saving philosophy major; market timing minor

I won't be doing a full post this week with analysis since I was traveling for work all this past week and need to catch up on emails today and the chores corresponding thereto. What free time there was this weekend was spent indulging my new interest in backpacking, which entailed spending hours and untoward amounts of money at R.E.I. accumulating the gear I intend to use on at least a couple trips to the Shenandoah National Park this spring/summer. Funny how it's so easy to justify spending when it can be classified as an 'investment' that will produce years of enjoyment. Any remaining hesitancy can be easily obliterated by imagining future trips with my sons (the youngest of which is only 6 months of age). All I can hope is that by spending the money, I'll feel obligated to actually go out and put the gear to use (sort of like a gym membership initiation fee).

Separately, in regards to the 'market timing' posts of late, I should mention that these quantitative rule-based strategies aren't really market timing in the purest sense of the word, at least not to my way of thinking. I think pure market timing entails moving in and out of the market based on esoteric gut-level decision making. In other words, it's based on an intuitive synthesis of whatever quantitative and/or qualitative information happens to be available at the time and is therefore not conducive to testing against historical data. Alternatively, I see the rule-based strategies as data-driven decision making, which because they're systematic, are conducive to testing. Now, perhaps it's possible that someone has an ability to practice pure market timing, but even if so, there's no point in writing about it because the reader can never know whether or not the ability truly exists because it can't be verified by a test. Rather, any prudent reader would have to fall back to Occam's razor and assume the writer is full of BS and is simply trying to either enhance their own bank account balance or their social status.

Now, having provided the above disclaimer, I may from time to time write about a personal decision to enter or exit the market based on whether or not I think it's headed up or down. I'm not sure why I might do this, other than this blog might one day be read by my kids when I'm gone and it might be nice and/or helpful from them to read in relation to their own future investing endeavors. Or perhaps, having a written record of my trials and errors might help me refine a strategy quicker than I otherwise would. In any event, I'll try to practice my own market timing rarely and only then with thoughtful reasoning based on the three fundamental drivers of market prices, which are (i) long-term valuation metrics, (ii) intermediate-term economic growth, and (iii) short-term market sentiment. Still, there is no way of knowing ex-ante whether my decisions will do me more harm than good over the long run.

To a large extent, do to the huge uncertainty, market timing is an insignificant factor in long-term investing success. Much more important in accumulating a nest egg sizable enough to maintain one's standard of living throughout retirement is the discipline to save money, which in turn is a lot like diet and exercise. My friend across the street who is a financial advisor conveyed this analogy to me as follows: "What diet and exercise regimen is best? The one you can stick to." It doesn't matter if you follow Adkins, South beach, Weight Watchers, or Jenny Craig because it ultimately comes down to the simple fact of calories in and calories out. In terms of saving money, it ultimately comes down to finding some way of mastering your desires. You will never succeed in denying yourself something you want. Your only hope is to change what you want. Obviously, this is an ideal state of mind and, based on my expenditures this weekend, one I've yet to reach.

Quote for the Week: "Life's necessities are cheap and easily obtainable. Those who crave luxury typically have to spend considerable time and energy to attain it; those who eschew luxury can devote this same time and energy to other, more worthwhile undertakings." - Lucius Annaeus Seneca (c. 4 BC-AD 65), Roman Stoic philosopher.