A Rich Life

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

Valuation-Informed Indexing #541: It’s Not Economic Developments That Cause Market Turns

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I’ve posted Entry #541 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called It’s Not Economic Developments  That Cause Market Turns.

Juicy Excerpt: What matters is not the economic development, what matters is the investor reaction to the economic development. Investors who are emotionally open to a price drop will respond differently to a change in interest rates or energy prices or political turmoil than will investors who are not emotionally open to a price drop. We need more investigations into what makes investors more open or closed to price drops.

“It’s Not Just Me. It Is 10 percent of the Population That Today Believes That Shiller’s Nobel-Prize-Winning Research Is Legitimate Research. I Want to Make it 90 Percent. That Won’t Happen Until We Open Every Site on the Internet to Honest Posting. So I Want to See That Happen.”

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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 either don’t understand the point made or you are intentionally ignoring it. The red flag should indicate to you that you are not really thinking about things correctly. What are the odds that only Rob Bennett is right. Answer: Slim to none and slim just walked out the door.

It is not honest posting when you are ignoring what people are telling you. Calling people goons means that you see these people as a threat to uncovering the real truth.

You lack total self awareness as well as situational awareness. There is no way for anyone to have a reasonable conversation with you.

The odds that only Rob Bennett is right are zero. But I am not the only person saying that valuations affect long-term returns. Shiller wrote an entire book on the subject and was awarded a Nobel prize for his research showing that it is so. Wade Pfau devoted 16 months of his life to investigating my claims and concluded that they all check out and that “Yes, Virginia, Valuation-Informed Indexing works!” John Walter Russell researched my stuff for eight years, receiving zero compensation, because he thought that the issues that I brought to the table were so important. Bill Bernstein said that the safe withdrawal rate was only 2 percent at the top of the bubble. The Wall Street Journal and the Economist both published articles saying that the Buy-and-Hold studies are out of date and in error. Thousands of my fellow community members have said that they would like to see honest posting permitted so that they could see my work and the work of other Valuation-Informed Indexers. Rob Arnott looked at my site and calculators and said that everything I have said sounds good to him. Several professors have told me that they have begun teaching Valuation-Informed Indexing in their classes after having being exposed to my work on the internet. And on and on and on and on.

It’s not just me, Anonymous. It is 10 percent of the population that today believes that Shiller’s Nobel-prize-winning research is legitimate research.

I want to make it 90 percent. That won’t happen until we open every site on the internet to honest posting. So I want to see that happen. The problem has never been that people do not see the merit of the case. The problem is that Buy-and-Holders see how positively people react to the message and feel that they need to shut the discussions down, even if it takes criminal acts to get the job done.

Not this boy, you know?

Mu best wishes.

Rob

Valuation-Informed Indexing #540: The Power of Market Timing Is Counterintuitive

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I’ve posted Entry #540 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Power of Market Timing Is Counterintuitive.

Juicy Excerpt: Everything about the world of stock investing is serious and sober and controlled. Shiller is saying something discomforting. He is saying that underneath the serious and sober and controlled exterior is a bubbling cauldron of investor emotion that tells the true story of what is going on. Shiller once said:  “There is a growing behavioral economics movement, but it has so far had limited impact. Economists are not fond of the softness and imprecision of psychology. These notions are considered vaguely unprofessional and flaky.” And scary!

“Why Are There People Who Still Talk About the Efficient Market Theory As If It Were a Real Thing? There Is No Intellectual Reason for Doing So. There is an INSTITUTIONAL Reason for Doing So.”

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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:

“Actually, I cannot recall anyone other than me ever saying things quite that way. “

That should be a red flag for you. There are many well educated and well informed people out there that can all do critical analysis. Further, they are actual “numbers” people. When you find yourself standing alone for two decades, at some point you have to self reflect and stop drinking your own Kool-Aid.

I agree with the point that you are making. It is absurd that I am the one making many of the claims that I am making. The Trinity study had been around since the mid-1990s. So there should have been lots of people pointing out the error in that study and in all the studies that followed from it (including the Greaney study) long before I came on the scene. It doesn’t take an I.Q. of 140 to check whether a retirement study contains a valuation adjustment or not. So, yes, in ordinary circumstances, the fact that I am the one making many of these claims should be a huge red flag. And I am certain that many take it as that and that that is why I have not been able to get my message out to millions of people.

These are not ordinary circumstances. That’s the thing. The idea that market timing does not work is rooted in a belief in the Efficient Market Theory, which in turn is rooted in a belief that investors are 100 percent rational. Shiller showed in 1981 that they are not. So the Efficient Market Theory has been discredited and the Trinity study along with it. Take those things out of the picture and there never would have been any conflicts whatsoever. We all would have been enjoying a great learning experience going back to the morning of May 13, 2002.

Why are there people who still talk about the Efficient Market Theory as if it were a real thing? There is no intellectual reason for doing so. There is an INSTITUTIONAL reason for doing so. During the time when it appeared that the Efficient Market Theory was a real thing, thousands and thousands of people built careers promoting Buy-and-Hold as if it were a legitimate investment strategy. Those people don’t want to give up their high-paying careers and they don’t want to give up their reputation as “experts.” So there is huge institutional resistance to the idea of people being permitted to post honestly re these matters. Valuation-Informed Indexers must be destroyed. That’s why Wade Pfau was threatened when he published research showing that in fact market timing always works and indeed is the key to long-term investing success.

The Buy-and-Holders would all be better off making the shift to Valuation-Informed Indexing. All of the people who promoted Buy-and-Hold strategies would love to be able to get back to doing good and honest work that helps people, which is what they intended to do when they entered this field, But they cannot do that. Their careers will be destroyed if they do. They have families to feed. So they pretend that they don’t understand what is going on. They fail to speak up about the death threat and the acts of extortion. And millions of people are misled into believing that there is some sort of mystical, magical research somewhere showing that market timing is not always 100 percent required and that Buy-and-Hold is a sound strategy.

There is not one person in the world who benefits from this massive cover-up. Opening every site on the internet to honest posting re the last 40 years of peer-reviewed research would be a boon to us all. But who the heck is going to stick his neck out and get the ball rolling, given the penalties that apply today for those who do so? That’s the job for a journalist. Which is what I am. So I do what I can.

People should be skeptical. This is a crazy story. Skepticism is justified. But there is an easy way for anyone who wants to get to the bottom of things to find out for himself or herself whether there really is funny business going on in this field, as I maintain. Pull up the Greaney study and see if you can find a valuation adjustment in it. If it is lacking one, as I have maintained since the morning of May 13, 2002, then this 40-year cover-up has put millions of retirements at grave risk of failing. That’s a matter of huge public policy significance.

We all should be working to overcome you Goons and to open every site on the internet to honest posting. I believe that we will be in the days following the next price crash, when it will be crystal clear to everyone how dangerous it is to persuade millions of stock investors that market timing (price discipline!) is not 100 percent required for every stock investor on the planet. The idea that it might not be is the worst mistake ever made in the history of personal finance and we need to get it corrected. Opening every site on the internet to honest posting re the last 40 years of peer-reviewed research in this field is the first step.

My sincere take.

Rob

 

“You Don’t Have to Take Anybody’s Word for Anything. It Wouldn’t Take You 10 Minutes to Pull Up Greaney’s Study for Yourself and See Whether It Contains an Adjustment for the Valuation Level That Applies on the Day the Retirement Begins.”

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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 claim to have all these supporters, yet you can’t even get one of the them to post anonymously on this site.

You claim that threats were made, yet you can’t post just one link here.

Everything you say requires us to just take you word for it. In many cases, we would also have to believe that there is also a mass conspiracy and that all these experts out there are liars.

You don’t have to take anybody’s word for anything, Anonymous. It wouldn’t take you 1o minutes to pull up Greaney’s study for yourself and see whether it contains an adjustment for the valuation level that applies on the day the retirement begins.

People used that study to plan their retirements. I was there. They talked about it every day at the old Retire Early board.

Rob

“A Nation Cannot Survive Indefinitely If There Is No Means to Communicate to Millions of Investors What the Peer-Reviewed Research Teaches Us All About How Stock Investing Works in the Real World. The People of the United States Are Going to Find a way to Overcome You Goons. Because We Have No Choice.”

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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 can’t name just one person and provide a link, yet Wade Pfau has denied that there was ever any threat made against him.  So the whole premise is false to start with.  When you send out 30,000 emails making the claim, you were just spreading something that lacks any proof.

The guy spent 16 months of his life studying whether long-term market timing always works or not. He sent me scores of e-mails describing his excitement over our findings. He posted numerous articles at his web site summarizing our work. He contributed to discussions about it at the Bogleheads Forum on many occasions, He sent our paper to several peer-reviewed journals and had it published in one. Then you Goons threatened to destroy his career unless he took the articles he had written down from his web site and agreed to stop doing honest work on these matters in the future. And he wrote to me and told me that he was scared of you and that one of the journals he had contacted had told him that they had received hate mail from Buy-and-Holders. He told me that he thought that he might lose his job if he continued doing honest work and that he thought that the best thing he could do was to keep quiet. That’s extortion, Anonymous.

And of course this is not the only case. There’s the fact that I was banned from many sites where hundreds of posters have expressed a desire to be able to hear what I have to say and despite the fact that I have never once in 19 years violated a published posting rule. There’s the fact that I have had financial advisers call me on the telephone because they want to pick my brain on Valuation-Informed Indexing but they ask me not to tell anyone that they have spoken to me. Rob Arnott said that he would like to help me but that he is dealing with too much “controversy” of his own because he has spoken honestly about the effect of stock valuations on long-term returns. Bill Bernstein said that the safe withdrawal rate studies were off by two full percentage points at the top of the bubble but then never said that when he was posting at the Bogleheads Forum. The Wall Street Journal ran a story in which Bret Arends said that the ides that long-term timing doesn’t work is “a bunch of hooey” and that the Buy-and-Holders leave out half the story when they talk to investors. Numerous professors who teach this stuff in universities have told me that my work is top rate and yet I am banned everywhere that matters. Call me madcap but, yes, I have come to believe that there is some funny stuff going on.

A nation cannot survive indefinitely if there is no means to communicate to millions of investors what the peer-reviewed research teaches us all about how stock investing works in the real world. The people of the United States are going to find a way to overcome you Goons. Because we have no choice. It will happen in the days following the next price crash, when millions of people will be able to see with their own eyes the consequences of the relentless promotion of a pure Get Rich Quick approach to stock investing without people even being able to hear about the downside of it and to deide for themselves. We’ll see, you know?

I will continue to wish you all the best things that this life has to offer a person. And I will continue to maintain that the retirement study posted to John Greaney’s web site lacks an adjustment for the valuation level that applies on the day the retirement begins. Because I believe that it is best for you Goons and for Greaney himself that this cover-up brought to a full and complete stop. I don’t believe that any of us is capable of knowing everything there is to know about a subject. So we should always be willing to let the other guy say what he thinks and to keep our minds open to learning from it. That’s where I am coming from, Anonymous. That’s the story here. I truly do not believe that that study contains a valuation adjustment. So that’s what I say when discussions of safe withdrawal rates come up on the internet.

My best wishes.

Rob

“There’s a Difference Between Knowing That Something Is Wrong and Wanting to Get Involved to Fix It. The Price for Getting Involved re This Matter Is Very High.”

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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:

Name just one person that agrees with you about Wade being threatened and show us the link.

I’ve spoken to many people about what happened to Wade Pfau. Everyone who I told the story to found it shocking. No one has ever questioned whether I was telling the truth.

I sent e-mails to 30,000 academic researchers telling them what happened to Wade. Several wrote back that this was below any acceptable ethical standard.

There’s a difference between knowing that something is wrong and wanting to get involved to fix it. The price for getting involved re this matter is very high. Shiller published his research in 1981. So the cover-up has been going on for 40 years. There are a lot of powerful and wealthy people who do not want the general public to learn what has been going on.

But what happens after the next price crash? If Shiller is right, many trillions of dollars of irrational exuberance will disappear into thin air. People will not be able to spend when they have lost that much money. Hundreds of thousands of businesses will go under. Millions of people will be thrown out of work. Political frictions will worsen. Will there be a few brave and good people who will work up the courage to speak out then? I think there will be.

We are a good people, Anonymous. We are not perfect or we would have got to work rewriting the textbooks soon after Shiller published his research. But we are basically good. That’s why we have laws against extortion, That’s why we have laws against threats of physical violence. We will as a society do the right thing in the end.

Or so this Rob Bennett fellow believes, in any event. There’s always that one-in-a-hundred possibility that I am wrong, We will just have to wait to see how things play out to find out for sure.

My best and warmest wishes to you and yours.

Rob

Valuation-Informed Indexing #539: We Don’t Acknowledge Our Get Rich Quick Urge Because It’s Irrationality Shames Us

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I’ve posted Entry #539 to my weekly Valuation-Informed Indexing column at the Value Walk<I’vesite. It’s called We Don’t Acknowledge Our Get Rich Quick Urge cause It’s Irrationality Shames Us.

Juicy Excerpt: The psychological block is the shame we feel over what we have done. The damage done by a bull market is small in its early years. So the shame felt over it is limited. But as prices rise higher and the risk attached to them grows greater, the shame we feel over our irrational behavior grows stronger. When a bull market has been in place for a long time (this one has been in place for a longer time than any earlier bull market in U.S. stock market history), the shame grows so strong that discussion of the dangers of bull markets becomes taboo. Irrational exuberance is fun in its early days, In its later days, it becomes something that we cannot bear to look at closely.

“My Answer Is to Do Everything We Can to Make the Buy-and-Holders Feel Better About the Mistake They Made By Pointing Out the Dozens of Powerful Insights That They Developed and Shared With Us All While Being 100 Percent Unwilling to Continue Engaging in Criminal Behavior to Keep the Cover-Up Going.”

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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:

“Because, if someone says that one of the things that I say is right, they know that they will be led by logic to saying that all of the things that I say are right. “

And to the opposite, when we see you say several things that are clearly wrong, then we look at everything you say with suspect and doubt.

Of course.

But there has never been one time in 19 years in which you have shown that I got something wrong. The only point you make is “well, other people don’t say these things.” That’s so. But you never consider the insane level of hostility you show when people do say these things (and there have been many, many occasions in which they have). The hostility silences people. You were hostile from the moment that I pointed out that the Greaney retirement study lacks a valuation adjustment. Insanely hostile. And entirely without cause. I have been proven 100 percent correct in my claim that that Greaney retirement study lacks a valuation adjustment. But it has not been corrected to this day. And the hostility has continued. If anything, it has increased. So we don’t have people saying it all the time. People are afraid to do so. But on every occasion on which someone has calmly looked at the study to determine whether or not it contains a valuation adjustment, the person has discovered that I was right all along on a very important point.

There has never been any intellectual debate. Every piece of evidence that we have looked at has lent support to the claim that market timing is always required. But, no, you don’t often hear people say that. The problem is not that it is not true or that the truth is not a terribly important one. The problem is that we have thousands of people who have built careers around the idea that market timing is not required or might not even always work. So there is huge institutional pressure to keep Shiller’s Nobel-prize-winning findings covered up.

The other side of the story is that, if Shiller is right that more than half of the value of today’s market is just irrational exuberance with no lasting economic substance, we are as a society going to get killed in the next price crash. We are going to see millions of retirements fail and hundreds of thousands of businesses go under and millions of people thrown out of work and a big increase in political frictions. And all of this will have been 100 percent unavoidable. All that we needed to do was to apply the same laws that apply in every field of human endeavor other than the investment advice field in the investment advice field as well and none of this bad stuff would have taken place. Permitting honest posting re the last 40 years of peer-reviewed research in this field is good stuff piled on top of good stuff piles on top of good stuff.

The “idea” that there might be some mystical, magical alternate universe in which market timing (price discipline!) is not always required for all investors is the worst mistake ever made in the history of personal finance. The amazing thing is that even our Buy-and-Hold friends would very, very, very much like to be released from the trap in which they find themselves so that they could direct their human energies to doing good for people rather than destroying their lives. But how do we get there? Tell the truth today and you make the Buy-and-Holders feel very bad about the 40-year cover-up. The only way out of the trap is coming clean and the cover-up has already gone on so long that coming clean is going to hurt some people terribly.

My answer is to do everything we can to make the Buy-and-Holders feel better about the mistake they made by pointing out the dozens of powerful insights that that they developed and shared with us all while being 100 percent unwilling to continue engaging in criminal behavior to keep the cover-up going. It will be interesting to see how it all play put.

My best wishes to you.

Rob

“I Have Never Seen a Board or Blog That Banned Posting by Buy-and-Holders. I Have Seen Many That Ban Honest Posting on Shiller’s Nobel-Prize-Winning Research. That’s Why Today’s CAPE is 36. People Are Only Hearing One Side of the Story.”

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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 think every board and blog should be open to my ideas and opinions, but that is not the way that things work.

Every investing board and blog should certainly be open to your ideas and opinions on investing. That’s the entire purpose of boards and blogs — to provide places for people to share their thoughts.

I have never seen a board or blog that banned posting by Buy-and-Holders. I have seen many that ban honest posting on Shiller’s Nobel-prize-winning research. That’s why today’s CAPE is 36. People are only hearing one side of the story. Not good.

Rob