A Rich Life

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

Buy-and-Hold Goon to Rob: “I Think Your Ex-Wife and Priest Would Disagree With That Statement.”

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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 always want to remain open to hearing thoughts coming from people on the other side of the table, Anonymous.”

I think your ex-wife and priest would disagree with that statement.

There’s some truth in that comment but it does not express the complete truth.

I once asked my priest whether he felt that I had committed a sin in making the choices that I had made. He said that someday in the future we would need to sit on the porch and have a long talk examining all the angles of the matter. If I had not listened to the other side at all, I think that that would have been a sin because of the damage that was done to my family. So I think that my priest was signaling that he believed that there was a bit of listening going on on my end.,

There certainly have been times when my ex indicated that she did not believe that I was listening to the other side. But we had a recent conversation in which she expressed the view that she believes that I am “a good soul.” So I think that she too is of two minds re this matter.

It’s hard for people to accept that there could be 41 years of peer-reviewed research showing that market timing is always 100 percent required and that there still could be a ban on honest posting at every large site on the internet. How could something like that happen? It boggles the mind.

I believe that people’s minds will change when they see the human suffering that we will experience in the days following the next Buy-and-Hold Crisis (I am presuming here that stocks will continue to perform in the fututre at least somewhat as they have always performed in the past). Then they will be concluding that it is the Buy-and-Holders who have been too closed to hearing the other side of the story.

We’ll see.

Rob

“None of Us Knows Today as Much About Stock Investing as We Would Have Known Had We Opened Every Site to Honest Posting re the Past 41 Years of Peer-Reviewed Research on the Afternoon of May 13, 2002, as I Proposed at the Time.”

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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 feel as if you can make claims about percentages and risk, yet admitting you are not a numbers guy, nor do you have any technical or analytical capability.  Really.  Shiller and Pfau don’t even make these claims around these numbers, despite the way you spin the story.

Wade Pfau devoted 16 months of his life to the study of my ideas on stock investing and concluded that: “Yes, Virginia, Valuation-Informed Indexing works!”

Robert Shiller wrote an entire book on the subject of irrational exuberance and was awarded a Nobel prize for the research on which that book was based.

If your point is that it is possible that in the 600 columns I have written for the Value Walk site, I might have gotten something wrong somewhere, then I agree. That’s why I say over and over and over again that we need to open every discussion board and blog on the internet to honest posting re the last 41 years of peer-reviewed research in this field, without a single exception. If I get something wrong and the entire internet is opened to honest posting, someone is going to catch my error and point it out, no? That’s a good thing, no? When an error is discovered, we all learn something (ESPECIALLY the person who made the error). To permit honest posting is a big plus.

I pointed out an error in the retirement study posted at John Greaney’s web site on the moring of May 13, 2002 (it lacks an adjustment for the valuation level that applies on the day the retirement begins). The Greaney study has not been corrected to this day. That’s the downside of a Ban on Honest Posting. When we ban honest posting, we all miss out on important learning experiences. That leaves us all dumber re the subject matter at issue than we would be if we permitted (or, better yet, ENCOURAGED) honest posting.

None os us knows today as much about stock investing as we would have known had we opened every site to honest posting re the past 41 years of peer-reviewed research on the afternoon of May 13, 2002, as I proposed at the time. That includes me. I have learned as much as I can. I have written hundreds and hundreds of columns re things I learned as the result of working up the courage to advance that famous post of May 13, 2002. I have desgined five unique calculators based on what we have learned from the last 41 years of peer-reviewed research. I am close to completing a book on the new model of understanding how stock investing works that follows from Shiller’s Nobel-prize-winning research and that replaces the now-long-discredited Buy-and-Hold Model. But you know what? I would know a lot more about this subject if all Valuation-Informed Indexers and all Buy-and-Holders had felt 100 percent free to post their sincere beliefs for the entire 20 years.

It pains me to think about how many amazing learning experinces I have missed out on because of the absuive efforts of you Goons and because of the failure of so many good Normals to work up the courage to stand up to you and insist that you knock off the funny business. That said, I believe that the good news here is 20 times more good than the bad news here is bad. We are still going to enjoy all of those amazing learning experiences, they are just going to be a bit delayed. I believe that the good people of this nation will pull together to insist that every site on the internet be opened to honest posting re the last 41 years of research in the days following the next Buy-and-Hold Crisis. Oh, will that be a time!

I hate it that we are going to have to see so much human suffering to get there. But I suppose that it takes what it takes. I do believe that we will all get there someday in the not too terribly distant future. We’ll see.

My best and warmest wishes to you and yours, Anonymous.

Rob

 

Buy-and-Hold Goon to Rob: “If You Don’t Know Technical Information, Do You Know What the Investing Research REALLY Says?

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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 don’t possess any expertise on any of the technical stuff, that is certainly fair to say.”

If you don’t have technical information, do you know how to fix a car?

If you don’t know technical information, can you understand the drawings of an engineering drawing?

If you don’t know technical information, do you know what the investing research REALLY says?

The answer to all is no. Therefore, you shouldn’t be telling anyone what YOU THINK the research says.

If there’s 41 years of peer-reviewed research showing that driving drunk is dangerous, I don’t need a degree in engineering to come to the conclusion that it’s a bad idea.

I am not the only person who THINKS that irrational exuberance is a real thing. It’s right there in the title of his book. And he was awarded a Nobel prize for doing the research that he writes about in his book. The people who awarded him the Nobel prize possess technical expertise.

If I say that Greaney’s study contains a valuation adjustment, I am engaging in financial fraud, a felony. I believe that is is better to say what I THINK than to say the opposite of what I think. I’m going to continue doing it.

My best wishes to you regardless of what investment strategy you elect to follow.

Rob

“If the Market Were Efficient, Market Timing Would Serve No Purpose.”

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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 didn’t you do this work?  It shows you don’t really know your subject matter.

I don’t possess any expertise on any of the technical stuff, that is certainly fair to say.

Please recall that, when I came to the Retire Early board at the Motley Fool site, I NEVER posted on investing. I only posted on how to save money. I saw that as being more up my alley because overcoming the resistance to saving money that holds most people back is an emotional thing. That’s my area of expertise — how emotions affect personal finance decsions.

I got into investing reluctantly. I tried for a long time to avoid it. But in the end you can’t do that. Once you save a lot of money for the purpose of achieving a higher level of fianncial freedom, you have to do something with it. So I was forced to look at these issues whether they possessed immediate appeal to me or not.

What I learned is that stock investing is a super, super, super emotional project. I love what the Buy-and-Holders did. They developed a model for stock investing that is rooted in research. I believe that’s the answer. People need to be able to think clearly and using research asa guide permts you to do that. The other thing that the Buy-and-Holders did that I absolutely love is that they kept things simple. I have no problem with people who enjoy researching companies picking individual stocks. But that sort of thing is not right for the average person, in my assessment. I like Bogle’s stuff. It is research-based and it is super simple. I criticize Buy-and-Hold in strong terms all the time. But I am a Buy-and-Holder at heart.

The reason why I criticize Buy-and-Hold as it is practiced today is that they made a mistake and have refused to correct it for the 41 years since the research revealed it. You have to correct your mistakes when they are discovered! Hioly moly! All that Valuation-Informed Indexing is is Buy-and-Hold with the idea that the market is efficient removed. Had the Buy-and-Holders had Shiller’s research available to them when they were developing their model, we would all be Valuatiion-Informed Indexers today. They never would have come to believe that market timing is not always 100 percent required if all the research had been available back in the 1960s.

The market timing question is an emotions question. So that one is right up my alley. The Buy-and-Holders wanted to help investors from making emotional choices. Which is a third thing that I absolutely love about them. That’s the key thing. They were 100 percent right about the most important goal, in my assessment. Their problem was their belief (this was an assumption, not a finding) that the market is efficient/rational. If the market were efficient, market timing would serve no purpose. If the market were efficient, Buy-and-Hold would be the ideal strategy.

But it’s not. That’s what Shiller showed. Stock investing is a highly emotional endeavor. Investors have to engage in market timing to keep investor emotion from getting so out of control that it craters the entire economy. This is 70 percent of the stock investing story. So long as most investors practice market timing you can never have a bull market. Which means that you can never have a bear market. Which means that you probably will never experience an economic crisis. Shiller’s research merited the Nobel prize he was awarded. Our discovered that martet timing is always required is the most important advance ever in our understanding of how the market works. Now we just need to work up the courage to point out the error everywhere and get millions of people up to speed on how stock investing really works.

I am never going to be a technical guy. I don’t have much to contribute re technical questions. My job is to open every site on the internet to honest posting re the last 41 years of peer-reviewed research. The resistance to honest posting is EMOTIONAL. There is no rational case for a Ban on Honest Posting. The resistance is 100 percent emotional. We can all start living richer and fuller and better lives starting today is we just work up the courage to say those three magic words “I” and “Was” and “Wrong.” The leverage in doing that is off the charts.

Once every site has been opened to honest posting, I intend to back out of the discussions. Let the technical people do their thing, you know? But in order for the tehnical people to do any good work, they need to feel safe saying what they honesrtly believe. That’s the big hurdle that we all face. That’s a purely emotional thing, there’s nothing even a tiny bit technical about it. It’s the Get Rich Quick urge gone wild. People have been led to believe that the wildly inflated numbers on their portfolio statement are real and they don’t want to give up that illusion, the peer-reviewed resear be damned.

We are going to have to give up the illusion if we want to move forward (and we need to move forward if we want to save our economic and political systems from collapse). Coming to terms with the realities of what the recent research teaches us is an emotional project. I believe that I have something to contribute in that area. So that’s the work I do. I want the technical people to be able to do honest work and for us to get there as a nation of people we need to come to terms with the tsunami of emotions that the Buy-and-Holders stirred up with their mistaken belief that market timing (price discipline!) is not always 100 percent required when buyng stocks.

I hope that that helps at leaat a tiny bit.

Rob

“The Trinity Study (the Study on Which Greaney’s Study Is Based) Showed the Error in Lynch’s Thinking. That Was a Very, Very Big Advance. My Suggestion That Valuations Be Taken Into Consideration Was Just Another Advance on Top of That One and This Guy Is Suggesting Possible Futher Advances for the Future.”

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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:

Uh oh. You are even wrong on the SWR with CAPE. But as you said, you really aren’t a math guy and given there is a lot of math involved, just using your fingers and toes won’t cut it.

https://earlyretirementnow.com/2022/10/12/dynamic-withdrawal-rates-based-on-the-shiller-cape-swr-series-part-54/

Thanks for the link.

There’a lot going on in that article. I am going to have to take some time with it before I feel that I can comment on it in any depth. I keep a file of ideas for my column at the Value Walk site. I have added to the list the idea of writing a column on the approach set forth in that article.

The article appears to me to be reasonable and intelligent and serious. I think it’s great that people are starting to look at different ways to calculate the safe withdrawal rate.That’s how we learn, by exploring new possibilities and by talking things over. I don’t see in that article any of the dogmatism that is characteristc of the Greaney Goons and the Lindaurheads. I may or may not agree with all of the points that this guy makes. But I feel confident that I will learn more about the subject by grappling with them. He is helping people.

The key point of my famous May 13, 2002, post was to reject Greaney’s dogmatism. Greaney said that a 4 percent withdrawal rate is “100 percent safe” regardless of the valuation level that applies at the time of the retirement. Thus guy does not agree with that. He says that it is possible even for a retitrement beginning at today’s valuation levels to get the withdrawal rate up to 4 percent (or higher) by being willing to spend the portfolio value down over time or by adding some other sources of capital (pensions, etc.) to the mix. The calculator (“The Retirement Risk Evaluator”) that I co-authored with John Walter Russell makes the same general point. We show that higher withdrawal rates are possible for those who are willing to see their portfolio depleted by 20 percent or 50 percent or 100 percent at the end of the 30-year time-period being examined). It’s very valuable for aspiring retirees to make the sorts of comparisons that become possible when this sort of analysis is done. So I applaud this aspect of what this fellow has done.

I haven’t studied this article. So I cannot offer a detailed assessment of it. But I find it very encouraging. My first impression is that this work has considerable value and can lead us to some very good places down the line. Please recall that my May 13, 2002, did not even make a statement that the Greaney retirement study was in error. I asked a question. The question was: Should we be taking valuations into consideration when calculating safe withdrawal rates? This guy is responding with an emphatic “yes” to that question. He is offering a very non-dogmatic take. The primary aim of my work was to lead us all away from the dogmatism of the 4 percent rule. It’s the “rule” part of that term that has done the real damage.

Please also recall that even the 4 percent rule was an important advance at one time. There was a day when Peter Lynch was saying that it was safe to take a 7 percent withdrawal from a stock portfolio because stocks produce average returns of nearly 7 percent. The Trinity tusy (the study on which Greaney’s study is based) showed the error on Lynch’s thinking. That was a very, very big advance. My suggestion that valuations be taken into consideration was just another advance on top of that one and this guy is suggesting possible futher advances for the future. People going through the kind of thought exercise I see in evidence here is exactly what we need to learn more and more about how stock investing works and about how to effectively construct retirement plans.

A catch-phrase that I have often used is: Let a thousand flowers bloom! That’s what it’s all about. We should be discussing this guy’s work at every discussion board and blog on the internet, as we should be discussing the Retirement Risk Evaluator at every discussion board and blog on the internet, as we should be discussing the 4 percent rule and the Trinity study and the Greaney study at evert discussion board and blog on the internet. My intitial reaction (I will give more of a reaction in my Value Walk piece somewhere down the line — I have a lot of items on my future columns list at the moment) is that this is very good stuff.

My best and warmest wishes to you.

Rob

Valuation-Informed Indexing #625: What CAPE Value Justifies Alarm?

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I’ve posted Entry #625 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called What CAPE Value Justifies Alarm?

Juicy Excerpt: Robert Shiller was recently quoted as saying that he is not alarmed over today’s CAPE value even though “It kind of puts us where we were in other times in history that were relatively extreme.” According to Shiller, the author of the book Irrational Exuberance, “the stock market has performed very well over the last 100 years. I like to look at long-term time horizons. And so when it’s highly priced, it doesn’t necessarily make it a horrible investment.” I do not agree. I am alarmed by today’s high CAPE value.

Valuation-Informed Indexing #624: Will There Come a Time When Short-Term Timing Will Work?

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I’ve posted Entry #624 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Will There Come a Time When Short-Term Timing Will Work?

Juicy Excerpt: Prices finally come down when the magnetic pull toward the fair-value price level becomes strong enough to overcome the strength of the collective Get Rich Quick urge. For a short-term timing strategy to work, someone would have to develop a means of predicting when that turning point would be achieved. It cannot be done today. We do not know enough about human psychology to identify the turning point in advance.

Valuation-Informed Indexing #623: Understanding Swings in Psychology Is the Key to Understanding Stock Investing

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I’ve posted Entry #623 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Understanding Swings in Psychology Is the Key to Understanding Stock Investing.

Juicy Excerpt: The stock market is nuts. It really is. Prices go up crazy amounts for crazy reasons. And prices go down crazy amounts for crazy reasons.

That scares us humans. Most of us have our retirement money invested in stocks. To cope with the fear, we cover our eyes at all the craziness. We tell ourselves that investors are rational and that the market is efficient. It really doesn’t matter so much when prices go down crazy amounts for crazy reasons, we assure ourselves. The stock market always comes back in time. Just hang in there. Buy and Hold. Tune out the noise.