John Lim

SOCIAL SECURITY benefits are fairly modest—the average retiree receives $1,555 per month or $18,660 a year—but they’re a vital source of retirement income for countless retirees. Today’s burning question: How can we shore up the program’s finances?
It’s estimated that Social Security provides some 30% of the income for the elderly and that nearly nine out of 10 people age 65 and older receive benefits. Social Security is even more important for women, 42% of whom rely on it for half or more of their income.

INFLATION IS IN the news and at the gas pump. We see it in smaller product sizes and empty store shelves. According to Google Trends, a record number of people have searched the term “inflation” this year. Inflation has even made its way into Halloween spoofs.
While some have suggested that investors are overreacting, I’m not so sure. If higher inflation is here to stay, the implications for both Wall Street and Main Street are profound.

IF THERE’S ONE THING that confuses me no end, it’s this: Why are interest rates—specifically long-term Treasury yields—so low?
The yield on the 10-year Treasury note has lately been close to 1.6%, with 30-year Treasurys at around 2%. Yet year-over-year inflation is currently somewhere between 4.4% and 5.4%, depending on your favored metric.
Think about what this means: Inflation-adjusted yields for both 10-year and 30-year Treasurys are deeply negative, assuming inflation remains elevated. Here are five theories for why Treasury yields are so low:
1.

I’M PLAYING ECONOMIST today, looking ahead to third-quarter GDP, the first estimate of which will be released Thursday. No, I won’t be offering a forecast. There are plenty of highly capable economists doing just that. Rather, my goal is to discuss what few in the media are talking about. Could a recession be in the offing?
According to economists Paul Samuelson and William Nordhaus, a recession is defined as “a period of significant decline in total output,

I RECENTLY WROTE about the fallacy of time diversification. Time diversification is the widely held belief that market risk declines as our holding period lengthens. It’s one of the cornerstones of many investors’ approach to asset allocation and risk management.
Financial theory, however, refutes time diversification because market risk—as measured by standard deviation—actually increases with longer holding periods. The math tells us that the dispersion of potential results widens with longer time horizons. This counterintuitive insight rests on the assumption that total returns have a normal,

IT’S A COMMONLY HELD belief that market risk is a function of time in the market. Simply put, risk falls as our holding period lengthens. This is the notion behind time diversification—the idea that more time allows us to diversify across different investment periods, resulting in reduced risk.
For example, the S&P 500 has historically generated positive returns in nearly every 20-year holding period, even after adjusting for inflation. Armed with this data, one of the first things financial advisors ask clients is about their time horizon.

I NEED TO CONFESS: I’m obsessed with the financial markets. Most weekdays, I check up on U.S. stocks, emerging markets, the EAFE (Europe, Australasia and Far East) index, the 10-year Treasury yield, gold and even the U.S. dollar index, or DXY, as it’s known. Then, at the end of most days, I view my updated portfolio online.
I don’t know why I do this. Deep down, I know it’s irrational. At university, I was an electrical engineering major,

HOW WOULD YOU LIKE to earn a guaranteed 6.7% or more on your money without taking any risk? Although it sounds too good to be true, that’s exactly the opportunity that will be offered on Nov. 1. The investment? Series I savings bonds.
I bonds are 30-year bonds issued by the U.S. Treasury, which are available to anyone who opens a free TreasuryDirect account. These bonds are the quintessential risk-free asset. Backed by the full faith and credit of the U.S.

INFLATION IS BAD news for bond investors, but it’s really terrible for annuitants and those receiving company pensions. Bond investors can at least reinvest maturing bonds in newer bonds paying higher yields. But most income annuities and pensions pay a fixed monthly benefit for life. In fact, you can no longer even buy inflation-adjusted single-premium immediate annuities. Meanwhile, just 7% of all private-sector pensioners received automatic cost-of-living increases, according to a 2000 survey by the Bureau of Labor Statistics.

THERE’S A LITANY of investment sins. But one may top them all. I’m guessing it’s one you haven’t given much thought to. Until recently, neither did I. The cardinal investment sin: selling your winners too soon.
From 1926 to 2016, more than half of all U.S. stocks—57.4% to be exact—returned less than one-month Treasury bills. In other words, you were better off putting your money into risk-free T-bills than owning these stocks. In fact,

AFTER DEPARTING the U.S. stock market for the greener pastures of emerging markets, I recently hit a pocket of turbulence. Although emerging market stocks are virtually unchanged year to date, they fell as much as 12% in August compared to the recent highs reached in February. By contrast, the S&P 500 is up 17% for the year, with barely a pullback along the way.
The travails of Chinese stocks explain much of this underperformance.

ONE OF THE GREAT mysteries in finance is the reluctance of retirees to annuitize more of their portfolio. Annuities—and here I’m referring to plain-vanilla income annuities—provide a guaranteed income stream for life. Examples include Social Security and company pensions. Income annuities can also be purchased from insurance companies. When you buy an immediate-fixed annuity from an insurer, you exchange a lump sum for a guaranteed, monthly payout for the remainder of your life and,

I RECENTLY LISTENED to a podcast featuring Richard Thaler, the Nobel prize-winning economist. To say I’m a huge fan of his work is an understatement. Thaler has that rare ability to communicate a complex topic—behavioral economics—to a lay audience in a way that’s both accessible and enjoyable. His book Misbehaving offers a fascinating historical account of behavioral economics, a field he played a major role in developing.
But it was a casual comment that Thaler made toward the end of the interview that really caught my attention.

ON AUG. 15, 1971, President Richard Nixon made the weighty decision to end the convertibility of the U.S. dollar into gold. By doing so, he drove a stake through the heart of the gold standard, a monetary system which fixed the worth of a unit of money to a specific amount of physical gold. Before that day, foreign central banks were able to exchange $35 for one ounce of gold from the vaults of the U.S.

“THE UNEXAMINED LIFE is not worth living,” warned the Greek philosopher Socrates. What has my examination turned up? Here are three recent thoughts on life and how money fits in:
1. What’s measurable isn’t always meaningful. It’s easy to get tunnel vision when it comes to our personal finances. We—along with our financial advisors—tend to focus on the size of our 401(k) or our net worth, in part because these are easy to measure.