Links - Markets and Investing

"Everything is stochastic"  - Larry Frank quoted by Dirk Cotton in reference to retirement finance.

One-Month Libor as of 6/9/2016 breaking up a bit through YTD2016 levels.

MARKETS AND INVESTING

What is the Worst Case Scenario for Bonds? Cullen Roche. "Rising rates do not necessarily mean negative returns for bonds! …A Medium duration bond portfolio (such as a bond aggregate) should not expose you to significant loss of principal even in the case of a sharply rising interest rate environment."  

The 1970’s are not a Good Proxy for a Bond Bear Market, Cullen Roche.  "The reason for this is simple – in the 1970’s the Fed Funds Rate averaged 7.15% and actually started the decade at 9%.  There was never a period where the overnight interest rate was 0% (as it is today) or got even close to that level.  So the 1970’s were a HIGH AND RISING interest rate environment and not a LOW AND RISING interest rate environment like we might experience going forward." 

Bill Gross & The 40 Year Black Swan, Ben Carlson.  "I have no problem with Mr. Gross alerting investors to the potential for lower returns in the future. My problem is that many professional investors, strategists and portfolio managers are using these numbers to scare investors."  

Another pov on Treasuries… The Long & Short of it...  MarketAnthropology.  

The Upside of Academic Finance, Ben Carlson.   " Because of the Internet nothing is properly rated these days anymore. Like the markets themselves, everything is in a constant state of being over- or under-rated. Academic finance theories are no different."

The Downside of Academic Finance, Cullen Roche.    "the average active investor MUST, by definition, underperform the less active investor because the more active investor generates the average return of the market minus taxes and fees while the less active investor generates the average return of the market minus their LOWER taxes and fees."

The Black Swan, thepfengineer.  "…when something does go wrong it will probably do so at the worst possible time, and at a magnitude much greater than you or I can imagine."   

The Risky Business of Liquidity, CIO.  "The more risk investors perceive in equity markets, the more illiquid global markets tend to become, according to new research." 

Risk and the stockmarket, Economist.  [this might be a repost] 

SEC Moves to Curb Leveraged ETFs, WSJ.  

11 Signs You Own the Right Portfolio – The Annotated Version, Cullen Roche.  

Will Bonds Deliver Crisis Alpha In The Next Crisis? AlphaArchitect.  "This analysis shows that bonds have provided some diversification benefit (positive performance during Crisis Alpha months) historically but that going forward, we may want to lower our expectations of bond performance during Crisis Alpha months.  It might be time to start looking for other investments or investment strategies to generate positive excess return during Crisis Alpha months." 

How to raise GDP 10%, and reduce inequality too,  John Cochrane. "The paper has a clear model and careful calculation of this effect.  Their bottom line is that US GDP would be overall about 10% higher than it is now -- and not just in some free-market nirvana, just if New York, San Francisco and San Jose were "only" as restrictive as the typical US city."  

Why Dividends Matter, charlessizemore.com.  "…stock dividends are more than just a quarterly paycheck. They are a way of doing things. I would go so far as to argue that they are a philosophy of life (or at least of business)."