A Rich Life

The Old Ideas on Saving & Investing Don't Work -- Here's What Does

Archives for August 2006

In Defense of Mary Poppins

by

This time The Little Stinkers have gone too far.

They are now directing their Smear Campaigns against Mary Poppins!

Here is a sampling of community comments put forward during recent discussions of The Poppins Matter:

JohnYaker: As far as John Greaney’s article referenced in the original post, I found it cruelly mean-spirited.

Gregory: You’re right, the article about Rob is very mean-spirited. It’s too bad the author feels the need to do this sort of thing.

OUJohnNasr: That link is mean-spirited, hateful, degrading, but above all, it’s true. Rob, if you are reading this, please do the right thing and get back in the work force. Leaving a $100,000+ a year job at the age of 43 was financial suicide considering the size of your nest egg.

Radioman: When, how and if to retire are determined solely by individual circumstances.

JohnYaker: The article says more about the character of the author than the subject. Reminds me of schoolyard bullying.

Earnabuck: I think Greaney is still steaming because Rob exposed him and his 4% SWR. He gave bad advice and attempts to change the spotlight off of his own recklessness. What a shame, quite petty.

Allan: I think Greaney’s website is full of excellent, specific information, while Rob’s website is like watching Mary Poppins.

CashNCarry: Why on earth would someone advertise their personal life the way he has, I mean he’s created his own personal Truman Show. It would be funny if it wasn’t so sad.

Clemcs06: Dude, get a freakin job so you can take your kids to Disney World.

Hocus: Many sites in the personal finance area are far too stuffy. Mary Poppins is the voice of common sense in comparison to some of the oh-so-grave-and-oh-so-self-important voices being heard on Planet Internet today.

Jason375: I am not sure Rob intends for his “advice” to be taken seriously. He likes to challenge the conventional wisdom (lots of posts with titles like “work is not a four letter word”) and get reactions.

Tc101: It takes all kinds. Maybe hocus adds some flavor to the mix.

Allan: The problem I have is that Rob is putting himself out to the general public as a financial expert, questioning the real experts like Bernstein and Scott Burns.

Greg24: I wouldn’t call it retirement to quit your job so you can post 12 hrs a day on the internet. [Editors Note: Ouch!]

Jason375: Greaney is single and managed to accumulate several million dollars for a secure retirement. Rob has millions less and dependents. I guess everyone is free to choose their own experts, lol.

CashNcarry: I hate to admit it, but hocus brings out the worst in me (and some others as well). He reminds me of one of those lifesize inflatable clown balloons I had as a child. You’d step on it’s feet, and whack the tar out of it, and it would go down and spring back up again ready for the next whack.

Arrete: I will not respond to any post directed at me by Rob because I already know he will either play the injured innocent, pretend we’re friends, or twist my words.

Hocus: My friendships are not dependent on what the individual who I have come to think of as a friend believes about safe withdrawal rates or any other investing topic.

My Obsession

by

There’s a fellow (“Allan”) at the Vanguard Diehards board who describes my interest in knowing whether the stocks that I buy will be able to provide an acceptable long-term value as an “obsession.”

Is he right?

In a way, I guess.

There’s no question but that I wouldn’t think of putting money down on stocks without first taking into consideration the price at which they are being offered. My desire to know the price I pay for stocks, and whether the stocks will be able to provide an acceptable long-term value given the price paid, affects all of my investing decisions. Price and value are pervasive concerns of mine. I suppose that some would say that any pervasive concern can fairly be characterized as a bit of an “obsession.”

We don’t use the word “obsession” when people ask questions about the prices they pay for other sorts of assets they buy, however. Why is it that some employ words with negative connotations to describe the idea of looking at the price offered and the value obtained from purchases of stocks but not from purchases of other assets?

Say that a car salesman talked up the benefits of a particular car and asked you kindly to sign your name to the bottom of the piece of paper he was holding in his hand? Suppose that you asked to know the price that you were agreeing to pay before signing and he responded that this request was a sign of an “obsession”? Would you go ahead and sign the piece of paper without knowing the price, as he was aiming to pressure you to?

I wouldn’t. I would wonder why he was pressuring me. In fact, there’s a good chance that I would walk away even if he agreed to reveal the price at that point. His reluctance to tell me the price would make me concerned whether he was the sort of person with whom I would want to strike a deal. I don’t even like to get involved with people who become hostile when I ask simple questions that anyone putting money down has an obvious need to have answered prior to signing on the dotted line.

Say that it was a house you were buying. Again, say that you asked to know the price and the response of the real estate agent was to say: “This is going to turn out to be a fine purchase for you in the long run, I am sure of it, now please just go ahead and sign without requiring us to waste further time dealing with this obsession of yours to know the price of the house you buy.”

Would that give you a good feeling about the house purchase?

It wouldn’t give me a good feeling. The reality, of course, is that the amount of money you will direct to buying stocks over the course of your lifetime will be a far larger sum than the amount that you will direct to buying cars or houses. The fact that those selling stocks are so defensive about discussions of price should alarm you. Your common sense should tell you that this is an extremely bad sign.

I want to know the price of something I buy before I buy it. You can call me obsessed. You can call me madcap. You can call me O.J or you can call me Ray; you can call me anything, what’s the difference what you say? It ain’t gonna change my take on this one. I want to know the price of something I buy before I buy it. That’s not a rule that applies just to stocks. It applies to stocks too, though. I am not aware of any reason why I should be willing to grant an exception to the usual rule for stocks.

Here is the portion of the article by Cliff Asness entitled Bubble Logic that inspired the riff that I am fumbling around with in this blog entry:

“Let us put our cynical hats on for a moment. Wall Street (buy and sell side) is in the business of selling you stocks, and they do not want you to leave the market. Let us rephrase the advice ‘Do Not Try and Time the Market’ another way. How about, ‘Ignore the Price of What I am Selling You and Buy No Matter What.’ If you think about it, it is the same advice.

“If your salesman told you to ignore the price of any other purchase than common stocks because it will all work out over the long run, you would run clutching your wallet. While perhaps usually good advice, ‘Do Not Try to Time the Market’ cannot mean ignore prices entirely, as in the extreme this is obviously silly. However, making great long-term returns without any imposition of effort or vigilance (i.e., having to watch prices for opportunities or bubbles) is obviously a seductive siren’s call.

“If being price sensitive means timing the market, and timing the market is a cardinal sin, then prices have no anchor to reality. If one is looking for possible causes of a financial bubble, then the ban on market timing must be a prime candidate.”

I see nothing bearish or obsessive in those words. Those are just plain old common-sense observations.

That’s the sort of investing advice that I would like to see a whole bunch more of in days to come. Cliff Asness is telling it straight, and today’s middle-class investor would be well-advised to pay heed to this speaker of straight-talk trying to break through the noisy salesmanship being put forward by too many of the best-known investment advisors (real-estate agents and used car salespeople like to put themselves forward as helpful advisors rather than pushy salespeople too, of course — Are those telling us not to worry our pretty little heads about the prices at which stocks are being sold today all that different?) regularly featured in newspapers and magazine articles and television programs.

I hereby declare Cliff Asness a Hero of the First Rank to the Financial Freedom Community and to the Retire Early Movement.

Thinking Like an Employee

by

I’ve written an article for the www.writershelper.com site entitled “Book Marketing and the Proposal Doctor.”

Juicy Excerpt: “She strongly urged me to write a more conventional money management book, one that would focus on tips for reducing spending. (My book is more of a “why to” than a “how to” as it argues that the motivation behind the saving effort determines its success or failure and rejects the goal of saving for an old-age retirement as generally ineffective)…. It was her comments that made me decide not to even submit my book to publishers but instead to publish it myself.”

Most first-time authors very much want a contract from a big publisher. It gives them credibility in the eyes of potential readers. I had dreams about the day that I would receive a letter making me an offer to publish Passion Saving. From that day forward, I would have a good answer to the question “What do you do?” The response “Random House is coming out with my book in January” sounds a whole bunch better than the response “I’m trying to sell books from my website.” For obvious reasons.

It sounds better. But I’m not at all sure that it is better.

The reality is that a first-time author usually obtains an advance of perhaps $20,000 or $30,000. If you spent years generating the ideas that drive your book (as I did and as many other authors do), that’s a very small payment on a per-hour basis.

The instant credibility you get from going with a big publisher is worth a lot. That’s for sure. That’s the best argument for going the big publisher route.

The problem is that credibility alone does not sell books. Most books sell few copies. Publishers don’t expect most books they publish to make money. Publishing a book to them is something akin to buying a lottery ticket. They’re looking for the one big one that makes them a million. They know that they need to publish hundreds of others to discover the one that clicks. So they do.

If you end up being one of the hundreds of others, you end up on the remainder table. What does that do for your credibility?

And the credibility you get from going with a big publisher does not come cheap. You give up control over the book. They decide on the cover. They decide on the title. They decide how to promote the book. The author is a hired-hand, and a poorly paid hired-hand at that.

After talking things over with the proposal doctor, I came to have doubts about the idea of trying to entice a big publisher to buy my book. The book argues that saving is the path to freedom, to getting to a point in life at which you begin to call the shots about your future. But here I was, the guy putting forward this argument, begging for crumbs from “the big boys.” Something didn’t fit.

I was thinking like an employee.

By seeking a publisher’s approval of my book, I was giving them power over what would be said in the book in exchange for money. There’s nothing wrong with doing that in the right circumstances. But it should not be the automatic choice.

I decided that the circumstances were not right in the case of Passion Saving. If the book is as good as I think it is, the big publishers will someday come to me. If they come to me, I’ll get a whole bunch more money. And I’ll be able to retain some control over how the book is sold.

You’re not selling books. But you are doing some sort of work in exchange for money. How many of the shots do you call?

As you gain experience and build contacts in your field, you should be becoming more independent, you should be gaining more control over how the work you do is completed. If that’s not happening, you need to be thinking about what you need to do to make it happen.

The point of the Passion Saving approach is that we don’t save money to have our expenses covered when we get old. We save to be free.

It makes sense for us to give up our freedom when we are young because it’s by working for others that we learn what we need to know to do important and profitable work. It’s a mistake to let those years of working for others cause us to think that we always need a sign-off from some higher-up to know which way is the best way to proceed with the work we do.

Sometimes we enslave ourselves. There’s a time for thinking like an employee and there’s a time for going beyond thinking like an employee.

The Confession Box

by

I am a Catholic. That means that I pay regular visits to the confession box.

My guess is that those of other faiths do similar sorts of things. I know that people in 12-step programs occasionally “take a fearless moral inventory.” It sounds like it is something along the lines of a whole bunch of trips to the confession box rolled into one.

There are two things about the confession-box experience that just about everybody who goes through it remarks upon. It feels awful going in. It feels real good coming out.

Most money management advice assumes that we are rational creatures pursuing our self-interest in a more or less informed way. The goal of much of what you read in personal finance guides is to help you become a little bit better informed. Perhaps you didn’t understand just how the rules for taking money out of a Section 401(k) plan work. The guide explains the rules, leaving you prepared to rationally pursue your self-interest in an even better informed way.

All of this is fine so far as it goes. To a large extent, though, it misses the point.

It’s obviously a plus to learn about the Section 401(k) rules. The reality, though, is that just about none of us are rational creatures pursuing our self-interest. We are humans. We are haunted by things we fear. We are excited about our hopes for the future. We often tell lies to ourselves to avoid looking at the things that frighten us and to trick ourselves into believing that our hopes for the future have a better chance of coming true than they really do.

We are liars by nature. A more charitable way to say it is to say that we are rationalizers by nature. Either way you say it, it comes to the same thing. We don’t face truths straight on. We kid ourselves. What a conundrum!

We hurt ourselves when we kid ourselves. I don’t believe that God invented confession so that he could enjoy seeing my humiliation when I have to report my sins to a priest. I believe that God invented confession because he loves me and because he knows that I need it if I ever am to find the right path.

By “the right path,” I don’t mean just the path to heaven. That’s the big one. But I believe that God loves me enough that He wants me not only to be with Him in heaven but to experience a little bit of heaven through the good experiences I have here on good old Planet Earth. God wants me to figure out what I need to do to retire early. God wants me to figure out what I need to do to be able to spend my time doing fulfilling work. God wants me to figure out what I need to do so that I can afford to take my boys to Disney World.

God actually does care about that stuff. And he knows just what I need to do. He would make a great money advisor. He’s got funny ways, though. It’s not like Him just to whisper in my ear the saving tips I need to know about to make these good things happen. God is like one of those professors I had in law school making use of that darn Socratic method thing. He wants me to figure this stuff out for myself.

He wants me to guess. Tha’ts what it comes down to. He knows the answers, but He’s not telling. I don’t know them, so I have to guess. It’s frustrating at times. Still, I have the sense that that’s indeed the way He has set things up.

One of the purposes of the confession box is to help me make better guesses. I mess up. You’re supposed to learn from your mess-ups. I don’t want to learn from my mess-ups, I want to forget about them as quickly as I can. I do this examination of conscience thing that you have to do before you go into the box, and the mess-ups are recalled to my mind. Then I learn from them.

Maybe.

The Section 401(k) stuff is not what matters most. What matters most is developing the habit of being honest enough with yourself that you will make good money allocation decisions, that you will spend when spending is the way to go and that you will save when saving is the way to go.
You learn this from experience. We all have lots of experience spending money. We all have lots of opportunities to learn.

Most of the time, we fail to take advantage of those opportunities. We mess up. We don’t want to think about it. We want to cover up our sins.

It’s a sick feeling you get waiting in line to go into the confession box. It’s not fun.

The money management equivalent is the feeling you get when you have to record in your budget-binder some dumb thing you wasted money on, knowing that your wife (or husband) is going to see it and probably even ask you about it. Who needs this?

You need this, you messer-upper you!

The Rumors About Stocks Are True

by

My wife and I were driving down the road the other day and we passed a Ruby Tuesday restaurant. “What was that song supposed to be about, anyway?” she asked. I said that it was about a hippie-chick who was so unwilling to become tied down by social norms that she refused to answer to any one name.

This got me to thinking about stocks.

Stocks are like hippies in that they are always changing their look. In the last three years of the 1990s, the DOW went up by about 30 percent a year. There are other times when stocks go down by just as much. One day you determine that your net worth is such-and-such, and the next day those old calculations are out the window. This is a fickle investment class.

Stocks are never boring. That’s the appeal. But fashions change. Who wants to be caught wearing bell-bottom stocks when straight-leg Treasury Inflation-Protected Securities (TIPS) again become the in thing?

What is the one bit of investing advice that most of the experts seem to agree on? Buy-and-hold, right?

What’s buy-and-hold all about? It’s about making a commitment. The experts are essentially telling us to marry our stocks.

The trouble is — the Ruby Tuesdays of the world don’t generally make the best life partners. We all long to be wild and free. But someone has to bring the car in to get the muffler replaced and she needs to do it at the particular time that the guy who offered to do the job set as the appointment time. I like hippies. But I have come to believe that they got carried away with the freedom thing. What’s the big deal about having a regular name like everybody else anyway?

Stocks are too flighty for my taste. I’m not against change. I’m against too much change. I like consistency too. I look for a nice mix of the two in my investment portfolio.

So here’s what I do. I’ve talked to some people who know about statistics and other jizz-jazz like that and they tell me that stocks have for a long time been generating an annualized real return of 6.8 percent. There are periods of time in which they generate far larger returns (if you are older than my six-year old, you can probably remember those days), and there are periods of time when they generate far smaller returns. In the long run, though, that 6.8 percent number is the number that matters.

My view is that investors should not even count returns greater than that when determining their net worth. Why count on something that isn’t going to be around for long? It’s only going to break your heart in the end to do so. The 6.8 percent return is the real thing. The rest is fluff. Forget her, I mean it.

At times of high valuation, you can’t even count on the 6.8 percent, unless you are willing to wait a long time (at least 30 years). So, at times like today, I move some of my money to more straight-laced asset classes, things like TIPS and IBonds. Stuff that might not come off as being quite as flashy as stocks. But stuff that you can count on to be there for you in times of need. You can see yourself getting old with TIPS and IBonds, and with stocks purchased at normal valuations levels too, can’t you? Today’s stocks are too fast to last.

Stocks are fun. I don’t say different. Sometimes it’s not fun you are looking for. Sometimes you want to have a serious conversation. TIPS and IBonds are serious-conversation sorts of asset classes. I concede that TIPS and IBonds are not glamourous. I think they’re cute as a button, though. As the sage Bruce Springstein once observed: “You’re no beauty but, hey, you’re allright, and that’s allright with me.” He’s a well-recognized authority on the effect of Cool Girls on Asset Allocation Strategies, so I figure he’s probably giving us the straight story.

The thing that always pulls me back to stocks is the 6.8 percent return. You’ll never get a return that attractive from TIPS or IBonds. It’s important to remember, though, that stocks can be counted on to provide a 6.8 percent return in a reasonable amount of time only when purchased at reasonable prices. At those sorts of prices, I love stocks enough to want to marry them.

When prices are at the sorts of levels that they are at today, I get nervous walking anywhere in the vicinity of a church while holding hands with stocks. Make a promise to have and to hold stocks, I mean to buy and to hold stocks, at a time when the P/E10 value is 26, one of the highest on record? Not this boy. Stocks today come with too much baggage. Stocks today are high-maintenance. Stocks today come with secrets from their past that they don’t want you to find out about. I’m not sure I even want to be seen alone with stocks nowadays. We’re old friends and that’s all, okay?

At times like today, I see an inner flame in the sorts of asset classes that some others might dismiss as “mousey.” It’s TIPS that are unforgettable at today’s prices. It’s IBonds that are always on my mind these days. Remember that Eagles song about the guy who found it a peaceful easy feeling to be falling in love because he was beginning the adventure with both feet firmly planted on the ground? Thats TIPS. That’s IBonds.

I don’t say that stocks never tempt me. My view is that stocks need to calm down a bit before they will be marriage material again. They’re still the talk of the town, but much of the talk nowadays comes in the form of ugly rumors. The thing is, they drive too fast and someone is going to end up hurt. Stocks need to learn to walk the line before I am going to bring them home with me to meet mom and dad.

Does Anybody Really Know What Time It Is?

by

What do you know? How do you know it?

You need to know certain things to get from the place where you are when you pull yourself out of your bed in the morning to the place where you are will be when you throw yourself back into it at night. For example, you need to know about gravity. If not for gravity, you would need to dress differently. You might need to wear heavy boots to keep from floating off into space. Gravity matters. Since you know that gravity exists, you keep this reality in mind as you make all of the various life decisions put before you during the course of another day spent journeying through this Valley of Tears.

You do know that gravity exists, right?

No. The truth is, you really don’t.

Have you ever explored the gravity question in depth? Have you ever checked out the claims that teachers and friends and experts have made about gravity? You haven’t. You have taken them on faith.

That’s what humans do. There are thousands of things we need to do to keep body and soul joined. We couldn’t possibly check out each and every little detail of each and every little claim that we elect to take on faith for the purpose of freeing up some time to devote to the things in our lives that we care about most.

I think you made the right choice re the gravity thing. I personally am confident that there really is such a force and that it really does work at least largely as lots of people tell us it does. The conventional understanding of how gravity works is cool.

The conventional understanding of how stocks work is not cool.

Taking things on faith makes sense. It save us an awful lot of time to just assume that, when lots of people say the same thing, they must all be right or at least close enough to being right that we don’t need to worry about it much. There are times, though, when taking things on faith can get you in a whole bunch of trouble. One of those times is when you are deciding how to invest your money.

Here are some words from a community member named “Janey”:

“What Rob said sounds reasonable enough, so I wouldn’t be able to judge his advice without additional input. I must rely on the fact that I don’t hear the authors I trust saying the same thing. The authors I trust seem to agree that returns may be lower in the years to come, but none of them suggest that we should drastically reduce our stock allocations in light of this information….I don’t have time to join the search for ‘the Grail of Investing.’ Besides, I have other priorities in life. So, I have to rely on the judgment of people who make the most sense.”

Janey is telling it straight. She is acknowledging that she is not able to identify any reasons why the Valuation-Informed Indexing approach to investing is not superior to the conventional indexing approach. It sounds fishy to her, though. There are lots of smart and well-informed and well-respected people who say things that are at odds with what I say. So she can’t help but conclude that there is probably something wrong with what I am saying. Given the practical reality that she cannot afford to spend years of her life researching my claims and the counters to my claims advanced by my critics, she has decided to place her confidence in what a lot of smart and well-informed and well-respected people have told her.

Janey believes in gravity. Is that so wrong?

I think it makes a lot of sense. I think Janey is a smart cookie and a nice person too (I am going by what I have read in a few posts she has put forward at the Vanguard Diehards board). I think she is making a mistake to place her confidence in the smart and well-informed and well-respected people in whom she has elected to place her confidence. But I understand why she has done so and I am grateful to her for sharing with us a look into the thought-process by which she made a decision to do so.

Janey makes investing decisions in the way that most smart and nice people make investment decisions. We humans are not computers with legs. We are social animals. We often decide what we think by asking others what they think.

The dominant investing paradigm assumes that we are computers with legs. The dominant investing paradigm says that the stock market is efficient because prices are set by millions of investors acting rationally in their self-interest.

In reality, prices are set by people. People make their investing decisions not rationally (reason comes into it, of course, but reason is not the dominant influence on our investing choices), but by talking with other people. Each time that another human becomes convinced that stocks are “good,” two things happen: (1) stocks become a little less “good” (because that human’s purchases cause the price of stocks to go up and the long-term return obtained by those who purchase stocks in future days to go down); and (2) those who retain doubts about how good stocks are become less sure of themselves as the result of hearing from yet one more fellow human how good they are. In time, just about all the humans that can be reached by telephone or e-mail or radio broadcasts own stocks and prices have been driven so high that we are in one of those rare time-periods when stocks are not so “good.”

Janey has been misled by the smart and well-informed and well-respected people in whom she has placed her trust. Not because they are bad or dumb or uncaring people (athough human failings do indeed play a role in making transparently silly ideas popular for a time). Because they are just as human as Janey is. Being smart and well-informed and well-respected doesnt make you any better at understanding how stocks work than all of your fellow humans who are a bit less smart and a bit less well-informed and a bit less well-respected than you. Janey would be better off listening to her common sense than listening to the people she has come to view as investing experts.

You cannot learn about stocks in the way that you learn about gravity. Why? Because the very fact that so many people have come to like stocks so much is what makes them unappealing. It is because so few question the value proposition of stocks today that stocks have today become such a dubious investment choice for the middle-class investor.

When I Didn’t Post Honestly

by

I have never engaged in deliberate deception in my writings. There was a time, though, when I was afraid to be fully honest about what I knew about stocks.

I founded the Financial Freedom Community in December 1999 with a series of posts about the Passion Saving concept that for a time made the Retire Early discussion board at the Motley Fool site the most exciting board on the face of Planet Internet. John Greaney was the founder of that board, and I knew from the first time that I looked at his web site that the methodology he used to calculate the safe withdrawal rate (SWR) was analytically invalid. I had done my own study of SWRs in the mid-90s in preparation for my own early retirement, and I had learned from reading John Bogle’s work that changes in valuations always affect long-term stock returns (and, thus, SWRs).

Early on in my posting career at Motley Fool, I tried to warn my fellow community members of the danger of going with too high a stock allocation when valuations are at extremely high levels. I held back, though, from posting the full truth about SWRs. One reason was that I did not want to suffer the “punishments” that Greaney made clear would be imposed on any community member who asked hard questions about the numbers in his study. Another was that we were just getting the Retire Early movement off the ground, and the last thing we needed was the sort of flame war that posters like Greaney use to block questioning of their claims.

I never told untruths. But I didn’t tell complete truths either. I held back.

Was it all Greaney’s fault? It was not. Greaney took advantage of a situation. But the reality is that Greaney could never have hoped to have had any success banning honest posting unless a good number of other community members were willing either to post in support of his attacks on honest posters or at a minimum to tolerate his attacks on honest posters. The ban on honest SWR posting that applies at that board to this day was a community effort.

Why the heck did our community go along with a ban on honest SWR posting? Don’t aspiring early retirees need accurate information on what the historical data says re SWRs?

Of course we do. And of course we know that we do.

The problem is that we sense that permitting honest posting on SWRs opens a Pandora’s box. Permit honest posting on SWRs, and the obvious next step is to permit honest posting on the question of how valuations affect long-term stock returns in general. Permit honest posting on the question of how valuations affect long-term returns in general, and the obvious next step is —

— the end of the Bull Market.

I’m not kidding.

Bull Markets are times when stocks become wildly overpriced. It is not rational to invest heavily in stocks when they are wildly overpriced. Bull Markets are irrational. All Bull Markets are fueled by some sort of deception or another. Without at least a good bit of self-deception, how could middle-class investors be persuaded to invest in ways contrary to their own self-interest?

The Great SWR Debate was never just a debate about a number. It was always also a debate about the nature of stocks as an asset class and about how to invest successfully for the long run. If Greaney had been found to have been right about SWRs, it would have meant that stocks had become a different sort of asset class than what they have been throughout the last 135 years of U.S. stock-market history. If Greaney had been found to have been right about SWRs, it would have meant that the Stocks-for-the-Long-Run Investing Paradigm had been a paradigm built on solid ground.

It’s not just the conventional methodology SWR studies that have been discredited as the result of our discussions. The dominant investing paradigm of the past 25 years has been discredited too.

That’s why it is so hard for so many to tell the complete and plain truth about SWRs. Telling the truth about SWRs sends you over a cliff. You land in a new and better world than the world you were in before you fell. Still, the fall is a long and scary one.

I knew back on May 13, 2002 (the day that I put forward “The Post Heard Around the World,” the one that kicked off The Great SWR Debate), that SWRs mattered. I didn’t know at the time how much.

Fear Strikes Out

by

I once was afraid that I was losing my hair.

I once was afraid that I would not be able to find another job that I liked as much as the one that I lost in the recession of the early 1990s.

I once was afraid that my grades wouldn’t be good enough to get me into law school.

I once was afraid to call up a girl and ask for a date.

I once was afraid to hand in my resignation from a high-paying job to become a freelance writer.

I once was afraid that disco was never going to fade in popularity.

I once was afraid that, if I played softball, someone would hit an easy fly ball to me and I would drop it.

I once was afraid that I would never stop coughing.

I once was afraid that I would not be able to finish running the marathon I had entered.

I once was afraid that I wouldn’t be able to write a book that met my standards.

I once was afraid of what the Greaney Goons would do to me if I reported to the Financial Freedom Community the truth about safe withdrawal rates.

I once was afraid to kiss a girl.

I once was afraid that I made a mistake by getting out of stocks.

I once was afraid that the judges in my Moot Court competition would ask me a question that I didn’t know how to answer.

I once was afraid that the attack on the World Trade Center might lead to a nuclear war.

I once was afraid that I wouldn’t be able to develop enough sources to cover tax legislative developments effectively for the newsletter at which I was employed.

I once was afraid to get married.

I once was afraid that my boy had broken a bone in his leg.

I once was afraid to confess a sin I had committed.

I once was afraid that dropping out of high school would not look good on my permanent record.

I once was afraid to start my own web site.