“For You and Your New School SWR Studies
to Gain a Measure of Credibility…”

Schroeder posted a comment to yesterday’s blog entry that I believe merits a blog entry of its own in response. His comment came in response to my observation that the Bogleheads wiki statement on safe withdrawal rates (SWRs) contains a link to an Old School SWR calculator but not to the only New School SWR calculator now available on the internet. Here is what he said:

“Actually, there are several links to Old School SWR studies. They have been authored by financial planning professionals and published in peer reviewed journals.

“Rob, you need to do the same. For you and your New School SWR studies to gain a measure of credibility, they need to be embraced by the financial planning community — both by practitioners in the field and journals read by both practitioners and academics.

“Another idea is to partner with someone who does have that credibility. I realize that the partners you have petitioned like Scott Burns and Jonathan Clements have not given you a warm reception. But surely, there must be others, right? How about Robert Shiller? That’s just one name that comes to mind. I’m sure you can think of dozens of other practitioners and academics who will partner with you.”

Schroeder is correct that there are many financial planning professionals who have endorsed the Old School SWR studies. This is an important fact and it is good that we remind those following our discussions of this reality from time to time.

Schroeder misstates the realities of what happened in my discussions with Scott Burns and Jonathan Clements.

Clements said that the Old School studies are “not the last word in SWR analysis,” in his view. That is obviously not an endorsement of the Goon position that posting on the flaws of the Old School studies should be banned at all Retire Early and Indexing boards. If the Old School studies are not the last word, we obviously should be seeking to learn how to enhance our understanding of SWRs.

Clements did not endorse The Retirement Risk Evaluator. But I think it would be fair to say that he endorsed the position of the thousands of community members who have expressed a desire that honest posting on the SWR topic be permitted on our boards. He is saying that we need to learn more. We obviously cannot learn more until the ban on honest posting is lifted.

For community members to be able to interact in an honest and informed way, they obviously need to know how the Risk Evaluator works and what it says. Hence, we need to see links to this tool in places like the Bogleheads wiki statement on SWRs. Clements is saying that we need to continue the learning process and the failure of the people who control what is put in the Bogleheads wiki statement to include a link hinders the learning process in a very serious way. It is the people who control what is put in the Bogleheads wiki statement who are rejecting what Clements has said on SWRs, not me (I of course look forward to the day when Clements goes a step further and endorses the Risk Evaluator).

Burns has written three columns on the New School research done by John Walter Russell. Mel Lindauer (co-author of The Bogleheads Guide to Investing) has compared those articles to the work of a journalist on the crime beat who reports on the actions of a serial killer. I don’t buy it. It is clear to me from the wording of his columns that Scott has reported on the New School findings because he sees great value in them. I am influenced by the fact that Scott has told me in private e-mail correspondence that he believes that John and I are right in what we say about SWRs. So Schroeder’s claim that Burns has not responded warmly to the New School concept (it was Burns who coined the “New School” terminology to make reference to our findings) is obviously more than a little bit off the mark.

The other side of the story is that Scott also has not endorsed the Risk Evaluator and Scott has indeed put forward some unkind words about me. He has described my efforts to get the Old School SWR studies corrected as “catastrophically unproductive.” He has said that “the whole idea that there is a new school of Safe Withdrawal Rates reeks of personal aggrandizement.” Yes, the guy who came up with the term “New School” mocks it. Beat that one in the irony department!

There is not one Scott Burns. There are two. If there were only one, the part of Scott Burns’ brain that understands that valuations affect SWRs and that the Old School numbers are thus wildly off the mark would tell the part that writes the column in the Dallas Morning News that millions of retirements are at risk of going bust and that this is the biggest story of his lifetime and that he had better get to work pumping out some columns.

And there is not one Jonathan Clements. There are two. If there were only one, the part of Jonathan Clements’ brain that understands that the Old School studies are not the last word in SWR analysis would be asking Rob Bennett for the details of the Campaign of Terror that has been used to block honest discussions of the need for improvements in the old SWR studies so that he could write the story up in The Wall Street Journal (now that Clements is no longer employed there, he would instead send an e-mail to one of his friends there tipping them off to the story that I let him know about in an e-mail).

This strange phenomenon in which the human personality is divided into two has not affected only Scott and Jonathan. I wrote a blog entry a little while back about something that happened to Rob Arnott (editor of the Financial Analysts Journal) at a recent conference of the sort of people who spend their working days constructing peer-reviewed SWR studies. He asked the group of 200 “experts” how many of them believed in the Efficient Market Theory. Not one raised his or her hand. He asked how many would be rooting the research they would be preparing when they got back to the office on Monday morning in the premises of the Efficient Market Theory. Nearly every one of the 200 raised his or her hand.

These are the people that Schroeder is telling me to contact for help with my credibility?

In the investing field?

Um — I think I might stick to the track I am on today. There’s lots of wonderful stuff done in the world of academia. There’s also a lot of gibberish produced in that world. My job is to sort out the good from the bad and report to you what I discover. My intent is to continue to do that job to the best of my ability and let my credibility take care of itself. I have a funny hunch that, given that I have discovered through that process that the Old School studies are wildly wrong, it does more for my credibility to report what the New School studies say than it would to endorse the Old School studies.

The reality is that there are scores of peer-reviewed studies that show that valuations affect long-term returns, probably hundreds. There is nothing that I have said about the investing realities that hadn’t been said thousands of times before I came along. And of course there are academics who report the realities. Another recent blog entry reported on a Capital Spectator article noting that: “a new generation of researchers took a fresh look at the random walk in the 1980s and 1990s and the accumulating tide of studies began to turn the academic tide.” More serial killers on the loose!

Valuations have been affecting long-term returns since long before the first Old School SWR study was a gleam in the eyes of the Trinity Study authors. Nothing has changed in recent years but the P/E10 value. When the P/E10 value is 24 (the number that applies today and one of the highest on record), it’s viewed as “rude” to comment on how stocks have performed since the beginning of time. It’s viewed as “kind” to tell people the sorts of fairy tales set forth in the Old School studies.

So be it.

But I’m not in the fairy-tale telling business. I write for people. When I click my words onto the computer screen, I have the image of a real live middle-class man or woman in mind as the person to whom I am directing the thoughts. The people who read my stuff matter to me. They have college educations to fund, retirements to finance, dreams of more fulfilling work that they could pursue if only they had a bit more money. I am going to tell the story straight to those people, smear attacks on my credibility be darned.

I understand Scott’s point that what the historical data says on SWRs is “information most people don’t want to hear.” That doesn’t matter to me. Or at least it doesn’t matter to me enough to make me go along with the idea that telling the story straight is “catastrophically unproductive.” I will post honestly or I will post not. There’s zero give on that one.

So I will continue to do my thing. John Walter Russell will continue to do his thing. Mel Lindauer will continue to do his thing. John Greaney will continue to do his thing. Schroeder will continue to do his thing. Scott Burns will continue to do his thing. Jonathan Clements will continue to do his thing (at a new place since he left the Journal recently). Life will go on, ob-la-di, ob-la-da.

The historical data will continue to say what it says. There is no Smear Campaign that can change that. The authors of the Old School studies got the number wrong, wildly wrong. Their error will cause millions of busted retirements in days to come in the event that stocks perform in the future anything at all as they have always performed in the past. And when we ask them to make corrections, we will hear word games in response. Har-de-har-har.

I write for people with a sincere desire to learn how to save and invest effectively. Thousands of them have expressed a desire that honest posting be permitted on our boards. I urge them to do what it takes to see that desire brought to fruition. It is these people, not the Goons, who built our boards. These people deserve better than they are getting today. A lot better.

I will continue to report accurately what the historical data says re SWRs. Deal with it, Goons.

Today’s Passion: The many community members who would like to see honest posting on SWRs permitted at our boards sound off in an article entitled Community Comments on Using Historical Data to Diminish Retirement Risks.


  1. Weird says

    So, your idea is to hope that some prof somewhere writes something resembling your opinion so that you can report on it?

    That is sad.

  2. Schroeder says

    “He asked how many would be rooting the research they would be preparing when they got back to the office on Monday morning in the premises of the Efficient Market Theory. Nearly every one of the 200 raised his or her hand.”

    I find this hard to believe. The number of portfolios managed on the premise of the Efficient Market Theory is very small. The vast majority of investors, both pros and do-it-yourselfers alike, still employ active strategies. This quote below is still very much the norm . . .

    “He asked the group of 200 “experts” how many of them believed in the Efficient Market Theory. Not one raised his or her hand.”

    Rob, I still don’t understand why you don’t want to make the effort to promote your New School SWR study. Today’s blog entry tells me that you don’t see it worthwhile to partner with like-minded financial professionals. That’s your choice, of course. But then maybe you can explain how the greater investing community will find out about your work.


  3. Rob says

    I find this hard to believe.

    I find the story hard to believe for very different reasons than the ones you are making reference to, Schroeder.

    Rob Arnott is a straight-shooter. So I feel that I have no choice but to believe the story. But there is a time when I would not have believed that such a thing was possible.


  4. Rob says

    then maybe you can explain how the greater investing community will find out about your work.

    My focus is on helping middle-class people who are seeking financial freedom early in life, Schroeder.

    I am of course happy when our ideas are picked up by others. If there are financial professionals who have questions about the work being done in our community, I am of course thrilled to help them out in any way I can.

    The “greater investing community” is comprised of people, right? Well, we provide investing insights to people. So it seems to me that that should cover it. Each day, I get up, do what I can to learn new things and share what I learn with others, and then I go to bed a number of hours later hoping that I have done some good. Every now and then, I remember to say my prayers. Too often, I forget.

    That’s pretty much the routine, you know? That’s the way I’ve been doing it for a long time now, dating back to even before May 13, 2002.

    If you know of an members of the “greater investing community” who are looking to learn about SWRs and the effect of valuations on long-term returns in general, please send them along. They will get a warm welcome to the Retire Early/Indexing community from me. We’ve got a lot of things on our plate at this particular moment in time. We could use the help!


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