Tag Archives: investing

Nowhere near the panic button 

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Maybe if I were more financially savvy, I’d be alarmed by the collapse of several banks over the weekend. As it stands, I’m mostly just preparing myself to ride out some choppy financial waters in the short term. The markets don’t currently seem to be in a panic, so I’m opting not to be either. After all, if the markets do decide it’s time to panic, it’s mostly too late for me to do anything about it anyway. 

Over the last 20-odd years, I like to think my approach to most financial contagion has been to shrug and keep buying every other week. As a young, new investor, I bought into the teeth of the collapse of the dotcom bubble, then through the Great Recession, and most recently through the panicked COVID-19 sell off. Not being a finance guy or an economist, most of what I know comes from history – and that’s that every squirrely period of economic chaos eventually ends. Over a sufficient enough period, every bad time, including the Great Depression, has ended with markets making new highs. 

The trick, of course, is simply to hang on and don’t even think about locking in your losses. It’s a trick, because, as they say, the markets can absolutely remain irrational longer than you the individual can remain solvent. Assuming the House of Representatives doesn’t insist on allowing the federal government to default in a few months, I’m not especially worried about staying solvent. If it goes the other way, how well my philosophy holds up gets a bit murkier.

In any case, I’m nowhere near the panic button despite how much the finical news reporters insist on wringing their hands.

Making my bet…

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I mentioned a few weeks ago that I was considering taking the last of my retirement accounts – a long held Roth IRA – out of the hands of a new advisor and tending to it myself. Well, that transfer was finalized Friday afternoon. Exclusive of whatever a federal pension looks like in 12 or 13 years and discounting almost completely the idea that I’ll ever see a nickel of the cash I’ve poured into the Ponzi scheme that is Social Security, I’m now the chief cook and bottle washer for every last scrap of cash I’m counting on to keep me from living under a bridge and eating cat food in retirement.

I’m mostly feeling good about that decision. I’ll feel even better once I’ve unwound that account and gotten everything into low-fee, index tracking funds that just bump along into the upper right quadrant without needing a whole lot of thought or analysis. It’s not exotic or adventurous, but it’s the kind of thing that was good enough for Jack Bogle when he built Vanguard and for Warren Buffett to recommend for his wife. That should be good enough for me by any measure. 

So yeah, I’m going to go ahead and place a big (for me) bet that the international economic order isn’t going to blow itself apart in the next three decades… or if it does, there will be a 1950s style boom decade while it all gets put back together. Past performance, as they say, is not indicative of future results, but over the long term, I’m comfortable coming down on the side of people always wanting to make money and buy stuff. In fact I believe in free markets and free people so much, I’m staking the last third of my life on it.

The ghost of Jack Bogle…

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I’ve been with the same financial advisor for near on 20 years. I’ve had very few complaints, aside, perhaps, from his being not quite as aggressive when picking investments as my own comfort level would allow. I appreciated someone who was “fiduciarily neutral” to act as a sounding board to discuss changes, goals, and long-term planning. Now that he’s set to retire, I have to wonder if I’m willing to peel off 1% a year to build that same relationship with whatever new guy comes in to take over the shop.

Over the last couple of years, I’ve held back a small amount in a separate investment account that I tinker with directly. I’m not a stock picker. I don’t have the time or inherent analytical ability to do deep evaluation on this stuff. I am, however, good at recognizing that over time, a broad index of the whole market has given me returns in that account that are perfectly acceptable. I’ve observed the same function in the Thrift Savings Plan sponsored by our beloved Uncle. Its core funds – again, broad market indexes – grind out ample returns over time. Set it and forget it until it’s time to rebalance.

The account I held with my old advisor has always been something I thought of as a fallback – a failsafe that would prevent one disastrous, misguided decision on my part from wrecking the entire house of cards. I wonder, though, if maybe it’s time I take the whole thing in hand for a decade or so… at least until I need to come up with a plan to move from the accumulation phase to it becoming a cash flowing source of income. With less than a handful of index funds being fed automatically every two weeks, it doesn’t feel like the occasional rebalancing should be something that’s too hard for me to manage. Saving the yearly fees until we reach a point where there’s heavy duty planning to do would also be a nice little bonus.

It’s all easy to say here, but does, however, require a tremendous leap of faith in my own ability not to fuck things up in the absence of a safety net. Maybe what I’m really waiting for is a late-night visit from the ghost of Jack Bogle to reassure me that “Nothing is simpler than owning the stock market and holding it forever.” Yeah. That would go a long way towards easing my mind on this one. 

What Annoys Jeff this Week?

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1. Crypto. I hold a vanishingly small position in Bitcoin. Of course, that position has grown even smaller over the last week. The collapse of Bitcoin has been met with the expected gnashing of teeth. Crypto was billed as a lot of things – including the future of online transactions as well as a hedge against inflation and the vagaries of traditional stocks. It was going to be the New Gold. Its behavior in the current downturn hasn’t proven any of that out. I mostly bought in wanting to learn about this new technological wonder, rather than execting Bitcoin would pop to $1,000,000 and I’d make my fortune. Crypto, for all its hype, has an astonishingly unproven record of being useful in the broader economy outside of being an item of curiosity. At best, it’s felt like even more of a casino than your run of the mill investment opportunities, so as they say, “don’t gamble with funds you can’t afford to lose.”

2. People. After attempting to resolve my ants in the well issue last summer by working with well and water experts and meeting with only temporary success, I turned to a local exterminator this spring to get a second opinion. I’m not sure whether I should be insulted or not that the first thing he said to me was “Yeah, don’t dump any poison down the well.” I suppose just the fact that he said that so quickly implies that there’s a non-zero number of my fellow residents of Cecil County who do respond to similar issues by actually running out and poisoning their own water source. I assured him that I had no intention of emptying a bottle of Terro into my drinking water supply and that I was consulting him for alternative approaches that wouldn’t result in potentially killing myself. The more unsettling part of this whole conversation is that the people who do have to be cautioned against drinking poison are also the people we encounter on the roads each day. They’re the people we encounter while we’re getting groceries. They’re the ones who sit in judgment of us as jury members. They’re the people who go to the polls to elect our leaders. Honestly, the fact that such a warning needed to be said explains a lot about why things are the way they are.

3. An unnamed online brokerage. On a lark, I opened an online brokerage account years ago. I threw a few dollars in it and attempted to teach myself a bit about the exciting world of penny stocks. Believe me when I say that didn’t go anywhere beyond giving me a solid lesson that I have no business spending time being a stock picker. As the market began its fall back around the first of the year, I dug out my log in and set up a small weekly buy order for a broad index fund. It was a chance to use the falling knife to begin capturing some shares outside what’s locked up, sacrosanct and untouchable, in my retirement accounts. I try very hard to be a set-it-and-forget-it investor. In fact, going weeks or months between looking at things isn’t uncommon. The fact that this particular broker has somehow managed to bungle my last two automatic transactions, though, has me double checking all their work to this point. Add in the apparent impossibility of getting authoritative answers from customer service and I’m left to wonder if it’s not time to decamp for an alternative platform. That’s its own flavor of pain in the ass, so I’m begrudgingly staying the course for the time being. If the next transaction inexplicably goes wonky, I’ll have to try elsewhere for my own sanity.

A tempting target…

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Back in April, Senators Jeff Merkley of Oregon and Maggie Hassan of New asked the GAO to launch a study on “risks that fossil fuel stocks currently present” to those invested in the federal government’s Thrift Savings Plan (TSP). The distinguished senators then go on to imply that the TSP should create funds that “incorporate climate change risk” as part of the 401-k style program’s offerings.

Part of the allure of the TSP is its remarkably small fee structure – it’s very cheap in comparison to many other funds. Fees are low, in part, because TSP is simple. It’s got five basic index funds and five “lifecycle funds” that automatically reallocate participant’s money based on target dates. It’s got an elegant simplicity that’s historically effective at creating wealth for its participants over their long careers.

Look, I accept that climate change is a real thing. I also don’t have any particular love of the energy sector – many leaders in the area are losing value. That’s my real issue with them, though. If we’re going to drop energy companies from a portfolio, do it because they’re not making us money – not because some holier-than-thou senator wants to score a few political points.

Congress never saw a big pot of money sitting around that it didn’t want to stick its whole hand into. With $500 billion in assets under management I can understand why the TSP is an awfully tempting target. That said, the very last thing I want to see is a good thing turned on its ear by driving TSP to respond to whatever political views happen to hold sway at any given moment. Treating retirement funds as just another political football is almost a guaranteed way to manage to take another slug of cash out of my pocket.

There are already fund options out there for just about any special interest that wants to play in the market – whether your “thing” is gender diversity, sustainable energy, human rights, or a laundry list of other causes. TSP should remain a broad-based set of fund options targeted at replicating the market overall and building wealth over time for the wide swath of federal employees. Catering to the few individuals who can’t seem to be satisfied with that just doesn’t make senses… unless of course you’re more interested in enforcing ideological purity than in making good financial decisions. Surely no member in the United States Senate could ever be accused of that.

The long view…

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I start most mornings with a quick review of the news – usually a scan of BBC, CNN, Fox, Washington Post, New York Times, and London Times. The one thing they all have in common this morning is that they’re screaming the arrival of a new economic collapse. The reader comment sections are even worse. Fear in the market is an ugly, ugly thing.

If I were fifteen years closer to retirement seeing the Dow bleed off 600 points in one trading session might ratchet up my pucker factor a bit. In my experience, though, it pays to remember that in financial markets time is generally your friend. Markets go up. Markets go down. But over the long term the trend has always clawed its way higher.

With six hundred points down I’m looking around the house wondering what I can sell to put my hands on cold hard cash. If I had a big pile of it just sitting around not doing anything, I’d be buying this dip with both hands… because in 20 years no one is going to even remember what a “Brexit” was. It’s one of those times where it really pays to take the long view.