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Foreign Affairs

Jonathan Clements  |  May 1, 2016

I HAVE NEVER BEEN to Japan and can’t claim any special knowledge of the country—and yet lately it’s been much on my mind. Japan is today’s poster child not only for wretched long-run stock market performance, but also for what happens to economic growth when the workforce contracts. Still, Japan’s troubles make me an even bigger advocate of investing abroad. Below, I explain why.
Never Going Back
In late 2008 and early 2009,

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Cover Up

Jonathan Clements  |  April 25, 2016

I AM WRAPPING UP WORK on my new book, How to Think About Money, which is scheduled for publication Sept. 1. Over the weekend, my designer–David Glaubke–delivered the book’s cover. He initially suggested the dashing but flawed Andrew Jackson, I countered with the renowned Broadway rapper Alexander Hamilton and we ended up settling on Benjamin “Penny Saved” Franklin–a character less often seen because he’s found not on the $10 or $20 bill,

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Happy Thoughts

Jonathan Clements  |  April 23, 2016

THINK ABOUT the bad stuff that didn’t happen. Very few of us will have a year when we crash the car, our home burns down, our employer goes belly up and our big bet on a single stock goes way down. Yet all of these things could happen, which is why we buy auto and homeowner’s insurance, keep an emergency reserve and avoid big bets on a single stock.
Sound sensible? There are two great dangers.

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It’s a Big World

Jonathan Clements  |  April 16, 2016

IF YOU WANT TO FEEL SHORT, stand next to somebody tall. Want to feel badly about your portfolio? Compare it to the Standard & Poor’s 500-stock index.
Over the five years through March 31, the S&P 500 notched an annualized total return of 11.6%, versus 7.2% for the Russell 2000 index of smaller U.S. stocks, 2.3% for MSCI’s Europe, Australasia and Far East index and a loss of -4.1% a year for MSCI’s Emerging Markets index.

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What’s in a Name?

Jonathan Clements  |  April 13, 2016

WHO WON? Last week, the Department of Labor issued new rules, saying financial advisors have a fiduciary duty when advising clients on how to handle their retirement accounts, such as 401(k) plans and individual retirement accounts. This fiduciary duty means advisors must act in a client’s best interest.
For registered investment advisors, or RIAs, this wasn’t an issue: These advisors, who typically get compensated through fees, were already held to a fiduciary standard. But it was a big deal for brokers,

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New Stats, Old Story

Jonathan Clements  |  April 6, 2016

DISCUSSING AMERICA’S RETIREMENT readiness is almost always dispiriting. A minority are in good shape, but most folks are just muddling along—and many aren’t even managing that. Here are some numbers from the Employee Benefit Research Institute’s 2016 Retirement Confidence Survey:

26% of workers say they have $100,000 or more in savings, excluding their home and any defined benefit pension. But the same percentage—26%—say they have less than $1,000. The picture is cheerier if you look at workers age 55 and older,

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Control What You Can

Jonathan Clements  |  April 2, 2016

ASK NOT WHAT the markets can do for you. Ask what you can do for your portfolio.
After 15 turbulent months for stocks, many folks feel they’re at the mercy of the financial markets. But in truth, we’re far from powerless. We may not be able to control the direction of share prices. But here are seven crucial financial levers over which we have a lot of control:
1. We can figure out how much cash we’ll need from our portfolio over the next five years,

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Fistful of Trouble

Jonathan Clements  |  March 26, 2016

CONFRONTED BY a complicated financial world, the temptation is to fall back on rules of thumb. But are these rules any good? Here are five of the most popular:
1. Save 10% every year. There are two knocks on this rule of thumb. First, the 10% of pretax income is the sum you’re meant to save for retirement—which means those who have other goals, like buying a house and paying for a child’s college education,

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A World of My Making

Jonathan Clements  |  March 17, 2016

WRITING MAY PROVIDE ME with a livelihood—but it also provides me with an escape. Whenever there’s a ruckus in some other part of my life, it can be comforting to power up the computer and spend a few hours wrestling with my latest article or book. Each piece is a world entirely of my making, where I’m fully in charge. Like a puzzle, I can move the sentences and paragraphs around, until I’m happy with the flow of the words,

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Not So Pure

Jonathan Clements  |  March 12, 2016

THE LATEST MUTUAL FUND SCORECARD from S&P Dow Jones Indices had sobering news for buyers of actively managed funds: Just 17% of U.S. stock funds beat the broad market over the past 10 years. But for those who dug into the numbers, there seemed to be a glimmer of hope.
The so-called SPIVA scorecard analyzes actively managed U.S. stock funds in 13 style boxes. There are four categories for value funds, four for growth funds and four for funds that straddle these two investment styles.

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Tobin’s Q

Jonathan Clements  |  March 10, 2016

THE FEDERAL RESERVE just released its latest “Financial Accounts of the United States”—which sent nerdy stock market analysts scrambling to look at table B. 103, which details the “Balance Sheet of Nonfinancial Corporate Business,” and especially line 44. That line compares the stock market’s overall value to the current value of assets owned by corporations. Some of these corporate assets are listed at their market price, while others are valued at their replacement cost.

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Four Big Questions

Jonathan Clements  |  March 4, 2016

MY MARCH NEWSLETTER went out this afternoon to folks on my email distribution list–and I also just posted a copy to this site. The newsletter discusses four key questions that stock market investors need to wrestle with. It also describes an intriguing approach to retirement income, where you start by explicitly deciding how much longevity risk you’re willing to take. 

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Muddling Along

Jonathan Clements  |  March 4, 2016

TEN-YEAR TREASURY notes are currently yielding 1.9%. That means today’s buyers will likely lose money, once inflation and taxes are figured in—and yet demand remains robust, as evidenced by 2016’s rise in Treasury bond prices. The healthy appetite for Treasurys partly reflects the vast amount of excess capital sloshing around the global financial markets, as well as the tiny payouts on alternatives such as money-market funds and savings accounts. But it also reflects the current fear engendered by both stocks and lower-quality bonds.

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The $686 Million Man

Jonathan Clements  |  February 26, 2016

EXXONMOBIL RECENTLY ANNOUNCED 2015 earnings of $16.2 billion, just half of 2014’s level. That news sent me scurrying around the Internet in search of a decade-old article I vaguely recalled.
At year-end 2005, Lee R. Raymond retired as ExxonMobil’s chairman and chief executive after 13 years at the helm. The following April, The New York Times reported that Raymond earned $686 million during that stretch, equal to $144,573 a day. The article noted that,

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We the People, We the Problem

Jonathan Clements  |  February 19, 2016

WHY IS THE U.S. ECONOMY growing so slowly? Should we bar new immigrants—and toss out some of those already here? Can we afford today’s Social Security retirement benefits? These three huge public policy issues might seem unrelated, but they are connected by two demographic realities: The workforce is growing too slowly—and the retiree population is growing too quickly.
Over the next decade, the U.S. civilian workforce is projected to grow at 0.5% a year,

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