“The long run is a series of short runs.”

That is a quote from one of two articles I found earlier in the week that each hacked away at the idea of stocks for the long run or phrased differently that stocks are always the best performing asset class.

Short post today, we are headed up to the Grand Canyon (two hours from Prescott) right after the close so my day is compressed somewhat.

The quote came from this article at MoneyWatch and the other article was by Jason Zweig at the WSJ. In coming at this I would suggest a healthy dose of skepticism because of the timing of when these questions are being asked which is after an especially bad decade for equity returns and an especially good 27 year period for bond returns. I am more than open to the idea of portfolio management evolving by necessity but I think the answer is closer to investing more into other parts of the world as opposed to giving up on equities.

One point I do not quibble with is the extent to which the timing of retirement versus stock market cycles can be simply a matter of luck. But to the extent that is true it is not a new concept. This is along the lines of saving for a child's college education and getting out of stocks completely or almost completely when the child turns 13 which is to say appropriate asset allocation given the totality of a person's situation.

Unfortunately this thought contradicts with something else that is just as important that I've been writing about for a while. A healthy 60 year old today realistically needs to plan for 30 years maybe more. At a 3% inflation rate (an example not a prediction) expenses go up 50% in 15 years. Loading up on fixed income with below normal yields simply will not get the job done in terms of the payout being too low and if yields normalize the fixed income products bought now will drop in price. Yes individual issues would mature at par but many people rely exclusively on bond funds which have no par value to accrue back to.

This is clearly a big problem, potentially anyway. In past blog posts I've tried to address this with two portfolio ideas. One is the willingness to adhere to an objective defensive trigger point; reducing equity exposure when the S&P 500 goes below its 200 DMA. The other idea is not so objective and may never happen but if there is every a repeat of the 1990s in your portfolio (the S&P 500 went from 353 up to 1464) then just take some money off the table. Monster decades happen every so often just as horrible decades happen. Odds are that after a monster decade we are closer to a horrible decade and vice versa. The 2020s may not be a decade where world equity markets quadruple but if it is, I say if, then take some off the table permanently. At that point you may or may not have enough money but after a decade of quadrupling but we would probably then be closer to another horrible decade.