I’ve posted Entry #149 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The New Consensus That the Safe Withdrawal Rate Studies Are in Error Is the First Step Towards Far Bigger Discoveries.
Juicy Excerpt: The debate over whether it is necessary to take valuations into consideration when calculating the safe withdrawal rate has never been an intellectual debate. Intellectually, it was always as simple as determining the sum of two plus two to figure out that the Old School safe withdrawal rate studies were in error. Shiller showed with research produced in 1981 that valuations matter. The Old School studies don’t consider valuations. So the Old School studies get the numbers wrong. It didn’t take us 11 years to figure out that one.
What is has taken us 11 years to do is to come to begin to come to terms with what Shiller has taught us with his revolutionary research.
Knowing that valuations matter changes everything that we once thought we knew about how stock investing works. Everything. It’s not possible to overstate how big a change we are talking about here.
I talk about the implications in all my writings. I am the only one I know who does that. But all of us sense how big a deal this is.