Scenario Surfer

The Scenario Surfer shows you each year’s starting value of P/E10. You can find out the current value of P/E10 if you know the current level of the S&P500 index. Simply use the Stock Returns Predictor.

All amounts are real dollar amounts. That is, all amounts are in terms of today’s dollars.

The Scenario Surfer uses the initial value of P/E10 to perform Stock Returns Predictions. From this, it generates 30 years of stock gains and losses. It does not use P/E10 afterwards except for informational purposes: to help with allocation decisions and to calculate the dividend amount. [The dividend amount estimate is 63% of smoothed earnings E10.]

The Scenario Surfer uses an advanced Monte Carlo simulation. It uses the most likely stock market return at Year 30 for a mean and 20% as the Year 1 standard deviation. It screens each allowable sequence at Years 10, 20 and 30 to be within calculated limits. It rejects other sequences. Allowable sequences must also pass within the inner confidence levels (20% to 80%) of Year 10 or Year 20 or both.

[Retired radiologist Raddr invented the notion screens to reduce standard deviation over time, the first form of mean reversion. Rob Bennett discovered the second form of mean reversion, that a wide deviation from the most likely value at Year 10 was followed by a narrow deviation at Year 20.]

For an in depth understanding, download my spreadsheet prototypes from my Yahoo Briefcase. I call them Retirement Trainers. My username is jwr19452000. In addition, you can read my Retirement Trainer descriptions at this site.

Yahoo Briefcase

Have fun.

John Walter Russell
October 10, 2007