An earlier blog entry described the background of my recent correspondence with Michael Kitces on safe withdrawal rates (SWRs). Set forth below is the text of an e-mail that I sent to Michael on November 11.
Michael:
I was greatly cheered by your e-mail. I have been waiting to hear those wonderful words “A lot of planners are starting to question their Passive Investing beliefs” for a long time. That’s the answer! That’s the path out of this hellhole!
I hope to make PassionSaving.com the meeting place for people losing confidence in the old, discredited model (Passive Investing — Bah!) and seeking to learn about a new, exciting, sensible, realistic model called “Rational Investing.” If you hear of financial planners who are up for exploring some new ideas about how stock investing works in the real world, please send them on over. Thousands of community members have done a lot of work preparing for this moment. We have a lot to offer — calculators, research, podcasts, articles, song lyrics. And we need the input of people on the inside to help spread our message far and wide. You are of course invited to the party. So Is Bill Bengen. So are any others with an interest in making sense of things. Let’s Learn Together! Let’s Disrupt! Let’s Go Rational!
Please let me know if in fact Bengen was getting his clients out of stocks before prices began falling. I of course want to tell his story in a fair and accurate and complete way. Also, if he has any thoughts to share about how he knows when to advise a lowering or an increasing of stock allocations, I would like to pass along his criteria to the many thousands of interested middle-class investors comprising the Retire Early and Indexing discussion-board communities.
Props to you for recommending that your clients lower their stock allocations Before the Fall. I can testify anywhere, anytime, anyplace that It wasn’t easy standing up to the “experts” during the days when prices were at insane levels. If you have any criteria to pass along re how to tell when stock allocations need adjusting, I would like to pass those along as well. Please feel free to lay claim on some space at my site to present your thoughts. Or if you have something already written to which you can provide a link, that works as well.
I hope that your dinner with Bill went well and that you both enjoyed the panel session on safe withdrawal rates. Thanks again for your most encouraging words. I’m psyched about where things appear to be headed (while of course also deeply concerned about the mess we are in today)!
Rob
I liked Today’s Passion. Word finally seems to be getting out.
The Random Walk model has failed. Rational investing makes sense.
Notice that the writer’s graph started in 1945. This is consistent with my own finding that dividend yield makes a good predictor if you start your data around 1950 but not much earlier. In the 1930s and before, dividend payout ratios occasionally reached dangerous levels. Dividends are much more secure today.
Have fun.
John Walter Russell