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

Hi Rob,

I ask these questions because I believe you have derived implications from Shiller’s work that are unfounded. I’ve tried to encourage you to take not just my word for it but to seek out the opinion of others whose opinions you respect. And, importantly, to do so with enough humility and intellectual honesty to accept their reaction at face value rather than constructing an intellectual Rube Goldberg contraption that allows you to dismiss them. Many of my prior comments to you toward this end were deleted.

I’m not familiar with some of the statements you ascribe to Shiller. But I don’t find it shocking in the least that, for instance, he believes stock prices are a bit overvalued yet he still holds a healthy allocation. That’s because he recognizes something important–the future is unknowable. Just because something has happened in the past does not mean it wil happen tomorrow. Shiller invests with a healthy balance of skepticism and prudence.

I’ve tried to encourage you to take not just my word for it but to seek out the opinion of others whose opinions you respect. And, importantly, to do so with enough humility and intellectual honesty to accept their reaction at face value rather than constructing an intellectual Rube Goldberg contraption that allows you to dismiss them.

You are asking me to cancel out what my brain tells me and to betray my country because of intimidation tactics used by Wall Street Con Men to silence those who ask hard questions, Anonymous. This I cannot do.

That’s because he recognizes something important–the future is unknowable.

That’s the fundamental question on the table — Are future stock prices knowable or not? If they are not knowable, I agree with you that Buy-and-Hold is the ideal strategy. On the other hand, if they are knowable, Buy-and-Hold is the most dangerous Get Rich Quick Scheme ever concocted by the human mind. It has caused four economic crises and is in the process of bringing on the Second Great Depression.

The “revolutionary” (Shiller’s word) aspect of Shiller’s research is that he showed that stock prices are knowable in the long term. That was something new. The entire Buy-and-Hold Model was based on an opposite belief.

The most important economic and political issue before our country today is whether the Buy-and-Holders are right or whether the last 33 years of peer-reviewed academic research in this field is right. I will continue to do what I can to get the internet opened up to honest exploration of this question.

Just because something has happened in the past does not mean it wil happen tomorrow.

It does not.

But 140 years of past is a lot of past.

And please remember that the last 33 years of peer-reviewed academic research shows that Buy-and-Hold worked for zero out of those 140 years.

We have to invest in some way. When we have one strategy that has worked for 140 years out of 140 years of stock market history and another that has worked for 0 our of 140 years of stock market history, I feel more comfortable going with and recommending the former over the latter. Call me madcap.

Shiller invests with a healthy balance of skepticism and prudence.

And incoherence. To say that stocks will not be safe to invest in again until the P/E10 value goes below 10 and then to go with a 50 percent stock allocation when that has not yet happened is incoherent.

Shiller is a great man. I rank him even higher than Bogle. But, like Bogle, he is a man. And, like all men, he get things wrong from time to time. His friends are the ones who tell him so and thereby help him on his way to a better understanding and even greater accomplishments.

My sincere take.

Rob

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

Question for you Rob. If Shiller’s actions indicate that his interpretation of his revolutionary research differ from your interpretation, is more likely that difference is attributable to Shiller being disingenuous for fear of being spoken ill of on finance blogs, or that you’ve mis-interpreted the implications of his work?

Thanks for asking an intelligent question, Curious.

You are referring to Shiller’s recent statement that he is today 50 percent in stocks. I am personally at zero stocks and I have said that the typical middle-class investor should today be going with a stock allocation between 20 percent and 30 percent, based on Shiller’s findings and the 33 years of peer-reviewed academic research that have followed.

It’s certainly possible that I have misinterpreted the implications of Shiller’s work. I did not go to investing school. I have never managed a big fund. I am one of the flawed humans. So people certainly need to understand that one possible explanation here is that I have messed up. I don’t think that’s the case. But then I wouldn’t, would I?

I will make the argument for the case that I have NOT messed up. I am not the person to talk to for hearing the case that I HAVE messed up. Those who believe that I have messed up should make that case.

Shiller has a long record of giving odd responses when asked about the practical implications of his “revolutionary” (his word) findings. In early 2009, he said that investors should stay out of stocks until the P/E10 value dropped below 10. We have not dropped below 10 since then. So Shiller is not following his own advice in going with a 50 percent stock allocation. Do you not find that odd? I sure do.

There’s another contradiction revealed by Shiller’s statement that he is at 50 percent stocks today. A few months ago, Shiller predicted that there will be a crash in 2014. That means sometime in the next nine months. He foresees a price crash and he is at 50 percent stocks? Does that make even a tiny bit of sense? It does not.

Shiller clearly does not know everything, Curious. I obviously love the guy. “Irrational Exuberance” is my Bible. But the guy obviously has not put all the pieces together.

You suggest that the only alternative to me being wrong is that Shiller is being “disingenious.” I don’t agree with that. I don’t think he knows all the answers and is just not revealing them to us. I do indeed think there may be some of that going on. There is a high price to be paid for speaking frankly about these matters. I believe that the Social Taboo holds Shiller back, that he does not say everything he believes because he fears the smears that would be directed at him if he did. He’s like all the rest of us in that regard.

But I also believe that Shiller does not know it all. Shiller is one of the humans and we humans learn by talking things over. We learn through give and take. We unearth puzzles and then we offer our thoughts as to the resolution of the puzzles and then we get some feedback that helps us figure out if we are on the right track or not and so on. That’s how it is done. That process is not taking place today. EVEN FOR SHILLER.

He no doubt has theories on certain questions. But until there is widespread and open and frank discussion of all these matters, he is not going to be able to do his best work. We have as a society crippled him. And that hurts us in a big way. We have also crippled Bogle, to be sure. And of course it is true that I am crippled as well. I would do better work if Shiller were being challenged on his contradictions on a daily basis and if Bogle were being challenged on his contradictions on a daily basis. I would learn from the discussions that would follow and I would be better able to do good work myself as a result. So would Bogle. So would Shiller. So would everyone else.

You challenge me daily to explain everything that goes on in the world of stock investing that seems a bit odd but you never challenge anyone else. Why don’t you start a thread at the Bogleheads Forum about Shiller’s contradictions and see if anyone there can figure things out better than I can? Then please start a similar thread re Bogle’s contradictions. Stop trying to put all the weight on me. I am just some fellow who figured out how to get his words posted to the internet. I don’t claim to be an expert. Bogle does, Shiller does. Those guys should be held to a higher standard than me and you are not today holding them to any standard whatsoever.

Yes, Shiller is afraid to speak out in perfect frankness. If he were not afraid, why would he have published a book that contains only two paragraphs on the how-to questions? Those are the questions of greatest interest to most book buyers. He refrained from addressing those questions because he fears the reaction he would get if he addressed them. It may be that he is not even personally aware of this. It may be that he tells himself some other story. But, yes, I believe that that is a big part of the explanation of the odd behavior.

But I am virtually sure that another big part of the explanation is that he has not put all the pieces of the puzzle together yet. That’s because he has not had enough discussions about his tentative beliefs to check them out and to revise them and to gain confidence in them. He’s like the vast majority of experts in this field in that respect. And it is killing us that that is so!

We should want Shiller devoting all his mental energy to these questions. And we should want that from Bogle. And we should want that from thousands of others. We start getting all the good stuff when we give ourselves permission to have open and free and frank and honest discussions on the implications of the last 33 years of peer-reviewed academic research.

I have tried for 12 years to get the ball rolling. That is my great “crime.”

Rob

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

Rob, Shiller never called it a Ponzi scheme.

> You’re wrong, Anonymous. You need to read the book. And lots of others need to start talking more frankly about the difference between the model rooted in Fama’s research (Buy-and-Hold) and the model rooted in Shiller’s research (Valuation-Informed Indexing). Both Fama and Shiller were awared the Nobel prize. They teach opposite things. So they can’t possibly both be right.The most important economic and political issue before us today is the question of whether Fama or Shiller is right. We should be discussing that at every board and blog on the internet every day. We all need to know the answer to this one. The only possible way to figure it out is to talk it over. Say that Bogle truly believes in Buy-and-Hold (I believe he does). He should get up on stage, talk about the arguments that Shiller and I make as to why Buy-and-Hold is a Ponzi scheme and then respond to them. Then all the people listening in get to decide who is right and how to invest their retirement money. That’s how our system works. Shiller identifies his findings as “revolutionary.” Please tell me one way in which Buy-and-Hold has changed as a result of these revolutionary findings. There is not one. Buy-and-Hold today is the same thing as it was before Shiller published his research or wrote his book. Going by how you Buy-and-Holders act, one would think that nothing has happened. Your claim that Shiller has not identified Buy-and-Hold as a Ponzi scheme lacks credibility because you cannot identify any way that anything that Shiller has said has had any effect on anything. So far as the Buy-and-Holders are concerned, Shiller has never said anything that wasn’t known to the Buy-and-Holders long before Shiller published his research. I say otherwise. I say that Shiller is right that his findings are “revolutionary.” I say that Shiller’s research has changed everything we know about how stock investing works in a fundamental way. I say that Buy-and-Hold needs to be entirely redone to reflect the last 33 years of peer-reviewed research in this field. And I say that I have every right to talk about the implications of Shiller’s findings on every discussion board and blog on the internet. The continued promotion of investing strategies that have been entirely discredited by the academic research for three decades now is killing us. We need to move on. There are millions of people whose lives have been ruined by the Buy-and-Hold Crisis and we all need to start pulling together to help them. If we don’t, we will be getting a taste of what it is like to be in their circumstances when the continued promotion of Buy-and-Hold brings on the next price crash. Do you ever stop to think that maybe you are wrong, Anonymous? Rob

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

Is Shiller emotional since he is heavily invested in the market?Shiller certainly has emotions. All humans have emotions.The statement you are referring to is one in which Shiller said that he is currently going with a 50 percent stock allocation. That is certainly on the high side for where things stand today. But it is possible for someone with particular stock-picking skill to do not awful with a 50 percent stock allocation even at today’s prices. I think a 30 percent stock allocation would make more sense today. But I wouldn’t call a 50 percent stock allocation an insanely “heavy” allocation. That said, you are making a good point in noting that Shiller’s stock allocation does not seem entirely consistent with the things he wrote in his book about how stock investing works. Why don’t you bring the conflict to Shiller’s attention and see if sense can be made of it? You want to know how stock investing works, don’t you? Why not try to find out what Shiller is thinking? I can speculate. But Shiller knows better than I do what he is thinking. Perhaps he will say something that will help us all come to a better understanding. The sense I get is that you don’t want to know. Bogle puts forward tons of contradictions in his public statements. None of the Buy-and-Holders ask him about them. It’s the same with Bernstein. It’s the same with Swedroe. Now you are focusing on Shiller. Ask! And reporters should be asking! Isn’t that the darn job? Don’t we want to know? Don’t we want to work through the puzzles that present themselves to us and learn now to become better investors? Ask! And don’t accept answers that don’t add up. Ask and then ask again until you have something that makes sense. I am NOT suggesting that you be rude or that you try to hurt Siller’s feelings or Bogle’s feelings or anyone else’s feelings. Yes, Shiller is emotional, as you suggest. Perhaps he doesn’t see some of his own contradictions. Many of us are blind to our own contradictions. If you point them out to him, he may well enjoy a great learning experience. And he may share that experience with you and with lots of others. There is never any harm done by asking any of these questions to the people who are far more likely to know the answers than I am. You direct them to me because you hate me and because you want to trip me up. But you should not be spending your time hating people on the internet or trying to trip up people on the internet. You should be spending your time trying to get answers to these questions. And you are more likely to get good answers by asking Shiller than you are by asking me. I sometimes feel that we are under a spell. The Buy-and-Holders did lots of wonderful things. Then they made one mistake. Then lots of people were hurt by that mistake. And somewhere along the line a wicked witch cast a spell on us that we would never say the words “I” and “Was” and “Wrong.” Instead, we would just let the mistake take us lower and lower and lower until we were totally destroyed. Shiller is a great guy, as Bogle is a great guy. Ask them your questions! Put them on the hot seat! Don’t take phony baloney explanations for answers. Dig deep. Find out what is really going on. You are not just helping yourself when you do this. You are helping Shiller and Bogle too. They both want to help people. They both have blind spots. They both need to be put on the hot seat from time to time to do their best work. That’s my sincere take, in any event. Rob

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

Rob,

Wade Pfau told a different story than you do and same with Mike Piper. Are they both liars and you are the only one telling the truth?

Wade told the same story as me before he was threatened and a different story than me after he was threatened. Mike tells the same story as me in private and tells a different story in public.

The back story here is that people got very excited when we discovered the Buy-and-Hold Model. People thought we had found the answer. It turned out that that wasn’t quite true — the Buy-and-Holders got one part of the story wrong and their entire model fails because of that mistake. But by the time the error was discovered, thousands of people had already built careers based on the failed model. So people rationalized. They told what they viewed as white lies, thinking to themselves that it was okay because Buy-and-Hold at least comes close to working and anyway there is nothing better out there. Then evidence came in that in fact Buy-and-Hold doesn’t work at all in the long term and that there is something 10,000 times better out there. By that time, all the people who had said positive things about Buy-and-Hold (which is the vast majority of people in this field) were trapped. They were in a cage from which there is no escape except telling the truth and there was an entire industry intent on using all of its considerable resources to destroy the career of anyone who dared to “cross” it by doing that.

I often make the comparison to the Civil Rights revolution. A number of Southern states had laws that said people with black skin could not drink out of the same water fountains as people with white skin. Those laws were 100 percent insane. No reasonable person can justify such laws. The people who lived in those states knew on some level of consciousness that those laws were insane. But they didn’t think the laws could be changed. They grew up in societies that had those laws and had never experienced life in a place that did not have those laws. It was not possible for them to imagine life without those laws. So they supported them. Or at least they didn’t fight them. They were born into ignorance and sin and they couldn’t imagine any alternative and so they supported or at least tolerated the continuation of ignorance and sin.

Everyone in this field wants to make the transition from Buy-and-Hold to Valuation-Informed Indexing. There is not one person who wants to see a worsening of the economic crisis. There is not one person who wants to see millions of failed retirements. There is not one person who wants to see more death threats and more unjustified board bannings and more acts of defamation and more threats to get academic researchers fired from their jobs. But what are they going to do? Talk honestly about a simple matter like how to calculate the safe withdrawal rate accurately and the Buy-and-Hold Mafia destroys your career. People rationalize that they can do more good working on the inside for gradual change than they can with their careers destroyed.

So no one tells the full truth re these matters today but me.

Shiller doesn’t. He is of course a brave and wonderful man. But Shiller predicted the economic crisis in his book and he said that it was the idea that a Buy-and-Hold strategy can work that was causing it. When the crisis came, he didn’t say “here is what I predicted, do you see now why we need to make the transition to Valuation-Informed Indexing?” He kept it zipped. He heard all sorts of silly explanations for the economic crisis put forward and he kept it zipped.

Arnott doesn’t. Arnott is a stud. I learned how to be tough about this stuff myself by watching him in action. But he does not today possess the courage to tell the full truth. When he wrote me to tell me that my ideas on investing are sound, he said that Jack Bogle is his friend and that Jack Bogle has always been a gentleman in his presence. That is probably so. But Jack Bogle was not being a gentleman when he failed to speak up about what Mel Linduaer did to the Bogleheads Forum and Arnott knew about that. So Arnott does not today possess the courage to tell the full truth.

If Robert Shiller and Rob Arnott are not telling the full truth, there is no one telling the full truth.

Except me.

I tell the full truth because I have been left with no other options. If the Buy-and-Hold Mafia could have blocked publication of Shiller’s book, they would have done it. They don’t possess quite that much power. So long as Shiller pulled a lot of his punches, he possessed the power to get the book published. But I am just some fellow who posts stuff on the internet. So the Buy-and-Hold Mafia did possess the power to block me. And they did it. So I don’t have the option of pulling punches and yet still telling pretty much the truth. My choice is to submit and pretend that I believe that the Old School studies get the numbers right or to have you Goons disrupt the discussion at any site on the internet at which I post.

Given those choices, I go with Option Two, telling the full truth. Suck it, Goons!

I’m like everybody else. I didn’t always tell the truth. I obviously did not tell the truth prior to May 13, 2002. I wanted to be popular, I wanted to be able to make a buck. So I kept it zipped. I was afraid of what the Buy-and-Hold Mafia would do to me if I told my friends what I knew about the Old School studies. Greaney got so bad that I couldn’t live with the rationalization any more. So I worked up the courage to put forward the May 13, 2002, post. And the rest is history.

If we could go back to May 13, 2002, you Goons would play it another way. I get that. I don’t have a magic wand. I cannot take us back to May 13 2002. We are in a place today where, if we permit honest posting, you Goons end up in prison cells. That gives you a huge incentive not to permit honest posting. I get that. There’s nothing I can do about it. For a time, I kept quiet about it because I knew that the prison-cell thing was a disincentive for you to permit honest posting. After you threatened Wade, it became clear that it was all a big joke and that you knew perfectly well that you were headed to prison once the truth came out and that there was already zero chance that you were ever going to come around. So I stopped playing that stupid game.

That’s where things stand today.

Everyone in the field is afraid to tell the full truth about the last 33 years of peer-reviewed academic research. The Buy-and-Hold Mafia has the power and wealth and connections to destroy just about anyone and the ruthlessness to follow through on its threats. Everyone sees that. Everyone gets that. That is the biggest factor I have working against me.

The other side of the story is that everyone in the field LONGS to be able to come clean. People didn’t get into this field to destroy millions of middle-class lives. So they WANT to tell the truth. They want to have fun again. They want to give accurate retirement planning advice. They want to bring the economic crisis to an end. They want to tell people how to reduce the risk of stock investing by 70 percent. That is the biggest factor I have working for me.

The power of the Buy-and-Hold Mafia diminishes as more and more middle-class lives are destroyed. The truth is that we are on the one-yard line. Some political blogger could write up the truth and get away with it today. With all of the documentation available at my web site, they would get away with it. And there are enough people entertaining doubts today that there is a good chance that the report would go viral. That is what was going on with the Wall Street Journal article that reported that the “experts” are leaving out half the story. I believe that that was a trial balloon. The Wall Street Journal was testing the waters to see whether telling the truth about the last 33 years of research would fly. That particular article did not go viral. But the next one might. Certainly the article published following the next price crash will go viral.

I will be there when it happens. I will tell the entire story. I will tell about the bad stuff you Goons did and I will tell about the extenuating circumstances. And we will see where things end up.

I tell the full truth because I have been left no options but to tell the full truth. Those are the cards I was dealt and I will play them to the best of my ability.

I wish you all good things, Anonymous.

Rob

 

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

Perhaps you should ask Shiller as to why he is in the market.

Perhaps you should, Pink.

Am I the only person on the planet who cares to know how stock investing works? LOTS of people are capable of asking Shiller hard questions that very, very, very much need to be asked. And of course lots of people are capable of asking Bogle similar types of questions. And we all would be better off if those questions were being asked on a daily basis.

It’s not rude to ask those questions. It’s liberating. Bogle wants to help people. Ask those hard questions and he will be forced to come to terms with his contradictions and he may learn and then teach some truly amazing things. And of course the same is so with Shiller. And with many others.

Shiller contradicts himself in his public statements all the time (as does Bogle). I cannot make sense of all that he says because it is not possible to make sense of contradictions. Contradictions don’t reveal the truth but they point us in the direction of the truth. Look at Shiller’s contradictions, note the puzzles in them, ponder the puzzles, and you can learn some things. That’s the best that can be done with it. This is how we handle contradictions in every field other than stock investing and this is how we should be handling contradictions in the stock investing realm as well. I am sure.

Shiller said in early 2009 that it would not be safe to invest in stocks again until the P/E10 level dropped below 10. I recorded a RobCast on his comments. The P/E10 level has not yet dropped below 10. So Shiller contradicted himself when he recently said that he is going with a stock allocation of 50 percent and that he believes that an even higher stock allocation might make sense for some investors.

I’ll give you my take on what Shiller may be thinking. Please understand that I am not God. I do not see into the man’s mind. I have studied these matters for a long time and I think I have some clues to figuring out what is going on. But that’s as far as it goes.

I worked with Wade Pfau for a long time, as you know. Wade flipped to the Goon side. That’s a strange, strange, strange reality. So I have spent a lot of time going through his words and trying to figure out how he could justify doing such a thing. The threats obviously influenced him. But I don’t believe that Wade is evil. He couldn’t go along with the threats unless he somehow rationalized his behavior. There had to be something that persuaded him that it was okay to do what he did or he wouldn’t have done it. So to make sense of all this, we need to be trying to figure out what that something is.

Wade was a Buy-and-Holder when he first began working with me. I was a Buy-and-Holder myself when I first began exploring this stuff. John Walter Russell was a Buy-and-Holder when he first began working with me. So you have to start with that. Wade was very interested in the stuff I wrote at the Vanguard Diehards board. He wanted to explore my ideas in more depth. He wanted to do research checking on them. But his basic orientation was the orientation of a Buy-and-Holder. He was open to the idea that improvement on the Buy-and-Hold Model was possible. But he was confident that the model itself was generally good, generally on the right track.

As Wade did his research, he became more and more convinced that Valuation-Informed Indexing is the real thing. He declared at one point: “Yes, Virginia, Valuation-Informed Indexing works!” So what did he do with his personal stock allocation? He decided on his allocation when he was a Buy-and-Holder. Now he was a Valuation-Informed Indexer. The same stock allocation could not possibly make sense. So what did he do?

Wade wrote a post to the Bogleheads Forum announcing that he was lowering his stock allocation. I don’t recall the details. I believe that what he said was that he was going to drop to a 50 percent stock allocation. He didn’t say where he was before that but my guess is that he was at perhaps 70 percent stocks. So he was lowering his stock allocation by about 20 percentage points. Does that make sense?

It does and it doesn’t.

Going by pure logic, it makes no sense. A 70 percent stock allocation or even an 80 percent stock allocation makes sense under Buy-and-Hold. Under Valuation-Informed Indexing, something around 20 percent made sense at the time Wade advanced this post. 30 percent could work. Something in that neighborhood. He chose 50 percent, about the mid-point between what the two models recommend. Huh? He chose an allocation that doesn’t make sense under either model! Why?

He did it because he is one of the humans. He once believed in Buy-and-Hold. Now he believes in Valuation-Informed Indexing. But he doesn’t Believe with a capital “B”. He kinda sorta believes. The two models are opposites. It is hard to make that transition all at one time. What Wade really was doing was taking a step in the direction of a belief in VII without making the entire journey. What he said was: “Yes, Virginia, VII works!” What he should have said if he were capable of 100 percent self-awareness (none of us are) is: “Yes, Virginia, VII kinda, sorta works — I think!”

Wade is not 100 percent sure. He used to believe in BH. He has become convinced of the merits of VII. But it’s a big, scary leap and there are lots of smart and good people who believe in BH. So he hedges a bit. He goes back and forth. He is moving over time more and more in the direction of VII. But he doesn’t want to bet his entire life on it. So when you Goons threaten to destroy his career if he continues doing research in accord with the VII model, he tells himself that it is okay to back off a bit, to move just a wee bit back in the direction of BH. He is not really confident re EITHER model at this point. So he makes choices that are consistent with the premises of NEITHER model.

The logic for VII is solid. The research supporting it is solid. The potential to help us solve our economic problems is amazing. I should win every debate. But I have one big problem. VII is too darn good! If I had co-authored a study showing investors how to reduce the risk of stock investing by 10 percent, I would be the toast of the town today. Bogle would love me. Bernstein would love me. I would have 5o sites asking me to write columns. I would be interviewed everywhere. There would be zero hostility. Because every single investor alive can see how wonderful it would be to come up with something that permits investors to reduce risk by 10 percent.

Unfortunately, VII doesn’t do that. VII shows people how to reduce risk by 70 percent. Isn’t that seven times better than the thing that would make me the toast of the town? By logic, yes. But humans are not purely logical creatures. A 10 percent risk reduction is an obvious plus. A 70 percent risk reduction is scary.

There are all sorts of threatening thoughts that enter the picture when someone shows us how to reduce risk by 70 percent. Have I made a mistake in my retirement planning? Have I been a fool? Have I been taken? Are we at risk of going into the second great depression? You don’t have to worry about that stuff when you learn how to reduce risk by 10 percent, You do need to worry when you learn how to reduce risk by 70 percent. So some hate VII with a burning hate. That’s you Goons.

Some others are not capable of hating it with a burning hate. Some others are scared at how big the jump is. But they love learning so much that they are not capable of hating VII no matter how big an advance it represents. But their fears cause them to want to diminish the impact of the advance. So Wade announced that he was lowering his allocation not from 70 percent to 30 percent but from 70 percent to 50 percent. That’s as far as he was emotionally able to take it at that time.

I believe that something like that is going on with Shiller. He takes steps forward and then he takes steps back. He says amazing things and then he pulls back and evidences doubt about his own amazing insights. He says one day that it will not be safe to get back into stocks until the P/E10 level hits 10 and he says on another day that he is going with a 50 percent stock allocation at a time when the P/E10 is above 25.

It makes no logical sense.

Humans are not 100 percent logical creatures.

You are just going to have to accept that. That’s the over-riding reality here.

How can Wade and Shiller and Bogle and all the others come to feel more comfortable with what the last 33 years of peer-reviewed research has taught us. By talking about it.

There is no other way. That is how humans learn. That is how humans develop confidence to push an idea farther and farther and farther. We all need to talk about this stuff. On a daily basis. For a long time. Over time, we will get more comfortable and we will develop more confidence and we will resolve all the contradictions that trouble us today. It’s a process. A process that we have not yet given ourselves permission to begin.

Shiller doesn’t know everything, Pink.

Not anymore than Bogle does. Not anymore than Wade does. Not anymore than you do. Not anymore than I do.

He is one of the humans. That is the story. He gets some of them right and some of them wrong. He is doing the best that he can. Give him a freakin’ break.

We are all in the same boat. We are all killing ourselves by not giving ourselves permission to discuss the findings of the last 33 years of peer-reviewed academic research. Why have we prohibited honest discussion of the last 33 years of research? Not because investing is such a trivial matter that there is no need to worry about getting it right. We have banned honest posting because investing is so important a matter than we cannot bear the thought of having gotten it horribly, horribly wrong for so many years and for having ruined millions of middle-class lives (including our own!) by doing so.

We don’t have an intellectual difference of opinion here. What we have is an emotional freeze-up. We are the luckiest generation of investors that ever lived. But we cannot take the step we need to take to reap the benefits of the three decades of research because the very first step in the process is acknowledging that we didn’t always know it all. To think that we ruined all those lives is just unbearable to many of us.

The other side of the story is that we ruin more lives with every day that the Ban on Honest Posting continues. So we are going to have to have this painful discussion sooner or later. Given that we are going to have to have it sooner or later, it makes sense to have it when the pain is much less than what it will be following the next price crash. My take.

Shiller doesn’t know it all. That’s why he sometimes says stupid things, Pink.

Bogle doesn’t know it all either. That’s why Bogle sometimes says stupid things.

What’s true of Shiler and of Bogle is true for every last one of us.

It all changes when we agree to work together to learn how stock investing works in the real world. That’s what we all want to do deep down inside. That’s what we all need to start doing very soon. It’s hard for some of us to take that step today. But there is zero kindness in leading those who find it hard to believe that they can avoid this pain. All they can do is to delay the pain and thereby make it hurt 20 times more than it would hurt to endure the pain today.

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

I naturally wish you all good things.

Rob

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

Have goons gotten to Shiller? Afterall, he has 50% of his money in the market.

Shiller certainly possesses an Inner Goon. We all do. I possess an Inner Goon, Anonymous.

I recorded a RobCast way back in 2009 titled “Shiller Pulls His Punches.” Why do you think he pulls his punches? It is because he is afraid of the negative feedback he knows he will hear if he speaks with 100 percent honestly re what he knows about how stock investing works. I have written numerous columns at the Value Walk site re things Shiller has gotten wrong. I believe that I have as much of a responsibility to call Shiller out on his b.s. as I have to call out Jack Bogle and the other Buy-and-Holders on their nonsense.

And I of course have a responsibility to call Rob Bennett out on HIS nonsense too. It was b.s. for me to fail to speak up about the errors in Greaney’s retirement study prior to the morning of May 13, 2002. It was b.s. for me to apologize for doing so a few days later. It was b.s. for me to continue to think that Buy-and-Hold could work until the night of August 27, 2002, when Greaney threatened to kill my wife and children and 200 of my fellow community members endorsed his post. It was b.s. for me to hold off on saying that the Old School SWR studies are “analytically invalid” until May 2003. It was b.s. for me to try so hard and for so long to avoid calling Lindauer out on his abusive posting practices when I started posting at the Vanguard Diehards board.

I have a Goon within me, Anonymous. I want people to like me. I want to tell people fairy tales and to be praised for it. I want to be rich. I want to be popular.

And Shiller faces the same demons. And everyone else does too.

I don’t think that the fact that Shiller is going with a 50 percent stock allocation today is a sign of goonishness on his part. The research says that the typical investor should be going with an allocation of about 30 percent stocks. Shiller is more knowledgeable than the typical investor. He may be able to pick stocks or segments that are less overvalued than the market as a whole and that therefore will do better than the market as a whole. So I could see a 50 percent stock allocation working out well for Shiller. I would’t advise him to go higher than that. But I wouldn’t call it goonish for him to go with a 50 percent stock allocation today.

I do think it was a bit goonish for Shiller to say that other investors who are less knowledgeable than him could go with a 50 percent stock allocation or even something a bit higher. That’s dangerous advice, in my assessment. Most investors are not as skilled as Shiller is. The numbers don’t support a 50 percent stock allocation today. And Shiller has predicted a crash. I have a very hard time seeing how you can predict a crash and also say that it is okay for ordinary investors to be going with stock allocations in excess of 50 percent.

There are judgment calls that come into play. People can have different opinions without one of them being guilty of goonishness. But I saw that statement about it being okay for ordinary investors to go with stock allocations in excess of 50 percent as being pretty darn far out there. I don’t think I would be doing my job if I didn’t say that I am not able to figure out a way to justify that statement, given what the peer-reviewed academic research of the past 33 years shows us about how stock investing works.

Perhaps Shiller can justify it. Perhaps Shiller sees something that I do not see. If that’s the case, then I would like to see him spell out his reasoning process re that particular statement. I am of course willing to hear his case. But going by what I know today, I feel compelled to say that I see that particular statement as being an irresponsible statement coming from a guy who is a giant in this field and who has done more to help us all understand how stock investing works than anyone else alive. Perhaps that’s why it bothers me so much to hear my hero give voice to those particular words. I expect more of my good friend Bob.

Yes, the Goons have “gotten to” Shiller to a point. But Shiller has also overcome goonishness to an extent that no one else alive on the planet today has managed. Both things are so. We need to take the good with the bad and to praise the good while criticizing the bad in a spirit of charity when we see it appear before us on our computer screens.

I hope that helps a bit, Anonymous.

Rob

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

if you have a single instance of an academic or professional agreeing with your claim that 1) your strategy is one that can and should be adopted by all stock investors; and 2) that once that happens stocks will provide a fixed real return of 6.5% year after year, I for one would live to see it.

There are many big names who agree with me that investors should take price into consideration when buying stocks just as they do when buying anything else. It would not be possible to list the names of all these people. Some of the lead proponents of this idea are: Rob Arnott, Andrew Smithers, Jeremy Grantham, and Ed Easterling. You will on many occasions even find big-time Buy-and-Holders like Jack Bogle and Bill Bernstein and Larry Swedroe mixing in honest and accurate stuff in with the smelly Buy-and-Hold garbage for which they are better known. I learned about the errors in the Old School safe-withdrawal-rate studies by reading one of the honest and accurate research-based passages in Bogle’s book.

I am not aware of anyone else ever saying that volatility in stock prices will go away once we open the internet up to honest posting on the peer-reviewed academic research of the past 33 years. I think it would be fair to describe that one as being a Rob Bennett original.

It does follow. But it doesn’t obviously follow. You need to spend some time thinking about this stuff to see how it follows. I have been working through how Valuation-Informed Indexing works for 10 hours per day and seven days per week for 12 years now. So I have had the opportunity to think about thing that no one else in this field has yet been able to think about. I am very proud of all that I have come up with as a result of putting so much sustained effort into the project. It’s largely because I keep finding exciting new implications to Shiller’s “revolutionary” (his word) 1981 insight that I keep drilling down deeper and deeper. Developing powerful new investing insights is what it is all about, in my assessment.

I think it’s possible that there is someone else out there who today possesses a vague understanding of this insight but who has not yet developed it fully enough to feel comfortable going public with it or who is afraid to go public with it because he knows how the Buy-and-Hold Mafia will react if he does. I have wondered at times whether Shiller has already written a sequel to Irrational Exuberance and is just holding back on publication of it until he feels that it would be safe to share more of what he understands about how stock investing works with the rest of us.

That’s speculation, of course. It is possible that Shiller and all others have told us all that they know. I certainly did not have that insight right off the bat. It came to be after lots of work trying to understand and explain to others the implications of Shiller’s findings.

Insights don’t just pop out of nowhere, in my experience. They come about sort of in the way in which songs come to songwriters. If you spend all of your days trying to write new songs, you might go a long time without having one come to you. Then one day something just clicks. It works that way with investing insights. If I stopped working this ground, I doubt that I would experience more insights. It is by forcing myself to come to terms with the sorts of challenges that people like you put to me that I cause my mind to go over lots of ideas and form them into new combinations and see things that follow from them.

It’s work. When the insight comes, it seems easy and obvious. But you never get to that point unless you work it and work it and work it, preparing the ground. One of the reasons why I engage with you Goons (lots of people think I am nuts to do so) is that I want to be challenged. I obviously don’t approve of the manner in which you present your challenges. You make things ten times harder than they need to be for every single person involved by the manner in which you choose to interact with me. But there’s some sort of legitimate point being made in perhaps one in twenty of the Goon posts. The insights that I can develop as a result of responding to that one genuine point can often make it more than worth my time to endure the ugliness and smelliness of the other nineteen comments.

I would flip it on you. You point out that there is no one else who has said that volatility would go away if we were to open the internet to honest discussion of the implications of Shiller’s “revolutionary” (his word) findings. It’s a fair point. But it is also a fair point for me to note that there is no Buy-and-Holder in 12 years who has been willing to make a case for why this insight is not a legitimate one. Why not?

The Return Predictor lets investors know what stock allocation is in their best interests. If every investor had access to a tool like the Return Predictor, why would all investors not ACT in their best interests? If all investors acted in their best interests, you could never again have a situation like the one we had in 2000, where stocks were paying a likely annualized long-term return of a negative 1 percent real and a risk-free asset class (TIPS) was paying a positive 4 percent real. Stock will never again reach those valuation levels once we supply a means for investors to apply the brakes to runaway overvaluation. Please point out to me the weak link in the logic chain if you see one.

If you want to say that there will always be some overvaluation and some undervaluation, I won’t argue with you. That could well be. But it seems to me that we are going to see a very big change once we supply investors with the tools they need to act in their best interests. If volatility is not eliminated altogether, it is certainly going to be diminished to a very big extent.

Is this a huge change? It is. I acknowledge that.

But have we not seen huge changes in other fields of life endeavor? I mentioned the introduction of the polio vaccine above. Was that not a huge change? Was the ending of slavery not a huge change? Were the advances we have seen in recent decades in computer technology not a huge change? Did the introduction of the birth-control pill not bring about huge changes? Did the harnessing of electricity not bring about huge changes?

If you want to be skeptical of claims re huge changes, that makes perfect sense. There are probably 20 claims of huge changes for every legitimate huge change. I have zero problem with a healthy skepticism. But death threats? Unjustified board bannings? Tens of thousands of acts of defamation? Threats to get academic researchers fired from their jobs? I have huge problems with that sort of thing.

There are two possibilities.

One is that I am wrong re my claim that price volatility will become a thing of the past once we open the internet up to honest posting re the findings of the last 33 years of peer-reviewed academic research. If I am wrong, smart people will obviously be able to say why without engaging in abusive practices. So I will come off looking like a fool. I have more than a little bit of a hard time thinking that that would break your heart, Curious.

The other possibility is that I am right. In that event, we are looking at achieving the biggest advance in our understanding of how stock investing works in our history. That’s pretty darn exciting stuff.

So there’s huge potential upside in permitting honest posting and zero potential downside. I wonder how we should play this one.

Anyway, no, I am not aware of anyone else saying today that price volatility will disappear once we open the internet up to honest posting on the last 33 years of peer-reviewed academic research and the implications that follow from it. But I sincerely believe that to be the case and I will continue to say that that is what I believe when the question is put to me.

My best wishes to you, Curious.

Rob

Set forth below is the text of a comment that I recently put to another blog entry at this site

Rob’s verdict: Shiller is just another cowering Goon, living in fear

No one who lives in the United States has ever seen anything like the 12-Year-Long Campaign of Terror against those of us who have posted honestly on safe withdrawal rates and other crtitically important investment-related topics on the internet, Anonymous.

Death Threats. Demands for unjustified board bannings. Tens of thousands of acts of defamation. Threats to get academic researchers fired from their jobs.

There are reasons why the people of the United States elected to make it a felony for anyone to participate in an act of financial fraud of that magnitude.

There is a reason why you and your fellow Goons and perhaps a good number of the Wall Street Con Men will be going to prison for a long time following the next price crash.

Yes, Shiller fears all that hate and anger and abuse.

He is one of the humans. ALL the humans fear that sort of thing, as we have seen for 12 years now.

And please note that it is ONLY Buy-and-Holders who embrace such acts of hate and anger and abuse. We have never seen the advocates of any other investing strategy embrace such tactics on even a single occasion.

I wonder why.

Rob

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

Do you think that Shiller has never read his own research, Anonymous? Shiller was the first person to publish research showing that long-term timing always works. It was the paper that Wade Pfau and I published together that shows that in a direct, practical way. But it was Shiller’s 1981 paper (the paper for which he won the Nobel prize) that showed that this was so in theory.

Shiller is the grandfather of Valuation-Informed Indexing. The entire reason why I took on this job is that when you Goons began attacking me back at the Motley Fool board, I went looking for help at sites that explored the implications of Shiller’s work . I learned that there were none! That stunned me. I saw the huge opportunity just sitting out there for anyone who had the balls to pick it up. And so I worked up the courage to do it myself! The rest is history!

You are right about one thing, Anonymous. You say that Shiller himself does not make a point of spelling out the distinction between short-term timing (which never works, according to the peer-reviewed academic research) and long-term timing (which always works, according to the peer-reviewed academic research in this field). Neither does Jack Bogle. Neither does Scott Burns. Neither does Bill Bernstein. Neither does Larry Swedroe. Neither does anyone outside of yours truly.

I wonder why.

Do you think it might have something to do with the reign of hate and abuse that the Wall Street Con Men and their Internet Goon Squads direct at anyone who makes this very obvious and very important distinction? Do you think your threats to kill family members of anyone who posts honestly on this question might have something to do with this strange reality? Do you think your demands for unjustified board bannings might have something to do with this strange reality? Do you think that the tens of thousands of acts of defamation that you have advanced might have something to do with this strange reality? Do you think that your threats to get academic researchers fired from their jobs might have something to do with this strange reality?

Do you think that the reason why the Boglheads split off from the Vanguard Diehards board when I announced plans to attend the annual meeting and ask Jack Bogle why he doesn’t talk about this distinction in every speech he gives might have something to do with this strange reality?

Do you think that the reason why you threatened to get Wade Pfau fired from his job after he co-published research with me pointing out the importance of this distinction might have something to do with this strange reality?

Yeah, I think so too.

When the Campaign of Terror is brought to a full and complete stop (by the close of business today???), I think it would be fair to say that Jack will be making this distinction in every speech he gives. And so will Bernstein. And so will Swedroe. And so will Burns. And so will thousands and thousands of others. And so of course will Shiller.

And there will of course be no more Buy-and-Hold. There will be Valuation-Informed Indexing instead.

And there will be no more economic crisis.

And we will all be enjoying the greatest economic boom in U.S. history. And the risk of stock investing will be reduced by 70 percent for every last one of us. And we will all be able to retire five to ten years sooner than we ever imagined possible in The Dark Ages of Investing Analysis (The Buy-and-Hold Era).

And you will be going to off to serve your long prison sentence for your multiple acts of financial fraud.

Whew!

And you wonder why I am such a big fan of the idea of permitting honest posting at every board and blog on the internet!

Rob