Wall Street's Best Euphemism

What marketing genius thought of correction as the term for a stock market drop of less than bear-market proportions?

Correction leads investors to look on the bright side and stop worrying. Stock prices went wrong ("Did you really buy Exxon at $100?") but now they're corrected. Aren't you glad?

Old line wealth managers wondered if our latest correction would panic clients of online investment services. Betterment's Dan Egan thought not: 

“The vast majority of our … customers are normal people going on with their lives. We are not going to be the ones who force our clients to pay attention to the stock market since we know that is not good behavior.”

Nevertheless, Egan took the precaution of posting What to Do After a Market Drop. The contents nicely mirror what non-robotic advisers were telling their clients. 

Your obedient blogger is not on Ric Edelman's email list, but for some reason Ric sent along this revealing chart – a good way to demonstrate that stock prices go up a lot more than they go down. 

Ironic, isn't it? Except in the very short term, the stock prices reset by a correction almost always prove to be pessimistic, and therefore incorrect.

The Trust Officer and the Orphan

This week's fiduciary feel-good story, spanning almost half a century, from Ron Lieber in The New York Times.

Police Officer Loses Job and Webber Inheritance

The Webber case, involving an elderly woman who was leaving more than $2 million mostly to charities until she met a young police officer, is decided at last. The officer, already fired from the force, loses his inheritance as well.

The court found Aaron Goodwin exerted undue influence over Geraldine Webber, who was in her 90s when she made a new will leaving Goodwin her waterfront home and other assets.

The Portsmouth Herald, our local paper, covered the Webber case like a blanket, spotlighting local attorneys who had refused – or in one case agreed – to draft her new will and questioning the actions or inactions of the police department and its commissioners.

How much of the more than $2 million is left to distribute, under Webber's earlier will, has yet to be reported.

Postscript: Morning paper just arrived. Can't accuse them of downplaying the story.

Retirement Investing: Plan B?

"We shall fight on the beaches, we shall fight on the landing grounds…." Oh, wait! That was Winston Churchill in 1940, not opponents of the Labor Department's proposed fiduciary standard for investment advice.  Nevertheless, they showed their fighting spirit at last week's hearings.

Requiring fiduciary-quality advice would not reduce costs, representatives of the investment-products industry contended. They repeated their warning in TV commercials. Workers seeking fiduciary guidance would have to pay up, shelling out the same one percent annually as richer folks. And the industry's fierce resistance ("We shall never surrender!") would send compliance costs through the roof.

Perhaps some sort of fiduciary standard for investment advisers to 401(k) plan investors may yet emerge. But the pale, anemic regulation probably won't be worth much. 

So it's time for Plan B: If sellers of investment products can't be turned into fiduciaries, perhaps they can be sidelined.

Plan B proponents advocate drastic steps to simplify retirement investing. They would replace today's  jungle of retirement plans and accounts with just one vehicle. John N. Friedman calls it the Universal Retirement Savings Account. Investment choices ideally would be limited to low-expense index funds or life-cycle funds. 

Unfortunately, history shows Plan B is a bad bet. Government efforts at simplification almost always fail– look at the Internal Revenue Code. Restricting investment choices to a few simple, inexpensive products is equally difficult. If this is a free country, shouldn't investors be free to buy pricey investment products without interference from the Nanny State?

Anybody got a Plan C?

Needed: Post-Death Media

The British may now make "pre-death" videos (h/t to Gerry Beyer's blog for calling attention to this item). Yes, and generations ago, people wrote pre-death letters. We're still waiting for real news, like post-death Facebook posts.

“America in Circulation” is Worth a Visit

The Museum of American Finance offers an online historical survey consisting of American paper money. Prepare to be amazed by the variety of bills and notes, some dating back to colonial times.

State bank notes often paid tribute to local enterprises. Stonington on the Connecticut shore once thrived as a whaling port.

This legal tender note was issued about a century after the Lewis and Clark expedition.

Genuine Stock Picks, Fake News . . . or Vice Versa

In The New York Times, Joe Nocera recalls when Jon Stewart, late of The Daily Show, took on Wall Street. Most famously, "the Cramer takedown."

Officially, Jim Cramer was an authentic stock analyst and Jon Stewart hosted a fake news program.  In reality, many a millennial looked to The Daily Show, not the networks, for news, and Cramer himself acknowledged his CNBC role as an entertainer.

Confusing? Not really. As George Burns might have said, "Authenticity - if you can fake that, you've got it made."

Don't Spend the Kids' Inheritance

Milllennials could need all the windfalls they can get. Steve Ratner in his NY Times column shows how 18- to 34- year olds are financially disadvantaged compared to their counterparts in previous generations.  Most of them won't inherit much, but every little bit will  help.

Postscript: Picked up my Monday NY Times this morning and noticed the print edition was light as a
feather. The paper's future resides online, and the transition is already noticeable. For instance, the print version of Ratner's column was accompanied by only one chart. The online version is graphically enriched.
One of the added graphics shows millennials are poorer than their age-group used to be. Another displays a major reason why.