Notes starting from December 17, 2007

Updated: January 19, 2008.

Twice Income

This characterizes another variable withdrawal strategy: withdrawing twice the income (dividends plus interest) produced by the portfolio.

Twice Income

Edited: Denial Is Expensive

Ignoring our cutting edge research can be expensive.

Note: We have advanced beyond this point using dividend and income strategies.

Edited: Denial Is Expensive
Denial Is Expensive

The Rule of 20-20

You need to save 20 times your desired retirement income. Worst case, your buying power will drop briefly by 20%.

The Rule of 20-20

Price to Sales Article

Here is a good article, well worth your time.

Price to Sales Article

Dividend Baseline (Edited)

Here is a baseline for dividend strategies.

It dramatically outperforms fixed allocation, liquidation strategies.

Dividend Baseline (Edited)
Dividend Baseline

I am 40 and Worried

Suppose that you are 40 and you have $100000. You have limited income. You are worried. Will you have enough at age 70? Will you be out on the street?

You will be OK. Use commonsense and pay attention to dividends.

I am 40 and Worried

Fatally Flawed

Traditional Safe Withdrawal Rate studies are fatally flawed.

Fatally Flawed

Inflation Sensitivity Study

I ran a short sensitivity test on a Taken At Face Value condition.

Inflation Sensitivity Study

Dollar Cost Averaging Today: Revisited

I looked at Dollar Cost Averaging with the Scenario Surfer. I used P/E10=26.

Dollar Cost Averaging Today: Revisited

When P/E10=8

If the stock market follows its normal course, P/E10 will fall to 8 at some time within the next 10 to 15 years. Those who have preserved their capital will face a glorious future.

When P/E10=8

Silliness About R-Squared

I occasionally run across a remark that an R-squared value of 0.1 or 0.2 is ridiculously low. Such folk haven’t a clue.

In the old days, so to speak, we used to think that a 30% or 40% correlation was worth looking at. Square this and you get R-squared values of 0.09 and 0.16. It is silly to reject an R-squared value of 0.1 or 0.2 outright.

R-squared is NOT a stand alone number. To use it, you need to know the variance and the number of degrees of freedom. But even more important, you need to know your application.

In most of the cases, what the person should have been interested in was whether the slope of a line was statistically significant, not whether R-squared was larger than some minimum value. Typically, the number of degrees of freedom is well over 25 and a variation about a mean value by 20% of the confidence limits is significant. Typically, the variation is much, much larger. Typically, the statistical significance is very, very high.

When P/E10=8: Accumulators

If the stock market follows its normal course, P/E10 will fall to 8 at some time within the next 10 to 15 years. This is the story for accumulators who dollar cost average.

When P/E10=8: Accumulators

An Idea

Wayne has a great idea. Read the January 3, 2008 Letters to the Editor.

January 3 2008 Letters to the Editor

Is it 20% or 25%?

The worst case drop in S&P500 dividends since 1950 was 25% after adjusting for inflation. If we smooth the income stream over 4 years, the worst case drop was 20%.

I used the smoothed number in earlier studies. These days, I typically report a 25% drop.

Two Gems from Lucky 7

Here are two gems from the Lucky 7 (Valuation Informed Indexing VII) section. The first has a delightful title: Stupid Assertions. The other offers a timely caution about Dollar Cost Averaging in today’s dangerous market.

Stupid Assertions
DCA Today: The Point of Frustration
January 16, 2008 Letters to the Editor

Sometimes Dividends Get Cut

Some people ascribe special significance to the recent dividend cuts among several Blue Chip financial institutions. They should not.

Sometimes Dividends Get Cut

Research Highlights

Here is an overview of some of my more important findings.

Research Highlights

Notes Index Starting from November 23, 2007