Is the way that I am describing things here more or less on track?
You are doing fine.
For those interested in seeing some pictures, look at this graph from the special SWR Research section. It plots Historical Surviving Withdrawal Rates (also called Historical Database Rates) versus the percentage earnings yield 100E10/P (or 100% / [P/E10] ). The data are from sequences starting in 1923-1980.
http://www.nofeeboards.com/jwr/pic3.JPG
Technical background material is presented in the
From Earnings Yield thread dated Thu Apr 15, 2004.
http://nofeeboards.com/boards/viewtopic.php?t=2368
I find it necessary to use the Full Screen mode in Windows. It is listed under View. You can also get the Full Screen mode by pressing key F11.
The lines are Calculated Rates. The lower confidence limit (relative to the Calculated Rate) is the Safe Withdrawal Rate.
Green and reddish brown colors are used with 50% stocks and 50% commercial paper. Data are presented as diamonds. Confidence limits are plus and minus 1.01%.
Blue and reddish purple colors are used with 80% stocks and 20% commercial paper. Data are presented as plus signs. Confidence limits are plus and minus 1.58%.
The Green line and the reddish brown diamonds describe what has happened with a 50% stock portfolio. Those diamonds below the green line are unlucky sequences. Safe Withdrawal Rates are 1% below the green line. One of those diamonds was unlucky enough to fall below the Safe Withdrawal Rate.
The reddish purple line describes what has happened with an 80% stock portfolio. Safe Withdrawal Rates are 1.6% below the reddish purple line. Those plus signs below the reddish purple line are unlucky sequences.
Notice that some sequences with low earnings yield are somewhat unlucky, but only slightly so.
Plots with Historical Surviving Withdrawal Rates (i.e., Historical Database Rates) show that the spread increases with earnings yield. This is awkward for statistics, but we do not claim great precision. We do claim consistency. Interestingly, the spread about similar plots using P/E10 instead of 100E10/P is well behaved, almost constant.
Have fun.
John R.