Eleven years after "Dow 36,000" comes Jame's Glassman's new book, "Safety Net" takes a decidedly different approach to saving for the long term. in a business section front page story in the March 6, 2011 Washington Post, Glassman, speaking in the first person, says that he has reached the conclusion that times are different now, and investors must take a much more conservative approach to investing, perhaps only exposing 50% of their investable net worth in the stock market.
Ray Lucia, syndicated talk show host, has remained consistent over the years, saying that discussing "percentages of net worth" is less interesting than matching investments to needs. You wouldn't put money into stocks today to pay for your son or daughter's college next fall. In the same way, as a 30 year old, you wouldn't save 401K money in bank CDs paying less than 1% interest.
I have tried to "Bucketize" my TSP portfolio (as Mr. Lucia describes it) by setting up a 15 year sustainable fund of stable money (4% of net) into the F and G funds, and the rest in the C, S, and I stock index funds. (Note: Mr. Lucia has expressed some concerns about the value in the F Fund (bond index fund) in potentially inflationary times ahead.) In this way I've met the "Safety Net" intent by not exposing 100% of my investments to the stock market, but staying sufficiently exposed to take advantage of the opportunities for growth that are surely ahead.
In the end I believe that Mr. Glassman, who is a brilliant economist, was infected with the exuberance of the roaring 1990s, and his earlier book signaled the end of a season for stocks. I'm confident that Mr. Glassman may have signaled the end of another season with "Safety Net."