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Author: peteyperson Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 5069  
Subject: Re: FIRE Benchmarks Date: 9/23/2003 12:59 PM
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Brewer,

Petey, I think that's a rather skewed version of what actually happened. I also would not call the likes of h*cus one of the "best fools", although there were some (like Wanderer) who it was a shame to lose.

hocus is not a mainstay of the nofeeboards, he has an offshoot board from that which most including wanderer refuse to visit. I would not let hocus color your views of the group which include raddr, FMO, ataloss, therealchips etc. Many retired folks actually living the dream and happy to share their asset allocations, approach to inflation and what/how they weathered the market drops and are still up 3 years later but without risky investments! This as opposed to investors focused 100% in the US markets who are down 40%..

I guess I also take issue with your assertion that the studies backing up the "safe" withdrawal rates were somehow incorrect. As with all studies, you have to pay attention to the assumptions used and methodology followed. Those who couldn't grasp this denigrated intercst's work, but never came up with viable alternative studies or even data on alternative asset classes. So far as I can see, intercst has provided the most thorough, robust studies on safe withdrawal rates that I have seen.

The studies are fine as they are. They are based on historical performance and a mix of US stocks and US bonds.

Many informed people include Warren Buffett and William Bernstein look at the current market valuation and see that it isn't likely to deliver historic returns because it is still 40% overvalued. Prices need to correct overnight to get back to real intrinsic values or a slow correction over time which will reduce returns for that time. Buffett, Bernstein and others predict 6-7% for the next decade or two because of these factors. Secondly, during FIRE you need assets invested across a range of asset classes include international, emerging markets and other classes like real estate. This spreads your investments across different investment cycles where when the US stocks are down, international may be up and real estate delivers a nice dividend and overall your assets may not be down. This can reduce your overall return as some asset classes don't deliver as much as historical but others like emerging markets are expected over decades to deliver better results.

Markets can only mature and be richly valued so far before you reach a ceiling on growth. The more mature the economy, the lower the growth rate. The less mature, the higher the growth rate. An all US investment going forward, which is what the FIRE w/d rate reports are based upon, will deliver a lower return and at higher risk because you're not diversified to assets you can sell off to fund FIRE when your US assets have lost 40% temporarily in a recession. I would recommend you read William Bernstein's Four Pillars to move away from the twisted thinking that intercst puts forth. This board is a chance to blast away the myth of the "safe" 4% w/d rate which is highly misleading and will likely lead to disaster.

Petey
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