Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
“One, you have only said that within the last few months. You could have saved lots of people a lot of time by saying it in May 2002. Why didn’t you.”
Because it was obvious to everyone taking part in the conversation that there was no valuation adjustment.
If it’s so obvious, why hasn’t the study been corrected to this day?
Today’s CAPE is 35. That’s an obvious threat to the smooth functioning of our economic system. But how many of the experts in this field are actively involved today in getting that CAPE value down?
Sometimes it is the most obvious things that are most important. For an alcoholic, the most obvious thing that he needs to do to make his life better is to start attending A.A. meetings. The fact that this is obvious doesn’t mean that you shouldn’t say something if you think of this person as a friend.
Rob
“If it’s so obvious, why hasn’t the study been corrected to this day?”
Because it doesn’t need to be corrected. Greaney (and Trinity and Bengen) set out to calculate what withdrawal rate survived in the past. They did so accurately and all came to the same answer (about 4%). Such a calculation does not need to be manipulated by changing the answer of that calculation.
If you wish to estimate a future withdrawal rate based on the market valuation at the start of retirement coupled with an estimate of future market volatility then do so. Or get someone else to do it for you.
We’ve already had people do it. We’ve had thousands of people express a desire that honest posting be permitted at every site. We had an academic researcher (Wade Pfau) conclude that the Greaney retirement study is “dangerous” and then devote 16 months of his life to co-authoring with me peer-reviewed research showing that “Yes, Virginia, Valuation-Informed Indexing works!” I am going to continue posting honestly re these matters and we will see how things play out in the days following the next price crash.
I naturally wish you all the best that this life has to offer a person, Evidence.
Rob