Cousin Irving Strikes Again

My cell phone rang, and I felt a pit in my stomach because my caller ID told me it was my cousin Irving. Against my better judgment, I answered the call.  And he was stark raving mad.

“Dude, I told you we are going to be in a nuclear war!” he screamed. Mind you, he told me awhile back a nuclear war wasn’t’ going to happen because Trump took care of the problem.  (Take a wild guess who he voted for last year).  I calmed him down, but then he got real excited about his money and said, “I see the ‘smart money’ has moved to bonds. Dude, how did you know that was going to happen, and what kind of analytics did you use to determine this?”  I told him I didn’t use any analytics.  “That’s BS,” he said.  “You must have one of those fancy Bloomberg terminals to trade ahead of the market.”  “No, Irv,” I replied, “those are for professional traders.”  “But that’s what I thought you were,” Irv said.  “No, Irv,” I replied, “I’m a planner, not a trader.”  “But on our last call, you predicted this would happen.”

“Irv,” I sharply retorted, “I’m not Nostradamus.  I can’t see the future.  My “research” is based on human nature, market history and a few people who won Noble Prizes for their research saying it’s good to combine stocks and bonds.  When things get tough and uncertain, money often flows to bonds.  The safest bonds are issued by the US government.”   And Irv shouted, “But interest rates are low and bonds have no returns these days.”   I felt like saying, “No sh*%t, Sherlock,” but I kept my cool.  “Irv, it’s obvious that rates are low, but I still view bonds as a form of insurance in case stocks go down.  Also my clients are okay with this.”

“So, have you moved all your clients’ money to bonds?” Irv asked.  “Irv,” I said, “they already have had bonds mixed with stocks.  It’s predetermined.  I don’t move money back and forth. That would be an attempt at market timing which no one has ever been consistently successful with.”

Irv then blasted, “But the guys on CNBC said stocks are going to be hit hard!”  Then I said, “Good for them Irv.  Remember bad news sells.”  Irv blurted, “So you don’t believe in their prediction?”  “Not really, Irv.  If they knew, why do they need a job?” I said.

I realized it is never productive to argue with an attorney, and I knew this conversation was not going to end well.  So I lied and told Irv I had a client meeting that I had to prepare for.  Ahh…peace and quiet at last.

My Cousin Irving’s End of the World Investment Strategy

I got a call recently from my cousin Irving (not his real name, of course), and he was quite perturbed. I asked him what was wrong, and he wanted to know if the insurance company that managed his 401(k) is safe. I said, “What the heck are you talking about, Irv?  It’s a huge company, and as far as I know, it’s solid.”  Irv then asked, “If I put all my money into the guaranteed account, is it safe?”  I told him that his money is as safe as the company is, and since the company’s always advertising on TV with celebrities singing catchy jingles, I think it’s in good shape.  “But,” I said, “if you’re that concerned, do your research and check out the company’s finances.”

I asked him why he was so anxious, and he started ranting.  He believed that the United States was going to be in a nuclear war with North Korea.  He went on to say that it’s actually Russia that is backing North Korea, and they will enter the war, too.  I told Irv that he was being a little reactionary, but he persisted and wanted to know where his money would be safe. “Well,” I suggested, “U.S. bonds may be a safe–but not guaranteed–place to be during an economic or political crisis.”  Irv immediately shot back, “Bonds suck, and they aren’t getting any return, so I sold all my bonds several months ago.  Now I’m invested 100% in stocks.”

I tried to explain to Irv that combining stocks and bonds is a good thing because each will have its day in the sun, and historically, when stocks go down, bonds usually go up. But Irv wasn’t buying any of it. He told me that he also sold his Euro-Pacific fund (which, by the way, has been doing quite well in the last year) because of a nuclear war risk.  I said, “Irv, if there’s a nuclear Armageddon, your money won’t be worth much anyway.”

Nonetheless, Irv persisted with his Magical Thinking argument that he could time the market, pick the best funds and get a great return with no risk. I told Irv his reasoning goes against the research of many economists who have won Nobel prizes for their studies of market behavior.

Our disagreement was rapidly devolving, but I tried one more tactic.  I reminded Irv that he was going to retire soon, and he should be more concerned with income rather than trying to get the best return. Irv yelled back, “Dude, all you do is stick to your orthodoxy–your discipline of not trying to pick the winners and not trying to outguess the markets. What kind of advisor are you, anyway? I retorted, “Irv, I think you just answered your own question.”

Like I always say, investing should be boring.  If you want excitement, try hang gliding.  If you want to gamble with your money, go to Vegas.