Set forth below is the text of a comment that I recently posted to the discussion thread for one of my columns at the Value Walk site:
Here is your parting post on that old thread. Remember this?
I finally finally get it.
I am deeply sorry for falsely criticizing the study and for wasting so much of the board’s time on this issue. The only possible saving grace here is that perhaps my public display of deep ignorance will cause a few others to realize that they do not understand the study as well as they need to and to spend some time getting more familiar with it in detail. I’ve said before that it is a valuable tool, and I am more convinced of that now.
You are right that my problem is that I was looking at the Dory36 calculator and was concerned to see years turn up where the safe withdrawal rate did not work. The descriptions of how the calculator differs from the root study were right there in front of me, so this is a weak excuse, but that’s what happened.
For what it’s worth, understanding for the first time that there really is a known safe withdrawal rate that applies in all circumstances makes me feel a little more comfortable with the idea of investing in stocks at today’s prices. I’m not going to make any quick major shifts, but being able to know the worst case scenario in advance is an important plus in having the confidence to invest in a volatile investment class.”
I said those words, Sammy.
What do you think that shows?
It shows that I am human just like you and Shiller and Bogle and Pfau and all the others. All humans live in communities. We are all subject to pressures to conform to widely endorsed beliefs.
The Buy-and-Holders are not bad people. You have never heard me say that. I have on thousands of occasions said that they are good and smart and hard-working people. Just like the version of Rob Bennett who said those words back on Day Four of our discussions. And just like the version of Rob Bennett who said those words, the Buy-and-Holders are sometimes held back by their desire to conform to social norms.
There was research done many years ago in which test subjects were asked to say which of two lines was longest. The people who participated in the research were able to give the correct answers when they took the tests alone. But when four fake test-takers who deliberately gave wrong answers were added to the mix, the majority of test-takers no longer could give correct answers. Social pressures wipe out our ability to think clearly.
It doesn’t happen only in the stock investing realm. It happens in every field of human endeavor. But the stock investing realm is not an exception to the universal rule. Humans behave when buying stocks just as they do when they do anything else. They let social pressures undermine their ability to reason.
That’s why we have bull markets. Bull markets are an emotional phenomena. Shiller showed that with peer-reviewed research in 1981. The reaction of you Goons to my post of the morning of May 13, 2002, confirmed Shiller’s findings. The reason why long-term stock returns are highly predictable is that investor emotions are the primary determinant of stock prices and investor emotions do not follow a random walk in the long run but instead follow a very clear pattern that has been repeating without exception fort 145 years now.
Stock valuations go up for about 20 years until prices have reached insanely high levels and then they go down for about 15 years. Returns are much lower during the down phases and risk is much higher during the down phases. Stocks are a far more attractive asset class during the up phases than they are during the down phases. Every investor alive needs to know about the 34 years of peer-reviewed research showing this. The cover-up has destroyed millions of lives. It cannot continue. Not if our economic system is going to continue.
We have to fix these errors, Sammy. We are all on the same side. We all should be working together.
That’s my sincere take re these terribly important matters, in any event.
I naturally wish you all the best that this life has to offer a person.