“Reporting the Numbers Accurately and Honestly Lets People See How Dangerous It Is to Persuade Millions of People That It Is Not Always 100 Percent Necessary to Engage in Long-Term Market Timing. ‘Forget’ to Engage in Market Timing and You Are Going to See a Bull Market. Have a Bull Market and You Are Going to Have a Bear Market. Have a Bear Market and You Are Going to Have an Economic Crisis. Have an Economic Crisis and Millions of People Are Going to Lose Their Jobs and We Are Going to See an Increase in Political Frictions.”

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

“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. “

There is no need to include a valuation adjustment in a study that reports on past withdrawal rates (the withdrawal rates that survived are the withdrawal rates that survived, no need for any adjustment)

If you wish to estimate what withdrawal rates will survive in the future, or estimate the probability that they will survive, then you may wish to consider valuations or other factors.

There is no harm in letting people know that the Historical Surviving Withdrawal Rate is 4 percent. But most people planning retirements want to know the SAFE withdrawal rate. That’s why Greaney did not correct the error. He wanted to continue to mislead people into thinking that 4 percent was the SAFE withdrawal rate. People love thinking that the safe withdrawal rate is always the same number, In a world in which the safe withdrawal rate was always the same number, there would be no negative consequences that would follow from pumping irrational exubernce up to insane levels. What a world, you know? The perpetual-motion-machine approach to investment analysis.

Back in the real world, the safe withdrawal rate is a number that ranges from 1.6 percent to 9.0 percent, depending on the valuation ;level at the time of the retirement. Reporting the numbers accurately and honestly lets people see how dangerous it is to persuade millions of people that it is not always 100 percent necessary to engage in long-term market timing. “Forget” to engage in market timing and you are going to see a bull market. Have a bull market and you are going to have a bear market. Have a bear market and you are going to have an economic crisis. Have an economic crisis and millions of people are going to lose their jobs and we are going to see an incresse in political frictions.

All 100 percent unnecessary in a day when Shiller’s Nobel-prize-winning research is available for all of us to discuss. So long as most investors are regularly engaging in market timing, you could never again see an out-of-control bull market. Stock prices are self-regulating in a world in which honest posting re the peer-reviewed research is permitted. High prices bring sales of stocks, which bring lower prices. It all works nicely so long as honest posting re the last 41 years of peer-reviewed research is permitted at every site, without a single exception.

Yes?

Rob