tag:blogger.com,1999:blog-6167053228142922997.post4105456750218329124..comments2023-10-30T11:57:40.433-04:00Comments on Wade Pfau's Retirement Researcher Blog: Spending Amounts vs Spending ValueAnonymoushttp://www.blogger.com/profile/04168922717655562721noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-6167053228142922997.post-15543480961304848372012-05-04T08:44:39.380-04:002012-05-04T08:44:39.380-04:00Yes, Wade, I appreciate and admire what you and Jo...Yes, Wade, I appreciate and admire what you and Joe Tomlinson are doing – explaining the concept to folks to help them think out their priorities.<br /><br />My purpose was/is to help SUPPORT what you each/both are doing, by separating it from the disgrace associated with the word “utility.” Shamefully, many economists use that word and MIS-use the concept through absurdly inadequate methods of leaping from Granny the victim to an alleged mathematical representation of her priorities. The effect is to throw Granny under the bus in order to create mathematical sport and technical publications for said economists.<br /><br />Dick PurcellDick Purcellhttp://www.dickpurcell.comnoreply@blogger.comtag:blogger.com,1999:blog-6167053228142922997.post-88941133393848978702012-05-04T01:49:19.508-04:002012-05-04T01:49:19.508-04:00Thanks Dick.
I was trying to emphasize, as has be...Thanks Dick.<br /><br />I was trying to emphasize, as has been expressed by Joe Tomlinson, that it is important to translate spending amounts into something that better represents the value provided by that spending.Anonymoushttps://www.blogger.com/profile/04168922717655562721noreply@blogger.comtag:blogger.com,1999:blog-6167053228142922997.post-70969666068502542982012-05-03T18:03:44.064-04:002012-05-03T18:03:44.064-04:00Wade –
Major thanks for describing the concept an...Wade –<br /><br />Major thanks for describing the concept and its value so well. And special thanks for addressing the horror of that word, "utility"<br /><br />The concept as you describe it is indeed valuable. But for people who understand the shamefully unethical way the high priests of investment theory and “education” have MIS-used the utility concept in conjunction with modern portfolio theory, the word utility is POISON.<br /><br />What they have done is divert the investor from pursuit of her investment’s utility, which of course is purchasing power for her needs and goals. They avoid addressing what might best for her utility, cut off the analysis short of that. Instead they pretend to determine her tradeoff preferences between a pair of techie measures that most investors don’t understand – return-rate arithmetic mean and return-rate standard deviation. To lubricate this deception, they label return-rate arithmetic mean “expected return,” although they know full well that return is not expected, and label return-rate standard deviation “risk” to divert the investor’s focus to her short-term fears.<br /><br />Of course, the investor cannot see how her choice of tradeoff between these techie one-year measures affects her utility, probabilities for purchasing power for her future needs and goals. That would require mathematical application of the probabilities reflected by those techie measures to the dollars and years of her cash flow plan and future needs and goals, applying compounding along the way.<br /><br />But what the heck, they say. We may be violating our responsibility to the investor, dooming her to sunset years in poverty. But we tenured academicians will have what we need for mathematical fun and games in the professors’ playground up in the ivory tower.<br /><br />I hope that in your valuable work, when you use the concept you will say “value” instead of that word those academicians have poisoned.<br /><br />Dick PurcellDick Purcellhttp://www.dickpurcell.comnoreply@blogger.com