Lauren Foster of the CFA Institute asked Wade Pfau, Michael Kitces, David Blanchett and I to suggest some resources for advisors dealing with retirement. What we suggested and a lot of other good stuff are available here. I think it’s well worth your reading.
Let me hasten to emphasize up-front that Dave has done some fabulous work by helping many, many people to get out of debt, stay out of debt, budget effectively, live frugally and save aggressively. But when it comes to investing and to doing math, he is simply out of his depth. Let’s start with the backstory. Continue reading
A number of years ago, during George W. Bush’s second term and by sheer happenstance, I ended up playing a round of golf with a Navy SEAL Commander (half the SEALs train here in San Diego). Obviously, much of his job was classified and he was very circumspect in what he shared. However, when I asked where or how I could become better informed about foreign policy, he recommended Ron Suskind’s book, The One Percent Doctrine.
The “one percent doctrine” (also called the “Cheney doctrine”) was established shortly after 9.11 in response to worries that Pakistani scientists were offering nuclear weapons expertise to Al Qaeda. Here’s the money quote from Vice President Dick Cheney: “If there’s a 1 percent chance that Pakistani scientists are helping al-Qaeda build or develop a nuclear weapon, we have to treat it as a certainty in terms of our response. It’s not about our analysis … It’s about our response.”
Thus in Cheney’s view and per subsequent policy, the war on terror required and empowered the Bush administration to act without the same level of evidence or analysis as might otherwise be necessary. Continue reading
PBS aired an important documentary Tuesday evening examining retirement planning in America and entitled The Retirement Gamble. One particularly noteworthy comment came from Vanguard founder Jack Bogle on the “tyranny of compounding costs.” In contrast to the “miracle of compound interest” (often attributed to Albert Einstein, probably falsely, but that doesn’t lessen the import of the concept), which shows how quickly interest can accrue when it is compounded, the tyranny of compounding costs addresses how dramatically returns are diminished on account of excess fees. Note the chart below from The Journal of Financial Planning. As always, fees matter – a lot.
The great scientist E.O. Wilson created a major stink over the week-end via The Wall Street Journal by arguing (or at least seeming to argue, among other things) that math skills are less important to most scientists than imagination, theory, concept and intuition. It reminded me of the 1976 SNL send-up of the Gerald Ford-Jimmy Carter Presidential Debate. In the “debate” (shown below — the noted section is about 6 minutes in), Chevy Chase, as Gerald Ford, responded to a difficult economics question as follows.
President Gerald R. Ford: [ sweating ] It was my understanding that there would be no math… during the debates.
My newest column is now available from Research magazine. Here’s a taste.
As [The Wall Street Journal's Jason] Zweig emphasized, we are all social animals. It is natural and inevitable for most people to measure their success and status against their peers, and advisors are people, too. Yet the advisor who loses business to the competitor proposing an unrealistic approach and envies him “has already lost the battle. [Warren] Buffett likes to say that companies get the shareholders they deserve. Ultimately, every advisor has to be reconciled to the perennial truth that you get the clients you deserve.”
Surely the best advisors will need to listen more carefully, to provide excellent advice and recommendations based upon the most thoughtful research, and to make their points in a way that resonates with clients both intellectually and emotionally. That’s far easier said than done, of course. Long-term financial and retirement planning is difficult business. As Dana Anspach sagely added, “It is hard to plan for something when you don’t want it to happen.” Indeed it is.
My latest “RetireMentor” column at MarketWatch is available here. A taste follows.
“[T]he discussion of investment performance (such as it was) in no way dealt with the most important issues of all—why we make such lousy investment decisions and how those lousy decisions impede and damage our financial health.”
I’m a big fan of Jake Tapper. I thought he was terrific at ABC News as the senior White House correspondent and I was disappointed when he wasn’t picked to host This Week both when George Stephanopoulos left in 2010 and when he came back in 2012. As of 2013, Jake returned to CNN to become Chief Washington Correspondent and anchor of a new weekday television news show, The Lead with Jake Tapper. The Lead, which debuted this week to generally good reviews, is the first CNN show to launch since Jeff Zucker took over as president of CNN Worldwide to revitalize the franchise.
I agree with the good reviews, but there’s a “big but” coming. Continue reading
As reported in The Los Angeles Times this week, Alex Permann, a 24-year-old optometry student at the University of Missouri-St. Louis, was selected for one of those popular shooting contests at this past Sunday’s Missouri Valley Conference tournament title game between Creighton and Wichita State. “All” he had to do was make a lay-up, a free throw, a three-pointer and a half-court shot in 24 seconds and he would win $50,000. Permann made the lay-up and, on his second attempt, he hit the free throw. He then ran out to half-court and nailed a shot from there. $50,000! Permann went wild, jumping around the court, arms raised in triumph. The crowd went wild too.