Strategy for a (substantially) higher withdrawal

[hocus]

Re: Strategy for a (substantially) higher withdraw

Mikey:

Thanks for putting up the link to the Smithers article.

Smithers makes a point that I believe lends a bit of support to the idea being put forward by Hankjoy. Smithers compares putting money in stocks at today's price levels with putting money down at the roulette table. The comparison is that it is possible both at roulette and at investing in overpriced stocks to make money in the short term. In the long term, however, the mathematcical realities are so strongly against you that you are all but certain not to realize a good outcome. The smart gambler is the one who walks away from the table after a few lucky spins, and the smart investor in overpriced stocks is the one who abandons his buy-and-hold philosophy before the mathematics of a long-term investment in that asset class catches up with him.

For purposes of the idea being discussed on this thread, however, it is important to note that the tables that Smithers employs to make his point are tables showing results for broad indexes of stocks. So his point really only applies to a broad index. He is not saying that an investor cannot overcome the mathematical realities that generally apply through effective stock picking. My guess is that this would be a hard thing to do, but it would seem to me that one would be far more likely to beat the averages through effective stock picking than through hoping that for some unknown reason the mathematical realities will not apply this go-around as they always have in the past.

The increases in stock valuations that we have seen in recent years have turned the conventional wisdom re indexing on its head. It used to be that indexing was thought to provide a superior long-term return because you limited your transaction costs while locking in the superior long-term returns provided by stocks. Now that valuation levels have gone so high and dividend payout levels have gone so low, what you are locking in is not something good but something bad--the long-run certainty (presuming that the future is like the past) of unappealing returns.

It still seems to me that the withdrawal levels that Hankjoy is suggesting are possible for his approach are too far on the high side to be believable. I remain skeptical as to the details of his approach. But it makes sense to me that an approach rooted in the idea of effective stock picking would provide a withdrawal rate higher than what could be reasonably justified for retirees invested in a broad index of stocks. Aspiring early retirees determined to maintain a high-stock portfolio at today's valuation levels might want to explore the idea of moving out of indexes until the SWR for the index approach becomes more atttractive once again.

I would like to see more analysis both pro and con as to Hankjoy's particular approach to stock selection. Much of what he is saying makes sense to me, but, again, I am skeptical that the sorts of withdrawals he is suggesting are possible can be counted on for the long term. Either way, I again applaud him for putting the question on the table. I've learned some new things about how to effectively invest for early retirement during the course of reading and participating on this thread.

 

[hocus]

Re: Strategy for a (substantially) higher withdraw

I do not believe I need above average talent to pick the right sustainable high yielders that will grow their dividends, just the self discipline to stick to the method without trying to modify it.

I believe that you are making a very important point here, HankJoy.

The Efficient Market Theory suggests that there is no possibility for any one investor to gain anything other than an extremely temporary edge because there is so much information about stock investments widely available that any temporary edge is quickly undermined as the information is transmitted to other investors. One big flaw in the theory is that it ignores the question of whether investors are able to act on the information available to them.

Effective investing is only in part a question of becoming well informed about your investment choices. The harder task is to become emotionally able to take advantage of what you have learned. There is tons of evidence, both in the historical stock-return data and elsewhere, that it is a rare investor who possesses the emotional fortitude to invest as effectively as would be possible were emotions not a major factor in investment success. Most investors should be putting less energy into become informed about their investment choices (although some efforts in this regard are of course required) and more into becoming emotionally prepared to reap the harvest of what becoming informed reveals to them.

Supporters of the Efficient Market Theory will pooh-pooh your ideas on grounds that you would need to become some sort of Super Investor to hope to reap returns better than average. I have found little support for that claim in the data and other materials that I have examined in the nine years that I have been developing the data-based SWR tool. My belief is that two of the most important factors leading to investing success are possession of the emotional fortitude to make investing choices that go against the grain of conventional wisdom at the time they are being made and possession of a long-term plan that helps you stick with well-reasoned choices for the long term.

My sense is that you are on the right track in your thinking. I am especially impressed that you came to this discussion board seeking feedback, probably knowing that the general reaction was not going to be terribly positive. I believe that that hints at an inner confidence in your ideas that is liklely the product of a lot of prior research and analysis. I have doubts about the target numbers you have put forward, as you know. But if the community analyzes your questions properly, over the coming months and years we will figure out who is right re the numbers or whether the reality is somewhere between your current expectations of what is possible and mine.

You are questioning key components of the "Stocks for the Long Run" paradigm, just as I am. You are coming at the question from a very different angle (a more pro-stock angle), and that is of course fine. But I like it that you are thinking things though independently of what you have read in personal finance magazines. It is my view that the advice commonly voiced in most personal finance magazines today is dangerous to the hopes of aspiring early retirees to realize their life goals. So I believe that more independent thinking is very much in need at the various Retire Early boards (there is generally a good bit more of it in evidence at this board than at some others, to be sure). So I find your question a fresh, compelling, and constructive one.

The Executive Summary version of the message communicated above is--Thanks, guy!

 

[unclemick]

Re: Strategy for a (substantially) higher withdraw

To repeat - my 20% hobby has not overwhelmed my balanced index in the last ten years. A couple of points:

1. My hobby is more in the middle - dividend plus dividend growth, not Trusts, MLP's, conv/ord. preferred, etc. I tend toward utilities, oils, REITs, banks and drugs when cheap enough.

2. My portfolio in this area is continually creamed by buyouts/mergers. In seems when a stock gets 'cheap' enough - they get bought or merged. Down to one water utility from 4 or five in the 90's. This effect(beware the experience of one) may make any data analysis difficult.

***** - now that I think about it, I am in a way persuing 'multiple streams of income', which is another way of looking at it.

Hank - This area is under discussed on this forum but I hesitate as to how to frame the discussion/analysis. I view it as a spectrum from high yield bonds - preferreds, MLP's, REITs, utilities and plain old div/div growth stocks. I also own Gabelli conv inc. closed end - yet another critter. Also what you take out and what you reinvest to keep up with inflation is another area. Right now I'm in DRIPS - reinesting div.

Again - just a hobby. 'Real ER' is balanced index.

 

[Billy]

Re: Strategy for a (substantially) higher withdraw

You might want to look at USA, (that's the symbol)Liberty Equity All Star Fund..a closed end fund that I have owned for years..this is not a recommendation to buy or sell.

Billy
Web-site www.geocities.com/ba264

 

[hankjoy]

Re: Strategy for a (substantially) higher withdraw

JWR1945
"First, about the S&P500 index and the historical record, dividend yields used to be much higher than they are today. Yields of 6% to 8% were commonplace. They have been declining for the last three or four decades as stocks have become more popular. You can check this out by looking at Professor Robert Shiller's database (which is what FIRECalc uses). www.econ.yale.edu/~shiller/"

Yes! The reason the yield was declining is not because the dividends went down but that the prices and the PEs shot up much faster than the dividend were growing. Even when the market collapsed for 3 years in 2000-2002 most dividends continued to be paid and even grew for many companies. If you had bought the S&P 500 when it was at 6% yield you could have lived on the 6% without ever selling a single share, the dividend would have gone up every year to keep up with inflation.

"I recommend that you (hankjoy) look at earnings yield based on the previous ten years of earnings (whenever possible). Dividends come out of earnings and looking at earnings yield (averaged) protects you from encountering surprise cuts in dividends. In addition, looking at ten years of earnings reduces the bad effects of many kinds of accounting gimmicks."

Good point. Here is a short cut in screening for which candidates to do serious due diligence on. If a company has paid a high dividend and raised it every year for 10 or more years (sounds like Mergent's dividend Achievers) it is very likely a good candidate because; sales and profits can be massaged (just look at Enron et. al.) but a dividend has to be paid in cash, the check has to clear the bank. A company might be able to borrow money, sell assets, issue more stock to make the dividend in the short run but over several years a high dividend that continues to increase is a real-can't be faked kind of thing. A clear signal that earning are real and growing. But this is only the beginning not the end of due diligence.

"For unclemick: one big advantage to holding individual stocks is that you have control of the prices at which you buy and sell. If you look at the 52-week high and low prices of individual stocks, this ratio is typically between 1.5 and 2 and for many it is 3 or higher. That is not because a stock's price goes up-up-up or down-down-down. It is normal volatility and prices go both up and down. Provided that you are willing to let an opportunity to get away from you and provided that you are able to wait for your own price, you can assure yourself of getting a better than the median price"

AND A BETTER THAN MEDIAN YIELD WITHOUT ADDED RISK.

" Your ability to do this with an index fund is much less."

Absolutely true. Great post, Hank Joy

 

[John Galt]

Re: Strategy for a (substantially) higher withdraw

Okay, this is just me talking. Forget the DJIA, P/E
ratios, long term trends, performance projections,
dividend history, etc etc. Rely ONLY on yourself.
Anticipating/expecting particular behavior from others
is a sucker bet. History is only marginally helpful.
Take Iraq. Ten years ago, no one could have predicted
the current mess. The financial markets are the same,
i.e. chaos................

John Galt

 

[hankjoy]

Re: Strategy for a (substantially) higher withdraw

Bob_Smith
"Hankjoy, if what you are suggesting is workable, there would be stock mutual funds yielding 8% consistently, and we'd all be spending 8% of our assets instead of 3% or 4%. "
Just because no one is doing it does not mean it cannot be done, we sent a man to the moon when no one had done it and many said we would fail.

"I wish it were possible, but there is no free lunch. Too many brilliant minds are analyzing every advantage imaginable, so it's very difficult to beat the market over a long period of time like 30 or 40 years."

Then how come Warren Buffett did it. It is possible but most want to follow the herd instead of following a plan that makes sense, but requires the emotional discipline to stick to it when everyone is crying the sky is falling.

"What you are describing is stock picking, and in that game there must be a loser for every winner."

Hey everybody listen up here.
NAIC (the investment club organization) says there are 3 ways to profit from growth investing;
1. Earning growth
2. Pe ratio expansion
3. Dividends
Bob-Smith you are right using method 2. If I buy a stock from you at a PE of 30 (when you only paid a PE of 20) because I am hoping to finding a greater fool than me to pay me a PE of 40 then somebody is gonna bet left holding the bag when the bubble implodes. This is called the greater fool theory of investing. We just saw that in 2000-2002.
But if buy a stock from you for twice what you paid 5 years ago because the earnings have doubled, everyone wins, there are no losers. That is number 1 above happening. A wise investor considers number 2 above to avoid paying too high a price or selling at too low a price.
Most of us don't even consider #3. Dividends are too slow, too boring, they are not a get rich quick vehicle so we ignore them. We would rather buy a growth stock growing earnings 15% a year with little or no dividend than one paying an 8-10% yield and growing earnings at 5-7% a year. But if we reinvest the dividend the combination will give us the same NAV value but with much narrower swings in price and much less downside risk. The dividends will grow to keep up with inflation and we never sell shares when the market is down to make part of our withdrawal because the dividend provides or exceeds our withdrawal requirements.

What are your thoughts? Hank Joy

 

[hankjoy]

Re: Strategy for a (substantially) higher withdraw

John Galt: (You missed my post above at #45.)
"Anticipating/expecting particular behavior from others
is a sucker bet.  History is only marginally helpful.
Take Iraq.  Ten years ago, no one could have predicted
the current mess.  The financial markets are the same,
i.e. chaos................"
Good point, very few things are guaranteed including your bond interest payments, but what is guaranteed is that inflation will erode both the buying power of bond interest payments and the value of the principle when the bond matures. TIPs provide protection here but at a very low interest rate.
However, things that have consistently happened over a long period of time are more likely to continue than things that have varied over a long period of time. ALD and FRT have both paid their dividends for over 160 quarters (more than 40 years without fail), they are more likely to continue than something that has only recently started paying dividends or something that has missed or reduced their dividend.
Which wouldyou rather have? hank Joy

 

[hankjoy]

Re: Strategy for a (substantially) higher withdraw

unclemick (I don't know how to put aquote in those nice enclosed boxes like you guys do, sorry)
"To repeat - my 20% hobby has not overwhelmed my balanced index in the last ten years."
I believe your hobby has been an outlet for the male hormones wanted us to mess with the ER portfolio and that is a good thing.

"1. My hobby is more in the middle - dividend plus dividend growth, not Trusts, MLP's, conv/ord. preferred, etc. I tend toward utilities, oils, REITs, banks and drugs when cheap enough."

The trusts and MLP I buy include dividend growth.



"Hank - This area is under discussed on this forum but I hesitate as to how to frame the discussion/analysis. I view it as a spectrum from high yield bonds - preferreds, MLP's, REITs, utilities and plain old div/div growth stocks."

Bonds do not grow their payouts nor their NAV if held to maturity. Prefferreds don't grow payouts either but have some asset growth potential if converted. However MLPs, Trusts, REITs, utilities,and dividend/dividend growth investments are all part of what I call "Single Best Investments",(after the book by Lowell Miller that got me started thinking about all this).

"Also what you take out and what you reinvest to keep up with inflation is another area. Right now I'm in DRIPS - reinesting div."

Most of these investments grow their dividends because earnings are growing and that makes their price rise over time so even if you don't reinvest dividends the income and NAV will grow faster than inflation. The few that don't grow that way you could reinvest a percentage of the dividend to keep up with inflation.

What are your thought on this? Hank Joy

 

[hankjoy]

Re: Strategy for a (substantially) higher withdraw

*****

"I believe that that hints at an inner confidence in your ideas that is liklely the product of a lot of prior research and analysis."

I could be wrong or missing something very key here but not because I have not carefully researched and thouroughly thought out this thesis. That is why I seek constructive criticism here to find out if there is some risk not accounted for in this investment model.

"I have doubts about the target numbers you have put forward, as you know. But if the community analyzes your questions properly, over the coming months and years we will figure out who is right re the numbers or whether the reality is somewhere between your current expectations of what is possible and mine."

This analysis is what I am looking for.

If a diversified group of companies with;

1. solid finances
2. has sustained a high yield for decades with
3. consistent moderate earnings growth to fuel dividend growth and
4. consistently raises the dividend while keeping the payout ratio consistent and
5. is not eating it's seed corn but retains and invest enough earnings to continue to grow the business and
6. we can live off of the dividend alone without ever being forced to sell shares in a down market to pay our bills,
7. then why would it be risky to withdraw only the dividend to live on?

"You are questioning key components of the "Stocks for the Long Run" paradigm, just as I am."

But in that book "Stocks for the Long Run" the author says something very profound about dividends and the role they play in being the driving force in the long run total return of stock investing. It is only a few paragraphs long and most people who claim to follow that book have missed that part. You can find it by looking up dividends in the index.


"The Executive Summary version of the message communicated above is--Thanks, guy"

IMHO I have much to learn from you all here at this board and perhaps something to contribute to the discussion. Thanks for your patience, Hank Joy

 

[JWR1945]

Re: Strategy for a (substantially) higher withdraw

You make quotes like this:
[ quote]Whatever you want to have in the pretty box.[ /quote]
except that you need to leave out that space between the bracket and quote] or /quote]:
[quote and then the end bracket] and [/quote and then the end bracket].

Also, it seems to me that you could wait three or four years, if necessary, to get a good price.

Have fun.

John Russell

 

[Bob_Smith]

Re: Strategy for a (substantially) higher withdraw

Hey Hankjoy, good posts! Just a couple of comments:

Then how come Warren Buffett did it?

1) He is a genius. I'm not.
2) He knows how to pick successful companies repeatedly. I don't.
3) He is willing to work very hard at it and devote his life to it. I'm not.
4) He can get access to CEOs and information I'll never get.

The dividends will grow to keep up with inflation and we never sell shares when the market is down to make part of our withdrawal because the dividend provides or exceeds our withdrawal requirements.

Yes, IF you pick the right stocks at the right time, and that's a very big "if". Fear of messing it up and losing my shirt would prevent me from trying. There are probably a hundred ways I could conceivably improve my withdrawal rate. Finding a mix of investments that covers me in a multitude of potential future scenarios almost guarantees that my withdrawal rate will be unimpressive compared with what might be possible if I were willing to place more concentrated bets and reach further. Covering myself as best I can must take precedence despite the lost opportunity, however.

 

[cute fuzzy bunny]

Re: Strategy for a (substantially) higher withdraw

Re: warren buffett.

How many successful stock pickers are out there that have done great and done great over a long time.

Hmmm...Buffett. If 1,000,000 people randomly chose stocks over a long period of time, I would expect there to be more than one random long term winner. Hence in simple odds, the numbers seem to hint that stock picking is a losing proposition.

I would also suggest that since Warren frequently takes a serious role in the management of the companies he buys, sits on the board of several, and exerts other direct influences that perhaps he simply buys distressed companies or ones with the right kind of cash flow and then helps manage them along to greater success...at least some of the time? In other words his success and power enables him to create further success?

Or maybe he just does have a good simple formula and nobody else on the planet can stand to keep it simple and within the boundaries of the formula.

Because surely if stock picking were possible, companies with reams of cash for analysis and hordes of experts would do better than the average person and certainly better than the average index.

They just dont. (shrug)

 

[hocus]

Re: Strategy for a (substantially) higher withdraw

But in that book "Stocks for the Long Run" the author says something very profound about dividends and the role they play in being the driving force in the long run total return of stock investing.  It is only a few paragraphs long and most people who claim to follow that book have missed that part.  You can find it by looking up dividends in the index.

There are too many references to "dividends" in the index for me to be sure which passage you are referring to, Hankjoy. But I found the passage below both relevant and compelling, so I will pass it along. These comments also relate to the work that JWR1945 has been doing at the SWR Research Group board at NoFeeBoards.com.

Pages 70-80: "Since earnings are the ultimate source of value, the earnings yield, which is the reciprocal of the price-earnings ratio, should be the best long-term guide to the real return that the market provides shareholders. This is because earnings are derived from real assets that in the long run will appreciate with inflation.

"This observation is borne out by the data....

"If the earnings yield, or P-E ratio, remains constant, then the rate of price appreciation will equal the growth rate in per-share earnings. In this case, the total return on stocks can be expressed as the sum of the dividend yield and the rate of growth of per-share earnings....

"Some analysts have viewed the recent decline in dividend yields with alarm. They believe the low dividend yield means that future returns will be low. But this fails to recognize that the current dividend yield and the future growth rate of per-share dividends are not independent. As long as the earnings yield does not decline, a reduction in the cash dividend means greater retained earnings, and hence a higher rate of growth of future earnings and dividends."

 

[hocus]

Re: Strategy for a (substantially) higher withdraw

Correction: The comments in the post immediately above appear on Pages 79 and 80 of Stocks for the Long Run, by Jeremy J. Siegel.

 

[hocus]

Re: Strategy for a (substantially) higher withdraw

I recommend that you (hankjoy) look at earnings yield based on the previous ten years of earnings (whenever possible). Dividends come out of earnings and looking at earnings yield (averaged) protects you from encountering surprise cuts in dividends.

Also, it seems to me that you could wait three or four years, if necessary, to get a good price.

JWR1945:

I am persuaded by the statistical work that you and several other fine researchers have done showing that the SWR for an investment in a broad stock index is exceedingly low at today's price/dividend levels. My recollection is that the number you put forward in a post at the SWR board for the valuation levels we were at in January 2004 was 1.6 percent. I cannot afford to direct even a small percentage of my portfolio to an asset class providing only a 1.6 percent SWR, given how little slack there is in my plan.

That said, I would like to move my stock allocation up from 0 percent to 10 or 20 percent in the not too distant future. There are several reasons. One is that I like being "in the game." Another is that stocks are my favorite asset class, so I have a bit of a sentimental attachment to this asset class. A third is that I have found in the past that I learn more about investment classes by making purchases of them than by just reading and thinking about them, and I want to learn all that I can about stock investing as early in life as I can learn it. A fourth is that I have CDs that come due from time to time that I am not able to renew at rates as favorable as those at which I purchased them, and I would like to move at least some of that money to other asset classes.

I find HankJoy's argument to possess some appeal. I think it makes sense to look at earnings yield, as you suggest above. My sense is that Hankjoy does not disagree with this suggestion.

My question is--What statistically based conclusions re HanjJoy's idea can be drawn from looking at earnings yield? Is it reasonable to conclude from looking at earnings yield for stocks meeting the characteristics listed by HankJoy to up one's SWR for a stock investment significantly above the SWR that applies for investing in a broad stock index? Or are there not enough companies around meeting HankJoy's requirements to be able to form any useful conclusions about whether assigning a higher SWR to this sort of stock investment is at all reasonable?

I don't require a 4 percent SWR from stocks to justify putting 10 percent of my portfolio into them. I need something higher than the numbers that apply for the broad indexes, however. I'm not necessarily opposed to the idea of just taking a chance on following something like the HankJoy approach as a means of upping my allocation to stocks a bit. But any statistical support for the Hankjoy approach or any variation of it that you or anyone else could put forward would make me feel at least a bit more comfortable with the idea of putting cash down on the table.

I'm known for being free with my words. But I'm on the cautious side when it comes to reaching into my pocket for purposes of turning over some of those green pieces of paper with pictures of government buildings on the back.

 

[Cut-Throat]

Re: Strategy for a (substantially) higher withdraw

*****,

I take it you think that the SWR presented by FIRECALC will be worse in the future than it ever has been in the past 100 years?

Calculations of stock valuations are usually flawed. People were convinced in 1958, when stock dividends fell below bonds that stocks were too expensive. They are waiting in their graves to get back into stocks.

Just something to keep in mind

 

[hocus]

Re: Strategy for a (substantially) higher withdraw

I take it you think that the SWR presented by FIRECALC will be worse in the future than it ever has been in the past 100 years?

I think that the FIRECALC tool is a powerful tool for investment analysis that in future years will be put to use by a great many investors to serve a wide array of purposes. I certainly will be advocating that a lot more people make use of the tool in the various writings and interviews and speeches that I will be either putting forward or participating in in coming days.

That said, I also believe that in order for the FIRECALC tool to achieve its potential, it needs to be reformed. The number that it currently refers to as the "safe withdrawal rate" is not that at all. The 4 percent number is properly termed the "Historical Surviving Withdrawal Rate." The HSWR is a concept related to the SWR, but it is not at all the same thing. The HSWR is an important number for investors to know and it is a number important to calculate as part of an effort to determine the SWR. But it is not the SWR, the take-out number that will work in a worst-case scenario presuming that the future turns out something like the past.

 

[Cut-Throat]

Re: Strategy for a (substantially) higher withdraw

*****,

Well I certainly agree that it is a HSWR ! - After all, no one can predict the future, so technically there is no such thing as a SWR. If anyone tells you there is, run away as fast as you can.

MY worst case scenario is that I get run over by a truck tomorrow and never get to spend my money.

 

[cute fuzzy bunny]

Re: Strategy for a (substantially) higher withdraw

Wow, thats a pretty good worst case scenario.

Mine is that I'm run over by a truck while Halle Berry is on her way to my house to pay me a million dollars to fool around with her.

One thing to consider is that while its fun to say "sure...its going to be different this time" - and I do it too - a civilizations economy does have a cycle and all historic powerhouse economies have conformed in somewhat similar ways. Our economy happens to be a particularly good one, and has been for an exceptionally long time. The "new world economy" is certainly more robust than the ones of old europe and the old middle east. It is however underpinned by readily available cheap oil, and currently some suspicious monetary policy.

I guess to make a long story short, its probably prudent to be conservative in ones withdrawal rate, safe or not, and also possibly prudent to look for good dividend and interest rates considering how highly priced most asset classes are today.

Might be a good idea to shift money slowly from expensive growth stocks and other highly priced, low dividend asset classes to a spectrum of high yielding value stocks across all capitalizations, high yield bonds, GNMA's, convertible securities, etc.

But I wouldnt throw the baby out with the bathwater and get rid of all my stocks, or drop below 30% stock holdings.

By the way, these days I'm about 55% bond, 45% stock. Most of the stock is large cap value with big shots of small cap value, REIT, foreign and emerging market (the latter all in my IRA). Half the bond is short term investment grade corporate, the rest is intermediate term financial and investment grade corporate.

When the dividend rates for some other asset classes goes over 8% I'm going to nibble. Inflation and interest rates dont scare me much anyhow; I dont buy much and I never carry debt.

Unless we see double digit inflation that runs on for years, I dont have a problem. If we do see that, I think we're all equally screwed excepting those 50+% in tips and ibonds.

On the other hand, if big inflation doesnt come around, tips and ibonds paying below 3.5% dont sound too enthralling either.

 

[wabmester]

Re: Strategy for a (substantially) higher withdraw

On the other hand, if big inflation doesnt come around, tips and ibonds paying below 3.5% dont sound too enthralling either.

How much inflation do you need to make TIPS attractive? Let's say conservatively inflation will hit 4% this year. That means that a 2.5% TIPS will yield the equivalent of 6.5% nominal bonds, and the only place you can find that yield right now is in much riskier junk bonds.

And for those of you who think stocks are currently expensive, what are your metrics? Many economists like to look at the difference between the E/P yield-equivalent and the risk-free rate of return. Currently, the spread suggests that stocks are significantly *under*valued.

 

[cute fuzzy bunny]

Re: Strategy for a (substantially) higher withdraw

Well theoretically no matter how high inflation goes, you just get the coupon rate. And you dont get the inflation adjustment until you sell.

Since much of what I buy (food and monthly utilities) arent greatly affected by run of the mill inflation, and I'm not likely to pay much if anything in taxes for the next 3-5 years, like I said, inflation doesnt scare me much.

I guess if I was buying cars every couple of years, buying lots of consumables regularly, taking out consumer loans, etc I'd be afraid. Very afraid.

 

[cute fuzzy bunny]

Re: Strategy for a (substantially) higher withdraw

Stock metrics. Hmm, almost nobody I know wants to buy them, people who have them are thinking that perhaps they shouldnt, and a lot of people are largely in cash or thinking about getting there.

Mass public sentiment beats the heck out of any metric. When I hear about lots of people thinking stocks are cheap and wanting to buy them, then they'll be cheap!

Of course theres that contrarian thing, but when I think about that my head hurts.

 

[Bob_Smith]

Re: Strategy for a (substantially) higher withdraw

Well theoretically no matter how high inflation goes, you just get the coupon rate.  And you dont get the inflation adjustment until you sell.

But the interest payments are based upon the inflation adjusted principal. In other words, I get 3.875% of a bigger pot if inflation heats up - without selling.

 

[cute fuzzy bunny]

Re: Strategy for a (substantially) higher withdraw

Hey whatta you guys want...I'm just a dog...