There is no discussing facts with Pamela Yellen. Here’s a copy of our back and forth for your entertainment:
April 28, 2014 at 5:49 pm
Why did you choose to use price returns for the S&P 500 and Dow Jones Industrial Averages instead of real returns, which would include dividends?
Pamela Yellen says:
May 1, 2014 at 12:28 pm
I DO discuss the impact of reinvested dividends right below my S&P 500 chart, as follows:
â€œEven when you include reinvesting dividends, the real purchasing power of your investment remains negative after 14 years! And this assumes you have no fees, commissions or taxes, which will take another big bite out of your savings.â€
How did you manage to miss that, just like Allan Roth missed it? And if you and he missed something that obvious, what else did you both miss?
And then you have the nerve to compare me to The Beardstown Ladies on your post tearing me down on your blog on your AllFinancialMatters website? Based on my supposedly omitting something I clearly noted on BOTH my website and in my book?
Iâ€™ve come to expect that of Allan Roth. Hopefully you are a man of honor willing to admit when you are wrong.
You know, Mr. JLP, itâ€™s easy to write whatever you want â€“ regardless of the impact it might have on others â€“ when you hide behind anonymity, as you do. I doubt you could take the crap and abuse I put up with on a daily basis for even one day if you used your real name.
May 1, 2014 at 1:38 pm
Thanks for the reply.
I still donâ€™t understand why you just donâ€™t use total returns for all your numbers. Why the difference? You clearly emphasize price returns over real returns, do you not.
May 2, 2014 at 11:03 am
The reason is simple, JLP â€“ I write my books for the consumer, not financial planners and investment advisors. Most consumers donâ€™t know what the phrase â€œtotal returnâ€ means and would never be able to relate to the total return numbers of the S&P 500 index, or any other index.
When you turn on any market watch report or read the Wall Street Journal, are they reporting the total returns of the indexes? NO!!!!!!!! So, if I did, it would only confuse people!
Besides, the point Iâ€™m making is that I DID spell out that the chart in my book and on my website did NOT include reinvested dividends. Isnâ€™t that what really matters?
But you never did address the issue I brought up in my statement: Even when you INCLUDE the dividends, the returns did not even keep up with inflation!!!!!!
Now riddle me this:
Why do you and Allan Roth both ignore the fact that the stock market returns you are talking about are BEFORE fees and commissions, BEFORE retirement account fees, and if investing in a tax-deferred account like a 401k or IRA, they are also BEFORE taxes?
Then you turn around and have the gall to compare them against the return of a Bank On Yourself- type dividend paying whole life policy, which is shown AFTER fees and commissions, AFTER account fees and AFTER taxes!!!!!!!!!
But, somehow thatâ€™s okay, right?
The numbers in all the policy examples in my book are bottom line numbers after ALL costs and taxes are deducted. Youâ€™d know that if you bothered to read my book. At least you admit you havenâ€™t read it and donâ€™t intend to. Roth either only read 5 pages of the book, or just ignored the rest because it didnâ€™t support his arguments.
It is the height of intellectual dishonesty, but itâ€™s the only way you can make your strategy look good. And the cherry on top of it is that those following YOUR advice get the pleasure of worrying about whether the next crash will wipe out 50% or more of their nest egg again, right before they planned to retire.
So, the real question is this: Are Allan Roth and Jeffrey Pritchard of AllFinancialMatters misleading their followers?
May 2, 2014 at 11:33 am
Actually, I ran the numbers using Vanguardâ€™s S&P 500 Index Fund. I adjusted the numbers for the monthly CPI index. It turns out you would have eeked out a paltry gain of .38% per year. Since these are inflation-adjusted returns and they are positive, a person would have kept up with inflationâ€¦just barely. Iâ€™m not here to tell you that the last 14 years have been great. They have not. But, that is only part of the story.
Letâ€™s say we look at these numbers from a DCA perspective. It would be very rare for a person to invest all their money on March 24, 2000, right at the VERY PEAK of the S&P 500 Index. However, letâ€™s say a person started dollar-cost averaging into Vanguardâ€™s S&P 500 Index Fund on that date and adding the same dollar amount at the end of every month. Adjusting for inflation (if you would like my numbers, let me know and Iâ€™ll email you my spreadsheet), they would have had a personal rate of return (using Excelâ€™s XIRR function) of 4.98% over the last 14 years. Not great, but not bad either considering how bad the market was over those years.
May 6, 2014 at 10:35 am
Well, I ran the numbers using the S&P 500 index numbers from Yahoo Finance and the inflation numbers from InflationData.com, rather than the numbers from a mutual fund, and there was no gain. And, given your demonstrated pattern of missing key data and reporting inaccurately, I am going to go with the numbers my team calculated, rather than yours. (But I can recommend a good reading comprehension course for youâ€¦)
But whether the gains beat inflation or not is interesting, but NOT the really critical issue, which you keep avoiding addressing. (I canâ€™t imagine whyâ€¦)
The KEY issue is that your numbers are BEFORE taxes and BEFORE all feesâ€¦ and the Bank On Yourself numbers are AFTER all fees, commissions and taxes.
If you believe the taxes and fees are insignificant, you should be immediately stripped of any licenses you hold, as well as the â€œlicenseâ€ to run your AllFinancialMatters blog. (This is why most blogging isnâ€™t writing. Itâ€™s graffiti with punctuation.)
Letâ€™s say I give you the benefit of the doubt and assume you do know taxes and fees have an impact. Can you tell us how much a 1% annual fee over 30 years and a 25% effective tax bracket in retirement will reduce these returns?
I DO know the answer. Are you really as clueless as you appear?
Hereâ€™s a hint: According to the most recent 401k Averages Book, the average total plan cost for small plans is 1.46% per year per year. (FYI â€“ IRA fees are usually higher.) Even the largest plans have fees that average 1%.
Fees that are added on, like 401(k) fees and mutual fund costs, compound AGAINST you. Deduct that 1.46% per year cost over a 30-year period. Or just run it with a 1% annual fee for 30 years.
Now letâ€™s assume youâ€™re fortunate enough to retire at â€œonlyâ€ a 25% effective tax rate.
Tell me whatâ€™s left of your return?
Maybe 4.98% before fees and taxes â€œisnâ€™t bad,â€ but it SUCKS after you account for fees and taxes.
Donâ€™t just keep repeating yourself like a parrot! Run the numbers! And I DARE you to publish these comments IN FULL along with that result on your blog! (Thatâ€™s assuming you could even calculate those numbers correctly â€“ which is questionable.) In fact, Iâ€™ve noticed how you have conspicuously NOT included any of my comments on your blog. After all, they drive a hole as big as a Mack truck through your logic. And youâ€™ve let the lies you originally published stand. Shame on you, Jeffrey Pritchard.
May 2, 2014 at 12:36 pm
Additionally, isnâ€™t it dishonest to pick the absolute market top as your starting point?
Why not be fair and pick the absolute bottom since March 24, 2000, run the numbers again, and compare results?
May 6, 2014 at 10:36 am
If I really wanted to slant the numbers, wouldnâ€™t I have done the chart from a market top to a market bottom?
But I didnâ€™t â€“ I took it to another market high, ending the week my book got published. I suppose you would have me take it from a market bottom to a market top?
You have demonstrated that you are both dishonest and uneducable, Jeffrey Pritchard. I have a â€œ3-strikesâ€ rule on this blog â€“ and you are now officially OUT. This conversation is over and you are now banned from this blog.