“In Ordinary Circumstances, Stocks Could Never Have Gotten So Overpriced That They Offered a Negative Long-Term Return. But the Buy-and-Holders Pulled That Off With Their Relentless Injunction to Avoid Market Timing (Price Discipline!).”

Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

“I am a journalist. That’s my job.”

A flute with no holes is not a flute. And a job that pays no money is not a job.

“The SAFE withdrawal rate varies from 1.6 percent”

That’s just silly. Even 100% TIPS paying zero percent real can support withdrawing 3% plus inflation for 30 years. Of course that plan falls apart when the retiree spends WAY more than that every year. You know, like you did.

Of course you would eventually run out of money. So it’s not “safe” by your squishy vague undefined notion of that term. But then neither is 1.6%. Or zero percent. Any scenario that could potentially leave you broke at any time in the future, for any reason, is by your definition not safe. So the only prudent course of action for anyone is to never quit your job, especially with ridiculously inadequate savings. You know, like you did.

It’s June, your latest book deadline. Where’s the book?

Your point about TIPS is correct and very important. An asset class that provided a return of zero would have a safe withdrawal rate of 3.3 percent. But the safe withdrawal rate for stocks in 2000 was only 1.6 percent! That’s shocking. That;s just astounding, But that’s what the numbers show when they are calculated honestly and accurately.

That’s why it is so important that someone tell this story clearly and fairly and completely. That’s why this is the most important journalism story of our time.

Market timing is price discipline. Markets determine the correct price for the thing being sold. That’s their purpose. And they do that because buyers and sellers test different prices until they find the one that works best. The Buy-and-Holders have created a market in which price discipline doesn’t exist. Stocks are always worth buying regardless of the price! A market without price discipline is like a car without brakes. It might feel like it;s a good car while it is zooming down the highway but the moment will come when you are going to really, really, really wish that you had insisted that brakes be installed before you took it out on the highway.

In ordinary circumstances, stocks could never have gotten so overpriced that they offered a negative long-term return. But the Buy-and-Holders pulled that off with their relentless injunction to avoid market timing (price discipline!). If our economic and political systems are going to survive, we are going to have to find some way to get accurate and honest information on how stock investing works out to millions of investors. There’s just no other way. It is going to take good journalism to pull that off. So, once I saw that people in positions of responsibility were failing to take effective action to rein in the criminal behavior of you Goons, I got on the job.

I think we are going to make it. There’s going to be an ocean of human misery on the road to the promised land. I wish that we had just opened every site to honest posting on the afternoon of May 13, 2002, as I proposed at the time. But I do believe that we are a good people and that we will work up the courage to do what needs to be done when we see that we really have no other options. We’ll see.

If valuations affect long-term returns, then there is zero chance that the safe withdrawal rate is the same number at all possible valuation levels. My sincere take. Everyone needs to know that. And, since the humans were designed with a seemingly limitless desire for Get Rich Quick/Buy-and-Hold strategies, we need to be reminded of it on a daily basis each time people get together to talk about stock investing. Honest posting re what the research says should be permitted. Everywhere and at all times.

I do wish you all good things, Anonymous.

Rob