I’ve posted Entry #427 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called There’s an Overton Window in the Investing Advice Realm Too.
Juicy Excerpt: But you have to be careful. I got into a lot of trouble saying the same thing as Bernstein because I added a bit of clarity that he prudently elected to leave out of his account. I said that, given that the Buy-and-Hold studies get the safe-withdrawal-rate number wrong, they should be corrected. Bernstein didn’t do that. His sin was forgivable, mine was not.
Is there a difference? Intellectually, no. A failed retirement is a serious life setback. So, if you get the safe withdrawal rate wrong in a study, you need to correct it. Intellectually, that follows. But the practical reality is that pointing out in an obscure passage in a long book that the safe withdrawal rate varies with changes in valuations does not raise the same threat to people who have published studies claiming that the safe withdrawal rate is always the same number. The two statements are very similar and the one certainly follows from the other. But the softer statement is barely tolerable while the stronger one goes just a bit too far.
In the linked article you state
“But it’s funny. You can actually almost kinda, sorta say it and live to tell the tale, William Bernstein says on Page 234 of his book The Four Pillars of Investing that, to identify the safe withdrawal rate at a time when stocks are as overvalued as they were at the top of the bubble, you need to subtract 2 percent from the usual 4 percent number.”
Here is the exact quote
“Recall from Chapter 2 that it’s likely that future real stock returns will be in the 3.5% range, which means that current retirees may not be entirely safe withdrawing more than 2% of the real starting values of their portfolios per year!”
So why the death threats? And why the demands for unjustified board bannings? And why the thousands of acts of defamation? And why the threats to get academic researchers fired from their jobs?
If Greaney really did get the number wrong in his retirement study, as Bernstein indicates, we need to tell all the people who believed that his study was on the up and up, no? Do all of those people not now have legal claims against Greaney himself and against all those who have posted in “defense” of him over the past 17 years? It sure seems to me that they do.
I don’t see that as a positive in any way, shape or form. The proper thing to do when you learn that you got an important number wrong in a retirement study published at your web site is to correct the darn study within 24 hours. If Greaney had done that, he would not now be looking forward to a long prison sentence. And neither would you, Evidence.
Or so it seems to Rob Bennett, in any event.
I naturally wish you the best of luck in all your future life endeavors.
Straight-Shooting Rob