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Author: JWR1945a One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74759  
Subject: They Got It Wrong Date: 6/19/2008 3:27 PM
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From my web site (edited):

They Got It Wrong

The original Safe Withdrawal Rate studies broke new ground. They advanced our knowledge of retirement finances tremendously. Yet, it is amazing how many things they got wrong.

What They Got Wrong

Early researchers tried to avoid probability and statistics. This leads to serious errors as valuations approach extremes, as they do today.

Early researchers did not attempt to find a measure of valuations, nor did they seek to exploit such a measure. Yet, introducing valuations is the most important factor by far.

Early researchers treated bonds simply as single year trading vehicles, sometimes including the effect of capital gains and losses, but more often simply varying the single year interest rate. This led them to overlook the true benefits of fixed income securities. They missed out on powerful alternatives to stock portfolios.

Early researchers rebalanced portfolios annually. This eliminates the upside and offers very little protection on the downside. Compared to using valuations, this is a horrible mistake.

Early researchers estimated the 30-Year Safe Withdrawal Rate to be 3.9% or 4.0% (plus inflation).

What They Got Right

The original Safe Withdrawal Rate researchers invented the historical sequence method. This gives us tremendous insight as to why retirement finances fail. The key failure mechanism: selling shares when prices are depressed.

What Others Got Wrong

The most serious error was freezing the research at its original findings. The original findings suggest using a high stock allocation with annual rebalancing. This turns out to be a horrible choice for today’s retirees.

Freezing the research also froze out the solutions. Knowing that selling shares at depressed prices causes failure, a much better alternative would be to rely on dividend strategies that avoid the need to sell. This turns out to be far superior to the liquidation strategies.

Not treating bonds properly caused researchers to overlook realistic bond alternatives. A TIPS ladder or a corporate bond ladder, with care to lock in higher interest rates, makes a lot of sense. Both approaches offer powerful alternatives to the traditional stock/bond portfolios.

Have fun.

John Walter Russell
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Author: AcmeFool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62791 of 74759
Subject: Re: They Got It Wrong Date: 6/19/2008 3:48 PM
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Have fun.

Thank you, I think I will...



What JWR got right:


What JWR got wrong:
(1) Assumed inflation is constant (with no extra-high periods);
(2) Assumed that this constant inflation rate would be well below the average over the last 50 years;
(3) Assumed it was possible to select companies that would increase their dividend yields by 6% or more indefinitely;
(4) Incorrectly defined the term "safe withdrawal rate" as something that can be reduced if you fall on hard times when it is really something that never has to be reduced because the initial rate was, well, safe;
(5) Refused to address any of the problems people pointed out, instead choosing to insult them and deflect any criticism;
(6) Assumed intelligent people would not call him out for the grossly incomplete and lacking "research" he performed;
(7) Assumed that calling people 10-minute experts would get them to stop being critical of his "research" and possible make him look intelligent;
(8) Assumed that if he threw enough <ahem> at the wall, eventually some of it would stick and look good. (Note: even if it does somehow look good, it still smells like <ahem>.)

Acme

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Author: killerfraug Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62792 of 74759
Subject: Re: They Got It Wrong Date: 6/19/2008 4:04 PM
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Safe withdrawal of JWR's posts: 100%

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Author: JWR1945a One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62793 of 74759
Subject: Re: They Got It Wrong Date: 6/19/2008 4:29 PM
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What the ten minute experts [this is the time that they said that they spent investigating my research] continue to get wrong:

The most serious error was freezing the research at its original findings. The original findings suggest using a high stock allocation with annual rebalancing. This turns out to be a horrible choice for today’s retirees.

Freezing the research also froze out the solutions. Knowing that selling shares at depressed prices causes failure, a much better alternative would be to rely on dividend strategies that avoid the need to sell. This turns out to be far superior to the liquidation strategies.

Have fun.

John Walter Russell

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Author: AcmeFool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62794 of 74759
Subject: Re: They Got It Wrong Date: 6/19/2008 5:32 PM
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What the ten minute experts [this is the time that they said that they spent investigating my research] continue to get wrong:

When research only takes 10 minutes to perform, it should not take any longer than that to show how poorly it was done. If you spent more than 10 minutes on the "research" you put out there then you are quite inefficient.



More of JWR's repeated blather without substantiation.

Someday you will either get it or you will disappear from these boards forever. Either of those will be a positive result.

Serious question -- how many dozens of people on different internet sites and message boards have to point out your errors before you accept that your work is grossly inadequate?

Serious question #2 -- will you EVER address even ONE of the issues we point out as being handled incorrectly? (I would guess no since you think anyone that points out an error in your work is incapable of understanding it. Arrogant much?)

Acme
(Who has discovered one thing JWR did right -- he did not try to sell anything on his web site!)

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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62795 of 74759
Subject: Re: They Got It Wrong Date: 6/19/2008 7:14 PM
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What Others Got Wrong

The most serious error was freezing the research at its original findings.


This statement displays a shocking lack of knowledge and a huge amount of arrogance.

Far from being "frozen", this topic has been the subject of an enormous amount of research and published papers and articles.

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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62796 of 74759
Subject: Re: They Got It Wrong Date: 6/19/2008 7:42 PM
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The most serious error was freezing the research at its original findings. The original findings suggest using a high stock allocation with annual rebalancing. This turns out to be a horrible choice for today’s retirees.

And the best choice for retirees in 1997 was to buy AMZN (at 1.50) and sell 3 years later (at 100). For retirees in 1990, to buy DELL (at 0.05) and hold it for 10 years and then sell it (at 50).
Or, heck, for retirees in the mid 1990's to buy dot-com stocks and hold them for 5 years.

This is an absurd argument. The question to be determined is not what's "best choice for today's retirees". The question is what's the best choice for retirees of any time, given that we do not know the future.

Knowing that selling shares at depressed prices causes failure,
That's why the conventional research & recommendations have a significant bond position---the bonds (and other fixed income assets) are there so that you don't have to sell equities when they are down.

a much better alternative would be to rely on dividend strategies that avoid the need to sell.
Dividends stocks have their place. In fact, I have a large portion of our assets in dividend-paying stocks. But you seem to be assuming that dividends will stay as they are--an unwarranted assumption. What is likely to happen when/if dividends are taxed more heavily than they are now? What will happen with dividends when/if they are taxed as ordinary income? Are you so oblivious that you haven't heard major politicians call for just that?

This turns out to be far superior to the liquidation strategies.
For all time????
Perhaps for recent history this is true, but I don't believe it has always been that way for the past---why would it be that way for all of the future?

Look, you can't just make a handwaving argument and expect it to be accepted. That is the *starting* point of the discussion, not the *ending* point. Where is the monte-carlo analysis? Where is the historical analysis? You have to back up your argument with data, no just mere assertion.

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Author: JWR1945a One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62797 of 74759
Subject: Re: They Got It Wrong Date: 6/20/2008 5:15 AM
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This turns out to be far superior to the liquidation strategies.
For all time????

Perhaps for recent history this is true, but I don't believe it has always been that way for the past---why would it be that way for all of the future?


It should be. Logically. It certainly has been since 1950 when companies became serious about retaining dividends, keeping payout ratios below 100%.

The key is that the mathematics changes when you make withdrawals. The probability distribution of dividends is stable, capital appreciation is highly volatile.

Look, you can't just make a handwaving argument and expect it to be accepted. That is the *starting* point of the discussion, not the *ending* point. Where is the monte-carlo analysis? Where is the historical analysis? You have to back up your argument with data, no just mere assertion.

I have a whole web site in which I establish every detail. It has over 600 pages of research over the past six years. I am not hand waving. I have done the equivalent of the Trinity Study dozens of times. I have documented my findings. I have made them available for scrutiny.

I do all this at my own expense, without advertising of any kind. I make my calculators available for free download from my Yahoo briefcase.

I generally use the Historical Sequence method although I have also developed Monte Carlo simulators (such as the Scenario Surfer).

Have fun.

John Walter Russell

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Author: AcmeFool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62798 of 74759
Subject: Re: They Got It Wrong Date: 6/20/2008 6:31 AM
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It should be. Logically.

No, there is absolutely no reason why it would be best in all time periods. Logic says otherwise. Just as different groups of stocks (large cap, small cap, international, etc.) do better in different time periods, dividends do better or worse at different times.

The fact that you say logically dividend strategies should always be better than other strategies makes our point better than we ever could. You are so blinded by your desire to do something new that you ignore the errors; you brush off the critics as ignorant or jealous; you do the very thing you are criticizing others of doing and freeze your work at a woefully incomplete level.



The key is that the mathematics changes when you make withdrawals.

It also changes when you correctly account for inflation. And it changes when you account for the times when companies reduce their dividends. Oh, and it changes when you have to reduce your lifestyle by 20-40% because your so-called "safe-withdrawal rate" was not sustainable. (Never mind that this clearly means your safe-withdrawal rate really was not...)

None of these problems are ignored or brushed under the rug in other people's studies. Somehow you consider your research adequate while ignoring these issues.



I have a whole web site in which I establish every detail. It has over 600 pages of research over the past six years. I am not hand waving. I have done the equivalent of the Trinity Study dozens of times. I have documented my findings. I have made them available for scrutiny.

It is insulting to people genuinely interested in advancing this work that you claim to have made your work available for scrutiny. You have ignored every criticism made of your work; you attack anyone that points out problems; you refuse to address even the simplest of issues. And you claim OTHERS have frozen THEIR work? Laughable.



As I said before, anyone that accepts your work is a sucker. Luckily for you, there are a lot of them out there. Unfortunately for you, there are plenty of intelligent people that see through the veil and can point out the massive flaws in what you have done.

Your arrogance is a sad thing. With some honest effort and acceptance that your work is not yet adequate, you could create a genuine product. But because you cannot accept criticism, you ignore everyone that does not blindly accept your work. Because you have the misguided belief that you are smarter than everyone else, you ignore everything we/they say.

It's unfortunate, but I am confident in saying that your work will never reach a meaningful / productive / beneficial level.

Acme

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Author: JWR1945a One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62799 of 74759
Subject: Re: They Got It Wrong Date: 6/20/2008 12:04 PM
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Look, you can't just make a handwaving argument and expect it to be accepted. That is the *starting* point of the discussion, not the *ending* point. Where is the monte-carlo analysis? Where is the historical analysis? You have to back up your argument with data, no just mere assertion.

You need to see my reference material. It is extensive.

This is my web site.
http://www.early-retirement-planning-insights.com/

You can download calculators from my Yahoo Briefcase. My Yahoo username is jwr19452000.

Everything is at my own expense. I do not sell anything. I do not accept donations.

Have fun.

John Walter Russell

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Author: LoudounSage Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62800 of 74759
Subject: Re: They Got It Wrong Date: 6/20/2008 12:44 PM
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This (JWR's pointing to "600 pages and my Yahoo briefcase") is no response.

I agree with AcmeFool -- the jig is up, JWR. "Where's the beef?"

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Author: hockeypop Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62801 of 74759
Subject: Re: They Got It Wrong Date: 6/20/2008 1:59 PM
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Just to reaffirm my original post, I did look, for a fairly long time, and I did find calculators (as I said), but nothing to indicate the basis of the calculations.

You mention that you use Shiller's data, but not how you use it. Most other research using his data refutes yours, and one can see the calculations.

At least you put the website address this time. As I said "You made me look." Shame on me -- until you give me an indication about where on that mishmash the "beef" really is.

Hockeypop

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Author: JWR1945a One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62802 of 74759
Subject: Re: They Got It Wrong Date: 6/20/2008 3:14 PM
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You mention that you use Shiller's data, but not how you use it. Most other research using his data refutes yours, and one can see the calculations.

This goes back a long time.

You might start by looking at the Foundations section. It has Our Strong Theoretical Foundations and the Logical Sequence.

You might be interested in the Current Research series. Current Research A is relevant as well as several other sections.

I added a series of modifications to John Greaney's Retire Early Safe Withdrawal Calculator (and I have made them available for download). This is the source of my Historical Surviving Withdrawal Rates.

I have developed the theoretical underpinnings along with the historical observations.

Have fun.

John Walter Russell

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Author: JWR1945a One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62803 of 74759
Subject: Re: They Got It Wrong Date: 6/20/2008 3:21 PM
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It should be. Logically.

No, there is absolutely no reason why it would be best in all time periods. Logic says otherwise. Just as different groups of stocks (large cap, small cap, international, etc.) do better in different time periods, dividends do better or worse at different times.

Clearly, you do not understand the Safe Withdrawal Rate problem.

Dividends are traceable to earnings, which have grown consistently (after smoothing) over a very long time frame.

Capital appreciation depends on investor whims. It is extremely volatile.

Selling when prices are low is what kills retirement strategies that liquidate shares.

Dividend strategies avoid this problem.

However, if you vary allocations slowly in accordance with valuations (as Benjamin Graham recommended), you can come very close to matching dividend strategies.

Have fun.

John Walter Russell

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Author: AcmeFool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62804 of 74759
Subject: Re: They Got It Wrong Date: 6/20/2008 4:46 PM
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Clearly, you do not understand the Safe Withdrawal Rate problem.

I am truly LMAO that *you* could say that to anyone. You do not even understand the DEFINITION of Safe Withdrawal Rate.

You have stated on numerous occasions that using your methods, the safe withdrawal rate is ___ (you constantly change the value). You also say that the worst case scenario is that you will have to reduce your withdrawals by 20% for a period of time. If the withdrawal rate was safe, you would NEVER need to reduce your withdrawals. So your on work uses something other than a safe withdrawal rate, but you wave your hands and say hocus pocus and hope nobody will call you out.

Oh, and when you ARE called out -- here and on every other internet site you visit -- you NEVER address the things people point out.


Your statement that you put your work out for anyone to review is an insult to the thousands of us that have had real research put through peer review. Making something available and ignoring (or insulting) criticism is not the same as making it available for review.

Acme
(Who notes that you can do an internet search for JWR and find several other web sites full of people that say the same about him.)

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Author: GusSmed Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62805 of 74759
Subject: Re: They Got It Wrong Date: 6/20/2008 4:51 PM
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Who notes that you can do an internet search for JWR and find several other web sites full of people that say the same about him.

Oh my gosh. I hadn't realized this was Hocus again until I did as you suggested.

- Gus

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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62807 of 74759
Subject: Re: They Got It Wrong Date: 6/20/2008 7:03 PM
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Clearly, you do not understand the Safe Withdrawal Rate problem.......

Unfortunately, you (JWR) seem to have a tendency to exhibit a posting behavior I first heard named in another tread topic---"wall of words". This phrase calls up a beautiful picture in my mind. A poster building a brick wall made of words, and like a brick wall it stands there solid and never answers any questions or responds to criticism.

What's your point? And why don't you give cogent responses to questions & criticisms? I don't have a dog in this fight, and know nothing about any past history between you (JWR) and AcmeFool. And don't have any reason to side with either you or him.

But what I do know is that he (and perhaps others, myself included) have asked reasonable questions.
But I haven't heard any response from your (JWR) to these questions.

Why are you bothering to do all this research and write these 600+ papers/pages? Is it purely a vanity product and you don't care if anybody thinks your work is good & valid? Or what?

What's the point of making claims but then ignoring questions?

For example, I asked "...dividend strategy...why do you claim that it will always be the best?" This is a reasonable question, and should merit a valid response. Instead you just said, "It's logical."

As if that is any kind of answer. Which it is not.

First of all, it is blind to a well-known saying, "The markets can stay irrational longer than you can stay solvent."
Instead of bothering to give any kind of decent response, you just waved your hands and said, "Because I said so."

How is this going to convince me?

AcmeFool has asked you several times about your assumptions on inflation. Seems that you have treated it as a constant, but EVERYBODY knows that it is not constant but is sometimes low and sometimes high--and sometimes *very* high, as those of us who were adults during the Carter years knows full well.

Yet I have never seen you give him any kind of response at all.

Here's how it should go:
AF: "Hey, you treated X as Y, but in fact X does not do Y."
Possible responses:
JWR: "I made a simplfying assumption which is adequate because of XYZ."
or
JWR: "No, I didn't treat X as Y, see Table #N of my paper titled XYZ."
or
JWR: "No, in fact X *does* do Y."
or
JWR: "Hmmm. You're right. I need to rework my figures and see what difference it makes."

There's a lot of reasonable responses you could make to his question---but ignoring the question is not one of them.

And, of course, there is the matter of your seemingly unique definition of SWR. The standard defintion is that SWR is the rate at which your portfolio will not be depleted before you die.
But you evidently say that sometimes you'd have to reduce an annual withdrawal by 20%. Therefore your stated SWR is *not* an SWR.

AcmeFool has complained about this many times that I have seen in the past several months. Yet I have not seen to even acknowledge his complaint one single time---you have always simply ignored it.

So, what's the deal, JWR? Are you purposely acting in such a way that others see you as a fool?

Why do all that work only to have everybody want to ignore it because you won't defend it and answer questions about it?

I can see that there may well be some value in your work-----but until you stop treating your own work as a farce, why should I bother?

BTW, this is a test. If you don't bother to give me some decent replies to my above questions, then I have no alternative other than to think you are just another internet troll spewing meaningless words.

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Author: JWR1945a One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62809 of 74759
Subject: Re: They Got It Wrong Date: 6/20/2008 7:33 PM
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What's your point? And why don't you give cogent responses to questions & criticisms? I don't have a dog in this fight, and know nothing about any past history between you (JWR) and AcmeFool. And don't have any reason to side with either you or him.

But what I do know is that he (and perhaps others, myself included) have asked reasonable questions.
But I haven't heard any response from your (JWR) to these questions.


I reply to honest comments and questions.

I go out of my way to avoid shouting matches.

If someone starts off in attack mode, I do not reply or I reply in a minimal fashion.

Have fun.

John Walter Russell

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Author: AcmeFool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62812 of 74759
Subject: Re: They Got It Wrong Date: 6/20/2008 7:49 PM
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I reply to honest comments and questions.

Honest questions:

(1) Why do you think it is ok to assume a constant rate of inflation?

(2) Why do you use a constant rate of inflation that is below the average rate of inflation over the last 50 years?

(3) Why do you think the definition of safe withdrawal rate allows for temporary reductions in withdrawals?

(4) How do you propose finding investments with a *guaranteed* 6% (or more) annual increase in dividends indefinitely? Note that by your own prior admission you must be *guaranteed* the 6% annual increase for your method to work.



If someone starts off in attack mode, I do not reply or I reply in a minimal fashion.

When this started months ago, there was no attack. I simply pointed out a few errors and you have always refused to address them. You then insulted me numerous times -- even having some of your posts pulled as a result.

You created the attack, but you complain about the contentious nature of things. All you have to do is address your errors (or stop posting your error-filled work) and I'll stop pointing them out. If you do keep posting this work without fixing the problems, I will continue to be critical so that the inexperienced that read these pages are not sucked in.

Acme

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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62814 of 74759
Subject: Re: They Got It Wrong Date: 6/20/2008 8:00 PM
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I reply to honest comments and questions.
No you don't.

I go out of my way to avoid shouting matches.
As well as discussions of any kind. You have a "dialog" the same way the left/liberals do----you talk and everybody else listens.

If someone starts off in attack mode, I do not reply or I reply in a minimal fashion.
Yeah, but to you "attack mode" means "ask questions".

Thanks. It's always a help when a loser goes around with a bright red "L" painted on their forehead. So thanks for letting me know to not waste any time on you or your writings.

As Ken FIsher once said, "Life's too short to waste on idiots, when there are so many great people to cogently discuss things with. At the first sign of idiocy I cut my losses."

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Author: GusSmed Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62815 of 74759
Subject: Re: They Got It Wrong Date: 6/20/2008 8:33 PM
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You have a "dialog" the same way the left/liberals do

While I agree with your assessment of Hocus, this kind of statement destroys a lot of your credibility in making it.

- Gus

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Author: JWR1945a One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62816 of 74759
Subject: Re: They Got It Wrong Date: 6/20/2008 8:59 PM
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Honest questions:

(1) Why do you think it is ok to assume a constant rate of inflation?

It is a matter of necessity--making analysis possible. I handle inflation with sensitivity studies.

(2) Why do you use a constant rate of inflation that is below the average rate of inflation over the last 50 years?

Is it? What should I use?

(3) Why do you think the definition of safe withdrawal rate allows for temporary reductions in withdrawals?

I am upfront about this issue. I established reasonable bounds. I have pointed out the difference in ground rules at my site.

(4) How do you propose finding investments with a *guaranteed* 6% (or more) annual increase in dividends indefinitely? Note that by your own prior admission you must be *guaranteed* the 6% annual increase for your method to work.

The S&P500 dividend AMOUNT has increased 5% per year (nominal) since 1950. Do you really think that a dividend investor will have a hard time locating something that is only 1% better? Josh Peters is one credible source of such investment information. There are others.

Have fun.

John Walter Russell

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Author: AcmeFool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62818 of 74759
Subject: Re: They Got It Wrong Date: 6/20/2008 10:31 PM
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It is a matter of necessity

No, it is not. There are many methods that are far superior and easily implemented.



Is it? What should I use?

I've told you before how you should do this. You ignored me then. YOU figure it out now.



I am upfront about this issue. I established reasonable bounds. I have pointed out the difference in ground rules at my site.

You have to be kidding. You use an accepted term in an unaccepted manner and then explain it away by saying you established reasonable bounds? I guess I can redefine words for my posts and use them as I see fit...and I don't need to bother with the new definition as long as I hide it away on my website somewhere.

Along those lines, I'll redefine potato and use it in a sentence. You are a potato. I'll leave it to you to figure out what that really means.


The S&P500 dividend AMOUNT has increased 5% per year (nominal) since 1950. Do you really think that a dividend investor will have a hard time locating something that is only 1% better?

Yes, I think you will have a hard time GUARANTEEING 1% better. Hindsight is worth nothing.

Acme
(Who notes that he has asked all of these questions -- and many more -- at least a dozen times prior to this series of inadequate answers.)

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Author: TheTruePhoenix Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62819 of 74759
Subject: Re: They Got It Wrong Date: 6/20/2008 10:51 PM
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Can't get enough of JWR? Read the classic Russellmania linked at http://s162532268.onlinehome.us/Sewer/viewtopic.php?t=1331

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Author: FlyingDiver Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62820 of 74759
Subject: Re: They Got It Wrong Date: 6/20/2008 11:03 PM
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Can't get enough of JWR? Read the classic Russellmania linked at http://s162532268.onlinehome.us/Sewer/viewtopic.php?t=1331

He's been at this for 5 years? Yikes.

joe

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Author: JWR1945a One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62821 of 74759
Subject: Re: They Got It Wrong Date: 6/21/2008 5:15 AM
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It is a matter of necessity

No, it is not. There are many methods that are far superior and easily implemented.

Show me! Remember, the idea is to come up with a method of assessing dividend strategies.

Is it? What should I use?

I've told you before how you should do this. You ignored me then. YOU figure it out now.

You like 4%. OK, use it in your calculations.

The traditional advice offered to retirees has been "4+3"--that is, withdraw 4% of the original balance and increase the amount withdrawn by 3% each year.


The S&P500 dividend AMOUNT has increased 5% per year (nominal) since 1950. Do you really think that a dividend investor will have a hard time locating something that is only 1% better?

Yes, I think you will have a hard time GUARANTEEING 1% better. Hindsight is worth nothing.


You must not understand. An increase of 6% means that the nominal dividend amount increases by a 1.06 factor each year, not that the dividend yield jumps by an increment of 6%.

Have fun.

John Walter Russell

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Author: GusSmed Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62823 of 74759
Subject: Re: They Got It Wrong Date: 6/21/2008 8:26 AM
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He's been at this for 5 years? Yikes.

More like 7-9. A long, long time ago the Retire Early Home Page (now RECF) was about retirement investing. Hocus made his first post there in May of 1999. His early posts weren't anything out of the ordinary, though some of them were extraordinarily popular. One of the easiest ways to find early his posts there, in fact, is to visit that board and sort by recs.

Then sometime in 2002, he began the slide into madness. He started talking about market timing, boosting returns by moving to cash when the S&P 500 when it was "grossly overvalued." Which he believed to be the case in May of 2002. Like many people, he was steering the car by looking through the rear view mirror. SPY still had a bit to slide before hitting the bottom, but it's still gained a bit over 25% since he wrote those words.

It soon became apparent that he had "retired" with too little money, and didn't have the temperament to stick out bad periods in any case, and was looking for ways to rationalize a way out of his financial problems.

It wasn't long before he began getting testy with people like Intercst for trying to inject some reality into his daydreams, and soon he was clamoring for his lost popularity and demanding that he be voted "board general" of REHP. Whatever that means. Eventually TMF banned him for disruptive behavior, and he took his show elsewhere.

And now he's back.

- Gus

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Author: AcmeFool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62824 of 74759
Subject: Re: They Got It Wrong Date: 6/21/2008 8:57 AM
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Show me! Remember, the idea is to come up with a method of assessing dividend strategies.

That was the idea when I posted dozens of times previously. Since you alternately ignored my questions or insulted my intelligence, I now have no interest in helping you. I will, however, point out your errors until they are corrected.



You like 4%. OK, use it in your calculations.

No, I have clearly indicated time and again that using a constant rate of inflation is inadequate. It would not matter if the constant rate is equal to the average over a long period; it still does not account for the times when things go terribly wrong.

Your method will fail in those periods, but your "research" will never show that because you make simplifying assumptions that ignore the worst-case scenarios.



The traditional advice offered to retirees has been "4+3"--that is, withdraw 4% of the original balance and increase the amount withdrawn by 3% each year.

This has not been the advice in the safe-withdrawal rate studies that we have referenced you to over and over.



You must not understand.

I understand perfectly well everything you are saying. Just because I don't agree does not mean I am confused.



An increase of 6% means that the nominal dividend amount increases by a 1.06 factor each year, not that the dividend yield jumps by an increment of 6%.

So you are able to give me investments where that 6% increase is GUARANTEED every year forever? How about this -- I will buy your suggested investment. I will change the investment any time you say I should, paying taxes as needed. If there is ever a year where my total amount of dividends received, net of taxes, does not increase by 6% (or more) over the prior year, you will pay me the difference IN CASH immediately. And you will keep doing this until I die. Are you willing to make that commitment? If not, you are not guaranteeing that the investment(s) actually exist.


As I said long ago, your work has potential. But it is embryonic in how far you have gone. And the way you refer to far more polished and complete -- and CORRECT -- research is insulting to anyone that does research in any field. Your changing the way terms are used is unacceptable.

Using your definition of Safe Withdrawal Rate, the old studies would have dramatically higher numbers as well. Does this actually mean anything? NO! Because those rates are not sustainable and, therefore, not safe.

I hope you will finally take my comments/criticisms seriously and improve your work. In time, it is possible I would even be willing to help you with this. But you have to show that you are serious about putting something meaningful out there AND that you are willing to accept criticism and use it to move forward.

Acme

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Author: JWR1945a One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62826 of 74759
Subject: Re: They Got It Wrong Date: 6/21/2008 10:32 AM
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Show me! Remember, the idea is to come up with a method of assessing dividend strategies.

That was the idea when I posted dozens of times previously. Since you alternately ignored my questions or insulted my intelligence, I now have no interest in helping you. I will, however, point out your errors until they are corrected.

I am serious about this one. If you can address DIVIDEND STRATEGIES better, I want to know how.

I am not talking about using dividend stocks in a typical liquidation approach. I have already investigated that.

Have fun.

John Walter Russell

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Author: AcmeFool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62827 of 74759
Subject: Re: They Got It Wrong Date: 6/21/2008 12:42 PM
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I hope everyone will look at this post. It is a legitimate attempt to convince JWR that his work has serious flaws that need to be addressed. I may have made some errors, but this is a good analysis of the work.

ANYONE sincerely interested in this research -- especially JWR! -- needs to read the entire post and take time to process the information. Anyone that dismisses this post proves they have no interest in advancing/correcting the research. This post is very long, but chock-a-block full of real work.


I am serious about this one. If you can address DIVIDEND STRATEGIES better, I want to know how.

(1) Use the accepted definition of safe withdrawal rate. If, under any past circumstances, you have to reduce your withdrawal rate to make the strategy work, then the withdrawal rate fails.

(2) STOP ROUNDING YOUR NUMBERS UP WHEN IT SUITS YOU. You claim your research supports a 6% withdrawal rate in a certain set of conditions. However, your own work -- flawed as it is with fixed inflation rates that are less than 2/3 of what they would need to be -- gives values as low as 5.59%. When you alter the numbers in your reporting like this, it shreds any credibility the rest of the work might have.

(3) Use more realistic methods for determining inflation rates. Fixed rates of inflation are not realistic and they lead to results like yours -- withdrawal rates that look artificially high but fall apart when inflation spikes significantly.

(4) Use more realistic dividend growth rates. In these threads, you have been claiming it is ok to guarantee 6% dividend growth rates. Many have asked you how you can guarantee this and you have never responded in a satisfactory manner. That's bad. But it is even worse when people look at the work you have posted and it assumes even higher growth rates -- 8% and 10%.

(5) Stop using constant dividend growth rates. In your own research, there have been 13 5-year periods since 1950 where the dividend growth rate was negative. How do you propose handling a time like the early/mid 70s where inflation spikes AND dividends are being cut? (Note that many believe we are about to have this again.) The LONG TERM growth rate is irrelevant when you hit a nasty patch.

(6) Recognize that even TIPS have periods of negative real returns. You cannot assume a fixed 2% rate of return on this asset class.


Let's use some of your own data. We'll work with the fixed dividend growth rates from your scenarios and see if/when they fail. We will use the inflation data working forward from 1970...

Scenario A -- A $1,000,000 portfolio will provide $57,100 the first year. The inflation rate in 1970 was 4.381%; this means that the retiree needs $59,601.55 in 1971. The growth rates described in scenario A will provide only $58,557. Therefore scenario A fails in 1971. It did not even make ONE YEAR!

The first year with a 5%+ shortfall using historical inflation rates was 1973; the first year with a 10%+ shortfall was 1974. The maximum shortfall was 47.61% in 1991.

5.71% WAS NOT a safe-withdrawal rate. Your work says 5.59% here, but there is no chance of this tiny difference overcoming a 47.61% shortfall down the road.



Scenario B -- A $1,000,000 portfolio will provide $57,100 the first year. The inflation rate in 1970 was 4.381%; this means that the retiree needs $59,601.55 in 1971. The growth rates described in scenario A will provide only $58,662. Therefore scenario B fails in 1971. It did not even make ONE YEAR!

The first year with a 5%+ shortfall using historical inflation rates was 1973; the first year with a 10%+ shortfall was 1974. The maximum shortfall was 42.22% in 1984.

5.71% WAS NOT a safe-withdrawal rate. Your work says 5.68% here, but there is no chance of this tiny difference overcoming a 42.22% shortfall down the road.



Scenario C -- A $1,000,000 portfolio will provide $57,100 the first year. The first year with a 5%+ shortfall using historical inflation rates was 1974; the first year with a 10%+ shortfall was 1975. The maximum shortfall was 32.24% in 1982.

5.71% WAS NOT a safe-withdrawal rate. Your work says this is the safe-withdrawal rate. Do you see how this is simply not true?



Scenario D -- A $1,000,000 portfolio will provide $57,100 the first year. The first year with a 5%+ shortfall using historical inflation rates was 1974; the first year with a 10%+ shortfall was 1976. The maximum shortfall was 29.94% in 1982.

5.71% WAS NOT a safe-withdrawal rate. Your work says this is the safe-withdrawal rate. Do you see how this is simply not true?



Scenario E -- I don't see how you come up with your safe-withdrawal rate here at all. For the other scenarios, you are presumably just working with the withdrawal rate the first year. In the cases where you dropped it lower, I am guessing you did this to overcome some case where the withdrawals fell short using your 3% inflation rate. But that does not work the same way with the TIPS included, even assuming the 2% real return.

Because I cannot determine where your values come from, I will skip this one for the time being.


BACK TO SCENARIO A.
For kicks, I went back and adjusted the initial withdrawal rate to see what it would need to be in order to make this an actually safe withdrawal rate. (Note that I am only working with a single starting point in time -- 1970. This is not the worst case scenario, but it is a bad one.) When there were excess funds, this money was put 15% into investment A and 85% into investment B, just as you did with your initial portfolio.

To make it 30 years, the initial withdrawal rate would have to be -- wait for it -- just 3.73%. Since this was not the worst possible starting year, the actual safe withdrawal rate would be lower. Additionally, since I am not convinced it is possible to find an investment where the dividend growth rate is guaranteed to be 8% ad infinitum, the safe withdrawal rate would drop again.

Dividend strategies can work for retirement. But they DO NOT substantially increase the safe withdrawal rate...if they increase it at all.

I sincerely hope JWR (and others) have made it this far. I am interested in all comments.

Acme

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Author: JWR1945a One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62831 of 74759
Subject: Re: They Got It Wrong Date: 6/21/2008 1:29 PM
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BACK TO SCENARIO A.
For kicks, I went back and adjusted the initial withdrawal rate to see what it would need to be in order to make this an actually safe withdrawal rate. (Note that I am only working with a single starting point in time -- 1970. This is not the worst case scenario, but it is a bad one.) When there were excess funds, this money was put 15% into investment A and 85% into investment B, just as you did with your initial portfolio.

To make it 30 years, the initial withdrawal rate would have to be -- wait for it -- just 3.73%. Since this was not the worst possible starting year, the actual safe withdrawal rate would be lower. Additionally, since I am not convinced it is possible to find an investment where the dividend growth rate is guaranteed to be 8% ad infinitum, the safe withdrawal rate would drop again.


I will continue to study your post.

You have a serious blind spot. In this analysis, you have assumed that the S&P500's dividend yield is that of all stocks. A dividend investor could easily buy stocks at twice the yield from quality companies. They can still do so today, with effort.

Your 3.73% might be closer to 7% for someone starting in 1970. This would be from a simple direct purchase. A dividend blend should do better. Remember, there are no stock sales.

Have fun.

John Walter Russell

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Author: JWR1945a One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62832 of 74759
Subject: Re: They Got It Wrong Date: 6/21/2008 1:35 PM
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(6) Recognize that even TIPS have periods of negative real returns. You cannot assume a fixed 2% rate of return on this asset class.

I will continue to study your post.

This reveals a serious blind spot. I see it mainly from stock oriented investors.

This is a serious flaw of most historical sequence calculators. They treat bonds and TIPS as single year trading vehicles.

You can hold bonds to maturity. It is a SERIOUS error to ignore this fact. A TIPS ladder allows you extract the high return. [A poster named peteyperson first pointed this out to me.]

Have fun.

John Walter Russell

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Author: LoudounSage Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62833 of 74759
Subject: Re: They Got It Wrong Date: 6/21/2008 1:44 PM
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He's been at this for 5 years? Yikes.

joe


Oh, joe, it even gets much better than that! Once you have browsed JWR's "SeWeR' board, why not spend some time in his mania-forum, too:



"The Best of Russell-mania
Get the latest happenings from the world of Russell-mania. Learn how to become your own sorcerer's apprentice and mine financial statistics, torture numbers, and delete inconvenient data points to support your theories. Russell often teams up with Rob Bennett, author of Passion Saving to form the Troll Brothers when they post in tandem on Internet discussion boards. "
http://www.s152957355.onlinehome.us/cgi-bin/yabb2/YaBB.pl?bo...

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Author: JWR1945a One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62834 of 74759
Subject: Re: They Got It Wrong Date: 6/21/2008 1:46 PM
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I will continue to review your post.

I use my "Income Allocators" for my Dividend Blend calculations. I recommend that you download my "Automatic Allocator" from my Yahoo Briefcase. It is a spreadsheet. It is very easy to use. You can run sensitivity tests, etc.

My Yahoo username is jwr19452000. The download from my Yahoo Briefcase is free.

You will gain insight as to what is going on.

Have fun.

John Walter Russell

[BTW, be sure to let Josh Peters know that it is impossible to do what he has actually done.]

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Author: AcmeFool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62835 of 74759
Subject: Re: They Got It Wrong Date: 6/21/2008 1:54 PM
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You have a serious blind spot. In this analysis, you have assumed that the S&P500's dividend yield is that of all stocks. A dividend investor could easily buy stocks at twice the yield from quality companies. They can still do so today, with effort.

My analysis never uses the S&P, so it is irrelevant. I used YOUR dividend values, even though I say they are not likely to be obtained in a guaranteed manner.



Your 3.73% might be closer to 7% for someone starting in 1970.

Not hardly.

Acme

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Author: AcmeFool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62836 of 74759
Subject: Re: They Got It Wrong Date: 6/21/2008 1:55 PM
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This is a serious flaw of most historical sequence calculators. They treat bonds and TIPS as single year trading vehicles.

Again, your assumption of a flaw is incorrect. You have to be able to buy the TIPS you are claiming to use in this analysis. Since there are many periods where these TIPS are not available, you cannot simply put them in there and act like it is a guarantee.

Acme

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Author: AcmeFool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62837 of 74759
Subject: Re: They Got It Wrong Date: 6/21/2008 2:09 PM
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[BTW, be sure to let Josh Peters know that it is impossible to do what he has actually done.]

I *NEVER* said it was impossible to do. I said you cannot guarantee that it will happen for the NEXT 30 years. You never stepped up and volunteered to pay me the difference if I should fail to receive the 6% your guarantee is possible. What about the 8% and 10% you used -- and I repeated showing the failures of your values -- in your studies? Will you pay me the difference if I cannot achieve those growth rates using investments YOU select?

Your work has serious flaws. I have again pointed them out. Using your dividend growth own values that I seriously dispute, I have showed that you are STILL dramatically overstating the safe withdrawal rate.

Heck, I did not check before because I figured the 5.59% rate was correct assuming a too-low fixed inflation rate of 3%. But even with this assumption, the safe withdrawal rate is actually 5.579%. It's not a lot, but errors like this further call into question *everything* you do.

I'm sorry, but your work would fail any serious peer review. In fact, it has failed multiple times, but you refuse to do anything about the problems. You claim those reviewing the work are not qualified. I guess you think you are the only one that is. But the fact is you are not the only one qualified to understand this work. Until you start addressing the flaws in your work, I have to question if YOU are qualified to understand what you have done.

Acme

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Author: JWR1945a One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62838 of 74759
Subject: Re: They Got It Wrong Date: 6/21/2008 2:18 PM
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I have read your many assertions.

I would like to see some content.

You have YET to show a better method to address DIVIDEND STRATEGIES.

Have fun.

John Walter Russell

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Author: AcmeFool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62840 of 74759
Subject: Re: They Got It Wrong Date: 6/21/2008 2:38 PM
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You have YET to show a better method to address DIVIDEND STRATEGIES.

That's NOT my job. That's YOUR job. YOU are the one claiming they provide better results than other strategies.

The fact is, your "Scenario A" Safe Withdrawal Rate *IS NOT* the 6% you claim (of course, you claim 6% while your own incorrectly performed research shows 5.59% -- tisk, tisk). It's not 5%, or even 4%. It's somewhere less than 3.75%.

If you want my spreadsheet showing you how I proved your work to be flawed, you can email me offline. Otherwise you have to do it yourself...it's not hard to do...

Acme

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Author: ziggy29 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62841 of 74759
Subject: Re: They Got It Wrong Date: 6/21/2008 3:17 PM
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Looks like it's time to take this board off of my favorites for a while.

#29

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Author: AcmeFool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62842 of 74759
Subject: Re: They Got It Wrong Date: 6/21/2008 3:50 PM
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You could just ignore this thread and the one where I reposted my work. I will not post anything elsewhere on this topic.

Acme

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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62844 of 74759
Subject: Re: They Got It Wrong Date: 6/21/2008 5:03 PM
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you cannot simply put them in there and act like it is a guarantee

Well, here's a major problem for me right there. Anyone who claims that there is a "guarantee" about dividends or yields is blowing smoke. These things cannot be guaranteed. Heck, even "sure things" like company safety & longevity are not sure things. Remember some of the supposedly stong, safe, sure-thing companies of decades past? Kodak, Xerox, Polaroid?

There are certain phrases in somebody's writing that are tip-offs that you can stop reading immediately, because what follows will be dreck:
In engineering: "get more energy out than is put in (i.e., perpletual motion".
In politics: "Bushitler", "DemocRATS", "Rethuglicans"
In finance/investing: "Guaranteed return"

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Author: AcmeFool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62845 of 74759
Subject: Re: They Got It Wrong Date: 6/21/2008 5:12 PM
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There are certain phrases in somebody's writing that are tip-offs that you can stop reading immediately, because what follows will be dreck:

Well said.

I think the thing that kills me is that JWR has the framework for some nice things. But there are major problems. I spent half an hour with his own work and found places where he is reporting wrong information. If this were work to be published in a peer-reviewed journal, he would be skewered worse than anything I have done.

I have tried to prod him to improve his work. I have even done some of the work along that path. It is on him to improve the work to something meaningful.

Acme

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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62846 of 74759
Subject: Re: They Got It Wrong Date: 6/21/2008 5:18 PM
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I have read your many assertions

Well, no. What you (and I) have read from AcmeFool is disputations of your data, methods, and calculations.

You have YET to show a better method to address DIVIDEND STRATEGIES.
Actually, he doesn't have to show any better method. What he has said is that your DIVIDEND STRATEGIES is riddled with errors.

For example, suppose I claimed that anyone can guaranteed live to be 100 by mainlining a pint of grain alcohol once a month. You would perhaps be inclined to dispute my claim.
If I then responded, "Ok, wise guy, you have to show a better way to live to 100 than my MAINLINE ALCOHOL STRATEGY.", then I have not in any way disproved your doubt nor proved my system.

Not that I expect you to underfstand this.

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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62847 of 74759
Subject: Re: They Got It Wrong Date: 6/21/2008 5:37 PM
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I think the thing that kills me is that JWR has the framework for some nice things.
I have tried to prod him to improve his work.


He won't, of course.

JWR is actually kind of interesting---in a puzzling sort of way.

It is clear that he's put in a great amount of work over the years, yet he refuses to address the issues when people point out the errors or ask pointed questions. And he responds (or fails to respond) in such a manner that portrays himself to be just another class of clueless internet kook.

I don't know why he would put in all that effort only to have it dismissed by anyone but naifs.

All I can think of, is that he is a classic example of the person described in a paper I read several years ago titled "Clueless People Don't Know That They Are Clueless". (Sorry, I don't have a link.)

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Author: vickifool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62864 of 74759
Subject: Re: They Got It Wrong Date: 6/22/2008 12:22 PM
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All I can think of, is that he is a classic example of the person described in a paper I read several years ago titled "Clueless People Don't Know That They Are Clueless". (Sorry, I don't have a link.)

Here you go:

Wikipedia
"The Dunning-Kruger effect is the phenomenon wherein people who have little knowledge (or skill) tend to think that they know more (or have more skill) than they do, while others who have much more knowledge tend to think that they know less. Dunning and Kruger were awarded a 2000 Ig Nobel prize for their work."
http://www.apa.org/journals/features/psp7761121.pdf

The original article (the link seems to have moved after being quoted above)
http://www.apa.org/journals/features/psp7761121.pdf

Vickifool

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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62873 of 74759
Subject: Re: They Got It Wrong Date: 6/22/2008 7:30 PM
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The Dunning-Kruger effect ...

Thanks!

The very first tidbit in that paper is exactly what I was thinking about vis-a-vis JWR.
"It is one of the essential features of such incompetence that the person so afflicted is incapable of knowing that he is incompetent. To have such knowledge would already be to remedy a good portion of the offense. (Miller,"

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Author: LoudounSage Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62877 of 74759
Subject: Re: They Got It Wrong Date: 6/22/2008 11:24 PM
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I believe that paper is a classic. I recall reading it when it first came out, and thinking "Whew, well maybe my own frequent post facto questioning of whether I was right or not, is not a horrible tic to be mindfully reduced, but instead is the sign of a healthy psyche, roughly (depending on quartile!) in tune with the limitations of my own knowledge and competency.

I find it particularly interesting that they chose humor as one of the test cases -- clearly JWR is one of those people who thinks he has a good sense of humor...

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Author: AcmeFool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62878 of 74759
Subject: Re: They Got It Wrong Date: 6/23/2008 7:50 AM
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I find it particularly interesting that they chose humor as one of the test cases -- clearly JWR is one of those people who thinks he has a good sense of humor...

This was one of the things I noted as well. Unfortunately for him, writing things that are laughably bad is not the same as being funny.

"Have fun."

Acme

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Author: LoudounSage Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62887 of 74759
Subject: Re: They Got It Wrong Date: 6/23/2008 11:53 AM
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Thanks, True Phoenix!

The favorite one for me, that gives my life inspiration, that I have pasted above my bed so it is the first thing I see when I wake up and the last thing I see when I go to sleep is extracted, below.

(Tao Ching, Desiderata and Lord's Prayer, eat your heart out!):

**************************
<quote>
Posted: Sat Oct 23, 2004 8:29 pm
subject: Tapping into Portfolio Gains

This survey shows us what happens if we remove a fraction of portfolio increases, but not any decreases, while making steady withdrawals.

I set up the latest version of my calculator, the Deluxe Version 1.1A07, to remove a percentage of year-to-year portfolio gains, but not losses, and determined 30-year Historical Surviving Withdrawal Rates (HSWR). I have summarized the results for 1921-1980.

The calculator is a modified version of the Retire Early Safe Withdrawal Calculator, Version 1.61, dated November 7, 2002. Use caution when looking at portfolios starting in 1973-1980. Be aware that the entries for 2003-2010 consist of dummy data with heavy losses. I have included those years because there are early failures in the decade of the 1970s.

I set up all portfolios to start with an initial balance of $100000. I set annual expenses at 0.20%. I rebalanced portfolios annually. I adjusted withdrawals to match inflation as measured by CPI-U. I reinvested all dividends and interest.

All withdrawal rates are presented as a percentage of a portfolio’s initial balance.

Historical Surviving Withdrawal Rates are in increments of 0.1%. The number of failures is less than or equal to the amount shown when the withdrawal percentage is as indicated. In all cases, an increase of the withdrawal percentage by 0.1% causes the number of failures to increase to an amount higher than indicated.

All of these results are for the 1921-1980 time frame. There are 60 historical sequences. Six failures represent 10%. Twelve failures represent 20%.

These are the results when stocks take up 50% of the portfolio.

These are the results when using 0.0% TIPS.
When none of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.7%.
2) For 6 failures, the withdrawal rate is 4.0%.
3) For 12 failures, the withdrawal rate is 4.2%.
When 25% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.4%.
2) For 6 failures, the withdrawal rate is 3.7%.
3) For 12 failures, the withdrawal rate is 3.9%.
When 50% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.2%.
2) For 6 failures, the withdrawal rate is 3.4%.
3) For 12 failures, the withdrawal rate is 3.6%.
When 75% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.0%.
2) For 6 failures, the withdrawal rate is 3.1%.
3) For 12 failures, the withdrawal rate is 3.3%.
When all of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 2.7%.
2) For 6 failures, the withdrawal rate is 2.9%.
3) For 12 failures, the withdrawal rate is 3.0%.

These are the results when using 1.0% TIPS.
When none of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.9%.
2) For 6 failures, the withdrawal rate is 4.3%.
3) For 12 failures, the withdrawal rate is 4.5%.
When 25% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.6%.
2) For 6 failures, the withdrawal rate is 4.0%.
3) For 12 failures, the withdrawal rate is 4.2%.
When 50% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.4%.
2) For 6 failures, the withdrawal rate is 3.6%.
3) For 12 failures, the withdrawal rate is 3.8%.
When 75% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.1%.
2) For 6 failures, the withdrawal rate is 3.3%.
3) For 12 failures, the withdrawal rate is 3.5%.
When all of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 2.9%.
2) For 6 failures, the withdrawal rate is 3.1%.
3) For 12 failures, the withdrawal rate is 3.2%.

These are the results when using 2.0% TIPS.
When none of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 4.2%.
2) For 6 failures, the withdrawal rate is 4.5%.
3) For 12 failures, the withdrawal rate is 4.8%.
When 25% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.9%.
2) For 6 failures, the withdrawal rate is 4.2%.
3) For 12 failures, the withdrawal rate is 4.4%.
When 50% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.6%.
2) For 6 failures, the withdrawal rate is 3.8%.
3) For 12 failures, the withdrawal rate is 4.1%.
When 75% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.3%.
2) For 6 failures, the withdrawal rate is 3.6%.
3) For 12 failures, the withdrawal rate is 3.7%.
When all of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.1%.
2) For 6 failures, the withdrawal rate is 3.3%.
3) For 12 failures, the withdrawal rate is 3.4%.

These are the results when using 3.0% TIPS.
When none of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 4.5%.
2) For 6 failures, the withdrawal rate is 4.9%.
3) For 12 failures, the withdrawal rate is 5.1%.
When 25% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 4.1%.
2) For 6 failures, the withdrawal rate is 4.4%.
3) For 12 failures, the withdrawal rate is 4.7%.
When 50% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.8%.
2) For 6 failures, the withdrawal rate is 4.1%.
3) For 12 failures, the withdrawal rate is 4.3%.
When 75% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.6%.
2) For 6 failures, the withdrawal rate is 3.8%.
3) For 12 failures, the withdrawal rate is 4.0%.
When all of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.3%.
2) For 6 failures, the withdrawal rate is 3.4%.
3) For 12 failures, the withdrawal rate is 3.6%.

These are the results when using 4.0% TIPS.
When none of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 4.7%.
2) For 6 failures, the withdrawal rate is 5.1%.
3) For 12 failures, the withdrawal rate is 5.4%.
When 25% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 4.4%.
2) For 6 failures, the withdrawal rate is 4.7%.
3) For 12 failures, the withdrawal rate is 5.0%.
When 50% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 4.1%.
2) For 6 failures, the withdrawal rate is 4.3%.
3) For 12 failures, the withdrawal rate is 4.6%.
When 75% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.8%.
2) For 6 failures, the withdrawal rate is 4.0%.
3) For 12 failures, the withdrawal rate is 4.2%.
When all of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.4%.
2) For 6 failures, the withdrawal rate is 3.6%.
3) For 12 failures, the withdrawal rate is 3.8%.

These are the results when using commercial paper.
When none of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.9%.
2) For 6 failures, the withdrawal rate is 4.4%.
3) For 12 failures, the withdrawal rate is 4.5%.
When 25% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.7%.
2) For 6 failures, the withdrawal rate is 4.0%.
3) For 12 failures, the withdrawal rate is 4.2%.
When 50% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.5%.
2) For 6 failures, the withdrawal rate is 3.7%.
3) For 12 failures, the withdrawal rate is 3.9%.
When 75% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.3%.
2) For 6 failures, the withdrawal rate is 3.4%.
3) For 12 failures, the withdrawal rate is 3.7%.
When all of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.0%.
2) For 6 failures, the withdrawal rate is 3.2%.
3) For 12 failures, the withdrawal rate is 3.3%.

These are the results when stocks take up 80% of the portfolio.

These are the results when using 0.0% TIPS.
When none of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.7%.
2) For 6 failures, the withdrawal rate is 4.2%.
3) For 12 failures, the withdrawal rate is 4.6%.
When 25% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.3%.
2) For 6 failures, the withdrawal rate is 3.7%.
3) For 12 failures, the withdrawal rate is 4.1%.
When 50% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.0%.
2) For 6 failures, the withdrawal rate is 3.3%.
3) For 12 failures, the withdrawal rate is 3.6%.
When 75% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 2.7%.
2) For 6 failures, the withdrawal rate is 2.9%.
3) For 12 failures, the withdrawal rate is 3.2%.
When all of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 2.3%.
2) For 6 failures, the withdrawal rate is 2.5%.
3) For 12 failures, the withdrawal rate is 2.7%.

These are the results when using 1.0% TIPS.
When none of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.8%.
2) For 6 failures, the withdrawal rate is 4.3%.
3) For 12 failures, the withdrawal rate is 4.7%.
When 25% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.4%.
2) For 6 failures, the withdrawal rate is 3.8%.
3) For 12 failures, the withdrawal rate is 4.2%.
When 50% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.1%.
2) For 6 failures, the withdrawal rate is 3.4%.
3) For 12 failures, the withdrawal rate is 3.7%.
When 75% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 2.8%.
2) For 6 failures, the withdrawal rate is 3.0%.
3) For 12 failures, the withdrawal rate is 3.3%.
When all of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 2.4%.
2) For 6 failures, the withdrawal rate is 2.6%.
3) For 12 failures, the withdrawal rate is 2.8%.

These are the results when using 2.0% TIPS.
When none of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.9%.
2) For 6 failures, the withdrawal rate is 4.4%.
3) For 12 failures, the withdrawal rate is 4.8%.
When 25% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.5%.
2) For 6 failures, the withdrawal rate is 3.9%.
3) For 12 failures, the withdrawal rate is 4.3%.
When 50% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.2%.
2) For 6 failures, the withdrawal rate is 3.5%.
3) For 12 failures, the withdrawal rate is 3.8%.
When 75% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 2.8%.
2) For 6 failures, the withdrawal rate is 3.1%.
3) For 12 failures, the withdrawal rate is 3.3%.
When all of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 2.4%.
2) For 6 failures, the withdrawal rate is 2.6%.
3) For 12 failures, the withdrawal rate is 2.9%.

These are the results when using 3.0% TIPS.
When none of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 4.0%.
2) For 6 failures, the withdrawal rate is 4.5%.
3) For 12 failures, the withdrawal rate is 4.9%.
When 25% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.6%.
2) For 6 failures, the withdrawal rate is 4.0%.
3) For 12 failures, the withdrawal rate is 4.4%.
When 50% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.2%.
2) For 6 failures, the withdrawal rate is 3.5%.
3) For 12 failures, the withdrawal rate is 3.9%.
When 75% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 2.9%.
2) For 6 failures, the withdrawal rate is 3.1%.
3) For 12 failures, the withdrawal rate is 3.4%.
When all of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 2.5%.
2) For 6 failures, the withdrawal rate is 2.7%.
3) For 12 failures, the withdrawal rate is 2.9%.

These are the results when using 4.0% TIPS.
When none of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 4.1%.
2) For 6 failures, the withdrawal rate is 4.6%.
3) For 12 failures, the withdrawal rate is 5.1%.
When 25% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.7%.
2) For 6 failures, the withdrawal rate is 4.1%.
3) For 12 failures, the withdrawal rate is 4.5%.
When 50% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.3%.
2) For 6 failures, the withdrawal rate is 3.6%.
3) For 12 failures, the withdrawal rate is 4.0%.
When 75% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.0%.
2) For 6 failures, the withdrawal rate is 3.2%.
3) For 12 failures, the withdrawal rate is 3.5%.
When all of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 2.6%.
2) For 6 failures, the withdrawal rate is 2.7%.
3) For 12 failures, the withdrawal rate is 3.0%.

These are the results when using commercial paper.
When none of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.9%.
2) For 6 failures, the withdrawal rate is 4.4%.
3) For 12 failures, the withdrawal rate is 4.8%.
When 25% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.5%.
2) For 6 failures, the withdrawal rate is 3.9%.
3) For 12 failures, the withdrawal rate is 4.2%.
When 50% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.1%.
2) For 6 failures, the withdrawal rate is 3.4%.
3) For 12 failures, the withdrawal rate is 3.8%.
When 75% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 2.8%.
2) For 6 failures, the withdrawal rate is 3.1%.
3) For 12 failures, the withdrawal rate is 3.3%.
When all of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 2.4%.
2) For 6 failures, the withdrawal rate is 2.6%.
3) For 12 failures, the withdrawal rate is 2.9%.

These are the results when stocks take up 20% of the portfolio.

These are the results when using 0.0% TIPS.
When none of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.4%.
2) For 6 failures, the withdrawal rate is 3.5%.
3) For 12 failures, the withdrawal rate is 3.6%.
When 25% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.3%.
2) For 6 failures, the withdrawal rate is 3.4%.
3) For 12 failures, the withdrawal rate is 3.5%.
When 50% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.2%.
2) For 6 failures, the withdrawal rate is 3.3%.
3) For 12 failures, the withdrawal rate is 3.4%.
When 75% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.1%.
2) For 6 failures, the withdrawal rate is 3.2%.
3) For 12 failures, the withdrawal rate is 3.3%.
When all of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.0%.
2) For 6 failures, the withdrawal rate is 3.0%.
3) For 12 failures, the withdrawal rate is 3.2%.

These are the results when using 1.0% TIPS.
When none of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.9%.
2) For 6 failures, the withdrawal rate is 4.0%.
3) For 12 failures, the withdrawal rate is 4.0%.
When 25% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.7%.
2) For 6 failures, the withdrawal rate is 3.8%.
3) For 12 failures, the withdrawal rate is 3.9%.
When 50% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.5%.
2) For 6 failures, the withdrawal rate is 3.6%.
3) For 12 failures, the withdrawal rate is 3.8%.
When 75% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.4%.
2) For 6 failures, the withdrawal rate is 3.5%.
3) For 12 failures, the withdrawal rate is 3.6%.
When all of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.3%.
2) For 6 failures, the withdrawal rate is 3.4%.
3) For 12 failures, the withdrawal rate is 3.5%.

These are the results when using 2.0% TIPS.
When none of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 4.3%.
2) For 6 failures, the withdrawal rate is 4.4%.
3) For 12 failures, the withdrawal rate is 4.5%.
When 25% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 4.1%.
2) For 6 failures, the withdrawal rate is 4.2%.
3) For 12 failures, the withdrawal rate is 4.3%.
When 50% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.9%.
2) For 6 failures, the withdrawal rate is 4.0%.
3) For 12 failures, the withdrawal rate is 4.1%.
When 75% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.8%.
2) For 6 failures, the withdrawal rate is 3.9%.
3) For 12 failures, the withdrawal rate is 4.0%.
When all of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.6%.
2) For 6 failures, the withdrawal rate is 3.7%.
3) For 12 failures, the withdrawal rate is 3.8%.

These are the results when using 3.0% TIPS.
When none of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 4.7%.
2) For 6 failures, the withdrawal rate is 4.9%.
3) For 12 failures, the withdrawal rate is 5.0%.
When 25% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 4.5%.
2) For 6 failures, the withdrawal rate is 4.6%.
3) For 12 failures, the withdrawal rate is 4.8%.
When 50% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 4.3%.
2) For 6 failures, the withdrawal rate is 4.4%.
3) For 12 failures, the withdrawal rate is 4.6%.
When 75% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 4.1%.
2) For 6 failures, the withdrawal rate is 4.2%.
3) For 12 failures, the withdrawal rate is 4.4%.
When all of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.9%.
2) For 6 failures, the withdrawal rate is 4.0%.
3) For 12 failures, the withdrawal rate is 4.2%.

These are the results when using 4.0% TIPS.
When none of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 5.2%.
2) For 6 failures, the withdrawal rate is 5.4%.
3) For 12 failures, the withdrawal rate is 5.5%.
When 25% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 5.0%.
2) For 6 failures, the withdrawal rate is 5.1%.
3) For 12 failures, the withdrawal rate is 5.2%.
When 50% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 4.7%.
2) For 6 failures, the withdrawal rate is 4.8%.
3) For 12 failures, the withdrawal rate is 5.0%.
When 75% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 4.5%.
2) For 6 failures, the withdrawal rate is 4.6%.
3) For 12 failures, the withdrawal rate is 4.8%.
When all of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 4.3%.
2) For 6 failures, the withdrawal rate is 4.4%.
3) For 12 failures, the withdrawal rate is 4.5%.

These are the results when using commercial paper.
When none of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.0%.
2) For 6 failures, the withdrawal rate is 3.4%.
3) For 12 failures, the withdrawal rate is 3.9%.
When 25% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.0%.
2) For 6 failures, the withdrawal rate is 3.3%.
3) For 12 failures, the withdrawal rate is 3.8%.
When 50% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.0%.
2) For 6 failures, the withdrawal rate is 3.2%.
3) For 12 failures, the withdrawal rate is 3.8%.
When 75% of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 3.0%.
2) For 6 failures, the withdrawal rate is 3.1%.
3) For 12 failures, the withdrawal rate is 3.7%.
When all of the portfolio gains are removed:
1) For 0 failures, the withdrawal rate is 2.9%.
2) For 6 failures, the withdrawal rate is 3.0%.
3) For 12 failures, the withdrawal rate is 3.5%. </quote>
http://s162532268.onlinehome.us/Sewer/viewtopic.php?t=1234

**************************

It's just so beautiful that it brings a tear to my eye each time I read it. And just think, this is only one post, of one thread, of the multitude from JWR that you indexed... awesome!

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