It is not in our human nature to imagine that we are wrong. —Kathryn Schulz
RETIREMENT FINANCE AND PLANNING
Front-Loading Your Spending Budget by Treating TravelExpenses as a Non-Recurring Expense, Ken Steiner.
After our last post, we received several questions on what
we meant (and what would be involved) when we suggested that retirees might
wish to consider treating certain expenses as non-recurring to “front-load”
their spending budgets. This post will
present an example that might be helpful in explaining this particular
“budget-shaping” approach.
Getting a Mortgage When You Have Assets But No Income,
Darrow Kirkpatrick
So I’ve learned that if you’re a retiree with little to no
documented income, but plenty of assets, you can certainly get a mortgage to
buy a house. And you can probably find a competitive interest rate. But you’ll
need to shop around. Some mortgage brokers won’t be familiar with these
asset-based kinds of loans. And others won’t necessarily have competitive
products to offer. [been thru the same hoops…]
The Ultimate Guide to Safe Withdrawal Rates – Part 18:
Flexibility and the Mechanics of CAPE-Based Rules. ERN
when it comes to Sequence of Return Risk, there is a
zero-sum game between the saver and the retiree… dynamic withdrawals don’t really avoid
sequence risk. True, you mitigate the impact of sequence risk on the final
portfolio value, but it’s at the cost of lower withdrawals along the way. There
is no free lunch and there’s no way to completely avoid sequence risk! …we can’t just set the initial SWR and then
never touch it again. We should keep updating the subsequent withdrawal rates
to reflect changing economic and financial conditions
Three Degrees of Bad, Dirk Cotton
A floor guarantees income; it does not guarantee that income
will exceed expenses…The term "ruin" better applies to bankruptcy
than to portfolio depletion, which may or may not lead to bankruptcy…there is a
valid argument that depleting an investment portfolio before the end of
retirement and relying on fixed annuities and Social Security benefits
thereafter can be the most efficient way to fund retirement in some scenarios.
Personal finance links: life planning, Abnormal Returns
[I was going to read and link some of his better links but
they were all pretty good]
…encapsulating the entire retirement problem in a single,
distilled drop of self-documenting genius…
[ if my links are a little short this week it is because I spent a little too much time working on this Kolmogorov thing, just ask my girlfriend. It is, however, something I've been meaning to take up for about 5 years. I might take it a little further still because I don't quite have a full grasp of this yet. On the other hand this may be about as far as I go. I set out a few years back to see if I could "see" retirement finance in some essential way. Many of the efforts on this blog, this link included, have gotten me pretty close to where I want to go. Past that I'm not sure what is left besides the details of living day to day in an "early" retirement. That and beating the eff. frontier a little bit...]
MARKETS AND INVESTING
David Blanchett and Philip Straehl addressed such
idiosyncratic risk factors in their research paper, "No Portfolio Is an Island ."
They wrote that investors would do well to think of their investment portfolios
as their "completer portfolios"--to offset risky bets in the rest of
their financial lives. For example, the person with a job in the technology
sector should avoid ramping up exposure to companies in that same sector. The
person with a lot of non-portfolio real estate holdings should skip the
dedicated real estate ETF. And so on. That's a valuable line of thinking. But
I'd suggest that you could interpret the research even more broadly. Take stock
of your whole financial life--your human capital as well as any assets you own
in addition to your investment portfolio--a stake in your brother's company or
a real estate rental, for example. The quirkier your nonportfolio assets, the
more simple, vanilla, and stripped down your investment portfolio ought to be.
4 Reasons Not to Own the Market Portfolio, Morningstar.
human capital affects the amount of equities that investors
might own, but not whether they should deviate from the market portfolio. But
it does once industry exposure is considered. Given that automobile stocks tend
to trade in unison, the automobile worker who faces the danger of being laid
off when the industry slumps would be best off avoiding auto stocks entirely.
Indeed, he should be wary of any industry that behaves similarly to the
automobile business.
The current outlook for stocks, bonds, and traditionally
allocated portfolios is near all-time historical low levels. A mean-variance
optimal portfolio using the current market forecasts relies heavily on more
unique asset classes such as U.S. Small Caps, Emerging Market Debt (Local
Currency), and Levered Loans. While investors may not be willing to hold such a
weird looking “60/40” portfolio, thinking outside the box may be necessary
going forward.
Why not just look at volatility? Because volatility is too
restrictive in a more complex price and return world where normality is the
exception. The cost of skew and fat tails are real for those who ignore them...
Don't be fooled by standard deviation when a little extra effort can generate
useful information on downside risk. “Risky” managers, based on standard
deviation, may actually be winners as measured by downside risk or lower
partial moments. http://mrzepczynski.blogspot.com/
ALTERNATIVE RISK
4 Seemingly Unrelated Factors, Swedroe
growth-options-induced expected idiosyncratic skewness
commands a negative equity return premium… Investors seem willing to accept
lower average returns in exchange for the more favorable (positively skewed)
risk/return profile resulting from future growth options… investors are better
served by avoiding stocks with high idiosyncratic skewness, which includes
firms with low profitability, high idiosyncratic volatility, lotteryness and
firms in distress.
First, momentum trading strategies are trend following by
nature, so they participate in most of the upside while avoiding bear markets
once they are firmly established. Most of the outperformance of momentum
relative to buy-and-hold comes from its ability to avoid bear markets. Second, while momentum strategies retain
most of the upside, they miss out on some gains during the transitions from
bear markets to bull markets. For example, due to the lag introduced by using a
12 month lookback period, momentum missed out on some of the recovery
immediately after the financial crisis.
Third, when there is no clear trend and prices experience large declines
with equally large rebounds, momentum strategies struggle. Under this type of
market environment, momentum strategies can participate in all the downside but
none of the upside. This can be clearly seen in late 2015 and early 2016 when
the S&P 500 experienced high volatility but with no trend upwards or
downwards.
My Mission:Advocating for Truth in Trading and Empowering Traders, Sean McLaughlin.
[his first post I found depressing because it was so
real and some of it hit close to home. Some good trading truths coming
from Sean, though. I have empathy and support for his "mission."]
Short Term Momentum and Long Term Reversals Can Coexist,
Alphaarchitect
SOCIETY AND CAPITAL
Workaholics Aren’t Heroes, signalvnoise.
Buzz Kill for Pot Farmers: Lower Prices, WSJ
shakeout in coding boot camps, techcrunch
After years of explosive growth, coding boot camps are
starting to scale back, if not shut down altogether. Two schools have announced
plans to close this year: Dev Bootcamp in San Francisco
and Iron Yard of Greenville, South Carolina. They have deep-pocketed parent
companies, too, having been acquired by Kaplan and the Apollo Education Group,
respectively.
While a knee-jerk decline is possible if war breaks out
between the United States
and North Korea ,
history suggests that any market decline should be short-lived.
Is Poor Health Hindering Economic Growth? Atlanta
fed
So how might poor health hinder economic growth? Health
factors account for a significant part of the decline in labor force participation
since at least the late 1990s. After controlling for demographic changes, the
share of people too sick or disabled to work is about 1.6 percentage points
higher today than it was two decades ago (see the interactive charts on our
website). Other things equal, if this trend reversed itself during the next
year, it could increase the workforce by up to 4 million people, and add around
2.6 percentage points to gross domestic product (calculated using our Labor
Market Sliders).
What Does It Cost To Start A New Farm? Fastcompany
Shawn Williamson, an accountant in St.
Louis , Missouri
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