I want to briefly rant about something I believe retirees should be aware of that can potentially run their portfolios off course. That is the subject of the permabear pundits. Surprisingly, it’s not the general pessimism that bothers me. My problem with these folks is two-fold:
- Their pessimistic position never changes (hence the name permabear).
- The record of a permanently pessimistic viewpoint is historically absurd.
I was sent one such newsletter this week (which sparked this brief rant) and it was written by a gentleman who has been routinely noted as a gold bug and has written many books - all with “Chicken Little, The Sky is Falling” titles.
I get it - pessimism sounds smart. It even comes off as if they are genuinely trying to help. The problem isn’t with being pessimistic but with being permanently pessimistic. I’m going to come back to this point in a moment.
One easy way to identify these folks that is often glossed over or missed by the general public is that almost all permabears sell one of two things:
- A new book that is hot off the press (because all their older books look ridiculous now).
- An email newsletter subscription that will continue to pander to our innate fears.
Anyone (myself included) who tries to sell you a book or newsletter subscription by catering to the fear side of your brain should immediately cause you to run away. It will not help you.
Okay, back to my point above. I know that I routinely share a positive viewpoint here on this site, so it may seem that I am railing against pessimism in general. While there is certainly some truth to that, I’m not against pessimism in general. I am against permanent pessimism - again for two reasons.
First, as I said above, permanent pessimism is historically absurd. Just look at any long-term record of the markets for all the evidence you may need. (Before I get email replies, no this time is not different no matter what they say.)
Secondly, their position as a permanent pessimist should cause you to discount the credibility (and maybe the intellectual capacity) of the person you are reading/watching. Let me explain this point.
One of the most difficult things to do in life is to be able to hold two contrasting ideas in one’s head at the same time. It’s entirely possible to be both a short-term pessimist and a long-term optimist which I believe is a consistently healthy response and a consistently healthy way to approach retirement portfolio planning. In fact, this is probably one of the smartest positions you could take when establishing a retirement portfolio.
If you are short-term pessimistic, then you will have your stable of less volatile assets to rely on when/if things go south in a hurry. And if you are long-term optimistic, you won’t be as apt to sell out of that downturn because you believe in the long term and are prepared for such an event. This is exactly the way I and many colleagues and academics whom I respect in our industry build portfolios.
I believe the ability to hold both of these viewpoints in mind at the same time is a critically defining factor in whether somebody “makes it in retirement” or doesn’t. The pundits can’t do this because they’ll sell fewer books and newsletter subscriptions.
For the record, I have no newsletter to sell to you. I am just trying to save one person at a time from these crazies.
Stay the course,
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This post is not advice. Please see additional disclaimers.