Notes

Two Posts Worth Reading Right Away

Here are two posts that you should read right away. More Than A Number helps you know what our research is all about. We provide meaningful insights. Our Roots tells you about our background and what we seek to accomplish.
More Than a Number
Our Roots

SWR Research Group Archives

I am making my copy of the SWR Research Group archives available to the public. They are in my Yahoo briefcase along with my calculators. These are posts from the old NoFeeBoards web site. Feel free to download them.
Calculators and Archives

Note on Price Discipline

I routinely apply price discipline with individual stocks.

I have recently investigated using price discipline with the S&P500 index. It turns out to be much, much more difficult than I had imagined.

With individual companies, I have always found a number of good choices to select from, whether buying or selling. It has always been reasonable to target a price that is lower than average when buying and higher than average when selling. You must allow yourself two or three years and you must be willing to select an alternative company. But you can always maintain price discipline.

The S&P500 or any other broad-based index is different. There are few suitable alternatives. You can gain a limited amount of flexibility from alternative investment classes and/or alternative slices within the S&P500. But you cannot come close to the selection available with individual companies.

Have fun.

John Walter Russell
August 10, 2005

Guidelines Section

Check out my Guidelines section. I have added many new posts.

My Guidelines are NOT elementary. They will NOT insult your intelligence. They cover important points that are often left unstated or overlooked.

More about Monitoring Portfolio Safety

Here is an article of interest for those of you who are interested in monitoring portfolio safety. I answer the question, "How well are year 2000 retirees doing financially?" in my thread about Year 2000 Retirees. I posted it at the NoFeeBoard.com site.

Perhaps, the last line tells you everything that you need to know: "[Today's] prices are very good if you wish to reduce your stock holdings."
NFB Year 2000 Retirees

A Must Read for Mutual Fund Investors

My investigations into Threshold Distortion has been highly successful. Mutual fund investors will want to read the entire series of articles.

There is skill among mutual fund managers. I tell you how to exploit it. It is worth 2% to 3% above passively managed index funds. My only caution is that you should be aware of the contents of Bull Market Bull. We are in a secular (long-lasting) bear market.

Read How to Exploit Skill for a very quick overview.
How to Exploit Skill
Read Exploiting Skill for an overview.
Exploiting Skill
Read Exploiting Skill: Newsletters for an attractive alternative.
Exploiting Skill: Newsletters

New Current Research Section

I have just added a new Current Research section, Keeping In Tune with the Human Element.

Have fun.

John Walter Russell
June 21, 2005.

A Good Idea for Dividend-Based Investing

A poster named Beachbumz has come up with a good idea for dividend investors. Here is a link to his Dividend stocks and options strategy thread at the General Finance discussion board at the NoFeeBoards.com web site.
Dividend stocks and options strategy

Browse around

I do not put everything into the New Post section. Browse around.

Have fun.

John Walter Russell
Last Updated on June 16, 2005.

Scott Burns Comments

From the column titled Be careful when comparing TIPS, I Savings bonds dated 02:38 PM CDT on Friday, June 3, 2005 By SCOTT BURNS / The Dallas Morning News under the question about a Spending decision, we read:

There is another disturbing factor.

The established safe-withdrawal-rate rules of thumb are based on long periods of time in which yields were higher than they are today and stock valuations were lower.

A growing school of thought believes future withdrawal rates should be reduced to reflect expected lower future returns.

This would knock another 1.5 to 2 percentage points off the safe withdrawal rate.

Scott Burns column
Scott Burns 2-02-05 archive

Scott Burns is aware of our research, our rationale and our numbers.

Rob Bennett first brought our research and these numbers to Scott Burns attention in February 2004.

In addition, Rob Bennett frequently cites sections from William Bernstein’s The Four Pillars of Investing which, upon careful review and reflection, would lead you to a similar conclusion, although not explicitly stated.

Have fun.

John Walter Russell:
Posted June 4, 2005.

The Rule of 25

We have worked hard to restore that old rule of thumb that Scott Burns talks about. Here is the latest.
The Rule of 25

Have fun.

John Walter Russell
Posted on June 6, 2005.

Savings Rate Statistics

I have just posted this general interest item in the General Finance section of the NoFeeBoards. You may find it interesting.
Savings Rate Statistics

Have fun.

John Walter Russell
Posted on June 8, 2005.

A Bond Tip

A TIPS-only portfolio makes a great baseline. It is tough to beat.

Your withdrawals include drawing down principal as well as collecting interest.

Whenever you wish to draw down principal, consider buying bonds on the secondary market that sell at a premium.

You should base your plans on the bond’s yield-to-maturity. The coupons pay more. They pay down the premium (which is part of the principal) as well as the interest.

There is a risk of a capital loss for bonds sold on the secondary market. This approach reduces the number of bonds that you have to sell when you make withdrawals.

Have fun.

John Walter Russell
Posted on June 12, 2005

Be sure to keep up with our Current Research

We have made considerable progress in our current research. We have come up with practical information that allows you to withdraw 4.0% safely for 40 years even at today's sky high stock valuations. We have included sensitivity studies involving TIPS interest rates.

Here is a link that outlines what you need to do.
TIPS Ladders for Today

Have fun.

John Walter Russell
Posted on June 16, 2005.

More on Threshold Distortion: Edited

This is a must read if you are a mutual fund investor.
More on Threshold Distortion: Edited

Note on the P/E10 anomaly

There is an anomaly associated with P/E10 and Historical Surviving Withdrawal Rates in the early years. Gummy, a prominent poster and retired mathematics professor whose real name is Peter Ponzo, was able to shed a little bit of light by plotting the (Half Failure Withdrawal Rate with 80% stocks) HFWR80 correlation versus E10/P (over a 36-year period) versus start year. There was a distinct null centered over the start year of 1881.
Gummy's P/E10 Correlation Discovery

I have collected a series of data in groups of 10 start years. I have calculated the real percentage returns over the next decade versus the percentage earnings yield 100E10/P. This takes 19 years of data. There is one data point at the first start year and it covers the first ten years. There is another data point one year later and it extends out an additional year. And so on. For example, the ten start years of 1901-1910 cover intervals from 1901-1911, 1902-1912, and so forth and it ends with the interval 1910-1920.

The graph for every decade except 1901-1910 and 1980-1989 has a positive slope.

I looked more closely into the behavior around the years 1901-1910. The slope of the graph for 1896-1905 was positive. The slope of the graph for 1901-1910 was minus 15.84. The slope of the graph for 1903-1912 was minus 17.133. The slope of the graph for 1904-1913 was minus 12.71. The slope of the graph for 1906-1915 was plus 4.4575.

This does not explain the anomaly, but it helps isolate it.

Have fun.

John Walter Russell
August 10, 2005