Recent blog entries have set forth the texts of e-mails between a community member named “Larry” and me. Set forth below is the text of an e-mail that I sent to Larry on November 11, 2009.
Thanks for the update.
I share your thinking on both aspects of the Hedge Fund question. Yes, there is a better understanding of the valuations topic among those who promote hedge funds (Easterling and John Mauldin are active here). But I too am skeptical of hedge funds, especially for the average person.
To me, the key is getting the word out to the typical middle-class investors. It is when the middle class dramatically overinvests in stocks that we see destruction to our economic and political systems. One big frustration that I feel that I come up against again and again is a compartmentalization of concerns.
People who care about economic and political issues tend to tune out investing discussions and people who care about investing tend to tune our economic and political concerns. All these areas overlap in the stock market. When the middle-class loses large portions of their life savings in the market, damage is done to the economy and to public confidence in our political leaders. I see these issues as connected. But I don’t know of too many others who approach these questions in an integrated way.
I am of course glad to hear that you are hearing a positive reaction to the calculator. I have both a positive and a negative reaction to your finding that it helps to promote the calculator as an asset allocation tool. That’s certainly a fair way to describe the calculator, and it is of course a good idea to go with what works.
However, I also believe that it is critical to get out the message that long-term timing works and is essential for long-term investing success. The biggest mental block we face is the idea that “timing doesn’t work.” If it were not for widespread belief in this idea, I don’t think that there ever would have been any objections to any of this. It all makes perfect sense.
But people have a really hard time accepting that timing works. So I can see how it might help to promote the calculator as an asset allocation tool. But I personally believe the message that timing always works is an important one (the other way of saying it is that paying attention to the price you pay for something always works).
I look forward to seeing your chart.