“Had We Opened Every Site to Honest Posting in a Short Time from May 13, 2002, We Could Have Gotten the CAPE Value down (Through Market Timing!) and Avoided the Economic Crisis of 2008. That Alone Would Have Had Huge Economic and Political Benefits for All of Us.”

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

The problem with you claiming that intercst should have corrected the study that day is that your suggestion would not have come up with a number lower than 4%. You suggested dividing the withdrawal rates that survived in to 3 buckets (from high, medium and low stating valuations). All the 30 year surviving percentages were 4% or higher, dividing those numbers into 3 groups would not have changed that.

I didn’t know on May 13, 2002, that the safe withdrawal rate for retirements beginning in January 2000 (the high point of the bubble) was 1.6 percent. I learned that as the result of the research that I did with John Walter Russell. But it was my May 13, 2002, that made John Walter Russell aware of the aituation and that led down the road to our research efforts.

So Greaney couldn’t have said on May14, 2002, precisely what the safe withdrawal rate was at all of the various CAPE levels. That research had not yet been done. But it was obvious that the correct number was lower than 4. 4 is the number you get when you don’t count valuations. Valuations were sky high at the time. The correct number was obviously a number a good bit less than 4.

Greaney should have added language to the study noting that he had failed to include a valuation adjustment and that the correct number was obviously a good bit less than 4. Then he should have participated in the research efforts to identify the correct number (both John Walter Russell and I invited him to join us and many, many community members would have been thrilled if Greaney dropped all the abusive stuff and participated in constructive efforts).

The goal of everyone should be to get the numbers right. That’s why I constantly say that we need to open every site to honest posting, It is possible that someone somesay will come up with an argument that the best number for retirements beginning in January 2000 was 1.5 or 1.7, not 1.6. If that happens, we will need to incorporate that new knowledge into our collective understanding (and we should of course thank the person who provided it). Under no circumstances should we threaten to murder the loved ones of those who add to our knowledge base. There shouldn’t be any controversy over that one. And there wouldn’t be any in any field of human endeavor other than the investing advice field (where there are dollars attached to attaining a reputation for possessing expertise and thus a particular unwillingness to acknoowledge errors made when not all the reaseah needed to know everything was avalable).

Greaney’s abusive behavor began about an hour after I put up the fateful post. I don’t believe that he knew at that time that the correct number for retirements beginning in January 2000 was 1.6 percent. But he clearly knew that he had not included a valuation adjustment in the study and that there was good reason to believe that one was needed to get the numbers right. Just saying that would have been a huge help. We had an entire community of people excited about the propsct of rolling up its sleeves and getting to the bottom of the safe withdrawal rate business. We lost our best people after they saw the death threats and the other garbage that you Goons advanced. But on the morning of May 13, 2002, we were in an amazing place to do some amazing work together that would have helped millions of people. Had we opened every site to honest posting in a short time, we could have gotten the CAPE value down (through market timing!) and avoided the economic crisis of 2008. That alone would have had huge economic and political benefits for all of us.

Rob