“Rob, Your Claim That a 65 Percent Price Drop Is the Default Expectation Is Just Absurd. Breathtakingly Absurd.”

Set forth below is the text of a comment that I recently put to the Goon Central board:

Hocus, that a 65% drop is the DEFAULT position is just absurd. Breathtakingly absurd.

Was it absurd that the safe withdrawal rate was 1.6 percent back when I first reported that it was 1.6 percent?

The Nisiprius post at Bogleheads yesterday hit it on the head.

Anything less than 7 percent was absurd in the mid-90s.

Then anything less than 4 percent was absurd after the Old School SWR studies were published.

Now the “official” line is that 3 percent is no longer absurd.

And after the next crash the new official line will be that anything above 2 percent is absurd (the SWR then will be 9 percent).

Buy-and-Holders treat nominal prices as reality. Nominal prices sometimes differ from valuation-adjusted prices enough to make valuation-adjusted prices appear “absurd”. From your perspective, what I am saying is absurd. That much is indeed so.

The question is — Can you be 100 percent certain that your position is the correct one?

The completely honestzzz repsonse to that question is that none of us can ever be 100 percent certain of anything. I cannot be 100 percent certain that VII works. I cannot even be 100 percent certain that the moon is not made of green cheese. I am 99.9999 percent certain about the moon thing. But not 100 percent.

We have a way of dealing with this reality of life down here in the Valley of Tears.

We let the other guy have his say. We don’t engage in death threats. We don’t engage in tens of thousands of acts of defamation. We don’t engage in board bannings. We don’t threaten academic researchers. When people do those things, they violate our cultural norms. We hold them civilly and criminally liable for the harm they have done to others.

If you are right and we never see the 65 percent price drop, you are for practical purposes probably in the clear, Yip. As you note, I have not been able to get influential people to take up my cause. So, in that event, you may get away with what you have done.

Just please remember that Jerry Sandusky got away with what he did for a long time before he was brought to justice. And Lance Armstrong got away with what he did for a long time before he was brought to justice. Conditions can change. And then a hammer can come down very hard. People don’t like being made fools of. If people do learn that you were making fools of them for a long, long time, the hammer may come down on you very hard indeed.

I will stand by you on all the points that count in your favor. There really were “experts” saying what you said. There really once was academic research supporting you. You really do follow the strategies you recommended for others. I am in the minority. All these things are so and I will testify that all these things are so and I will point people to the Post Archives showing these things to be so. I will argue that this is a case in which a measure of mercy is called for, that this is a case in which we need to have understanding of human failings and that we need to put the ugliness of criminal trials and prison sentences behind us and move on. All that you will get from me.

You won’t get perjured testimony from me. I ain’t interested in going to jail myself. So I will testify to the other stuff too. In cases in which you have left me no alternative, I will paint you in a bad light because there are some things re which there is so much evidence that I go to jail myself if I do not acknowledge the reality.

People will be hurting. In a horrible way. You did that. People are going to be very angry. You got a small taste of what the public mood will be in the time after the September 2008 crash. This one will hit with ten times the force. The mood will be 10 times worse this time.

I’ll do what I can. I can only do so much.

What I say seems absurd from the perspective of someone who believes in Buy-and-Hold. And you do believe. But the laws of this country do not permit the behavior you have evidenced even in cases in which the person engaging in the behavior truly believes that the statements are absurd. There is no “absurd” exception to our civil and criminal laws.

So you had better be very, very very, very, very sure. You are risking the continued viability of the economic and political system of this country. And you are risking every penny you have saved in this lifetime. And you are risking your personal freedom for the remaining days of your retirement.

My take is that the fact that you would even for two seconds give consideration to the idea of risking all that because some fellow on the internet discovered an error in a safe withdrawal rate study you liked is itself strong evidence of the dangers of the Buy-and-Hold “idea.” But I am confident that you view that one as “absurd” too. You would, wouldn’t you?

As absurd a person as I may be, I care for you and I will do all in my power to help. You’ve got my pledge re that one.

It is my belief that I am running out of time re my efforts to help you in an effective way. I am bound by conscience to report that reality to you, as absurd as you you no doubt hear it to be.

I wish you the best of luck in all your future endeavors.

Hang in there, man.


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