Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
Don’t you care about SWR at all? If so you would have some insight or opinion on the substance of Wade’s article. Assuming you even read it.
It’s cool that Wade is getting deeper into this stuff. I am not persuaded by every word that he wrote. But that doesn’t matter much. What matters is that he is digging. That’s how we all learn. So my first reaction is just to be excited that he continues to dig deeper into this stuff.
This paragraph sounds like a cop-out to me: “It is not a conservative guess about a safe withdrawal rate, but rather it is the best guess based upon the historical relationship between withdrawal rates, market valuations, and interest rates. It could end up being more or less (we won’t know which for another thirty years).”
It’s fine to calculate the “best guess” rather than the “safe” number. I have zero problem with that. John Walter Russell and I did that with the Retirement Risk Evaluator. The withdrawal rate that has only a 50 percent chance of working out (rather than a 95 percent chance — defined as “safe”) is the “best guess” number because factors that cannot be known can push it in either direction.
But people want to know the “safe” number to plan their retirements. It is hard for me not to speculate that the reason why Wade does not want to give that number is that he knows that you Goons will come after him if he writes honestly about this question. This is an important matter. He should not permit your intimidation tactics to influence him.
We obviously do not know what number will barely work at the end of 30 years. But we know what the odds are of various possibilities. He should be willing to identify the “safe” number (the number that is virtually certain to work (John and I defined “safe” as the number with a 95 percent chance of working out).
Wade is trying to stay out of trouble and he is putting millions of middle-class retirements at risk to do so. This is where we part company. There’s still good stuff in the article and I think we all should be grateful that Wade continues to do the good work he does. But he is not being fully honest here. He is playing games. I find it highly offensive and irresponsible and, frankly, shameful.
People don’t behave like this in other fields of human endeavor. People shouldn’t behave like this in the investing advice field either. I of course have sympathy for the fact that Wade has kids to feed and he fears the consequences of behaving in a fully honest manner re these questions. But there are responsibilities attached to putting yourself forward as an “expert” in this field. Wade knows about the history of this question and he knows how dangerous the Old School SWR Studies are and I am not able to feel good about his ducking of this very important question.
That’s my sincere take re that one, in any event. We won’t KNOW what will survive for 30 years. OBVIOUSLY. No one ever thought we could know such a thing. But we know the worst case scenario today. And we should tell people that. To duck the question just extends the cover-up to the great harm of every single person involved.
I don’t personally buy what he is saying about interest rates. It seems to me that the effect of interest rates would be factored in to the price. So you don’t need to separately count that. Mispricing is the product of emotion, which by definition CANNOT be factored in (investors cannot be aware of their own irrationality — if they were they would stop being irrational!). It’s possible that I am wrong. I certainly don’t object to Wade looking at the question. But I am not personally convinced at this point in time.
Saying that “investors should remain cautious and flexible” is just verbiage. It tells us nothing. The Old School SWR studies were promoted in thousands of places. The numbers in those studies are wildly off the mark from the numbers you get from an accurate and honest analysis. That’s the headline here. Wade should be focused on warning people about the dangers of the Old School studies and about the need to get them corrected immediately and about the 14-year cover-up and about the intimidation tactics that have been employed to keep him from promoting the research that I co-authored with him. AND he should continue digging, as he does in this article. That’s my take.
What I am saying here benefits ALL of us, Anonymous. Including you Goons. The worst thing for all of us is continuation of the cover-up. You don’t see it and Wade is afraid to take you on at this point in time. But I am pretty darn sure that we will all be breathing a lot easier when this massive act of financial fraud comes to a full and complete stop.
My bottom line is that there is a mix of good and bad in this article. The continued probing will yield good fruit in time, I have no doubt of that. But Wade is ducking the most important issues. And that’s a darn shame. For everybody.
Again, thanks for bringing the article to my attention. I am happy to know about it even if I am not 100 percent thrilled with the content.
I guess those observations ended up not being so terribly brief after all!