Tales to Be Told

Jonathan Clements

IF THIS TURNS OUT to be a major bear market, there will be a slew of articles to be written. It’s the negative correlation enjoyed by every financial writer: Even as our portfolios shrink, our potential for pontification soars.

But what if the market bounces back? It’s almost too painful to contemplate. Think of all the articles that won’t get written. If the past week’s rally continues, here are 10 stories that will have to wait for the next market downturn:

1. Don’t panic. To be sure, many of us ink-stained wretches—both here at HumbleDollar and elsewhere—have already churned out the ritual “keep calm and carry on” articles. It’s an underappreciated art form: You strive to sound intelligent as you warn that stocks could easily full much further—or, for that matter, go right back up.

2. Time to rebalance. This one is best written when stocks are off at least 20%. But deadlines are deadlines. We have to write something this week, so we’ll probably trot it out when the market is down a mere 11%.

3. She called it. There’s always some Wall Streeter—not necessarily female—who mutters “crash” before the crash occurs or, better still, actually moves clients’ money out of stocks and into Treasury bills. Our new goddess of market timing is swiftly hoisted onto a pedestal and thereafter her every pronouncement parsed by adoring investors, until her lack of clairvoyance becomes too obvious to ignore.

4. Lemons into lemonade. Without the fruit metaphor, no story on taking tax losses is complete. As share prices sink further and year-end approaches, readers will be reminded of the silver lining—that realized capital losses can be used to offset realized capital gains and up to $3,000 in ordinary income.

5. Underwater overseas. With U.S. stocks down 25%, xenophobic pundits will note that foreign stocks are even more wretched, down 29%. Where’s the diversification in that? The often-huge difference in 10-year returns between U.S. and foreign stocks is, of course, too inconvenient a fact to mention.

6. Active managers triumph. Index funds aim to keep their cash holdings to a minimum, so they track their target index as closely as possible. Actively managed stock funds often keep 3% or more in cash, so they can easily pay off departing shareholders and have money to put to work in new investment ideas.

The unsurprising result—that active funds often fall a little less during market declines—will be hailed as a sign that the long-awaited revival of active management has begun. Further signs will not be forthcoming.

7. Time to rebalance (again). Okay, we ran this story before. But this time, we really mean it. Cue the hate mail.

8. Off target. After months of searching, an intrepid financial writer tracks down an investor who is shocked—shocked!—to discover his target-retirement fund has gone down in value. How could something so sensible, offering broad stock and bond market diversification in a single package, be allowed to become the default investment option in many 401(k) plans?

The financial writer’s day is complete when a publicity-hungry congressman fires off a press release demanding Capitol Hill hearings. The congressman’s demand is met with widespread indifference from more sensible colleagues.

9. Conversion therapy. Otherwise known as “lemons into lemonade (part II),” writers urge investors to take advantage of the depressed stock market by converting their traditional IRA to a Roth. With share prices down sharply, the resulting tax bill would be similarly shrunken. Shell-shocked investors shake off their paralysis just long enough to send the writers yet more hate mail.

10. It’s a bear trap. Share prices begin their long climb back to new highs. Every step of the way, some ink-stained wretch strikes a literary pose of world-weary sophistication—and warns ominously that the good times won’t last.

Follow Jonathan on Twitter @ClementsMoney and on Facebook. Check out his three earlier articles about 2018’s market decline: The Morning AfterTaking Stock and Just Speculating.

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