No. of Recommendations: 1
Random spot check on equity risks: imagine portfolio of 100% the S&P 500 and its cap-weight predecessors. Purchased today at today's valuation based on cyclically adjusted real earnings (which is much less overvalued than if we use cyclically adjusted sales).
Imagine it drops the first period to the valuation level seen at the end of 1929 measured the same way based on cyclically adjusted earnings yield, then tracks real total returns observed starting then. (reality could easily be much worse, but this is something we know happened in the past)
Use the traditional 4% SWR. (4% of initial portfolio value withdrawn per year, adjusting with inflation)
That equity pot would last less than 11 years.
I thought I'd find the data showing today's valuation is significantly higher than its peak in 1929, but the data I see has today's CAPE ratio at 32.2, and a peak 1929 CAPE ratio of 32.6 occurring in September. I guess in your scenario we're adjusting it to December of 1929 when it was at 22.01, and already into the crash, then we're using yearly data onward. I understand the point is basically we're overvalued, it doesn't make sense to be in bonds, but 100% stocks wouldn't have survived the great depression. I just want to make sure this isn't 1929's crash on top of another 1929 crash.
