Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
“You can’t provide links today for what they will be saying in the days following the next price crash.”
I don’t have a time machine. How can I, or anyone else, provide a link for something in the future. What I can do is post a link on what has happened and what people have said. The other websites do not paint a favorable picture of you and what you have said.
Shiller provided us all a means to see into the future. That’s why he was awarded a Nobel prize. That’s why I argue that we should be permitted to discuss his research findings at every web site.
You cannot tell whether a retirement plan is safe or not without taking a look into the future. You cannot know what stock allocation to go with without taking a look into the fuure.
The Buy-and-Holders are taking a look into the future when they say that this will be the first time in history that investors who failed to practice market timing/price discipline will end up okay. So we all make an effort to look into the future. The difference is that some of us use peer-reviewed research as a guide and some of us just take a purely emotional approach. The purely emotional approach has the edge at a time when irrational exuberance is at insane levels. But, if Shiller is right, those days will not last forever.
None of these websites of which you speak has offered a screenshot of the page of the Greaney study containing a valuation adjustment. I wonder why.
Rob
When Shiller’s looked into the future, he warned you not to time the market. You didn’t listen.
Shiller never did that. He published a paper in July 1996 warning investors that those who stuck with their high stock allocation in the face of the insane stock valuations of that day would likely live to regret it within 10 years. That’s a recommendation of market timing, Anonymous. The same person cannot both advocate market timing and warn against it. That makes no sense,.
Now —
There is confusion re these points, I grant you that. Shiller should by this point have written an entire book on how to engage in effective market timing. That would be a huge plus. And hundreds of others who work in this field should be speaking out about how to engage in market timing. That’s the way these sorts of developments are handled in every field other than the investment advice field. There was a time when many academics thought that the market was efficient, in which case timing would not work. Shiller’s work discredited that belief. And we should have had a national debate on the question of how to go about market timing in the best possible way. But there is a mountain of money to be made pushing Buy-and-Hold (non-timing) strategies. A lot of powerful and wealthy and well-connected people have done everything in their power to keep the Buy-and-Hold money train rolling. This massive cover-up is killing us as a society. We need to move on.’
I certainly have not listened to claims that market timing is not required for all investors. How could that be? Market timing is price discipline. Price discipline is what makes markets work. How could there ever be a market where the exercise of price discipline did not work or was not required? It simply cannot be. When Wade Pfau was working with me, he spent 16 months trying to find one scintilla of evidence that market timing might not work or might not be required. He came up empty-handed. And then you Buy-and-Hold Goons threatened to destroy his career when he reported his findings at the Bogleheads Forum and numerous community members responded in a highly positive way. Gee, I wonder what is going on here.
Please mark me down as being 100 percent in favor market timing. Please feel free to tell everyone on the internet that that is my position, I would feel that you were doing me a favor.
Market timing rules! Buy-and-Hold drools!
My sincere take.
Rob
“Shiller never did that.”
Yes, he did. You have been given the link, but you ignore it. You need to stop blocking honest posting.
I am not persuaded by what he said at the link. He offered some words saying that he does not believe in market timing. But that could be a reference to short-term timing, which of course I do not believe in either. I have seen thousands of occasions where people fail to distinguish short-term timing from long-term timing.
The title of Shiller’s book is “Irrational Exuberance.” If irrational exuberance exists, market timing is absolutely essential. The level of irrational exuberance is obviously not constant. There are times when there is lots of irrational exuberance and times when there is little or none. Risk is obviously much greater when irrational exuberance is high. So an investor who wants to keep his risk profile constant over time MUST, MUST, MUST practice market timing. There is no other way to pull it off.
Now —
I think that it is possible that Shiller is not in agreement with everything that I have said about market timing. You wouldn’t expect that to be the case. It is rare to find two people who have precisely the same views on every aspect of a question like this. So I would very much like to hear him expand on his views on market timing. That would help every investor alive. The way to make it happen is to drop all the criminal stuff and make people who want to comment on these matters feel 100 percent secure that there will be no negative consequences if they challenge the Buy-and-Hold dogmas. The fewer intimidation tactics we see, the more honest posting we will see. And honest posting is a win/win/win/win/win.
That’s my sincere take re these terribly important matters, in any event.
My best and warmest wishes to you, Anonymous.
Rob
And here is yet another article showing that Rob Bennett ignores the research that shows he is wrong. This piece of research by Bill Bengen, supported by work from Michael Kites completely blows Rob Bennett out of the water.
https://www.fa-mag.com/news/choosing-the-highest–safe–withdrawal-rate-at-retirement-57731.html?print
It doesn’t do that at all. There are numerous places where this study shows that the methodology used in the Greaney study and in the other Buy-and-Hold studies does not work.
“Examining the chart, one is immediately struck by the countervailing behavior of the two data series. High initial withdrawal rates are consistently associated with “cheap” stock markets, and low initial withdrawal rates are associated with “expensive” stock markets. The correlation between the two data series is negative 0.75, which is quite strong. Obviously, it paid to retire when stocks were cheap!:
That’s Valuation-Informed Indexing, not Buy-and-Hold. That’s market timing.
“Retirees facing more favorable market circumstances, on the other hand, have been able to successfully withdraw up to 13% of their portfolios. So how do we determine a safe withdrawal rate that fits a particular environment—one hopefully significantly higher than 4.5%?”
Again, this is Valuation-Informed Indexing, not Buy-and-Hold, Again, this is market timing.
And please note this:
“The term “safe” is meaningful only in its historical context, and does not imply a guarantee of future applicability.”
Greaney sure doesn’t agree with this. His study does not take valuations into consideration AT ALL and yet he claims that it identifies the “safe” withdrawal rate. Huh? What the f? Then he engages in criminal behavior to keep people from learning about the error in the study. Again, huh?
This is the future of investment analysis. We all need to move past the Buy-and-Hold/Efficient Market garbage and start calculating this stuff accurately. Market timing is price discipline. There is no way that exercising price discipline could ever be a bad thing. It is the idea that price discipline might not be required (Buy-and-Hold) that is a bad thing Market timing/price discipline always works and is always 100 percent required for investors seeking to keep their risk profile roughly constant over time.
My sincere take.
Rob
That work by Bengen destroys everything you have said. Just look at the conclusion:
“In summary, based on the earlier work of Michael Kitces, I have presented a tabular method to select an initial withdrawal rate for retirement portfolios, based on both recent inflation and stock market valuations. It exhibits a wide range of choices, between the “worst case” of 4.5% and a high of 13%, representing the full range of historically successful withdrawal rates. It is simple to use, though right now it applies only to tax-advantaged portfolios with a desired longevity of 30 years.”
No chance now of a New York Times article. No windfall of $500 million. Your last 2 decades just went down the drain.
None of what you say is so, Anonymous.
Look at the allocation he is examining. It’s 50 percent stocks. Greaney was looking at 80 percent stocks. The safe withdrawal rate is obviously higher when you go to a lower stock allocation (when stock prices are high). So he is certainly not saying that the Greaney study is correct. I did a good thing by pointing out that error.
And the very fact that this study exists is traceable to The Great SWR Debate, which I initiated with my famous post from May 13, 2002, pointing out the error in the Greaney study. I have extensive discussion with both Kitces and Bengen and both have become better informed re these matters as a result. Which is of course a good thing. What we want to do is to open every site on the internet to honest posting re the last 39 years of peer-reviewed research, so that we can get more and more and more good stuff coming our way.
I think I’ll get the New York Times article. I think I’ll get the $500 million settlement payment. I think that every person in the United States will be living a better life as a result of what we have all learned about these matters during the first 18 years of our discussions. I think that all that good stuff will start happening in the days following the next price crash. when millions of us will be able to see by looking at our portfolio statement why going pure Get Rich Quick/Buy-and-Hold is never the right answer.
I certainly agree with Bengen that there are times when the safe withdrawal rate is MUCH higher than 4 percent. I have been saying that since the first day. We should have begun the project of getting the word out on that to every investor in the nation on the afternoon of May 13, 2002. It is the criminal behavior of you Goons that has been holding us all back for 18 years now.
If the safe withdrawal rate were the same number at all times, Bengen would not be providing “a wide range of choices.” Please give me a freakin’ break.
My best wishes to you.
Rob
You have now confirmed that Bengen’s numbers are even more conservative than Greaney’s. It’s obvious why you have ignored this research. It totally blows away everything you have said. This document is your worse nightmare. You just can’t spin it in any possible way.
You really think you are teaching Kitces and Bengen? Really?
“You have now confirmed that Bengen’s numbers are even more conservative than Greaney’s.”
It’s not a question of being more conservative or less conservative. It’ s a question of being more accurate. If you include a valuation adjustment, your numbers will be more accurate. The error that Greaney made was in failing to include a valuation adjustment.
My sincere take.
Rob
“You really think you are teaching Kitces and Bengen? Really?”
Without question. My conversations with them showed that beyond any doubt whatsoever.
And of course the peer-reviewed research of the past 39 years taught ME.
It is by studying the peer-reviewed research that we all advance in our understanding. This is why I say that we should be permitting honest posting re the peer-reviewed research. By talking over what we have learned we all advance in our understanding. A win/win/win/win.
Rob