Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
You probably can’t afford the WSJ, but there is an article this week where Bill Bengen says the current SWR is about 3.3%, and that he personally has scaled back to 20% stocks, 10% bonds and 70% cash, due to extreme valuations in both stocks and bonds.
But why am I having to tell you this? The most Rob-friendly article in years, maybe ever, and you have absolutely no clue. Despite your claim that this topic is your entire focus in life, to the neglect of everything else. You’re like someone claiming to be a violin virtuoso without even bothering to own a violin.
Bill Bernstein published a book that reached bookstores on May 14, 2002, in which he said that you need to subtract 2 points from the 4 percent rule to get the actual safe withdrawal rate that applied at the top of the bubble. It’s not exactly news to see an expert come forward and acknowledge that the Buy-and-Holders got the numbers wildly wrong in their retirement “studies.”
What good has it done us? People still want to be misled with the Buy-and-Hold/Get Rich Quick stuff. So there is still a market for it. The Greaney study, which misled so many of my friends back at the Motley Fool board, hasn’t been corrected to this day. Today’s CAPE value is 35.
This ain’t science, Miasma. People engaged in science correct errors when they are brought to their attention. That’s how people learn. That’s how the sciences advances over time. Stuff done in the investment advice field has the trappings of science because there is a marketing benefit to making things look like they are science. But it lacks the element where you correct errors that are discovered. So it’s not real science. It’s a scam. It’s a fraud.
We will have to decide as a people in the days following the next price crash whether we want the real thing. We can have it if we want it. The 41 years of peer-reviewed research is there for us to talk about when we give ourselves permission to do so. It is clear that there are many people in this field who long to do honest work and who would be 100 percent happy to do so once they were given the signal that something was going to be done about the Buy-and-Hold Goon Squads. I believe that, we will give ourselves to take advantage of the last 41 years of peer-reviewed research once we see the ocean of human misery that is likely to appear with the coming of the next Buy-and-Hold Crisis. But nobody can say for sure until it happens, right? So we are just going to have to wait a bit to see how things play out.
Rob
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