The abduction of Elizabeth Smart was one of the most followed child abduction cases of our time. At the tender age of 14, just before celebrating her middle school graduation, Elizabeth went to sleep in her family home just as she had always done. Awakened hours later to a knife held roughly against her throat, she was taken from her home and family and held captive for nine long months.
In this captivating message, Elizabeth shares her incredible story of perseverance in the face of unimaginable adversity. Her message not only tells her personal story but also discusses topics such as overcoming extreme adversity, the importance of process of recovery, and not allowing your past to dictate your life’s future. Elizabeth knows that there is nothing more important than having hope in a difficult situation. Having lived through an extreme circumstance as a young teenager, she is living testament to the power of hope and perseverance.
Today, at 5:00pm, Laura Hawley will be interviewing Elizabeth Smart on Dollars & Sense. Don’t miss this interview, tune in to WLKF-AM 1430 this afternoon.
My self-imposed job this month is to cheer you up, so I’ll start with this question: Have you noticed there is a presidential campaign going on around us?
So how am I doing so far with my self-imposed job? Feel better yet? Nah, me neither.
How about jumping to hurricane Matthew for a change in subjects? The state was declared a disaster area two days before the storm reached our shores, and what we found in Polk Country was what Winnie the Pooh termed, “A Blustery Day”.
So what does this have to do with investing? Not much perhaps, except from a perspective perspective.
I read one of Peggy Noonan’s recent columns in the Wall Street Journal wherein she lamented that many of us (particularly those in the news media) are living on “the Edge of Stupid”. http://www.peggynoonan.com/the-politics-of-the-shallows/ She described the malady caused by the hurried pace of our modern news cycle. We also, it seems to me, have a need in our current culture to find both a victim and a guilty party for each current event that makes the news.
This tendency has made our political races more polarizing, and more distressing to follow. It has made us prepare for natural disasters (which is a good thing to do), as if proper governmental policy and action can prevent nature from disrupting our lives (which is a stupid thing to believe).
I see this same thinking in investing. On a day the Dow Jones Industrial Average has a loss of over 100 points, the pundits arrive that night to explain the market’s ‘disruption’ was due to Reason X. Or Y. Or maybe even X, Y and Z.
It drives me out of my mind. The need to create a seemingly plausible explanation for a (usually) inexplicable short term market fluctuation makes me pull my hair out (this, coupled with three, it’s-time-to-be-adults-already children have me nearly bald now. The attached picture is thankfully about three years out of date.)
Do you really want to know why the market goes up or down? Here are the basics: in times of economic growth, stock markets tend to rise. In times of economic slowing, stock markets tend to fall. Greed and exuberance sometimes drives the markets too high. Fear sometimes drives it too low. During all these times and tendencies, the market will fluctuate from day to day, hour to hour.
So what’s the point? The point is to reject the demand from our oppressive media and social outlets to respond to foolishness. If it’s presidential politics, listen to the news, and turn off the noise. If it’s hurricane season, you know to prepare and give thanks if the storm passes you by (a little donation to our friends on the east coast or in the Caribbean who suffered loss is a good choice too). And in investing, prepare for the storms, listen to the news, stay on the course you’ve charted and turn off the noise.
For your education and entertainment this month, I wrote an over-long and painfully boring column on “sequence of returns” and how that can affect your investment portfolio in retirement. To acknowledge the dubious claims of “educational” and “entertainment”, I trashed the whole thing and started over.
Here’s the column re-write in normal language: If things are rosy in the economy and investment markets during the early years of your retirement, you will probably be much better off than if they are not. Furthermore, if they are not so rosy and it turns out that you are soon withdrawing an unsustainable amount from your investments, you may well run out of money. Duh. I think that is why it is called “unsustainable”.
It originally took me 555 words (no I didn’t count, Microsoft Word did) to say that. That doesn’t include my spreadsheet with 27 lines and four columns of numbers in case you wanted proof. As often as I try to remind you to not spend so much time on the details that the important information gets lost in the weeds, you’d think I might remember that myself.
So what, you may ask, was my point in even starting a column on such a dull topic? The idea was spawned from the questions from people who are looking for either reassurance after the daily deluge we all get predicting chaos, cataclysm and catastrophe are just around the corner. Furthermore the prognosticators of doom will assure you that the lack of destruction, despair and devastation (okay, I’ll quit with the alliteration for today, but it was fabulous, fantastic, fun for me) is irrefutable proof that the very same is just around the corner.
To steal from Mark Twain’s famous quote and rephrase it: “Rumors of the end of life as we know it are greatly exaggerated.” But on the other hand…
It is a scary world out there. And as I showed in my long & unseen diatribe on “the sequence of returns” there is plenty of stuff out of your control that affects your ability to make ends meet. This is obviously a lot more intimidating in those years when we are older and don’t have the employment options and number of years left to make adjustments.
(By the way, if you are morbidly curious about “the sequence of returns” issue, you can search for it on the Internet. You’ll find better written and even more boring articles on the subject than I generated.)
So what do you do when stuff like the “banking crisis” of 2007 comes along during your retirement and reduces your portfolio by 20, 30 or even 40 percent in one year? Answer: You planned for this possibility. I don’t expect you to be either happy or nonplussed by bad times, but I do expect you and your advisor to have an idea how to manage it.
So if you’re spending more time today talking about rates of return, fee structures and the ilk than you are on risk management and retirement spending forecasts you need to adjust your thinking a bit. Perhaps a visit with your financial advisor about the road ahead, not the road behind can allay those fears.