I’ve posted Podcast #100 to the “RobCasts” section of the site. It’s called You Won’t Believe the Truth About Stock Investing Until You’ve Heard It 5,000 Times.
Marketing professionals know that, when it comes to persuading humans of something, repetitition trumps logic. That’s why the Stock-Selling Industry tells us so often that “timing doesn’t work” and rarely mentions the 30 years of academic research showing that valuations affect long-term returns (and that therefore long-term timing must work).
Evidence Based Investing says
30 years of academic research showing that valuations affect long-term returns (and that therefore long-term timing must work).
The academic research certainly shows that the wide range of returns starting from low valuations have a higher average than the wide range of returns starting from low valuations.
They do not show that “therefore long-term timing must work”. That is your own special leap of logic.
Bill Bernstein has shown in “The Best Market Indicator Ever” that even when you find an indicator that predicts future returns, constructing a market timing scheme that increases returns does not follow.
Evidence Based Investing says
CORRECTION
30 years of academic research showing that valuations affect long-term returns (and that therefore long-term timing must work).
The academic research certainly shows that the wide range of returns starting from low valuations have a higher average than the wide range of returns starting from high valuations.
They do not show that “therefore long-term timing must work”. That is your own special leap of logic.
Bill Bernstein has shown in “The Best Market Indicator Ever” that even when you find an indicator that predicts future returns, constructing a market timing scheme that increases returns does not follow.
Rob says
The academic research certainly shows that the wide range of returns starting from low valuations have a higher average than the wide range of returns starting from high valuations.
Thanks for saying that, Evidence. I think it’s a big help for you to say that.
Rob
Rob says
They do not show that “therefore long-term timing must work”. That is your own special leap of logic.
I believe that the logic chain here is rock solid.
You’re allowed to think different and to say different. I am grateful to you for taking the time out of your day to share your thoughts re this matter with us.
But I have to say what I believe. I believe that the logic chain at issue here is rock solid.
Rob
Rob says
Bill Bernstein has shown in “The Best Market Indicator Ever” that even when you find an indicator that predicts future returns, constructing a market timing scheme that increases returns does not follow.
I believe that this is the same Bernstein article that you cited on an earlier occasion. If I am wrong about that, please let me know.
If I am not wrong about that, then my response now is the same as it was then. Bernstein is showing why short-term timing does not work. I am convinced that short-term timing does not work. A showing that short-term timing does not work is not evidence that long-term timing does not work.
If I am going to be persuaded that long-term timing does not work, I am going to need to either hear a logical argument as to why or to see some data showing that this is indeed the case. I have never in seven years heard any logical argument that long-term timing does not work. Nor have I ever seen any data showing this to be so. All the arguments and data that I have seen cut the other way.
The historical data is public information. Anyone who cares to can check it out for himself or for herself. I think that the best thing for people to do is to do just that. Our retirements are at stake here. it makes sense for us all to take 15 minutes to check the data out for ourselves.
Rob
John Walter Russell says
From Diversifying Risk:
“The issue is whether we can exploit such information. The answer is simple: YES.”
“We have up to twenty years for prices to become attractive. We can draw down a TIPS ladder. If we withdraw 4% of the original principal (plus inflation) from a 2% TIPS ladder, we still have 51% of our original balance at Year 20. We will break even if prices take twenty years before returning to normal. More likely, prices will fall to bargain levels within ten years. If so, we will do exceedingly well. We will still have 75% to 80% of our principal available.”
http://www.early-retirement-planning-insights.com/diversifying-risk.html
Just think of how much better it is if you can buy TIPS at more than 2% interest!
Have fun.
John Walter Russell
Evidence Based Investing says
I believe that this is the same Bernstein article that you cited on an earlier occasion. If I am wrong about that, please let me know.
I think it is the same one. As someone once said “You Won’t Believe the Truth About Stock Investing Until You’ve Heard It 5,000 Times.” So I think if I tell you about it another 4,998 times maybe you will get it.
Rob says
So I think if I tell you about it another 4,998 times maybe you will get it.
In my case it might take 10,000 tries, Evidence. Some of us are a little extra slow on the uptake.
Thanks for your response.
Rob