I was once very popular.
No – really!
From May of 1999 through May of 2002, I posted on the internet only about effective saving strategies. People loved my stuff. It got to a point at which I would turn up in the morning at my favorite discussion board and say “hello” and the post would get eight recommendations! It sounds terrible for me to say it but it was getting annoying.
Q4 2022 hedge fund letters, conferences and more
One thing that I love about writing on discussion boards and blogs is that you obtain quick feedback on your ideas and that helps you refine them. People patting you on the back regardless of what you say because they like you so much is ego-boosting but it is not really helpful feedback.
Those were the days!
Today I am banned at every large investing site on the internet. What a difference 20 years makes!
Stock Investing Risk Is Variable
It’s not really the passage of time that changed this. It was the nature of my posting. I can tell you precisely when the roof caved in on me. On the morning of May 13, 2002, I advanced a post suggesting that it is a logical impossibility that the safe withdrawal rate is the same number at all possible valuation levels.
If valuations affect long-term returns, as Shiller’s research shows to be the case, stock investing risk is not constant but variable. The safe withdrawal rate is a risk assessment tool. So the safe withdrawal rate has to vary as well.
(Research that I have worked on in the days since I advanced my infamous post shows that the safe withdrawal rate is 9.0 percent when valuations are where they were in 1982 and 1.6 percent when they are where they were in 2000 – so, yes, one number [the Buy-and-Holders say that that number is 4 percent] can never tell the full story).
If I was at risk of getting a big head in those days prior to May 13, 2002, things that have happened in the days since have cured me of that affliction. The truth of course is somewhere in-between the two extremes. I am not as smart as some were making me out to be in the days when I wrote only about saving strategies.
And I am not as dumb as a good number of others have made me out to be since I pointed out the error in the Buy-and-Hold retirement studies (“oops, ma, I forget to include the valuation adjustment!).
Google has a tool that lets site owners see what visitors to their site are doing there. You can use it to figure out what topics to focus on, that sort of thing. I used to watch new people come to my site, get excited about the saving material housed there, then stumble into one of my articles on stock investing and make a quick exit.
Each day I was grinding out new investing articles. Each day I drove more potential customers away. If there were a prize handed out for least effective marketing efforts, I would be a shoo-in.
Personal Troubles
One year I was selected to give a talk at the annual conference for personal finance bloggers. When I walked onto the stage, my first slide appeared before my audience. It stated the title of my talk – “How to Become the Most Hated Blogger on the Internet.” I got a good laugh from that one. I had them eating out of my hand.
But of course sooner or later one must turn to points of substance. That was when the trouble began. I had to explain the story with safe withdrawal rates and all of the other matters that I have come to learn about as a result of that disturbing kick-off experience.
The room got very quiet in the minutes following that initial big laugh. (The nice part of the story is that three people came up to me after the talk and invited me to have a few beers with them and we had a good time together).
Why am I telling you this? You don’t come to this site to learn about my personal troubles.
Here’s the thing. In this case, my personal troubles are in an important sense your personal troubles too.
You invest in stocks. You read articles on the internet to learn what you need to know about the subject of stock investing. Guess what? Most site owners are not super cool with putting up articles that drive people off of their site.
People like bull markets even though it hurts them in the end to believe for a time that their stock portfolios are worth a whole big bunch more than they really are worth. People do not want to hear about the realities of stock investing at times when the CAPE value is what it is today (it is 30 on the day when I am writing these words – the fair-value CAPE is 17).
So you are not hearing the straight story about this important subject. You are not. I am sure.
Shiller tells a story in his book about a message that was delivered to him in the moments before questions were directed at him in a television interview. He was warned that what he said in the interview might affect stock prices. That is so. The entire point of interviewing an expert like Shiller is to permit listeners to learn something about the subject.
Shiller gained fame showing that stock valuations matter, that irrational exuberance is a real phenomenon. It’s not at all hard to imagine how, if he made his point effectively, the answers he gave in that interview might have persuaded some people to sell some of their stocks and the collective effect might have been for stock prices to drop.
Good!
That’s what we should all want stock prices to do when stocks are priced too high, as they were on the day when that interview took place. Every time I read that passage of the book (I have read Shiller’s book four times), I wonder whether Buy-and-Holders are warned when they begin television interviews that their comments might cause stock prices to rise.
I view that as a terrible outcome at times when stocks are already overpriced. But of course that is a minority viewpoint at times of crazy high stock prices. How could it be otherwise?
You are hearing one side of the story a whole big bunch more times than you are hearing the other side of the story. You should take that unfortunate reality into consideration before taking any steps that could cost you money.
Rob’s bio is here.
