Author Dr. William J. Bernstein ( the guy ***** continually misquotes)...
Here's a link to an article by William Bernstein from his Efficient Frontier site that sums up some of the important points made in Chapter Two of his book "The Four Pillars of Investing."
http://www.efficientfrontier.com/ef/403/fairy.htm
William Bernstein: "I’m going to discuss the single most important issue in finance—future stock market returns—in the clearest, most descriptive, least mathematical terms possible.
"....Nobody knows what the market is going to do tomorrow, next month, or even in the next five years. And in the final analysis, what the market does over such relatively short periods is irrelevant to the average investor. What is important is return over the next few decades, and we do have a pretty good idea of what’s going to happen over such long time periods.
"The biggest area of confusion among the investing public concerns just where stock returns come from. The most popular misconception is that future stock returns somehow derive from past stock returns—that is, from the Stock-Returns Fairy. In the past few decades, the packaging of historical financial returns has become an industry bigger than the GDP of some South American nations. The silliness of this approach is obvious: if you pay twice as much for an asset as you should have, that increases the return of the guy who sold it to you, just as surely as it reduces your future return.
"So just where do stock returns come from? In order to answer this question, first ask yourself this: how much would you be willing to pay for a business that distributes $10,000 each and every year?...Thus, in the very long term, stock price increases come from only one source: increases in dividend income.
"....The value of the stock market almost exactly tracks the dividends and earnings it produces; in short, it behaves just like any other business."
The methodology used by JWR1945 to calculate SWRs takes account of the earnings they produce. The approach used in the REHP study does not; the REHP study reports the same SWR regardless of whether valuation levels are low, medium, high, or extremely high. It is not possible to accurately determine the SWR without taking the valuation factor into account. It is a factor critical to the question being examined (What withdrawal rate is safe?).