Foundations
Updated: April 15, 2009.
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Our Strong Theoretical Foundations
Although we generate numbers, that is not what we emphasize. They help us gain insight. Numbers are not our foundation. Cause and effect is.
Our Strong Theoretical Foundations
Logical Sequence
This is how we have come up with our results.
Logical Sequence
Using all of the Data
One of the critical failings of the conventional methodology is that it focuses on only a handful of historical sequences. We use as much of the historical record as we can.
Using all of the Data
Refusing to See the Obvious
You should reject all claims that an effect does not exist simply because a statistical test fails to declare significance.
Such claims are false. Yet, they are commonplace. I read such assertions by academics. Yet, they demonstrate poor scholarship. This is a major league scandal.
Refusing to See the Obvious
Paradoxes and Confusion
Clearing up two areas of confusion: What is mean reversion? What is the right way to investigate Safe Withdrawal Rates?
Paradoxes and Confusion
Gordon Model Summary
This is a summary about return predictions based upon the Gordon Model.
Gordon Model Summary
The Stability of Estimates Based on Earnings Yield
Our calculations snap down right away to produce stable Safe Withdrawal Rates. This is in sharp contrast with the traditional method of selecting the lowest Historical Surviving Withdrawal Rate from among the years examined.
The Stability of Estimates Based on Earnings Yield
Stability of Earnings Yield Supplement
This extends our investigation of how well our method works. It works exceedingly well.
Stability of Earnings Yield Supplement
The Story Behind the Numbers
Too often, I see numbers in isolation. Too often, someone identifies 4.0% as The Number without any explanation whatsoever. There needs to be more.
The original 4.0% was never The Number. It was only an illusion.
The Story Behind the Numbers
Mean Reversion Theory
I have seen many arguments against the notion of Mean Reversion. Most of them fail because words are used too loosely, without definitions. Others fail because they use definitions that are overly restrictive.
Central to the notion of Mean Reversion is the existence of a constraint. Prices cannot rise and fall entirely independent of earnings.
Mean Reversion Theory
Building Blocks
I have posted a lot of articles with lots of numbers. Those numbers are meant to help, to provide assistance, to supply insights. They tell you can do. The let you know what to look for. They do not tell you what you must do.
Lots of details are not found in numbers. Lots of details are unique to your own situation. This article helps you bring everything together.
Building Blocks
Building Blocks: Edited
Special Note about Mean Reversion
Rob Bennett has made an important discovery. Mean Reversion occurs faster when you adjust for valuations.
Special Note about Mean Reversion
Rob Bennett's Mean Reversion Discovery
Retirement Planning Insights
Here are insights for retirement planning, both before and after retirement.
Retirement Planning Insights
New Standards for Financial Reporting
During my professional career, I was never allowed to get away without doing the following. Why do we allow "financial experts" to get away with anything less?
This is based on my “It’s about time...” series of notes.
New Standards for Financial Reporting