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Bob, I feel your either not fully realizing what most of us are trying to say, or perhaps intentionally redirecting the conversation.

I'm sure most of us own RioCan. No one here has ever debated whether they felt it was a good investment.

What has largely been argued is the single word "sustainable". If I recall correctly, when I mentioned if you thought I could retire at the ripe age of 30 and count on an 8% return from RioCan for 55-60yrs, you suggested I could.

There has been no evidence presented in all these pages and pages of how RioCan's distribution is guaranteed. You yourself mention that you have to reevaluate this on a semi-regular basis.

If anything, perhaps one question we should be asking is why should anyone settle on an 8% yield when historically, the S&P500 has returned roughly 11.5% to investors.
 

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Discussion Starter #62
"Sustainable" Defined

Bob, I feel your either not fully realizing what most of us are trying to say, or perhaps intentionally redirecting the conversation.

I'm sure most of us own RioCan. No one here has ever debated whether they felt it was a good investment.

What has largely been argued is the single word "sustainable". If I recall correctly, when I mentioned if you thought I could retire at the ripe age of 30 and count on an 8% return from RioCan for 55-60yrs, you suggested I could.

There has been no evidence presented in all these pages and pages of how RioCan's distribution is guaranteed. You yourself mention that you have to reevaluate this on a semi-regular basis.

If anything, perhaps one question we should be asking is why should anyone settle on an 8% yield when historically, the S&P500 has returned roughly 11.5% to investors.

Hi Sampson

Thank you for this constructive comment, as I believe that maybe there has been some unintentional , but differing interpretations of the word "sustainable" that has resulted in much un-necessary debate.

What I mean by stating that Riocan's cash yield is sustainable is primarily that it can be considered as an after inflation yield, due to other positive factors such as distributions/unit price increases over time. Similar to the GIC nominal 5% yield less 2% inflation = 3% "sustainable" yield.

Secondly, by "sustainable", I also mean that I believe that Riocan's cash distribution is safe for the foreseeable future.

However, at NO time did I ever intend to suggest that Riocan's distribution is guaranteed for 50 years.

Although continual portfolio evaluation is absolutely necessary, I still believe that you can achieve a 8% overall "sustainable" cash yield on your portfolio, and retire now, if that is really your wish.

I'm not sure where you get this S&P 11.5% yield from, as I believe that the last 10 year S&P yield is much closer to ZERO. While it is another completely different issue, I further believe that all portfolio's should be focused primarily on monthly cash flow income, and less on growth for total return.

Again, the only things in life that are guaranteed are death and taxes.

Thanks again for your good point, and hopefully I have better explained what I mean by the word "sustainable".

Bob
www.cfrca.com
 

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There are no secrets Bob. Here they are, including the dates in which they were published:

Canadian Capitalist posts on REITs

You simply don't get my point. When you say a 8% sustainable yield I take it to mean the traditional discussion of portfolio withdrawal rates (which is where this conversation started). The thumb rule is a traditional retiree can withdraw 4% from their portfolio (including capital drawdown) with a high degree of certainty that they won't outlive the capital. They then adjust it for inflation increases every year. I simply don't think RioCan's distributions fall in the same category. In the past ten years RioCan has boosted distribution at a better than 3% annual growth rate. This happy state won't last forever.
 

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Hi Sampson

Thank you for this constructive comment, as I believe that maybe there has been some unintentional , but differing interpretations of the word "sustainable" that has resulted in much un-necessary debate.

What I mean by stating that Riocan's cash yield is sustainable is primarily that it can be considered as an after inflation yield, due to other positive factors such as distributions/unit price increases over time. Similar to the GIC nominal 5% yield less 2% inflation = 3% "sustainable" yield.

Secondly, by "sustainable", I also mean that I believe that Riocan's cash distribution is safe for the foreseeable future.

However, at NO time did I ever intend to suggest that Riocan's distribution is guaranteed for 50 years.

Thanks again for your good point, and hopefully I have better explained what I mean by the word "sustainable".

www.cfrca.com
I've watched this debate silently from the sidelines, and drawn some amusement from the battle of words. With written words as weapons, and combatants far removed in time and space, meaning and nuance can be lost, in the hands of even the most skilled debater.

While I know absolutely nothing about REIT's and RioCan, it does seem clear that the fundamental issue in this debate is the meaning of sustainable.

Per Wikipedia, "Sustainability, in general terms, is the ability to maintain balance of a certain process or state in any system". It is almost explicitly implied that this balance is not one that can end in 1 year or 5 years or 50 years, but rather one that is perpetual, without end. If this state of balance could be less than forever, one would have to qualify this by stating, "The balance is expected to be sustainable for 50 years, but somewhere in that period an imbalance may occur, and a sustainable situation may no longer be possible."

The word sustainable, when used alone, means forever.

If you wish to state that a yield is sustainable for 5 years, then you may be able to argue that point convincingly enough. If one were to state a yield is sustainable forever, which you had done, knowingly or not, by using sustainable without temporal qualification, then you have yourself admitted that this is an untenable position.

This definition is the key theme the others have been trying to debate.

And to conclude, Bob, you entirely diminish yourself, your argument, and your credibility when you write, "One of us is severely lacking?". On this forum we discuss ideas, whether they be good or bad, and render opinions on same ideas. We do not pass value judgements on those with the audacity to post. It is within bounds to express opinion counter to those posted, but without bounds to belittle the author of said opinion.
 

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Discussion Starter #66
Appears That "Sustainable" Has Too Many Meanings ?

There are no secrets Bob. Here they are, including the dates in which they were published:

Canadian Capitalist posts on REITs

You simply don't get my point. When you say a 8% sustainable yield I take it to mean the traditional discussion of portfolio withdrawal rates (which is where this conversation started). The thumb rule is a traditional retiree can withdraw 4% from their portfolio (including capital drawdown) with a high degree of certainty that they won't outlive the capital. They then adjust it for inflation increases every year. I simply don't think RioCan's distributions fall in the same category. In the past ten years RioCan has boosted distribution at a better than 3% annual growth rate. This happy state won't last forever.

Hi CC

It appears that Sampson has made the best point of all of us so far by stating that the focus has been on what does "sustainable" mean.

Neither one of us has been getting the others point, but thanks to Sampson, we are much closer.

The thumb rule that you state above, ie a retiree can withdraw 4% from their portfolio (although I thought it excluded capital drawdown) with a high degree of certainty that they won't outlive their capital does relate to my original point. Maybe we have different interpretations of this thumb rule, but I also thought that it was 4% after inflation adjustment.

Despite some interpretation differences about this 4% thumb rule, my position is that it is far too low. This is mostly due to pedlars who push a low 4% rule in order to cover up both their high fees and poor performance.
Personally, I stand by my position that the thumb rule should be 8%, ie a retiree or anybody else for that matter, can spend up to 8% of their portfolio without worrying about outliving their capital. Of course, this requires them to earn a 8% sustainable rate (as I have defined sustainable above) on their overall portfolio.

Personally, between using some LIMITED leverage, and purchasing investments with a higher yield/risk than Riocan, my own sustainable rate is much higher than 8%. However, I don't want to expand on this point too much, less I get attacked again by another dozen forum members.

However, as I have stated before, I don't expect everybody to agree with me on this, but if I can at least get investors debating the issue (which has been a resounding success for far !), maybe they will move from 4% to 6%, which would still be a significant improvement.

Although we are both Riocan unitholders, it appears that I believe that Riocan's distributions provide an example of an 8% sustainable rate, while you believe it might be closer to 4%. While I still would disagree with you about this, I do understand your position. As you have correctly pointed out before, nobody knows the future, maybe we are both wrong about Riocan and its future 20 year sustainable rate will be 6% ?

Truly now a better debate, after we have spent some time explaining to each other what each of us means by "sustainable".


Bob
www.cfrca.com
 

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Discussion Starter #67
Out Of Bounds ?

I've watched this debate silently from the sidelines, and drawn some amusement from the battle of words. With written words as weapons, and combatants far removed in time and space, meaning and nuance can be lost, in the hands of even the most skilled debater.

While I know absolutely nothing about REIT's and RioCan, it does seem clear that the fundamental issue in this debate is the meaning of sustainable.

Per Wikipedia, "Sustainability, in general terms, is the ability to maintain balance of a certain process or state in any system". It is almost explicitly implied that this balance is not one that can end in 1 year or 5 years or 50 years, but rather one that is perpetual, without end. If this state of balance could be less than forever, one would have to qualify this by stating, "The balance is expected to be sustainable for 50 years, but somewhere in that period an imbalance may occur, and a sustainable situation may no longer be possible."

The word sustainable, when used alone, means forever.

If you wish to state that a yield is sustainable for 5 years, then you may be able to argue that point convincingly enough. If one were to state a yield is sustainable forever, which you had done, knowingly or not, by using sustainable without temporal qualification, then you have yourself admitted that this is an untenable position.

This definition is the key theme the others have been trying to debate.

And to conclude, Bob, you entirely diminish yourself, your argument, and your credibility when you write, "One of us is severely lacking?". On this forum we discuss ideas, whether they be good or bad, and render opinions on same ideas. We do not pass value judgements on those with the audacity to post. It is within bounds to express opinion counter to those posted, but without bounds to belittle the author of said opinion.

Hi Ben

You make some valid points.

The word sustainable , used alone, likely is generally interpreted to mean forever. When I use the word sustainable, I should include that while a 8% sustainable yield is possible, it definitely requires continual portfolio evaluation. This is in addition to my other comments on the word sustainable.

My intention was never to belittle anybody, and if my reply about severly lacking came accross as such, I do sincerely apologize. My intention was only to state that the poster has overly limited themselves in who they consider investment teachers.

With respect to belitting posters, have you read some of the comments that were directed my way ? Why not jump in off the sidelines then with your noble purpose ?

Anyway, thank you for your valid points.

Bob
www.cfrca.com
 

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Hi Bob,

I have not been diligent in following this thread, nor reading all posts and comments, but if in fact there were disparaging comments directed at you rather than at your ideas, then quite rightly my last comment would apply in your defense as well. We all know better, and can be forgiven when our guard slips for a minute.

Consider then my comment to be a reminder to the community at large on what should constitute respectful dialogue. This financial forum is a gift and a privilege to us all, and with a little respect and a dose of good humour, we'll all continue to reap the rewards from sharing our views in public discussion.

That's all from me on this thread...if there's more to be said on an 8% sustainable yield from RioCan, have at it!
 

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Discussion Starter #69
Thanks Ben

Hi Bob,

I have not been diligent in following this thread, nor reading all posts and comments, but if in fact there were disparaging comments directed at you rather than at your ideas, then quite rightly my last comment would apply in your defense as well. We all know better, and can be forgiven when our guard slips for a minute.

Consider then my comment to be a reminder to the community at large on what should constitute respectful dialogue. This financial forum is a gift and a privilege to us all, and with a little respect and a dose of good humour, we'll all continue to reap the rewards from sharing our views in public discussion.

That's all from me on this thread...if there's more to be said on an 8% sustainable yield from RioCan, have at it!

Hi Ben

Thanks for your comments, as I believe that a reminder to respect each other was definitely needed by all of us in this thread !

Sadly, unlike your fortunate self, I suppose it would be bad manners for me to leave my own thread ?

However, despite my occasional complaint, I have truly enjoyed taking on all comers defending a 8% sustainable (as previously defined) yield position !

Thanks again.

Bob
www.cfrca.com
 

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I have learned almost everything that I know about investing from Benjamin Graham and Warren Buffett.

You state that you have learned everything that you know about investing from CC.

One of us is severely lacking ?
And this is why people have got their back up and are refuting your points with some malice, because you're coming across as a jerk, Bob. Someone gives a hat tip to the person who first awakened them to investing and taught them the basics and you ASSUME that is the entire breadth of their knowledge??? First of all, you can say you learned everything you know from them, but since I would find it hard to believe the premise that you are either old enough to have worked with Graham or been the apprentice of Omaha, what you REALLY mean is that you've read what they have written and said "ok, sounds good to me"... guess what, other people have managed to do that too. The reality is that while you can learn a bit and be successful at investing, there is always, ALWAYS more you can learn because the environment changes constantly... if not, then you're a leech and should just tell your clients to read Graham and Buffet and do it themselves. So the person lacking is the one who thinks he knows it all, not the one who respects his first guru while still continuing to learn.

Now on to your point. As you say, forget Riocan and the RoC diversion, it's only one example of your super secret squirrel picks. The bottom line is that you have now redefined it to mean that "When I use the word sustainable, I should include that while a 8% sustainable yield is possible, it definitely requires continual portfolio evaluation." ... in other words, Riocan ITSELF may not have an 8% sustainable yield, but you feel there will always be something that can be jumped to in the portfolio to replace it if it drops, and therefore the PORTFOLIO can have an 8% sustainable yield.

I'm not saying that's not possible, but what I am saying is that for that to occur, you are relying on:

1) A financial advisor that can always spot the opportunities that will not result in losses that will pull the overall yield below 8%, who will not embezzle funds, and who will be there for your entire retirement (or will be replaced by someone equally capable). You may be one of these people, which is why you feel confident that it can be done in general, but analysis of active managers has shown they cannot always beat the market, incidents of fraud from the most unlikely advisors are well documented, and there is no guarantee that if you get hit by a bus tomorrow your replacement will be as good as you are. I have no idea what the odds of getting a good advisor for the entire time you need them is, but I CAN guarantee you it is less than 100%.

2) If you lower your required savings at the time of retirement because you can acheive an overall yield of 8% on your retirement savings, and you are expecting to live to 95 since that's how long most of your family lived, that means you are expecting an 8% yield in your 90's... but to acheive this sustainable yield you are investing in equities, which are not only vulnerable to correction (both systemic and company risks), but are also not guaranteed cash flow... a one-two punch of a market correction and a dividend reduction as we have just experienced could derail your plan. Again, considering we have JUST experienced one, I think it's safe to say that the odds of the market going *** backwards at a terrible time for the plan is > 0%.

3) You are assuming there are always buying opportunities with good yields, but during boom times (such as the height of the market) every asset class was overvalued, and there was almost nothing you could buy that would yield 8% sustainable, nor was cash providing that return. Presumably another high performing asset would not fail during that time, so during the booms you shouldn't need to be hunting for an investment, but since company risk cannot be permanently eliminated, nor can the possibility of LBO's, it could happen. Bell Canada, a long time blue chip dividend stock almost got bought out, and there was a chorus of "where will we be able to get good returns now". Again, no clue on the actual chances, but greater than 0%.

So what does it mean in the end? Well, for someone retired, or nearing retirement without enough funds for a 4% return, you are giving a message of hope, and that's a good thing. For others, you are laying out another possibility that they can think about if they want to take a little more risk in their life, and chance eating cat food at 90 to tour the world at 40, and some people may be fine with it, some might not.

In fact, I had taken your message as a very good positive one until you tried to shove it down everyone's throat as a universal truth and not recognize that there ARE risks. A continuous 8% yield is POSSIBLE and SOME people may choose to lower their retirement goal because of it, but it is not, and never can be, guaranteed, and the only people that sell absolutes are con men and priests.
 

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Despite some interpretation differences about this 4% thumb rule, my position is that it is far too low. This is mostly due to pedlars who push a low 4% rule in order to cover up both their high fees and poor performance.
Personally, I stand by my position that the thumb rule should be 8%, ie a retiree or anybody else for that matter, can spend up to 8% of their portfolio without worrying about outliving their capital. Of course, this requires them to earn a 8% sustainable rate (as I have defined sustainable above) on their overall portfolio.
I'm a DIY investor as are most people on this forum. We have little interest in uncritically parroting "research" from vested interests. The 4% withdrawal rule doesn't come from peddlers of financial advice. It comes from heavy duty research, initially by William Bengen in the FPA Journal. Here it is:

Determining Withdrawal Rates Using Historical Data

Also, check out this article in the Financial Analysts Journal by Rob Arnott:

Sustainable Spending in a Lower-Return World

For the long-term investor, return expectations of 8–9 percent cannot be justified in a world of stock yields below 2 percent and bond yields of 5 percent. If a person’s intended spending rises with inflation, as it often does, then sustainable spending will fall well short of 5 percent without more contributions to the portfolio.

None of this analysis is comforting to those who would like to rely on lofty return assumptions to justify chunky spending or skinny contributions. But planning for the future on the basis of sound assumptions is far better than relying on hope as a strategy for the future.
Today, S&P dividend yield is about 3%; TSX dividend yield is about 4%; bonds yield about 3%. A traditional 60/40 portfolio has a 3.6% portfolio yield. Spending the income from such a portfolio is probably sustainable (again there are no guarantees; dividends haven't always kept pace with inflation in the past) for a long time.
 

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An 8% yield is no less sustainable than a 4% yield depending on when the denominator was acquired. Back in the happy days in 2007, few investors would challenge the sustainability of Manulife's tiny 2.2% dividend yield. Shareholders were congradulated for investing within the 4% speed limit instead of chaising yields.

Happy days disappeared when the financial tornado spun MFC's yield to over 10%, but the 10% today is no less sustainable than the 2.2% from before. Of course Manulife can easily regain to $40/share as markets recover, thus lowering the yield to 2.6%. Again, the new shares aren't any safer than the previously purchased shares.

A similar story can be told for riocan. Yield was 4.9% in 2007, and 12% this March. You might buy half a position in 2007 and average down in March, but both halves share the same yield sustainability.
 

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Discussion Starter #73
Bob's Replies

Hi

Some quick replies/thoughts :

-StephenHeath - as I stated yesterday to Ben, I do sincerely apologize if my comment came accross the wrong way, as it was not my intention
-again, I'm being misinterpreted, as I never said that an 8% sustainable portfolio yield is guaranteed - actually quite the opposite as a 4% sustainable yield could likely be guaranteed, but 8% definitely does involve accepting some risk


-CC - Sorry, but I consider Bergen as just another wrapper/pedlar, and his work is not what I would call "heavy duty" research


-Financial Jungle - very good point that price paid makes a significant difference in the sustainable yield that you will receive - price paid effects both your initial cash yield percentage, and what you might get in future price appreciation - ie anybody who bought Riocan at its 2007 $27 high will likely NEVER get a 8% sustainable yield over many years


Challenging the 4% sustainable myth is unbelievably more difficult than I could have ever imagined ! Maybe 8% sustainable is crazy, but why not believe that better than 4% is not unrealistic, even if you achieve 6% ?


Bob
www.cfrca.com
 

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REITinvestor.ca reiterates #3 Ranking & cautiously believes RioCan distribution....

RioCan REIT (REI.UN - TSX)

April 30, 2009

REITinvestor.ca reiterates #3 Ranking & cautiously believes RioCan distribution to be safe for 2009. Maintains target $13.25/ unit.


REITinvestor.ca, a private subscriber-based independent rating & ranking service, believes that the current distribution of $0.115 per month ($1.38 annualized) is secure for the next 12 months, assuming financial and economic conditions do not weaken substantially over the rest of the year.

Following a review of RioCan’s Q1-0 Report, REITinvestor.ca believes that management is working hard to manage the current difficulties in retail- and office-leasing markets. REITinvestor.ca is maintaining its neutral #3 rating for REI.UN for 2009.

Of particular note to REITinvestor.ca:

- RioCan REIT continues to maintain high occupancy rates (97%) despite a spike in the number of unbudgeted vacancies;

- While same-property NOI declined by 4.3% from Q4-08 to Q1-09 (and will likely remain under pressure going forward), third-party management fees and a reduction of internal administration expenses are offsetting much of the NOI decline;

- RioCan management is committed to not proceed with any future developments unless the project is substantially preleased to credit-worthy tenants;

- REI.UN was successful in issuing $180M in new unsecured debentures in Q1 (of which approximately $56M was used to repurchase other maturing debentures);

- RioCan added net new financing in Q1-09 of $104M;

- RioCan secured an additional $90M credit facility in Q1-09;

- REITinvestor estimates that RioCan’s total liquidity to total debt has improved to approximately 11%, and that its current Loan-to-Value ratio is at a low 54%;


- Management reports that approximately 12% of its properties are unencumbered by debt, providing for potential access to additional mortgage funds;


- However, REITinvestor.ca notes that other serious risks remain:

o Namely, its $200M credit line may be terminated if loan-to-value for pledged properties exceeds 60%. REITinvestor estimates the REI.UN entire portfolio is currently leveraged to 52.2%.
o S&P and DBRS maintained their credit rating for REI.UN at BBB, or investment grade, as of 12/31/09. This rating could be affected by further weakening of financial and economic conditions, which could trigger replacing debentures coming due.
o RioCan has a number of joint venture partnerships which expose the REIT to external risk, in case of default by a partner.
o RioCan will need to implement a Qualification Plan for REIT Exemption, according to SIFT legislation, by December 31, 2010, the failure of which would have a material and adverse affect.





REI.UN units closed on Tuesday, April 29 at $14.44 per unit. For more information, visit REITinvestor.ca


DISCLOSURE: REITinvestor.ca maintains its own investment fund and is not currently holding units of REI.UN.

REITinvestor.ca does not provide investment advice, nor does it recommend the purchase or sale of securities including any REIT units it covers. Please consult your personal professional advisor before investing.
 

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Hi
CC - Sorry, but I consider Bergen as just another wrapper/pedlar, and his work is not what I would call "heavy duty" research
Well, all I hear from you is unsubstantiated claims and individual names and beliefs that 8% withdrawal rates are sustainable. In comparison, Bergen's paper at least has facts and inferences that can be debated.
 

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An 8% yield is no less sustainable than a 4% yield depending on when the denominator was acquired. Back in the happy days in 2007, few investors would challenge the sustainability of Manulife's tiny 2.2% dividend yield. Shareholders were congradulated for investing within the 4% speed limit instead of chaising yields.

Happy days disappeared when the financial tornado spun MFC's yield to over 10%, but the 10% today is no less sustainable than the 2.2% from before. Of course Manulife can easily regain to $40/share as markets recover, thus lowering the yield to 2.6%. Again, the new shares aren't any safer than the previously purchased shares.

A similar story can be told for riocan. Yield was 4.9% in 2007, and 12% this March. You might buy half a position in 2007 and average down in March, but both halves share the same yield sustainability.
Yields on RioCan and Manulife were lower then because investors weren't worried about the sustainability of distributions / dividends. Now they are, which is why prices are lower and yields are higher. Investors were underpricing risk then and they are overpricing it now. Fair enough.

Even if an investor waited in cash and scooped up stocks at or near the March lows, they still don't have a 8% dividend yield they can live forever on. The yields hit slightly more than 4% on the TSX and slightly more than 3% on the S&P 500. In the past, dividends have more or less kept pace with inflation and if the future looks like the past, investors can consume the dividends safely.

The other 4% has to come from alpha, either superior stock picking skills or market timing. Maybe some are smart enough to attain that. I would bet that most investors can't. In fact, average investors won't even get the market yields due to performance chasing and expenses.

Even for the smart ones who waited patiently in cash for stock yields to go up, how did they meet their 8% sustainable withdrawals prior to market lows? By consuming capital! Bond and stock yields stayed low for a long time, so that is a lot of capital already consumed even while waiting. And the wait may have turned out to be such a long one that by the time stock prices were low enough, the capital would have been consumed.
 

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Even if an investor waited in cash and scooped up stocks at or near the March lows, they still don't have a 8% dividend yield they can live forever on. The yields hit slightly more than 4% on the TSX and slightly more than 3% on the S&P 500. In the past, dividends have more or less kept pace with inflation and if the future looks like the past, investors can consume the dividends safely.
I'm lost at the part where 4% was sustainable before the crash, while 8% isn't today.

XIU was yielding 2% just 18 months ago. If the 4% withdrawal was sustainable on 2% yield (+ capital gains?), then why not 8% today when the yield is twice as high? After all, the "relative" sustainability of these XIU units shouldn't change despite being 50% cheaper today.


Even for the smart ones who waited patiently in cash for stock yields to go up, how did they meet their 8% sustainable withdrawals prior to market lows? By consuming capital! Bond and stock yields stayed low for a long time, so that is a lot of capital already consumed even while waiting. And the wait may have turned out to be such a long one that by the time stock prices were low enough, the capital would have been consumed.
I can't speak for others, but I'm still in the accumulation phase.
 

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I'm lost at the part where 4% was sustainable before the crash, while 8% isn't today.

XIU was yielding 2% just 18 months ago. If the 4% withdrawal was sustainable on 2% yield (+ capital gains?), then why not 8% today when the yield is twice as high? After all, the "relative" sustainability of these XIU units shouldn't change despite being 50% cheaper today.
Say 2% was the dividend yield on the TSX. 4% was the yields on bonds. A blended 60/40 portfolio would have provided a 2.8% yield pre-crash. The rest will have to come from capital consumption. Since capital is consumed, this yield won't last forever. But it will last long enough for traditional retirees.

Today, dividend yield on the TSX is 4%. Bonds yield 3%. The same blended 60/40 portfolio will yield 3.6%. The rest again has to come from capital consumption.

My guess is if capital isn't touched the 2.8% yield pre-crash and 3.6% today can be safely spent for a long time. i.e. they are probably sustainable. Neither is anywhere close to 8%. Someone who wants to spend 8% will be depleting capital at a fast pace then and now. That's why I think 8% isn't sustainable.
 

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Bob, I'm having trouble understanding your point then. You said

-again, I'm being misinterpreted, as I never said that an 8% sustainable portfolio yield is guaranteed - actually quite the opposite as a 4% sustainable yield could likely be guaranteed, but 8% definitely does involve accepting some risk
...
Challenging the 4% sustainable myth is unbelievably more difficult than I could have ever imagined ! Maybe 8% sustainable is crazy, but why not believe that better than 4% is not unrealistic, even if you achieve 6% ?
Now, I could be wrong about where the 4% really comes from, but where I use that figure to calculate the return on investments from age 65 on for my personal planning, it is the assumption of 2% inflation and 2% interest, based on my historical observation that laddering 5 year GIC's at the best rate you can get tends to get you those results. In other words, that's the risk free baseline, or as close as I can get to it for estimation purposes. (I know in the past you mentioned the 8% being comprised of inflation + returns as well so we're on the same page there).

So... what is the benefit in 8% or 6%? I mean, I can see your point that because it is higher than 4%, it means less money needs to be stockpiled at 65, but that is because you are boosting risk and reward compared to an all GIC portfolio, and that's pretty much common sense. Especially since you agree that it's not a risk free scenario. (And admittedly, nothing in life is risk free, even that 4% could get hit with new taxes, or banks closing and CIDC not covering what they promised, or other problems).

I guess it just seems like this thread has gone on so long, and everyone has softened their position from absolutes, that we're no longer talking about a big shocking thing, but simple risk vs. return exactly according to textbook?

(PS: One bit of disclosure, I just double checked my retirement spreadsheet, which is what I used to calculate my retirement principle targets and my future income targets (with inflation assumptions)... My Retirement to Death phase is calculated assuming a 6% return (including inflation, which boosts the principle, of 2.5% and profit to live on of 3.5%, since I'm aiming to leave a big inheritence if possible).
 

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Somewhere in the thread, we switched from a dividend-stock-picking portfolio to an index/bond portfolio. Personally I use bonds and cash as a temporary place to park money. If bonds are thrown into the mix, then 8% is pushing it.

Added: Also want to add that long-term, both dividend yield and capital are indexed to inflation, but bond yield is norminal. Assuming long-term inflation is 3%, investors should consume only 1% of the 4% bond yield to maintain real purchasing power. 1% on bonds adds a lot of pressure to equities. That means prior to the crash, investors must've assumed a safe 6% withdrawal on the equity portion in order to raise overall portfolio withdrawal to 4%.

Not all TSX stocks pay dividends. For an experienced full-time dividend investor like Bob, it's possible to focus only on the dividend-paying, high quality (e.g. best 7 REITs) TSX constituents, but only invest when they're cheap. If Bob did acquire his Riocan at 12+% yield (twice!), he can afford 4% yield on his next purchase, or 6% on his next 2 purchases to average 8%.
 
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