Subject: Re: help finding a Mungo post
Also 2517:
So, the percentage of your portfolio you can liquidate and spend each quarter is proportional to how much this number has gone up.
To the extent that the valuation methodology is valid and the smoothing isn't too extreme, by construction your portfolio will always have the same real value and it will last forever.
...
For a SWR strategy based on this, I think it's OK to put a floor on the withdrawn amount. But that's a matter of taste.
(my personal favourite version pays out only 90% of the allowed amount each quarter to give slight long term growth, but also has a floor payment of 1% per quarter)
Here are the figures for how much this strategy would have produced in income. It was proposed about 10 years ago, I think.
The variant here is the one I suggested above: floor of 1% payment per quarter (SWR 4%), and paying out only 90% of the recommended payment to add a tiny buffer and to allow the portfolio intrinsic value to rise very slowly over time.
The start date is chosen to be an unlucky one for any safe withdrawal test: right at the end of a stretch of very high valuation levels.
These columns show the estimated total intrinsic value of the portfolio after the quarterly sales, the *market* value of the portfolio after the sales, the quarterly amount liquidated, the sum of the liquidations in the prior four quarters, and the trailing four payments as a percent of the original portfolio size, assumed to be $1 million in today's money at end of September 1999. All dollar amounts are inflation adjusted to a recent figure of CPI of 314.9.
Port IV Port MV Quarter TTM % orig val
1999-12-31 1004315 1121142 43348
2000-03-31 1007846 1072011 33805
2000-06-30 1010798 1000686 26302
2000-09-30 1013329 1141071 25655 129110 12.9%
2000-12-31 1015747 1260921 27013 112775 11.3%
2001-03-31 1017336 1138303 16001 94971 9.5%
2001-06-30 1018553 1177646 12659 81329 8.1%
2001-09-30 1019474 1184716 9635 65309 6.5%
2001-12-31 1020105 1277479 7110 45406 4.5%
2002-03-31 1014578 1184713 11145 40549 4.1%
2002-06-30 1007127 1093332 11441 39331 3.9%
2002-09-30 1000405 1191790 9917 39613 4.0%
2002-12-31 992975 1156460 9853 42356 4.2%
2003-03-31 987718 999979 9951 41163 4.1%
2003-06-30 991957 1123845 10761 40482 4.0%
2003-09-30 997475 1137250 10240 40806 4.1%
2003-12-31 1019745 1273153 10138 41090 4.1%
2004-03-31 1030350 1371305 22875 54014 5.4%
2004-06-30 1032834 1255398 27168 70421 7.0%
2004-09-30 1035074 1193883 23254 83435 8.3%
2004-12-31 1037522 1186134 25190 98487 9.8%
2005-03-31 1039722 1127530 21472 97084 9.7%
2005-06-30 1041741 1065618 18592 88508 8.9%
2005-09-30 1043594 1018596 16277 81531 8.2%
2005-12-31 1045383 1071721 16499 72839 7.3%
2006-03-31 1047359 1075298 18265 69633 7.0%
2006-06-30 1049117 1050143 15836 66876 6.7%
2006-09-30 1051143 1069287 18544 69143 6.9%
2006-12-31 1053815 1221860 27887 80531 8.1%
2007-03-31 1056170 1177638 23633 85899 8.6%
2007-06-30 1058519 1119273 22358 92421 9.2%
2007-09-30 1061119 1200533 26476 100353 10.0%
2007-12-31 1063325 1396878 26076 98542 9.9%
2008-03-31 1065062 1291006 18952 93862 9.4%
2008-06-30 1066463 1118529 13227 84731 8.5%
2008-09-30 1067676 1199070 12257 70511 7.1%
2008-12-31 1068706 896744 7779 52214 5.2%
2009-03-31 1065569 778882 8673 41935 4.2%
2009-06-30 1053805 779516 13999 42708 4.3%
2009-09-30 1051044 878384 9839 40291 4.0%
2009-12-31 1047314 854085 10904 43416 4.3%
2010-03-31 1048880 1044258 9962 44705 4.5%
2010-06-30 1044629 1005826 11092 41798 4.2%
2010-09-30 1042123 1031833 11253 43212 4.3%
2010-12-31 1046968 987136 10339 42646 4.3%
2011-03-31 1052741 1007922 10947 43631 4.4%
2011-06-30 1055212 902664 10655 43194 4.3%
2011-09-30 1052016 815757 11012 42953 4.3%
2011-12-31 1054769 866508 10813 43427 4.3%
2012-03-31 1065392 904734 10782 43262 4.3%
2012-06-30 1073420 909618 10932 43538 4.4%
2012-09-30 1085077 949419 10851 43377 4.3%
2012-12-31 1092234 950407 15997 48562 4.9%
2013-03-31 1095196 1068522 26009 63789 6.4%
2013-06-30 1098080 1117817 26421 79278 7.9%
2013-09-30 1100951 1102960 25890 94317 9.4%
2013-12-31 1104454 1123902 32082 110402 11.0%
2014-03-31 1107667 1146165 29924 114317 11.4%
2014-06-30 1110846 1116855 28768 116664 11.7%
2014-09-30 1113958 1189147 29898 120672 12.1%
2014-12-31 1116917 1271525 30310 118900 11.9%
2015-03-31 1119686 1203186 26779 115755 11.6%
2015-06-30 1122282 1097105 22842 109830 11.0%
2015-09-30 1124679 1030861 19777 99709 10.0%
2015-12-31 1127024 1027232 19233 88632 8.9%
2016-03-31 1128970 1087839 16876 78729 7.9%
2016-06-30 1130659 1081287 14536 70423 7.0%
2016-09-30 1132262 1062228 13534 64180 6.4%
2016-12-31 1134234 1177416 18427 63373 6.3%
2017-03-31 1136371 1173410 19860 66358 6.6%
2017-06-30 1138517 1167192 19796 71617 7.2%
2017-09-30 1140547 1239353 19857 77940 7.8%
2017-12-31 1143456 1303723 29844 89357 8.9%
2018-03-31 1146013 1274299 25593 95089 9.5%
2018-06-30 1148733 1155397 24621 99915 10.0%
2018-09-30 1151978 1289783 32705 112763 11.3%
2018-12-31 1154448 1207256 23246 106165 10.6%
2019-03-31 1157137 1160069 24257 104830 10.5%
2019-06-30 1159824 1190257 24814 105023 10.5%
2019-09-30 1162700 1133945 25248 97566 9.8%
2019-12-31 1166197 1199384 32369 106689 10.7%
2020-03-31 1168796 943748 18889 101320 10.1%
2020-06-30 1171050 913851 15828 92334 9.2%
2020-09-30 1173293 1057580 18194 85280 8.5%
2020-12-31 1176231 1123947 25267 78177 7.8%
2021-03-31 1179272 1197575 27794 87082 8.7%
2021-06-30 1182771 1239917 33019 104273 10.4%
2021-09-30 1186050 1169556 29101 115181 11.5%
2021-12-31 1189494 1228357 32006 121920 12.2%
2022-03-31 1192494 1388249 31432 125559 12.6%
2022-06-30 1194728 1025541 17256 109795 11.0%
2022-09-30 1196650 973792 14076 94771 9.5%
2022-12-31 1198310 1108391 13824 76589 7.7%
2023-03-31 1199702 1088521 11361 56517 5.7%
2023-06-30 1201123 1212316 12914 52176 5.2%
2023-09-30 1200551 1185845 9710 47809 4.8%
2023-12-31 1200072 1192566 13774 47759 4.8%
2024-03-31 1203638 1380028 11644 48042 4.8%
2024-06-30 1206371 1305216 14404 49532 5.0%
2024-09-30 1208314 1451362 21009 60831 6.1%
2024-12-31 1210382 1404747 21605 68661 6.9%
2025-03-31 1212166 1611266 21337 78354 7.8%
Generally, there is a lot of variability of the withdrawals. But that can be seen as the sum of (a) safe withdrawal rate of 4% inflation adjusted, plus (b) a highly variable but large and fairly frequent chunk of extra money when value growth has been good lately.
The value metric uses is the simple average of (16 quarter WMA of my two-and-a-half-column method, scaled) and (16 quarter WMA of real book per share, scaled).
The two are in fact extremely close, so just using book gives pretty much the same result. The main difference, still small, is that my two-and-a-half-column method has been more conservative lately because net earnings in operating subsidiaries have been weak.
Jim