Set forth below is the text of a comment recently put to another thread at this site by a regular site visitor, followed by my response:
Can you name a single person who’s either pure BH or pure VII as you define them? A person who would never, ever change his allocations under any circumstances, or one who is forced to mechanically make changes based on valuations, with no consideration of other factors?
Of course you can’t. No such person exists. Even theoretically there’s no sane person who believes valuations can never have an effect on future returns, or one who says they must always. The data is clear – historically, valuations have had some effect on future prices, some of the time. Shiller will tell you that. Vanguard will tell you that. Fama will tell you that. There are no two “opposite” (your word) views.
The retirement study posted at John Greaney’s web site does NOT contain an adjustment for the valuation level that applies on the day the retirement begins. Greaney often referenced that study in his posts at the Motley Fool board. I put forward a post on the morning of May 13, 2002, that asked whether we should be considering valuations when we identified the safe withdrawal rate. You say here that: “Historically, valuations have had some effect on future prices, some of the time.”
So should SWR studies include an adjustment for the valuation level that applies on the day the retirement begins or not? I say they should. What do you say, Anonymous?