William Bernstein - A Day To Remember (article)

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EvelynTroy
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William Bernstein - A Day To Remember (article)

Post by EvelynTroy »

William Bernstein has contributed an article today at Humble Dollar - he presents: A Day To Remember - October 19, 1987
Here are two lessons that took me decades more to learn—and which could have made my financial journey far smoother:
https://humbledollar.com/2022/01/a-day-to-remember/


Evelyn
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Re: Wm. Bernstein_A Day To Remember (article)

Post by jebmke »

I remember it well. For most of us that day, ignorance was bliss. There was no internet and even if you knew what was going on, there wasn't really anything you could do about it. My wife was in the business back then. I met her downtown (Boston) and we walked from the financial district to the North End for dinner. I kept one eye glancing up now and then to watch for the falling analysts and portfolio managers.
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Re: Wm. Bernstein_A Day To Remember (article)

Post by Damocles »

Thanks for posting this! I'm always on the lookout for the latest thoughts from Bernstein and it appears that he doesn't use Twitter (not that I can blame him).
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Re: Wm. Bernstein_A Day To Remember (article)

Post by Silk McCue »

A good read. Thanks.

Cheers
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Re: Wm. Bernstein_A Day To Remember (article)

Post by NoRoboGuy »

Black Monday. Yes, I remember.

I remember the the Friday before Black Monday, too. The Dow was down over a hundred points within the last 30 minutes of trading. That was unheard of back then. I jumped on the phone to my broker, intending to go short. The phone lines were jammed, and I never got through.

Saturday, I had Reserve duty (Air Force). People laughed at me when I told them the market would crash on Monday.

They stopped laughing.
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Re: Wm. Bernstein_A Day To Remember (article)

Post by winterfan »

I enjoyed the article, but 20 years in safe assets seems excessive and overly conservative. I know he says that retirees with a pension and SS that covers their expenses can be 100% stock, but almost everyone will receive a SS check eventually. Maybe it's for people who need a large income? I say this, because for us, once SS kicks in, most of our day to day expenses will be covered. We will use our portfolio for extras and larger purchases. I think 10 years ought to be enough to weather any volatility.
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Re: Wm. Bernstein_A Day To Remember (article)

Post by Grt2bOutdoors »

winterfan wrote: Sat Jan 15, 2022 8:53 am I enjoyed the article, but 20 years in safe assets seems excessive and overly conservative. I know he says that retirees with a pension and SS that covers their expenses can be 100% stock, but almost everyone will receive a SS check eventually. Maybe it's for people who need a large income? I say this, because for us, once SS kicks in, most of our day to day expenses will be covered. We will use our portfolio for extras and larger purchases. I think 10 years ought to be enough to weather any volatility.
Not everyone retires at age 65, voluntarily. If you are pushed out of the workforce at 58 and are unable to be fully employed again, having a pile of safe assets can tide you over. Social security is not a retirement plan.
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Re: Wm. Bernstein_A Day To Remember (article)

Post by Random Walker »

Many of us think in terms of a single top down AA. Many of us have also read WB’s LMP/RP concept. In this article he does a good job of discussing integration of the LMP/RP thinking into the overall AA for us top down thinkers. He says that for himself and his clients, he has an overall AA but does a little mental accounting to be aware of the LMP portion of the portfolio locked away in safe assets. This is the approach I had developed after reading WB’s Life Cycle Investing ebook. Strongly recommend investors familiarize themselves with the concept of Murphy’s Law of Retirement.

viewtopic.php?t=220275

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Re: Wm. Bernstein_A Day To Remember (article)

Post by Fortitude »

When Black Monday occurred, I was 26 years old with very little invested in a 401K that my employer had recently established. My wife and I had been married a year and we had just bought our first house earlier that year and our daughter hadn’t yet been born. With little at risk and not feeling the gut wrenching fear felt by many, I remember Black Monday well.

I was at a training seminar and called in to the office to check in with my boss about something and I asked him how everything was. He was 39 years old at the time; married with children. He was freaking out and I asked him what was wrong. He screamed at me, “What the “F” are you talking about! What planet are you on!”

With no internet and cell phone, I had no idea what the hell he was talking about and failed to understand why he was going off the rails when I digested what had happened. I didn’t follow the market then as I began doing later in life.

Now as an experienced investor with much that needs to be protected and going through the 9/11/01 attack, the 2008 fInancial crisis and the 2020 market crash from Covid, I am all too familiar with how sick my boss felt during the October 1987 crash. I’ve reflected on that phone call with my former boss with each black swan event I’ve experienced and am grateful for everything I’ve learned over the years on building and managing a diversified portfolio.
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Re: Wm. Bernstein_A Day To Remember (article)

Post by Goodenoughforme »

Thanks for posting the article from Humble Dollar. That date brought back memories.... I was sitting in our morning meeting when our boss stated "we all lost money in our 401K's". It didn't really phase me at the time and I didn't change anything in my account ( I was young and oblivious to what really happened). I was down in the Wall Street area later that day where people's reaction was much different than mine where I was startled to see one person lying on the side walk who was as white as a ghost. That day really must of been much more significant to him.
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Re: Wm. Bernstein_A Day To Remember (article)

Post by ROIGuy »

Could you imagine how much worst that day could of been if people could of traded on the internet the way they do now?
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Re: Wm. Bernstein_A Day To Remember (article)

Post by TheTimeLord »

S&P 500 Close
Oct 16, 1987 - 282.70
Oct. 19, 1987 - 224.84
Oct. 20, 1988 - 282.88

Source: Yahoo Finance
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Re: Wm. Bernstein_A Day To Remember (article)

Post by Fortitude »

Mr.BB wrote: Sat Jan 15, 2022 9:34 am Could you imagine how much worst that day could of been if people could of traded on the internet the way they do now?
That’s an interesting point. Add to that the impact that algos would have had. I’m not sure if they were used at the time, but if they were, I’m pretty sure they weren’t used to the extent firms employ them today.

It was because of Black Monday that circuit breakers were built into the system.
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Re: Wm. Bernstein_A Day To Remember (article)

Post by TheTimeLord »

Mr.BB wrote: Sat Jan 15, 2022 9:34 am Could you imagine how much worst that day could of been if people could of traded on the internet the way they do now?
I think it would be an interesting discussion on if that would make it worse or not. The panic cause by people not being able to reach their brokers or get accurate pricing surely added to the panic. Also, we have circuit breakers now that would provide cooling off periods.
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Re: Wm. Bernstein_A Day To Remember (article)

Post by AlwaysLearningMore »

EvelynTroy wrote: Sat Jan 15, 2022 7:42 am William Bernstein has contributed an article today at Humble Dollar - he presents: A Day To Remember - October 19, 1987
Here are two lessons that took me decades more to learn—and which could have made my financial journey far smoother:
https://humbledollar.com/2022/01/a-day-to-remember/


Evelyn
From the article: "For the retiree, holding 10 years of living expenses in safe assets is barely acceptable, 15 years is better and 20 years’ worth is optimal. Once you’ve filled your retirement safe-asset bucket, you can begin filling and growing your risk-and-aspirational bucket. Never forget, if you’re going to survive retirement, your portfolio first has to survive. If you play portfolio Russian Roulette, by taking more risk than you can handle during a frightening economic and investment crunch, you’ll inevitably pay the price."

Extolling safety first makes sense to many investors.
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Re: Wm. Bernstein_A Day To Remember (article)

Post by winterfan »

Grt2bOutdoors wrote: Sat Jan 15, 2022 9:00 am Not everyone retires at age 65, voluntarily. If you are pushed out of the workforce at 58 and are unable to be fully employed again, having a pile of safe assets can tide you over. Social security is not a retirement plan.
Yes, that might be true in that case, but to me, it's seems like too broad of a statement to make. The percentage in bonds seems more dependent on your expenses, portfolio size, risk levels, human capital (as he says), debts, COL, etc. The hypothetical 58 yo can still get a PT job. Perhaps they have enough money saved and would prefer to lower their expenses/lifestyle and withdraw a smaller amount from their portfolio while unemployed. I'm not totally disagreeing, I just think there are more options available than saying 20 years in fixed assets. Maybe I am just an optimist, but we are age 49/61 and have 10 years in FA and a paid off house. I feel totally comfortable with that.
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Re: Wm. Bernstein_A Day To Remember (article)

Post by Valuethinker »

Fortitude wrote: Sat Jan 15, 2022 9:21 am When Black Monday occurred, I was 26 years old with very little invested in a 401K that my employer had recently established. My wife and I had been married a year and we had just bought our first house earlier that year and our daughter hadn’t yet been born. With little at risk and not feeling the gut wrenching fear felt by many, I remember Black Monday well.

I was at a training seminar and called in to the office to check in with my boss about something and I asked him how everything was. He was 39 years old at the time; married with children. He was freaking out and I asked him what was wrong. He screamed at me, “What the “F” are you talking about! What planet are you on!”

With no internet and cell phone, I had no idea what the hell he was talking about and failed to understand why he was going off the rails when I digested what had happened. I didn’t follow the market then as I began doing later in life.

Now as an experienced investor with much that needs to be protected and going through the 9/11/01 attack, the 2008 fInancial crisis and the 2020 market crash from Covid, I am all too familiar with how sick my boss felt during the October 1987 crash. I’ve reflected on that phone call with my former boss with each black swan event I’ve experienced and am grateful for everything I’ve learned over the years on building and managing a diversified portfolio.
A very good post.

When you realise you won't have the time to make your losses back.... time waits for no one.

That sick pit in the stomach. When you worry if you can pay your Mum's nursing home fees...
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Re: Wm. Bernstein_A Day To Remember (article)

Post by Kurmudjon »

winterfan wrote: Sat Jan 15, 2022 8:53 am I enjoyed the article, but 20 years in safe assets seems excessive and overly conservative. I know he says that retirees with a pension and SS that covers their expenses can be 100% stock, but almost everyone will receive a SS check eventually. Maybe it's for people who need a large income? I say this, because for us, once SS kicks in, most of our day to day expenses will be covered. We will use our portfolio for extras and larger purchases. I think 10 years ought to be enough to weather any volatility.
+1
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Re: Wm. Bernstein_A Day To Remember (article)

Post by Grt2bOutdoors »

winterfan wrote: Sat Jan 15, 2022 10:21 am
Grt2bOutdoors wrote: Sat Jan 15, 2022 9:00 am Not everyone retires at age 65, voluntarily. If you are pushed out of the workforce at 58 and are unable to be fully employed again, having a pile of safe assets can tide you over. Social security is not a retirement plan.
Yes, that might be true in that case, but to me, it's seems like too broad of a statement to make. The percentage in bonds seems more dependent on your expenses, portfolio size, risk levels, human capital (as he says), debts, COL, etc. The hypothetical 58 yo can still get a PT job. Perhaps they have enough money saved and would prefer to lower their expenses/lifestyle and withdraw a smaller amount from their portfolio while unemployed. I'm not totally disagreeing, I just think there are more options available than saying 20 years in fixed assets. Maybe I am just an optimist, but we are age 49/61 and have 10 years in FA and a paid off house. I feel totally comfortable with that.
I err on the part of conservatism. One can always adjust a conservative portfolio and increase the risk level if they choose. A risky portfolio however can not be made more conservative after a large risk event has passed without adding additional risks that you not have wanted to introduce including that of portfolio failure. During the Great Depression and I know it was almost 100 years ago, more than 25% of the population could not find any work (FT/PT). I'm not ready to retire yet, but have added more of a "floor" as I get closer. Having more money is nice, having enough is more important. A 20 year blanket depending on assets could be as little as zero if Social Security fully meets your basic expenses to requiring large amounts, most of us are likely to fall in the middle.
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Re: Wm. Bernstein_A Day To Remember (article)

Post by SimpleGift »

From the article:
William Bernstein wrote:Over the past four decades, I’ve learned that the prime prerequisite for a successful portfolio is that it survives.
A great deal of truth in this one sentence — with implications for investors that are deep and far-reaching.
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Re: Wm. Bernstein_A Day To Remember (article)

Post by Leesbro63 »

Thanks for posting this. Great article. There was a great comment on the Humbledollar site below the article. I'm a huge Dr. Bernstein fan, but I agree with this comment in that a Liability Matching Portfolio is sort of an illusion and a fallacy. That is becoming more clear now that we've had 7% of our fixed income inflated away last year. I particularly like the Rick Ferri reference. Here is the comment by "Nick M":


“When you’ve won the game, stop playing” seems like it shouldn’t apply in any reasonable investing scenario. Investing isn’t gambling, or at least it need not be, and treating it like it is seems like a recipe for market timing behavior. Also, what does that phrase even mean in practice? Should I hold only low yielding bonds and suffer the ravages of high inflation, creating a constant and guaranteed permanent loss in purchasing power? This is why Rick Ferri said “there are no risk-free investments after taxes and inflation.” Investing, like life, is full of risk. Paying attention to one particular risk doesn’t make the others go away. Better to acknowledge that every decision has an associated risk. Reevaluate those risks occasionally, and make small changes over time; but to “stop playing” I would argue is impossible.

Full disclosure: While I like this comment, I still hold lots of low yielding short term fixed income.
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"A Day to Remember"

Post by Taylor Larimore »

[Thread merged into here --admin LadyGeek]

Bogleheads:

Bill Bernstein may be the smartest man I ever met. the LIterary Hub describes him this way:

"William J. Bernstein is a neurologist, financial theorist, and historian whose books include A Splendid Exchange, Masters of the Word, The Delusions of Crowds, The Birth of Plenty, and The Four Pillars of Investing. He is the co-founder of the investment management firm Efficient Frontier Advisors, and has written for publications including the Wall Street Journal and Money magazine. He was the winner of the 2017 James R. Vertin Award from CFA Institute. He lives in Oregon."

Bill has also donated one of the best (and shortest) free internet book on investing here. I am pleased to know that he recommends my favorite Three-Fund Portfolio

This is a link to Dr. Bernstein's latest article Published today in the "Humble Dollar" website. I recommend reading it:

https://humbledollar.com/2022/01/a-day-to-remember

Best wishes.
Taylor
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Last edited by Taylor Larimore on Sat Jan 15, 2022 2:49 pm, edited 4 times in total.
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Re: "A Day to Remember"

Post by oldcomputerguy »

^ Taylor, I think perhaps you might have left out the link to the article. I think this is the one:

A Day to Remember
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Re: "A Day to Remember"

Post by uslee2004 »

Taylor Larimore wrote: Sat Jan 15, 2022 1:57 pm Bogleheads:

Bill Bernstein may be the smartest man I ever met. the LIterary Hub describes him this way:

"William J. Bernstein is a neurologist, financial theorist, and historian whose books include A Splendid Exchange, Masters of the Word, The Delusions of Crowds, The Birth of Plenty, and The Four Pillars of Investing. He is the co-founder of the investment management firm Efficient Frontier Advisors, and has written for publications including the Wall Street Journal and Money magazine. He was the winner of the 2017 James R. Vertin Award from CFA Institute. He lives in Oregon." Bill has also donated one of the best (and shortest) free internet book on investing here. I am pleased to know that he recommends my favorite Three-Fund Portfolio

This is a link to Dr. Bernstein's latest article Published today in the "Humble Dollar" website. I recommend reading it.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "An investment in knowledge always pays the best interest."
Believe there has been a thread on this:
viewtopic.php?f=10&t=367826&newpost=6451756
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Re: "A Day to Remember"

Post by Mel Lindauer »

Taylor Larimore wrote: Sat Jan 15, 2022 1:57 pm Bogleheads:

Bill Bernstein may be the smartest man I ever met. the LIterary Hub describes him this way:

"William J. Bernstein is a neurologist, financial theorist, and historian whose books include A Splendid Exchange, Masters of the Word, The Delusions of Crowds, The Birth of Plenty, and The Four Pillars of Investing. He is the co-founder of the investment management firm Efficient Frontier Advisors, and has written for publications including the Wall Street Journal and Money magazine. He was the winner of the 2017 James R. Vertin Award from CFA Institute. He lives in Oregon." Bill has also donated one of the best (and shortest) free internet book on investing here. I am pleased to know that he recommends my favorite Three-Fund Portfolio

This is a link to Dr. Bernstein's latest article Published today in the "Humble Dollar" website. I recommend reading it.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "An investment in knowledge always pays the best interest."
Hi Taylor. I agree that Bill may well be the smartest guy I've ever met. And I firmly believe that there is another day that is indelibly etched in your mind; you freezing in a foxhole with German tanks approaching (aka The Battle of the Bulge).

This Marine salutes his paratrooper friend and co-author.
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Taylor Larimore
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Re: "A Day to Remember"

Post by Taylor Larimore »

oldcomputerguy wrote: Sat Jan 15, 2022 1:58 pm ^ Taylor, I think perhaps you might have left out the link to the article. I think this is the one:

A Day to Remember
oldcomputerguy:

Thank you for noting my omission. I edited my post to include the link.

Best wishes
Taylor
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Re: Wm. Bernstein_A Day To Remember (article)

Post by SGM »

I was in the oil industry in those days. I had a lot of assets in company stock. While I was saving for retirement, I did not mind drops in the market. I wanted the market to be low while investing and high when retired. I was 100% in stocks plus we had a house that would soon double in value.

As a retiree I mostly spend dividends and interest. We also have other income streams. I could still be 100% in stock but chose to add some bond funds in retirement. Our farm neighbors help us out with certain tasks, and we reward them in our own way.

I have read much of what Bill Bernstein has written. I enjoyed his chats with Jack Bogle at the national meetings. Bill Bernstein was very approachable at these meetings.
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Re: Wm. Bernstein_A Day To Remember (article)

Post by LadyGeek »

I merged Taylor Larimore's thread into the ongoing discussion.

Update: I clarified the thread title.
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Re: Wm. Bernstein_A Day To Remember (article)

Post by arcticpineapplecorp. »

Thanks. Nice write up by Dr. Bernstein. I found two interesting possible typos...

"I taught myself to spreadsheet..."

Didn't know the word "spreadsheet" was being used as a verb. Could be. Unless it was meant to be "I taught myself to use a spreadsheet."

Then there's this one:
Why is this? At the beginning of the 20th century, each dollar invested in stocks yielded about five cents in annual dividends. Even if stock prices fell, that 5% yield nicely cushioned the loss in share prices. Over the decades, that yield has fallen to well below two cents, which is a much thinner cushion.
I think it meant to be percent, not cents.

Otherwise, a fine article.
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Re: Wm. Bernstein_A Day To Remember (article)

Post by Bill Bernstein »

Thanks for all the kind words!

A few points:

I'll admit to a bit of literary license with "won the game." I love it as a resonant metaphor, but of course I don't mean it literally. Investing certainly isn't a "game."

Same with "stop playing." Again, I apologize for being a sucker for good metaphors; what I literally mean is "reduce your risk."

SGM's situation sits at the most optimistic extreme. If your burn rate is below 2% and you can live on the dividends of your 100% stock portfolio with a good margin of safety, then you don't need a large LMP. (Nor do you need much of an LMP if all of your living expenses are met with Social Security + pensions.) This assumes, of course, that you're one of those rare people who can live with a 100% stock portfolio, with the full knowledge of what happened in 1929-1932 in mind.

Finally, today's bloated stock and bond prices mean that we all have far more assets than we'd have with higher real interest rates. Yep, this year I expect to lose several percent of my spending power in safe fixed income assets. But that can't go on for very long without Fed action, and if the equity risk premium hasn't changed--and, if anything, it may have actually shrunk--then taking more risk in stocks may not be the most brilliant of moves.

Bill
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Re: Wm. Bernstein_A Day To Remember (article)

Post by loghound »

Great Article

I know sometimes people snub their noses at the bucket strategy, but it really helps with the mental/psychological side of investing (I'm not in retirement yet (soon!) but I've begun to see the wisdom of bucketing (at least mentally) your various assets)
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Re: "A Day to Remember"

Post by iceport »

Taylor Larimore wrote: Sat Jan 15, 2022 1:57 pm This is a link to Dr. Bernstein's latest article Published today in the "Humble Dollar" website. I recommend reading it:

https://humbledollar.com/2022/01/a-day-to-remember

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "An investment in knowledge always pays the best interest."
Thanks for the link to an excellent, thought-provoking article, Taylor. Not only was it interesting, but reading it had a calming effect on this Saturday afternoon — with the comfortable feel of a fireside chat.

It was also the first time I ever remember reading such a detailed confessional from Bill Bernstein, admitting to some of the same mistakes I've made over the course of my investing life.

Thanks again!
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Re: William Bernstein - A Day To Remember (article)

Post by ret_geo_bor »

In October 1987 I was 29 and had just quit a job I hated without a plan on what would come next. Being young and clueless I cashed out the small (few thousand $) 401K balance. Once the crash happened shortly afterwards, thinking how smart I was to avoid losing so much. Much later and many times since then, I have speculated how much that few thousand would have grown to if I had been wise enough to roll it over into an IRA.
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Re: Wm. Bernstein_A Day To Remember (article)

Post by J295 »

Bill Bernstein wrote: Sat Jan 15, 2022 2:42 pm Thanks for all the kind words!

A few points:

I'll admit to a bit of literary license with "won the game." I love it as a resonant metaphor, but of course I don't mean it literally. Investing certainly isn't a "game."

Same with "stop playing." Again, I apologize for being a sucker for good metaphors; what I literally mean is "reduce your risk."

SGM's situation sits at the most optimistic extreme. If your burn rate is below 2% and you can live on the dividends of your 100% stock portfolio with a good margin of safety, then you don't need a large LMP. (Nor do you need much of an LMP if all of your living expenses are met with Social Security + pensions.) This assumes, of course, that you're one of those rare people who can live with a 100% stock portfolio, with the full knowledge of what happened in 1929-1932 in mind.

Finally, today's bloated stock and bond prices mean that we all have far more assets than we'd have with higher real interest rates. Yep, this year I expect to lose several percent of my spending power in safe fixed income assets. But that can't go on for very long without Fed action, and if the equity risk premium hasn't changed--and, if anything, it may have actually shrunk--then taking more risk in stocks may not be the most brilliant of moves.

Bill
Use and meanings of the phrases “won the game” and “stop playing” always seemed self evident to me, but nice of you to clarify since in other threads some have been fencing with windmills about this language.

Appreciate you sharing your perspectives over the years, including this most recent article.
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Re: William Bernstein - A Day To Remember (article)

Post by abuss368 »

EvelynTroy wrote: Sat Jan 15, 2022 7:42 am William Bernstein has contributed an article today at Humble Dollar - he presents: A Day To Remember - October 19, 1987
Here are two lessons that took me decades more to learn—and which could have made my financial journey far smoother:
https://humbledollar.com/2022/01/a-day-to-remember/


Evelyn
Thanks for sharing. Can one even imagine having a portfolio decline 25% in a single trading session!

Wow!
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Re: "A Day to Remember"

Post by arcticpineapplecorp. »

iceport wrote: Sat Jan 15, 2022 2:50 pm
It was also the first time I ever remember reading such a detailed confessional from Bill Bernstein, admitting to some of the same mistakes I've made over the course of my investing life.
Yes. That was very interesting to me too and I don't recall ever reading those details either. Not just about his active investing mistakes but also his use of futures in his younger years as well.
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SimpleGift
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Re: William Bernstein - A Day To Remember (article)

Post by SimpleGift »

From the article:
William Bernstein wrote:Fortunately, my financial journey got better from there. Not long after, I came across the books of Burton Malkiel and Jack Bogle, and began to immerse myself in the world of academic finance, particularly Eugene Fama and Kenneth French’s work on market efficiency and factor investing. I taught myself to spreadsheet, which was far less ubiquitous back then than it is now. My portfolio, whose stock exposure now consisted entirely of low-cost passively managed funds, prospered.
Yes, interesting to hear a few details about Mr. Bernstein's financial journey — and poignant that my "aha! moment" came soon thereafter when reading his Efficient Frontier blog in the 1990s — a time when I was floundering about investing matters.

And so the wheel turns. With thanks to those who see the light, and share it with others!
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Re: Wm. Bernstein_A Day To Remember (article)

Post by David Jay »

arcticpineapplecorp. wrote: Sat Jan 15, 2022 2:41 pmThen there's this one:
Why is this? At the beginning of the 20th century, each dollar invested in stocks yielded about five cents in annual dividends. Even if stock prices fell, that 5% yield nicely cushioned the loss in share prices. Over the decades, that yield has fallen to well below two cents, which is a much thinner cushion.
I think it meant to be percent, not cents.
When the topic is dollars (see blue, above), cents and percent are equivalent. Two cents out of every dollar = 2% of a dollar

I grew up with people talking this way, so Bill's text seems completely normal to me.
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Re: Wm. Bernstein_A Day To Remember (article)

Post by arcticpineapplecorp. »

David Jay wrote: Sat Jan 15, 2022 6:10 pm
arcticpineapplecorp. wrote: Sat Jan 15, 2022 2:41 pmThen there's this one:
Why is this? At the beginning of the 20th century, each dollar invested in stocks yielded about five cents in annual dividends. Even if stock prices fell, that 5% yield nicely cushioned the loss in share prices. Over the decades, that yield has fallen to well below two cents, which is a much thinner cushion.
I think it meant to be percent, not cents.
When the topic is dollars (see blue, above), cents and percent are equivalent. Two cents out of every dollar = 2% of a dollar

I grew up with people talking this way, so Bill's text seems completely normal to me.
Ah thanks. That does make sense (cents) now that I read it again. :oops:

Now am I wrong too or did "spreadsheet" become a verb at some point?
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Re: William Bernstein - A Day To Remember (article)

Post by Bill Bernstein »

Re "to spreadsheet," I'm not a grammatical stickler. My go-to for common usage is JSTOR, which I think is even more authoritative than, say, the Chicago Style Manual or a standard dictionary.

So you made me look! I can't find the the infinitive form but there are plenty of past participle and gerund entries on JSTOR, see, for example, the journal article half way down this page:

https://www.jstor.org/stable/i25062632

Then, of course, there's this:

https://en.wiktionary.org/wiki/spreadsheeted

FWIW, I kind of enjoy getting pulled over by the grammar police ;-)

Bil
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arcticpineapplecorp.
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Re: William Bernstein - A Day To Remember (article)

Post by arcticpineapplecorp. »

Bill Bernstein wrote: Sat Jan 15, 2022 7:03 pm Re "to spreadsheet," I'm not a grammatical stickler. My go-to for common usage is JSTOR, which I think is even more authoritative than, say, the Chicago Style Manual or a standard dictionary.

So you made me look! I can't find the the infinitive form but there are plenty of past participle and gerund entries on JSTOR, see, for example, the journal article half way down this page:

https://www.jstor.org/stable/i25062632

Then, of course, there's this:

https://en.wiktionary.org/wiki/spreadsheeted

FWIW, I kind of enjoy getting pulled over by the grammar police ;-)

Bil
Thanks Dr. Bernstein. I probably should have checked it myself. Got a new word in my vocab now--Spreadsheeted.
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Re: William Bernstein - A Day To Remember (article)

Post by LadyGeek »

You can google it. :wink:

(Sorry, couldn't resist.)

In October 1987, I was working as an engineer. A few of my colleagues were watching the news in disbelief. "Hey, look what the market's doing.". I went "Huh, I guess that's not good." and then went back to engineering.
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Re: William Bernstein - A Day To Remember (article)

Post by nedsaid »

The crash in October 1987 was an emotionally traumatizing experience for me, I lost hundreds of dollars that day and it seemed like my financial life just ended. I wondered if the sun would ever shine or if the birds would ever sing again. It seems silly in retrospect, but the emotional pain was real. I did not sell and in fact still own that same mutual fund today.

About a year later, a friend of mine went into the investment business and I moved my Bank Certificate of Deposit IRA over to him. I bought my first stock, AST Research, and as they say it was off to the races.

It was later on that I learned about John Bogle and indexing. I bought my first index fund in 1995.
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Re: William Bernstein - A Day To Remember (article)

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In 1987 my only investment was a 401K. We got quarterly statements. I supposed I must have noticed something the following January, but I honestly don't remember anything at all; it was a long time ago. Of course my losses were somewhat smaller; as a young computer programmer I probably had four figures invested in total.
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Re: William Bernstein - A Day To Remember (article)

Post by sergeant »

On Black Monday I was off duty. The Watch Commander phoned me at home and ordered me into work. I was stationed in front of an EF Hutton office. Before I arrived several of their customers had shown up armed with firearms demanding their money. There was a line of customers wrapped around the building all day. Easy OT for me but I did feel bad for some of the customers.

I had about 20k in my 457b account and didn't really care about the financial loss.
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Re: William Bernstein - A Day To Remember (article)

Post by BarbBrooklyn »

I was a young mom with 3 kids and a husband who worked in FinTech. (They didn't call it that back then. They just knew if the numbers on the ticker ever stopped, they'd be taken out and shot. Or something like that).

So I'm driving the Littles home and I hear about this market craziness, but what got me was the VOLUME. I knew what load the system he was supporting could bear and the number they were reporting was way above that.

I said to the kids (7, 6 and 4), "Daddy can't come home tonight; let's make hot dogs". They were mystified how I knew what Daddy was going to do from listening to the radio.

He staggered in 3 days later.
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Re: Wm. Bernstein_A Day To Remember (article)

Post by impatientInv »

Bill Bernstein wrote: Sat Jan 15, 2022 2:42 pm Thanks for all the kind words!

Bill
Thank you for another wonderful article. I need to rethink my risk tolerance as my stock allocation had increased more and more. I was lucky in 2020. Not sure how I would take 2000-09 market. This article is perfect start for me. Plan to read books over the next few days.

Again thank you.
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Re: William Bernstein - A Day To Remember (article)

Post by GuyInFL »

I remember a lot of volatility shortly after the crash and I recall buying more mutual funds.
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Re: William Bernstein - A Day To Remember (article)

Post by aj76er »

Wonderful article. Thank you for sharing.

In the past, William Bernstein has also mentioned that 1/2 of equity dividends can be considered "safe" (as long as the equities are properly diversified). This would help reduce the burden of holding so much in low-yielding (negative real return) fixed income. To implement this, I would suggest using previous year's total amount of equity dividends, cutting that in half, and subtracting it from your required income floor.

For example, if non-discretionary spending was $50k/year, and one had $1,000,000 in global equities (e.g. VT), then last year they received around $20k in dividends. So, 1/2 of that is $10k, and they only need $40k per year in fixed-income. 20years of that would be $800k. The resulting portfolio AA would be approximately 55/45 Stocks/Bonds. If they want a little cushion for rebalancing, perhaps use an AA of 50/50 Stocks/Bonds, and only rebalance down to $800k of fixed income if a stock crash occurs.
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Re: William Bernstein - A Day To Remember (article)

Post by livesoft »

Ah, yes! October 1987: Probably the first time we did any major tax-loss harvesting.
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