Risk and time are opposite sides of the same coin, for if there were no tomorrow there would be no risk. Time transforms risk, and the nature of risk is shaped by the time horizon: the future is the playing field. PeterL. Bernstein
RETIREMENT FINANCE AND PLANNING
How ETFs might help retirees better manage distributions,
pionline.com
Although many legal boundaries stand in the way, instead of
receiving a cash lump sum, retirees could instead receive a balanced portfolio
of ETFs allocated based on a specific risk profile.
The holy grail of retirement income planning is finding
strategies that enhance retirement efficiency – strategies that simultaneously
allow you to spend more and leave behind a legacy you can be proud of, in a way
that other strategies may not. The definition of efficiency varies from person
to person as it depends on how long you will live. As mentioned in the first point, a number of
strategies can enhance efficiency over the long term (but not necessarily the
short term) with more spending and legacy.
Life-Cycle Earnings Curves and Safe Savings Rates, Tharp and
Kitces.
Results indicate that failing to account for more realistic
earnings curves throughout the life-cycle may overstate SSRs for lower-income
households while understating SSRs for higher-income households and understate
SSRs for younger households while overstating SSRs for older households.
Furthermore, historical SSRs of 10% or less are found for all but the highest
income households after accounting for more realistic earnings curves and
Social Security benefits.
MARKETS AND INVESTING
The Big List of Behavioral Biases, psyfitec.com
introduction to … ever-growing list of irrational or, at
least, slightly odd behaviours in the sphere of investment
Portfolio Selection with Mental Accounts and Estimation Risk,
Alexander et al.
In Das, Markowitz, Scheid, and Statman (2010), an investor
divides his or her wealth among mental accounts with short selling being
allowed. For each account, there is a unique goal and optimal portfolio. Our
paper complements theirs by considering estimation risk. We theoretically
characterize the existence and composition of optimal portfolios within accounts.
Based on simulated and empirical data, there is a wide range of account goals
for which such portfolios notably outperform those selected with the
mean-variance model for plausible risk aversion coefficients. When short
selling is disallowed, the out performance still typically holds but to a
considerably lesser extent. [not read]
ALTERNATIVE RISK
Commodity Trading Advisor Woes Continue In 2017,
PriceActionLab
CTAs should not expect strategies with names borrowed from
cute animals to work in the era of algo trading and machine learning; there is
an expiration date to all strategies. Success requires continuous innovation.
Trend-Following With Valeriy Zakamulin, AlphaArchitect
The profitability of a trend following strategy is based on
the ability of early recognition of turning points in the stock price trend.
However, since the stock price is noisy, the noise complicates the
identification of the trend and trend turning points. To remove the noise,
traders use right-aligned moving averages. These moving averages have the
following two most essential properties. First, the longer the size of the
averaging window, the better a moving averages removes the noise in the stock
prices. At the same time, the longer the size of the averaging window, the
longer the lag time between a turning point in the intrinsic stock price trend
and the respective turning point in a moving average.
Strategic asset allocation is the policy you would choose if
you thought risk premia were constant; tactical asset allocation is the changes
you would make if you believe risk premia are time-varying.
We find that the most compensated options to sell on the
S&P 500 surface per unit of stress-test loss are front-month options with
strikes near-the-money and moderately below the index level. We apply these
results to evaluate return expectations for short volatility strategies,
potential added return from option selection, and implications for variance
swaps. [comment: this paper backs my amateur
strategy and positioning. Near dated
options somewhere between .5 and 1.5 standard deviations in oom strike seem to
be a sweet spot in both the paper and my experience]
Performance Of Timing Strategies Since Financial Crisis Bottom, PriceActionLab
It may be seen from the above performance table that no
strategy beats buy and hold in terms of CAGR performance. The 60/40 portfolio
has the highest CAGR, Sharpe and MAR (CAGR/Max. DD). From the timing
strategies, PSI5 has the highest Sharpe and CAGR is close to that of the 60/40
portfolio. Long-short 50/200 cross has been a disaster with negative performance.
SOCIETY AND CAPITAL
Of money and morals, aeon.co
The roots of this revulsion [to lending at interest] run deep, and across cultures.
Vedic law in Ancient India condemned usury, and rulers routinely capped
interest rates from Ancient Mesopotamia to Ancient Greece. In Politics,
Aristotle described usury as ‘the birth of money from money’, and claimed it
was unnatural because money was sterile and should not ‘breed’.
The Pricing Answer to Traffic Congestion, Tim Taylor
The fifth view is perhaps most favored by transportation
experts, but is also generally reviled by the traveling public and the officials
they elect: using prices to balance the supply of and demand for travel…The
economics of traffic congestion is clear-cut. Those stuck in traffic naturally
prefer to think of congestion as caused by everyone else, but everyone who in
the jam is part of the problem.When you are in a traffic jam, those in front of
you in line are imposing costs of time delay on you, and in turn, you are
imposing costs of time delay on all of those behind you in line. Those costs
are a form of pollution, a "negative externality" as economists call
it. If drivers were required by road
pricing to pay these peak-load costs that they impose on others when the roads
are congested, many of them would find a way to shift the time or route or mode
of their commute, or to telecommute at certain times.
The results imply that retail dispensaries lead to reduced
crime in the neighborhoods where they are located. Reductions in crime are
highly localized, with no evidence of benefits for adjacent neighborhoods. The
spatial extent of these effects are consistent with a policing or security
response, and analysis of detailed crime categories provides indirect evidence
that the reduction in crime arises from a disruption of illicit markets.
Given that we derive real per capita personal income by
dividing nominal income by cost of living, one might expect that the most
costly cities have the lowest adjusted incomes. While that is sometimes true,
it’s not always the case. For example, San Jose
and San Francisco , California Bridgeport , Connecticut McAllen , Texas
we still think the scope around the discussion of quants is
far too small. What we find interesting isn’t classifying the money flows into
quant strategies, but discussing what people are doing in the quant space
overall; who and how algorithms are being built; where the lines blur with
FinTech; and the lineup of players in the space. Sure, there are the big banks expanding their
quant departments with recent grads with PhDs and degrees in computational
finance (that’s an engineering degree if you’re all wondering); but in this
consumer driven economy, it’s not just them and big hedge funds rushing into
the quant world. Mom and pop investors are taking an interest, as are aspiring
computer programmers and coders.
During the global financial crisis, Alexis Stenfors was a
rogue trader at Merrill Lynch, cooking the books to hide the millions he lost
in the market. He recounts his experiences in a new book, Barometer of Fear: An
Insider’s Account of Rogue Trading and the Greatest Banking Scandal in History.
Stenfors is now a senior lecturer in economics and finance at the University
of Portsmouth England .
But the designers of state-run auto-IRA plans fail to
consider three questions: Do the poor need to save more for retirement? Will state-run
auto-IRA plans increase net household savings? And, after accounting for
interactions with means-tested government transfer programs, will state-run
auto-IRA plans make the poor better off? The answer to all three questions may
be “no.”
The Great Recession’s regional effects, FRED blog.
Every corner of the U.S.
was hard-hit by the Great Recession, but the varying makeup of local economies
resulted in different effects on individual cities, states, and regions. Areas
that are reliant on economic necessity—say, healthcare and waste management—may
fare better during economic downturns than areas that are reliant on economic
prosperity—say, tourism and construction. In 2008, the recession particularly
disrupted the construction industry. According to the Bureau of Labor
Statistics, the percentage of jobs lost in that industry, 19.8%, exceeded those
of all other nonfarm industry supersectors.
A Visual Map of the Social Media Universe,
VisualCapitalist.com
Retirement Dread Is Replacing the American Dream, Bloomberg.
The government’s latest report on Social Security is bad
enough. Trends in income inequality and health care make it worse.
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