To paraphrase Thomas Edison, good risk management is 1 percent quantification and 99 percent beating the cocksure over the head with a stick. - Michael Zwecher
MAP OF THE DAY
RETIREMENT FINANCE AND PLANNING
The Middle Game, Dirk Cotton. Life expectancies are
dramatically lower during the Middle Game than in the Opening Game and this
fact alone makes the Middle a significantly different game…Hopefully, the
retiree has implemented a variable-spending strategy rather than having tried
to spend a fixed percentage of initial savings each year. This will act to
mitigate the risk of portfolio depletion over time. In my simulations, few
retirees deplete their savings before well into the Middle Game…As in chess,
the primary objective of the Opening Game in retirement finance is to set up a
winnable Middle Game. The best strategy for a retired household's Middle Game
will depend largely on how well they were positioned coming out of the Opening
Game and they won't know that until they get there. That position will be the
result of decisions made in the Opening Game, like Social Security claiming and
spending decisions, and luck, like health, mortality, and market returns.
Ken Steiner on Blackrock's CoRI index. The details of the calculations in our
Actuarial Budget Calculator (ABC) workbooks are in the PV Calcs tab, where
“Present Value of Future Years with Desired Increases” is shown. This is the present value of future years of
retirement used in the equation above, and should be very close to the CoRI
index, when you input the recommended assumptions and desired increases equal
to inflation into the ABC.
The Definitive Book on Factor Investing, gestaltU
Making Retirement Income Last a Lifetime, John Ameriks,
Ph.D., Robert Veres
and Mark J. Warshawsky, Ph.D. (2001) and some commentary from Pfau (2011)
Portfolio Success Rates: Where to Draw the Line, Philip L.
Cooley, Ph.D.; Carl M. Hubbard, Ph.D.; and Daniel T. Walz, Ph.D. JFP.
12 Reasons You Will Go Broke in Retirement, kiplinger
100 year HQM bond rates, FRED.
Treasury Bills Outperform Most Stocks — Say What???
AlphaArchitect.com
The Limits of Investment Math, Morningstar. too much math can be a drawback. It can
mislead.
ALTERNATIVE RISK
Fail, win and then fail some more to become a winning trader,
smbtraining.com
A Smoother Path to Outperformance with Multi-Factor Smart
Beta Investing. Research
Affiliates. Researchers have identified
hundreds of factors that purport to predict equity returns; we find a half
dozen that provide an opportunity to outperform the market…a smart beta
strategy diversified across factors substantially reduces tracking error
relative to the average of the single-factor strategies, and dynamic
rebalancing materially increases expected return relative to rebalancing to
equal weights. https://www.researchaffiliates.com/en_us/publications/articles/594-a-smoother-path-to-outperformance-with-multifactor-smart-beta-investing.html
The Other Side of Uncorrelated. Pension Partners. “Low correlation, low volatility, no
downside, and high returns. I want to have my cake and eat it too.”
SOCIETY AND CAPITAL
Wanted: Factory Workers, Degree Required, NYT “In our
factories, there’s a computer about every 20 or 30 feet,” said Eric Spiegel,
who recently retired as president and chief executive of Siemens U.S.A. “People
on the plant floor need to be much more skilled than they were in the past.
There are no jobs for high school graduates at Siemens today.”
Voices From Rural America on Why (or Why Not) to Go toCollege NYT Young people from remote
parts of the country face special challenges in furthering their education
(“Colleges Discover the Rural Student”). Many are low income and first in their
families to attend college. Universities can be big and distant, and scary: Are
the students smarter? Are their values the same? Six students talked about
their choices.
Our 9,000-Year Love Affair With Booze, National Geogr. Alcohol
isn’t just a mind-altering drink: It has been a prime mover of human culture
from the beginning, fueling the development of arts, language, and religion.
Everything You Thought You Knew About Bond Yields Is Wrong:
HSBC, Bloomberg. Not so, says HSBC Holdings Plc fixed-income analysts led by
Steven Major. Instead, high debt levels, demographic forces and wealth
inequality overwhelm the traditional forces cited for the feared unravelling of
the bond market's 35-year bull run this year.
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