My hope is that this site will serve as a Learning Together resource rather than as a place for Rob to stand up on a box and shout his opinions at unfortunate passers by.
[link]General Hocomania
Rob acknowledges Greaney’s study accurately reports the historically surviving withdrawal rate
Submitted by Schroeder on Fri, 2008-06-20 20:52.Sifting through the hocomania, we see that Rob acknowledges Greaney’s study accurately reports the historically surviving withdrawal rate . . .
There are many people who have asked that Greaney call his study an Historical Safe Withdrawal Rate study. If he did this, there would obviously be no problem with it. He has never agreed to do this. And of course there is language throughout the study in which he discusses safe withdrawal rates, not historical surviving withdrawal rates. All of that needs to be changed to make the study accurate.
If it were made accurate, there would not be a thing wrong with it. The problem is the inaccuracies. I gave the study a five-star review at Soapbox.com because it does a good job of reporting the HSWR. I have no problem whatsoever with using that methodology to determine the HSWR. That's just what it does.
Hocus acknowledges the end of the secular bear market
Submitted by Schroeder on Sun, 2008-03-09 21:23.Schroeder: The Dow reached all-time highs last year.
Hocus: What a relief!
Financial Webring Analyzes Valuation Informed Investing (VII)
Submitted by Schroeder on Mon, 2008-02-18 21:48.Martingale offers this interesting comment . . .
**LINK**
If VII is really just the value effect and/or the momentum effect, that's a fairly serious criticism of it, as it could be cheaper in that case simply to follow one of those strategies instead (eg: buy and hold value stocks). It would also imply that you are not getting any free lunch if, as many have argued, there are rational reasons why value and momentum investing have higher returns than the market average. To wit, they are perhaps riskier.
I think Martingale is on to something. His rationale makes sense with respect to the value effect (though I'm not fully understanding how the momentum effect applies).
P/E10 acts like a value-based screen by raising the VII investor's stock allocation when value stocks dominate the S&P 500 (as evidence by lower P/E10 levels ). And conversely, lowers the VII investor's stock allocation when growth stocks dominate the S&P 500 (as evidence by higher P/E10 levels ).
I find this a logical explanation why VII may tend to outperform B&H, as value stocks tend to outperform growth stocks over long periods.
Now the question becomes is whether VII is still an effective value screen as it was in the past. And my answer is, probably not. And the reason is because many companies, including value stocks, have shifted their payout policy away from cash dividends and toward share buybacks. Share buybacks will have the effect of boosting prices more so than when cash dividends were the dominant payout policy.
The Goons intimidated William Bernstein
Submitted by Schroeder on Fri, 2008-02-01 21:34.I wish there was clean hoco-quote for this; it would have been nicer to make this a one-sentence deal. Oh, well. So here goes . . .
Or the William Bernstein who, when asked about SWRs at The Old Vanguard Diehards Board at a time when the Lindauer Goons were in the room and had made clear how they would deal with anyone who posted honestly on this topic,said that he had "no idea" what the SWR is?
So the Goons have intimidated William Bernstein, too? I had no idea.
The Goons have posted Lindauer's [?? I think hocus meant to refer to Bernstein] "no idea" comment hundreds of times. The Goons take comfort in it. The Goons use it to justify their Campaign of Terror. The majority of community members would like to see honest posting permitted and they would get what they want if people like Bernstein spoke up in favor of it and in opposition to the Goon tactics.
Bernstein degrades himself when he agrees to go along with the Goon agenda in this way.
"Wide range of possibilities at all valuation levels"
Submitted by Schroeder on Mon, 2008-01-28 22:48.I guess hocus didn't realize that he admitted to a major flaw in his New School methodology . . .
The historical data shows that there is a wide range of possibilities at all valuation levels, not just for those from P/E10 of 15 to P/E10 of 20. Valuations are the single most important factor; they are not the only factor.
This is quite an admission, hocus. Don't you see that this serves to undermine the validity of JWR's calculators?
This "wide range of possibilities" describes why statistical tests, like r^2, show that the historical data does not support the kinds of conclusions regarding SWRs that you and JWR espouse.
Email from William Bernstein
Submitted by Schroeder on Wed, 2007-12-26 10:46.One of hocus' favorite references is to William Bernstein's "fuggedaboudit". Ataloss recently posted the original quote from an email he received from Bernstein. LINK
the trinity study?? fuggedaboudit. the methodology is sound, but remember, there's a 7% real equity return embedded into it. who in the peanut gallery wants bet their retirement on that?
"No connection whatsoever between the SWR and the real rate of return"
Submitted by Schroeder on Wed, 2007-11-28 21:40.No connection? That's what hocus says. LINK
I think it's reasonable to believe that one's overall stash can grow by about 4 percent real per year plus any additions to saving. This is a very rough rule of thumb. People should be working their own numbers and coming up with more customized rules of thumb.
I am inclined today to suggest a higher number for those using the Valuation-Informed Indexing approach. I think that a Multiply-by-20 rule would work for a good number of aspiring early retirees. In general, though, it is better to underestimate your earnings than to overestimate them.
There is of course no connection whatsoever between the SWR and the real rate of return earned on all of your holdings. The idea that the two are the same thing is Goon Talk.
Nov 1 Blog: Reply to Scott Burns
Submitted by Schroeder on Thu, 2007-11-01 21:40.This one has got to be the best example of hocomania that Robert Michael Bennett has ever produced. It's a keeper for the ages. The best part is that Scott Burns responded to such madness. There were over 4,000 words in hocus' November 1st blog. But I managed to extract only the "Juicy Excerpts". Enjoy!
**LINK**
I don't mean to be insulting here, Scott, but I feel that I need to point out that it is your job to understand this sort of thing. Do you understand it? Are you just pretending not to understand it? Is there something about this issue and the reaction of some to honest reporting on it that causes you to not want to let into your consideration of it knowledge that in other circumstances you would be happy to make use of?
<snip>
Why do you twist yourself into logic pretzels in an effort to avoid the obvious realities that apply here?
<snip>
You should be asking yourself why you put up so much resistance to being convinced of things that are so obviously so.
<snip>
You say: "The algebra of corporate returns..." blah, blah, blah, blee, blee, blee. No one cares about algebra, Scott.
<snip>
Those peoples' retirements are in grave danger as a result of the demonstrably false claims of the Old School studies. That's the bottom line. I implore you to make that your focus in your consideration of how to proceed re this issue.
<snip>
You say "I don't know" how things will turn out for today's retirees. Precisely so. If you don't know how things will turn out, you know that the Old School studies get the number wrong.
<snip>
The difference is that the New School studies do what they purport to do; they report what will work in the event that stocks perform in the future as they have in the past. The Old School studies do not do this.
<snip>
Poking the Troll
Submitted by Schroeder on Mon, 2007-10-01 15:55.For the past few weeks, I've been "Poking the Troll" by pointing out 3 things that are hard for hocus to reconcile.
1) Hocus was featured in a Liz Pulliam Weston article. Hocus is attributed to saying that a 4% withdrawal rate is perfectly reasonable for early retirees. Hocus does not want to engage in honest and informed posting on that topic. LINK
2) In an interview, Robert Shiller revealed that he owns 60% stocks. LINK Hocus was totally flummoxed by that.
3) In another article, Robert Shiller advised investors to "diversify completely and not try to beat the market." LINK
Hocus made a heroic attempt to engage in thoughtful dialog on the last two items. However, that didn't last very long before hocus returned to his old ways. LINK
SWR vs PE10 Analysis
Submitted by sgeeeee on Wed, 2007-08-29 02:17.SWR as a Funtion of PE10
This SWR vs PE10 analysis uses the data collected and posted by JWR at (JWR NoFeeBoard Study). Basic analysis of SWR as a function PE10 is presented on intercst’s board at
50/50 Portfolio Analysis
and
80/20 Portfolio Analysis
The raw data is the result of computing safe withdrawal rate for a 30 year retirement starting in each year from 1921 to 1980 using FIRECalc (FIRECalc Historical Simulator) along with the standard unit retiree assumptions. The resulting SWR for each year is then associated with the PE10 value of the initial year in retirement.
The plotted results (SWR vs PE10) indicate that using an initial withdrawal rate of approximately 4% and adjusting for inflation would have survived at least 30 years (assuming inflation adjusted spending model and 0.2% expense ratio) for any retiree who started their retirement since 1921 regardless of PE10 value when the retirement started. In addition, the SWR-PE10 analysis indicates that SWR has been essentially independent of PE10 value for high values of PE10. In the case of a 50/50 stock/bond portfolio, the historical SWR is shown to be ~4% and independent of PE10 for values of PE10 greater than 13. In the case of an 80/20 portfolio, the SWR has been ~4% becoming independent of PE10 for values of PE10 greater than 16.
Significance of PE10 <13 and PE10<16
For PE10 values less than 13 and 16 respectively, the historical record appears to exhibit a dependence of SWR on PE10. There are several reasons why one might choose to ignore this dependence and continue to use the guaranteed safe initial withdrawal rate of 4%. Specifically, those reasons include:
1) Shiller’s data shows that PE10 has been above 13 since March 1986 and above 16 since March 1987. So, the historical data of JWR’s study indicate that PE10 values have had no impact on the SWR of anyone retiring during the past two decades or of those due to retire soon.
