Six years ago, Jonathan Clements penned his 1,009th and final personal finance column for The Wall Street Journal before joining Citigroup (C). If, like me, you've missed his voice, I have some great news. This Sunday, Clements' WSJ columns (syndicated to about 69 local newspapers) will resume. I caught up with him this week to get his take on what's been happening in personal finance since he last wrote for The Journal.
During the past six years, Clements remained active in personal finance as Citi's director of financial education. He wrote his fourth book in 2009, Little Book of Main Street Money (Wiley), and a novel in 2012 about money, love and bicycling, 48 and Counting (CreateSpace Independent Publishing Platform).
Clements said the stock market today seems much like the stock market of six years ago. He pointed to five great years for stocks and their relatively rich valuations. He doesn't see a collapse coming similar to the one in late 2008 and early 2009, but he cautions that future stock and bond returns are likely to be more modest than over the past five years.
While I had framed the interview as asking him to comment on what has changed over the past six years, Clements kept emphasizing what hadn't changed, pointing to four principles.
First, it's still impossible to forecast stock returns over the short run. Second, costs matter, and higher costs are predictive of lower returns. Third, taxes are costs, and focusing on tax efficiency is critical. Finally, it's more important to concentrate on risk management than on returns, which means one should keep a relatively constant exposure to high-risk stocks and low-risk bonds.
Clements explained that because we can't control returns, focusing on the principles we can control is critical for investors.
I kept pressing him for changes he saw in investing or at least any surprises in the area of personal finance. He said he was surprised the stock plunge and Great Recession didn't have more of a long-lasting impact on Americans' personal savings rates, which remain abysmal. He said the Great Depression caused some enduring changes for Americans, and he thought the near-collapse of our financial system would have had a larger impact.
So, there you have it. The same principles in investing that worked six years ago work just as well today. Though Wall Street firms like Lehman Brothers and Bear Stearns have disappeared, sound investing principles are forever.
I tried my hardest to get a glimpse of what Clements would be writing about, but all he would tell me is his first column, on April 6, would be about his new column and what to expect. Personally, I hope he'll write more about the subject of money and happiness.
Even though I spend my entire professional life (and some of my personal life) on the subject of personal finance, Clements has a unique ability to offer insights about money that I had never thought of, as well as help me explain the topic to others. I confess that I called Clements in March of 2009, hoping he could talk me off the ledge, and he did. When fear ruled the day, his calm demeanor brought back the common sense that capitalism wasn't dead and rebalancing was the right thing to do.
If your newspaper carries The Wall Street Journal Sunday, you're in for an additional treat with your morning coffee. If you don't get a paper that carries it, here's a handy link to the Sunday Journal section where you'll find Clements' Sunday columns.
The investing principles he'll be writing about may be the same, but I predict he'll deliver more of his brilliant insights and commonsense solutions about what's going on in the market today.