A Rich Life

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

“An Effort to Engage in Long-Term Timing Is Successful at the Moment It Is Made Because That Is the Moment When the Risk Profile Is Corrected.”

by

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 do you consider long term timing and when have you been successful in getting back in the market?

Short-term timing is trying to guess when a price change will take place and to profit from it. Long-term timing is changing your stock allocation because the level of risk associated with that stock allocation has changed and you want to keep your risk profile constant over tine.

An effort to engage in long-term timing is successful at the moment it is made because that is the moment when the risk profile is corrected. I don’t think that it is possible for an effort in long-term timing to fail, not any more than it is possible for an effort to engage in price discipline to fail when making purchases in any other market. If someone pays less for a car because he engages in research and negotiates with the dealer, I don’t see how that effort could produce bad results. He may end up getting the wrong car because he didn’t know his own mind well enough. That sort of thing can happen in the stock market. You could engage in market timing to adjust to your preferred risk profile and you could determine years later that you chose the preferred risk profile improperly. That doesn’t show that price discipline (market timing) is a bad thing. It shows that our execution of it is going to be imperfect because our knowledge of the subject is imperfect.

That’s not an argument for failing to engage in market timing (price discipline), it is an argument for expanding our knowledge of the subject. Which of course requires opening every investing site on the internet to honest posting re the last 39 years of peer-reviewed research in this field.

Rob

“Irrational Exuberance Is Something That Disappears Into Thin Air. It Is a Psychological Phenomenon, It Does Not Have Economic Validity. But Businesses Count It As Real. So They Make Plans Based on a Belief That That Money Will Be Around. When It Disappears, Those Plans Are Put at Risk of Failing.”

by

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 hundreds of thousands of businesses would not have gone under. And millions of workers would not have been thrown out of their jobs. ”

Wrong. Businesses do not fold because of stock price. They fold due to lack of profit and/or capital. That is how it should work. Why should any business have endless access to debt?

Irrational exuberance is something that disappears into thin air. It is a psychological phenomenon, it does not have economic validity. But businesses count it as real. So they make plans based on a belief that that money will be around. When it disappears, those plans are put at risk of failing. If irrational exuberance is a real thing (Shiller was awarded a Nobel prize for his discovery of it), then it certainly can cause businesses to fail

We all should be doing everything in our power to keep irrational exuberance as limited as possible, To do that, we need to open every site to honest posting re the last 39 years of peer-reviewed research in this field.

Rob

Valuation-Informed Indexing #514: If There Were No Market Timing, There Would Be No Stock Price Changes

by

I have posted Entry #514 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called If There Were No Market Timing, There Would Be No Stock Price Changes.

Juicy Excerpt: Timing is the means by which participants in the market adjust to change. A new source of oil is discovered and lots of market participants are affected. Prices are lowered, sales increase, workers are hired, some companies gain market share and other companies lose market share. Do we call it “timing” when a company elects to lower its reliance on electricity and increase its reliance on oil because oil prices have fallen? I have never heard that term used to describe that sort of decision. But that’s what it is, isn’t it? Isn’t the company that elects to use more oil in those circumstances doing the same thing as an investor who buys more stocks when the CAPE value drops?

“I Think That Every Person Alive on the Planet Should Be Asking Shiller Questions About the Far-Reaching Implications of His Amazing Research.”

by

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

Other than you, I don’t see anyone else asking him questions.

I think that every person alive on the planet should be asking Shiller questions about the far-reaching implications of his amazing research. I don’t think there should be a single exception. The more people who ask him questions, the more we all are likely to learn. I am not even able to imagine any downside.

Rob

Valuation-Informed Indexing #513: Do Compounding Returns on Pretend Stock Gains Produce Real Value?

by

I’ve posted Entry #513 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Do Compounding Returns on Pretend Stock Gains Produce Real Value?

Juicy Excerpt: Another issue is that investors who are open to the idea of moving a portion of their assets into non-stock investments can often obtain better-than-normal returns on those investments by looking for alternatives to stock when prices go out of control. Treasury Inflation-Protected Securities (TIPS) were paying a return of 4 percent real in January 2000. Stocks purchased at that time have offered a return of only 3.7 percent real during those years. That 4 percent return was an exceptional deal, to be sure. But I don’t think that it was a coincidence that an amazing return was being offered on a non-stock investment class at the time in U.S. history when irrational exuberance was at its height. It took that sort of return to attract investors to a non-stock asset class at that time. Investors who were unwilling to participate in the irrational exuberance were properly rewarded by the market for their contrary convictions.

“Maybe I Am Wasting My Time and Maybe I Am Leading the People of the United States to the Biggest Advance in Our Understanding of How Stock Investing Works Ever Achieved in Our History.”

by

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

There are no goons. Just people that don’t agree with you. If and when there is a drop in the market, it will not be blamed on buy and hold. Every day, there are predictions of drops that are tied to some particular reason. Here is another example:

https://www.marketwatch.com/story/the-stock-markets-comeuppance-is-coming-heres-how-to-prepare-your-portfolio-now-2020-08-18

You are wasting your time.

Buy-and-Holders are going to offer rational explanations of any price changes. That is what they do. The premise of the strategy is that investors are rational. If investors are rational, then it is not possible that prices could fall for any but a good reason.

But that’s not what Shiller’s research shows Shiller showed that gains that push prices above the prices we would have if the CAPE were 16 are the product of irrational exuberance. I believe that Shiller’s Nobel-prize-winning research is legitimate research. So I don’t have any option but to say that the Buy-and-Holders are wrong. Shiller’s research cannot be reconciled with the research that was once thought to support Buy-and-Hold (and that still is in the minds of millions of Buy-and-Holders).

I don’t think that I am wasting my time. But, given that it is a physical impossibility for me to post dishonestly re these matters, we will just have to wait to see how it all plays out. We do not need to have every Buy-and-Holder change his mind on the day of the price crash. We already have 10 percent who believe that Shiller’s research is legitimate. If that number goes above 20 percent, I believe that we will be on our way. Once we get to 20 percent, people will be speaking up when they see criminal behavior and more and more of us will feel free to post honestly and knowledge of how stock investing really works will just spread and spread. Once we are all living better lives in about 20 ways, there is not going to be anyone who is ever going to want to go back to the Buy-and-Hold garbage. We will work together as a society to bury that smelly garbage 30 feet in the ground, where it can do no further harm to humans and other living things.

Or maybe not. I thought that Motley Fool would give Greaney the boot when he advanced his first death threat. That was on the evening of August 27, 2002. So I obviously was proven to be wrong re that one. It is at least within the realm of the possible that it is happening again and that I just cannot see it. But given that I am physically incapable of saying that I believe that Greaney’s retirement study contains an adjustment for the valuation level that applies on the day the retirement begins. we will just have to wait to see how it all plays out. Maybe I am wasting my time and maybe I am leading the people of the United States to the biggest advance in our understanding of how stock investing works ever achieved in our history.

I naturally wish you all the best that this life have to offer a person, on any event, my dear Goon friend.

Rob

Valuation-Informed Indexing #512: Market Timing Can Work Even When It Produces Lower Returns

by

I’ve posted Entry #512 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Market Timing Can Work Even When It Produces Lower Returns.

Juicy Excerpt: Returns are not all that matter. If higher returns are obtained at the cost of taking on excessive amounts of risk, that’s a bad result. A strategy that produces those sorts of results is a bad strategy, in my assessment.

“This Is the Story of Humans Struggling to Gain the Ability to Put Reason to Use in Their Understanding of How Stock Investing Works”

by

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 has any journalist been paid $500 million for reporting?

When before has there been a 39-year cover-up of the most important advance in our understanding of how stock investing works in the history of the United States?

If you didn’t think that this was worth a whole big bunch more than $500 million, you wouldn’t fight so hard.

I didn’t go looking for this story. It came to me. Either Greaney’s study contains a valuation adjustment or it doesn’t. In normal circumstances, it wouldn’t take 18 years to settle that one. The fact that it has taken that long tells us that this is a story like no other. It is the story of humans struggling to gain the ability to put reason to use in their understanding of how stock investing works, which will reduce stock investing risk by nearly 70 percent, if the Bennett/Pfau research is on the mark. If that ain’t worth a whole big bunch more than $500 million, I have a hard time thinking what would be.

Rob

“It Is the Cover-Up That Has Been Holding Back All That Amazing Work for 39 Years Now and It Is Journalism Work to Expose That Cover-Up. Exposure of the Cover-Up Has to Come First. It Is Exposure of the Cover-Up That Permits All the Amazing Stuff to Take Place.”

by

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 continuously comment on your “ work” and that you deserve to be paid $500 million for your work. Yet another example that you are not just reporting.

The work that I am referring to is journalism work. I don’t do investment advice work. I do journalism work. I bring things to light. I explain things to people. I expose crimes. Those are journalistic endeavors.

I haven’t been paid a penny for my work for over 18 years now. That is an exceedingly odd reality. Why have I been willing to stick at this so long without receiving compensation for my efforts? Because I see that the need for the work that I do is so great here. We don’t need peer-reviewed research showing that valuations affect long-term returns. We have had that for 39 years. We have thousands of people who would love to be telling people about the implications of Shiller’s amazing research and who are not doing so because they are afraid of the punishments that they would face for exposing the 39-year cover-up. We need to unleash those people. More amazing research is not going to get the job done. There’s only one thing that can get the job done — EXPOSURE of the cover-up. That’s journalism work. That’s what I do.

There will be thousands of people who will come after me who will do amazing work on the investing advice side and who will be compensated in the hundreds of thousands or in some cases perhaps in the millions for doing so. Good for them. But those people will not be doing what I am doing — exposing the cover-up so that all those people can feel free to do the good work that they want to do. It is the cover-up that has been holding back all that amazing work for 39 years now and it is journalism work to expose that cover-up. It is because exposure of the cover-up is of such huge importance that the work that I have done is worth well in exceed of $500 million. Exposure of the cover-up has to come first. It is exposure of the cover-up that permits all the amazing stuff to take place.

After the cover-up has been exposed and we have thousands of people writing about this stuff at every site on the internet, I intend to drop out of the discussions and permit people with more knowledge and experience than me to take over building up the Valuation-Informed Indexing concept. I will probably return to writing about effective saving strategies. Or I may do some work on career-building issues. I would like to write a third book called “The Self-Directed Life: When to Risk All You Have to WIn What You Might Love More.” I am not a guy naturally drawn to the examination of investing issues. I do the investing stuff because I found out about the cover-up (to my great shock and dismay) and I couldn’t see how someone who loves his country would not do everything in his power to help his country out when it found itself in such circumstances.

Does that help?

Rob

“Again, If You Want to Know the Extent to Which Shiller’s Views Are in Accord With Mine, Ask Him. Knock Off All the Criminal Stuff and Just Ask Him. There Is a Reason Why You Have Not Done That for 18 Years Now. You Don’t Want to Know.”

by

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

No, you are making interpretations. Shiller does not say what you say. Therefore, you are not reporting.

It is Shiller who has said that there is irrational exuberance, not me. It’s not an interpretation for me to say that. It is reporting.

It is an interpretation for me to say that that means that there is zero chance that the safe withdrawal rate is always the same number. Shiller has not said that and I have reported on why he has not said it — the relentless abuse advanced by Buy-and-Holders at those of us who believe that Shiller’s Nobel-prize-winning research is legitimate research and who post our honest views about the how-to implications of that research.

Again, if you want to know the extent to which Shiller’s views are in accord with mine, ask him. Knock off all the criminal stuff and just ask him. There is a reason why you have not done that for 18 years now. You don’t want to know. You feel that the chances of Buy-and-Hold remaining dominant for another week or another month or another year are better if people are kept in the dark. I am a journalist. So I naturally do not want to see people kept in the dark. I oppose the 39-year cover-up.

Shiller did something important in 1981, He changed our understanding of how stock investing works in a fundamental way. Now we all need to insist on recognition of our right to post honestly re what his amazing research findings show so that we can all begin living better lives from that point forward.

That’s my sincere take, Anonymous.

Rob