Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
“The safe withdrawal rate is not always 4 percent. It is a number that changes with changes in valuation levels.”
But for some reason you think the fair value PE10 figure is always the same.
The average daily high temperature in New York City in January is 39 degrees. Can that change? Sure. But only very slowly. Ten years from now it might be that the average daily high temperature in New York City is 40 degrees or 38 degrees. That can happen.
But if the daily high for one January day is 3 degrees, you don’t start acting as if the daily high temperature for January has dropped to 3 degrees. You certainly don’t bet your retirement savings on such a belief.
That’s the equivalent of what the Buy-and-Holders do in their retirement studies. The fair-value CAPE value of 16 is based on 150 years of stock market history. Could it change to 17 or to 15? Sure. But those sorts of changes happen very slowly. All investors should be highly suspicious of retirement studies based on an assumption of huge changes in the fair-value CAPE number.
Stock prices went up by 126 percent from 1996 through 1999. The normal price rise for four years would be 26 percent. So it was irrational exuberance that caused the other 100 percent of the total price rise. Could it be that irrational exuberance was responsible for only 98 percent of the total price rise or for 102 percent of it? Those are possibilities. But Greaney didn’t base his study on a belief that irrational exuberance was responsible for only 98 percent of the price rise. His study was set up to show zero effect for irrational exuberance! He told aspiring retirees that they could treat the entire 126 percent price rise as real and that their retirements would be “100 percent safe” all the same.
Huh? What the f?
And he showed that he knows that this position cannot be defended in civil and reasoned debate when he responded to questioning about the methodology used in his study with death threats and demands for unjustified board bannings and thousands of acts of defamation and threats to get academic researchers fired from their jobs. He’s a con man, Evidence. I mean, please give me a freakin’ break.
And it is not just Greaney. Lots of people saw what he did. And either supported him or ignored his behavior. Those people AIDED the con.
We WANT to be conned about how stock investing works when prices are where they are today. We LIKE believing that we have more money in our accounts than we really do have in them, we LIKE thinking that we can retire early many years before we have saved enough to do so responsibly.
The question is — Should people who participate on discussion boards make note of the 38 years of peer-reviewed research showing that Buy-and-Hold is a con, that the market is not efficient and that instead valuations affect long-term returns? I think that those of us who believe that Shiller’s Nobel-prize-winning research is legitimate research should make note of that. Shiller discredited Buy-and-Hold. And I believe that Shiller is onto something. So that’s what I tell people when I post on discussion boards and blogs.
It’s up to them whether they go with what I say or with what the Buy-and-Holders say. It’s not my place to tell people what to do. But it IS my place to post honestly. And I sincerely do not believe that Greaney included a valuation adjustment in his study. So that’s what I tell people. No apologies whatsoever.
I wish you all the best that this life has to offer a person.
Con Man Exposer Rob
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