“One thing I’ve learned is that in the investment business
when you hear the word ‘never,’ it’s about to happen.” – Jeffrey Gundlach
Incarceration rates/100k 1978-2015
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RETIREMENT FINANCE AND PLANNING
Applying a Systematic Investment Process to DistributivePortfolios - A 150 Year Study Demonstrating Enhanced Outcomes Through Trend
Following, Blueprint Investment Partners.
…we seek to analyze the effects on the sustainability of various initial
distribution rates when applying a systematic risk management strategy to
traditionally constructed portfolios. The systematic risk management strategy
examined in this paper will be referred to as trend following…Our findings
indicate that portfolios with trend following tend to survive more frequently
and last longer during failures than similarly allocated buy and hold
portfolios.
Do Americans Really Save Too Little and Should We Nudge Themto Save More? The Ethics of Nudging Retirement Savings, Zywicki. …once it is recognized that there is an
opportunity cost to saving more—one must consume less today, borrow more, or
work more—the theoretical validity of the claim that people undersave because
of behavioral biases is suspect. Given the inherently subjective nature of
opportunity cost, a central planner cannot be confident that he can make people
better off by influencing their consumption expenditures across time than he
could by shifting consumption expenditures across different goods and services
today. It is concluded that there is little reason to believe that people would
be made better off by nudging them to save more for retirement.
Saving Retirement, Jeffrey Saut. The point is, there is a very good chance
that retirees will require income for longer than they anticipate, and the
average person is woefully unprepared.
The Many Uncertainties Involved With Retirement Planning,
Ben Carlson. You make your assumptions.
You set your plan. You try to account for as many variables as you can. But
then you let go of all of those factors that are completely out of your
control. You update your priors as new information comes to light. Eventually,
real world results replace your assumptions and you get a better sense of how
well reality fits within your initial plans. [comment: not bad for a young not-retired guy]
How much can I spend in retirement? Our Take on the 4% Rule.
Cordant. The first priority of
retirement planning is to ensure one doesn’t outlive their assets. Early
retirement age combined with good health and improved medicine is the perfect
recipe for outlasting your assets without proper planning. For those retirees
that hang ‘em up well before 65, using the 30-year assumption could cause them
to drastically undershoot their realistic life expectancies, causing major
financial pain in later years.
Millennials may need to double how much they save forretirement, WP and Stanford center on Longevity.
Treatment of Inflation in Retirement Planning Calculations:An Improved Method, Journal of Fin Planning.
In calculating the capital needs for retirement, inflation-adjusted
rates of return for each step should be chosen based on portfolio choices
appropriate for before and after retirement.
MARKETS AND INVESTING
The Mythology of Rebalancing: A Random Walk down Performanceand Risk Management, AlphaEngine Global Investment Solutions …we will just
focus on the robo-advisors and argue that one key activity underlying these
platforms and even practiced very broadly in institutional investing and
defined contribution funds, naïve rebalancing, is predicated on bad theory and
myths and fails the key test of whether it truly improves performance and/or
risk management. We will demonstrate that many previous studies of rebalancing
examine this issue from a simplistic perspective of a two-asset portfolio and a
simple measure of risk, volatility. When we examine these strategies from the
perspective of a multi-asset portfolio and a broader set of risk statistics
(that a sophisticated investor would apply), then these naïve rebalancing
strategies are nothing more than a form of poor market timing and the
performance is a coin-toss and the risk profile of the portfolio is typically
worsened.
New Research on Forecasting Returns with the CAPE Ratio. Georg Vrba. Thus, the most likely forward 10-year real
annualized return would be about 5.5% [hmmm]
Managing Active Risk. Newfound. We believe that understanding, monitoring,
and adjusting for risk budget limits in absolute level, relative composition,
and tracking error is critical for constructing a portfolio that investors can
stick with over the long run.
ALTERNATIVE RISK
How Not to Get Fired with Smart Beta Investing, Research
Affiliates. Agents often have an incentive to choose portfolio allocations
designed to minimize their risk of being fired at an all-too-common three-year
evaluation horizon, over which both robust strategies and “the best” managers
can experience prolonged bouts of underperformance.
SOCIETY AND CAPITAL
Hyperinflation When prices go out of control, FRED blog
The Oxfam Report is Important, But There’s More to the Story,
visualcapitalist.com. Oxfam and many others are rightly concerned about
inequality. But, for the people that need it most, things continue to get
better. Such a narrative is not sexy enough for a click-driven media that
thrives on sensational or emotional soundbites.
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