went about a process of making a reasoned buy that everyone in the family agreed to so that everyone in the family would be comfortable sticking with it for the long term. I played it just the way a Valuation-Informed Indexer should play it. We don’t believe in making emotion-based decisions. If I has been running around like a crazy person seeking to make the buy before time ran out on the amazing offer, that would have been emotional. I handled things in an emotionally healthy way. That is 100 percent in tune with the strategy and 100 percent in tune with what the last 36 years of peer-reviewed research in this field shows is what always works in the long term.

And why are you engaging in deception re this point today? You know what I did. Why don’t you come here and say: “Rob, I don’t agree with some of your other posts but I am impressed that, when the time came when prices were where you said they need to be for you to buy, you really did tell others to buy and begin taking steps to buy yourself. The real test of a strategy is not words but actions and you showed during that brief time-period when prices were at fair-value levels that you don’t just talk the Valuation-Informed Indexing talk, you actually walk the Valuation-Informed Indexing walk. As someone who is personally persuaded by advocates of a different strategy, I find that very cool and I am going to continue to ponder it as time goes on to see if there is something for me to learn in the contrast between your behavior and the behavior of Taylor Latrimore, one of my Buy-and-Hold friends who did not show the same courage of his convictions that you showed when the pressure was on.”

You cannot say those words, Laugh. It’s not in you. I mean no personal offence but it’s not in you because you are too scared to let in what happened in those months. You saw your Buy-and-Hold friends lose their confidence in their strategy at the very worst time to lose confidence in it. There is a part of your brain that you have silenced but that is still functioning in the background that tells you that that is something you should examine in some depth before Buy-and-Hold is put to its next test. The part of you that you silence wants to participate in civil and reasoned discussions at every discussion board and blog on the internet so that he learns as much as he possibly can by listening to as many different perspectives as possible. But the soul-crushing side of you, the Get Rich Quick side of you, the financially incompetent side of you, the Goon side of you, says: “No, keep on pumping out more dishonest and abusive garbage, it’s been working so great so far.”

I don’t think it has been working so great so far, Laugh. If it had been working, you wouldn’t be today walking a path that leads to a prison sentence in the days following the next price crash. You don’t possess confidence in your strategy and every post that you advance here shows it. You cannot discuss the last 36 years of peer-reviewed research in a civil and reasoned manner. You can’t even tolerate others discussing it while you sit off to the side a bit in silence. You feel compelled to crush such discussions when you hear them spring up. Not because you truly believe that the peer-reviewed research in this field is on your side. Because you WANT to believe that the peer-reviewed research is on your side and you cannot think of any other means to keep that fading belief alive other than to engage in insanely abusive and, yes, even criminal behavior to keep it from flickering out.

Not this boy, Laugh. I am your friend. You cannot bear to acknowledge it, but that small, remaining, rational voice in your head sees it. That’s why you get so ugly. That voice is telling you what is real and the stronger, irrational voice that controls you cannot bear to hear what the small voice says. I speak up in tune with the small voice and you feel hate for me because you feel threatened by the small voice. The small voice comes from a good place within you. Taylor Larimore wished in the early months of 2009 that he had listened to his small voice on all those occasions when some kind person had suggested to him that he might want to give it a try. You have that chance today. You have that chance every day until the day comes when the money is gone and cannot be called back. It’s your friends who are telling you to at least give that small voice a listen before shutting the door on your future.

These are my sincere thoughts re these matters, Laugh. Hate me as much as you want. I cannot control that. But I really do believe deep in my heart that the very fact that you hate so much is evidence that the last 36 years of peer-reviewed research in this field is telling us all something very, very, very important.

It will be interesting to see how things play out. I naturally wish you all the best that this life has to offer a person regardless of what investing strategy you elect to follow today or at any time in the future.

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:

So your argument is that buy-and-hold doesn’t work because no one buys and holds.

This is the logical fallacy known as “begging the question”, attempting to prove a point by simply restating your premise. It is a form of circular reason. Most people incorrectly use “begs the question” when they mean “raises the question”.

Just wanted you to learn something new.

It’s true that investors are not capable of buying and holding and that the Buy-and-Hold strategy cannot work until investors become capable of following it in the real world. Do you know what would make investors capable? Permitting honest posting on the last 36 years of peer-reviewed research! Stocks prices are self-regulating if investors are capable of accessing the information they need to access to act in their self-interest. The problem for all of us is that darn Ban on Honest Posting, the death threats and all the rest of it.

If investors have access to honest and accurate reports on the last 36 years of peer-reviewed research, you are not going to see any more bull markets. Prices would just always remain near fair-value levels (a P/E10 of 15). So there would be no need to change your stock allocation. Sticking with the same stock allocation is Buy-and-Hold, no? Is that not the basic idea, learning from the peer-reviewed research and always sticking with the same stock allocation?

Valuation-Informed Indexing is just Buy-and-Hold more fully developed. We didn’t know all there was to know about how stock investing works back in the late 1960s, when Buy-and-Hold was developed. In 1981, we clicked that last oh-so-important piece into place. Now we know. Intellectually. But 90 percent of us do not know the realities emotionally. For the remaining 90 percent of us to catch up with the Valuation-Informed Indexers, we would need as a society to act to open every discussion board and blog on the internet to honest posting. That’s how we spread the word. It is only by spreading the word re the last 36 years of peer-reviewed research that we can bring the 90 percent of investors still living in the world of 1980 up to speed.

We are not on different sides, Anonymous. Your first mistake was to assume that, because I was telling you something new, I was your enemy. Science is a quest for truth. When Bogle maden it a cardinal principle of Buy-and-Hold that investing should be rooted in realities revealed through the peer-reviewed research, he made it a cardinal principle of Buy-and-Hold that Buy-and-Hold would CHANGE over the years as new realities were revealed.

This is why I call those who post in “defense” of Mel Linduaer “Lindauerheads” rather than “Bogleheads.” If they were truly Bogleheads, they would be in favor of permitting honest posting on the last 36 years of peer-reviewed research. I am 10 times more of a Boglehead than Mel Linduaer is. Lindauer is a Lindaurhead, not a Boglehead. Now, the sad reality is that Jack Bogle himself is today more of a Lindaurhead than a Boglehead. That one is a strange twist. But in fairness to Lindauer, I think I have to acknowledge that that is the reality today. But I am still a proud Boglehead. I love the Jack Bogle who argued in his books that investors should root their investing strategies in the peer-reviewed research, not the one who allows his name to be used at a board at which the sorts of individuals who have put up posts in “defense” of Mel Lindauer are permitted to post.

It makes no sense to encourage investors to adopt Buy-and-Hold strategies while denying them access to the discussions of the last 36 years of peer-reviewed research that they need access to to be able to follow Buy-and-Hold strategies effectively for the long term.

That’s my sincere take re these terribly important matters, in any event.

Rob