Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
I can link to multiple studies that show that the inflation adjusted withdrawal rate that survived all 30 year periods in the past out of a high equity portfolio is about 4%.
Can you point me to I cthe study that shows that the safe withdrawal rate was 1.6% at some point?
The inflation-adjusted withdrawal rate that survived all 30-year periods in the past out of a high equity portfolio really is 4 percent. So you are going to have a hard time finding one that says otherwise.
That’s not the dispute. The dispute is over whether all ethical people should be speaking up to correct John Greaney when he claims that 4 percent is the SAFE (not the SURVIVING) withdrawal rate. I have been saying since the first day that it would be fine if Greaney said that that is the historical SURVIVING withdrawal rate. But why the dishonesty? There were people at the Motley Fool board who believed Greaney when he said that 4 percent of the SAFE withdrawal rate. A failed retirement is a serious life setback. A good number of those people had become friends of mine over the years. Not this boy, you know?
John Walter Russell did the math to determine what the true safe withdrawal rate was at the top of the bubble and showed that it was 1.6 percent. His work was not published in a peer-reviewed journal. But several experts have checked his work and found that it is solid stuff. Wade Pfau did that. Michael Kitces did that. Rob Arnott did that. Others have done that.
Someone should have done peer-reviewed work reporting the safe withdrawal rate accurately and honestly a good number of years ago. Why haven’t they? Because you Goons have not yet been placed in prison cells, where you belong, and they are afraid of you.
The Buy-and-Holders made a mistake in thinking that the market is efficient and that thus there is no need to consider valuations when calculating the safe withdrawal rate. So what? The only people who never make mistakes are people who never stick their necks out and try to accomplish new things. So the mistake is trivial. The problem that everyone in our nation is suffering from today is that the mistake they made is so big and has been covered up for so long that there is a group of internet Goons committing criminal acts to keep people from learning the accurately calculated safe withdrawal rate. The Buy-and-Holders didn’t just get important things wrong. They have engaged in a brutal cover-up aimed at making sure that no one ever gets those things right because the Buy-and-Holders would look so bad if word about the extent of the mistake got out.
This situation cannot continue indefinitely, in my assessment. Continuation of the cover-up hurts us all. It hurts me because I cannot earn a living in this field unless I agree to post dishonestly, which I will never do. It hurts the millions of investors who have been denied access to honest and accurate safe withdrawal rate studies that they need to be able to plan their retirements effectively. It hurts the owners of the hundreds of thousands of businesses that will go under when the economy contracts as a result of the next price crash. It hurts the millions of workers who will lose their jobs when those businesses go under. It hurts you Goons because your prison sentences will be longer the longer the cover-up goes on and the more lives it destroys. Continuation of the 39-year cover-up is a lose/lose/lose/lose/lose. It is not possible for any rational person even to imagine any possible upside.
My sincere take.
My best and warmest wishes to you and yours.
Upside-Seeking Rob
Notice that Robert Shiller has never said one negative thing about Buy and Hold, yet he has warned against market timing on a consistent basis.
Notice that John Bogle put up a post at the Bogleheads Forum in which he said that he believed that Valuation-Informed Indexing can work. That’s market timing, Anonymous. Bogle has said both positive and negative things about market timing, just as has Shiller.
If irrational exuberance is real, market timing MUST work. In a world in which irrational exuberance is a real thing, stock investment risk is not constant but variable. So any investor seeking to keep his risk profile constant over time MUST engage in market timing. And yet, as you say, Shiller does not openly state that all investors need to engage in market timing. Shiller’s public statements are as confused as Bogle’s were.
No one can speak clearly about this stuff for so long as they are putting on this charade that Shiller’s Nobel-prize-winning research did not change our understanding of how stock investing works in a fundamental way. We all need to be talking about the Shiller Revolution at every investing discussion board and blog on the internet. That’s the only way that we can all learn what we need to learn. It’s the only way out of this mess.
I don’t know it all, Anonymous. I don’t claim that I do. But I sincerely believe that the retirement study posted at John Greaney’s web site lacks an adjustment for the valuation level that applies on the day the retirement begins. So I need to say that. If I fail to say that, I am committing financial fraud. If I fail to say that, I am betraying my fellow community members.
Bring all the abusive stuff to a full and complete stop and Shiller will begin saying things that he has never said before. So will just about everyone else who works in this field. There is not one school of academic thought re how stock investing works today. There are two. Everyone needs to acknowledge that so that we can all feel comfortable posting honestly and learning together.
I think that Shiller will heartily endorse market timing if we do what we have to do to make him feel comfortable to share his sincere thoughts re these matters with us. I could be wrong. I don’t think that I am. But it is possible. I am not wrong that we should all do everything in our power to make him and everyone else feel comfortable sharing his sincere take. I am not wrong re that one, Anonymous. We all need to be working for that. That’s the only way to take this thing to a positive place for every single person concerned.
That’s my sincere take.
I wish you all good things.
Process-Oriented Rob