For those who do not know me personally, my father died 30+ years ago this month. Recently, I saw some of his paperwork at my mom's place that he had written in the final 18 months of his life. It was calculating his pending retirement, which was anticipated within the subsequent five years (assuming he did not keep working longer to increase his monthly stipend, which I have always held he would have). While reflecting on the paperwork, I realized that this was the closest I would ever get to an adult conversation with my father.
My initial takeaway from what I saw in this paperwork was how his calculations would have failed in today's realities, a meticulously planned future that never panned out. At first, I chalked it off as naivety to the stock markets, but after reflecting a bit longer, I realized that my dismissal foolishly undermined his ability to adapt.
One big pet peeve of mine today is how often macroeconomic discussions online that outright ignore reactive behaviors. We saw it at play most recently within the false narrative of $GME, where the stock price of GameStop rose to bankrupt Melvin Capital Management. The pitch was that if $GME rose to $150, it would bankrupt the hedge fund. The folly was that it assumed a hedge fund would sit idly by as its losses mounted.
I hear other online dimwits proclaim that they will never buy ZEVs because there are not enough recharging stations, as if supply-and-demand would not create that reasonably foreseeable shift. I am waiting to see whether fueling stations will become hybrid models offering both refueling and recharging, but a belief that the number of today's recharging stations would remain static lacks any foresight (or hindsight, for that matter as things have changed when changes occur).
At work, I call it the kaleidoscope effect, where making one change causes ripples that might change the big picture, even unexpectedly. While we cannot plan for those changes, we cannot detail a plan past them either. Unfortunately, this is what happens too often from the collective wisdom of the vocal minority online. I even read articles stating what the $15 minimum wage “would” do while describing what it could do (which I expect to benefit the retirement crisis more than poverty rates). Their goals are based on unrealistic ability to prepare a future from a smörgåsbord, freely selecting which changes they want and what details remains the same (not to mention, determining how the world around them accepts the changes without reacting).
While my father's plans for the future were set on a past reality, his ability to adapt to a changing environment would have determined his success. Once consumer interest rates yielded <4% for 10+ years, his planned reliance on dividends would have required adjusting. Setting plans for 30 years is unreasonable. Things change, especially plans.
If things never changed, then rebalancing would be a futile exercise. But they do, so rebalancing is very worthwhile. That was my task today, moving 2% from my active and passive domestic equities to spread across my domestic bonds and international exposure. It was a small percentage (honestly, the dollar amount moving at first made me expect it would be a higher percentage, so it somewhat surprised me to acknowledge how far that account has appreciated in the past couple years) but it reacted to recent changes. Next quarter, it will react to those changes.
