A Rich Life

The Old Ideas on Saving & Investing Don't Work -- Here's What Does

Buy-and-Hold Goon to Rob: “There Is Also Value in Recognizing That You Are NOT Going To Be Able to Calculate a FUTURE Safe Withdrawal Rate Accurately.”

by

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

“There’s value in calculating the safe withdrawal rate accurately before one hands in one’s resignation.”

There is also value in recognizing that you are <b>not</b> going to be able to calculate a <b>future</b> safe withdrawal rate accurately.

Any risk determination involves looking at what may happen in the future. That’s what the words mean.

It is not possible to know what withdrawal rate is going to SURVIVE in the future. I completely agree with that much. There’s always a range of possibilities. When the safe withdrawal rate is 1.6 percent (as it was in 2000), it is entirely possible that a withdrawal rate a good bit higher than that will survive. If a particular retiree wants to use a higher number as his personal withdrawal rate, that is of course fine. It is his choice.

But we shouldn’t be telling people that a withdrawal rate of 4 percent is “100 percent safe” at a time when the safe withdrawal rate is 1.6 percent and a 4 percent withdrawal has only a 30 percent chance of working out. Just because we do not know precisely what withdrawal rate is going to survive doesn’t justify reporting inaccurate numbers.

The safe withdrawal rate is defined as the highest withdrawal rate that would work in a worst-case scenario, the worst returns sequence that we have seen in the historical record. The error in the Buy-and-Hold studies is that they do not adjust for valuations. They report the SAME NUMBER as being safe at all valuation levels.

If the market were efficient, that would be correct. But Shiller showed that the market is NOT efficient in research that was published in 1981, that valuations affect long-term returns. When you take valuations into consideration, you see that a withdrawal rate that would work just fine at moderate valuation levels could easily produce a failed retirement for a retirement beginning at insanely high valuation levels. Whether that retirement will survive 30 years or not depends on what returns sequence happens to turn up. In many of the return sequences that we have seen in the past, it fails. In some, it succeeds. That’s not “100 percent safe.” That’s not what “100 percent safe” means.

The word games serve no good purpose, Evidence. A failed retirement is a serious life setback. We should be permitting honest posting re this subject at every site on the internet.

That’s my sincere take, in any event.

Rob

Valuation-Informed Indexing #600: The Investment Issues That We Cannot Talk About Are the Investment Issues That We Most Need to Talk About

by

I’ve posted Entry #600 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Investment Issues That We Cannot Talk About Are the Investment Issues That We Most Need to Talk About.

Juicy Excerpt: When we develop a strong aversion to looking at something, there is a reason. Often the reason is that it is very important that we look at the thing that we do not want to look at.

“I Am Banned for One Reason and One Reason Only. I Am the Person Who Pointed Out the Error in the Retirement Study Posted at John Greaney’s Web Site.”

by

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

You are not blocked because of you opinion on investing. You are blocked because of your poor behavior. Using this last post as an example, you make allegations of a criminal act, yet fail to provide proof of such. You claim Wade’s job was threatened when it was not. Wade also asked you to stop posting damaging comments about him, yet you continued. You keep repeating the failed lie about “honest” posting that is actually dishonest.

All these people stopped talking to you 15 years ago, yet you still won’t admit that you are the problem versus everyone else.

I am banned for one reason and one reason only. I am the person who pointed out the error in the retirement study posted at John Greaney’s web site. Before my famous post on the morning of May 13, 2002, I was the most popular poster at the Motley Fool site. Greaney himself had a post that served as an introduction to all newcomers to the Retire Early board in which he urged them to read my stuff before looking at anything else because it was “seminal” material. From the moment that I put forward the post pointing out the error in the Greaney study, it has been relentless attacks from Greaney and his Goon pals for 20 years running.

Wade LOVED doing honest work. I have 16 months of e-mails in which he over and over again expressed how excited he was over the research he was doing with me showing how big an advance it was to move from Buy-and-Hold to Valuation-Informed Indexing. You have a tiny number of posts that he put forward with a gun to this head (figuratively) because you Goons threatened to get him fired from his job is he continued doing honest work. Gee, I wonder what was going on there.

Wade is going to flip back in the days following the next price crash, presuming that stocks continue to perform in the future somewhat as they always have in the past. We will all pull together, open every site on the internet to honest posting re the past 41 years of peer-reviewed research, and live better lives from that point forward as a result.

My sincere take.

Rob

“The Problem Here Is That Natural Process of Fixing Mistakes After They Are Revealed Has Not Applied in the Investment Advice Realm. There Is a Lot of Money That Flows From Being Recognized As an Expert in the Investment Advice Realm. And People Feel That Acknowledging This Huge Mistake Will Make People Feel That They Are Not Really Experts. So Instead of Acknowledging the Mistake and Fixing It, We Have Been Covering It Up for 41 Years Now. Which Makes It Really Hard to Change Course.”

by

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

Again, what friends?  You put a link to posts that are from 2001 to 2007, which are from 15 to 21 years ago (which also lack and context).  Where are these friends?

Everyone on the planet wants to know how to invest effectively, Anonymous. There is not a single exception. Everyone alive is my friend.

Does that include you Goons, people who have threatened to murder my loves ones if I continue to post honestly re the error that John Greaney made in the retirement study posted at his web site? It does. It doesn’t appear that way on the surface, I of course get that. But why this insane intensity on the part of you Goons to block millions of people from learning about what the last 41 years of peer-reviewed research in this field teaches us all about how stock investing works in the real world? You don’t feel that intensity because you believe that getting the safe withdrawal rate right doesn’t matter. You feel that because you believe that getting the safe withdrawal rate right matters a great deal. You can’t bear to acknowledge the mistake you made. But imagine that you had never made the mistake. Imagine that this was the first time we were ever discussing safe withdrawal rates. Then you would be thrilled to talk things over with me without any abusive stuff sidetracking the discussions. If we could come to this stuff fresh, we would be the best of friends.

We made a mistake AS A SOCIETY back in the 1960s. I don’t believe that there was any bad intent. We just didn’t know it all at that time. So we were vulnerable to making mistakes and we made one on the biggest issue out there (whether market timing is always 100 percent required for every investor or whether there might be some circumstances in which it might not even work). We messed up. Big deal, right? When you mess up, the truth eventually comes out and you fix the mistake and you move forward. That process of fixing mistakes is just part of life.

The problem here is that natural process of fixing mistakes after they are revealed has not applied in the investment advice realm. There is a lot of money that flows from being recognized as an expert in the investment advice realm. And people feel that acknowledging this huge mistake will make people feel that they are not really experts. So instead of acknowledging the mistake and fixing it, we have been covering it up for 41 years now. Which makes it really hard to change course. Now it’s not just the embarrassment of acknowledging the mistake that people are worried about. It’s the prison sentences for the criminal acts that were committed as part of the cover-up and the civil lawsuits to recover financial losses and on and on and on. The more damage the mistake causes, the greater the intensity of the desire to cover it up becomes.

I am working at cross purposes with the people who want the cover-up to continue. I want to help every single person involved by bringing the cover-up to a full and complete stop, by opening every internet site to honest posting re the last 41 years of peer-reviewed research. I oppose the cover-up. But you know what. A lot of the people working to keep the cover-up going deep down inside would like to see the same laws that govern behavior in every field of human endeavor outside of the investment advice field to apply in the investment advice field as well. People who work in this field at basically the same as people who work in all other fields. They want to be free to do honest work. They want to be free to help people rather than destroy their lives.

So, yes, all of those people are ultimately on the same side as me. Yes, they are all my friends. We are in unfortunate circumstances at this moment in time that have made some people feel pressured to pretend that they are not my friends. But the idea of having a ban on the discussion of Shiller’s Nobel-prize-winning research at every site on the internet is just not a viable long-term proposition. When you discover that you have made a mistake about something important (safe withdrawal rates are important), you need to correct the mistake and get on with your life. There is just no other way to play it.

I am your friend and you are my friend. You cannot bear to acknowledge it at this time. But how about after the next price crash? If stocks continue to perform in the future anything at all as they have always performed in the past, you are going to be seeing millions of lives destroyed as a result of your relentless promotion of the pure Get Rich Quick/Buy-and-Hold “strategy..” I have a funny feeling that you are going to recognize then that I was being your friend all along by suggesting that we open every site on the internet to honest posting. It’s important that mistakes be corrected and the only way that it can ever happen is for us to permit honest posting. People are not going to correct mistakes until they see that they are indeed mistakes and that can’t happen until they first give themselves permission to talk things over.

We’ll see, okay?

Rob

Buy-and-Hold Goon to Rob: “We Just Established That Greaney Is Irrelevant. So His 20 Year Old Study Is Even More Irrelevant. This Insane Merry-Go-Round Has Been Spinning for 20 Years and Gotten You Nowhere, Leaving Your Real Life an Utter Train Wreck. How Many More Years Before You Finally Step Off the Carousel? The Apparent Answer Is “All of Them”.

by

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

“It’s a good thing to point out an error in retirement study. “

We just established that Greaney is irrelevant. So his 20 year old study is even more irrelevant. You replied that the real problem is his behavior (although any “behavior” in regards to you ended many years ago, so that is also irrelevant.) Now you’ve jumped right back to his irrelevant study.

This insane merry-go-round has been spinning for 20 years and gotten you nowhere, leaving your real life an utter train wreck. How many more years before you finally step off the carousel? The apparent answer is “all of them”.

I’m out. Good luck, Rob.

I naturally wish you all the best that this life has to offer a person, Miasma, regardless of what investment strategy you elect to follow.

Rob

“It’s Not Really Greaney That Is the Problem. The Problem Is That Many Normals TOLERATE Greaney’s Behavior. So Behavior Norms That Apply in Every Other Field of Life Endeavor Do Not Apply in the Investment Advice Realm.”

by

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

“When he saw the article in the Wall Street Journal saying that I had been right all along, he gave me a call. I told him about the bans. He was shocked. He said that he was going to put up a post at the Bogleheads Forum telling the story. I told him that he would be banned if he did. He made a bet with me that he would not be banned. Of course he was banned within 30 seconds of advancing the post.”

First of all, I have no doubt that everything in that paragraph is a lie. Which of course is nothing new.

Will you ever get past your Greaney obsession? It’s been 20 years and you’re just as pissed as on day one. Constantly ripping on him only reflects on you. Your current real-life isolation and squalor should have clued you into that by now. Greaney is nobody, except presumably to Mrs. Greaney. Comparing Bengen to Greaney is like comparing Elvis to the third backup Elvis impersonator in Pig’s Knuckle, Arkansas. Yet you just can’t help yourself.

It’s not really Greaney that is the problem. The problem is that many Normals TOLERATE Greaney’s behavior. So behavior norms that apply in every other field of life endeavor do not apply in the investment advice realm. Hence that CAPE value of 35 that applies today. I can handle Greaney so long as everyone around me enforces the same laws in the investing advice field that they enforce in every other field of human endeavor.

Rob

“It’s Not Hard to Calculate These Numbers Accurately. If This Were Any Other Field of Human Endeavor, We Could Get All the Errors Corrected in 15 Minutes. The Problem Is That in the Field of Stock Investing People WANT To Be Told Lies. If the Experts Report the Numbers Honestly and Accurately, They Lose Their Jobs. I Have Been Doing This Too Long to Believe That One Article Is Going to Change the World. If It Was That Easy, Bernstein’s Book Would Have Changed the World Back in May 2002.”

by

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

  1. “There’s no news in knowing that 4 percent is not always safe.”

    When the creator of the 4% rule says 4% is no longer safe, in the friggin Wall Street Journal, it’s huge news. Many times more people saw that article than Bernstein’s obscure twenty year old book. Thousands of times more people than saw Greaney’s study. Millions of times more than remember Greaney’s study (pretty much only you and Greaney.)

    But to you, it’s all meh. Funny how you always have an excuse for taking no action yourself. You accept no personal responsibility for anything or anyone. It’s always “we have to…” meaning other people. When are you, Rob Bennett, going to do something more than make a note for yet another unseen ValueWalk repetition?

    The Wall Street Journal had an article saying that the 4 percent rule is in error many years ago. I had a friend (Brian) at my last corporate job and we had discussed safe withdrawal rates when we worked there together. This was before I ever posted to Motley Fool. He was a Buy-and-Holder. He told me in a friendly way that I was nuts.

    When he saw the article in the Wall Street Journal saying that I had been right all along, he gave me a call. I told him about the bans. He was shocked. He said that he was going to put up a post at the Bogleheads Forum telling the story. I told him that he would be banned if he did. He made a bet with me that he would not be banned. Of course he was banned within 30 seconds of advancing the post.

    It’s not hard to calculate these numbers accurately, Miasma. If this were any other field of human endeavor, we could get all the errors corrected in 15 minutes. The problem is that in the field of stock investing people WANT to be told lies. If the experts report the numbers honestly and accurately, they lose their jobs. So they feel a lot of pressure to either pretend that they believe in the Buy-and-Hold stuff or to actually force themselves to believe it.

    Will it change in the days following the next price crash? That’s the question.

    Do you want to take a bet on whether Greaney corrects his study as a result of this latest Wall Street Journal article? I know which side of that bet I want to be on.

    I’m happy that Bengen is telling at least some of the truth re this matter. But it is going to take more than one somewhat accurate article to get that CAPE value down to a reasonable level. People believe things that they hear over and over again. And the steady drumbeat of the Buy-and-Holders is not going to be drowned out by a single somewhat accurate article in the Wall Street Journal. If we opened every site to honest posting, we would see real change. One article will be ignored by all the people making money pushing the Buy-and-Hold garbage.

    I am happy to see anything honest appear. But I have been doing this too long to believe that one article is going to change the world. If it was that easy, Bernstein’s book would have changed the world back in May 2002.

 

Buy-and-Hold Goon to Rob: “When the Creator of the 4% Rule Says 4% Is No Longer Safe, in the Friggin Wall Street Journal, It’s Huge News. Many Times More People Saw That Article Than Bernstein’s Obscure Twenty Year Old Book. Thousands of Times More People Than Saw Greaney’s Study. Millions of Times More than Remember Greaney’s Study (Pretty Much Only You and Greaney.)”

by

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

“There’s no news in knowing that 4 percent is not always safe.”

When the creator of the 4% rule says 4% is no longer safe, in the friggin Wall Street Journal, it’s huge news. Many times more people saw that article than Bernstein’s obscure twenty year old book. Thousands of times more people than saw Greaney’s study. Millions of times more than remember Greaney’s study (pretty much only you and Greaney.)

But to you, it’s all meh. Funny how you always have an excuse for taking no action yourself. You accept no personal responsibility for anything or anyone. It’s always “we have to…” meaning other people. When are you, Rob Bennett, going to do something more than make a note for yet another unseen ValueWalk repetition?

 

 

“There’s No News in Knowing That 4 Percent Is Not Always Safe. Those Who Have Been Paying Attention Have Known That for Many Years, for Two Decades Really. But Why Did Smart People Make That Mistake and Why Did Other Smart People Tolerate It for So Long? That’s the Important Question.”

by

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

“It’s not exactly news…What good has it done”

So now you’re just a burned-out nihilist. Doing nothing but bitching all day, every day. Which somehow is vitally important to save the world, leaving no time for anything else, like your family for example.

Coming up on your next self-imposed book deadline. The world awaits.

I don’t think that I am a nihilist at all. When I saw your comment, I added an item to the list that I keep of columns that I intend to write for the ValueWalk.com site. The title for that one is “It’s Not Just Getting the Safe Withdrawal Rate Studies Corrected, It’s Coming to Terms With Why We Got Them Wrong.”

There’s no news in knowing that 4 percent is not always safe. Those who have been paying attention have known that for many years, for two decades really. But why did smart people make that mistake and why did other smart people tolerate it for so long? That’s the important question.

The answer is that we all have a Get Rich Quick/Buy-and-Hold urge residing within us. We all want something for nothing. So we lie to ourselves. We tell ourselves that the safe withdrawal rate is the same number when the CAPE is 44 as it is when the CAPE is 8. It’s nonsense, of course. Dangerous nonsense. But it is dangerous nonsense that we all like to hear. It is dangerous nonsense that SELLS.

Will we permit ourselves to advance in our understanding of how stock investing works in the days following the next price crash and live better lives from that point forward as a result? I hope so, you know? I like the humans. So I would like to see them learn what they need to learn so that they can all live better lives.

My best and warmest wishes to you, Miasma.

Rob