A Rich Life

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

“Had It Not Been for the Abusive Behavior of you Goons, Valuation-Informed Indexing Would Today Be the Dominant Model for Understanding How Stock Investing Works. It Would Have Supplanted Buy-and-Hold. That Ain’t 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:

“ I believe that it may get some traction in the days and years following the onset of the next Buy-and-Hold Crisis. That would be super, That is what I hope will happen.”

It is your hope, just like everything you have placed hope in. It hasn’t gotten any real traction in well over 20 years. At some point, hope gives way to facing reality. It is long past the time for you to look at reality based not only on the passing of over 2 decades, but given your age, you have minimal choices to at least salvage something for whatever meager retirement fund you might be able to scrap together. You even destroyed your earnings history for social security benefits, so I can’t think of how you could be in any worse situation.

It has gotten TONS of traction. Not enough to overcome you Goons, that much is so. But enough to show that, had it not been for the abusive behavior of you Goons, Valuation-Informed Indexing would have taken over the world a long time ago. Had it not been for the abusive behavior of you Goons, Valuation-Informed Indexing would today be the dominant model for understanding how stock investing works. It would have supplanted Buy-and-Hold. That ain’t nothing!

I have seen some amazing things happen. John Walter Russell was the most respected numbers guy in the Retire Early community. He devoted eight years of his life to researching my ideas without receiving a penny of compensation. Wade Pfau came to me and asked if it would be okay if he published peer-reviewed research on the Valuation-Informed Indexing concept. Then he concluded that it checked out completely. He was so excited by what he found that he was talking about receiving a Nobel prize for his work. We have seen THOUSANDS of our fellow community members express a desire that honest posting re the research he permitted. That’s traction.

The only hold-up has been the abusiveness and the criminal behavior of you Goons. And that abusiveness actually tells the same story, just in a different way. If you Goons hadn’t seen how much interest there is in the Valuation-Informed Indexing concept, you would have no problem with it. You wouldn’t just say: “So what? Let people invest how they want to invest.” The fact that you see it as such a threat shows that you appreciate that there are MILLIONS of investors who would like to learn what the research really says. Your behavior is a back-handed compliment but it’s a compliment all the same.

Or so I sincerely believe, in any event.

Rob

“We Can All Enjoy Returns of 6.5 Percent Real Without Ever Creating Any Irrational Exuberance. Why Isn’t That Enough?”

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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 person that owns stock has more than just a piece of paper with numbers.  They are OWNERS of companies and those companies generate profits for their owners and have done so very reliably.   Those that don’t own companies are merely the customers.   Which would you rather be, an owner or a customer?  You decided to merely be a customer for well over 25 years and it didn’t work out for you.  Meanwhile, the owners have made out very well.

What you are saying here is so. Stocks are an amazing investment class. You certainly get no argument from me.

The question on the table is — Is it better to price stocks at their real value or to at times let one’s Get Rich Quick urge get out of control and price stocks at far more than their real value, causing a price crash and an economic collapse in days to come? I say that it’s better to always price stocks at their real value. That permits investors to plan their financial affairs effectively and avoids all of the dysfunction associated with price crashes and economic collapses. When we make our economy stronger, we make everyone in it richer.

We can all enjoy returns of 6.5 percent real without ever creating any irrational exuberance. Why isn’t that enough? Why do you feel its necessary to create mountains of irrational exuberance and thereby brings on the oceans of human misery we have seen in every Buy-and-Hold Crisis. I would encourage whatever amount of valuation-based market timing was needed to keep stock prices at reasonable levels. We could all retire years sooner and invest with far less risk. That sounds like investor heaven to me. I see all upside and zero downside.

Rob

“If We Are Not Going to Permit Discussion of the Peer-Reviewed Research, We Should Just Shut Down All the Peer-Reviewed Journals.”

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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 all these buy and holders that know numbers better than you and that have multi-million dollar retirement portfolios should all switch over to your market timing scheme, despite the fact that buy and hold has worked in EVERY single 30 year period, while at the same time, we have never seen a successful outcome with your market timing scheme.  Got it.

Whether they switch or not is up to them. I don’t tell people what to do. All that I say is that they should permit honest posting re the peer-reviewed research. There are thousands of people who expressed a desire to engage in discussions of what the research says. When you engage in criminal behavior to block such discussions, You are walking down a very dark path. I wouldn’t do it. I think that going down that path was a very bad move.

Buy-and-Hold has NEVER worked better than Valuation-Informed. Wade Pfau and I spent 16 months examining that question. It has never happened once in the history of the market. Surprise! Surprise! It has never happened because it never CAN happen. If valuations affect long-term returns, investors who fail to engage in valuation-based market timing are permitting their risk profile to get out of whack. That can never be a good thing. It’s a logical impossibility. I mean, come on.

If we are not going to permit discussion of the peer-reviewed research, we should just shut down all the peer-reviewed journals. They aren’t doing us any good if we don’t permit discussion of what is published in them. The Buy-and-Holders once advocated making reference to the peer-reviewed research. If you encourage people to publish peer-reviewed research, there’s always a chance that you will learn something new. When you do, you have to learn how to pronounce those horrible words “I” and “Was” and “Wrong.” That’s just the way it goes. There’s no getting around it.

My best wishes.

Rob

Valuation-Informed Indexing #696: Most Buy-and-Hold Dogmas Have Never Been Formally Stated

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I’ve posted Entry #696 to my weekly Valuation-Informed indexing column at the Value Walk site. It’s called Most Buy-and-Hold Dogmas Have Never Been Formally Stated.

Juicy Excerpt: My sense is that the Buy-and-Holders simply never made the distinction between the guessing-game form of market timing and valuation-based market timing. They were properly persuaded that the guessing game form of market timing does not work and improperly stated their conclusion as an admonition against market timing in general. Index funds were not widely available at the time when the Buy-and-Hold strategy was being developed and valuation-based market timing only works with index funds. My guess is that few appreciated the need to distinguish between the two types of market timing in those days.

Valuation-Informed Indexing #695: Many People Believe That There’s Research Showing That Market Timing Doesn’t Work

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I’ve posted Entry #695 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Many People Believe That There’s Research Showing That Market Timing Doesn’t Work.

Juicy Excerpt: I don’t believe that the people who developed Buy-and-Hold back in the 1960s were even thinking about valuation-based market timing when they came to their conclusion that market timing doesn’t work.

“How Has Buy-and-Hold Worked Out for Us As a Nation of People? Was the 2008 Economic Crisis a Positive Experience? Are We Happy With Today’s CAPE Value of 34?”

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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 how has all this worked out for your retirement plan, Rob?  Is it fully funded?  Is you family now financially secure?

How has Buy-and-Hold worked out for us as a nation of people? Was the 2008 economic crisis a positive experience? Are we happy with today’s CAPE value of 34?

Rob

“Greaney Doeesn’t Like to See People Talking About It. The More They Talk About It, the More That Their Common Sense Becomes Dominant Over Their Get Rich Quick/Buy-and-Hold 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:

“ So do that. Nobody is saying that you can’t do that. You should do what you think is best. Some others might want to do something different. So what, you know? You do you and they can do them.”

And that is what we have done. We go with buy and hold because it works. We avoid risky timing schemes so that we don’t go broke (like you). We ban internet trolls that make up stories about abusive posting and criminal acts.

Sorry, but I would rather be sitting with $7.6 million in my accounts vs having $0 in my 60’s. Call me crazy.

I wish you the best of luck with it, Anonymous. I can go that far.

I can’t say that I believe that the Greaney retirement study contains a valuation adjustment. That’s the point of conflict that became evident on the afternoon of May 13, 2002. If I say that the Greaney retirement study lacks a valuation adjustment, people gradually lose confidence in the study. I think that’s a good thing. Greaney does not see it as being a good thing. So, since May 13, 2002, we have been working at cross purposes.

I consider him a friend. I enjoyed the good times we had together in the days before I pointed out the error in his study. But I feel better about myself when I post honestly. So, since May 13, 2002, I do that.

I don’t believe that Greaney himself truly believes that his study contains a valuation adjustment. I think that Evidence nailed that one. But Greaney doeesn’t like to see people talking about it. The more they talk about it, the more that their common sense becomes dominant over their Get Rich Quick/Buy-and-Hold impulse. I like it when common sense and rationality and research become dominant. Greaney doesn’t like that one tiny little bit. He hates it, hates it, hates it.

The only reason why Greaney hates me so much is that I tried to bring rationality and common sense and research into discussions of safe withdrawal rates. That’s the “bad behavior” for which I have been banned at every site. I don’t see it as bad behavior. I see it as good behavior. I offer precicsely zero apologies for pointing out that the Greaney study lacks a valuation adjustment.

I wish you all good things.

Rob

“A Person Can Obtain Most of the Benefits of Valuation-Based Market Timing By Making Only One Allocation Change Every Ten Years on Average.”

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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:

Buy and Holders collectively will achieve the market return (minus very small transaction costs)

Market timers collectively will achieve the market return (minus much larger transaction costs)

I appreciate you making an effort in this comment to present a rational case for the Buy-and-Hold position rather than just engaging in name-calling, Evidence.

The transaction costs for Valuation-Informed Indexers do not need to be large at all. They need to check the CAPE value once a year to see if their stock allocation percentage still makes sense given the risk profile that they believe is appropriate for someone in their circumstances and for someone with their financial goals. But dramatic swings in CAPE values do not take place frequently. A person can obtain most of the benefits of valuation-based market timing by making only one allocation change every ten years on average.Making only a small number of allocation changes permits the investor to retire years sooner while dramatically reducing the risk he takes on by investing in stocks. The transaction costs incurred are trivial relative to the benefits obtained by following a research-based strategy,

Please remember that Shiller’s Nobel-prize-winning research bad not yet been published at the time the Buy-and-Hold strategy was being developed. At the time, the Efficient Market Theory was popular among academic economists. If the market were efficient, there would be no need for valuation-based market timing. The reason why Shiller was awarded a Nobel prize is that he DISCREDITED the Efficient Market Theory. He showed that irrational exuberance is a real thing. If irrational exuberance is a real thing, an investor who wants to keep his risk profile stable over time (that is, to Stay the Course in a meaningful way) is REQUIRED to engage in valuation-based market timing. In a world in which valuations affect long-term returns, there is no other way to get the job done.

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

Rob

“What Are My Responsibilities When I See a Super Weird Situation Like This? I Sure Don’t Want to See the People of This Country Having to Endure Yet Another Buy-and-Hold Crisis. Do You?”

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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:

No.  “Not working out” means that your retirement plan did not go as you said it would.  Do you think it is a good thing to have a depleted retirement account when you are 60’s?  Are you not responsible for that, just like everyone else is responsible for their own situations?

I’m responsible for it. But no reasonable person could have anticipated that I would see 22 years of abusive behavior, including a number of criminal acts, directed at me because I pointed out an error in a retirement study that some guy was pushing at a discussion board at which I posted. I mean, holy moly!

Am I not responsible for posting my sincere views on subjects that I address at discussion boards and blogs? It sure seems to me that I am. I have asked responsible parties to take effective action re you Goons, I have been doing that since June 2002. This situation is not my doing.

What are my responsibilities when I see a super weird situation like this? I sure don’t want to see the people of this country having to endure yet another Buy-and-Hold Crisis. Do you? What do you propose that I do about it? My take is that I should do everything in my power to see that every internet site is opened to honest posting re the last 43 years of peer-reviewed research in this field? Does that not make perfect sense? Do you have any better ideas re how to deal with this matter?

That’s where I’m coming from re this one, Anonymous.

Rob