A Rich Life

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

“So What You Are Saying Is That We Buy-and-Holders Might Have to Take a Few Less European Vacations, or Might Have to Do wWthout Our 3rd Vacation Property, or Might Not be Able to Trade in Our S Class Mercedes Every Year for the New Model (Resorting to Every Other Year), While We Wait for the Market to Recover Like It Always Does.”

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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:

So what you are saying is that we buy and holders might have to take a few less European vacations, or might have to do without our 3rd vacation property, or might not be able to trade in our S class Mercedes every year for the new model (resorting to every other year), while we wait for the market to recover like it always does. Oh, woe is me.

I’m saying that, because the Greaney retirement study lacks a valuation adjustment, it gets the numbers wildly wrong. I’m saying that, if we had begun permitting honest posting re the peer-reviewed research on the afternoon of May 13, 2002, as I proposed at the time, we would today be 22 years ahead of where we are in our development of the Valuation-Informed Indexing concept.

Rob

Comments

  1. VII gets the numbers wildly wrong. How do we know this? Let’s use you and me as an example. We are both in our 60’s. If one of us was a market timer over the last 30 years, that person would have substantially less money in their retirement account vs the other that was a buy and holder. There is no argument on this. It is simple math. The market timer would not be able to retire right now. That is a very big problem for someone in their 60’s because most people have little time to continue working and many are forced out of working by health issues, ability to work a job or job availability.

  2. You’re not adjusting for irrational exuberance. If you adjust for irrational exuberance, you get very different numbers. That’s the entire dispute. The last 43 years of peer-reviewed research shows that you need to adjust for irrational exuberance and the Buy-and-Holders ignore it because they don’t want to acknowledge that they made a mistake in failing to distinguish the guessing-game approach to market timing (which really doesn’t work) and valuation-based market timing (which is just price discipline and which the entire 150 years of historical return data available to us shows is always 100 percent required for every investor. There’s no other way to combat irrational exuberance.

    We should be Permitting honest posting re the peer-reviewed research so that each investor can hear both sides and decide for himself or herself. That’s my sincere take re this terribly important matter.

    If we permitted honest posting re the peer-reviewed research, everyone would just retire when he had enough saved to support a retirement. There wouldn’t be any of this phony baloney irrational exuberance floating around in our portfolios. So it would not be difficult to know when we had enough wealth accumulated to finance a retirement. Irrational exuberance hurts us all. It is the cancer of the personal finance world. We should all be working together to eliminate it. That means encouraging each other to practice price discipline (valuation-based market timing!) as needed.

    Where I’m coming from.

    Rob

  3. It is simple math, Rob. We don’t play with made up numbers like you. You either have the money in your 60’s or you don’t. The game is over. The only dispute is in YOUR mind. You think the world has to agree with your opinion. Newsflash: it doesn’t.

  5. “adjusting for irrational exuberance”

    Adjusting for irrational exuberance doesn’t pay the bills. You can spend all day, every day, “adjusting for irrational exuberance” and that won’t put food on the table or make a mortgage or rent payment.

  6. I think we all should be adjusting for irrational exuberance. When we fail to do so, we come to believe that the irrational exuberance portion of our portfolio is real money, the same as gains that are rooted in economic growth rather than just investor emotion gone haywire. The next thing you know, there are people putting out safe withdrawal rate studies that lack a valuation adjustment. Not good.

    Where I’m coming from.

    Rob

  7. It is irrational to tell people that they have it all wrong when they have millions in their account while you have nothing?

  8. We disagree.

    If you are friends with someone and you see that he got an important number wrong in a retirement study posted at his web site, you should tell him immediately. I am sure.

    Rob

  9. “you should tell him immediately”

    and you should follow up by explaining why you think he got the number wrong and demonstrating with an analytically valid study what the right number is.