A Rich Life

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

Valuation-Informed Indexing #458: Permitting Honest Posting on How Stock Investing Works Changes How Stock Investing Works

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I recently posted Entry #458 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Permitting Honest Posting on How Stock Investing Works Changes How Stock Investing Works.

Juicy Excerpt: Is there a giant conspiracy? Yes and no. I don’t believe that a bunch of people met in a room and decided to mislead. What I like to say is that there is a conspiracy of ignorance. Up until 1980, we only knew a limited number of things about how stock investing works and, given what knowing that limited number of things told us, Buy-and-Hold looked like a very plausible strategy. Robert Shiller changed that when he published his Nobel-prize-winning research showing that valuations affect long-term returns. If Shiller’s research is legitimate, stock investing risk is not stable but variable and investors who want to maintain a constant risk profile over time have no choice but to adjust their stock allocations in response to big valuation shifts. But most of us have not incorporated Shiller’s findings into our understanding of how stock investing works because the old understanding permits us to continue to believe that the numbers on our portfolio statement accurately reflect the true, lasting value of our portfolio and we like being able to continue to believe that.

Buy-and-Hold Goon to Rob: “This Is My Last Post, So Now You Get to Sit Around With a Permanently Empty Comments Section, a Website That Has Little to No Traffic/Visibility and Exists Only to Help You Cope With Your Poor Decisions.”

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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:

Here is the bottom line. You don’t consider others opinions. You twist everything to suit a view. You call people names and threaten them.

This is my last post, so now you get to sit around with a permanently empty comments section, a website that has little to no traffic/visibility and exists only to help you cope with your poor decisions.

Good luck. You need it.

Okay, Anonymous.

I’ll miss the part of you that sometimes puts forward helpful words (but obviously not the other part).

And I sincerely wish you the best of luck in all your future life endeavors.

Hang in there, man.

Name-Calling, Prison-Sentence-Threatening Rob

“The Whole Discussion-Board Thing Works ONLY If All Community Members Feel 100 Percent Comfortable Posting Their Sincere Views.”

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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 want feedback.”

No you don’t. You just want to keep pushing your points.

You’re wrong, Anonymous.

I want both. I want feedback. AND I want to post honestly re my views on how stock investing works (or, as you put it, I want to push my points).

The two work together. I want feedback so that I can inform my thinking and challenge my current beliefs. Now — if I agree to post dishonestly (to push YOUR points because I am afraid of what you will do to me if I post honestly re my own views) then all of the informing stuff serves no good purpose. Say that I work so hard at listening to feedback that I become the best informed person in the world but that I agree to post dishonestly because I fear what you will do to me if I say something other than what you believe. Are my posts helpful? I say “no.” I say that my posts would be exceedingly unhelpful in those circumstances.

The whole discussion-board thing works ONLY if all community members feel 100 percent comfortable posting their sincere views. That’s why we have laws against financial fraud. We recognize as a society how dangerous your intimidation tactics are. So we adopted laws letting people know that we would send them to prison if they engaged in that sort of behavior. Good for us, you know?

I only wish that we had all been enforcing those laws going back to the morning of May 13, 2002. Then we would not have suffered that economic crisis in 2008 (we would have suffered a recession but things would not have gotten as out of control as they did) and we wouldn’t be looking forward to a follow-up in the next year or two or three. And you Goons wouldn’t be looking forward to long prison sentences. And the Motley Fool’s Retire Early board would today be the most successful investing board on the internet instead of a shell of what it once was.

Having those laws is a solid first step. But we need to ENFORCE those laws to get the job done.

My sincere take.

Point-Pushing Rob

“I Want to Know Why People Who Have Doubts About the Merit of the Last 38 Years of Peer-Reviewed Research Have Those Doubts and I Want to Learn How to Address Those Doubts Effectively So That I Can Persuade Millions to Join the Research-Based Investment Advice Revolution.”

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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 do you have a comments section? You really aren’t interested in a real discussion. You never give any serious consideration of anyone else’s comments and you even block the majority of comments. When you do allow comments, it is only so you can respond with the same lines you have used for the last 2 decades. You might as well just totally shut down the comments section as it serves no real purpose.

I want feedback.

I’d like to have other Valuation-Informed Indexers posting here. Just because you believe that valuations affect long-term returns doesn’t mean that you know all there is to know about how stock investing works. We should all be talking things over with each other. That’s how we deepen our understanding and identify weak points in our understanding.

I’d like to have lots of Normals posting here. I want to know why people who have doubts about the merit of the last 38 years of peer-reviewed research have those doubts and I want to learn how to address those doubts effectively so that I can persuade millions to join the research-based investment advice revolution.

The only ones that post here even a tiny bit regularly are you Goons. You Goons are a bit of a drag at times, to be sure. But I cannot say that I have not learned important things from you from time to time. So I am reluctant to shut you down. I put up with the ugly stuff because I want to mine the good stuff, which really is there, buried deep down inside. The full truth is that buried deep down inside every Goon is a human who longs to know how to invest effectively for the long term as much as all the rest of us. I try to keep my focus on the good stuff that you bring to the table to the extent that that is possible and to tune out the boring, nasty, arrogant, foolish stuff.

Does that help a little bit?

Comment-Permitting (and Encouraging!) Rob

“I Expect the Laws of the United States To Be Followed When I Post on Boards Where People Meet To Learn About Retirement Planning and I Point Out To Them That a Study That Many of Them Are Using To Plan Their Retirement Lacks an Adjustment for the Valuation Level That Applies on the Day That the Retirement Begins. It Hasn’t Happened. But Those Laws Remain in Place. Those Laws Are Every Bit as Much a Reflection of Our National Will As Is the Popularity of Buy-and-Hold.”

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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:

“Is there anything else that I can do for you?”

I am not asking you for anything. You are the one asking. You want Shiller, Wade and a host of other people to say things. You want people to let you have an unfettered soap box on their forums to say and do whatever you want. You seem to be hoping that we will all just go along with your unverified claims of death threats, job threats, etc. You want the The New York Times to write articles about you. You want people to pay you $500 million. Read your board. You are the one making all the demands.

I expect the laws of the United States to be followed when I post on boards where people meet to learn about retirement planning and I point out to them that a study that many of them are using to plan their retirement lacks an adjustment for the valuation level that applies on the day that the retirement begins. That much would be fair to say.

It hasn’t happened. But those laws remain in place. Those laws are every bit as much a reflection of our national will as is the popularity of Buy-and-Hold. We are as a nation acting in a conflicted way for the time being. Will we resolve the conflict in the days following the next price crash, when we see with our own eyes how much following Buy-and-Hold strategies has hurt us, just as the last 38 years of peer-reviewed research in this field told us it would?

I believe that we will. I believe that our best days are ahead of us. I believe that Buy-and-Hold is the past and that Valuation-Informed Indexing is the future. So I am waiting for that big advance.

I want Shiller to do things, I want Wade Pfau to do things, I want everyone living in the United States to do things. Why wouldn’t I? I love my country. I love the people who reside in it. Naturally, I wish the best for them. Naturally I want to see them do the things that they need to do to advance into a very bright future in which the risk of stock investing has been reduced by nearly 70 percent (according to the peer-reviewed research that I co-authored with my good friend Wade Pfau).

I want lots of things. But I don’t think that it would be quite right to say that I am asking for those things today. I would of course like to have those things today. But I no longer believe that it is possible for me to have them today. I need help to make all these things happen. And I do not believe that I am going to get that help until we see another price crash and it causes people to open up to the idea of giving the last 38 years of peer-reviewed research in this field a serious look.

I want lots of things. But I am not asking for anything at this moment in time. I am just waiting. I am always trying to understand better what is going on. And I am writing a book that tells the story. And that’s pretty much it.

I respond to your questions because I want to help you cope with any pain that you are feeling and because I don’t want to pass up on any learning experiences that might be made available to me by people who are skeptical of my beliefs about how stock investing works and who have from time to time asked me questions that helped me think about aspects of the story that I had not considered enough before hearing those questions.

There is nothing that I am asking you for at this point in time, Anonymous. I have offered to help you and you have demonstrated a lack of interest in my offers. So be it, you know? You are obviously not required to accept my offers. You have other plans. I wish you the best of luck with those plans. Go in peace, grasshopper, you know?

Hang in there, dear friend.

Rob the Demanding One

“I Am Commenting on ALL Research. Shiller’s Research DISCREDITS Fama’s Research and All Buy-and-Hold Research. There Was Never Any Research Showing That Long-Term Timing (Price Discipline) Isn’t Always Required. That Was an ASSUMPTION, Not a Finding. Fama Showed That Short-Term Timing Doesn’t Work and the Buy-and-Holders Jumped to the Conclusion That Long-Term Timing Isn’t Required. They Didn’t Check, They Just Assumed. Shiller Was the First to Check.”

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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:

All of that is factually incorrect. Wade, and many others, have addressed our comments regarding John Greaney. You can choose not to agree with it, but that doesn’t mean anything other than your disagreement. Secondly, your comments about the 38 years of research is also wrong. You are not commenting on all research. Instead, you are just stating your opinion on a couple comments from 2 people. Third, we have significant amounts of outcome data on buy and hold portfolios that have been successful, yet we have zero outcomes based on VII. Lastly, your claims of criminal activity lack any factual basis. Your claims of death threats and job threats continue to remain unsupported.

What matters is what the members of your jury say when they meet in the days following the next price crash. How many site owners do you think are going to be willing to ban honest posting on safe withdrawal rates after your prison sentence has been announced? I know! I know! The answer is: precisely zero. And, once there is no ban in place, every investor alive in the United States is just going to learn and learn and learn and learn and learn. All of the hundreds of investing insights that we should have been mining for 38 years now will suddenly become available to us within the space of a few months. It will be the most exciting time for investors in the history of our nation. Are you joking?

I am commenting on ALL research. Shiller’s research DISCREDITS Fama’s research and all Buy-and-Hold research. The core idea in all Buy-and-Hold research is that the market is efficient, that price changes are caused by a rational assessment of economic developments. Shiller showed that that is not so, that valuations affect long-term returns, that price changes are caused by investor emotion, which is transitory and not real or permanent. There is nothing going the other way. There was never any research showing that long-term timing (price discipline) isn’t always required. That was an ASSUMPTION, not a finding. Fama showed that short-term timing doesn’t work and the Buy-and-Holders jumped to the conclusion that long-term timing isn’t required. They didn’t check, they just assumed. Shiller was the first to check and he showed that valuations affect long-term returns (which cannot possibly be so if the Buy-and-Hold assumption is valid). And everyone who has ever checked this in the 38 years since has found the same thing.

We should open up every site on the internet to honest posting and get the word out re the dangers of Buy-and-Hold to every investor alive on the planet. That’s Rob Bennett’s sincere take re these terribly important matters, in any event.

I wish you all good things, dear friend.

Opinion Holding Rob

“There Is No Research Supporting the Buy-and-Hold Claim That There Is No Need to Practice Price Discipline (Long-Term Timing) When Buying Stocks. Wade Pfau Found it Hard to Believe That the Buy-and-Holders Had Been Making This Claim for Many Years and That There Was Precisely Zero Support for it in the Literature. So He Looked and He Looked and He Looked. And He Came Up Empty-Handed. There Is Nothing.”

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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 use the word “honest” as a way of trying to convince people of credibility or to subtly say that those in opposition are somehow dishonest. I could just say that I will post honestly about how the moon is made of green cheese. What you are really saying is that you will continue to post your opinions.

Secondly, you have been telling us how we should wait to see how things play out. We have already seen that. Wake up, Rob. You are now in your 60’s. You can’t afford to keep sitting around.

Yes, I will continue to post my opinions. That is certainly what I am saying.

And, yes, one reason why I frequently note that I honestly do not believe that the retirement study posted at John Greaney’s web site contains an adjustment for the valuation level that applies on the day the retirement begins is that the fact that I am okay with honest posting and the Buy-and-Holders are not suggests a credibility problem for the Buy-and-Holders. That is certainly what I am saying.

The Buy-and-Holders and the Valuation-Informed Indexers are speaking different languages, Anonymous. There really is research supporting Valuation-Informed Indexing. It exists. 38 years of it exist.

There is no research supporting the Buy-and-Hold claim that there is no need to practice price discipline (long-term timing) when buying stocks. Wade Pfau found it hard to believe that the Buy-and-Holders had been making this claim for many years and that there was precisely zero support for it in the literature. So he looked and he looked and he looked. And he came up empty-handed. There is nothing. That’s why you Goons felt that the only way to keep Buy-and-Hold going after Wade began putting up posts about the peer-reviewed research that he co-authored with me was to threaten to get him fired from his job if he continued doing so. You didn’t engage in criminal acts because you thought it was a fun idea. You engaged in criminal acts because you felt that you were backed into a corner and you couldn’t think of any other way out.

Get Rich Quick schemes are rooted in emotion, not reason. I can put forward thousands of posts making the rational case for Valuation-Informed Indexing and they won’t cause you to modify your views one iota. Your views are rooted in emotion, not reason. You want Buy-and-Hold to be a real strategy. You want the numbers on your portfolio statement to be accurate. You want stocks to be the best asset class regardless of the price you pay for them. You want crazy things, things that are a logical impossibility. But you want them really, really, really bad. I am insisting on my right to talk about strategies rooted in the peer-reviewed research. So we are working at cross purposes.

Will a price drop of more than 50 percent change investor emotions enough so that we will be able to open every discussion board and blog on the internet to honest posting re the last 38 years of peer-reviewed research in this field? I sure think so. I think that that is going to bring on the crisis that we need to as a society achieve this paradigm change.

But I am not God. I could be wrong. We are going to have to wait to see it play out to find out for sure.

I certainly wish you the best of luck with it, dear friend.

I am going to continue to post my opinions HONESTLY. There’s no give re that one. Zero flexibility.

I hope that that helps at least a tiny bit.

Still Sleeping Rob

 

Buy-and-Hold Goon to Rob: “Your Entire Diatribe Is Taking a Few Comments From a Couple People and Then Creating a Whole Story That You Say Supports Your Position.”

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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:

“Valuation-Informed Indexing is supported by 38 years of peer-reviewed research and a Nobel prize. ”

No, it is not. Your entire diatribe is taking a few comments from a couple people and then creating a whole story that you say supports your position.

I am going to continue posting honestly on safe withdrawal rates and on scores of other critically important investment-related topics, Anonymous. It will be interesting to see how things play out in the days following the next price crash.

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

Diatribe Advancing Rob

Buy-and-Hold Goon to Rob: “Everyone Thinks Their Own Opinions Need to Be Considered. What Matters Is What That Expert Consensus Feels Needs To Be Addressed.” Rob’s Response: “It Sounds Like You Are Saying That a Strategy That Enjoys Consensus Support May Not Be Challenged in Posts Put To the Internet.”

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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:

But I believe that every single person in the United States would benefit if Shiller would address a lot of the questions that I have raised over the past 17 years about the implications of his Nobel-prize-winning research.”

Everyone thinks their own opinions need to be considered. What matters is what that expert consensus feels needs to be addressed.

Your ego is way too inflated.

90 percent of the experts in this field believe today that Buy-and-Hold is fine. And 90 percent of today’s investors believe that Buy-and-Hold is fine. I think it would be fair to say that 90 percent constitutes a “consensus.” So Buy-and-Hold enjoys consensus support. We agree re that much.

Where we part company is when you say that “what matters is what that expert consensus feels need to be addressed.” It sounds like you are saying that a strategy that enjoys consensus support may not be challenged in posts put to the internet. I couldn’t possibly disagree more. Valuation-Informed Indexing is supported by 38 years of peer-reviewed research and a Nobel prize. If I were to say in a post that I believe that the safe withdrawal rate is always the same number, I would be engaging in financial fraud (I obviously do not believe any such thing — there are tens of thousands of posts that could be submitted as evidence that I do not believe any such thing). It cannot possibly be the case that the right thing for me to do at this point in the proceedings is to agree to commit financial fraud to appease you Goons.

I don’t believe that my ego is inflated. I think that the work that I have done is of huge importance. I believe that the transition from Buy-and-Hold to Valuation-Informed Indexing represents the biggest advance in the history of personal finance. But I of course always give credit to the many fine people who have helped us achieve that advance, a group that obviously includes many Buy-and-Holders and that to a small extent even includes you Goons. So the issue isn’t ego.Thousands of people have done good work. I am one of them and I have long been the lead voice urging that we open the entire internet to honest posting re the far-reaching implications of the last 38 years of peer-reviewed research in this field. So I have played a particularly important role. But thousands of people have made positive contributions. I obviously could never have gotten to first base but for the contributions of many fine people. This has certainly not been anything even remotely close to a one-man effort.

A number of academics told me that the story is that we are as a nation working our way though a paradigm change. That’s the deal. Shiller’s work represents such a huge advance that people who believe in Buy-and-Hold have a hard time letting it in. These academics told me that it will take a crisis to get things to a point where enough people will open their minds to the new model for it to gain some momentum. That sounds right to me. I believe that the crisis that will change things will be the 50 percent drop in stock prices that we should be seeing within the next year or two or three, according to Shiller’s understanding of how the market works. My job is to prepare the ground for the transition. I need to do everything that I can to understand on a deep level why as a society of people we have been so reluctant to make this transition and to pull everyone together so that we do not destroy ourselves in recriminations after that crash arrives and does great harm to millions of lives.

I believe strongly that the Ban on Honest Posting is doing great harm to every last one of us, Anonymous. It hurts me, it hurts you, it hurts Shiller, it will have a long-term negative effect on Bogle’s reputation, and on and on and on. If I had a magic wand, I would wave it in the air and bring the Ban on Honest Posting to a full and complete stop by the close of business today.

I am fresh out of magic wands.

So I have to accept what comes no matter how horrifying the reality is that I see playing out before all of our eyes.

I am here to help. I can assure you of that much. Let me know of some way that I can help you out and I will be there for you in three seconds and you won’t have to ask a second time.

Outside of making that promise, I do not see what I can do for you. I cannot change the realities of stock investing. If Shiller is right in what he believes about how stock investing works (I believe that he is), then Shiller is right in what he believes about how stock investing works and there is nothing that I can do about it except to wait to see how things play out following the next crash and do everything in my power at that time to make life as easy as possible for every single person affected by those events.

I hope that works for you.

My best and warmest wishes to you and yours.

Ego-Inflated (Or Not?) Rob

“Greaney Helped a Lot of People. He Told People That the Safe Withdrawal Rate Was 4 Percent. If He Had Not Been Saying That, I Am Confident That a Lot of the Posters at the Old Motley Fool Board Would Have Been Putting Together Retirement Plans Calling for a 7 Percent Withdrawal. So Greaney’s Study Was a Plus in a Very Important Sense.”

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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 are literally a very sick man, Rob. Sick meaning ‘in need of medical attention and treatment’. I recently saw you posting at some obscure blog where you tried to ingratiate yourself to the blog-owner, exactly as you tried to do with Greaney on Motley Fool, exactly as you did Wade Pfau on Mstar or wherever you tracked him down at… it’s part of your standard M.O: it always begins with treacly praise and fawning bows and over the top accolades to the person you are targeting and ‘buttering-up’. But it never lasts long! You need to look up the meaning of the word obsequious in the dictionary. You are disgustingly and stupidly transparent with that behavior, and not one soul is ever taken in by your false flattery and ridiculous ‘me-too-isms’. You should consider why you are so fawning to people, only to later throw them ALL under the bus when they chose not to tout you and your bizarre brand of insanity. Todd Trelander? Mel Lindaur? Arrette? Promethius? Raddr? Motley Fool? Bogleheads? etc etc etc. I thank the stars that (to date at least) your particular brand of mental illness has not manifested itself into actual violence (as far as is known publicly). I do fear though, that your level of financial destitution and mental instability could easily lead you to eventually become unhinged enough to actually try to harm yourself or others. So, Please. Please. Get help, Rob. I genuinely hope you will, before your ongoing years-long decline eventually turns into a full blown mental health crisis. Think about it seriously. Talk it over with the wife. And/or a trusted physician. Get a mental health wellness referral. As you often ask: “What’s the downside?”

I love my Buy-and-Hold friends, Hopeful. None of the positive stuff that I say is fake. It is all 100 percent sincere. I view Bogle as a giant in this field. The only person I have learned more from is Shiller. To be second to Shiller is to be a giant in the field. Greaney helped a lot of people. He told people that the safe withdrawal rate was 4 percent. If he had not been saying that, I am confident that a lot of the posters at the old Motley Fool board would have been putting together retirement plans calling for a 7 percent withdrawal. So Greaney’s study was a plus in a very important sense. And on and on and on. We would not be where we are today if not for the good work of the Buy-and-Holders. There would be no Valuation-Informed Indexing had Buy-and-Hold not come before it. Valuation-informed Indexing is the fulfillment of the Buy-and-Hold dream, which was a very, very life-affirming dream indeed.

I love the Buy-and-Holders. And one of the things that I most love about them is that they argue that investors should use the peer-reviewed research in this field as guidance on how to invest effectively for the long run. It’s because I believe in that Buy-and-Hold idea that I believe that we should open every discussion board and blog on the internet to honest posting re the last 38 years of peer-reviewed research in this field. On safe withdrawal rates and on scores of other critically important investment-related topics as well.

Does all of that not make perfect sense, my dear Goon friend?

Nearly Unhinged Rob