We Accidentally Watched the News

Dudley and Betty accidentally watched the news.

This was rarely helpful.

They hadn’t intended to. The television was on, they were drinking coffee, and one thing led to another until several professionally concerned people were explaining why everything was bad.

Inflation was up. Interest rates were rising. Stocks were falling. Consumers were worried, businesses were worried, and economists were worried about how worried everyone was.

Betty looked at Dudley.

“That doesn’t sound good.”

“No.”

On television, a red chart appeared. Dudley had noticed that financial television rarely used red to announce anything pleasant.

“What does that mean for us?” Betty asked.

Dudley knew the answer. Mostly.

“It means we should probably turn off the television.”

“Dudley.”

“I’m serious. It’s not helping.”

Betty picked up the remote and turned it off. The room became considerably less alarming.

“Okay,” she said. “Now what does it mean for us?”

Dudley took a drink of coffee. That was the better question.

They had planned for markets to fall, not because Dudley knew when they would fall. He absolutely did not. He had spent enough time on the Internet to discover that many people knew exactly when the next market crash would occur. Unfortunately, they all had different dates.

So Dudley and Betty had done something less interesting. They prepared for the possibility.

Their advisor had recommended a simple portfolio: roughly seventy percent stocks and thirty percent bonds and other safer investments. Dudley had initially found this boring. He had read many things that were more sophisticated. Some had diagrams.

But the advisor kept coming back to the same idea. They were retiring, and they would need money from the portfolio. If stocks fell shortly after retirement, they didn’t want to sell those stocks to pay the bills. Within the safer part of the portfolio, they kept enough accessible money to cover roughly the next three years of what they expected to need. The rest had time.

Dudley understood this intellectually. Now the television had turned red, and understanding it emotionally was apparently a separate feature.

Later that morning, Dudley opened the laptop.

Betty sat beside him, which was unusual. Normally she regarded Dudley’s financial tools the way she regarded the furnace. She wanted them to work. She did not particularly want a tour.

Dudley opened the investment accounts. There it was. The stocks were down—not one stock, most of them—and the number at the top of the screen was smaller than it had been.

Betty leaned closer.

“How much did we lose?”

Dudley didn’t like the word lose.

“Well.”

“That means I’m not going to like the answer.”

“No. I mean we haven’t really lost it unless—”

“Dudley.”

“The accounts are down.”

“I can see that.”

Dudley nodded. This was not his strongest explanation.

He pulled up the one-pager. That helped. The one-pager did not have a red banner. It did not have a television personality. It did not have breaking news. It had their life on it. What they had. What they spent. Where the next few years of money would come from.

Dudley pointed.

“This is the important part.”

“The bonds?”

“The safer money.”

The safer money was there for the next few years. Its job wasn’t to beat the stock market. Its job was to be there when they needed it, and it was.

Betty looked at the screen.

“So that’s the money we’re spending?”

“For now.”

“And the stocks?”

“We leave them alone.”

“For how long?”

“Hopefully until they recover.”

Betty thought about this.

“And if they don’t?”

Dudley appreciated Betty’s ability to locate the unpleasant part of any financial assumption.

“Then we adapt.”

“How?”

“Depends on what’s happening. We could spend less on optional stuff. I could work more. We could rebalance. There are a bunch of things we could do.”

“But not today.”

Dudley looked at the numbers.

“No.”

Something significant had happened, and the correct response appeared to be nothing.

Borris walked into the room.

Dudley saw an opportunity.

“Borris, this is actually a really good example of sequence-of-returns risk.”

Borris stopped.

Dudley continued.

“The danger isn’t just that stocks go down. It’s when they go down relative to when you’re taking withdrawals.”

Borris turned around.

“If you have to sell stocks after they’ve fallen—”

Borris walked out of the room.

Betty watched him leave.

“He made a good decision.”

“I wasn’t finished.”

“He was.”

Dudley looked toward the doorway.

“He could benefit from understanding this.”

“He has no assets.”

“He has us.”

Dudley couldn’t argue with that.

Jingo was upstairs. They found her asleep on top of the dryer. It was warm, Jingo had identified this as desirable, and she required no further analysis.

“You know,” Dudley said, “Jingo has a very straightforward approach to risk management.”

Betty looked at the sleeping cat.

“She’s warm.”

“Exactly.”

“She didn’t manage anything.”

“She identified what she wanted and positioned herself accordingly.”

Betty stared at Dudley.

“Do not make the cat part of your investment strategy.”

“I’m just saying.”

Jingo opened one eye, then closed it. The dryer continued running.

Over the next few weeks, the news remained bad. Inflation stayed high. Interest rates kept moving. Stocks moved around, mostly in directions Dudley didn’t enjoy. He checked the accounts more often. Not daily. Usually. The one-pager remained stubbornly boring.

Their spending hadn’t suddenly changed. The mortgage was still the mortgage. Groceries cost more, which they noticed. Utilities were utilities. The auto insurance would arrive when the auto insurance arrived.

Betty still wanted flowers, Borris still wanted food, and Jingo still wanted Betty. The life they had planned remained remarkably similar to the life they were living.

One afternoon Dudley called the advisor. He had a few questions. This was how Dudley described conversations in which he had fourteen questions.

They went through the portfolio. The allocation had moved because stocks had fallen. They talked about whether anything needed to be rebalanced, what they expected to spend over the next few years, and what circumstances might actually require them to change course.

The advisor was calm, which Dudley found mildly irritating. Eventually the call ended.

Betty was nearby.

“Well?”

“We’re fine.”

“Anything we need to do?”

“Not really.”

Betty smiled.

“You called someone to tell you what the one-pager already told you.”

“I verified.”

“Of course you did.”

Dudley closed the laptop. He hated to admit it. The advisor had been right. Not about what the market would do. The advisor hadn’t predicted any of this. That was the point. He had been right about building a portfolio that didn’t require them to predict it.

That evening, Dudley fed the cats.

Borris appeared immediately. Apparently their disagreement over sequence-of-returns risk had not damaged the food-service relationship.

Jingo came down from upstairs and went looking for Betty.

Dudley watched them.

Borris knew what he needed.

Food now.

Everything else could wait.

Dudley smiled. Maybe the cat understood more than he’d given him credit for.

The markets were down, inflation and interest rates were up, and the news remained terrible. But the money Dudley and Betty needed hadn’t changed. The money they wanted to grow had time to recover.

They were paying attention. Nothing required panic or a new plan.

Nothing required Dudley to turn the television back on.

So he didn’t.