Seems to me that these models are an effective way of explaining what has already happened, and not as useful for predicting what will happen. Conditions (economic, social, political, etc.) are variable making it unlikely that the model will accurately predict the same outcomes. As Adam suggests, they are interesting to ponder (for some) but not to be completely relied on.
Good morning and happy Saturday. I have another consideration to add to your list: Supply & Demand. By many measures it appears that more dollars are chasing fewer publicly traded equities. In some cases, those dollars are on “autopilot” (i.e. 401k contributions or automatic investment plans) which create recurring demand regardless of valuations and frequently into the same company shares. It seems to me that an ever increasing number of dollars purchasing a narrow collection of stocks is another factor driving prices higher and reducing the relevance of many historical metrics such as P/E ratios.
Thank you Matt for your post. It motivated me to watch a documentary on Calvin Coolidge so that I could better understand the reference. Indeed lowering taxes and reducing the deficit was central to Coolidge’s economic policies which seemingly fueled the Roaring 20’s. He also rather surprisingly declined to seek reelection in 1928 right before the Great Depression set in. Interesting history no doubt!
This is truly a fascinating topic and one that requires some real consideration amongst those of us who are considering retirement or are recently retired. I have long thought about the contradiction between the need for long term thinking in one’s personal financial planning while our system of government only allows for short term thinking. The ultimate goal of seeking re-election every few years does seem to lead to short term thinking and kicking the can down the road. Reverting to policies that will reduce spending, balance the budget and shrink or eliminate the deficit almost seem impossible in this political environment. But sustaining a $2T annual deficit seems equally improbable and could result in a significant global financial event. This feels like one of those times when ignorance is bliss for those who are just living their lives and not thinking long and hard about the frightening future that may very well lie ahead.
I think the to decision diversify is a function of your desired outcomes and investing goals. If you are looking for pure growth then picking a small number of potential winners makes sense. But if you are looking for capital appreciation and preservation, broad diversification is the better choice. Just like the game of craps…you can either put all your chips on a few numbers and win big, or you can spread your bets and stay at the table longer.
“retiring is not the end of striving, it simply enables striving for goals or purpose that each of us is empowered to choose.” I absolutely love this quote. Thank you for putting how I feel about approaching retirement. Everyone tells me I am too young to be thinking about retirement because I have so much energy and too much to offer. From today forward, this is going to be my response!
I am not an overly religious person and firmly believe in free will and the importance of taking responsibility for our own actions, but this article and related comments made me think back on an impactful quote I heard in my 20’s. I was at a Baptist funeral for a work colleague who died unexpectedly of a heart attack a few weeks after her father had died. She was a lovely person who was universally liked and respected by her colleagues. As I sat in the church and witnessed the terrible sadness of the family, the preacher said something like “g-d shows you the mountains to lift you from the valley, but he also shows you the valley so that you will appreciate the mountains”. I apologize if that quite is not 100% accurate (it was over 30 years ago), but I recall this message often and it helps me maintain balance and perspective. Yes, there are friends, family, neighbors, colleagues who appear more fortunate than I am and of course there are many, many others much less fortunate. I believe the message is that we need to appreciate the things we do have and what we have achieved while always being thoughtful of those who have less and are less fortunate.
I committed to “paying myself first” when I started my first job. The power of compounding just made sense to me. We saved as much as we could into 401k’s and our brokerage account, including automatic withdrawals that funded a diversified set of funds. We also paid our credit card bills off each month. This did not leave much leftover, but I told my wife that she would thank me some day…and that time is now. My regret is having the false confidence to choose my own individual stocks and actively managed funds to invest in. We did ok and I enjoyed the research, but as I look back, I realize that I could be further ahead if I just picked a few index funds and rebalanced periodically. I have been working to switch things over, but large capital gains have limited my flexibility.
Wow, I have the same list of brokerage accounts PLUS 401k’s at three different providers! I keep it all on a single spreadsheet updated monthly to ensure I have the full picture and proper diversification, but must admit it is getting difficult to keep track of the different rules across the providers. They absolutely offer different user experiences and products so consolidation will limit your options, but that may or may not matter to you based on your needs.
This weekend I logged into one of the many websites I need to check my balances (which I try to do on a monthly basis to update my consolidated spreadsheeet). Much to my surprise, the JPMorgan Pension site said that per their records, I no longer have a pension balance as of May 31st and if I had any questions that I could call them M-F from 8-7pm. Fortunately it is a relatively small part of my retirement savings and I am not yet dependent on it. I called first thing Monday and was told that it was just a system error due to a recent “upgrade” and that it should be corrected soon. On the same call I asked them to send me the paperwork to move the cash balance into one of my existing IRAs. Maybe it is time to consolidate after all.
Comments
Seems to me that these models are an effective way of explaining what has already happened, and not as useful for predicting what will happen. Conditions (economic, social, political, etc.) are variable making it unlikely that the model will accurately predict the same outcomes. As Adam suggests, they are interesting to ponder (for some) but not to be completely relied on.
Post: Good in Theory
Link to comment from June 14, 2025
Good morning and happy Saturday. I have another consideration to add to your list: Supply & Demand. By many measures it appears that more dollars are chasing fewer publicly traded equities. In some cases, those dollars are on “autopilot” (i.e. 401k contributions or automatic investment plans) which create recurring demand regardless of valuations and frequently into the same company shares. It seems to me that an ever increasing number of dollars purchasing a narrow collection of stocks is another factor driving prices higher and reducing the relevance of many historical metrics such as P/E ratios.
Post: You Never Know
Link to comment from June 7, 2025
Thank you Matt for your post. It motivated me to watch a documentary on Calvin Coolidge so that I could better understand the reference. Indeed lowering taxes and reducing the deficit was central to Coolidge’s economic policies which seemingly fueled the Roaring 20’s. He also rather surprisingly declined to seek reelection in 1928 right before the Great Depression set in. Interesting history no doubt!
Post: Feeling Moody
Link to comment from May 25, 2025
This is truly a fascinating topic and one that requires some real consideration amongst those of us who are considering retirement or are recently retired. I have long thought about the contradiction between the need for long term thinking in one’s personal financial planning while our system of government only allows for short term thinking. The ultimate goal of seeking re-election every few years does seem to lead to short term thinking and kicking the can down the road. Reverting to policies that will reduce spending, balance the budget and shrink or eliminate the deficit almost seem impossible in this political environment. But sustaining a $2T annual deficit seems equally improbable and could result in a significant global financial event. This feels like one of those times when ignorance is bliss for those who are just living their lives and not thinking long and hard about the frightening future that may very well lie ahead.
Post: Feeling Moody
Link to comment from May 24, 2025
I think the to decision diversify is a function of your desired outcomes and investing goals. If you are looking for pure growth then picking a small number of potential winners makes sense. But if you are looking for capital appreciation and preservation, broad diversification is the better choice. Just like the game of craps…you can either put all your chips on a few numbers and win big, or you can spread your bets and stay at the table longer.
Post: Spreading Your Bets
Link to comment from April 12, 2025
“retiring is not the end of striving, it simply enables striving for goals or purpose that each of us is empowered to choose.” I absolutely love this quote. Thank you for putting how I feel about approaching retirement. Everyone tells me I am too young to be thinking about retirement because I have so much energy and too much to offer. From today forward, this is going to be my response!
Post: Never Enough
Link to comment from February 15, 2025
I am not an overly religious person and firmly believe in free will and the importance of taking responsibility for our own actions, but this article and related comments made me think back on an impactful quote I heard in my 20’s. I was at a Baptist funeral for a work colleague who died unexpectedly of a heart attack a few weeks after her father had died. She was a lovely person who was universally liked and respected by her colleagues. As I sat in the church and witnessed the terrible sadness of the family, the preacher said something like “g-d shows you the mountains to lift you from the valley, but he also shows you the valley so that you will appreciate the mountains”. I apologize if that quite is not 100% accurate (it was over 30 years ago), but I recall this message often and it helps me maintain balance and perspective. Yes, there are friends, family, neighbors, colleagues who appear more fortunate than I am and of course there are many, many others much less fortunate. I believe the message is that we need to appreciate the things we do have and what we have achieved while always being thoughtful of those who have less and are less fortunate.
Post: Why We Struggle
Link to comment from January 4, 2025
I committed to “paying myself first” when I started my first job. The power of compounding just made sense to me. We saved as much as we could into 401k’s and our brokerage account, including automatic withdrawals that funded a diversified set of funds. We also paid our credit card bills off each month. This did not leave much leftover, but I told my wife that she would thank me some day…and that time is now. My regret is having the false confidence to choose my own individual stocks and actively managed funds to invest in. We did ok and I enjoyed the research, but as I look back, I realize that I could be further ahead if I just picked a few index funds and rebalanced periodically. I have been working to switch things over, but large capital gains have limited my flexibility.
Post: Committing Ourselves by Jonathan Clements
Link to comment from August 25, 2024
Wow, I have the same list of brokerage accounts PLUS 401k’s at three different providers! I keep it all on a single spreadsheet updated monthly to ensure I have the full picture and proper diversification, but must admit it is getting difficult to keep track of the different rules across the providers. They absolutely offer different user experiences and products so consolidation will limit your options, but that may or may not matter to you based on your needs.
Post: All in One Place
Link to comment from July 3, 2024
This weekend I logged into one of the many websites I need to check my balances (which I try to do on a monthly basis to update my consolidated spreadsheeet). Much to my surprise, the JPMorgan Pension site said that per their records, I no longer have a pension balance as of May 31st and if I had any questions that I could call them M-F from 8-7pm. Fortunately it is a relatively small part of my retirement savings and I am not yet dependent on it. I called first thing Monday and was told that it was just a system error due to a recent “upgrade” and that it should be corrected soon. On the same call I asked them to send me the paperwork to move the cash balance into one of my existing IRAs. Maybe it is time to consolidate after all.
Post: All in One Place
Link to comment from July 2, 2024