The Economic Crisis of 2008 Did Not End, It Has Been in Remission

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The Economic Crisis of 2008 Did Not End, It Has Been in Remission
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There have been many articles appearing in recent months suggesting that the economy might go into a recession within the next year. Many have focused on whether the Federal Reserve should cut interest rates to stop this from happening. There also has been a lot of speculation as to the effect that an economic downturn will have on the 2020 Presidential elections. I have not seen anyone talk about how today’s high stock prices will likely cause an economic collapse.

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There have been numerous suggestions coming at things from the opposite direction, making the case that a recession will likely cause stock prices to fall hard. But I view that way of thinking about things as a holdover from the Buy-and-Hold Era. If stock price changes are caused by rational assessments of economic developments, it would make sense that economic bad times would cause stock prices to fall. But I believe that Shiller’s research showing that valuations affect long-term returns is legitimate research. If that is so, then high stock prices are caused by irrational exuberance and the inevitable disappearance of irrational exuberance causes trillions of dollars of consumer spending power to leave the economy, causing a contraction.

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Q3 2019 hedge fund letters, conferences and more

Growing Up In The Fund Management Business: This PM’s First Stock Was A Value Stock

Invest ESG Leon CoopermanWhen portfolio managers get started in the business, their investing style often changes over the years. However, when Will Nasgovitz bought his first stock when he was 12, he was already zeroing in on value investing, and he didn't even know it. Nasgovitz has been with mutual fund manager Heartland Advisors for almost 20 years, Read More

If that’s the way things work, the economic crisis of 2008 never came to an end. Employment numbers improved and businesses stopped going under. So, in a surface sense, economic conditions certainly improved. But the economic numbers improved only when CAPE levels returned to the dangerous levels that applied prior to the onset of the crisis. We pumped up stock prices to make people less fearful of spending but at the cost of insuring that a follow-up price crash would be coming in not too long a time.

So the economic crisis never really ended. It went into remission. If the economy was booming with stock prices at reasonable levels, we could take comfort that good times really had returned. But I don’t feel able to trust a recovery that is financed by an overpriced stock market. Overpriced stocks makes us feel that it is safe to spend again. But the financial security pushing spending forward is illusory. There is no “there” there when stock prices could fall to fair-value levels at any moment and trillions of dollars of spending power could be taken off the table again.

I am not a fan of illusory stock prices. I think that we all should be doing all that we can to keep stock prices at something close to fair-value levels at all times. All of our financial planning decisions depend on us knowing how much wealth we possess and it is not possible to know this for so long as stocks are priced at two times their real value, as they are today.

We cannot even form reasonable assessments of the merit of the actions of policymakers at times when high stock prices are causing the economic numbers to look better than they would look if stock prices were at reasonable levels. President Trump naturally says that it is his policies that have brought on good economic times. But how can we know how the economy would be doing if the entire stock market were priced at one-half of the level at which it is today priced. And I of course do not intend to make a partisan comment here. President Obama’s policies looked better because of the effect of high stock prices as well.

It is the Federal Reserve’s job to keep the economy from contracting too hard. Does that mean keeping stock prices from crashing? I get the sense that there are times when Federal Reserve members take this factor into consideration. But keeping irrational exuberance going at some point becomes a futile endeavor. We can’t just create money out of thin air by pushing stock prices upward. At some point the market insists that prices reflect real value (this is Shiller’s core finding). Pushing prices up is a holding action. Sooner or later we have to accept that fair-value prices will prevail again and that the economic pain that follows from a return to fair-value prices must be endured.

High stock prices are a lie. That’s what I am saying. They are not just a lie that affects stock investors. They are a lie that affects everyone who is living in our economic system. The Pretend Money that is created when stock prices rise above fair-value levels always disappears down the road a bit. And the net result is a negative because of the disruption experienced when businesses that appeared to be doing well go under and when workers who appeared to be headed for decent retirements find themselves far short of achieving their financial goals at a time in life when it is too late to do anything about it.

I reject the idea that we may be seeing a new economic crisis in the days ahead. To my way of thinking, we will be seeing a resumption of a crisis that we experienced for only a few months in late 2008 and early 2009 and then put off for another time. We put that crisis off because we did not look how out stock portfolios looked when fair-value price levels were restored. But the put-off was a temporary thing. To achieve more permanent solutions to the problems that received national attention in late 2008, we are going to have to come to terms with the primary cause of those problems -- the high stock prices that still apply today.

Rob’s bio is here.

Updated on

Rob Bennett’s A Rich Life blog aims to put the “personal” back into “personal finance” - he focuses on the role played by emotion in saving and investing decisions. Rob developed the Passion Saving approach to money management; Passion Savers save not to finance their old-age retirements but to enjoy more freedom and opportunity in their 20s, 30s, 40s, and 50s - because they pursue saving goals over which they feel a more intense personal concern, they are more motivated to save effectively. He also developed the Valuation-Informed Indexing investing strategy, a strategy that combines the most powerful insights of Vanguard Founder John Bogle and Yale Professsor Robert Shiller in a simple approach offering higher returns at greatly diminished risk. Tom Gardner, co-founder of the Motley Fool web site, said of Rob’s work: “The elegant simplicty of his ideas warms the heart and startles the brain.”
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19 COMMENTS

  1. The reason why people should follow it is because it has always worked. There has never been one exception in the historical record.

    In the event that stocks continue to perform in the future at least somewhat as they always have in the past, I will get the returns that I expected. Now, I obviously cannot get those returns on amounts that I sold off. But that’s a separate matter. I only sold off because I wanted to take advantage of huge opportunities that were presented to me. If I retained the assets, I would get those returns.

    It will have taken longer to get them than I anticipated. You’ve got me there. 17 years is indeed a long time. A very long time. Stock prices have remained at very high levels for longer in this bull/bear cycle than they have in any earlier one. That’s real. That’s a fact.

    But are you willing to act as if this strange situation will continue forever? I am not willing to do that. If stock prices are determined in the way that Shiller’s research shows they are, those high prices will end in not too much more time.

    You say that” “Time is your enemy when you market time.” That’s probably true to a small degree. But I do not think that it is true nearly to the extent that you think it is true. Look at all the times in history when market timing has eventually worked (that’s every case currently available for our review). There were lots of cases in which Buy-and-Hold had gone ahead for a significant length of time. But in every case market timing won the day in the end. Do you think that’s coincidence? I sure don’t. I think market timing always prevails because it is rooted in a realistic understanding of what causes stock price changes while Buy-and-Hold is rooted in a mistaken understanding.

    The one point that you are making that is somewhat valid is that prices have remained high for a longer period of time this time than ever before. That is so. If people want to go with Buy-and-Hold because of that, they should do that. But that is sure not what I am going to do. I don’t see any reason to believe that all of the laws of stock investing have suddenly been turned on their head. I believe that the fundamental rules will continue to apply as time goes by. We will just have to wait and see to know for sure. But I feel a lot better going with what has always worked than abandoning it for something very different for no good reason other than a hope.

    I hope your strategies do for you what you are hoping they will do for you, Sammy. I obviously don’t expect to see that happen. But I am a fallible human and it could be that I will be proven wrong. If that turns out to be the case, I would like to think that at least my friend Sammy will see good results as a consequence. So there is no way that this can turn out all bad.

    Rob

  2. The crash hasn’t happened yet, Sammy. We are living in a time when there has not yet been a penalty for counting gains that are the product of irrational exuberance as real. The VII strategy has not failed. It is a long-term strategy. The long-term is not here yet. When it arrives, the strategy will have succeeded once again, just as it has on every earlier occasion in the historical record.

    Say that you have a friend who makes it a practice to drive drunk. You tell him: “I don’t think that that’s such a hot idea.” He responds that: “I am still alive. Your strategy of not driving drunk has been a big failure. Why should I consider following your advice when you say that driving drunk is dangerous and yet I am still alive?”

    It’s too late to begin following a strategy of not driving drunk after you are already dead. You have to be willing to look at the evidence that, since the beginning of time driving drunk has been a bad idea, and apply history’s lesson to your own situation.

    It’s the same with stock investing. The entire historical record shows that counting irrational exuberance as real is very dangerous stuff. But if you want to take the fact that we have not yet seen the crash that will wipe out the irrational exuberance from this particular bull/bear cycle as evidence that stocks are going to begin behaving in a way in which they have never behaved before, that’s up to you.

    I don’t feel that the research-based approach has failed because we have not yet seen the price crash. I am happy that the peer-reviewed research taught me what I needed to do to protect myself before the crash came.

    You are of course free to follow whatever strategy you prefer. But I am not about to switch to a Get Rich Quick approach until I see some reason to believe that Shiller’s Nobel-prize-winning research is not legitimate research.

    I hope that helps a tiny bit.

    Rob

  3. there you go again. You still do not answer the question. You are just repeating a bunch of lies, hoping that you can pull me off the topic in order to argue a different point.

    Once again, here is the question.

    Your timing strategy didn’t work and you did not get the returns you said you would. Why should anyone follow your advice or the VII strategy when you failed?

  4. No, it hasn’t worked at all. Nor has your tactic to divert the topic with another long post filled with lies yet again.

    Answer the question.

  5. I disagree.

    I have learned amazing things over the past 17 years. My work has been endorsed by thousands of ordinary people and by dozens of big names and the work is unique work (meaning that I have few competitors) in a highly lucrative field. That sounds real,real, real, real good to me.

    If the work that I have done brings in even a small fraction of the value that it has added to the world, the Bennett family will be taken care of financially for many generations to come. If you would have asked me what the odds were that I would be able to produce this kind of value on the day when I began investigating the VII concept, I would have put it at one million to one. I guess I will just have to struggle on somehow now that the one in a million shot has come through for me.

    Oh, woe is me!

    I think you WANT me to have not succeeded. I think that is how you hope you will be able to block people from learning what they need to know — you don’t feel that you can defeat the ideas, so you put all your effort into defeating the person carrying the ideas to others. I see that as deeply, deeply, deeply sad stuff. If I ever get to the point where I feel that way about ideas that I am trying to defend, I hope that I just give up on those ideas rather than try to defend them that way.

    I think that lots of others will be making big money from these ideas down the road a piece, by the way. Today, the Buy-and-Holders scare people into thinking that they will pay a financial penalty for exploring Shiller’s research. That’s a desperation tactic. It’s what we would see if someone came up with a cure for cancer and the people who earn big incomes at cancer treatment centers put all their energies into destroying the careers of the people with the new and better approach. That sort of thing makes the people involved feel sick inside. It’s not a good long-term plan. Eventually, a good people finds a way to make the transition to the new and better approach. That’s what I think we will see here. Probably not until we see all the human misery that we will see with the next price crash. But eventually. And better late than never, right?

    Wade Pfau said after 16 months of researching this stuff: “Yes, Virginia, Valuation-Informed Indexing works!” You are standing in the path of the history train, Sammy. That’s not a good place to be standing. This is a nation committed to progress. The investment advice field cannot long remain the one big exception.

    We’ll see.

    My best wishes.

    Rob

  6. 17 years is long term (as you have even stated yourself). For your system to work, you need to have not spent down a considerable portion of your nest egg in order to take advantage of a market downturn. Time is your enemy when you market time. Of course, you are still doing the same as before by changing the topic and spouting lies in order to divert from the question that has been asked so many times.

    Once again, answer the question:

    Your timing strategy didn’t work and you did not get the returns you said you would. Why should anyone follow your advice or the VII strategy when you failed?

  7. The strategy worked well IF Shiller is right.

    Yes, my portfolio is down because I spent down. That has nothing to do with the merit of the strategy.

    And Valuation-Informed Indexing has not produced gains equal to Buy-and-Hold if you do not divide the Buy-and-Hold portfolios by two to reflect the irrational exuberance contained in them today. But, if you make the valuation adjustments, VII has done just as well as Buy-and-Hold on a risk-adjusted basis and will likely end up doing a good bit better in the long run (because of the returns that VII will yield on stocks that will be purchased at low or moderate prices someday in the future.

    VII has been soundly beating Buy-and-Hold for 150 years, Sammy. There has never been an exception. Today is an exception if you don’t make the valuation adjustments that are needed to get a clear fix. But if you make the adjustments, today is not an exception either. And of course there were times in history when for a number of years it appeared that Buy-and-Hold would end up ahead. It just never turns out that way in the long run. Irrational exuberance never ends up being a good thing for the investor who counts on it to finance his or her retirement.

    Irrational exuberance hurts you. And the more of it there is, the more you end up getting hurt. This is why I say that all investors should practice market timing (price discipline!) at all times. Price discipline/market timing is what makes the market work. Do away with it and the market becomes dysfunctional and we all suffer the very serious consequences.

    I could ask why anyone should follow Buy-and-Hold when there is 38 years of peer-reviewed research showing that there is precisely zero chance that it could ever work for a single long-term investor. Your starting point premise (whether the market is efficient or whether valuations affect long-term returns) determines where you end up. I believe that Shiller’s Nobel-prize-winning research is legitimate research.

    My sincere take.

    Failed Strategy Advocate Rob

  8. Your portfolio did not do what you said it would do. VII did not work. We can all read what you wrote. Your plan failed. You do not make up risk adjustments. Nor do you even risk adjust for results that have already occurred. You should have learned that in your basic finance classes.

  9. It’s true that I have spent down much of the money and that those funds are not available to me to invest in stocks when prices are better. But you are ignoring the reason why I was willing to spend down those funds. I have devoted the last 17 years to developing and promoting the Valuation-Informed Indexing concept, which I expect will be a goldmine for me in the days following the next price crash.

    A person’s stock portfolio is not his entire net worth. A person’s earning capacity is a big part of the story. If Shiller’s Nobel-prize-winning research is legitimate research (I believe it is), then there will be hundreds of millions of dollars to be made explaining and promoting the Valuation-Indexing concept in the days following the next crash (when millions of people will be able to see in a very concrete why it is so dangerous to place one’s retirement hopes in a Buy-and-Hold strategy). I expect to be playing a big role in spreading the word about the implications of Shiller’s “revolutionary” (his word) research findings and, as a result of the work that I have done over the past 17 years, I am well-placed to do that.

    If you read my book “Passion Saving: The Path to Plentiful Free Time and Soul-Satisfying Work,” you will see that this was the plan all along. I certainly did not expect to see the level of abusiveness that I have seen. No rational person could have anticipated anything like that. But the abusiveness ultimately increases my income-earning potential. If there had been no abusiveness on the part of Buy-and-Holders, just about everyone would be a Valuation-Informed Indexer today (the case that valuations affect long-term return is very, very strong). So I would have a lot more competition re my investing message. Which would mean that I would make a lot less money. The abusiveness held me back for a long time but also greatly increased my earning potential.

    I essentially converted dollars that I expected to use to earn investment income into dollars that permitted me to continue to do this work for 17 years in the face of extraordinary amounts of abuse with the expectation that the work would bring in a far greater number of dollars in the days following the next price crash. I chose to invest in myself and in my business and in my belief that Shiller’s Nobel-prize-winning research is legitimate research over stocks because the long-term payoff from doing so seems likely to be much, much, much greater. That’s the Passion Saving concept. The idea is to free one’s self from paycheck dependence so that one can add more value to the world through one’s work and thereby earn a much bigger income for one’s self.

    It all fits together, Sammy. It’s been an exceedingly strange journey. I certainly give you that one. But all of my actions have been consistent with my stated beliefs about how people should go about the business of financing their journey through life. Getting stock investing right is important. But getting one’s work choices right is also important. My work choice has been to help people understand the far-reaching implications of Shiller’s amazing research. I am likely to earn a whole big bunch more from that than I would from investing in stocks, regardless of whether I followed a Buy-and-Hold strategy or a Valuation-Informed Indexing strategy. I naturally went with the choices that were likely to provide a much bigger payoff (while also helping millions of other investors as well, to be sure).

    I hope that helps a tiny bit. I am very proud of the work that I have done. I offer no apologies for taking the more financially rewarding path. I only wish that the Buy-and-Holders were less abusive so that more people would choose this exciting and rewarding path and thereby help us all to live far richer lives in the future than we have been able to live during the Buy-and-Hold Era.

    My best wishes to you.

    Income-Maximizing Rob

  10. I’ve addressed the question hundreds of times and you always come back and ask it again.

    It all depends on whether the market is efficient, as the Buy-and-Holders say, or whether valuations affect long-term returns, as Shiller’s research shows. If valuations affect long-term returns, then you need to adjust for valuations to know the true and lasting value of your portfolio. Since I believe that Shiller’s Nobel-prize-winning research is legitimate research, I always adjust for valuations. Doing that today means dividing the amount in your portfolio by two when stocks are priced as they are today (stocks are today priced at two times fair value).

    You don’t make that adjustment. As noted above, we have had this discussion hundreds and hundreds of times. Every time we have it, I note that you don’t adjust your portfolio value for the effect of valuations. If the market were efficient, that would make perfect sense. But if valuations affect long-term returns, it makes no sense at all. We are starting from different premises and thus we always end up reaching very different conclusions.

    I wouldn’t have a problem if everyone in this field just told people that there are two schools of academic thought as to how stock investing works, one rooted in the research of Eugene Fama and one rooted in the research of Robert Shiller. That’s fair. But I think it is a very, very, very dangerous and irresponsible idea to just report results as if the market was efficient and to ignore entirely the 38 years of peer-reviewed research showing that valuations affect long-term returns. That’s what happened with Greaney’s safe withdrawal rate study at the old Retire Early board. He told people that a 4 percent withdrawal was “100 percent safe” and people believed him because he never mentioned that there is 38 years of peer-reviewed research showing that the safe withdrawal rate is a number that varies from 1.6 percent to 9.0 percent,depending on the valuation level that applies at the time the retirement begins. Those people were misled in a horrible way.

    I think we need to begin making it a practice to permit honest posting re this stuff. Most people find intuitive appeal in the Buy-and-Hold position. You look at your portfolio statement, it says that you have $100,000 in stocks, and so that is what you have. It SOUNDS right. But if Shiller is right that 50 percent of that money is the product of irrational exuberance rather than economic realities, then you don’t have $100,000 in a real and lasting sense, you have $50,000. Investors need to know that. At the very minimum, they need to know that there is 38 years of peer-reviewed research showing that to be so. It’s not at all a good idea to mislead people re the numbers that they are using to plan their retirements.

    What if Shiller’s Nobel-prize-winning research is legitimate research? That’s the question that I am always wondering about. If that’s the case, then the irrational exuberance will be blown away in the wind sometime in the next year or two or three and millions of people will be left with far short of the amount they need to finance decent retirements. Not good. They won’t be left short because they did not save enough, they will be left short because the Buy-and-Holders misled them about what the peer-reviewed research in this field teach us all about how stock investing works in the real world. Not good at all. Not even a tiny bit good. I think that millions of people are going to be very upset in the days following the next price crash. And for perfectly understandable reasons. I think that we are going to see lots of lawsuits, lawsuits that could have been avoided just by us all insisting that investors be told that there are today two schools of academic thought re how stock investing works, not one.

    That’s my sincere take re these terribly importance matters, in any event.

    I naturally wish you the best of luck with whatever investment strategy you elect to follow.

    Peer-Reviewed Research Advocate Rob

  11. Spending down is a separate issue. You are not getting the returns you said you would with VII and it shows your market timing is not working. The goldmine you refer to is not from investing returns, but from some deluded notion that goons will be making settlement payments to you and/or people will pay you money for your “insights”.

    Again, you still haven’t answered the question:

    why should anyone follow your advice or the VII strategy when you failed?

  12. No, Rob, you are not answering the question and you never have. You are diverting and lying, just like always. I will state it as simply as possible and as clear as possible:

    You have made claims about timing and you are the promoter of your own timing strategy called VII. You publicly disclosed your retirement plan in 2002 in which you claim to have had a nest egg of $400,000. You claimed to have an expense budget of $30k/year, with your nest egg invested in i bonds, TIPS and CDs. In 2005, you provided an update that your expenses had risen to $38k. You said you were not concerned with the rise in expenses because the market would return 7% real and that with VII, you would easily exceed that. Your continued updates over the years is that you never moved into stocks and that you were returning 3.5% real. We know you have a history of lying and your results could be worse than that, but if we even ta your word for it, we can see that your timing strategy has not worked. You would have spent down much of that $400k by now and would not have much to move back into the market to save yourself.

    So, why should anyone follow your advice or the VII strategy when you failed?

  13. You’ve seen the paper that Shiller put out in 1996 advocating market timing in no uncertain terms, Sammy. And of course it is his life’s work to make the case for market timing. The title of his book is “Irrational Exuberance.” If stock gains that are the product of overvaluation are just irrational exuberance rather than rooted in economic realities, doesn’t that tell you that you should think of them differently than how you think of the gains that are real? It sure seems so to me.

    Do you think that the gains of the late 1990s were real? The U.S. economy is strong enough to generate annual gains of 6.5 percent real. In four years, that would be 26 percent. From 1996 through 1999, we saw gains of 126. So 100 percentage points of those gains were just irrational exuberance. Do you think it was a good thing that we pumped stock prices up so high? I sure do not.

    Had we been telling investors how important it is to always practice market timing, we never would have seen those crazy gains. When prices got dangerously high, most investors would have lowered their stock allocations. Those sales would have pulled prices down to reasonable levels. Problem solved.

    And then we wouldn’t have experienced the 2008 economic crisis. Shiller predicted the crisis in his book, published in March 2000. He said that we would see the loss of trillions of dollars of wealth as stock prices worked their way back to reasonable levels. How about if we just never let them get out of hand in the first place? How could we keep stock prices in check? Advocate market timing. That would do it.

    Wade Pfau was amazed when he investigated the case for market timing. He thought that he was going to find some research showing that timing might not always work. But of course there is no such research. He ended up wondering how he came to be the first person to check this out (he of course learned later why that was). If it is really true that there is zero research suggesting that market timing might not work (and it is), why don’t we tell people that? Why are we keeping it a secret?

    It’s because the Buy-and-Holders don’t want to acknowledged having made a mistake that has been public knowledge to those who keep track of the peer-reviewed research for 38 years now. Was this cover-up worth bringing on an economic crisis? I don’t see it. And how will it ever end? The longer it goes on, the more lives are destroyed and the worse the Buy-and-Holders feel about having their mistake exposed. It seems to me that they would be better off to just come clean and put this behind them.

    Please feel free to put on my tombstone: “Rob Bennett Lies Here — Unabashed Advocate of Market Timing.” It’s the only thing the Buy-and-Holders got wrong. But holy smokes, what a mistake to make!

    That’s my sincere take, Sammy.

    Rob

  14. All of Shiller’s work supports market timing. If the market is efficient, as was widely believed when Buy-and-Hold was being developed, timing is not required and it is not even a good idea because stock investing risk is constant over time. But if valuations affect long-term returns, as Shiller showed, then stock investing risk is not constant but variable. In that case, timing is required for all investors seeking to keep their risk profile roughly constant over time.

    Shiller has advocated market timing on several occasions. He was clear as clear can be in 1996. He said that investors who stuck with their high stock allocations despite the high prices that applied at that time would live to regret it within 10 years. If that’s not advocating market timing, I don’t know what is.

    However, Shiller did make an offhand comment in an interview he did a few years ago in which he suggested that he no longer believes in market timing. I very strongly believe in market timing. I think it is the key to successful long-term stock investing. And it is the key to stabilization of the economy. Market timing is price discipline. A market in which price discipline has been removed is a market that is on its way to collapse. And, when the stock market collapses, so many people lose so much spending power that the economic system always collapses as well. So I strongly advocate market timing.

    Is it possible that Shiller no longer supports market timing? I can’t entirely rule out the possibility given that he did make that one off-hand comment that suggested he was experiencing doubts. I want to know more about Shiller’s views on this question and about the views of hundreds of other experts in this field. We need to have a national debate on this question. What does Shiller really believe? Why does he believe that? What do others believe? Why do they believe that? John Bogle once came within an inch of endorsing Valuation-Informed Indexing, which of course is all about market timing. If Shiller now no longer believes in market timing and Bogle before his death had come a long way to endorsing it, we all need to be reconsidering the question until our thinking is clearer.

    I would be a multi-millionaire today if it were not for the abusive posting of you Goons. I mean, please give me a break. There is huge interest in this stuff. I have had hundreds of people tell me that I am the first person who has written about stock investing in a way that makes complete sense. Say that that is 10 percent of the population. That’s millions of people. I have a funny feeling that I will have no problem bringing in a mountain of money after prices have crashed and I am able to reach all of the people who want to learn more about how stock investing works in the real world. My plan hasn’t failed at all. I saved like a madman in earlier days because I wanted to be able to do work like this and not need to worry about money coming in immediately and that plan has worked like a dream. I haven’t cashed in yet. But if you go by the 200 rave endorsements on the home page of my web site, I think it would be fair to say that things are looking very good.

    I think that LOTS of people will be making money doing this in the days following the next price crash. If valuations really affect long-term returns (Shiller was awarded a Nobel prize for his work), then any investment strategy that does not call for market timing is dangerous. A strategy that does not call for market timing is a strategy that does not call for price discipline. Huh? Price discipline is wonderful. Price discipline is what makes markets work. I believe that Valuation-Informed Indexing is the future and that Buy-and-Hold is the past.

    I believe that launching a national debate on this stuff will end up helping every investor on the planet in a very big way. The key is getting the Buy-and-Holders to acknowledge at least the possibility that they made a mistake re market timing. I love that the Buy-and-Holders recommended using the peer-reviewed research to guide one’s investment strategy. But it’s just a reality of the scientific process that no finding is ever the final say. We are always in the process of learning new things and I believe that the last 38 years of -peer-reviewed research in this field is amazing stuff. We need to be talking about it at every site on the internet.

    My best and warmest wishes to you, my old friend.

    Rob

  15. Again, you are diverting the topic of your retirement plan and market timing scheme failures by repeating a lie about Shiller.

  16. Your entire post is made up with a string of delusional comments and outright lies. All of this is your attempt to hide your failings. Again, Shiller said not to use CAPE for timing the market. You have been given the link to his comments multiple times. You have also conveniently avoided the facts about your own retirement plan with your VII investing strategy. Your timing strategy has not worked. It is a plain and simple fact. The primary points are listed above. This was YOUR plan. The mystical “goons” did not create this plan. This was all you.

  17. Rob,

    You have been pushing this story for a long time. Shiller even warned that you shouldn’t use CAPE to time the market. It is bad enough that you have been misleading people with your crash predictions that have failed time after time.

    Look at how this has impacted you. In 2002, you posted your retirement plan in which you had a nest egg of $400k invested (as you claim) in i bonds, TIPS and CDs and your spending budget was $30k/ yr. You have reported a real return of 3.5 percent (which is probably even embellished based on other comments you made. You made several other statements that you would be transitioning into stocks along the way. In 2005, you provided an update that your spending was up to $38k, which is a large percentage increase over the 2002 budget. You told people that you were not concerned because the market returned 7% real and that with your VII strategy, you would get a return in excess of the 7%. It has now been 17 years since the launch of your 2002 plan. Your VII strategy has kept you out of the market and you have missed out on the large gains. You have acknowledged that you now have to return to the job market. Clearly, your plan with VII failed. Even if there was some huge drop today, your nest egg has deteriorated, so there is not much left to put back into the market. It is just simple math, but as you say, you are not a math guy.

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