"Grammar, once a benchmark of basic literacy, is now a luxury...digital communication has inflected written English in the way that the guillotine inflected Marie Antoinette's neck." Dominic Green
RETIREMENT FINANCE AND PLANNING
How to Rescue an Underfunded Retirement, Joe Tomlinson
Americans have under-saved and will need more than
withdrawals from savings to survive retirement. An optimal withdrawal strategy
and asset allocation, delaying Social Security, annuitizing, tapping home
equity and possibly working longer need to be evaluated…The biggest
improvements in retirement prospects come from working longer. For those who
don’t save enough, it is a big plus to have stable employment in a good job,
and to keep building job skills while maintaining good health. More human
capital makes up for less financial capital.
The idea that we can spend an amount calculated at the
beginning of retirement and continue spending it regardless of what happens to
our financial situation over perhaps 30 years is not only risky but irrational…SWR
is like an annuity from an insurance company with a 5% to 10% chance of going
out of business…It’s expensive to tie up 96% of your wealth so you can safely
spend 4% of it… it is irrational to ignore new information that comes available
as retirement progresses and financially unsound to attempt to derive constant
income from a volatile portfolio. The strategy is risky for retirees who are
not wealthy and unnecessary for those who are. [Wise words from Dirk. You may recall that I have suggested that a
constant spend strategy is a very active risk accepting posture. Dirk
just says it better.]
What Investment Risk Really Is, Illustrated, Waring and
Siegel [2018]
We’re focused here on the task of simply understanding what
risk really is, and how it changes with SAA policy choices and with different
approaches to spending. Along the way, we’ll examine how risk looks for the
traditional single-period capital asset pricing model, as well as for a
multi-period consumption-based model…Don’t like the risk? Change the asset
allocation.
Spending, Relationship Quality, and Life Satisfaction in Retirement; Finke, Ho, Huston
this research explores how spending and relationship quality
contribute to life satisfaction in retirement, controlling for financial and
human capital factors. The results provide evidence to suggest that leisure
spending, health status, and spousal and friend relationships have the greatest
impact on creating life satisfaction during retirement, while other type of
spending and children relationships do not.
Variable-spending strategies are similar to constant-dollar
strategies in that they spend periodically from an investment portfolio but
differ in that they spend a periodically updated amount based on portfolio
performance – they spend more in good markets and less in bad markets. This is
a huge difference.
The Fundamental Law of Personal Finance, The Savings Habit
Spend less than you earn.
Tontine Trust announces the development of a pioneering peer-to-peer longevity risk-sharing platform.
Tontine Trust announces the development of a pioneering
peer-to-peer longevity risk-sharing platform.
Due for launch in 2018, the Tontine Trust platform is set to disrupt the
traditional retirement market by offering its first fully-regulated tontine of
ETFs that will generate a variable income expected to be 40%+ higher than fixed
lifetime annuities. ["Tontine" is interesting as is the use of
peer-to-peer and blockhain but even more interesting (or tricky or curious…) is
the "fully-regulated" thing. We'll see. Tontines were
"regulated" out of existence because of abuses. That's not to say I
wouldn't like to see a p2p tontine on the market or something like it.]
View security as your ability to adapt to change. Security
isn’t about how much money you have — I know people with tons of money who are
frightened. Security is understanding that no matter what may happen to you,
you have the ability to deal with it.
MARKETS AND INVESTING
About 42% of SPY ETF total return since inception on January 29, 1993 , is due to dividend
reinvestment. This has important ramifications: (a) Stock market is nowhere
near a bubble state, (b) if you do not reinvest dividends, then all the
reported long-term stock market performance are irrelevant to you and (c) the
high impact of dividends minimizes risk of uncle point.
Incompetence-Based Investing, Isola
“Advisers are willing to hold the investments they
recommend. Indeed, they invest very similarly to clients, but they have
misguided beliefs. Both clients and advisers exhibit trading patterns
previously documented for self-directed investors. For example, they purchase
funds with better-than-average historical returns and they overwhelmingly
favour expensive, actively managed funds. This similarity suggests that
advisers do not dramatically alter their recommendations when acting as agents
rather than principals.” … True believers are lethal.
ALTERNATIVE RISK
Size Matters, If You Control Your Junk, Asness Frazzini Israel
Pedersen
[lurid title; paywall..so I have not read]
The size premium has been challenged along many fronts: it
has a weak historical record, varies significantly over time, in particular
weakening after its discovery in the early 1980s, is concentrated among
microcap stocks, predominantly resides in January, is not present for measures
of size that do not rely on market prices, is weak internationally, and is
subsumed by proxies for illiquidity. We find, however, that these challenges
are dismantled when controlling for the quality, or the inverse
"junk", of a firm. A significant size premium emerges, which is
stable through time, robust to the specification, more consistent across
seasons and markets, not concentrated in microcaps, robust to non-price based
measures of size, and not captured by an illiquidity premium. Controlling for
quality/junk also explains interactions between size and other return
characteristics such as value and momentum.
RIP XIV, Corey Hoffstein
But at some point we should probably ask ourselves, “why do
we think we actually deserve to earn 40%+ annualized forever?”
SOCIETY AND CAPITAL
From the outside, all hugs look benign. Only the huggee
knows whether what’s coming is a welcome embrace or slightly icky… “To be any
good, an embrace must be mutual,” Garrison Keillor once wrote. Yes, it’s
surreal to cite Keillor now, on the subject of touching. But exploring the
weirdness is why we’re all here, no?
The Great Advantage… Tim Taylor
Tocqueville argues that aristocracies "are infinitely
more expert in the science of legislation" than democracy and also that
those " who are entrusted with the direction of public affairs in the
United States are frequently inferior, both in point of capacity and of
morality, to those whom aristocratic institutions would raise to power."
But in Tocqueville's view, these problems are more than counterbalanced by the
fact that democracy over time is responsive to "the well-being of the
greatest possible number," and that a democracy has checks and balances.
From this perspective, Tocqueville offers one of his famous lines: "[T]he
great advantage of the Americans consists in their being able to commit faults
which they may afterward repair."
Exploring the Risks and Consequences of Elder Fraud
Victimization: Evidence from the Health and Retirement Study, Michigan
Retirement Research
Center
When LBQ responses were pooled across survey years, we found
that younger, male, better-educated, and depressed persons reported being
defrauded significantly more often. Victimization was associated with lower
nonhousing wealth in the combined sample controlling for other factors, but had
no measurable impact on cognitive, psychological, or physical health outcomes.
economists use math not because they are smart, but because
they are not smart enough. http://conversableeconomist.blogspot.com/2018/02/some-thoughts-about-economic-exposition.html
Prime-Age Men May Never Return to U.S.Workforce, Fed Paper Says; Bloomberg
A decline in demand for middle-skilled work -- a phenomenon
dubbed “job polarization,” because more positions are concentrated at the
higher and lower ends -- has played a role in keeping prime-age men out of the
job market, Didem Tuzemen, an economist at the Kansas City Fed, wrote in the
paper released this week. Without job polarization, Tuzemen estimated that 1.9
million more prime-age men would have been employed in 2016.
One of the internet’s most important qualities is that it
slashes transaction costs to a bare minimum. What has followed is a remarkable
development: It is becoming cost-effective, even profitable, to serve the world’s
poorest two billion people—whether they are online or not.
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