Sep 21, 2019

Some Self-Reflection on the Joint Spend-Allocation Choice...For Me This Time

A lot of tech bluster on this blog notwithstanding, most of the count-on-one-hand readers of the blog might be surprised to learn that I directly use very little of the methods on this blog to manage myself on a regular basis. Most of what I do here on the blog comes from mere curiosity, a curiosity that when sated accrues to my general understanding, to be sure. In reality, on a monthly basis I mostly use the following:

Sep 19, 2019

Revisiting Backward-Induction-Derived Asset Allocation over Multiple Decumulation Periods

"Arguably, for someone willing to pay careful attention to the evolving funding status of their retirement (the present value of their remaining assets divided by the present value of their remaining liabilities), asset allocation can be adjusted dynamically by matching assets to liabilities in coordination with the client’s risk capacity and risk aversion, rather than just on an arbitrary path. But for those unwilling to take such care, such as users of target date or lifecycle asset allocation funds, or for those whose goals are somewhat more complex in the balancing of current and future, income and legacy goals, what should be the default equity glidepath in the postretirement period?"
Pfau, W. and Kitces, M (2013)

"...the optimal asset allocation moves after significant market events. This means an investor needs to monitor and adjust their asset allocation after such events. They cannot simply follow a glide path."
Irlam, G (2014) 

These quotes are not incompatible. I was considering this today because I was re-reading Irlam (2014) on using backward induction (BI) via stochastic dynamic programming (SDP) so that I could revisit and repair some software I built in 2017 that attempted to replicate what Irlam had done in 2014.  It's a deceptively simple idea that is hard-ish to implement and even harder to figure two years later when you are trying to figure out what you did earlier (note to self: comment one's code better).

Sep 13, 2019

Annuities and Random Interest Rates

Just buzzed through this paper (Dynamic Portfolio Choice with Annuities When the Interest Rate Is Stochastic Yannick Dillschneider, Raimond Maurer, and Peter Schober August 29, 2019). It was analytically a little dense for me. I can maybe 20% follow Americans and Canadians in their notation. For Germans writing in English, that drops off to about a 1% follow…on a good day. They lost me pretty quickly. Here are some excerpts, though:

Sep 12, 2019

If a sovereign country were to retire...

If a sovereign country were to retire and forgo income, they's have the same issues, except for the immortality thing, as any run of the mill retiree. This was recently covered in
The Optimal Extraction Rate versus the Expected Real Return OfA Sovereign Wealth Fund,  By Knut K. Aase and Petter Bjerksund [2019], a fun but very dense read that has a ton of affinities with retirement finance.  

Here are some selected extracts. Not all of these will make sense out of context and I'm not going to correct copy paste errors in all of the characters. 

Sep 11, 2019

Chris Mamula on not knowing

When I think about retirement risk, it's never, or almost never, volatility, it's this:

Sep 9, 2019

A Middle Path and the Courage to Take it

The following, recent, and unrolled Twitter thread by AJA Cortes (@AJA_Cortes) is a wee bit polemical and maybe a little off path with respect to my usual vibe, and might be vaguely risky here, but it harmonized with some thoughts I had recently about my own journey into, and maybe out of, retirement finance:
Masculinity is RISK taking. To "play it safe" is a negatively feminine quality, the desire to protect oneself from harm and consequence. Operating by fear is always cowardice. What does "negatively feminine" mean? Its means when a feminine trait takes on negative form. Impulsiveness and destructive behavior would [be] the "negatively masculine" equivalent (and complementary inverse). The role of father is to introduce tension to his children so that they might be brave. A son who takes no risks is an emasculated individual. A daughter who takes no risks and is fearful will always be at risk to be manipulated by safety and by group think. Men who don't take risks and live for safety are bitches[; e]veryone is disgusted by them, both men and women. There is an inherent intelligence in us all that recognizes bravery, and is repulsed by cravenness. AJA Cortes 

Sep 2, 2019

Cross-section of a hurricane vortex

Here's an image I hadn't seen before. This is a hurricane vortex. It's a cross section of the wind speeds of the system. If I understand this right these readings come from aircraft sampling. Which reminds me that the guys in these planes have some you know what.