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Re: The 4% Rule

Posted: May 2nd, 2020, 12:32 am
by Spet0789
1nvest wrote:Gold as a currency has : liquidity (the mechanisms for buying and selling gold are well established, well regulated, and global); Independence from fiat currencies (not issued by a government); No counter-party risk; Also it has a degree of multi-year inverse correlation to stocks.

For a US investor who yearly 50/50 stock/gold across 1980's and 1990's, the price of gold sank -44%, but they ended that two decades with over 8 times as many ounces of gold at the start.

Yes currencies have attempted to peg to gold, but all fiat currencies ultimately have failed. Sooner or later the pressures to debase arise, and when fiat currencies are backed by nothing at all its even more tempting for the 'legal counterfeiter' to abuse that position and print/spend money at the cost of all other notes in circulation. In September 1931 the Bank of England had to break the Pound away from the gold standard, as largescale holders of Pounds were converting those notes into gold and British gold was being taken out of the country. In August 1971 President Nixon did the same for the US$ for the exact same reasons.
The major reason for the change was that Britain had pretty much run out of silver as it was all being used to purchase goods from China - the Chinese not being interested in buying manufactured goods from europe but the europeans and british being very keen on buying tea, silks and other goods from China in exchange for silver. The balance of trade was only corrected by force with the opium wars.

And here we are yet again, buying from China, not exporting much in return. Yet another Opium war in the making? No! Fortunately if China stopped buying the US$ (Treasury's) it wouldn't make much difference, in fact they did pretty well stop buying back in 2011. Similarly if they dumped the US Treasury's they do hold then whilst it would cause a short term shock/decline, so others would take up that slack. https://www.forbes.com/sites/gordonchan ... 71f7f162c4

Whilst some central banks have dumped their gold (Canada) in total faith of fiat, most central banks still keep stockpiles of gold - just in case.


Canada is in quite a special position in that it is a huge gold producer. I expect they saw no need to double up and also hold gold.

Re: The 4% Rule

Posted: May 2nd, 2020, 9:25 am
by EthicsGradient
1nvest wrote:For a US investor who yearly 50/50 stock/gold across 1980's and 1990's, the price of gold sank -44%, but they ended that two decades with over 8 times as many ounces of gold at the start.

What does this mean?

Yes currencies have attempted to peg to gold, but all fiat currencies ultimately have failed.

Logically, this means you are claiming there are no fiat currencies left, since you say they have all failed. How, then, do you describe the present-day currencies of the world?

Re: The 4% Rule

Posted: May 8th, 2020, 12:06 am
by 1nvest
EthicsGradient wrote:Logically, this means you are claiming there are no fiat currencies left, since you say they have all failed. How, then, do you describe the present-day currencies of the world?

Obviously there are current active fiat currencies, but all sooner or later default or fail. https://www.linkedin.com/pulse/changing ... ublished=t

Follow the links from that link and it leads to a free book by Ray Dalio - in the sense you have to sign up to a email list (so use a throwaway email if that it a bother).

Re: The 4% Rule

Posted: May 9th, 2020, 10:16 am
by EthicsGradient
1nvest wrote:Obviously there are current active fiat currencies, but all sooner or later default or fail.

Ah, so it was a failure of tenses. What you meant by "all fiat currencies ultimately have failed" was "all fiat currencies ultimately will fail". So it's not a statement of fact, just a prediction. Is Ray Dalio a well-known soothsayer whose mystical predictions are given weight by the financial world, academic macroeconomists, politicians and so on? Is it any more significant than "all stars will become red giants, sooner or later"?

And again, what did "for a US investor who yearly 50/50 stock/gold across 1980's and 1990's, the price of gold sank -44%, but they ended that two decades with over 8 times as many ounces of gold at the start" mean? It is meaningless at the moment.

Re: The 4% Rule

Posted: May 9th, 2020, 12:37 pm
by 1nvest
EthicsGradient wrote:what did "for a US investor who yearly 50/50 stock/gold across 1980's and 1990's, the price of gold sank -44%, but they ended that two decades with over 8 times as many ounces of gold at the start" mean? It is meaningless at the moment.

Don't look at gold in isolation as many/most do, rather look at it as part of a blend of rebalanced assets. viewtopic.php?p=306939#p306939

Re: The 4% Rule

Posted: July 10th, 2020, 1:51 pm
by taken2often
The simplistic answer is take 80% of the natural yield on UFPLS and invest 20% per year to index the fund. Work for the number of days to make up your needs if not covered doing something that you really enjoy.

On investing I only invest for income. Preference Shares and Dividend growth Investment Trusts and shares. Unit Trusts can wipe you out.

Re: The 4% Rule

Posted: August 15th, 2020, 1:18 pm
by Gilgongo
ReallyVeryFoolish wrote:I have to say, I think Itsallaguess is spot on there. The next generation are simply not going to have the luxury of defined benefits pensions that in effect arrive like a salary cheque does each month.


Exactly. Pensions used to be simple. The idea that millions of us will be wrangling spreadsheets in their dotage and making draw-down calculations based on how the FTSE has been behaving is utterly unbelievable. Much less casually paying a few grand a year for "advice". Flying blind to be slaughtered by sequence risk more like.

As an aside, I floated the idea here of an online "drawdown calculation tool" for this reason. You input your investments, choose a desired income, a withdrawal method (so many to choose from these days!), and then it tells you what to sell to get your "income cheque" each period (and also buy to maintain assets allocations if necessary). Pretty simple robo-advice idea really. But nobody was interested. I suspect that's because most here aren't the demographic that's affected.

viewtopic.php?f=17&t=20829

Re: The 4% Rule

Posted: August 15th, 2020, 1:40 pm
by 1nvest
Gilgongo wrote:
ReallyVeryFoolish wrote:I have to say, I think Itsallaguess is spot on there. The next generation are simply not going to have the luxury of defined benefits pensions that in effect arrive like a salary cheque does each month.

Exactly. Pensions used to be simple. The idea that millions of us will be wrangling spreadsheets in their dotage and making draw-down calculations based on how the FTSE has been behaving is utterly unbelievable.

Collective insurance for health and pensions is IMO far far better. The onus being transferred from the government onto individuals naturally induces risks that for some (many?) will be very sour. The question is why we accepted that transfer?

I see the demise of equal 'free' healthcare for all as equally as the progressive ending of fair pensions for all. A return to Victorian times may have glamour for some, but for others a return to a good nights rest being a case of having the funds to pay to slump over a taunt rope rather than wandering the streets shouldn't be a 21st century aspiration.

When gold was money you could deposit that money (lend it to the state) in return for a 3% to 4% type average return. Being pegged to a fixed amount of gold that interest in effect expanded the number of ounces of gold you owned. The state in effect paid you for it to securely store your gold. With that certainty you could make more certain plans - such as funding retirement. Inflation was also broadly flat. Nowadays the state works against the people, rather than in support of the people. It fundamentally is serving big businesses, not those that elect/appoint it.

Re: The 4% Rule

Posted: August 15th, 2020, 3:52 pm
by dealtn
Gilgongo wrote:
ReallyVeryFoolish wrote:I have to say, I think Itsallaguess is spot on there. The next generation are simply not going to have the luxury of defined benefits pensions that in effect arrive like a salary cheque does each month.


Exactly. Pensions used to be simple. The idea that millions of us will be wrangling spreadsheets in their dotage and making draw-down calculations based on how the FTSE has been behaving is utterly unbelievable. Much less casually paying a few grand a year for "advice". Flying blind to be slaughtered by sequence risk more like.

viewtopic.php?f=17&t=20829


What is this "slaughtered by sequence risk" you are concerned about exactly? I'm struggling to see what concern you have that is much different to the 1,000s of other probability events we encounter in a lifetime that we adjust to even if low probability events occur.

None of us know (or knew) how our careers would pan out over a 40+ time line. There was no prescriptive formula "get this job, you will be paid x rising by y% every year and retire in z years". We survived as jobs and plans adjusted. It will be even more uncertain for the generations that follow us.

Similarly nobody is given a formula that details their health issues, or an accurate personal longevity table to live with. We just "live" adjusting if we are unfortunate to need to.

So if you really want a prescriptive pension then pension freedoms haven't denied you of that. There is still a market for annuities after all. If the cost (or income from the other end of the lens) isn't satisfactory then you have to live with it. Earn more before retiring, or accept the risks of managing the pension, with in all likelihood a continuing (but low) state safety net.

Like I said in the thread you link to, you are likely an outlier (as am I, probably), but it is far from clear to me what the "silver bullet" you are seeking is. Most will just live with the risk, surely?

Re: The 4% Rule

Posted: August 15th, 2020, 6:25 pm
by Gilgongo
dealtn wrote: Most will just live with the risk, surely?


If there's nothing else that can be done, then yes. Obviously :D

My point though is to discuss the possibility of an alternative to that. Not a silver bullet, but an alternative to just flying blind. Nobody on THIS forum flies blind, but they do all seem to have a different way of drawing down in retirement. And if you have a fairly minimal pension pot (I think the average post 2014 is about £200K) then small short term mistakes can have big long-term consequences. The mood on this board is that "common sense and KISS" is the true way of dealing with things, but when you dig into that I find it tends to be those with very much above-average sized portfolios who say that. The survivorship bias here seems quite strong to me.

Re: The 4% Rule

Posted: August 15th, 2020, 6:49 pm
by dealtn
Gilgongo wrote: The mood on this board is that "common sense and KISS" is the true way of dealing with things, but when you dig into that I find it tends to be those with very much above-average sized portfolios who say that. The survivorship bias here seems quite strong to me.


Well I guess it's hard to work out survivor bias. I suspect the greater bias here is "selection bias" actually. Asking a subset of people that have an interest in finance/investment and then using those answers to extrapolate to a population that mainly doesn't, and has an average pension pot of £200k (if that's true - I don't know - but doesn't sound unreasonable - although many may have additional retirement income streams) sounds biased to me.

I also suspect that many on here won't necessarily be retired, or in drawdown, but still investing too. I can't see what additional alternatives anyone can provide, but will be enlightened by any from others. Reducing risk by acknowledging what that might be, is of course common sense (but that's already been provided), and simply accepting that it isn't possible to avoid mistakes with foresight. Mistakes may be apparent with hindsight, but even then, may only be sub-optimal not disastrous.

Good luck.