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

So, you agree that Shiller has not said the words specifically that you can use his work for long term timing.

That’s a pretty darn good question, Anonymous. I like the way you phrased this one

Shiller (and all the others) is cagey and cautious about what he says.

His words show that he WANTS to help people out. He is TRYING to get good information out to people. He has a conscience.

But he knows that millions of people have been taken in by the smelly Buy-and-Hold garbage. He doesn’t want to find himself in the spot in which Rob Bennett finds himself, with people threatening to kill his loved ones and determined to destroy his career and all this sort of thing. So he puts forward all the information that anyone needs to figure out how stock investing really works while also being careful not to state things too clearly. That way, the people who want to know the truth have access to it and the people who want to continue to live in a fantasy world feel free to do so. He stops short of making clear and definitive statements that would make the fantasies go “pop!”.

I play it in very different way. Perhaps you’ve noticed!

Bogle plays it the same way Shiller does. Bogle and Shiller don’t have the same beliefs. I am certain that Bogle has far more confidence in Buy-and-Hold than Shiller and that Shiller has far more confidence than Bogle in Valuation-Informed Indexing. But they are pretty darn similar in their use of word games to avoid stating things in a clear way that would provide actionable investing advice to those reading their words.

There was a great illustration of this in the speech that Bogle gave to the annual meeting of the Vanguard Diehards in the Fall of 2006. Bogle gave a fantastic presentation on the dangers of investing in overpriced stocks. Most of the talk was pure gold. He went on for paragraph after paragraph of top-notch, research-based stuff. Then, in the last paragraph, he said something like: “So, in conclusion, just always remember to Stay the Course!” You Goons interpreted that as an endorsement of Buy-and-Hold, which is of course precisely how Bogle was hoping you would interpret it. So you all jumped up and down. “He’s assuring us once again that the last 33 years of peer-reviewed research is garbage, that the pure Get Rich Quick approach is sure to work for the first time in history. This guy is so smart!”

You obviously didn’t say those precise words anymore than Bogle said in the first 20 paragraphs of his talk that Buy-and-Hold is the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind. But that’s what I heard from Bogle and from you. And it wasn’t just me. John D. Craig heard the same thing. Both of us wrote e-mails to Bogle at the time congratulating him on the great speech and asking that he be even more clear in his warnings about the dangers of over-investing in stocks at those prices. Bogle did not respond to either of us.

Say that you bring in your car for its annual inspection. Say that the guy who looks at it sees nothing wrong with the car. He is pulled in two directions. The honest thing is to say “this car is fine.” The dishonest thing is to say that you need repairs. He makes more money if he says the car needs repairs. What stops him from doing the dishonest thing?

The biggest force pushing him to be honest is that he wants to have a good reputation. If he cheats too much, word will eventually get around and his short-term profits will be transformed into long-term losses. The other force is that, if he goes too far with the dishonesty, he will eventually cross legal lines and may end up in prison.

There IS dishonesty in car inspections. Bad stuff happens in the car inspection field. But as a general rule the bad stuff is limited. People don’t want to develop bad reputations and people don’t want to go to prison and the people who bring their cars in don’t want to get ripped off. So there are limits as to how far the bad stuff can go.

The problem we have in the investing advice field is that the dishonest stuff has gone so far during the Buy-and-Hold years that the field is today 100 percent corrupt. There’s a concept in the law of “Standard industry practice.” If you go outside of standard industry practice, that is used against you. In the investing advice field, the standard industry practice is to ignore the last 33 years of peer-reviwed research and to pretend that Buy-and-Hold can work. The standard industry practice is financial fraud! It’s those who post honestly who are accused of offering “dangerous” advice and who get kicked off of discussion boards because they make those pushing the Buy-and-Hold garbage look bad.

One reason why this has happened is that there is a power imbalance. The Wall Street Con Men have an awful lot of money and power and influence. So they get away with acts of dishonesty that no one in any other field could get away with.

Another factor is that the fraud does not become evident until a good number of years have passed. If car-repair fraud could not be discovered for 10 years or longer, there would be a lot more car-repar fraud!

Yet another factor is that most stock investors WANT to be conned. Most of us are worried about whether we will have enough to retire or not. The Buy-and-Holders exploit this fear by telling us that we have three times what we really have and then taking credit for the great results! Did you ever hear Taylor Larimore brag about how following Jack Bogle’s investing advice permitted him to live in “the house that Jack built”? Jack ain’t about to rebuild the house when Taylor loses it in the next price crash. But so long as the con remains unexposed, Taylor feels like Jack is his good friend. It’s the same thing Bernie Madoff did. The Get Rich Quick impulse is a powerful impulse. Con men are always going to be trying to exploit it.

People who offer investing advice pursue two goals at the same time. They want to tell the truth because they have consciences and they care about their clients and readers and all that sort of thing. But they also want to turn a buck! To help their readers, they need to promote Valuation-Informed Indexing. But to turn a buck they need to promote Buy-and-Hold. So they do both! They give speeches in which they reveal important truths in seven or eight paragraphs of prose. Then in the final paragraph they sum it all up by saying “now just be sure always to do the precise opposite of all that I have said in the first eight paragraphs. Buy-and-Hold rules!”

That makes all of their clients and readers who have become addicted to the Get Rich Quick garbage happy. They ignore the first eight paragraphs and focus on the conclusion. They say to themselves: “I KNEW that Buy-and-Hold was the answer! I knew the last 33 years of peer-reviewed research was garbage! Now I am sure. This salesman fellow just told me that stocks are worth buying at any possible price! How smart I was to sense that all along! I am really something! I love this salesman guy. I only wish that I had more money to invest in this asset class paying a negative long-term return! So long as I can lose money every year, I should be able to retire in no time! This Get Rich Quick stuff is AMAZING.”

Yeah, sure it is.

Shiller is under the gun. So is Bogle. So is EVERYONE who works in this field.

It won’t be a problem following the next price crash because you Goons will no longer be singing the praise of the Wall Street Con Men after you have lost most of your retirement money., At that point, it will become acceptable for the “experts” (experts in marketing!) in this field to tell the truth and those who don’t go to prison will be happy to do so. Once all the textbooks have been corrected, there is no reason to believe that anyone will ever fall for the Buy-and-Hold garbage again. This is the first ELECTIVE economic crisis we have experienced. This is the first one that has come AFTER the peer-reviewed research was published showing us what really works. So I presume that we will be moving on after the next crash.

For now, though, people like Shiller and Bogle are in a bind. Do they destroy their careers by telling the truth? Or do they save their careers by telling more lies while mixing in a lot of good, solid, true stuff as well? Shiller tells as much truth as he feels he can get away with. But, no, he does not tell the truth in as plain and clear and bold a way as he needs to if he wants to make Valuation-Informed Indexing the dominant model, as I do.

I want to bury Buy-and-Hold thirty feet in the ground, where it can do no further harm to humans and other living things. Shiller WANTS to do that too but not enough to be willing to say things in the way he would need to say them to get the job done and to thereby bring a pile of abuse down on his head from all the people who have been tricked into thinking Buy-and-Hold can work.

Here are two statements:

1) Timing never works; and

2) Short-term timing never works but long-term timing always works and is always 100 percent required.

The first statement is the lie that Buy-and-Hold advocates tell their readers.

The second statement is what the last 33 years of peer-reviewed research reveals as the reality.

Shiller has devoted his entire life to helping people understand that the second statement is the true one. But, yes, he has lied in many of his public statements because he doesn’t want his career destroyed for telling the truth about stock investing before it becomes fashionable to do so.

Sue the man, you know?

My job is to tell people why we are in an economic crisis and why millions of people are on their way to suffering failed retirements. I need to tell both sides of the story. Shiller is a giant, a good man and a smart man. And Shiller is afraid of what would be said about him by the Buy-and-Holders if he were to state the truth as clearly and plainly and firmly as I do.

That’s your fault. He WANTS to tell the truth. After the next price crash, he will. Then we will all pull together to rebuild our broken economy.

I hope that helps a bit.

Rob

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

Shiller on CAPE:

“John Campbell, who’s now a professor at Harvard, and I presented our findings first to the Federal Reserve Board in 1996, and we had a regression, showing how the P/E ratio predicts returns. And we had scatter diagrams, showing 10-year subsequent returns against the CAPE, what we call the cyclically adjusted price earnings ratio. And that had a pretty good fit. So I think the bottom line that we were giving – and maybe we didn’t stress or emphasize it enough – was that it’s continual. It’s not a timing mechanism, it doesn’t tell you – and I had the same mistake in my mind, to some extent — wait until it goes all the way down to a P/E of 7, or something.”

This one is also relevant. So it is a good thing that you bring it to our attention. But thus one is deceptive. And yo should point that out. Otherwise, you mislead people.

Shiller is saying that you can’t use P/E10 for short-term timing. That’s true. And, yes, everyone needs to be reminded of that frequently.

He is NOT saying that P/E10 should not be used for long-term timing. His life’s work shows that long-term timing ALWAYS works and ALWAYS must be employed by every investor hoping to have a realistic chance of long-term investing success.

There is now 33 years of peer-reviewed research showing that long-term timing is required. Anyone who is familiar with the peer-reviewed research and says otherwise is engaged in an act of financial fraud. There is no excuse for this. Millions of people are today unemployed because of this massive act of financial fraud. Millions are on their way to suffering failed retirements. I will not participate in this massive act of financial fraud in any way, shape or form.

I will do what I can to get the prison sentences of those who HAVE participated in this massive act of financial fraud reduced a bit. But I will never add my name to their “cause.” I love my country. I will fight to protect her from the sorts of individuals who have used their life energies to confuse millions of middle-class investors re the critical distinction between short-term timing (which never works, according to the peer-reviewed research) and long-term timing (which always works and which is always 100 percent required, according to the peer-reviewed research).

And, yes, my hero Robert Shiller is engaging in financial fraud here by failing to make this critical distinction. He is putting millions of retirements in jeopardy by confusing people on this point (and his words ARE confusing to those who have not studied these matters in great depth).

Shiller should be ashamed of himself for playing a part in this very, very, very sick and very, very, very dangerous and very, very, very irresponsible word game.

I cannot say whether he will be sent to prison or not for this act of financial fraud. That’s for the people of the United States to say. I can say that I will never myself participate in these sick and twisted word games. I will tell people about the many wonderful things that Shiller has done for us. I will tell people that he has advanced our knowledge of how stock investing works to a degree that no one else has ever achieved. I will also say that he was too afraid of what the Buy-and-Hold Mafia would do to him if he told the full truth here to state the obvious truth plainly and clearly and boldly and without apology. Shiller hurts us all when he lowers himself to the sort of tactics that you Goons have been employing on a daily basis for over 12 years now.

Again — That’s my sincere take re this terribly important matter. No felonies for this boy! I would be grateful if you would try to find somebody else.

No can do.

I can’t go for that.

Rob

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

From Shiller,

“It is dangerous to assume that historical relations are necessarily applicable to the future. There could be fundamental structural changes occurring now that mean that the past of the stock market is no longer a guide to the future.”

I am grateful to you for putting forward that statement, Anonymous. It is responsive to the challenge that I presented in the blog entry.

I will use your comment as a separate blog entry. When the blog entry appears (the next available spot is August 10, 2015), I will add a link to it in the slider that appears at the top of every page of the site. Every investor (both Buy-and-Holders and Valuation-Informed Indexers) needs to know about this comment from Shiller.

Please understand that I do not disagree with what Shiller is saying. He is saying that it would be dangerous to assume that the correlation between valuation levels and long-term returns that we have seen over the 140 years of stock-market history available to us necessarily will apply in the future. It is possible that that correlation will NOT apply. No one can look into the future. So no one can say with 100 percent certainty. As Shiller notes, there COULD be structural changes occurring now that mean that the past will not be a good guide to the future.

That’s a sound, responsible statement. If you want to add that statement to the bottom of every post that I put forward at every board and blog at which I post, I have zero problem with the idea. I think that an argument could be made that that would be a positive. People need to know about this caveat. I sure don’t want anyone changing how they invest based solely on what I say about what the historical data teaches us. I don’t want that sort of responsibility on my head.

Now –

Can you point us to a comment in which my good friend Jack Bogle says the same thing coming from the other direction? It would do my heart good to see a comment in which Jack says: “It is dangerous to assume that historical relations are not applicable to the future. It might be that the stock market will continue operating in the future much as it always has in the past. In that event, those following Buy-and-Hold strategies will be suffering devastating losses in days to come.”

That’s the other side of the story, is it not? It is possible that stocks will never again perform as they always have in the past. Point taken. It is ALSO possible that they will. Every investor on the planet needs to know this. We should all join in together to take actions to insure that every board and blog on the face of Planet Internet is opened for honest posting by the close of business today. It is not even possible to imagine any downside. Am I not right about that one?

There are two schools of thought in the academic community as to how stock investing works. There is the school rooted in Fama’s research and there is the school rooted in Shiller’s research. Both schools of thought need to be represented at every board and blog on the internet. There should be zero controversy over this. There should be a 100 percent consensus re this point.

There are millions of smart and good people who believe that Buy-and-Hold is the ideal strategy. There is a large but much smaller number who believe that Buy-and-Hold has been discredited by 33 years of peer-reviewed research and that Valuation-Informed Indexing is the first true research-based strategy. We all need to get about the business of exploring the merits of BOTH models for understanding how stock investing works.

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

Rob

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

What specific texts did you study that Greaney and other Motley Fool members were unaware of? I am planning my own early retirement and would like to learn, as you did. Please don’t say “Irrational Exuberance.” I already have that one, and I believe Greaney as well as most members of Motley Fool have either read it, or are certainly familiar with it’s essential elements, so that doesn’t fit your claims. Looking for those other hallowed texts that you had access to, and informed your opinions, but others somehow overlooked.
Thanks.

It’s not just what you read that matters, Yogi. It’s what you do with what you read. If all that mattered was what you read, we would all be even; we all have access to all the same books. But Bogle obviously doesn’t share all the same views as Shiller. And Shiller obviously doesn’t share all the same views as you. And you obviously don’t share all the same views as Wade Pfau. And Wade obviously doesn’t share all the same views as me. And on and on.

We all have access to the same materials. And to a considerable extent we read the same things. But we come to very different conclusions about how stock investing works as a result of reading generally similar materials. Why?

Part of it is that we have different personalities. I am an INFJ under the Myers-Briggs personality assessment system. Greaney is an INTJ. That’s a HUGE factor here. An INFJ and an INTJ can read precisely the same materials and come to very different conclusions re the subject they are examining. The two personality types process information in very different ways.

There are many more INTJs (and personality types that are similar to the INTJ type) in this field than there are INFJs. That’s a big factor here. That will change as Behavioral Finance becomes the dominant school of thought. But we are not there yet. Most people who work in this field today have a numbers focus. It’s as if we had a bunch of people who are engineers trying to wrote novels. That’s never going to work out well. There have been exceptional cases. But as a general rule the things that engineers are good at and the things that novelists are good at are very different things. For many years we thought that investing was a field of human endeavor in which engineers would do a good job. In recent years we have been learning that novelists possess more of the necessary skills (while engineers also have important things to contribute, to be sure).

Another factor is the life experiences held by the people who read the materials.

Say that Shiller had published his “revolutionary” research in 1961 rather than in 1981. That means that there never would have been an industry of wealthy and powerful and well-connected people built up around the promotion of Buy-and-Hold before it was discredited. Had things played out that way, we would ALL be Valuation-Informed Indexers today. Bogle would have had zero trouble understanding the implications of Shiller’s work had he not been a Buy-and-Holder for 16 years before Shiller published it. The cognitive dissonance kicked in because he felt that his reputation was tied up in the continued popularity of Buy-and-Hold.

Bogle felt that he had something to defend. So he was not capable of looking at things objectively. You often put up sarcastic comments suggesting that it is crazy that I say that I am 12 years ahead of Bogle in my understanding of how stock investing works. You are ignoring the fact that I have a big edge on Old Saint Jack. I don’t pretend to be an expert. So I don’t feel any need to be defensive when I learn about new ideas. My edge over Jack Bogle has nothing to do with what books I have read or what books he has read. It is largely the result of the fact that he got famous promoting Buy-and-Hold and I didn’t and so I had nothing to lose by discovering the implications of Shiller’s revolutionary findings.

A third factor is that it is not just how open you are to reading certain materials and the extent to which your personality is attuned to taking in the insights that can be mined from those materials but also how hard you work it when you come across materials that make points that have never been made before. You say that you have read Irrational Exuberance. How many times?

I have read it four times. Please understand that I did not get all there is to get from reading the book the first three times I read it. I would probably profit from reading it a fifth time.

This is a strange phenomenon. It is highly counter-intuitive. The same words were on all the pages the first three times I read the book. Why is it that I did not mine all the insights that are available to someone reading the book on the first occasion on which I read it? If I was smart enough to gather those insights on the fourth read, surely I was smart enough to gather them on the first read.

No.

It doesn’t work that way.

I was able to mine SOME of the insights that are available for mining in Shiller’s book on the first occasion on which I read it. But not all of them.

What happened is that I read the book the first time and mined some insights and then went about my business. When I went back to it a year or two or three later, I had one or two or three more years of arguing with you Goons behind me. So I had looked at lots more questions. And I had struggled with lots more puzzles. And I had SOLVED lots more puzzles. So the Rob Bennett who read Irrational Exuberance the second time possessed a very different mind (at least when it comes to its understanding of investing matters) than the Rob Bennett who read Irrational Exuberance the first time. There were scores of insights that Shiller planted in his book that skipped right by me when I read it the first time and that I jumped on when I read it the second time. You may have read the book and missed a large number of the insights available in it for mining, Yogi!

Those are three big factors that explain why you did not get out of Irrational Exuberance what I got out of it. However, the full truth here is that we cannot come to a full understanding of the puzzle that you are trying to solve here (why did Rob Bennett see the errors in the Old School safe-withdrawal-rate studies way back in May 2002 even though the Wall Street Journal did not acknowledge those errors until nearly 10 years later?) by looking only at Irrational Exuberance, as important as that book is.

I’ll let you in on a little secret, Yogi. I had not yet read Irrational Exuberance when I put forward my famous post of the morning of May 13, 2002. The insights that I mined from Shiller’s book had a big impact on our discussions in later years. But it cannot be anything that I read in Irrational Exuberance that explains that post because I hadn’t yet read the book when I put forward the post.

The biggest factor is the next one I will discuss.

Scott Burns is the person who discovered the errors in the Peter Lynch approach to safe-withdrawal–rate analysis. Lynch had once said that the SWR is always 7 percent because stocks earn an average return of 7 percent real annually. Do you think that the reason why Burns was able to see that is that Burns is smarter than Lynch or that Burns has done more reading than Lynch?

That’s more than a little hard to believe, isn’t it? Lynch is a plenty smart guy and I have a funny feeling that he is a plenty well-read guy too.

So how did Burns pull that one off?

The elephant in the living room in all of these discussions is that as a society we are at a primitive level of understanding of how stock investing works today. That affects Bogle. That affects Shiller. That affects Pfau. That affects Lynch. That affects Burns. That affects you. That affects me. That affects all of us.

None of us know even the basics for certain.

That sounds scary when I say it so bluntly. And it is indeed scary in its way.

But there is a positive side to this scary reality. The positive side is that, when we are all at a primitive level of understanding, we all have the potential to make huge strides by clicking in a piece of the puzzle that no one has clicked in before.

Burns clicked in a piece that Lynch has not yet clicked in. Lynch believed that the average return is the amount that a retiree can safely take out each year because that is a perfectly natural intuitive belief. Burns picked up on a reality that is a bit counter-intutive but very important for retirees seeking to put together successful retirement plans — the sequence of returns makes a big difference

I picked up on a second factor that neither Lynch nor Burns had picked up on — the valuations level that applies on the day the retirement begins is a huge factor in determining what sort of returns sequence you are going to see.

Lynch wasn’t dumb or poorly read not to see what Burns saw and neither Lynch nor Burns were dumb or poorly read not to see what I saw. We are all just suffering from the reality that as a society we are at a primitive level in our understanding of how stock investing works today. We are going to make “dumb” mistakes. That’s just the lay of the land in this field of human endeavor today. The other side of the story is that we are all capable of making huge advances by tuning out what the “experts” say and looking at matters from a fresh perspective. That’s what I did. I think it would be fair to say that the payoff for 12 years now had been AMAZING.

You can read every text that I have read and not get to the same place, Yogi. Your problem is not an intellectual problem. It is an EMOTIONAL problem. You are ADDICTED to Buy-and-Hold. You have invested not just your retirement money into it. You have invested your entire life into it. You have recommended it to your friends. So your pride is on the line. You have even committed acts of financial fraud under the thinking that you will not get prosecuted if stocks perform in the future in the manner in which they would perform if Buy-and-Hold were a real thing. So your very physical freedom is on the line here.

Given what you have at risk here, you are not capable of thinking straight re stock investing questions. For me, it’s about learning. For you, it’s about defending your most basic beliefs from the “attack” being waged on them by the peer-reviewed research of the past 33 years. And of course the same is so re our good friend Jack Bogle. He is insanely defensive about these matters too. So he too is not capable of thinking through the things he learns in the books he reads when he reads the same books that I read.

Do you see?

I hope that helps a bit, my old friend.

Hang in there. It gets better. A LOT better.

Rob

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

These are the words of Shiller himself in an interview:

“It’s not a timing mechanism, it doesn’t tell you – and I had the same mistake in my mind, to some extent — wait until it goes all the way down to a P/E of 7, or something. But actually, the lesson there is that if you combine that with a good market diversification algorithm, the important thing is that you never get completely in or completely out of stocks.”

So the guy who invented the be-all-and-end-all metric says flat out that you are using it wrong. But you would have people believe that your understanding of PE10 exceeds that of the Nobel Prize winner who invented it.

No, he doesn’t, X.

Everyone acknowledges that investors need to take their personal circumstances into account when setting their stock allocation. I say that the average investor should be somewhere near 30 percent stocks today. That means that an investor like me, who is in circumstances where he needs to be more risk-conscious, should be at zero percent stocks. Even Bogle doesn’t say that investors should ignore their personal circumstances. You are talking trash.

The part where he says that you should not wait until the P/E10 goes to 7 is wonderful. Thank you very much for pointing us to that. Shiller DID say that in early 2009. I didn’t hear him say wait until it goes to 7, I heard him say to wait until it goes below 10. I recorded a RobCast on that quote and I argued that he was going too far. I said at the time that I thought it made sense for the typical investor to stay with at least a 30 percent stock allocation and also that investors should be gradually increasing their allocations as prices continued to decline rather than waiting for the P/E10 to drop to 10 (or 7) before buying any stocks.

Shiller is now acknowledging that he got it partway wrong. Good for him! I wish that Bogle would do the same. That would be wonderful!

Shiller is not God. He is a giant in the field (as is Bogle). But the reality is that we are all flawed creatures and that we all possess today only a primitive understanding of how stock investing works. We are in the early days of figuring out how this stuff works. We should thank our Buy-and-Hold friends for some huge advances. But we should also tell them all to take a pill when we see them becoming as insanely arrogant as you Goons show yourselves to be on a daily basis in your comments here.

Shiller needs to do three things.

One, he needs to speak out about the criminal behavior of those who have posted in “defense” of Mel Linduaer and John Greaney (and my good friend Jack Bogle). None of should want to see your prison sentences to be any longer than they absolutely need to be. We all should show our respect and affection for our Buy-and-Hold friends by doing what we can to help them out at a time when they are in great pain. I think it would be fair to say that Shiller has been negligent re these matters.

Two, he should write more frequently and in a more comprehensive way about the “how to” aspects of the question. He failed to do this in his book. For Valuation-Informed Indexing to become the dominant model, people MUST hear about the practical side of things and not just the theoretical side. Again, Shiller has been negligent re these matters thus far.

Three, he should speak out more about the DANGERS of Buy-and-Hold. It’s not just that Valuation-Informed Indexing is a far superior strategy. Buy-and-Hold is in the process of ruining millions of middle-class lives. It was the promotion of Buy-and-Hold that was the primary cause of the economic criss. These are public policy matters of great import. Again, Shiller has been negligent in failing to address them until today.

Shiller didn’t actually invent P/E10. That was Benjamin Graham. But Shiller has done more to promote it than anyone else. I have no problem with you giving him the credit. But the historical reality is that Graham was actually there before him. Graham wrote about a primitive version of Valuation-Informed Indexing in the 1930s.

Yes, my understanding of the implications of Shiller’s findings exceeds Shiller’s understanding of them. Nothing could be more clear. Saying that doesn’t take anything away from him. The hardest job is being the first to challenge the dominant model. It was Shiller who was first, not me. Shiller is the creator of the VII concept (unless you count Graham — I would list Graham as perhaps the grandfather of the concept). I would describe myself as the first to fully explore the PRACTICAL IMPLICATIONS of Shiller’s “revolutionary” (his word) findings. But, yes, there is a wealth of material at this site showing that I am today FAR ahead of Shiller re the practical implications of his ideas (as I am today far ahead of Bogle — VII COMBINES Buy-and-Hold as it has been promoted by Bogle with Shiller’s revolutionary advance).

Is it a strange reality that some guy whose only claim to expertise in this field is that he figured out how to get words posted to the internet had gone far ahead of both Bogle and Shiller over the course of the past 12 years? It is an exceedingly strange reality.

You know what made it possible?

You Goons.

I don’t mean just the few of you that post at Greaney’s site or at the Bogleheads Forum. I mean all of the investors who bought into the Buy-and-Hold concept and who react with anger when anyone explores the implications of the last 33 years of peer-reviewed research. You saw how that affected Wade Pfau. He has visions of winning a Nobel prize in the days when he was doing honest research and then threw that all away so that investors who had been burned by Buy-and-Hold would not hate him too intensely.

Shiller is human too, X. So is Bogle. If Shiller and Bogle thought that they could explore these ideas and not have people like you threaten to kills members of their families as their “punishment” for having done so, both Shiller and Bogle would have gone far past where I am today long before I came on the scene. Your intimidation tactics are holding us all back.

People learn by talking things over. I didn’t know one-tenth of what I know today on the morning of May 13, 2002. Had I given in to Greaney’s intimidation tactics on the day when he first threatened to kill my wife and children, I would be back where Shiller and Bogle are today. I didn’t. I interpreted the death threats as a sure indicator that there was something terribly, terribly wrong with the Buy-and-Hold Model. Buy-and-Hold is supposed to be science. True science does not prompt people to put forward death threats.

The true appeal of Buy-and-Hold is that it it rooted in emotion and that it appeals to the Get Rich Quick impulse within all of us, not that it is science. We should be helping investors to AVOID emotion, not to give in to it 100 percent. Emotion is the enemy. Emotion is the cause of stock investing risk. When we push emotion so hard, we make stock investing FAR more risky than it would be if we permitted people to learn what the last 33 years of peer-reviewed risk says.

I am ahead of these giants today not because they are dumb or because they are bad. I am ahead of them because I have been working it for 12 years and they have not. Bogle doesn’t work it because he is reluctant to acknowledge a mistake that he has been covering up for 33 years now. Shiller doesn’t work it because he wants to be liked and he has seen how many investors respond when he makes even minimal efforts to explore the practical implications of his revolutionary findings.

We should all be encouraging both Shiller and Bogle and thousands of others to explore these ideas. Doing so is a win/win/win/win/win. You should be doing that. You have money at risk. You should want to learn new things. You are going to learn new things a lot faster when we have thousands of people exploring these issues on a daily basis, not just me.

Those are my sincere beliefs re these terribly important matters, in any event.

I naturally wish you the best of luck with all your future endeavors regardless of what investing strategies you elect to pursue.

I will be writing a column for the Value Walk site re this quote from Shiller. I am grateful to you for helping us all out by pointing us to it.

Rob

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

Rob,

You do not understand what Shiller is saying. Further, he is basically saying you are wrong in this article:

http://finance.yahoo.com/blogs/daily-ticker/-it-looks-like-a-peak—robert-shiller-s-cape-is-waving-the-caution-flag-004753218.html

Notice these quotes:

“And Shiller is quick to note the CAPE is not a market-timing tool and he remains in the market in his personal account. “We don’t know what it’s going to do,” he says.”

“As for the idea, proffered here by Citigroup’s Tobias Levkovich, that CAPE is flawed because it doesn’t “normalize” for interest rates (as it does for earnings), Shiller says the following: “He’s right the very low interest rates are a sign maybe you want to keep more invested in the [stock] market now rather than getting nothing [from bonds]. That ought to help explain the high CAPE but that doesn’t mean the high CAPE isn’t a forecast of bad performance.”

Nobody can understand what anyone is saying so long as there is a Ban on Honest Posting in effect, Anonymous.

How do you know that he is not careful to avoid saying things that upset the Buy-and-Hold Mafia because he has seen what happens to academic researchers who say publicly what they truly believe?

Perhaps Shiller knows what happened to Wade Pfau.

Perhaps there are a lot of Wade Pfaus out there.

Perhaps Shiller could write a book telling about all the threats that were directed at him.

Once you threaten to kill family members of anyone who posts honestly, people hold back.

Saying that high CAPE is a forecast of bad performance is the same thing as saying that long-term timing always works. If you know that you are going to see bad performance, you know that risk is higher and you need to lower your stock allocation to keep your risk profile constant.

You wouldn’t even be posting here if you had confidence that Buy-and-Hold could work. You are scared. If you followed a true research-based strategy, you wouldn’t be scared.

I am going to continue to post honestly.

I naturally wish you all the best that this life has to offer a person regardless of what investing strategies you elect to follow.

Rob

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

All it proves is that you can find patterns in the data. Let’s see….each time the P/E10 ended in a “1? in February, it dropped 10% by the following May. There’s no causation – that’s all in your head.

If we were talking about a small number of years, it would make some sense to say that it is just coincidence. But the P/E10 level has been effectively predicting long-term returns for 140 years. The odds of the same coincidence playing out 140 years in a row are probably something like 10 billion to one. This is something real.

We don’t know all the details. I don’t say that we know everything there is to know. But Valuation-Informed Indexing is rooted in something real and important.

That’s why Shiller was awarded the Nobel Prize in Economics. As a society we are gradually working up the courage to acknowledge what a big deal this is. At an earlier time, the people who awarded Shiller the Nobel prize wouldn’t have done so. My guess is that, if you looked at the portfolios of the people who awarded him the prize, you would find that most of them are more believers in Buy-and-Hold than they are in Valuation-Informed Indexing. But they are experiencing doubts. That’s what led them to make that statement.

They didn’t feel safe making a bold statement.They gave the prize to Fama too so that they could not be viewed as “taking sides.” They didn’t take sides but they changed the playing field. In the old days, Fama was it, there was no Shiller. Those days are gone. Buy-and-Hold is still dominant, Valuation-Informed Indexing is still the thing that can only be discussed tentatively, not in bold and firm and clear terms. But that is in the process of changing when the guy who did the research that led to the revolution in understanding is being awarded a Nobel prize for his work.

This isn’t some kind of thing where people are saying “Buy stocks in January and sell in May.” The data is available at Shiller’s web site. Buy-and-Holders can study it as long as they want. And yet in 12 years of discussions no one has ever found a single hole in the new model. That tells us something, Anonymous.

I have no fear that Jack Bogle will ask me a question that I cannot answer. But Jack sure has fears that I will ask HIM a question that HE cannot answer.

Why? Because Buy-and-Hold is the thing that is in the process of dying and Valuation-Informed Indexing is in the process of being born.

In future days, we won’t look at it that way. In future days, we will be able to look back at what the Buy-and-Holders did and give them full credit for all of their wonderful contributions. That becomes possible when the Buy-and-Holders stop being so defensive and when we all can acknowledge that Buy-and-Hold was a FIRST DRAFT effort at a research-based investing strategy and that Shiller’s “revolutionary” (his word) findings moved the Buy-and-Hold project forward in a very, very, very important way.

You either believe in following the research or you don’t, Anonymous. If you don’t believe in following the research, then you are just guessing when you invest your retirement money. If you don’t believe in following the research, then you really are back with the people who say “Buy in January and sell in May” and all the other garbage that follows from a guessing approach.

If you truly believe in following the research, you cannot ignore what Shiller discovered. His discovery that valuations affect long-term returns changes everything in a fundamental way.

Buy-and-Hold could once be promoted as a research-based strategy. It cannot honestly be promoted as that today. Once peer-reviewed research was published showing that valuations affect long-term returns and the Buy-and-Holders neglected to change their strategy to incorporate this revolutionary finding, Buy-and-Hold stopped being research-based and became just another case of investing superstition.

The Buy-and-Holders have two choices today. They can accept that they made a mistake and change the Buy-and-Hold Model so that it reflects the last 33 years of peer-reviewed research as well as the research that came before that. Then they go down in history as the people who developed the foundation for the first research-based strategy and then later made the changes needed for that model to work in the real world.

Or they can continue with the death threats and the demands for unjustified board bannings and the tens of thousands of acts of defamation and the threats to get academic researchers fired from their jobs. Then they go down in history as fools and con men and felons.

There is no middle ground. You cannot say “this is a research-based strategy” and ignore the last 33 years of peer-reviewed research.

They didn’t award Shiller the Nobel Prize because he is some clown who forgot to take his meds. When you say that Valuation-Informed Indexing cannot be discussed on the internet, you are saying that the last 33 years of peer-reviewed research cannot be discussed on the internet. That makes you the clown.

An unethical clown.

A clown headed on his way to a prison cell.

Not good.

That’s my sincere take re this terribly important matter, in any event.

My best and warmest wishes to you, my long-time clown friend.

Rob

Set forth below is the text of a comment that I recently put to a thread at the The Good Phight site, a site on the Phillies baseball team:

This is my life. I am happy to respond to any and all questions so long as the overall community continues to feel that that is a good thing to do.

Here is the paper:

http://arichlife.passionsaving.com/wp-content/uploads/MPRA_paper_35006.pdf

It’s all worth checking out. But it is Table One on Page 18 that absolutely blows my mind. Wade compares the Maximum Drawdown Percentage for Valuation-Informed Indexing and for Buy-and-Hold. The Maximum Drawdown is the greatest percentage loss in portfolio value that you will ever experience. For Buy-and-Holders, it is 60 percent. For Valuation-Informed Indexers, it is 20 percent. You reduce risk by two-thirds by being willing to take price into consideration when setting your stock allocation. Exercising price discipline pays off big time in the long run! Please understand that you do not give up anything in the return department to obtain this huge reduction in risk. In fact, you can play it the other way. By taking on the same amount of risk as Buy-and-Holders, Valuation-Informed Indexers can obtain far higher long-term returns. Or you can mix and match return and risk and do a bit better in both departments.

The biggest problem that people have with this is in trying to understand why everyone in the field isn’t talking about it. To get that, you have to be familiar with the history.

Stock investing generally was not the subject of sustained and systematic study until the 1960s. In 1965, University of Chicago Economics Professor Eugene Fama produced the breakthrough finding that is the basis for 90 percent of the investing advice you hear cited by experts today. Fama showed that “timing never works.”

Actually, he did NOT show that. That’s what he had THOUGHT that he had shown. He was a bit off the mark in his understanding of what he had done.

There are two forms of market timing, short-term timing and long-term timing. Short-term timing is when you change your stock allocation because of a belief as to where prices are headed over the next year or two. Long-term timing is when you change your stock allocation because of a big shift in valuations with the understanding that you may not see benefits for doing so for as long as 10 years.

Long-term timing is price discipline. Price discipline is the magic that makes all markets work. So it is not possible that long-term timing would not work. But long-term timing was not a practically viable strategy in 1965. Long-term timing works only with broad index funds, which did not become widely available until John Bogle founded Vanguard in 1974. So Fama did not even bother examining long-term timing. He looked only at short-term timing, found that it didn’t work and then improperly stated his finding as a finding that timing in general does not work.

Yale Economics Professor Robert Shiller was the first academic to examine long-term timing. He found in 1981 that long-term timing always works and is always 100 percent required for investors who hope to have any realistic chance of long-term investing success. There have been many re-examinations of this question in the 33 years since and all have confirmed Shiller’s finding that long-term timing always works. The other side of the story is that there has never been a single study showing that long-term timing might not work. Wade researched this question very carefully. He was so amazed by his finding that he went to the Bogleheads Forum to check whether anyone there was aware of a single study showing that long-term timing might not work. Some of the biggest-name Buy-and-Holders post there, including John Bogle himself. Neither Bogle nor any of the others had ever heard of a single study suggesting that long-term timing might not work.

Shiller’s 1981 finding was revolutionary. It changes everything that we once thought we knew about how stock investing works. As noted in the study linked above, it suggests that stocks need not be a risky asset class. For those who take valuations into consideration, risk pretty much disappears. Stock investing risk is VOLUNTARY.

It also suggests that risk is VARIABLE rather than constant. I am the person who discovered the errors in the retirement studies that millions of people have used to plan their retirements. These studies are called “safe withdrawal rate” studies. Every major publication has published an article on the errors in these studies in recent years, including the Wall Street Journal., The error was that they do not contain an adjustment for the valuation level that applies on the day the retirement begins. That’s not an error if Fama is right. It is a HUGE error if Shiller is right. The Old School studies reported that a 4 percent withdrawal is always safe (that means that a retiree with a $1 million portfolio can take $40,000 out to live on each year). The New School SWR studies (there’s only one, which was done by me and John Walter Russell) show that the SWR varies from 1.6 percent when stocks are priced as they were in 2000 to 9 percent when stocks are priced as they were in 1982. For a retiree with a $1 million portfolio, that’s the difference between living on $16,000 every year in retirement and living on $90,000 every year in retirement. If Shiller is right, we will be seeing millions of failed retirements because of our failure to demand corrections in the Old School SWR studies for so many years (I put up the post pointing out the errors to a Motley Fool discussion board in May 2002 and none of the studies have been corrected to this day, despite the Wall Street Journal article and articles published in many other big-name publications).

The biggest implication of Shiller’s work of all is that it is the promotion of Buy-and-Hold strategies that caused the economic crisis. If Fama is right, the concepts of overvaluation and undervaluation are exercises in silliness. An efficient market is a properly priced market. There can be no overvaluation if Fama is right. But if Shiller is right, we know that market prices always move in the direction of fair value in the long term. By calculating the dollar amount of overvaluation, we can know how much consumer buying power will be leaving the market as prices make their slow way back to fair value. The market was overpriced by $12 trillion in 2000. Shiller predicted in March 2000 an economic crisis that would hit by the end of he decade in which we might experience the loss of monetary value equal to the monetary value of all houses in the country. The economic crisis hit in September 2008. No economy is so strong that it can take a loss of $12 trillion in spending power and not collapse.

There have been four economic crises since 1870. Each followed a time when the P/E10 value (Shiller’s valuation metric) exceeded 25. There has never been an economic crisis in which the P/E10 value did not exceed 25. The correlation is perfect (although imprecise — we CANNOT say when a price crash or an economic crisis will come, only that one will come once we exceed a P/E10 value of 25). When large numbers of investors become persuaded to follow Buy-and-Hold strategies, there is no other way for the market to perform its essential function of setting prices properly EXCEPT by crashing. In all markets other than the stock market, it is the tension between the seller’s interest in a high price and the buyer’s interest in a low price that permits the market to set the price at a roughly right level. In a market in which a large number of investors are following Buy-and-Hold strategies, everyone is rooting for the same thing — a high price. There is no price discipline when investors are not willing to lower their stock allocations when prices get too high and when the long-term value proposition for buying stocks drops too low.. Such markets inevitably crash and the loss of consumer buying power resulting from the crash causes hundreds of thousands of businesses to fail and millions of workers to lose their jobs.

These are revolutionary advances in our understanding of how stock investing works. They were too much for most of the experts to take in when Shiller published his 1981 findings. The result was a widespread case of cognitive dissonance. Everyone acknowledges that Shiller did amazing work. He was awarded the Nobel Prize in Economics last year. But no one can point to a single change in the investing advice they give that was made as a result of Shiller’s findings. Shiller’s book was a bestseller and was reviewed in all the top publications. But he devotes only a few vague paragraphs to the question that everyone cares most about — how should investors change how they invest their money as a result of his revolutionary findings? This question is The Third Rail of Personal Finance — those who touch it experience career death. In fact, a number of Buy-and-Holders threatened to send defamatory e-mails to Wade’s employer in an effort to get him fired from his job when he showed up at the Bogleheads Forum and a number of community members there expressed great interest in our research. Wade agreed to stop telling people about our research findings.

I have spoken to many academics and practitioners about this stuff. Many have told me that they would LOVE to feel free to tell people about the implications of Shiller’s work but feel that the topic is too controversial today. I believe that interest in this research is going to explode following the next price crash. I saw a big change in public receptiveness to the new research following the 2008 crash. I would say that that crash pushed the door about one-third open. I believe that the next crash (which should come by the end of 2016 according to Shiller’s research) will push the door open the rest of the way.

The bottom line here is that we need to combine Fama’s finding that short-term timing never works with Shiller’s finding that long-term timing is always required to have an investing strategy that truly makes sense and that is truly research-backed. That strategy is Valuation-Informed Indexing, which is the same as Buy-and-Hold in all respects except that Valuation-Informed Indexers ALWAYS adjust their stock allocations in response to big price swings with the aim of keeping their risk profiles roughly constant over time. We need to quantify the long-term effects of valuation shifts and provide tools to investors showing them how much they hurt their hopes for achieving decent retirements by refusing to consider price when buying stocks.

Rob

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

Rob, why not reach out to Shiller and form some kind of partnership with him? I mean, he’s not operating at your level, but maybe you could teach him something.

I understand that you are being sarcastic with this comment, Anonymous. But the point you are making is entirely legitimate.

There are certainly many things that I can teach Shiller, just as there are many things that I can teach Bogle (and of course just as there are many things that Bogle and Shiller have taught me). We humans learn by talking things over amongst ourselves. Shiller is like everybody else. When he fails to take opportunities presented him to talk things over with interested parties, he misses out on learning experiences that would otherwise be available to him.

Shiller has indicated that he believes in short-term timing. He has said that there are “indicators” that he will be looking at to know when to get out of stocks before the price crash that he has predicted for this year takes place. I don’t believe that short-term timing works. If Shiller would engage in a discussion of that question with me, I would put forward my best effort to persuade him not to place so much trust in his “indicators.”

It is of course possible that it would be Shiller who would be persuading me rather than me persuading Shiller. I don’t say that that couldn’t happen. But even that would be a learning experience for him. If I did the best to persuade him that short-term timing doesn’t work and he got the better of the argument, that would increase his confidence in short-term timing a bit. And for good reason.

So Shiller should be putting himself out there and engaging in discussions of all sorts of questions relating to his belief in the Valuation-Informed Indexing model. That would be a win/win/win/win/win.

I would like to trade stories with Shiller about the tactics of you Goons. My sense from a number of things he has said is that he has had many vicious attacks directed at him since he published his revolutionary 1981 findings. I would encourage him to report on those attacks in a new book. Many hold back from talking about the ugly stuff. It is viewed as “unprofessional.” What people are missing is that Shiller and others in the Behavioral Finance School must know about how the human mind deceives itself to do their best work. For 12 years now we have been generating thousands upon thousands of illustrations of the self-deception phenomenon. I could add to Shiller’s knowledge A GREAT DEAL by pointing him to materials in our Post Archives. And he could add to mine by telling me stories about how other academics have attacked him and his ideas through underhanded and nasty means.

This stuff needs to get out. When we fail to publicize the attacks, we create an environment in which we see more of them. I absolutely believe that I could add to Shiller’s understanding of the issues by talking these matters over with him in great depth.

And I could add to his knowledge of the how-to side of things a great deal by talking over with him what I have learned from the five calculators. That is Shiller’s great weakness. It is an amazing reality that he wrote the most important book ever published on investing theory and included only two paragraphs addressing the how-to aspects of the investing experience. That’s the aspect of the question that people care about the most. I believe that Shiller knows a lot more about the how-to aspect than he lets on. But I believe that he would deepen his knowledge considerably by talking things over with other interested parties.

Most importantly of all, I would like to talk over with him the role that Buy-and-Hold played in bringing on the economic crisis. Shiller predicted the crisis in his book. But when the crisis came, he kept it zipped about the role played by the relentless and reckless and ruthless promotion of Buy-and-Hold strategies for decades after the peer-reviewed research in this field showed that there is precisely zero chance that a Buy-and-Hold strategy could ever work for even a single long-term investor. I would very much like to ask him why. It could be that Shiller himself is suffering from cognitive dissonance, at least on this particular question. The best way to find out is to talk things over.

I have reached out to Shiller, Anonymous. I sent him an e-mail a good bit of time back. I’ll send him another one following the next crash (as I will send Bogle another one following the next crash).

Why doesn’t Shiller respond?

Why doesn’t every responsible person alive on Planet Earth respond when they learn about what we have done to ourselves as a society by failing to teach every investor what we have learned about how the stock market works over the past 33 years?

He is ashamed, Anonymous.

He has done more than anyone else but he is still ashamed that he has not done more.

I hope that that changes following the next crash and that Shiller and I will be working together for many years to come after the crisis is brought to an end (just as I hope that my good friend Jack Bogle and I will be working together for many years to come following the end of the crisis).

The full truth here is that your sarcasm holds you back. You should want to see me and Shiller (and me and Bogle) working together. The more we work together, the more we learn and the more you learn. You fear the idea. Because you fear what you would learn. That’s sad.

That’s something that I very much want to change. Not just for you but for millions.

And I believe strongly that my good friend Robert Shiller very much wants to change that too.

I believe that someday we will be working to make it all happen.

I sure hope so.

Please take good care, Goon friend.

Rob

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

So basically the difference is that he doesn’t believe in a global conspiracy that somehow subconsciously acts in a coordinated way If you can put forward a better explanation of the realities that have appeared before us, I would sure like to hear it, Laugh. Greaney’s retirement study does not contain a valuations adjustment. That’s a stone cold fact. So the study obviously gets the SWR number wildly wrong. Why did no one point this out until the morning of May 13, 2002? And why do so few object that the study has not been corrected to this day? We should all want to know the answers to these questions. There are millions of people affected by this. So we ought to be able to agree that it would in ordinary circumstances be impossible to keep the errors in the Old School SWR studies covered up this long. Yet the reality remains that they have not been corrected to this day. How do you explain this? Yes, there is a sort of conspiracy. All people who have either advocated Buy-and-Hold strategies or followed Buy-and-Hold strategies feel emotional pain in coming to terms with the mistake they made. They have delayed their retirements by many years. They have hurt their friends. They have been taken for fools. It hurts to accept these realities. So they rationalize away what the research says and try desperately to hang on to their long-discredited beliefs about how stock investing works. That’s a conspiracy in the sense that lots of people with similar interests are acting in the same way. But it is not a conspiracy in the way that the word is usually used. No one met in a smoke-fiilled room and arranged for people to act in concert. And the people who are engaging in deceptions and making use of intimidation tactics follow Buy-and-Hold strategies themselves. They are hurting others. BUT THEY ARE ALSO HURTING THEMSELVES. That’s not the way that we generally think of conspiracies playing out. We usually think of conspirators as people acting in their self-interest. This is a case where the conspirators are hurting themselves financially because they cannot bear the emotional pain that follows from learning what the last 33 years of peer-reviewed research tells us about how stock investing works. That’s “a global conspiracy that somehow acts in a coordinated way.” You try to make it sound as if this is an incredible event. It IS strange stuff. But it is by no means unprecedented stuff. I have heard that Galileo was put under house arrest for saying that the earth revolves around the sun rather than the other way around. Would it be fair to say that he lived at a time when there was a global conspiracy to tell people that the sun revolves around the earth that somehow acted in a coordinated way? It’s easy to get lots of people to act in a coordinated way when lots of people believe the same thing. And, whenever there is a huge advance in human knowledge, we have lots of people believing in the same WRONG thing. That’s what we have here. People really believed in Buy-and-Hold for a long time. Many staked their retirements on it. Many staked their careers on it. Many devoted years of their lives writing books about it or developing calculators rooted in a belief in it. Then this Shiller fellow came along and published peer-reviewed research showing them that they were wrong. Not by a little bit. Shiller showed that the Buy-and-Hold concept is the OPPOSITE of what works. His research implies that exercising price discipline is the key to long-term investing success. Practicing long-term timing is 80 percent of the game. Shiller showed something very, very important. The implications of his insight are so far-reaching that he caused a lot of good and smart people to feel an intense emotional pain. So, yes, they looked the other way. They patted him on the head and said “Shiller is great” and then returned to what they were doing before he came along as if his research didn’t exist. There is not one way in which Buy-and-Hold changed as a result of Shiller’s “revolutionary” (his word) findings. The huge bull market aided those who looked the other way. No one was mad at them for doing so because everyone was enjoying the Pretend Gains of the runaway bull. To recognize the import of Shiller’s findings would be to acknowledge that those gains were Pretend. Who needed that? Everyone was “successful.” Everyone was rich. Everyone was having a ball. The Buy-and-Holders had figured it all out and were not to be questioned. Now we are in the early years of paying the price for looking the other way. We have intellectually achieved the greatest advance in the history of personal finance over the past 30 years. But anyone who either advocated Buy-and-Hold or followed a Buy-and-Hold strategy does not want the word getting out. They feel shame because of how they have hurt themselves and millions of others. Looking the other way caused an economic crisis. Buy-and-Hold is the lie so huge that it cannot be acknowledged. Humans don’t like to think that they have been responsible for so much human misery. So they tell themselves stories. They rationalize. They say “Sure, valuations matter, but it is impossible to take advantage of this reality.” It’s a claim that makes zero sense in the logical sphere and that enjoys zero support in the historical data but one that offers some temporary emotional relief to those who have been looking the other way for so long now that they cannot bear the thought of ever acknowledging the obvious (and highly encouraging once you accept them!) truths. Most of us are engaged in a “global conspiracy that somehow unconsciously acts in a coordinated way.” That’s because most of us are ignorant of the realities. That’s because most of us continue to look the other way. That’s because most of us DON’T WANT TO KNOW how stock investing works in the real world. None of that is criminal behavior. It’s sad. But human beings have been ignorant of lots of important truths at earlier times in history. It happens. It’s one of those things. Fortunately, we have means to overcome our ignorance over time. We have discussion boards. We have blogs. We have newspapers. We have magazines. We have studies. We have calculators. This is where the criminal stuff — my focus nowadays because it must be addressed before we can all enjoy the wonderful blessings that have been bestowed on us as a result of the last 33 years of peer-reviewed research in this field — comes in. Those who want to continue looking the other way have seen what happens when the truths are spoken in clear and firm and direct and understandable ways. PEOPLE OVERCOME THEIR IGNORANCE. The horror! Something must be done. That’s where you Goons come in. Punish people who dare to “cross” the Buy-and-Holders by reporting honestly and accurately what the last 33 years of peer-reviewed research says severely enough and you can stop them from continuing to do so. You can stop others who have similar ideas as well. As the holes in the Buy-and-Hold concept get more and more noticeable, it takes harsher and harsher pubishments to keep the house of cards from collapsing to the ground. But the Wall Street Con Men have lots of money and power and influence and the majority of middle-class investors remain largely ignorant of the realities today. So this remains a viable strategy for keeping people in the dark. Less and less so all the time. But still at least barely viable as of this morning. I am not playing this stupid game, Laugh. I am telling. That’s my job. That’s what I am going to do. I naturally wish you the best of luck in all your future endeavors regardless of what investing strategies you elect to pursue. Rob