A Rich Life

The Old Ideas on Saving & Investing Don't Work -- Here's What Does

Comments

  1. You probably can’t afford the WSJ, but there is an article this week where Bill Bengen says the current SWR is about 3.3%, and that he personally has scaled back to 20% stocks, 10% bonds and 70% cash, due to extreme valuations in both stocks and bonds.

    But why am I having to tell you this? The most Rob-friendly article in years, maybe ever, and you have absolutely no clue. Despite your claim that this topic is your entire focus in life, to the neglect of everything else. You’re like someone claiming to be a violin virtuoso without even bothering to own a violin.

  2. Bill Bernstein published a book that reached bookstores on May 14, 2002, in which he said that you need to subtract 2 points from the 4 percent rule to get the actual safe withdrawal rate that applied at the top of the bubble. It’s not exactly news to see an expert come forward and acknowledge that the Buy-and-Holders got the numbers wildly wrong in their retirement “studies.”

    What good has it done us? People still want to be misled with the Buy-and-Hold/Get Rich Quick stuff. So there is still a market for it. The Greaney study, which misled so many of my friends back at the Motley Fool board, hasn’t been corrected to this day. Today’s CAPE value is 35.

    This ain’t science, Miasma. People engaged in science correct errors when they are brought to their attention. That’s how people learn. That’s how the sciences advances over time. Stuff done in the investment advice field has the trappings of science because there is a marketing benefit to making things look like they are science. But it lacks the element where you correct errors that are discovered. So it’s not real science. It’s a scam. It’s a fraud.

    We will have to decide as a people in the days following the next price crash whether we want the real thing. We can have it if we want it. The 41 years of peer-reviewed research is there for us to talk about when we give ourselves permission to do so. It is clear that there are many people in this field who long to do honest work and who would be 100 percent happy to do so once they were given the signal that something was going to be done about the Buy-and-Hold Goon Squads. I believe that, we will give ourselves to take advantage of the last 41 years of peer-reviewed research once we see the ocean of human misery that is likely to appear with the coming of the next Buy-and-Hold Crisis. But nobody can say for sure until it happens, right? So we are just going to have to wait a bit to see how things play out.

    Rob

  3. “It’s not exactly news…What good has it done”

    So now you’re just a burned-out nihilist. Doing nothing but bitching all day, every day. Which somehow is vitally important to save the world, leaving no time for anything else, like your family for example.

    Coming up on your next self-imposed book deadline. The world awaits.

  4. “Bill Bernstein published a book that reached bookstores on May 14, 2002, in which he said that you need to subtract 2 points from the 4 percent rule to get the actual safe withdrawal rate that applied at the top of the bubble.”

    This is an inaccurate paraphrase.

    Are you willing to use the exact quote?

  5. I don’t think that I am a nihilist at all. When I saw your comment, I added an item to the list that I keep of columns that I intend to write for the ValueWalk.com site. The title for that one is “It’s Not Just Getting the Safe Withdrawal Rate Studies Corrected, It’s Coming to Terms With Why We Got Them Wrong.”

    There’s no news in knowing that 4 percent is not always safe. Those who have been paying attention have known that for many years, for two decades really. But why did smart people make that mistake and why did other smart people tolerate it for so long? That’s the important questin.

    The answer is that we all have a Get Rich Quick/Buy-and-Hold urge residing within us. We all want something for nothing. So we lie to ourselves. We tell ourselves that the safe withdrawal rate is the same number when the CAPE is 44 as it is when the CAPE is 8. It’s nonsense, of course. Dangerous nonsense. But it is dangerous nonsense that we all like to hear. It is dangerous nonsense that SELLS.

    Will we permit ourselves to advance in our understanding of how stock investing works in the days following the next price crash and live better lives from that point forward as a result? I hope so, you know? I like the humans. So I would like to see them learn what they need to learn so that they can all live better lives.

    My best and warmest wishes to you, Miasma.

    Rob

  6. “Bill Bernstein published a book that reached bookstores on May 14, 2002, in which he said that you need to subtract 2 points from the 4 percent rule to get the actual safe withdrawal rate that applied at the top of the bubble.”

    This is an inaccurate paraphrase.

    Are you willing to use the exact quote?

    I think it’s an accurate paraphrase. If you want to quote from the book, I’m fine with that.

    If you advance a quote that has something to do with hot dog stands, there is a good chance that your words will not appear here.

    Rob

  7. “If you advance a quote that has something to do with hot dog stands,”

    You do realize that I am not the one who used a hot dog stand analogy, don’t you?

  8. “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!”

    The actual quote.

    Doesn’t use the word need.

    Doesn’t use the phrase “actual safe withdrawal rate that applied at the top of the bubble”

    Uses the phrase “may not be entirely safe withdrawing more than 2%”

    Do you have any actual numbers on how those who retired at the top of the bubble are doing?

  9. You do realize that I am not the one who used a hot dog stand analogy, don’t you?

    You don’t object to it. There have been times when I was having a potentially productive back-and-forth with you and someone else comes in with this disruptive hot-dog-stand thing and you say not a word, suggesting that you are okay with it. That suggests bad faith on your part.

    You should want to get to the bottom of this. Do you believe that Greaney included a valuation adjustment in his study or not? If not, when did you first call on him to correct the error?

    Rob

  10. “There’s no news in knowing that 4 percent is not always safe.”

    When the creator of the 4% rule says 4% is no longer safe, in the friggin Wall Street Journal, it’s huge news. Many times more people saw that article than Bernstein’s obscure twenty year old book. Thousands of times more people than saw Greaney’s study. Millions of times more than remember Greaney’s study (pretty much only you and Greaney.)

    But to you, it’s all meh. Funny how you always have an excuse for taking no action yourself. You accept no personal responsibility for anything or anyone. It’s always “we have to…” meaning other people. When are you, Rob Bennett, going to do something more than make a note for yet another unseen ValueWalk repetition?

  11. “You don’t object to it. There have been times when I was having a potentially productive back-and-forth with you and someone else comes in with this disruptive hot-dog-stand thing and you say not a word, suggesting that you are okay with it. That suggests bad faith on your part. ”

    It is only disruptive if you react to it. I choose not to let it distract me.

    Having posted here for some time I have got used to ignoring terrible analogies (see repeated drunk driving analogies)

  12. “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!”

    The actual quote.

    Doesn’t use the word need.

    Doesn’t use the phrase “actual safe withdrawal rate that applied at the top of the bubble”

    Uses the phrase “may not be entirely safe withdrawing more than 2%”

    Do you have any actual numbers on how those who retired at the top of the bubble are doing?

    Bernstrein’s phrase describes precisely what a safe withdrawal rate is. The idea is not to come up with a number that MIGHT work. The idea is to come up with a number that almost certainly will work, presuming the stocks continue to perform in the future somewhat as they have always performed in the past. Greaney said that his 4 percent number was “100 percent safe.” Bernstein is saying that he was wrong to say that. That’s what I say.

    I believe that those who retired at the top of the bubble should be doing fine. The thing that causes retirements to fail is a sharp price drop in the first ten years of the retirement. There was a sharp price drop in 2008 but prices recovered quickly. So those retirement should be okay.

    That doesn’t make them retroactively safe. They were risky at the time they were initiated. We should have been telling the people putting together retirement plans at the time that.

    People putting together retirement plans today using a 4 percent withdrawal are taking on a big risk. Had Greaney corrected his study at the time he learned of the error he made in it, there would not still be people today using that crazy 4 percent number. We should learn from out mistakes, not cover them up.

    There is 150 years of historical return data showing that the most important factor in the safety of a retirement is the valuation level that applies on the day the retirement begins. Given that the valuation level is the most important factor, we should take it into consideration when calculating the safe withdrawal rate.

    It all goes back to the worst mistake ever made in the history of personal finance — the “idea” that the market is automatically efficient. The last 41 years of peer-reviewed research shows that efficiency is the IDEAL, not something that it automatically handed to us. We have to work hard to achieve that. We do that by regularly reminded ourselves of the dangers of Get Rich Quick strategies and of the importance of always engaging in enough market timing to keep our risk profile roughly constant over time. We all should be aiming to Stay the Course in a meaningful way.

    Rob

  13. “You don’t object to it. There have been times when I was having a potentially productive back-and-forth with you and someone else comes in with this disruptive hot-dog-stand thing and you say not a word, suggesting that you are okay with it. That suggests bad faith on your part. ”

    It is only disruptive if you react to it. I choose not to let it distract me.

    Having posted here for some time I have got used to ignoring terrible analogies (see repeated drunk driving analogies)

    I think the drunk driving analogy is a very strong and helpful analogy. It gets to the essence of what is wrong with the Greaney retirement study. It sounds plausible on the surface to say “4 percent has always worked, therefore it is safe.” But the deeper reality is that there are only a tiny, tiny number of occasions when 4 percent has worked for retirement that began when valuations were at sky high levels and on that tiny number of occasions the retirements came within a whisker of fails. The data is telling us that taking a 4 percent withdrawal for a retirement beginning at sky high valuation levels is an extremely risky thing to do, not a “100 percent safe” (Greaney’s phrase) thing to do.

    We should tell people the truth about these matters. A failed retirement is a serious life setback.

    Rob

  14. “There’s no news in knowing that 4 percent is not always safe.”

    When the creator of the 4% rule says 4% is no longer safe, in the friggin Wall Street Journal, it’s huge news. Many times more people saw that article than Bernstein’s obscure twenty year old book. Thousands of times more people than saw Greaney’s study. Millions of times more than remember Greaney’s study (pretty much only you and Greaney.)

    But to you, it’s all meh. Funny how you always have an excuse for taking no action yourself. You accept no personal responsibility for anything or anyone. It’s always “we have to…” meaning other people. When are you, Rob Bennett, going to do something more than make a note for yet another unseen ValueWalk repetition?

    The Wall Street Journal had an article saying that the 4 percent rule is in error many years ago. I had a friend (Brian) at my last corporate job and we had discussed safe withdrawal rates when we worked there together. This was before I ever posted to Motley Fool. He was a Buy-and-Holder. He told me in a friendly way that I was nuts.

    When he saw the article in the Wall Street Journal saying that I had been right all along, he gave me a call. I told him about the bans. He was shocked. He said that he was going to put up a post at the Bogleheads Forum telling the story. I told him that he would be banned if he did. He made a bet with me that he would not be banned. Of course he was banned within 30 seconds of advancing the post.

    It’s not hard to calculate these numbers accurately, Miasma. If this were any other field of human endeavor, we could get all the errors corrected in 15 minutes. The problem is that in the field of stock investing people WANT to be told lies. If the experts report the numbers honestly and accurately, they lose their jobs. So they feel a lot of pressure to either pretend that they believe in the Buy-and-Hold stuff or to actually force themselves to believe it.

    Will it change in the days following the next price crash? That’s the question.

    Do you want to take a bet on whether Greaney corrects his study as a result of this latest Wall Street Journal article? I know which side of that bet I want to be on.

    I’m happy that Bengen is telling at least some of the truth re this matter. But it is going to take more than one somewhat accurate article to get that CAPE value down to a reasonable level. People believe things that they hear over and over again. And the steady drumbeat of the Buy-and-Holders is not going to be drowned out by a single somewhat accurate article in the Wall Street Journal. If we opened every site to honest posting, we would see real change. One article will be ignored by all the people making money pushing the Buy-and-Hold garbage.

    I am happy to see anything honest appear. But I have been doing this too long to believe that one article is going to change the world. If it was that easy, Bernstein’s book would have changed the world back in May 2002.

    Rob

  15. “When he saw the article in the Wall Street Journal saying that I had been right all along, he gave me a call. I told him about the bans. He was shocked. He said that he was going to put up a post at the Bogleheads Forum telling the story. I told him that he would be banned if he did. He made a bet with me that he would not be banned. Of course he was banned within 30 seconds of advancing the post.”

    First of all, I have no doubt that everything in that paragraph is a lie. Which of course is nothing new.

    Will you ever get past your Greaney obsession? It’s been 20 years and you’re just as pissed as on day one. Constantly ripping on him only reflects on you. Your current real-life isolation and squalor should have clued you into that by now. Greaney is nobody, except presumably to Mrs. Greaney. Comparing Bengen to Greaney is like comparing Elvis to the third backup Elvis impersonator in Pig’s Knuckle, Arkansas. Yet you just can’t help yourself.

  16. It’s not really Greaney that is the problem. The problem is that many Normals TOLERATE Greaney’s behavior. So behavior norms that apply in every other field of life endeavor do not apply in the investment advice realm. Hence that CAPE value of 35 that applies today. I can handle Greaney so long as everyone around me enforces the same laws in the investing advice field that they enforce in every other field of human endeavor.

    Rob

  17. It’s not Greaney’s behavior. It is your behavior. You are the one kicked off the boards.

  18. That’s wrong. That’s a huge problem. It’s a good thing to point out an error in retirement study. Everyone in this field should be thrilled that we learned about the error in the Greaney retirement study at a time when we could have saved millions of people from suffering serious financial harm. We could have avoided the 2008 economic crisis had we taken immediate action in May of 2002, as I proposed at the time. The investment advice field is not just about turning a quick buck. Human beings are affected when someone gets the numbers in a retirement study wildly wrong. We are going to have to come together as a people and deal with this matter in a constructive and life-affirming wasy.

    That’s my sincere take, Anonymous.

    My best wishes to you.

    Rob

  19. “It’s a good thing to point out an error in retirement study. ”

    We just established that Greaney is irrelevant. So his 20 year old study is even more irrelevant. You replied that the real problem is his behavior (although any “behavior” in regards to you ended many years ago, so that is also irrelevant.) Now you’ve jumped right back to his irrelevant study.

    This insane merry-go-round has been spinning for 20 years and gotten you nowhere, leaving your real life an utter train wreck. How many more years before you finally step off the carousel? The apparent answer is “all of them”.

    I’m out. Good luck, Rob.

  20. I naturally wish you all the best that this life has to offer a person, Miasma, regardless of what investment strategy you elect to follow.

    Rob

  21. You have no businesses making the comma you do when you lack any education in this area and have a failed retirement.

  22. Do you think it would have been better if I had just kept it zipped re the error in the study?

    Rob

  23. “ Do you think it would have been better if I had just kept it zipped re the error in the study?”

    That’s been addressed thousands of times. Why do we need to keep repeating the same thing just because you don’t like the answer.

  25. I think it was better that I spoke up. I felt like a creep during the three years when I was afraid to do so. I haven’t liked everything that has happened in the 20 years since. But I definitely don’t feel like a creep anymore. From May 13, 2002, forward, I have at least been able to look my fellow community members in the eye.

    My best wishes to you.

    Rob

  26. Do you think we should keep it zipped as to why you are wrong?

    No.

    I think you should keep it zipped when you feel an inclination to advance death threats or demands for unjustified board bannings or acts of defamation or acts of extortion aimed at silencing academic researchers who have “crossed” the Buy-and-Holder by doing honest research. But, when you put forward arguments for why you believe that your understanding of how stock investing works is the right one, you are helping us all out. I don’t say that we should permit honest posting only for Valuation-Informed Indexers. I say that we should permit honest posting for EVERYONE, Buy-and-Holders and Valuation-Informed Indexers alike.

    Rob