Tuesday, September 4, 2007

"Safe" is a happy word

Anticipating All the Retirement Variables
I love following the stock market. In the very long run it's a beautiful thing, at least in the postwar world, and I hope it doesn't turn around and bite my head off the way it did in the tech crash. But to have most investments in fluctuating stocks with a solid amount in VAs and fixed annuities represents a nice pillow on which to lay your head. "Safe" is a happy word.

Things that concern me:
  1. Ben Stein is starting to offer disclaimers on his bullishness.
  2. Nobody can anticipate "all" the retirement variables.
  3. "Following" the stock market might be why heads were bitten off during the tech crash.
  4. In the "very long run" we're all dead.
  5. We aren't in a "postwar world." We are at war.
  6. Bear markets slide down slopes of "hope."
  7. I don't have any VAs or fixed annuities. I can't "anticipate" their long-term future solvency, nor do I wish to pay them relatively high fees to manage my risk for me.
  8. "Safe" is a happy word. I agree. He told me. If I tell two friends, and they tell two friends, and so on.... Wait, I think that's what I am doing.
  9. Weren't we told that the reason for the selloff was because risk aversion was spreading? So what will the spreading of risk aversion advice do?
  10. The article ends with a very clear warning and I've used that warning as the title of my article.
I like Ben Stein. He was fantastic in Ferris Bueller's Day Off. I also happen to think he's a smart guy. However, he's an optimist. I'd guess 95% of the time it serves him very well. The other 5% of the time, well, oh oh. He also did a good job in this article pointing out two of the biggest risks I see, for what that's worth. Unfortunately, I tend to see them as the same risk.

Someday, and perhaps soon, there will be a stock market correction that's -- so to speak -- correct. It won't be based on fear and rumors and short sales. It'll be caused by something fundamental like a wild overvaluation of stocks or a dollar crisis -- which definitely could happen -- or an outburst of inflation requiring rises in the interest rate, which are almost always poisonous for stocks.

Or maybe even a wild borrowing spree which led to an overvaluation and overleveraging of home prices that led to a seemingly booming economy that led to an overvaluation of stocks based on unsustainable profit margins that led to a dollar crisis that led to an outburst of inflation as predicted by the price of oil, gold, and silver? That's some supply chain of negativity I've got going there. I'd like to think I'm a realist, but after reading that maybe I'm a pessimst. If so, he'd no doubt have a similar critique of what I write. Only time will tell.

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