A Rich Life

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

“The Published Rules of the Various Sites Did Not Come Into Being As Some Sort of Aberration. They Say Something About What We Are As a People.”

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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:

“If you are talking about the owners of sites, I have asked them to enforce the rules that THEY THEMSELVES adopted for their sites. That’s not asking them to change, it’s asking them to be what they always intended to be.”

There is no rule that says that Rob Bennett gets to do whatever he wants on anyone else’s site.

Every site has rules, Anonymous. I have never seen a site that had a rule prohibiting honest posting. If I ever found one like that, I would respect it. I wouldn’t post there because I am not interested in posting dishonestly. But a site like that wouldn’t do that much damage. If you let people know up front that you do not permit honest posting, people are not going to take the investment advice that is offered seriously. I suppose that they could visit to obtain some amusement or something like that. Not my thing. But to each his own, you know?

That was not the situation at the Retire Early board. There was no rule there prohibiting honest posting and people believed that the investment advice was sincere. People discussed the Greaney retirement study every day and they used it to plan retirements. So I had an obligation to point out the error in the study.

Some people would have preferred that I had not done that. Fine. Those people can continue to use the 4 percent rule if it makes them happy. It’s none of my business what they do. But there were other people who were thrilled to find out about what the last 39 years of peer-reviewed research says about the subject of safe withdrawal rates. No one has a right to block those people from seeing the posts that they want to see. The rules of the board do not permit intimidation tactics aimed at achieving that purpose.

Now you have pulled it off regardless of what the rules say. And you think that is some great accomplishment. I do not. I believe that the published rules of the various sites reflect what we truly are as a people. So I go by that. I believe that there will come a day when every site on the internet will permit honest posting re the last 39 years of peer-reviewed research. Because those rules did not just come into being as some sort of aberration. They say something about what we are as a people. It’s the popularity of Get Rich Quick/Buy-and-Hold that is the aberration. That will pass with the arrival of the next price crash, which will make Get Rich Quick/Buy-and-Hold less appealing. And we will get back to being what we truly are deep down inside as a people.

That’s where I am coming from. I wish you all good things.

Rob

“My Aim Is to Set Up a New Version of Every Investing Discussion Board and Blog on the Internet. A New, HONEST Version, One That Permits Discussion of the Last 39 Years of Peer-Reviewed Research in This Field.”

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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:

Why don’t you start up your own version of the Bogleheads forum for your own followers instead of expecting other people to change for you?

My aim is to set up a new version of every investing discussion board and blog on the internet, Anonymous. A new, HONEST version, one that permits discussion of the last 39 years of peer-reviewed research in this field. Why should I limit myself to one site when I can have every site? Doing it that way benefits every last one of us. We all need to know how best to invest our retirement money. The more sites we have permitting honest posting, the more we all will be able to learn.

And I have never asked anyone to change for me. If there are people who believe in Buy-and-Hold, I ask them to post in support of Buy-and-Hold, That’s not changing. If they engage in criminal acts, I ask them to knock it off. But they had to agree to follow U.S. law when they first signed up at whatever board they are at — the published rules of all the boards require that. That’s not really changing either, it is doing something that they promised to do at an earlier time.

And all that should have happened on the day in 1981 when Shiller published his Nobel-prize-winning research showing that there is precisely zero chance that a pure Get Rich Quick/Buy-and-Hold strategy could ever work for a single long-term investor. Once honest posting is permitted (and encouraged!) at every site, all of our problems are over. We will all be learning new things every day. Stock investing will be far less risky and far more profitable. Out economic system will operate fare more smoothly. We will all be living better and richer lives from that point forward. I can live with that!

Shiller’s research helps us all. New knowledge is always a plus, It is not even possible for the rational human mind to imagine any exceptions.

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

Rob

“Bogle Obviously Knew Someone for Whom Market Timing Worked. Unless We Are to Believe That Bogle Does Not Know Himself!”

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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:

When Bogle put up his posts about the success of buy and hold, he was sending a message that quick rich timing scheme were a bunch of garbage and that he was also supporting Mel over Rob Bennett.

Bogle has said negative things about market timing on many occasions. That’s a fact. He has this little riff where he would say that not only did he not know anyone for whom market timing had worked, he did not know anyone who knew anyone for whom market timing had worked. But Bogle said in an interview that he himself timed the market successfully.

He lowered his own stock allocation in 1999, in part because of the insane CAPE level that applied at the time. He benefited from doing that as the return was much lower than the average long-term return for many years thereafter. So Bogle obviously knew someone for whom market timing worked. Unless we are to believe that Bogle does not know himself!

It’s very hard for anyone to talk about these matters with complete honesty, Anonymous. The experts made a mistake when they came to believe that the market was efficient. They hurt millions of people in very serious ways with that mistake and they don’t like the idea of people finding out about the mistake. So they make things uncomfortable for people who speak honestly re these matters.

But our Wall Street Con Men friends would like to come clean! Nothing could be more clear. Bogle was trying to come clean when he said that he could see how Valuation-Informed Indexing could work. If Lindauer had expressed a willingness to travel a bit down a more constructive road, Bogle would have jumped on the opportunity to take a sad song and make it better.

We all want the same things deep down inside. We all are capable of making mistakes and, when we do make them, we have to count on our friends to help us find our way to getting those mistakes corrected. It is those who encourage us to correct our mistakes promptly who are our true best friends. Bogle was being a friend to Lindauer. Lindauer was not being much of a friend in return when he slapped down Bogle’s suggestion to take things to a higher road.

That’s my sincere take, in any event.

Bogle did not behave perfectly. But he did make an effort on occasion. I cannot recall Lindauer ever doing that (I believe that Taylor Larimore made an effort along those lines on at least one occasion).

Rob

 

 

 

“When John Bogle Put Up His Post Saying That He Could See How Valuation-Informed Indexing Could Work, I Believe That He Was Putting Out a Feeler to Mel Lindauer. He Was Trying to Resolve the Frictions So That Everyone Could Get Along.”

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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:

Put me down for standing behind Jack and Mel. People like you that make up lies need to be put in your place.

When John Bogle put up his post saying that he could see how Valuation-Informed Indexing could work, I believe that he was putting out a feeler to Mel Lindauer. He was trying to resolve the frictions so that everyone could get along. If Lindauer truly supported Bogle, he would have jumped at that opportunity. He would have said that he agree with Bogle that Valuation-Informed Indexing can work and all of the nasty stuff would have been behind us.

Rob

“One Significant Difference Between Shiller and Me Is That He Directs a Lot of Energy to Describing the ‘Narratives’ That Investors Use to Form Their Stock-Buying Decisions. I See Narratives as Being Primarily an Exercise in Rationalization. People Decide What They Want to Do for Emotional Reasons (Greed Pushing Prices Up and Fear Pushing Prices Down) and Then Turn to Things Like Narrative to Justify Their Choices.”

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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:

Robert Shiller once again says you are wrong:

https://www.cnbc.com/2020/12/15/robert-shiller-calls-stocks-highly-priced-but-wouldnt-cash-out.html

He does not mention anything about a stock crash. In fact, he says that the market is not so high that he wouldn’t consider it an investment.

Thanks much for the link.

There is nothing that Shiller said in that interview with which I would disagree. There’s no valuation level at which I would say that people should not consider stocks as an investment. So I certainly agree re that one. And I of course agree that stocks are highly priced.

I would convey more worry in my tone, that’s for sure. This is not a time for complacency. The CAPE level is alarming. So, while I don’t disagree with Shiller’s statements, I do take issue a bit with his tone.

One significant difference between Shiller and me is that he directs a lot of energy to describing the “narratives” that investors use to form their stock-buying decisions. I see narratives as being primarily an exercise in rationalization. People decide what they want to do for emotional reasons (greed pushing prices up and fear pushing prices down) and then turn to things like narrative to justify their choices. It doesn’t hurt to mention the narratives. I don’t object to the discussion of them. But I would not put as much focus on them as Shiller does.

I wish that the people who interview him would ask him what stock allocation he would suggest for the typical investor. I would say “30 percent stocks” at today’s prices. Shiller often says what he says here – that people should not cash out. That doesn’t tell us anything. It is never a good idea to cash out. But it certainly doesn’t make any sense to be going with the same stock allocation today as you would go with if stocks were priced at reasonable levels. I wish that interviewers would try to get him on the record re that one.

I don’t know what Shiller would say to that question. My sense (from other interviews that I have seen with Shiller) is that he almost always goes with mostly stocks himself. My sense is that he moves to different market segments when prices in the broad U.S. market get too high. Or he invests in non-U.S. markets. I am okay with that. I don’t think it is a dumb idea. But I have doubts whether it is the right approach for the investor who does not want to spend a good bit of time researching this stuff. I think it is better for that investor to keep things simple and to go with a lower stock allocation at times when prices are insanely high. Shiller may know enough to be able to protect himself without getting out of stocks altogether. But I don’t think that that is so for the typical middle-class investor.

He certainly never said anywhere in that interview that I am wrong to believe that irrational exuberance is a real thing. His entire life’s work shows that he agrees with me re that one. And that is the one that matters. If irrational exuberance is a real thing, the safe withdrawal rate is a number that changes with changes in valuation levels and the entire Buy-and-Hold Model is dangerous stuff. I have never seen Shiller say anything to make me think that he does not believe that irrational exuberance is a real thing. But I certainly think it would be a good idea if he put more focus on the dangers of Buy-and-Hold.

I think that everyone in this field should be speaking out on that one. Those who still believe in Buy-and-Hold should of course say what they still believe. Everyone should be posting honestly. But everyone should be acknowledging the elephant in the living room — the 39 years of peer-reviewed research showing that stock investing risk is not constant but variable and that therefore market timing must always work and is always required for investors who seek to keep their risk profile constant over time.

My best and warmest wishes to you and yours.

Rob

“Wade Was Wrong When He Said What He Said. What He Said Was Absolutely Idiotic. He Said That Greaney Had Solved the Problem on the First Day When He Said That Anyone Who Wanted to Take a Lower Withdrawal Rate Could Do So. That Was of Course Never the Issue in Dispute. The Issue Was Whether Those of Us Who Believed That a Valuations Adjustment Was Required to Get the Number Right Should Be Permitted to Say That. Greany Understood That, If People Became Aware of the Error in the Study, They Would Lose Confidence in It and He Did Not Want That to 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:

“I believe that the retirement study posted at John Greaney’s web site lacks an adjustment for the valuation level that applies on the day the retirement begins.”

Did you lie on that thread when you admitted you were wrong and apologized? Was Wade Pfau wrong when he also corrected you?

I had no intention to deceive when I posted my apology. I was suffering from cognitive dissonance. I strongly believed that the Greaney study lacked a valuation adjustment. I had checked it many times before I put up my famous post saying that it did not. But scores of people whom I respected and considered friends were telling me that I was wrong and the board community, which I loved, was being torn apart at the seams. I somehow persuaded myself that I might be wrong and that an apology was in order.

Yes, Wade was wrong when he said what he said. What he said was absolutely idiotic. He said that Greaney had solved the problem on the first day when he said that anyone who wanted to take a lower withdrawal rate could do so. That was of course never the issue in dispute. The issue was whether those of us who believed that a valuations adjustment was required to get the number right should be permitted to say that. Greany understood that, if people became aware of the error in the study, they would lose confidence in it and he did not want that to happen. I don’t believe that Wade came up with those words on his own. I believe that he was afraid that you Goons would do damage to his career (he told me this) and so he agreed to sign on to words that Greaney composed that he obviously did not think had anything to do with the problems we experienced.

Rob

“To Say That Irrational Exuberance Exists Is to Predict a Price Crash Whenever Stock Prices Get Out of Hand.”

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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 that prediction was wrong. But you still didn’t answer my question. When has Shiller predicted the next crash?

The title of his book is “Irrational Exuberance,” Anonymous. To say that irrational exuberance exists is to predict a price crash whenever stock prices get out of hand. At the time when Buy-and-Hold was developed, the dominant academic theory re how stock investing works was the Efficient Market Theory. If the market is efficient, stock prices are set by a rational process and the risk of a price crash is the same at all times. If there is such a thing as irrational exuberance, the risk of a crash increases with increases in prices. A high CAPE level always predicts a price crash to someone who believes that Shiller’s Nobel-prize-winning research is legitimate research.

Rob

Valuation-Informed Indexing #529: If Market Timing Works At All, It Works All the Time

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I’ve posted Entry #529 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called If Market Timing Works At All, It Works All the Time.

Juicy Excerpt: Market timing works all the time. It doesn’t always quickly increase an investor’s returns. But it always gets his or her risk profile back to where it should be. Investors who go with the proper risk profile always end up with enhanced lifetime returns, just as people who eat carbs and sweets in moderation always enjoy healthier lives and just as sober drivers always live longer. The primary goal of investment advisors should be to get their clients so in the habit of engaging in market timing that they don’t even give serious thought to going with Buy-and-Hold strategies.

Buy-and-Hold Goon to Rob: “Why Has Shiller Continued to Tell People, Even as Recently as Last Month, to Keep Buying Stocks? Either He Is Lying or You Are Misrepresenting His Work. Which Is It?”

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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:

“Shiller’s research shows that 50 percent of the value of the stock market today is cotton-candy nothingness. ”

Really? Then why has Shiller continued to tell people, even as recently as last month, to keep buying stocks? Either he is lying or you are misrepresenting his work. Which is it?

I tell people to buy stocks. I say that the typical middle-class person should be going with a 30 percent stock allocation today. If that person is saving a portion of each paycheck, then he should be putting 30 cents of each dollar saved in to stocks. That’s buying stocks. So there is no contradiction there.

The better question is — Does Shiller believe that people should be going with a lower stock allocation today, when the CAPE value is 32, than they did in 1982, when the CAPE value was 8. I say with no hesitation whatsoever, that they should be going with a lower stock allocation today. The risk of owning stocks in 1982 was virtually non-existent. The risk today is off the charts. So the investor who wants to keep his risk profile constant over time MUST go with a lower stock allocation today. That is, he MUST practice market timing.

Does Shiller agree? We all should want to know the answer to that question. We all should be urging the launching of a national debate in which Shiller and thousands of others would be asked that question. Bogle agreed before he died that Valuation-Informed Indexing (market timing!) would probably work. I think that Shiller would say the same. Shiller would probably state the point more strongly. So let’s ask him!

He is not going to answer the question unless you Goons agree to drop the criminal stuff. No one likes to see their career threatened. No one likes to see the lives of their loved ones threatened. So you will have to leave that stuff behind if you hope to get Shiller to respond to your questions. But I am 100 percent sure that he will be happy to help you out of you simply agree to be constrained by the dictates of U.S. law. Do that, and everyone wins.

My sincere take.

I naturally wish you all the best that this life has to offer a person.

Rob

“We All Have a Get Rich Quick/Buy-and-Hold Impulse Residing Within Us. We Need to be Reminded Daily of the Dangers of the Get Rich Quick/Buy-and-Hold Approach If We Are to Overcome That Impulse.”

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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:

“What I say is that we should be permitting discussion of what Shiller says at every site on the internet.”

There is plenty of exposure to what Shiller says. You have also had more than sufficient exposure of your comments. We do not need constant repeating of the same material as it is already out there and easily accessible. The problem is that you cannot accept the answers you have been given, nor are you willing to take the blame for your own actions.

The Greaney retirement study has not been corrected to this day, Anonymous.

Also, we all have a Get Rich Quick/Buy-and-Hold impulse residing within us. We need to be reminded daily of the dangers of the Get Rich Quick/Buy-and-Hold approach if we are to overcome that impulse.

Rob