John Greaney (he posts in the Financial Freedom Community as “Intercst”) is by far the most abusive poster in the history of our movement. I think it would be fair to describe him as the most abusive poster in the history of the internet (this is certainly so if the damage done by the abusive posting engaged in is viewed as the most important consideration in the assessment).
Even going back to the Golden Age of the Motley Fool board (a board started by John Greaney), Greaney had his rough edges as a poster. It was my post of May 13, 2002, putting on the table the question of whether changes in valuations affect safe withdrawal rates (“The Post Heard Around the World”) that caused Greaney’s transformation from a moderately abusive poster into the out-of-control one that he is today. So it is clear that the discussions held during The Great Safe Withdrawal Rate Debate caused Greaney to lose confidence that he could defend his safe withdrawal rate claims (posted at a study published at his web site, RetireEarlyHomePage.com) in reasoned debate. For a long time now John Greaney has been engaging in deliberate deception of fellow community members and of readers of his web site by failing to correct his now-discredited safe withdrawal rate claims.
The safe withdrawal rate is a mathematical construct. It’s not the norm even for those given to deception to aim to deceive on the results of a numerical construct. What the heck could this guy (and his supporters, of which there are still a good number) be thinking?
Emotional Pain in Acknowledging the Obvious Realities
My take is that it is not so much what he is thinking. It is what he is feeling that holds the key to solving this mystery. Greaney’s behavior demonstrates that he knows he got the number wrong. But Greaney experiences emotional pain when he considers acknowledging that he got the number wrong.
Calculation of the safe withdrawal rate is no ordinary numerical calculation. It is a numerical calculation that has implications reaching in a hundred directions. It is because of what we learned during The Great Safe Withdrawal Rate Debate that we have been able to begin developing a new approach to investing, Valuation-Informed Indexing. It is because of what we learned during The Great Safe Withdrawal Rate Debate that we were able to reveal the critical flaws in the Stocks-for-the-Long-Run Investing Paradigm (while also affirming key insights of the paradigm that do stand up to scrutiny).
A “paradigm” is “a model.” It is a way of thinking about something that encompasses many interconnected insights joined together in a single system of thought. The Stocks-for-the-Long-Run Paradigm has been dominant for 20 years now, and it will be some time before investors are able to accept that there are serious flaws to that paradigm and that it needs to be replaced by something new (my tentative name for the paradigm to come is “The Realistic Buy-and-Hold Investing Paradigm, or, more simply, “The New Buy-and-Hold”).
Our safe withdrawal rate discussions have not led us to abandon only our old and confused ideas as to what withdrawal rates are safe in retirement. They have caused us to begin a quest to learn what the historical stock-return data really says, a search to find out what sorts of investing strategies are really most likely to work for long-term buy-and-hold investors.
I see this battle of the investing paradigms as the most compelling aspect of The Great Safe Withdrawal Rate Debate. We are seeing a change in how aspiring early retirees think about how to invest successfully take place before our eyes day by day, thread by thread, post by post.
It is an exciting process to watch when our community is doing its best work. It is a painfully embarrassing process to watch when our community’s most abusive posters take control of the field. We are seeing both the best that the new internet discussion-board communications medium has to offer and the worst that it has to offer at the same time.
One puzzle that often presents itself in the course of our discussions is — Why is it that John Greaney and his supporters do not acknowledge the errors made in the RetireEarlyHomePage.com study? What possible purpose could be served by continuing to deny the obvious realities that can be verified by anyone caring to check what the historical data says for himself or herself? The obvious realities are that the 4 percent withdrawal rate identified in the study as “100 percent safe” is at moderate valuation levels indeed a rough approximation of the true safe withdrawal rate, at low valuations a number two percentage points or even more lower than the true safe withdrawal rate, and at high valuations a number two percentage points or even more higher than the true safe withdrawal rate.
The question I often find myself wondering about as the discussions proceed and as the abusive posting continues is — Why the deception? Do the Greaney supporters not see how bad it makes them look in the eyes of fellow community members? Why not simply acknowledge that the data says what the data says and focus instead on an argument that it is reasonable in some circumstances to withdrawal a percentage of one’s portfolio a good bit higher than the “safe withdrawal rate” (as that term is defined in the safe withdrawal rate literature)?
Arrete Comes Close to Telling It Straight
There was a post the other day at the Vanguard Diehards board that caused me to take the time to organize the thoughts I am presenting here and to see if I could gain some insight into what is behind this exceedingly strange phenomenon.
A poster who goes by the screen-name “arrete” put up a post arguing that the withdrawal rate that will work for a retirement beginning today (for those going with a high-stock portfolio allocation) is likely to be a number somewhere between 2 percent and 5 percent. Those numbers are roughly correct. The low-end withdrawal rate possibility was indeed about 2 percent a few years back, at the top of the recent stock-price bubble. Valuations have dropped a bit since then, and the safe withdrawal rate today (for a portfolio of 80 percent S&P stocks and 20 percent short-term Treasuries) is a number somewhere between 2.5 percent and 3.0 percent. So the range of possibilities that arrete put forward with her assertion that a withdrawal of something between 2 percent and 5 percent is likely to work is indeed in the ballpark of the range you would get from performing an analytically valid examination of the historical stock-return data.
Where the arrete post went off the rails was in its suggestion that all withdrawal rates between 2 percent and 5 percent are equally safe. Arrete is one of the lead Greaney supporters in our community and she has never acknowledged that Greaney got the number wrong in his study. So it appears that she feels compelled to suggest that there is no way of knowing whether a 2 percent withdrawal is any safer than a 5 percent withdrawal.
The idea that all withdrawal percentages between 2 percent and 5 percent could possibly be equally safe is of course absurd. But that is the sort of claim that Greaney supporters feel compelled to make when they acknowledge that the historical data shows that withdrawal rates higher than 2 percent (at today’s valuations, higher than about 3 percent) may well not work, in the event that stocks perform in the future somewhat in the way in which they have always performed in the past. Arrete cannot acknowledge that there is a greater risk to taking a 5 percent withdrawal than there is to taking a 2 percent withdrawal because to do so would be to acknowledge that Greaney got the safe withdrawal rate number (defined in the Greaney study as the withdrawal that works in a worst-case scenario) wrong in his study.
I think it is fair to say that Greaney supporters have not been able to come up with any logically coherent way to present their case, and that that is why they have relied almost exclusively on deceptive and abusive posting as their means of “responding” to posts that report accurately what the historical stock-return data says.
Again, why do they do this? What possible payoff is there in engaging in deceptive and abusive posting when there is no hope of ever showing that the data says something that it does not in fact say? It’s one thing to condemn abusive posting, something I believe all responsible community members need to do, given the great damage that Greaney and his supporters have done to a number of discussion boards that at earlier times served as outstanding learning resources for aspiring early retirees. It’s something else to come to an appreciation of some of the emotional motivations behind the abusive posting we have all had to endure in recent years. I certainly do not want to be perceived as excusing it. I would like to understand it better. Why does this strange phenomenon in which posters continue to defend nonsense gibberish assertions (such as the claim that a 2 percent withdrawal and a 5 percent withdrawal are equally safe) persist?
Our Safe Withdrawal Rate Findings Change Everything
I believe that a big factor is the scope of change required in an investor’s thought processes by acceptance of our safe withdrawal rate findings of recent years. Paradigm changes do not take place in a week or a month or a year. New ideas catch on gradually. People first begin to have doubts about the old idea, and then become open to consideration of the new idea, and then over time become firmly convinced of the merits of the new idea. It doesn’t happen in a flash. It takes time.
Those following the ongoing safe withdrawal rate discussions on the various Financial Freedom Community boards are watching the death of the Stocks-for-the-Long-Run Paradigm take place in real time. We are also watching the birth of the paradigm that will replace it, a paradigm that I have tentatively named “The Realistic Buy-and-Hold Paradigm.” It is a new type of buy-and-hold investing that we are developing, an approach to buy-and-hold investing that really makes sense.
John Greaney and his supporters are not emotionally prepared for this transition. My sense is that most Greaney supporters enjoyed some investing success during the days when the old paradigm was unquestioned and they have come to feel a great emotional investment in the now-discredited tenets of the Stocks-for-the-Long-Run paradigm.
What Investing Advice Would John Greaney Give His Best Friend?
Say that John Greaney were to go to dinner with his best friend, and his best friend were to tell him that he is planning to hand in his resignation from his job within a few weeks and that he used the safe withdrawal rate study published at John Greaney’s web site to put together his retirement plan. Would John Greaney tell even his best friend that the safe withdrawal rate study published at RetireEarlyHomePage.com got the safe withdrawal rate number right? I can do no more than guess, of course, but my guess is that John Greaney’s advice to his best friend would be to go ahead and make use of the numbers put forward in that study.
Why? Why would I expect John Greaney to engage in deception on the safe withdrawal rate question even when speaking to his best friend?
The reason I say this is that I believe that John Greaney has in his own mind justified his deceptions. I personally do not think they can be justified. The John Greaney deceptions have done great harm to thousands of aspiring early retirees and are likely to do great harm to hundreds of thousands more in days to come. But I believe that John Greaney at least tries to persuade himself that his deceptions might not cause so much harm after all.
How does he do this? I believe that John Greaney justifies his safe withdrawal rate claims using a logic not too far off from the logic used in the arrete post noted above. John Greaney knows that the historical stock-return data does not say what he says it does. But he also knows that it is at least possible that a 4 percent withdrawal rate really will work for retirements beginning at the valuation levels that apply today. In fact, there is about a 50 percent chance that such retirements will survive 30 years. I believe that John Greaney has to some extent (not entirely) persuaded himself that the deceptions he has put forward are not such a big deal because there is roughly a 50 percent chance that the retirement plans constructed pursuant to his false safe withdrawal rate claims might survive all the same.
It is indeed possible that this could happen. No one knows what sort of returns sequence we will see in the next 30 years. It could be that the retirees taking John Greaney’s advice will get lucky and that their retirements will survive. The deception, of course, is that the fact that these retirements have about a 50 percent chance of surviving 30 years does not justify referring to them as “safe.” Retirements that have only a 50 percent chance of working out are risky retirements, not safe retirements. The words “safe” and “risky” are not synonyms. They are antonyms.
My personal guess is that John Greaney not only would tell his best friend to follow his now-discredited safe withdrawal rate claims. I think it goes even farther than that. I think that John Greaney himself follows his own now-discredited safe withdrawal rate claims. I don’t believe that he has altered his own investing theories despite all that we have learned over the course of The Great Safe Withdrawal Rate Debate.
John Greaney knows that his old investing beliefs do not stand up to reasoned scrutiny (if he did not know this, he would not have made a decision to walk down the dark path of becoming such a highly deceptive and abusive poster). But he has not yet been able to bring himself to let in the learning experience that appears before his eyes every time he looks through the Post Archives of any of the Retire Early boards at which the question of what the historical data really says about safe withdrawal rates is discussed.
It is an exceedingly strange phenomenon, is it not?
Investor Reactions Are Too Emotional for Markets to be Efficient
The reaction to our safe withdrawal rate findings that we have seen on the part of John Greaney and his supporters serves as an important demonstration of why stock markets cannot be truly “efficient.” For markets to be efficient, investors must employ reason in making their investing decisions. What we have seen during The Great Safe Withdrawal Rate Debate shows that reason is not the primary driver of many investing decisions. Reason is an important factor for most investors. For many, however, emotions are primary and reason is used largely as a means of supporting decisions primarily emotional in nature.
The hardest job faced by an investor seeking to invest successfully for the long term is to rein in the emotions that so often serve to undermine long-term investing success. The Stocks-for-the-Long-Run Investing Paradigm offered important clues for how to go about doing this. Specifically, the old paradigm favored buy-and-hold investing strategies. The most important task before us in developing the Valuation-Informed Indexing approach to investing is learning what it takes to form realistic hopes of sticking to a long-term buy-and-hold investing strategy.
We have seen a good bit of deception evidence itself during the course of The Great Safe Withdrawal Rate Debate. It is not only deception of others that we are seeing. We are seeing a good bit of self-deception too. That reality holds important clues that we need to be mindful of in developing a new and more realistic investing paradigm to replace the old and discredited one that appears now to be in its dying days.