A Rich Life

The Old Ideas on Saving & Investing Don't Work -- Here's What Does

“Once Every Investor Appreciates How Important It Is To Engage in Market Timing, There Will Be Mountains of Material Generated to Help Them Do It Effectively. There Will Be All Sorts of Good Stuff Available to Us, Things That We Cannot Even Imagine Today. We Don’t Today Even Appreciate What We Are Missing Because So Many of Us Have Fallen for the Line About Market Timing Not Always Being 100 Percent Required and 100 Percent Beneficial.”

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

“I don’t believe that any of us has sole possession of the truth. I believe that, if we all post honestly, the truth will reveal itself over time.”

What is it that you believe that people don’t already know? What information is not out there?

People need to understand that the value proposition of stocks is not constant but variable. Investing rationally means looking at the pros and cons of various stock allocations at a particular point in time and choosing the one that makes the most sense for someone in your particular circumstances. That process of thinking things through is cut off when investors come to believe that market timing is not required. Market timing is the act that permits reason to enter the stock investing project. That’s why the payoff for engaging in it has always been so huge.

There was a poster at the Bogleheads Forum who said: “No one would ever go into a bank and announce that ‘I will take three certificates of deposit please’ without first checking on the rate being offered. But that’s how all Buy-and-Holders make stock purchases. They don’t even check how the current CAPE level affects the value proposition of the thing they are buying before making a decision. I would like to see people making use of their reasoning abilities when buying stocks. To do that, they have to give up any aversion they feel to market timing.

Once every investor appreciates how important it is to engage in market timing, there will be mountains of material generated to help them do it effectively. There will be all sorts of good stuff available to us, things that we cannot even imagine today. We don’t today even appreciate what we are missing because so many of us have fallen for the line about market timing not always being 100 percent required and 100 percent beneficial.

Rob

“Every Member of My Family Lives in the United States. My Mother Lived Through the Great Depression. She Told Me Stories. This Way, I Can Go to Sleep at Night Knowing That I Did Everything in My Power to Spare the Members of My Family What We Are Going to See If the Continued Promotion of the Buy-and-Hold ‘Strategy’ Brings on the Second Great Depression.”

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

“Would it have been better if I had just kept my mouth shut about the error in the Greaney study?”

Every member of your family would answer that one with a big fat Yes.

How lucky for the world that their opinions don’t matter.

I don’t know, Anonymous. Every member of my family lives in the United States. My mother lived through the Great Depression. She told me stories. This way, I can go to sleep at night knowing that I did everything in my power to spare the members of my family what we are going to see if the continued promotion of the Buy-and-Hold “strategy” brings on the Second Great Depression.

The crazy stuff is out of my hands. I have spoken out in opposition to it on many occasions. No one person can bring it to an end on his or her own. We are all going to need to pull together as a society if we want to see that little dream come true. ALL of the families in the United States have a role to play here. No reasonable person can deny that I have done my part and then some more on top of that and then some more on top of that.

Don’t let the bad guys get you down, my good friend.

Rob

 

“The Only Thing Holding Us Back Today Is the Unwillingness of the Buy-and-Holders to Say the Words ‘I’ and ‘Was’ and “Wrong'”

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

https://www.fool.com/retirement/2021/07/07/how-to-retire-with-2-million-on-an-80000-salary/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article

Just confirms success with buy and hold for the long term and then use a 4% SWR.

Articles like this will say something different after we have opened every discussion board and blog on the internet to honest posting re the last 40 years of peer-reviewed research in this field. Adding a Get Rich Quick/Buy-and-Hold component to a retirement plan adds nothing — it always subtracts by increasing risk and diminishing returns. The best thing to do is to Stay the Course. In a world in which valuations affect long-term returns, that requires market timing to keep irrational exuberance from getting out of hand.

The only thing holding us back today is the unwillingness of the Buy-and-Holders to say the words “I” and “Was” and “Wrong.” I have a funny feeling that, in the days after the next price crash, we will all be working together to encourage each other to engage in market timing (price discipline!) at all times and to keep irrational exuberance to a bare minimum.

We’ll see.

Rob

“The Shift from Buy-and-Hold to Valuation-Informed Indexing Is the Biggest Advance in the History of Personal Finance.”

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

And not one of those comments are backed up with any facts.  Look at how that has worked out for you.

The shift from Buy-and-Hold to Valuation-Informed Indexing is the biggest advance in the history of personal finance. Are you joking?

That advance benefits everyone alive in the country that I love. You are pointing out that I have not yet seen personal benefits. I haven’t. But what happens to my country affects me. So I need my country to survive and to thrive. And the last 40 years of peer-reviewed research shows that that is not possible if we don’t all pull together and put all investors on notice as to the critical importance of market timing, I have a funny feeling that, once the word gets out and we are all living better and richer lives in about 50 different ways, that Old Farmer Hocus will be seeing plenty of personal benefits from all this.

So I get to do very well while also doing great good. That’s a pretty darn good combination. Yes?

And look at how it has worked out for you. I think it would be fair to say that you are looking forward to a long prison sentence in the days following the next price crash. Holy moly!

Rob

Valuation-Informed Indexing #558: The Term “Irrational Exubernace” Is a Synonym for “Scam”

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I’ve posted Entry #558 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Term “Irrational Exuberance” Is a Synonym for “Scam”

Juicy Excerpt: Irrational exuberance is a scam. Is that not so?

Even people who are generally sympathetic to Shiller’s ideas usually do not refer to it as such. People think of irrational exuberance as one more thing to take into consideration when settling on a stock allocation. It’s really much more than that. Shiller’s showing that there are times (like today!) when more than half of the wealth held in the stock market is artificial is a cry of “foul!” as to the entire working of the market. For so much false wealth to be created, pretty much all of us had to be in on the scam. We are not talking about some small act of corruption. This is pervasive.

“I Think It Would Be Fair to Say That We Will All Enjoy the Greatest Surge of Economic Growth in Our Nation’s History and That There Will Not Be One Person Looking Back with Longing to the Buy-and-Hold Days.”

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

How have things worked out for you? Have you received backing by the financial experts? No. Do you have successful outcomes supporting VII? No. Has your retirement plan been successful? No. Did your crash predictions come true? No. Did you finish your book on time? No. Did you get a job at the beginning of the year as you previously said? No.

What have been your successes? Setting a record for board banning? Longest streak of repetitive posts? Avoiding real work?

It was a huge success to work up the courage to point out the error in the retirement study posted at John Greaney’s web site.

It was a huge success to have thousands of our fellow community members express gratitude to me for starting the most exciting investment debate in the history of the internet.

It was a huge success to have a Ph.D. in Economics ask me to co-author research with him showing the superiority of Valuation-Informed Indexing over Buy-and-Hold and for him to conclude after 16 months of in-depth explorations that “Yes, Virginia, Valuation-Informed Indexing works!”

The biggest success will come in the days following the next price crash. We are going to have to rebuild our broken economic system at that time, are we not? I think it would be fair to say that we are not going to rebuild it with even more promotion of the pure Get Rich Quick/Buy-and-Hold “strategy.” We are going to need to open every discussion board and blog to honest posting re the last 40 years of peer-reviewed research in this field. I think it would be fair to say that we will all enjoy the greatest surge of economic growth in our nation’s history and that there will not be one person looking back with longing to the Buy-and-Hold days. For someone who has a deep love for his country, that is going to feel like a big success.

Do I wish that Greaney had corrected his study within 24 hours of the moment he learned of the error he made in it? Obviously. Of course.

Do I believe that the good we have seen over the past 19 years has been 50 times more good than the bad that we have seen over the past 19 years has been bad? Obviously. Of course.

My best and warmest wishes to you and yours.

Rob

“There Are Two Ways to Do Stock Investing. You Can Go Rational or You Can Go Emotional. The Only Explanation for Failing to Correct Errors in Retirement Studies Is That You Have Gone Emotional. There Is No Rational Reason Not to Practice Market Timing at All Times. The Only Possible Reason for That Choice Is It Permits Irrational Exuberance to Take Over.”

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

You should have corrected your errors over 19 years ago.  Funny how you won’t even allow a link to the thread you say is famous.

If the study had been corrected 19 years ago, we wouldn’t be having this discussion today, Anonymous.

There are two ways to do stock investing. You can go rational or you can go emotional. The only explanation for failing to correct errors in retirement studies is that you have gone emotional. There is no rational reason not to practice market timing at all times. The only possible reason for that choice is it permits irrational exuberance to take over.

I don’t like irrational exuberance. So I vote for market timing. That’s the difference between us. That’s the difference between Buy-and-Hold and Valuation-Informed Indexing. That’s the entire shebang.

Do you want to know the true and lasting value of your portfolio? Or do you want to be comforted by the pretty lies supplied by irrational exuberance? Fail to practice market timing and you transform Buy-and-Hold — which in other respects is a research-based approach — into a pure Get Rich Quick approach. Not this boy, you know?

I favor Buy-and-Hold with market timing added. That’s Valuation-Informed Indexing.

My best and warmest wishes to you and yours, dear Goon friend.

Rob

“What I Say Is That the Greaney Retirement Study Lacks an Adjustment for the Valuation Level That Applies on the Day the Retirement Begins. It Shouldn’t Take 19 Years to Determine Whether That Is So or Not.”

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

I have read your post from May of 2002. I have read all the responses as well. The whole history is different versus your portrayal. If you feel there is some error in the math, it is up to you to show the math and your correction.

All you have really done is tell people you think there is a problem, how great you think you are (telling us you think you and the post are famous), how people tell you that they support you (which we can’t find) and how you think there is some massive fraud and cover-up (which is also made up).

So, if you really want to convince people, here is what you can do:

Post the link to the thread with your post from 2002. Show the error and your mathematical corrections. Invite people to comment and debate. Very simple.

What I say is that the Greaney retirement study lacks an adjustment for the valuation level that applies on the day the retirement begins. It shouldn’t take 19 years to determine whether that is so or not. Greaney should have corrected the study within 24 hours of the moment that he learned of the error he made in it.

Rob

“If Motley Fool Had Given Greaney the Boot When He Advanced His First Death Threat (As I Recommended at the Time), Valuation-Informed Indexing Would Today Be the Dominant Model for Understanding Stock Investing.”

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

So you have posted the same thing 17,877 times.  What makes you think that when you post it 17,878 times, people will suddenly change their mind?

There were scores of people who responded to my very first post asking if we should consider valuations when calculating the safe withdrawal rate by thanking me for starting the most exciting and helpful discussion in the history of the Retire Early board. If Motley Fool had given Greaney the boot when he advanced his first death threat (as I recommended at the time), Valuation-Informed Indexing would today be the dominant model for understanding stock investing today.

Motley Fool went for the quick buck. It’s hard for a research-based strategy to compete with a pure Get Rich Quick approach for popularity points.

I have never had any problem whatsoever convincing lots of people of the merit of following a research-based approach. The problem is that, the more successful I am in persuading people, the more brutally abusive you Goons become. People don’t like to see the lives of their loved ones threatened. Until as a society we agree to enforce the laws of the United States in the investing advice field as we do in all other fields, you Goons are going to have the edge.

I believe that we will see a big change in the days following the next price crash, when millions of people will see half of their stock portfolio disappear into thin air. We’ll see.

Rob

“The 4 Percent Rule Is Not Something That Greaney Made Up Himself. That Rule Was Cited in Thousands of Newspaper Articles. Hundreds of Thousands of Investment Advisers Cited That Rule in Retirement Planning Advice That They Advanced to Their Clients. Millions of Retirement Plans Were Constructed With the 4 Percent Rule in Mind. If It Really Is So That That Rule Was Constructed Without the Effect of Valuations Being Considered, We Are Looking At the Biggest Act of Financial Fraud in the History of the United States. BY FAR.”

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

The Greaney issue has been addressed.  You just don’t like the answer.  Why do you still keep repeating it?  It isn’t helping.  If fact, it just continues to hurt you because people have long grown tired of having to repeat themselves over and over again, while you hijack and fill up threads.  It is a huge waste of time.  It is just one of many reasons why you get banned.

The 19-year cover-up of the error in the Greaney retirement study is a public policy matter of critical importance. Say that there is a one-in-a-hundred chance that I was right in what I said in my famous post from the morning of May 13, 2002. The odds are a lot higher than that. More like a 99.999-in a hundred chance. But let’s just say that the odds are one-in-a-hundred for purposes of discussion, If that’s so, then we should be discussing the question on every discussion board and blog on the internet.

The 4 percent rule is not something that Greaney made up himself. That rule was cited in thousands of newspaper articles. Hundreds of thousands of investment advisers cited that rule in retirement planning advice that they advanced to their clients. Millions of retirement plans were constructed with the 4 percent rule in mind. If it really is so that that rule was constructed without the effect of valuations being considered, we are looking at the biggest act of financial fraud in the history of the United States. BY FAR. If you added together the dollar losses caused by every act of financial fraud in the history of the United States, the number wouldn’t come close to being equal to the dollar losses caused by this one 19-year cover-up.

Fair enough?

Rob