Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
“Stocks were priced at three times fair value in 2000.”
Only if you believe that PE10 is an immutable number as are the constants from the physical world.
This does not follow.
Someone could use a different valuation metric and conclude that the market was priced at 2.6 times fair value or 3.4 times fair value or whatever.
You didn’t use ANY valuation metric in your study, John. It’s not that you are wedded to some valuation metric other than P/E10. You made NO adjustment. That’s why your numbers are so wildly off the mark.
Had you said in response to my May 13, 2002, post “Well, I used valuation metric x and I came up with a safe withdrawal rate of 1.8 but I of course see the need to let my readers know that, had I used P/E10 — the metric endorsed by Nobel-prize-winning economist Robert Shiller — the number that I would have produced would have been 1.6,” there would have been no problem. The community members who saw merit in metric x would have used 1.8 and the community members who saw merit in the metric endorsed by the Nobel-prize-winning economist would have used 1.6. There would have been no death threats. There would have been no demands for unjustified board bannings. There would have been no tens of thousands of acts of defamation. There would have been no threats to get academic researchers fired from their jobs.
All of the financial fraud stuff followed because you included no valuation adjustment AT ALL in your “study” and you were not able to think up any way to defend this mistake within the bounds of the U.S. law. So you went down the dark path that you went down.
I told you at the time NOT to go down that dark path. You have no beef with me, my long-time abusive-posting friend. Your beef is with John Greaney. Your beef is with the man in the mirror.