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May we please now develop a list of Faulty SWR Factors? In the interests of removing personality from the conversation, I suggest that we refer to intercst's work on safe withdrawal rates as "The Study," both to give it the credit it is due and to assist us in staying focused on The Study rather than intercst.

I repeat my request:

hocus, what, in your opinion, is another Faulty SWR Factor, and please support your selection with a brief reason for its inclusion on our list. Thank you.
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What, in your opinion, is another Faulty SWR Factor

The second biggest flaw is that the study is not statistically valid. Datasnooper (who is famous as this site for exposing the flaws in the "Dogs of the Dow" investing approach recommended in one of the Motley Fool books) has noted that there are not 130 independent data points in the study, but only four (because there are only four 30-year time-periods examined).

Looking at four data points does not produce statistically valid results. To say that the intercst study tells you the safe withdrawal rate for a retirement beginning today is something like saying that you flipped a coin four times, it came up heads each time, so now you know that the next time it will come up heads again.

It might, and then again it might not. The data you looked at is not adequate to provide an answer to the question.
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hocus wrote:
The second biggest flaw is that the study is not statistically valid. Datasnooper (who is famous as this site for exposing the flaws in the "Dogs of the Dow" investing approach recommended in one of the Motley Fool books) has noted that there are not 130 independent data points in the study, but only four (because there are only four 30-year time-periods examined)<snip>

If you are quoting Datasnooper correctly (which I seriously doubt owing to your record here) then datasnooper (and you) are DEAD WRONG!!

With 135 years of data. There are 105 THIRTY YEAR ROLLING PERIODS!!! Each and every one is an INDEPENDANT DATA POINT. Only THIRTY data points are needed to make this a statistically significant study. Intercst has done statistical OVERKILL (by a factor of 3.5) on his statistically significant SWR study.

Hocus, PLEASE stop posting about something you know absolutely NOTHING about (i.e. statistics and simple math). You just make yourself look like an idiot.
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Hocus, PLEASE stop posting about something you know absolutely NOTHING about (i.e. statistics and simple math). You just make yourself look like an idiot. </i.

Galeno: In your opinion as a medical professional, how long until the big crash?
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For Faulty SWR Factors, we now have:

1. The failure to adequately account for over-valuation in stock prices. Stock prices in the late 1990s were at levels higher than any ever seen in the 130 years examined by The Study.

2. The Study is not statistically valid; i.e., there are not 130 independent data points in The Study, only four, because there are only four 30-year time-periods examined.

Can you think of another, hocus?
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Hocus, PLEASE stop posting about something you know absolutely NOTHING about (i.e. statistics and simple math).

Do we have a statistician in the crowd who could support or refute galeno's statement?

(Prometheus, this hall monitor job is tough. I have another life, ya know. <g>)
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For Faulty SWR Factors, we now have:

1. The failure to adequately account for over-valuation in stock prices. Stock prices in the late 1990s were at levels higher than any ever seen in the 130 years examined by The Study.


I believe at current (12/02) valuations we're safely back within the range of the data points in the REHP study, correct?

Gn
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Galeno: In your opinion as a medical professional, how long until the big crash?

ogrecat, please use the Ignore Thread feature. We're trying to get away from gratuitous insults and let the debate go forward until it proves or disproves itself.

(Prometheus, H-E-L-P! <g>)
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Galano: Hocus, PLEASE stop posting about something you know absolutely NOTHING about (i.e. statistics and simple math)
.
Catherine: Do we have a statistician in the crowd who could support or refute galeno's statement?


Here is a post in which intercst responds to the DataSnooper charge:

http://boards.fool.com/Message.asp?mid=17775982
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I believe at current (12/02) valuations we're safely back within the range of the data points in the REHP study, correct?

JWR1945 has done an analysis indicating that, re the valuation issue, we are now back within a safe range.

That does not mean that we do not need to discuss this matter on the board. There are a good number of community members who retired during the time-period when we were not in the safe range. Those people need to be thinking about whether they need to change their asset mix to make their portfolios safe. To do that, they need to know the true SWRs of the various asset classes.
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For Faulty SWR Factors, we now have:

1. The failure to adequately account for over-valuation in stock prices. Stock prices in the late 1990s were at levels higher than any ever seen in the 130 years examined by The Study.

2. The Study is not statistically valid; i.e., there are not 130 independent data points in The Study, only four, because there are only four 30-year time-periods examined.

Can you think of another, hocus?


A third problem is that for the study to work, stock returns need not only be as good as they have been over the past 130 years, they must also occur in the exact same sequence as they did in the past.

raddr did an analysis on the other board showing that, if, say, the results of Year Nine turn up immediately prior to the results of Year 8 rather than immediately after the results of Year 8, that can cause a drop in the SWR even if the overall results from stocks are generally the same in the future as they were in the past.
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"da man" wrote:
A third problem is that for the study to work, stock returns need not only be as good as they have been over the past 130 years, they must also occur in the exact same sequence as they did in the past.

raddr did an analysis on the other board showing that, if, say, the results of Year Nine turn up immediately prior to the results of Year 8 rather than immediately after the results of Year 8, that can cause a drop in the SWR even if the overall results from stocks are generally the same in the future as they were in the past.


This can only occur while under the influence of very powerful hallucinogenic drugs (e.g. LSD, STP, jimson weed, large amounts of psillosibin (sp?) or mescaline). Even while on large amounts of galeno wacky weed I cannot reproduce the "da man" results quoted above. The community properties of addition and multiplication (I learned these in fourth or fifth grade of primary school) prohibit it.

Note to self: I better get off this thread before I get kicked off TMF for a week again <grin>.
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The community properties of addition and multiplication (I learned these in fourth or fifth grade of primary school) prohibit it.

For those interested, I've copied the text of the raddr analysis below. If you have questions for raddr, you need to ask them at the other board. The graphs that were included in his original post did not make it over here.

The raddr analysis begins here:

Wanderer and I were discussing awhile back how sensitive the SWR ("safe" withdrawal rate) is to the sequence of returns from year to year. I played around with Shiller's market data since 1871 and found that merely switching two years in the sequence could make a huge difference. IOW if you take the 130 years since 1871, randomly switch two, and leave the other 128 alone you can significantly change the SWR in many cases. Each time I started out with the historical data anew before switching 2 years.

I took the TMF's REHP methodology and ran it 1000 times exactly as was done for the historical data exceptly I randomly switched 2 years of historical data for each run. Details:


-75:25 stocks:commercial paper - real inflation adjusted (CPI)returns
-30 year simulated retirement for each year from 1871 to 1971 (100 overlapping periods)
-0.2% annual expenses
-returns for two random years switched for each run



Here's what happens:



As you can see just above the blue "simulation mean" line there is a dense green line of dots at about 3.85%. This is the historical 30-year SWR as determined by the real historical data. Note that this is where most of the dots are congregated which means that switching 2 years in the return sequence made no difference in the SWR for most of the simulated runs. However, approximately 25% of the dots fall below this meaning that the SWR would've been lower if only 2 years in the sequence had been different. In a few cases the SWR would have been below 3%! Of course, in some cases the switch would have raised the SWR but not by much (less than 0.5%). Not only that but only 13% of the time did the SWR go up - roughly half of the number of times it went down.

Just to show how little the change was in the returns sequence here is a representative sample of 9 switched-data return histories (red lines) plotted against the actual historical data (blue line):



A fair criticism could be made that taking returns out of sequence is an artificial situation and I wouldn't disagree. However, I left 128 out of 130 exactly the same. And history won't repeat exactly the same way which is why you have to take a study like that done at REHP with a large grain of salt. I mean who can predict when an event like 9-11 will happen and throw the markets out of whack for a year or two
________________
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CatherineCoy pleads:

(Prometheus, H-E-L-P! <g>)

Well maybe he'd be more likely to come to your aid if you'd spell his name right. ;-)

-
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CatherineCoy pleads:

(Prometheus, H-E-L-P! <g>)

Well maybe he'd be more likely to come to your aid if you'd spell his name right. ;-)


I missed an "s," didn't I?

Prometheuss, H-E-L-P-P!
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galeno: Hocus, PLEASE stop posting about something you know absolutely NOTHING about (i.e. statistics and simple math).

CC: Do we have a statistician in the crowd who could support or refute galeno's statement?

(Prometheus, this hall monitor job is tough. I have another life, ya know. <g>)


Okay CC, now I am feeling sorry for you, so I will throw some more fuel on the fire.

I am not a statistician, but I have endured more than a few graduate level probability and statistics classes (enough to know that this question should sanitized and taken to an unbiased statistician). DataSnooper is qualified as a statistician and he has a valid point. Consider two rolling 30 year periods that start in successive years (e.g., 1959 & 1960). 29 of the 30 years that are part of the period starting in 1959 are also part of the period starting in 1960. You will do about the same if you start in either of these two years because inflation and return on your asset classes differ only by what happens in 1959 and 1989. So if you want periods with absolutely no correlation then you must select periods without overlap like 1929-1958 and 1959-1988, right? Well there is even a problem here. What happens to investments and inflation in the last few years of the first period probably affects what happens in the early years of the next period. So we are always on a slippery slope when we pretend that there is no correlation.

However, Galeno's claim that 135 years worth of data provides 105 data points is not all wet. As a practical matter, one retires in a given year and cares about his nest egg lasting for the next thirty years (in our canonical example). The fact that a 4% withdrawal rate has worked for the last 105 complete 30 year periods and the remaining 29 incomplete periods counts for something. The fact that a higher withdrawal rate has not worked is even more important. When intercst (and the Trinity study and others) concluded that 4% was the "safe" withdrawal rate it was news because professionals were advising folks to plan for withdrawals ranging from 5% to 10% with 7% being a very common number.

While I am spending time on this, I might as well muck with another aspect of this debate that seems to confuse more than a few folks. intercst used a standard technique (efficient frontier) to determine the optimal asset allocation from the historical data. (That allocation differs as you adjust the withdrawal period.) It represents the best you could have done investing in those two asset classes. It does not say much about what might be the best allocation between equities and fixed income assets for the future; however, conventional wisdom says that it is a pretty good guess. To do better you must predict the future. If you "know" that stocks will under perform then you can adjust the allocation accordingly.

So what's the bottom line? When Bernstein says that the safe withdrawal rate for folks who retired at the peak of the last bull market might be as low as 2%, he is predicting future returns that are historically worse than they have been over any 30 year period in the last 135 years. If you look back over historical data for the worse 30 year period then you have some margin of safety; however, there will probably be an even worse period somewhere in the future. Is that period 1999-2028? It could be, but the 4% safe withdrawal rate is so cautious that I would take a chance on it if I had any sort of safety net (e.g.'s, the ability to downsize, a small pension, or generous children).

Regards,
Prometheuss




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So what's the bottom line? When Bernstein says that the safe withdrawal rate for folks who retired at the peak of the last bull market might be as low as 2%, he is predicting future returns that are historically worse than they have been over any 30 year period in the last 135 years. If you look back over historical data for the worse 30 year period then you have some margin of safety; however, there will probably be an even worse period somewhere in the future. Is that period 1999-2028? It could be, but the 4% safe withdrawal rate is so cautious that I would take a chance on it if I had any sort of safety net (e.g.'s, the ability to downsize, a small pension, or generous children).

if you run out of money you have senior housing (subsidized), food stamps, utility subsidies, and a whole slew of other "OLDER ADULT SERVICES". you are gonna die anyway! the scary part is running out of money while i can still play 18 holes, jog, and chase the old widow women around with my viagra bottle. educate your kids and get them started but let them make their own way, you did. "Someone is going to have a party on your money and it might as well be you". fred
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yo no who writes,

<<<What, in your opinion, is another Faulty SWR Factor>>>

The second biggest flaw is that the study is not statistically valid. Datasnooper (who is famous as this site for exposing the flaws in the "Dogs of the Dow" investing approach recommended in one of the Motley Fool books) has noted that there are not 130 independent data points in the study, but only four (because there are only four 30-year time-periods examined).

Looking at four data points does not produce statistically valid results. To say that the intercst study tells you the safe withdrawal rate for a retirement beginning today is something like saying that you flipped a coin four times, it came up heads each time, so now you know that the next time it will come up heads again.

It might, and then again it might not. The data you looked at is not adequate to provide an answer to the question.


That's very interesting. If having only 4 completely separate 30-Year periods is a problem for Datasnooper, what does he think about asset classes like REITs, international funds, and TIPS for which there is only only 30 years of reliable data or less? Having only one data point for a 30-Year withdrawal wouldn't give me much comfort. Extrapolating one 30-year period and expecting things to remain the same for a 40 or 50 year pay out period would give me even less comfort.

intercst

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yo no who writes,

raddr did an analysis on the other board showing that, if, say, the results of Year Nine turn up immediately prior to the results of Year 8 rather than immediately after the results of Year 8, that can cause a drop in the SWR even if the overall results from stocks are generally the same in the future as they were in the past.

I'm familiar with raddr's juxtaposition of the historical data, but I'm not sure what it adds to analysis.

If I told you could switch year 11 with year 12 and pump up the safe withdrawal rate from 4% to 4.5% would that have any greater credibility than raddr's assumptions.

I've been saying for the past 4 years that it is possible to make assumptions that will lead to a lower historical withdrawal rate, but there are just that, someone's assumptions.

intercst
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When intercst (and the Trinity study and others) concluded that 4% was the "safe" withdrawal rate it was news because professionals were advising folks to plan for withdrawals ranging from 5% to 10% with 7% being a very common number.

For the record, Prometheuss, I do not take exception to anything in your post, and I am one of those who gave it a rec. It helps the board come to an informed understanding of this matter.

I particularly endorse the statement above. It is one of the reasons why I was so excited to discover the RetireEarlyHomePage.com site when I did, and one of the reasons why I elected to participate in the discussion board when intercst moved it here.
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If having only 4 completely separate 30-Year periods is a problem for Datasnooper, what does he think about asset classes like REITs, international funds, and TIPS for which there is only only 30 years of reliable data or less?

My presumption is that Datasnooper would argue that it is not possible to come up with statistically valid SWRs for those asset classes either.
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If I told you could switch year 11 with year 12 and pump up the safe withdrawal rate from 4% to 4.5% would that have any greater credibility than raddr's assumptions.

Raddr found some cases where switches caused the SWR to go up. But increases were less common than drops, and the size of the drops were generally greater than the size of the increases.

I believe that the problem stems from the fact that the study was produced through datamining. When you use datamining, any small item you overlook can cause changes in the results larger than what you would intuitively expect.

I've been saying for the past 4 years that it is possible to make assumptions that will lead to a lower historical withdrawal rate, but there are just that, someone's assumptions.

The entire study is a big assumption. The whole enterprise is statisitically invalid.

You are entitled to invest pursuant to assumptions that have appeal to you, intercst. But others are entitled to have discussions to examine assumptions that have greater appeal to them. The results of the study are the product of your assumptions, they are not scientific truth.

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What happens if I expect to live more than 30 years, like a lot longer? The Raelians eventually hope to develop adult clones into which humans could transfer their brains.
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YKW quoted raddr to justify 2%:

raddr did an analysis on the other board showing that, if, say, the results of Year Nine turn up immediately prior to the results of Year 8 rather than immediately after the results of Year 8, that can cause a drop in the SWR even if the overall results from stocks are generally the same in the future as they were in the past.

And I'm sure there are a zillion things in the 'past' that if you 'changed' would have affected the SWR rate....like the Japanese getting lost on the way to Pearl Harbor or getting hit by an off shore hurricane......Hitler being assasinated in 1937......

There are lots of 'single events' and changes of outcome that affect the world.

What YKW fails to acknowledge is that in the HISTORICAL record (not to be confused with the hysterical record) of 130 years of data, there are NO periods where 4% didn't work. None. Not one.

If the data HAD been different, then a different SWR WOULD have been calculated.

Gosh, hocus, if someone had slipped on the sidewalk in front of your house, successfully sued you for a million dollars, and collected it, then we can be sure your outcome would have been different too.

I think it's bad enough to go around with 'doomsday scenarios' based upon illogic and unmath for the future, but retroactively writing doomsday scenarios about things that DIDN"T happen takes the cake....


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telegraph shrewdly noted:
If the data HAD been different, then a different SWR WOULD have been calculated.

Gosh, hocus, if someone had slipped on the sidewalk in front of your house, successfully sued you for a million dollars, and collected it, then we can be sure your outcome would have been different too.

I think it's bad enough to go around with 'doomsday scenarios' based upon illogic and unmath for the future, but retroactively writing doomsday scenarios about things that DIDN"T happen takes the cake....


YKW's IDEAS have taken the cake on many occasions. And that's why I call YKW's buddies's ideas "chumpy" too. I, for one, am glad they don't post their IDEAS here anymore.
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This thread is getting pretty long.............

It is possible that the 4% worst case scenario safe withdrawal rate over the past 100 years or so has limited predictive value going forward. Not 100% safe. Not 95% safe. Not 90% safe. It is merely a study which demonstrates what happened in the past to a large segment of the equity and bond markets and inflation as well. Only time will tell what the future will bring.

For the individual who has retired, I think safety is more or less an all or nothing event. Either the money lasts, or it doesn't. What difference does the percentage of time the SWR was safe in the past make to the retired individual. Except maybe to allow him/her to sleep better believing, rightly or wrongly, that the retirement is 100% safe based on the worst history had to offer.

But markets, countries, and economic forces change over the long time periods the early retired is planning for. Bernstein, I believe, suggests that to use a SWR confidence level of greater than 80% is statistical overkill due to the many other factors ever changing in the unknown future.

It seems quite possible to me that the future could have a worst case scenario that is close to the great depression, but maybe without a huge world war a decade or so later. Or maybe a Japan like deflation for a decade or so. Or maybe a profound shift of economic force away from U.S. dominance, towards Europe and Asia. Or maybe the future will bring 50 years of robust economic growth with modest inflation and without major war, famine, or disease. These are not asteroid like events, but a few possibilities.

A 4% SWR seems conservative to me, after all who can imagine an economic disaster worse than the great depression. As a child of depression parents, I am quite aware of the suffering many, many went through. My father, the son of a mason, grew up during the great depression, with family dispersed, no work to be found, his brothers and sisters sent seperate ways, basic needs such as food, clothing and shelter a real challenge, has always told me that you never know when a rainy day may come, and to always be prepared for that rainy day. So, from my perspective, some cushion in addition to a conservative 4% SWR is in order. And, any ways to improve upon the 4% SWR is worth learning about.
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<<The second biggest flaw is that the study is not statistically valid. Datasnooper (who is famous as this site for exposing the flaws in the "Dogs of the Dow" investing approach recommended in one of the Motley Fool books) has noted that there are not 130 independent data points in the study, but only four (because there are only four 30-year time-periods examined)<snip>>>

If you are quoting Datasnooper correctly (which I seriously doubt owing to your record here) then datasnooper (and you) are DEAD WRONG!!

With 135 years of data. There are 105 THIRTY YEAR ROLLING PERIODS!!! Each and every one is an INDEPENDANT DATA POINT. Only THIRTY data points are needed to make this a statistically significant study. Intercst has done statistical OVERKILL (by a factor of 3.5) on his statistically significant SWR study.

Hocus, PLEASE stop posting about something you know absolutely NOTHING about (i.e. statistics and simple math). You just make yourself look like an idiot.


The "Study" doesn't use any statistics at all, it uses only arithmetic. Anyone who ever downloaded the spreadsheet and looked at it would know this. All it does is state that starting in year 1872, 1873, ..., 19XX, a YY year period of withdrawal will either fail or not fail. Then it tallies up all the failure periods and divides that by the total number of periods to determine what percentage of the periods failed. Thats it.

Usually those failures begin around 1929, and around the mid-to-late 1960's. If you assume that going forwards, there will be a string of YY years that are worse than starting in those above years, then your portfolio will fail.

The "Study" never said anything other than this.
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With 135 years of data. There are 105 THIRTY YEAR ROLLING PERIODS!!! Each and every one is an INDEPENDANT DATA POINT.

This is pure BS. There are 105 thirty year periods, but they are far from independant. Periods with adjacent start years share 29 years out of 30: or 97% of their makeup is the same. There is very strong auto correlation of SWR from year to year, and there is significant autocorrelation even 15 years out.

Only THIRTY data points are needed to make this a statistically significant study.

And what hat did you pull that number out of?

Intercst has done statistical OVERKILL (by a factor of 3.5) on his statistically significant SWR study.

As markr33 pointed out, intercst has done no statistical analysis of the study to determine the significance of it, and he has said as much in the past.

Ben
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The "Study" never said anything other than this.

The "study" is a bunch of numbers, and there is nothing wrong with the numbers.

The problem is what intercst says on this board about the study. intercst says on this board that the study tells you the safe withdrawal rate. It does not. He used a methodology that does not permit a statistially valid assessment of the safe withdrawal rate. He cannot possibly know what the safe withdrawal rate is by looking at the numbers that appear in his study.

More serious-minded researchers have taken a look at some of the factors that intercst failed to look at and have come up with assessments of the safe withdrawal rate far off from the one intercst frequently refers to on this board. The proper thing to do if he is going to refer to the numbers in his study is to note when doing so that the study was prepared using a methodology that produces results lacking statistical validity.
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says on this board that the study tells you the safe withdrawal rate. It does not. He used a methodology that does not permit a statistially valid assessment of the safe withdrawal rate.

<scratches head> I swore I'd quite replying to the Captain's posts, but...there are no statistics in intercst's study! It's like saying my bank statements are statistically invalid. You keep looking for the missing stawberries in the wrong places.
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galeno: With 135 years of data. There are 105 THIRTY YEAR ROLLING PERIODS!!! Each and every one is an INDEPENDANT DATA POINT.

Ben: This is pure BS. There are 105 thirty year periods, but they are far from independant. Periods with adjacent start years share 29 years out of 30: or 97% of their makeup is the same. There is very strong auto correlation of SWR from year to year, and there is significant autocorrelation even 15 years out.

galeno: Only THIRTY data points are needed to make this a statistically significant study.

Ben: And what hat did you pull that number out of?

galeno: Intercst has done statistical OVERKILL (by a factor of 3.5) on his statistically significant SWR study.

Ben: As markr33 pointed out, intercst has done no statistical analysis of the study to determine the significance of it, and he has said as much in the past.

Galeno's rant reminded me of Bluto's speech to rally the Delta House in the movie Animal House ("... was it over when the German's bombed Pearl Harbor?").

Regards,
Promtheuss

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There are no statistics in intercst's study! It's like saying my bank statements are statistically invalid. You keep looking for the missing stawberries in the wrong places.

It is intercst who, in response to a criticism of the study put forward by Datasnooper (who earlier revealed the invailidty of the research backing the Dogs of the Dow strategy), said that the study was produced in such a way that it is not possible to assign it any "statisitcal confidence levels." If you don't like the word "statistics," take it up with intercst. I think he did the right thing in acknowledging that the claims he makes to have discovered the safe withdrawal rate are statistically invalid claims.

Here's the link to the intercst response to the Datasnooper charge.

http://boards.fool.com/Message.asp?mid=17775982
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It is intercst who ... said that ... it is not possible to assign it any "statisitcal [sic] confidence levels." If you don't like the word "statistics," take it up with intercst. [He acknowledged} that the claims he makes to have discovered the safe withdrawal rate are statistically invalid claims.

Jeez... I despair.

He didn't say they are "statistically invalid." He said that statistics were not applied. It was not a statistical study. It was not intended to be a statistical study.

And while I'm on the soapbox, the "SWR" is defined as safe for the portfolio, in the sense that, under the specified conditions, the portfolio does not decline to zero value. It is not defined as "safe" for the investor, whatever that might mean.

Regards,
holzgrafe
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There are no statistics in intercst's study! It's like saying my bank statements are statistically invalid. You keep looking for the missing stawberries in the wrong places.

I disagree. If your bank statement mentions "average daily balance" you can be sure that (descriptive) statistical analysis is involved. In intercst's study, there aren't any FANCY statistics. But statistics are involved. These were the steps of the intercst study on SWRs:

1. Calculate the SWR for each of the 105 thirty-year rolling periods
2. Pick the lowest (THE MINIMUM) of those 105 numbers
3. Call that minimum the 100% SWR

Just doing step 1, 2, & 3 IS "descriptive statistical analysis." Saying there's no statistics involved is just pure ignorance (of which there is plenty one this board). If you don't believe me, look at any chapter one of any statistics textbook.
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It was not a statistical study. It was not intended to be a statistical study.

Whatever it was intended to be, it doesn't provide you with statistical confidence that you know the safe withdrawal rate. Thus, the 4 percent number that intercst cites is just his opinion. He is entitled to an opinion on this question, but so are other community members. Those community members should be able to start threads rooted in different understandings of the SWR and not have those threads turned into circus events.

It is not defined as "safe" for the investor, whatever that might mean.

This gets to the heart of it for me, Holzgrafe. What I want to talk about is the SWR that applies for the investor. That was the whole point of the "Coin Toss" post, thst different sorts of investors have different SWRs.

This is why I say that it is not necessary for me to refer to the intercst study in my posts, so long as intercst does not come to my threads and cite his study as "proof" for a number different than the one I am putting forward based on an entirely different way of looking at the question.
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What I want to talk about is the SWR that applies for the investor

But that's impossible. What is "safe" for the investor, in the sense you describe, is a wholly subjective matter -- subjective to the dreams and fears of the investor in question. It can't be predicted because it will be different for each investor, and it can't be practically quantified because there are way too many variables, many of which are themselves intrinsically unquantifiable.

The only thing that can be quantified (if not necessarily predicted) is how the portfolio itself behaves, which is what the SWR study did for the asset classes for which it had data.

IF you could come up with asset data similar to that used in the SWR study but bearing on other asset classes, that would be useful input to the problem. Until you do, I don't see much chance of you achieving your stated goals.

Regards,
holzgrafe
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IF you could come up with asset data similar to that used in the SWR study but bearing on other asset classes, that would be useful input to the problem. Until you do, I don't see much chance of you achieving your stated goals.

The way I see it--but I'm no statistician--this requires a huge spreadsheet. First you plug in one asset class (or any mix of assets) and hypothecate what would've happened had you retired on that asset mix in X-month of X-year going forward X-years. And you keep doing it over and over until you're satisfied that, present day--and assuming that the future is no worse than the past--you can tolerate the risk inherent in that asset mix.

It's just one big numbers-crunching exercise with a long list of variables. You need a statistician expert in Excel, no?
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What is "safe" for the investor, in the sense you describe, is a wholly subjective matter...and it can't be practically quantified

There are many aspects of the question that can be quantified, holzgrafe. For example, we know that investors with a large portfolio have a higher SWR than those with a small porfolio. Those with extra assets are less likely to panic in a stock market dowturn, so they tend to obtain higher long-term returns from that asset class.

What we don't know at this point is how significant a factor this is. That's one of the things that community members expressed an interest in exploring in the early stages of the Debate About Having a Debate.
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No. of Recommendations: 23
<For example, we know that investors with a large portfolio have a higher SWR than those with a small porfolio.>


Once again, you get it backwards. The portfolio size does not drive the SWR, it is the expenses or planned expenses that do.

Person A has 500k. At 4%, that becomes a 20k draw. As long as the 20k meets their budget, it will work.

Person B has 1000k. If they need 60k/yr, the 6% draw will have a high probability of failure. It does not entitle them to a larger SWR.

Long before you settle on a personal SWR, one needs to define how much they will need each year. Once you have a grip on that, you look at the size of your pile. If you determine that your draw will need to be over 4%, you need to make an honest appraisal of the situation.

1.You can decide to hold off until you can make the pile bigger.
2.You can look for areas that would cause you to lower your draw (reduce your expenses).
3.You can decide to supplement your plan by working part time.
4.You can decide to go ahead anyway as the 4% is an historically worst case scenario.
5. You can consider the impact from other sources of income kicking in at a later date (pension, SS, inheritance, lottery winnings, etc).

Obviously, if your pile is very big and your needs are very small you can have a very low SWR and not think about this issue at all. However, having a large pile by itself does not ensure greater success than someone who is very disciplined with their smaller pile.


BRG

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CC: The way I see it--but I'm no statistician--this requires a huge spreadsheet.It's just one big numbers-crunching exercise with a long list of variables.

That's not the problem. The problem is that, in general, we don't have the necessary data. More to the point, the data doesn't exist -- at least, not going back far enough to be useful, statistically or otherwise.

hocus: we know that investors with a large portfolio have a higher SWR than those with a small porfolio.

We don't know that. You have simply asserted that, with very little justification that I've seen so far. Nowhere I know of does it say that all people with low net worths have a less rational view of the market than all those with high net worths. As was pointed out in the original thread on the subject, a large portfolio is not equivalent to having perceived "extra assets". Indeed, a general characteristic of those with a lot of money these days seems to be that they tend to spend more of it. This is not universally true, of course, but I argue that those of whom it is not true also tend to have their portfolios pretty well in hand, and thus are outside our range of discussion anyway.

Regards,
holzgrafe
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the Y-K-W claims,quote:


More serious-minded researchers have taken a look at some of the factors that intercst failed to look at and have come up with assessments of the safe withdrawal rate far off from the one intercst frequently refers to on this board.


Please identify the 'more serious researchers' and please idendify the works (specific references to the factors that intercst did not look at, not mere speculation), and please provide the exact quotes (other than Bernstein) of your 'researchers' and their research to show that THER safe withdrawal rates are 'far off' from the ones intercst frequently refers to!

Give us, only, the names and works in which they have provided the 'factors' and SWR. Nothing else. No 1000 word tomes on who agrees with you about an 'assessment' of something.

And, as to your:

The proper thing to do if he is going to refer to the numbers in his study is to note when doing so that the study was prepared using a methodology that produces results lacking statistical validity.

2 plus 2 equals 4. It has no 'statistical validity. It is not based upon statistics. You seem to not even be able to get it through your head, that a study NOT based on 'statistics' but actual facts, needs to have 'statistical' validity.

If you add up all the numbers from 1 to 100, and provide the sum, there is no 'statistical validity' to the probability that you calculated the right distribution of numbers. Just like the sum of the numbers from one to 100 have one and only one answer, looking at 130 years of data, and determining a SWR from that gives you one and only one answer. Duh!

The 100% SWR succeeded in EVERY 30 year period in the study.

And it was never claimed to be a 100% accurate prognistitor of the future. (and none of your experts is likely to claim 100% accuracy either).

PLease, put up or shut up. YOur 'reseachers' and their research, or your silence.

This is getting old..


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the alleged hocus factor number 1:

For example, we know that investors with a large portfolio have a higher SWR than those with a small porfolio. Those with extra assets are less likely to panic in a stock market dowturn, so they tend to obtain higher long-term returns from that asset class.

What we don't know at this point is how significant a factor this is. That's one of the things that community members expressed an interest in exploring in the early stages of the Debate About Having a Debate.


Please provide the data - references, sources, and other to back your 'claim' that you 'know' this.

I have seen nothing anywhere to suggest that there is any statistical validity ( or other validity) to your alleged claim.

Please define 'larger' and 'smaller' portfolio in less than 20 words.

Please define 'extra assets'.

Please show, with varying degress of assets, exactly what percent of people are going to sell what percent of stock based upon how 'large' or 'small' their portfolio is.

THen please do a statistical analysis of your data to show there is validity.

And then show how 'important' a 'factor' this is!

And don't ask everyone else to do your work.

And you obviously don't understand the SWR study since it is based upon rational people doing rational things with their money, not fear based investors panicking like the herds. (who aren't going to be retired anyway since they are too busy consuming).

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No. of Recommendations: 13
Does YKW actually believe that

1) talk show hosts want to talk about 'negatives', ie, how little money you can take out of your portfolio, the fact that people will never be able to save enough to EVER retire since the SWR is 2%, thus dooming everyone to a lifetime of working, and how every previous study on portfolio withdrawals by prestigious institutions like the Trinity Study, and hundreds of financial/portfolio folks, are incredibly wrong? (and he alone has the correct numbers for a measely return on your investment income).

2) That anyone is going to buy the 'book'? Tens of thousands are published. Most wind up as 'discards' at the second hand book stores.

3) That the book is going to get noticed in the blitz of 'The Minute Millionaire', Rich Dad/Poor Dad series of co-authored silly stuff, and the like......which promise instant riches, the lifestyle of the rich and famous...... or he is going to be the next Suze Orman?

Yep, I can just see a review " this book tells you that you are going to work forever since it will not be possible to save enough money to retire on. No solutions to this problem are included, and only doomsday scenarios of 80 and 90 year old great grandpas and grandmas working at the Walmart are included. In fact, the author claims that almost no one is going to be able to retire before the age of 75 due to his orchestration of statistical work by others to make his points. The author received 4037 'recommendations' on the Motley Fool Retire EArly board during his discussions of assesments of a methodology for determining the results. The author himself has had to return to work since his strategy failed to keep him and his family adequately retired. He is now sharing his experience of investors who panicked and sold everything during the stock market peak of 1995-1999"

4) That after just one appearance, where he blabbers the host to death without answering a simple question, that other talk show hosts will want to have a repeat performance?

Ho ho ho.....that is good for a nice laugh on a stormy day in this neck of the woods....
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hocus: <For example, we know that investors with a large portfolio have a higher SWR than those with a small porfolio.>

gurdison:Once again, you get it backwards.


I undertand that you do not agree with me on this, gurdison.

I hope that you do agree, however, that those who want to have the discussion may do so without first gaining your agreement.
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hocus: <For example, we know that investors with a large portfolio have a higher SWR than those with a small porfolio.>

gurdison:Once again, you get it backwards.

I undertand that you do not agree with me on this, gurdison.

I hope that you do agree, however, that those who want to have the discussion may do so without first gaining your agreement.


Maybe this is a large part of our problem. Hocus, this is the discussion. Are you saying that a discussion is only permitted to contain posts that agree with you? Gurdison has posted a valid comment on your assertion which deserves consideration and, if merited, rebuttal. That is what a discussion is generally agreed to be.

What else were you expecting?

BTW, I propose a new acronym: WFWR, or "Warm, Fuzzy Withdrawal Rate", to distinguish it from the established SWR "Safe Withdrawal Rate." The distinction is important and caused much of the early chaos on the subject. The SWR is simply that rate which the portfolio survives if the specified rules are observed. The WFWR is that rate which an individual investor feels comfortable with, under whatever assumptions/demands he cares to make. Note that one is a simple statement of (essentially) portfolio end value while the other incorporates the wealth of subjective constraints which you have been discussing.

Clearly, it is the WFWR which you and those who agree with you are concerned with. If we adopt this new nomenclature, I am sure that a great deal of pointless wrangling will be eliminated.

If you prefer, we could make it "CWR" for Comfortable Withdrawal Rate, but either way I strongly urge you to consider the idea.

Regards,
holzgrafe
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Are you saying that a discussion is only permitted to contain posts that agree with you?

Of course not. That's silly.

Gurdison has posted a valid comment on your assertion which deserves consideration and, if merited, rebuttal.

It deserves consideration as part of the debate. At the moment, the community is deciding whether it supports the idea of having a debate under the Motley Fool posting rules. Galagan says yes. If you agree, please rec his post. If enough do that, we will have a chance to consider gurdison's quesiton and any others that come to be posted.
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me: Are you saying that a discussion is only permitted to contain posts that agree with you?

hocus: Of course not. That's silly.

Then the discussion is proceeding. Please give it the attention you say you want it given. Because...

me: Gurdison has posted a valid comment on your assertion which deserves consideration and, if merited, rebuttal.

hocus: It deserves consideration as part of the debate. At the moment, the community is deciding whether it supports the idea of having a debate under the Motley Fool posting rules. Galagan says yes. If you agree, please rec his post. If enough do that, we will have a chance to consider gurdison's quesiton and any others that come to be posted.

This sounds appallingly like delusions of grandeur. The community is deciding no such thing. You are getting the debate you've been asking for, courtesy of gurdison and others. Participate in it or don't; but if you don't, then let's have no more whining about "the debate that the board is not letting you have".

If on the other hand you do actually want a real debate, then gurdison's comments deserve factual response, and the ball's in your court.

Regards,
holzgrafe
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<I understand that you do not agree with me on this, gurdison.

I hope that you do agree, however, that those who want to have the discussion may do so without first gaining your agreement.>


I do not believe that this is a matter of simple disagreement. If you say up is down or black is white and I say "hold on a minute", I would not call that a mere disagreement. We have differences of opinion all the time on the board and they do not typically lead to the impasses that you almost always manage to find yourself at.

Some board members are dead set against the concept of investment real estate. Others warmly embrace it and personally own a number of rental properties. Still others have found a middle ground of sorts by investing in REITs. Some of the discussions between those groups have gotten a bit loud from time to time, but all three catagories of posters are well represented here and manage to get heard. There is no board concensus about which one is right. What allows them to get their point accross is that posters from each catagory that have implemented their strategies and been successful with them.

When anyone wants to broach the subject of real estate, they do not have to ask to have a discussion on the subject. They just start a new thread. If any want to discuss the subject in even more detail than the board normally would, there are separate FOOL boards for Investment Real Estate and for REITs. Similarly, we have many discussions over tax issues. Once again if one has a question on tax issues that may be beyond the scope of our general discussions here there is a FOOL board for that too. For people with more traditional retirement issues in mind there is a Retired Fools board. There are many possible outlets for discussion.

You fail to gain meaningful "traction" here because you never seem to get off the drawing board. Your 0/100 portfolio shows a historical SWR of around 2.3%, yet you confidently say it will support 4%, maybe more. That alone causes many here to tune you out. You often say you want to get back up to a 50/50 split, but offer no definitive method of how or when to get back in. I have mentioned on more than one occasion that you were very successful in the hyper saving phase of your working life. I happen to think that what you have said about that can be a useful first step to anyone planning for FI/RE. In that instance you set out a concept, implemented it and it worked. There is a tremendous disconnect between your current portfolio construction, where you want to get it to and the historical data. Unless or until you bridge that gap, your ideas will never be very well received.


As to the math issue that prompted my original response, I would still like to hear you explain how a bigger pile = a higher SWR. Intercst has a decent pile of assets, but my recollection is that he has a WR in the neighborhood of 1-1.5%, not 5-6%. In the example I gave, person B had a pile twice the size of person A, yet it would not be enough to cover their expenses at a 4% WR. I still maintain that a SWR does not come first. It is the last step in the process. You have to know your level of expenses. You also have to know your level of risk tolerance. You also need to determine what percentage of your assets that you want to place into each asset class. Unless you are way off the chart with assets, it is impossible to say a particular dollar amount of assets will be enough for a particular person. You have to know the other factors first.


BRG

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I do not believe that this is a matter of simple disagreement. If you say up is down or black is white and I say "hold on a minute", I would not call that a mere disagreement. We have differences of opinion all the time on the board and they do not typically lead to the impasses that you almost always manage to find yourself at.

This is an excellent summary of the problem we face. You are right that differences of opinion on other matters do not lead to the same sort of impasses. And you are right that the objection that a significant segment of this community has to my ideas on SWRs is something more than "simple disagreement." There is a group here that appears to me to make up about a third of the board that hears me to be saying that black is white. You are right about that.

But you are not right in your suggestions that all segments of the community hear me to be saying that black is white. The 86 who recced the "Coin Toss" post and the 80-plus who recced the "My Plan" post want to hear more of what I have to say on this. They want to be able to ask me questions and offer insights of their own on threads dealing with my understanding of the safe withdrawal rate concept.

The problem we need to solve is--What does a board do when one significant segment sees a poster arguing that black is white and another significant segment sees him offering the best on-topic debate the board has seen in a long time. Galagan has offered an idea that I believe holds a great deal of promise. I hope that community members will give serious consideration to the proposed course of action he put forward in his post from late yesterday afternoon. That's this one.

http://boards.fool.com/Message.asp?mid=18355089

Your 0/100 portfolio shows a historical SWR of around 2.3%, yet you confidently say it will support 4%, maybe more. That alone causes many here to tune you out.

The 2.3 percent number comes from the intercst study. I believe that intercst came up with the wrong number because he used the wrong methodology. If you use a different methodology (one I consider more accurate), you come up with a different number.

This is why I consider it disruptive for intercst to come to each of my threads and offer his study as proof of the claim you make above. It is the premise of each of my investing threads that the SWR cannot be accurately calculated using the methodology used by intercst. I shouldn't have to go through all that each time I start a new thread. It should be understood on the board that there are different ways of calculating SWRs that yield different results.

I don't go to each intercst thread and give my opinions as to why his approach is wrong. I think that people who want to discuss his approach should be able to do so in peace. I am asking that the same courtesy be extended to me. If intercst has something constructive to offer to these threads, I want to hear it. But it is not constructive for him to cite his study as an authority to people who are trying to have a discussion premised on the idea that his methodology does not provide the right answer in all circumstances.

You often say you want to get back up to a 50/50 split, but offer no definitive method of how or when to get back in.

The reason I want to have a discussion is so that I can develop a definitive method of doing this. I explained that in the very first post, the one that went up on May 13. Here's that post.

http://boards.fool.com/Message.asp?mid=17209214

I have mentioned on more than one occasion that you were very successful in the hyper saving phase of your working life. I happen to think that what you have said about that can be a useful first step to anyone planning for FI/RE.

If I had my druthers, Gurdison, I would return to posting about those sorts of issues. They hold a lot more interest to me than the investing questions.

But the survival of this board is a matrer of intense concern to me. I use this board as a resource in pursuing my life project (learning about and teaching about early retirement and financial independence). It would be a serious life setback for me if this board were to go away. There have been many strong expressions of discontent here with excessive off-topic posting and personal attacks. Unless we find a way to deal with those problems, I have concerns that the board is going to die.

The natural way to solve the problems is to expand the level of on-topic posting. When people have substance to focus on, they drop the personal attack stuff, in my experience. The most on-topic issue I can think of is safe withdrawal rates. So I put forward a post last May suggesting that we discuss some aspects of the SWR question that we have not discussed here before.

It is entirely possible that, if we permitted the debate, it would go on for a few hours or a few days and then interest would peter out. What makes the Debate About Having a Debate a never-ending one is the discomfort the commuity has with the idea of blocking debate on an on-topic matter. A good number of community members just can't stand to see that happen. Until recently, most have not been willing to ask the disrupters to knock off the funny business either, so it just goes on and on.

I would still like to hear you explain how a bigger pile = a higher SWR.

This was discussed a lot in earlier threads. Check out the "Coin Toss" thread from June, and some other threads that sprung up as a consequence of comments offered on that one.





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You are getting the debate you've been asking for, courtesy of gurdison and others.

That's not right, Holzgrafe. There are a good number of informed and reasonable-minded community members who are not participating in this thread.

A pattern that plays itself out again and again is that I put up a post with substance, and it gets a good number of recs, demonstrating yet again the strong community interest in learning more about this subject. Then there is a personal attack or a deception, and people on the thread realize that it is going nowhere. Lots of folks leave the thread, and from that point forward it's one of those circus event things.

To have the debate I have been asking for, we need an expression of community will that discussions of the realities of safe withdrawal rates are to be held pursuant to the Motley Fool posting rules. I have long believed that most members of this community want just that. If I had any doubts, they were erased by the response to the poll post from last week in which 68 people said that this board is "going to hell" with its focus on off-topic posting and personal attacks. Here's that post.

http://boards.fool.com/Message.asp?mid=18331587

That expression of community will lacked one essential element of what we need to get the board back on track. The community was not explicitly saying in that post that it wanted the disrupters to knock off the funny business. Galagan's post provides the missing element. Here's that post.

http://boards.fool.com/Message.asp?mid=18355089

He says "People who think that intercst's study is sufficient should work on other issues that are important to potential early retirees. Criticism of potential alternative studies that haven't even been started yet is premature." That's his way of putting it, not mine, but the bottom line is the same as what I have been saying. If you do not want to participate, you do not need to, but you are not to disrupt. That's Motley Fool's position too.

The Galagan post now has 18 recs. I expect it will get more in the course of the day. If that were all we had, I don't think that 18 recs would be a strong enough expression of community will to turn the trick here. Combined with the 68 votes for more on-topic posting and fewer personal attacks, however, I believe that we now have a strong expression of community will that the disrupters knock off the funny business and allow community members who want to do so to Learn Together.

Here's what I will do. I'll take a few months away from this. That will give the board a chance to cool down and will give me a chance to catch up one some other work. Then I will put up a thread-starter addressing some issue of substance on the safe withdrawal rate question, and we'll see how that goes.
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You are getting the debate you've been asking for, courtesy of gurdison and others.

I'm not getting the debate I'm looking forward to. The reason is that the work hasn't been done yet.

You are getting the debate you've been asking for, courtesy of gurdison and others. Participate in it or don't.

There's nothing to participate in yet. The intercst study has been done and exists. Any study that may prove better hasn't been done yet.

We're not debating the merits of two studies. We're bickering about whether or not anyone needs to do a second study. Personally, I would prefer not to have to argue about the potential problems with intercst's study until we see whether or not they make any difference. It would be dumb to argue that intercst's 4 percent is based on dangerous information, only to crank through the numbers in a different way and come up with exactly the same number.

I think by now everyone knows what claims the intercst study makes. It's enough to say that some people think we're done, and others don't. I think we have more work to do. I'd ask those who disagree with me not to mock me publicly. Let us fools (big or small f, depending on your opinion) see if we can come up with something better. When we're done, then we can debate. Until then, you're just trying to grab a ghost.

dan
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I will put up a thread-starter addressing some issue of substance on the safe withdrawal rate question, and we'll see how that goes.

Definition of insanity: doing the same thing over and over again but expecting different results <grin>.
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Hocus,

I think galagan,bensolar and others either disagree with parts of the intercst study and are treated fairly.I for one love to read reasons why the intercst study may be done in a better way or may be missing something.You have been arguing to be heard without debate or only with people who agree.That is insane.This is a message board.I know you paid your $30,so did everyone else.Some people disagree with the way the 30 year rolling periods overlap with each other and really have 29 years of similarity.I think that is the way it happened and that is the way it should be calculated.That is the way the business cycle happens (boom and bust).Intercst never said that the next 100 years will not have a lower swr,only that 4% works for the past and that if the future is no worse it will work.I also notice you never respond to people like telegragh who i feel puts his disagreement in the most succinct way.Please attempt to reply to telegraphs points ,which i believe would go a long way to explaining your point of view.


2828
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me: You are getting the debate you've been asking for, courtesy of gurdison and others.

hocus: That's not right, Holzgrafe. There are a good number of informed and reasonable-minded community members who are not participating in this thread.

And that is their right. They are not participating because you have still not offered them any real substance. There's very little to participate in, and it's your fault. Gurdison has made a contribution and you are so far refusing to honor it.

hocus: A pattern that plays itself out again and again is that I put up a post with substance, and it gets a good number of recs, demonstrating yet again the strong community interest in learning more about this subject.

WILL YOU GET OFF THIS RIDICULOUS 'REC' HOBBYHORSE???? A strong community interest in anything is demonstrated principally by a strong community participation. If that isn't happening, it's because the community isn't interested, no matter what your personal wishes are.

hocus: ... To have the debate I have been asking for, we need an expression of community will that discussions of the realities of safe withdrawal rates are to be held pursuant to the Motley Fool posting rules. I have long believed that most members of this community want just that. If I had any doubts, they were erased by the response to the poll post from last week in which 68 people said that this board is "going to hell" with its focus on off-topic posting and personal attacks.

Oh please. To have the debate you have been asking for, you need to provide something factual which actually can be debated, and then you need to respond to messages posted in response to your assertion(s). Gurdison is still waiting. The debate is still waiting. The board is still waiting. What exactly are you doing to participate in the debate that you started?

...And while we're on the subject of your lack of real contributions, when are you going to tell us specifically which asset classes it is which you claim have higher SWR than the S&P500???? I went so far as to start an entire thread on the subject, and we still haven't heard from you.

Put up or shut up.
holzgrafe
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when are you going to tell us specifically which asset classes it is which you claim have higher SWR than the S&P500????

And I have a highly paid statistician all lined up. Still, nuthin' from hocus.
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markr33,

Like Promethesis I'm not a statitician, but have had a number of graduate courses in various aspects of statistics and experimental design, and have applied those techniques during my research career. Taking the value of a number of cases and dividing by the number of cases is usually considered a discriptive statistic (mean, median, mode, inter-quartile range etc.). In contrast are inferential statistics, where one attempts to assign a level of confidence in a number acheived or project an estimate based on sampling assumptions from an assumed distribution. I think what you meant was the SWR study does not rely on inferential statistics. Correlation is a funny mixture: the coefficient itself is discriptive, but any interpretation of it is inferential. And of course the same can be said when we wish to express how much confidence we have that any measure of central tendancy is a good estimate, then we get into matters like skewing and so forth.

db
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Like Promethesis I'm not a statitician, but have had a number of graduate courses in various aspects of statistics and experimental design, and have applied those techniques during my research career. Taking the value of a number of cases and dividing by the number of cases is usually considered a discriptive statistic (mean, median, mode, inter-quartile range etc.). In contrast are inferential statistics, where one attempts to assign a level of confidence in a number acheived or project an estimate based on sampling assumptions from an assumed distribution. I think what you meant was the SWR study does not rely on inferential statistics. Correlation is a funny mixture: the coefficient itself is discriptive, but any interpretation of it is inferential. And of course the same can be said when we wish to express how much confidence we have that any measure of central tendancy is a good estimate, then we get into matters like skewing and so forth.

Again, there are no statistics involved since ALL the periods must not fail. Basically, each period of YY years is checked using the historical data and the worst case is reported as the historical SWR. The percentage of safety is always 100% because the 100% was the goal chosen (if something less than 100% were chosen, then the historical SWR would likely be higher).

Now whether or not the study is "statistically valid" is another story altogether. It may not be, but because there isn't enough data, not because of some intrinsic error in the analysis.
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markr33: Again, there are no statistics involved since ALL the periods must not fail. Basically, each period of YY years is checked using the historical data and the worst case is reported as the historical SWR. The percentage of safety is always 100% because the 100% was the goal chosen (if something less than 100% were chosen, then the historical SWR would likely be higher).

Now whether or not the study is "statistically valid" is another story altogether. It may not be, but because there isn't enough data, not because of some intrinsic error in the analysis.


I think this is where the confusion begins. Intercst (and others who came before and after him) used 100% to describe how many historical periods experienced a failure. They did not use 100% to describe a level of confidence or as part of any sort of statistical inference. The study makes no statistical claim so it is vacuously statistically valid. In mathematical logic, an empty (vacuous) or null statement is always true. If I make no claim about tomorrow's weather, then my weather prediction for tommorow is right in a bizarre mathematical sense. That's why my daddy always said, “Why sit there in silence and let folks suspect you are a fool when you can open your mouth and remove all doubt.”

Regards,
Prometheuss
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