A Rich Life

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

Valuation-Informed Indexing #630: Market Timing Makes Stock Investing Rational

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I’ve posted Entry #630 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Market Timing Makes Stock Investing Rational

Juicy Excerpt: I look forward to living in a world in which rational stock investing is encouraged rather than discouraged. I believe that that world is coming in the days following the next economic crisis brought on by the relentless promotion of Buy-and-Hold strategies. There are all sorts of interesting questions that experts in this field will feel free to examine in those days.

Valuation-Informed Indexing #629: Buy-and-Hold Made Stock Investing More Emotional Than It Has Ever Been Before

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I’ve posted Entry #629 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Buy-and-Hold Made Stock Investing More Emotional Than It Has Ever Been Before.

Juicy Excerpt: Investors have always wanted to believe that the irrational exuberance that they create by practicing price indifference is real. And so stocks have always been a high-risk asset class at times of sky-high prices. But the Buy-and-Hold Model, which would have greatly diminished our ability to create irrational exuberance had Shiller’s Nobel-prize-winning research been available at the time it was being developed, made matters much worse than they have ever been before.

“The Thing That Has To Be Figured Out Is, Why Is There Even One Person Who Has Not Insisted That the Greaney Study Be Corrected Immediately?”

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

You are broke and divorced, but somehow have convinced yourself that you think you have things figured out.

I do not believe that the retirement study posted at John Greaney’s web site contains a valuation adjustment. I am not the only person who has come to that conclusion. Many people have looked at it. Not one has been able to identify a valuation adjustment in the study. That includes a guy who posts under the screen-name “Evidence-Based Investing.” Evidence is one of the generals in Graney’s army of Goons. Evidence advanced a post in late 2021 saying that “nobody” truly believes that the Greaney study contains a valuation adjustment, including Greaney himself. I think that Evidence nailed in with that one.

The thing that has to be figured out is, why is there even one person who has not insisted that the Greaney study be corrected immediately? That’s the Get Rich Quick/Buy-and-Hold urge that resides within all of us at work. We all like the idea of getting something for nothing and the stock market offers us an amazing opportunity to obtain it. Just push prices up beyond their fair-value level (a CAPE value of 17) and you can pretend that you are closer to having enough for retirement than is really the case. There’s a rub. however. If the irrational exuberance is exposed, people lose confidence in it and sell stocks and prices go down and the irrational exuberance disappears. So those who have an inclination to post honestly about what the peer-reviewed research tells us all about how stock investing works in the real world need to be supressed to keep the scam going. That’s me. I’m a threat to today’s CAPE value of 29. Every investor who longs to believe that Buy-and-Hold/Get Rich Quick is a real thing has a motive to want to see me banned from every investing site on the internet.

The Bennett/Pfau research shows that reining in irrational exuberance is 70 percent of what it takes to achieve long-term success as a stock investor. So 70 percent of an investment expert’s job is to encourage market timing, which is the only tool we have available to us to rein in irrational exubernce before it gets out of control. LOTS of people want to tell the truth about this stuff. If they didn’t, Shiller’s book would not have become a bestseller and he wouldn’t have been awarded a Nobel prize for his work. But most people are frightened by death threats and by threats to destroy their careers if they do honest work. If we all want to invest more effectively than was ever possible in the days before Shiller published his Nobel-prize-winning research, the first step is opening every site on the internet to honest posting re the past 41 years of peer-reviewed research.

I would not be either broke or divorced if you Goons had not directed abusive and criminal behavior at me and at others who worked with me to get the word out about what the last 41 years of peer-reviewed research teaches us all about how stock investing works in the real world. We need to apply the same laws in the investment advice field as apply in every other field of human endeavor. It’s important to get the numbers right in retirement studies. People use retirement studies to plan retirements. A failed retirement is a serious life setback.

My sincere take.

And my best and warmest wishes to you and yours.

Rob

“Say That Permitting Honest Posting Adds $300,000 to the Accumulated Wealth of Every investor Over the Course of an Investing Lifetime. Say That It’s Only 100 Million People Who Would Receive That Added $300,000. That’s a Number Far, Far, Far in Excess of the $500 Million That I Have Indicated I Would Be Willing to Settle My Legal Claims For.”

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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:

Let’s make this more simple for you to understand.  If you had to offer a product or service based on your “ideas”, what would you be selling at a price point of $100?

95 percent of this battle is getting every discussion board and blog on the internet opened to honest posting re the last 41 years of peer-reviewed research in this field, witout a single exception. Once that goal is achieved, all of the rest falls easily into place.

The shift from a pure Get Rich Quick/Buy-and-Hold “strategy” to the first true research-based strategy is not a small shift. We need to get every book in the field revised, every calculator redone. Instead of pushing the generation of more and more and more irrational exuberance morning, noon and night, we will be encouraging people to rein in their Get Rich Quick/Buy-and-Hold urges and thereby become able to retire many years sooner while taking on only a fraction of the risk that they felt they needed to take on in the days before Shiller published his amazing, Nobel-prize-winning research.

The market will dictate what products and services are offered. The critical step is overcoming the Ban on Honest Posting that now applies at every large site on the internet and thereby bringing the market for honest, research-based investment advice into existence. I am not even a tiny bit worried about how things will go in Stage Two. It’s Stage One that has been holding us back for 20 years now. The more lives that the Buy-and-Holders destroyed with their relentless promotion of the :idea” that there might be an alternate universe 20 billion light years away in which market timing/price discipline is not 100 percent required for every investor, the less willing they are to own up to the mistake that they made in the 1960s that Shiller exposed to those who follow the peer-reviewed research in the early 1980s.

We need to bring an end to that. We need to get to a situation where we are all on the same side, where we are all working together so that we can learn together as much as we can about how stocks work in the real world in as little time as we possibly can learn it. We are talking about the difference between going down, down, down and going up, up, up. I think it would be fair to say that the “idea” that market timing is not always 100 percent required is the most dangerous and destructive mistake ever made in the history of personal finance.

Say that permitting honest posting adds $300,000 to the accumulated wealth of every investor over the course of an investing lifetime. I think it would be fair to say that that’s a pretty darn conversative estimate of what is at stake there. Say that it’s only 100 million people who would receive that added $300,000. That’s obviously a lowball estimate. That’s a number far, far, far in excess of the $500 million that I have indicated I would be willing to settle my legal claims for. $500 million is not a small amount of money. It’s a HUGE amount of money. We are not going to have any problem whatsoever figuring out ways to make vast amounts of money from permitting honest posting re the peer-reviewed research. The only problem we might have is figuring out how to count it as it comes pouring in so fast.

I don’t exclude you Goons from that. John Walter Russell and I made an offer to Greaney in the early days to join with him to develop accurate and honest safe-withdrawal-rate research. I think it would be fair to say that Greaney would have the top investing site on the internet today had he taken us up on that offer back then. People are happy to pay for investment materials that offer huge benefits. Shiller didn’t win a Nobel prize for no good reason. This is truly life-enhancing stuff. There’s money to be made here. Mountains of it. At all possible price points. And of course the truly wonderful thing here is that all who get involved are earning that money by doing tremendous good for millions and millions of people (including the Buy-and-Holders, who would get to come clean about the mistake they made back in the 1960s, before Shiller’s research was even available to us).

Valuation-Informed Indexing is Buy-and-Hold corrected for the horrible error that has caused so much human tragedy over the years. It’s good stuff piled on top of good stuff piled on top of good stuff. It’s not even possible to imagine any downside. That translates into mountains of well-earned profits in this highly lucrative field, in which behaving with integrity is every bit as important as it is in any other field of human endeavor regardless of how you Goons have reacted to the thousands of pleas that honest posting be permitted that we have seen over the first 20 years of out discussions.

My best and warmest wishes.

Rob

“Market Timers Beat the Market By Maintaining Their Rationality in the Face of Insane Emotionaliism in the Market, Which Is Always Temporary.”

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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 everyone has emotions, than that is not the issue. The difference comes down to decisions. Market timers think they can beat the market. Buy and holders know that the market is unpredictable in the short term, but grows in the long term. Buy and holders know that market timing has never had a successful outcome. Buy and holders know that the market has always gone up the the long run and if they don’t do anything based on emotions, they will have a successful retirement. I have $6 million+ as my proof. Your outcome is a depleted savings account. Results matter.

Yes, market timers believe that they can beat the market. They beat it by maintaining their rationality in the face of insane emotionaliism in the market, which is always temporary. If you were looking to buy a car that had a market value of $20,000 and you happened to stop in to a particular dealer who said that he would sell you the car for $60,000, you would be wise to engage in timing of your purchase. The smart thing would be to wait for the dealer to realize that he is not going to be able to sell the car for that price and to go with a more reasonable price. When he agrees to sell for a sensible price, your smart move would be to buy. By timing your purchase, you get a far better deal for your money.

Market timing has of course had ONLY successful outcomes. The entire point of the Bennett/Pfau research was to show that. For the entire history of the market, market timing (price discipline!) has dramatically diminished risk while also dramatically increasing return. Investor heaven! Common sense tells us that market timing/price discipline must always work. And the past 41 years of peer-reviewed research CONFIRMS that what common sense tells us must be so in fact really always has been so. Refusing to practice price discipline (that is, following a Buy-and-Hold “strategy”) always subtracts, it can never add.

We agree that the market is unpredictable in the short term and we agreed that it always goes up in the long term. Where we don’t agree is that I say that an investor should aim to keep his risk profile stable over time. In a world in which valuations affect long-term returns (the world we live in!, it is not possible to do that without being willing to engage in market timing. Keeping one’s risk profile constant over time always produced better long-term results. It is not even possible for the rational human mind to imagine how it could be different.

Markets set prices properly. That’s their core purpose. When millions of investors become unwilling to practice market timing/price discipline, it becomes impossible for the market to set prices properly. It becomes dysfunctional and we see price crashes and economic crises and an increase in political frictions. Not good. We should permit honest posting re the last 41 years of peer-reviewed research at every site on the internet, without a single exception.

My sincere take.

Rob

“It Is Impossible for a Buy-and-Holder Ever to Get the Numbers Right”

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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’s different about your emotions? It seems to keep you from finishing the book and then getting a job. If the emotions were as you say, why do I still have $6 million+?

If you think you have $6 million and you are a Buy-and-Holder, you don;t have $6 million. It is impossible for a Buy-and-Holder ever to get the numbers right. Buy-and-Holders do not adjust the numbers to reflect the effect of irratonal exuberance, which is a real thing (according to the last 41 years of peer-reviewed research).

All of us have somewhat different emotional reactions to life events as a result of having had different life experiences. My life experiences have led me to believe that it is important for millions of middle-class investors to have access to honest and accurate and resarch-based reports on how stock investing works. The intense hostility direted at my from the Goon segment of the Buy-and-Hold community (about 10 percent of the overall population of Buy-and-Holders) has caused me anguis because it has affected my ability to earn a living for 20 years now.

I don’t think that that’s at all unusual. I think that just about anyone would feel those same feelings of anguish. The thing that is different with me is the strong conviction that someone has to do something to see that the entire internet is opened to honest posting re the last 41 years of peer-reviewed research. There are a good number of others who think that that would be a good thing, But I don’t know of anyone else who feels strongly enough about it to endure the sorts of personal abusse that I have taken on. I think that just goes to my personal life experiences. I chose journalism as a career because I see value in people coming to understand the world around them. My belief that honest posting on the research should be permitted in the investing advice realm is just a paticular manifestation of that general perspective that coming to an understanding of the world around one is a positive.

My best wishes to you.

Rob

“The Buy-and-Holders and the Valuation-Informed Indexers Share a Desire to Minimize Emotion in Stock Investing, Their Approach to Doing So Is Different. The Buy-and-Holders Disdain Emotion. They Don’t Talk About It. They Act As If It Doesn’t Exist. The Valuation-Informed Indexers Tackle 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:

You told us you were the one with emotional issues and that’s why you couldn’t finish the book.

All humans have emotions, Anonymous. There are no exceptions.

The Buy-and-Holders and the Valuation-Informed Indexers share a desire to minimize emotion in stock investing, Their approach to doing so is different. The Buy-and-Holders disdain emotion, They don’t talk about it. They act as if it doesn’t exist. The Valuation-Informed Indexers tackle it. The reason why we engage in market timing is that market timing is the tool available to us to overcome the effect of investor emotion. The CAPE value revreals how much emotion there is in the market at a given point in time and by engaging in the appropriate amount of market timing investors are able to pull the CAPE value back to where it should be. We respond to emotion and thereby overcome it.

Rob

Valuation-Informed Indexing #628: The Standard Buy-and-Hold Allocation Advice Is More Dangerous Than It Seems

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I’ve posted Entry #628 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Standard Buy-and-Hold Allocation Advice Is More Dangerous Than It Seems.

Juicy Excerpt: I knew many investors who swore fealty to Buy-and-Hold principles who went with stock allocations of a good bit higher than 60 percent at times when the CAPE value suggested a stock allocation of 30 percent. Stock allocations of 80 percent were common. In fact, it became standard practice in Buy-and-Hold retirement studies purporting to reveal the safe withdrawal rate to use an 80 percent stock allocation as the default assumption. Huh? It’s conventional wisdom that retirees should be going with lower stock allocations than younger investors. So what sense does it make for researchers who follow Buy-and-Hold principles in their work to assume 80 percent stock allocations for retirees?

“The Amount of Resistance to a New Idea Is a Signifier of the Power of That Idea. In This Case, the Resistance Has Been Greater Than Anything That I Have Ever Witnessed. To Come Up With a Comparable, You Would Have to Suggest Something Like the Reaction We Saw to the Idea That All Races Should Be Treated Equally in the Eyes of the Law.”

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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 yet you wonder why all the boards banned you.

It’s not quite true that I “wonder” about that. It’s not the norm. So it surprises me. And I certainly think about it often. But, if you take into consideration how humans behave in other areas of life endeavor, it is not all that terribly difficult to figure out what is going on.

New ideas scare people. People get used to one way of living and they don’t like thinking that they are going to need to adjust to something different. Most of us can handle small changes. But big, fundamental changes can mess with our minds. Shiller’s Nobel-prize-winning research findings are the biggest advance in our understanding of how stock investing works ever achieved in the history of the planet. They are extrmely positive changes for all of us. But, for those of us who are emotionally invested in the old understanding (Buy-and-Hold), they represent a shocking change. They turn the world on its head.

Many Buy-and-Holders react to the fear they feel when confronted with the possibility that they didn’t always know it all by trying to silence the voices speaking of the new findings. That’s not an acceptable response. Silencing discussion of the realities hurts everyone, including the people doing the silencing. So that’s not the answer. But it is not 100 percent beyond human understanding why Buy-and-Holders respond to Shiller’s research in the way they do.

I like to put a positive spin on things. I think it would be fair to say that in the usual case the amount of resistance to a new idea is a signifier of the power of that idea. In this case, the resistance has been greater than anything that I have ever witnessed. To come up with a comparable, you would have to suggest something like the reaction we saw to the idea that all races should be treated equally in the eyes of the law. That one messed with people’s minds something terribly. That’s what we have here.

People fight and fight and fight and fight. But, in the end, they are going to have to accept that the research says what the research says. You can’t have a society of people in which discussions of what 41 years of peer-reviewed research tells us all about stock investing is banned at every site on the internet. That’s not just a situation that has long-term viability. So we know that as a society, we will be moving forward in time, presumably in the days following the next Buy-and-Hold Crisis. Given that reality, the charitable thing to do is to do what you can to see that the transition is made as quickly as possible.

The intense resistance to Shiller’s breakthrough research findings is an exceedingly strange thing. But it is also an exceedingtly human thing. Humans have a problem with change. And it is exceedingly positive thing. We will all live better lives when we are able to earn far higher returns on our stock investments while taking on only a fraction of the risk that we were required to take on in the pre-Shiller years.

It’s a shame that we have caused ourselves so much pain with our insane resistance to hearing about the research. But the good news here is 20 times more good than the bad news here is bad. Humans are imperfect creatures. We get scared when something threatens to shake up our understanding of how the world operates, even when the change is a very, very positive change. But, after some struggle with a new idea, we usually eventually work up the courage to embrace a better future. I think that that is what will happen in this case as it has in so many others.

Rob

“If Buy-and-Hold Were a Real Thing, Buy-and-Holders Could Be Friends With Valuation-Informed Indexers.”

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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:

As it stands today, no one in the investment community will talk to you, your savings are depleted and your wife divorced you.  Despite all this, you somehow won’t admit you have been wrong.  My question is this:  what scenario would have to occur for you to finally admit you are wrong?  Is there any scenario or will you just continue with the same response saying that you “ want to see how things turn out”?

You cite the abusive stuff and its effects over and over and over again as if that supports the Buy-and-Hold case, I see it just the other way around. If Buy-and-Hold were a real thing, we never would have seen a single abusive post, much less any of the criminal stuff. If Buy-and-Hold were a real thing, Buy-and-Holders could be friends with Valuation-Informed Indexers.

They could post at the same board communities without any friction evidencing itself. There would be disagreements. Disagreements are healthy. They generate learning experiences. But there would never be any abusive stuff. There would never be any board bannings. There would never be any depleted savings. There would never be any divorces. There would be people having fun together learning about an important subject.

Point me to a site where Buy-and-Holders and Valuation-Informed Indexers post together on a daily basis in peace. I am not aware of any such site. If there is one, I want to go there and post there and enjoy the learning experiences that I would be able to enjoy there.

I don’t trust anything that is said at a site at which people of all opinions do not feel free to post their honest views. There’s too much of a danger at such a place of groupthink setting in. That’s what I see going on at all of the big investing sites. Buy-and-Hold groupthink has taken over. The people who participate are smart enough. But they are only hearing one side of the story. So the same perspective gets reinforced over and over and over again. It’s not healthy.

There’s nothing that could be said at that kind of site that could persuade me. I once was a Buy-and-Holder myself because I believed that Buy-and-Hold was science. When I saw the intimidation tactics tolerated at the Retire Early board after I pointed out the error in the Greaney retirement study, I knew that Buy-and-Hold was not real. It’s an emotion-based strategy. Investors create irrational exuberance by failing to practice market timing/price discipline and then they become defensive about the phony gains that they have created for themselves.

Something has to break that cycle. The only thing that could break it is to permit honest posting re the peer-reviewed research. Permitting honest posting re the peer-reviewed research would keep people honest. It would be hard for them to let their emotions get too out of control because each time they crossed a line there would be people pointing out the dangers of doing that.

That’s what I need to see. I doubt very much that everything that I have said is right. What are the chances of that given the number of things I have said? I want to learn where I have made mistakes and develop a better understanding. But I cannot trust things being said by people engaging in intimidation. The use of intimidation tactics tells me that those people do not have confidence themselves in what they are saying. People don’t engage in intimidation when they are confident of what they are saying.

We need to normalize investing discussions. We need to apply the same laws that apply in every field other than the investing advice field in the investing advice field as well. There is no amount of intimidation that will persuade me. I need to see civil and reasoned discussion of the how-to implications of the last 41 years of peer-reviewed research in this field. The stuff that is your greatest fear is the stuff that I need to see to be persuaded that there’s merit in what you are saying.

My best and warmest wishes to you.

Rob