Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
Fair value is what the market determines. Stocks go up and down, but continue to rise over time. We have learned that market timing doesn’t work and that people can and do go broke when following schemes like this.
Fair value is what the market determines when investors have access to discussions of the peer-reviewed research. The market obviously is not able to function properly when honest posting re the last 44 years of peer-reviewed research is prohibited at every site.
Today’s CAPE value is 33. Are we to believe that the relentless promotion of the Buy-and-Hold “strategy” had nothing to do with that?
Rob
Everyone has access to all the information they need. They can even read all of your posts that you have repeated thousands of times. What they don’t need, is to hand over their website to let us just endless repeat the same things over and over again that you have already said thousands of times. If that happened, board owners would just watch their websites deteriorate.
If they reined in the abusiveness from the Buy-and-Hold side of the table, their sites would flourish. All of the interactions that I have had with investors over the past 23 years show that. People love exploring the issues. People HATE the abusiveness that the Buy-and-Hold Goons bring to the table, It scares them and repulses them and causes them to drop out of the discussions. That’s why we have rules prohibiting such behavior at every site. Unfortunately, there’s a quick buck to be made in ignoring those rules and that reality has an influence.
We permit honest posting re peer-reviewed research in every other field of human endeavor. I don’t believe that the investment advice field can long continue to be the sole exception to the otherwise universal rule. We’ll see, you know? I think we have goodness within us and that the awful Goon stuff will not be able to survive the goodness in the final analysis.
Wish us luck!
Rob
“If they reined in the abusiveness from the Buy-and-Hold side of the table, their sites would flourish. ”
Their sites are flourishing
There are over 8,000,000 posts at Bogleheads
Millions more at other sites
Whereas Passion Saving has virtually no traffic
You got 100 likes (or thumbs up or whatever it was) on a few posts at Motley Fool and that made you think that you were an investing genius
You tried a get a Passion Saving board going at MF but that failed (that should have been a lesson to you)
Everyone who interacts with you spots your issue and points it out to you but you ignore their advice
You claimed that you would be willing to flip burgers if required but your unwillingness to contribute financially to your family left you in your current predicament
You are a one trick pony, pointing out that the SWR studies don’t fiddle the numbers but just report what withdrawal rates survived (which is something everyone else already knew), but failing to follow up with a convincing argument as to why they should do so.
You should either be willing to report accurately what is safe or not claim to be reporting what is safe. Valuations matter, Evidence. So, to identify the safe withdrawal rates accurately, you need to take valuations into consideration.
My sincere take.
Rob
When you refer to “what is safe” you are referring to what withdrawal rate will survive in the future.
That is not knowable.
The Greaney, Bengen and Trinity studies report what survived in the past and all agreed the 4% (roughly) was what survived in all cases in the past.
If you wish to carry out a different study, that estimates what might survive in the future, you are free to do so.
Insisting that other people alter studies to report (incorrectly) that 4% did not survive in the past is a ridiculous demand.
We all agree that 4 percent always survived in the past. That is not in dispute.
It was not always safe in the past. There were some valuation levels at which it was high risk but happened to survive.
People need to know that. If people want to use a withdrawal rate that has always survived but that is high-risk at the valuation level that applies on the day their retirement begins, I wish them the best of luck with it. But I am not going to say that something is safe just because it always survived in the past. To find out whether it is safe, you need to look at the factors affecting safety and the most important factor affecting safety is valuations.
I have never once suggested that anyone say that 4 percent did not always survive in the past. I have said that we all should be free to point out that it is not possible to calculate the safe withdrawal rates accurately without taking valuations into consideration and that it is irresponsible to say that there is one withdrawal rate that is safe at all valuation levels. Valuations affect long-term returns and the safe withdrawal rates changes with changes in valuation levels.
Rob
“To find out whether it is safe, you need to look at the factors affecting safety and the most important factor affecting safety is valuations. ”
To find out what is safe you need to define what you mean by safety.
The Greaney, Bengen and Trinity studies were very clear what they were calculating. If you ran out of money before the last day of the period being examined then that withdrawal rate had not survived. If your balance went to 0 (but no lower) or was positive at the end of the period then your portfolio had survived.
You need to decide what you mean by safe.
How much needs to be left at the end of the period for you to declare that it is safe? If you think that dropping to 0 (but not negative) is not safe then how much do you need? Is 5%,10% or 25% of the original portfolio needed for you to declare it safe?
If so run the numbers and report what you find.
John Walter Russell and I did that. We found that the valuation level that applies on the day the retirement begins makes a big difference. The 4 percent number comes from the 30-year time-period that began in 1929, just prior to the crash. In 70 percent of the return sequences that we have seen in the historical record, a 4 percent withdrawal failed for a retirement beginning in 1929. A lucky returns sequences turned up and 4 percent survived. But there was no guaranty that that would happen. Those retirements were lucky, not safe.
People using the 4 percent rule need to know about the risk that they are taking on by doing so.
Rob
“In 70 percent of the return sequences that we have seen in the historical record, a 4 percent withdrawal failed for a retirement beginning in 1929.”
In the only actual returns sequence that happened from 1929 onwards, 4% survived.
70% of the simulated sequences in your calculator for a 1929 valuation 4% did not survive.
I will leave it as an exercise for the reader to decide whether to base their judgement on reality or your calculator.
Of course it is up to the individual investor to decide how to act on the information presented. The key is that both Buy-and-Holders and Valuation-Informed Indexers should always feel 100 percent free to make their case. There should never be any intimidation in the discussions.
Rob
“The key is that both Buy-and-Holders and Valuation-Informed Indexers should always feel 100 percent free to make their case. ”
Everyone is free to make their case. You have made your case numerous times at numerous boards and the message has been rejected over and over again.
Everyone should also be free to reject the case that is being made.
Rather than improving your arguments or accepting the repeated advice to change the way you go about things you choose to avoid actual discussion.
You are much more comfortable getting banned and being able to complain about being banned than actual discussion of investing issues.
I’m not willing to say that I believe that the Greaney retirement study contains a valuation adjustment. I sincerely believe that it lacks one. I am going to continue to say that.
Rob
“I’m not willing to say that I believe that the Greaney retirement study contains a valuation adjustment. I sincerely believe that it lacks one. I am going to continue to say that.”
And you prove my point.
You are very good at stating that the Greaney study doesn’t contain a valuation adjustment.
You much less good at stating why it should contain such an adjustment.
Because you recognize your weakness at explaining why it should contain such an adjustment you choose not even to try.
That is why you are more comfortable getting banned than engaging in debate.
That is why you choose not to contribute at reddit.
You could even set up a r/passionsaving subreddit if you wanted to.
But you are more comfortable in an environment where you don’t have to defend your ideas and where you can remove posts that you don’t like.
No one has told you that you must agree with them and no one has to agree with you. You made your own choices and we have made our choices. You need to learn how to deal with that reality.
It’s self-evident why a valuation adjustment is needed, Evidence. Shiller showed that valuations affect the result. So they have to be considered.
The real question is — Why didn’t the people who developed the Buy-and-Hold strategy say from the beginning that valuation-based market timing is always 100 percent required for every investor. It appears to me that it was their belief in the Efficient Market Theory that confused them. If the market were efficient, there never would be any overvaluation. So there would be no need for market timing. But of course Shiller discredited the Efficient Market Theory. So that’s ancient history at this point.
Other than that, it’s loony tunes to think that valuation-based market timing would not be required. Do you think that investors can just bid stock prices up to whatever they want them to be and there’s no price to be paid, that the stock market is just a money machine. Wade Pfau devoted 16 months of his life trying to find some indication in the peer-reviewed research that valuation-informed market timing isn’t required and of course he came up empty-handrd. The idea is preposterous.
Given that price discipline is required in every other market that ever existed, 3why wouldn’t it be required in the stock market? The only reason why anyone suggests it might not be is that the Buy-and-Holders made a terrible mistake a long time ago and now they don’t want to acknowledge it. Which of course just compounds the mistakes. There has never been on iota of evidence that valuation-based market timing is not required. A stock market in which market timing is not required is like a perpetual motion machine. It doesn’t exist because it cannot exist.
Markets set prices. That’s what they do. Investors need information to set prices properly. Deny them the information they need through these abusive tactics and it takes the market longer to get prices right. So we have these horrible price crashes and economic collapses. Permit honest posting re the peer-reviewed research and the market could get the price right much more quickly and we would all live better and happier lives. Buy-and-Hold is a marketing gimmick, nothing more and nothing less. It causes an ocean of human misery and serves no good purpose whatsoever.
If Buy-and-Hold were a real thing, all Buy-and-Holders would welcome challenges to it. The Buy-and-Holder live in fear that people will discover the peer-reviewed research and all the Get Rich Quick garbage will come tumbling down. It’s not possible to criticize the case for Buy-and-Hold because no case in favor if it has ever been presented. It’s OBVIOUS that you can’t just create phony baloney money and then count on it for your retirement.
The unfortunate thing is that we humans all carry a desire for Get Rich Quick stuff within us. So Buy-and-Hold has appeal. But what happens after the next Buy-and-Hold Crisis, when we will all see up close and personal the negative side of going with a pure Get Rich Quick “strategy”?I have hopes that that will be a turning point. We’ll see, you know?
I know for certainty that I don’t want to be on the side saying that the safe withdrawal rates is always the same number. That’s a logical impossibility in a world in which valuations affect long-term, returns. That’s the world that we live in, according to the last 44 years of peer-reviewed research in this field.
Research matters.
Rob
No one has told you that you must agree with them and no one has to agree with you. You made your own choices and we have made our choices. You need to learn how to deal with that reality.
I felt 10 times better about myself once I worked up the courage to post honestly re the error in the Greaney retirement study. I have never looked back and I very much doubt that I ever will.
Rob
I feel 10000 times better having money in my retirement accounts and having an intact marriage instead of being broke and divorced. Results matter.
Okay, Anonymous.
I naturally wish you all the best that this life has to offer a person, in any event.
Hang in there, old friend.
Rob