It was 43 years ago this day, or this week anyway, that Mr. Little assigned us to write a short essay on ‘Spring’ for our Seventh Grade English class. I remember this in part because I was so stymied by it – what on Earth would I have to say about Spring? What could I tell Mr. Little that he did not already know? Spring has sprung, the grass is green, it’s time to get things really clean. In choosing the season that has the most meaning, towards Spring, I must say, I am most likely leaning. For Spring, it’s well known, is a time of rebirth. And it’s also a time for a real thorough cleaning.

Sure, I can be flip about it now, but at the time all I could think of was flowers and birds are really sissy things like that, and I could think of no way to give Spring an edge.

But mainly I remember this assignment because of what happened next. The day after we turned in our essays, Mr. Little called on one of us – I think it was Lloyd Guller – to read his essay, which had won an A, and Lloyd read 100 words on the life and times of one Ed Spring, someone he had made up for the occasion. I was outraged, but Mr. Little thought his little tactic deserved an A for imagination.

So here’s my essay:

It’s Spring! (Though not in Bolivia.) A good time to buy ski equipment on sale. I don’t think we ever should have gone off Daylight Saving Time in the first place. The TIPS that mature April 15, 2032, with a 3.375% coupon and a face value that rises with inflation, were selling for under 99 yesterday. Not bad for a retirement plan. The end.

Robert Doucette: ‘In a recent piece on the PBS News Hour you talked to a lunch-time bookstore audience about diversifying investments and a lot of them were emotionally opposed to it. William Bernstein’s book, The Intelligent Asset Allocator, gives a convincing argument. It graphs the risk/reward curves for pure portfolios and mixed stock/bond portfolios, and shows that adding a little bit of bonds significantly reduced the risk of an all-stock portfolio with little effect on the return. Would this convince people to reallocate their 401K, or is this whole area too complicated? I am concerned that there will be a movement to protect people’s 401K retirements that will have the government setting allocations.’

☞ People will put too little into stocks when they’re cheap and too much into stocks when they’re dear. Nothing is likely to change that. The government certainly can’t, and I don’t think it will try.

I do think, however, that it might be in order to outlaw, or at least make it more difficult, for people to keep more than 20% of their 401(k) in their own company stock.

By ‘make it more difficult,’ I mean, for example, requiring people to read and sign a form that would make a really good case, in an engaging way, against doing this. It could conclude with this question:

Why do you want to bet more than 20% of your retirement fund on your own company stock?

[ ] a) I want to show that I am a loyal employee. [This is an admirable sentiment, but a terrible way to invest. Don’t do it!]

[ ] b) Well, look how well the stock has done in the past! [Yes, but what matters is how it will do in the future. Very often, the stocks that have done best in the past do worst in the future. Your company is doubtless a fine one, and it may do very well. But do you really want to put all your eggs in one basket? For years, doing that looked so smart at Enron, so smart at Lucent, so smart at so many others. But what a mistake!]

[ ] c) This is a terrific company with exciting plans! [How many companies do you think tell their employees that their prospects are dim and they have no exciting plans? Yet can everyone can’t be above average. And what if your company really is more exciting than almost any other, but the company’s stock price already reflects that?]

[ ] d) I want to bet my entire future on just one company, no matter how reckless everyone says that is – and by an amazing coincidence, I have decided that the absolute best one stock in the whole world is . . . my own company!

 

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