Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
“But I do not believe that the market is efficient.”
And it doesn’t matter whether it is efficient or not.
A buy and hold investor will receive the market return (minus very low costs) over any given period.
Investors as a whole will receive the market return (minus higher costs) over any given period.
The buy and hold investor will get a higher investment return than investors as a whole.
If buy and hold doesn’t work then investing doesn’t work.
John Greaney was telling people that the safe withdrawal rate was 4 percent at a time when it really was 1.6 percent. A failed retirement is a serious life setback. I believe that we all should be trying to get the numbers right in retirement studies that we publish. I think that accuracy and honesty matter a great deal.
Sue me.
Stickler-for-Honesty-and-Accuracy-in-Retirement-Studies Rob
Evidence Based Investing says
I can link to multiple studies that show that the inflation adjusted withdrawal rate that survived all 30 year periods in the past out of a high equity portfolio is about 4%.
Can you point me to the study that shows that the safe withdrawal rate was 1.6% at some point?
Rob says
The inflation-adjusted withdrawal rate that survived all 30-year periods in the past out of a high equity portfolio really is 4 percent. So you are going to have a hard time finding one that says otherwise.
That’s not the dispute. The dispute is over whether all ethical people should be speaking up to correct John Greaney when he claims that 4 percent is the SAFE (not the SURVIVING) withdrawal rate. I have been saying since the first day that it would be fine if Greaney said that that is the historical SURVIVING withdrawal rate. But why the dishonesty? There were people at the Motley Fool board who believed Greaney when he said that 4 percent of the SAFE withdrawal rate. A failed retirement is a serious life setback. A good number of those people had become friends of mine over the years. Not this boy, you know?
John Walter Russell did the math to determine what the true safe withdrawal rate was at the top of the bubble and showed that it was 1.6 percent. His work was not published in a peer-reviewed journal. But several experts have checked his work and found that it is solid stuff. Wade Pfau did that. Michael Kitces did that. Rob Arnott did that. Others have done that.
Someone should have done peer-reviewed work reporting the safe withdrawal rate accurately and honestly a good number of years ago. Why haven’t they? Because you Goons have not yet been placed in prison cells, where you belong, and they are afraid of you.
The Buy-and-Holders made a mistake in thinking that the market is efficient and that thus there is no need to consider valuations when calculating the safe withdrawal rate. So what? The only people who never make mistakes are people who never stick their necks out and try to accomplish new things. So the mistake is trivial. The problem that everyone in our nation is suffering from today is that the mistake they made is so big and has been covered up for so long that there is a group of internet Goons committing criminal acts to keep people from learning the accurately calculated safe withdrawal rate. The Buy-and-Holders didn’t just get important things wrong. They have engaged in a brutal cover-up aimed at making sure that no one ever gets those things right because the Buy-and-Holders would look so bad if word about the extent of the mistake got out.
This situation cannot continue indefinitely, in my assessment. Continuation of the cover-up hurts us all. It hurts me because I cannot earn a living in this field unless I agree to post dishonestly, which I will never do. It hurts the millions of investors who have been denied access to honest and accurate safe withdrawal rate studies that they need to be able to plan their retirements effectively. It hurts the owners of the hundreds of thousands of businesses that will go under when the economy contracts as a result of the next price crash. It hurts the millions of workers who will lose their jobs when those businesses go under. It hurts you Goons because your prison sentences will be longer the longer the cover-up goes on and the more lives it destroys. Continuation of the 39-year cover-up is a lose/lose/lose/lose/lose. It is not possible for any rational person even to imagine any possible upside.
My sincere take.
My best and warmest wishes to you and yours.
Upside-Seeking Rob
Evidence Based Investing says
I see you have corrected your typo
“John Walter Russell did the math to determine what the true safe withdrawal rate was at the top of the bubble and showed that it was 1.6 percent.”
Do you have a link for that?
When I go to his website http://www.early-retirement-planning-insights.com/index.html I see “Even before the October 2008 meltdown, my latest research had lifted the Safe Withdrawal Rate to 6%.”
Rob says
I am confident that, if I looked for a bit, I could find a link. But I don’t think it serves a good purpose for me to do that. We need to have John’s work available at every investing site on the internet. And we need to have the work of hundreds of people doing follow-up work available at every site on the internet. The obvious thing to do is to open every site on the internet to honest posting and then just reap all of the benefits that would obviously follow from doing so. That’s all upside and zero possible downside.
If as a society we want to know how stock investing works, we will know. If as a society we do not want to know how stock investing works, we will not know. We are going to decide this matter as a society. It’s hard for us to do that at a time when stocks are priced at two times their fair value. Our Get Rich Quick urge interferes with our ability to think clearly, just as drinking large quantities of alcohol interferes with our ability to drive a car properly.
I believe that the next price crash, as horrible as it will be in terms of bringing on vast amounts of human misery, will help more of us to see the downside of following a pure Get Rich Quick/Buy-and-Hold approach. We’ll see. In the interim, I am going to do what I can to help us all make the transition. I am going to continue to speak in favor of the idea of opening every discussion board and blog to honest posting. About 10 percent of us have shown the ability to appreciate the dangers of Buy-and-Hold even at a time when stocks are priced at two times their fair value. So it is obviously possible for more of us to do so if the 10 percent who appreciate this today work up the courage to share our honest thoughts despite the huge amount of resistance they encounter. And I am going to finish work on a book that I believe will help us all to come to terms with what we have done to ourselves when we are as a society more open to the idea of coming to terms with that portion of our history.
I hope that that helps a small bit. We all want the same things deep down. We are all on the same side.
My best wishes to you, Evidence.
Forward-Looking Rob