Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
A 4 percent withdrawal rate has always worked. That’s an objective fact. At some CAPE levels, a 4 percent withdrawal rate is super, super, super safe. At others, it is high-risk. There were a tiny number of occasions when a 4 percent withdrawal rate was high risk but worked all the same. Having a high-risk withdrawal rate work on one or two occasions doesn’t turn it into a safe withdrawal rate. That’s like saying that driving drunk and not getting killed on a tiny number of occasions transforms drunk driving into a safe way to drive. To determine whether something is safe or not, you have to look at the factors affecting safety. In stock investing, the number-one factor affecting safety is the CAPE level.
Market timing is price discipline. Price discipline always works for anything that can be purchased. It is impossible for the rational human mind to imagine any circumstances in which market timing might not work. The peer-reviewed research that I co-authored with Wade Pfau shows that market timing has been working very well for as far back as we have records of stock prices. I knew when Wade and I began that project how it was going to turn out. Because it is a logical impossoibility that it could have turned out any other way. (I did not anticipate how dramatic the results would be, however — I think that I had been brainwashed a bit by the relentless promotion of the Buy-and-Hold dogmas.)
If the market were efficient, market timing would not work. Because, if the market were efficient, there would not be mispricing (the reason why market timing works is that the market will always correct a mispricing — it is the core job of all markets to get prices properly). Shiller was awarded a Nobel prize for his amazing research because he was the one who showed that the market is not efficient. Once the foundation stone for Buy-and-Hold was discredited, we all should have begun the move to a better strategy. To make that move effectively, we need to open every discusion board and blog on the internet to honest posting re the the last 41 years of peer-reviewed research in this field, without a single exception. We all should be united in wanting to learn as much about this stuff as possible.
My sincere take.
Rob
You feel as if you can make claims about percentages and risk, yet admitting you are not a numbers guy, nor do you have any technical or analytical capability. Really. Shiller and Pfau don’t even make these claims around these numbers, despite the way you spin the story.
Wade Pfau devoted 16 months of his life to the study of my ideas on stock investing and concluded that: “Yes, Virginia, Valuation-Informed Indexing works!”
Robert Shiller wrote an entire book on the subject of irrational exuberance and was awarded a Nobel prize for the research on which that book was based.
If your point is that it is possible that in the 600 columns I have written for the Value Walk site, I might have gotten something wrong somewhere, then I agree. That’s why I say over and over and over again that we need to open every discussion board and blog on the internet to honest posting re the last 41 years of peer-reviewed research in this field, without a single exception. If I get something wrong and the entire internet is opened to honest posting, someone is going to catch my error and point it out, no? That’s a good thing, no? When an error is discovered, we all learn something (ESPECIALLY the person who made the error). To permit honest posting is a big plus.
I pointed out an error in the retirement study posted at John Greaney’s web site on the moring of May 13, 2002 (it lacks an adjustment for the valuation level that applies on the day the retirement begins). The Greaney study has not been corrected to this day. That’s the downside of a Ban on Honest Posting. When we ban honest posting, we all miss out on important learning experiences. That leaves us all dumber re the subject matter at issue than we would be if we permitted (or, better yet, ENCOURAGED) honest posting.
None os us knows today as much about stock investing as we would have known had we opened every site to honest posting re the past 41 years of peer-reviewed research on the afternoon of May 13, 2002, as I proposed at the time. That includes me. I have learned as much as I can. I have written hundreds and hundreds of columns re things I learned as the result of working up the courage to advance that famous post of May 13, 2002. I have desgined five unique calculators based on what we have learned from the last 41 years of peer-reviewed research. I am close to completing a book on the new model of understanding how stock investing works that follows from Shiller’s Nobel-prize-winning research and that replaces the now-long-discredited Buy-and-Hold Model. But you know what? I would know a lot more about this subject if all Valuation-Informed Indexers and all Buy-and-Holders had felt 100 percent free to post their sincere beliefs for the entire 20 years.
It pains me to think about how many amazing learning experinces I have missed out on because of the absuive efforts of you Goons and because of the failure of so many good Normals to work up the courage to stand up to you and insist that you knock off the funny business. That said, I believe that the good news here is 20 times more good than the bad news here is bad. We are still going to enjoy all of those amazing learning experiences, they are just going to be a bit delayed. I believe that the good people of this nation will pull together to insist that every site on the internet be opened to honest posting re the last 41 years of research in the days following the next Buy-and-Hold Crisis. Oh, will that be a time!
I hate it that we are going to have to see so much human suffering to get there. But I suppose that it takes what it takes. I do believe that we will all get there someday in the not too terribly distant future. We’ll see.
My best and warmest wishes to you and yours, Anonymous.
Rob
You have made lots of claims about Pfau and Shiller, yet none of them promote you, VII or any market timing scheme.
Open up every discussion board and blog on the internet to honest posting re the past 41 years of peer-reviewed research and see what happens. I would be willing to bet you five dollars that within one year we would have THOUSANDS of experts in this field (including Shiller and Pfau) arguing that market timing is always 100 percent required for every investor.
Game?
Rob
Every board is open to honest (truthful) posting.
Are they all open to a discussion of how to combat irrational exuberance?
What conclusions have they come to?
Rob
“ What conclusions have they come to?”
They have concluded that pinning your hopes on getting a $500 million windfall is the definition of insanity.
Okay, Anonymous.
Rob