Weekend Links - Retirement Finance, Markets

QUOTE OF THE DAY

If you want success, figure out the price, then pay it.  -Scott Adams

 CHART OF THE DAY

RETIREMENT FINANCE AND PLANNING

Retirement Planning dressed in the clothes of StrategicPlanning for Business: The Intersection of What's Desired and What's Possible,Part 6, Dirk Cotton at theRetirementCafe.com.

Retirement Security: Better Information on IncomeReplacement Rates Needed to Help Workers Plan for Retirement, GAO at SSRN.  [I have not read this]

Early Retirement Blogs for Everyone. Retireby40.  a list of FIRE (financial independence retire early) blogs. 

New Tool Aims To Optimize Retirement Withdrawals, InvestmentNews.com.  " Non-traditional drawdown strategies improve tax efficiency that can extend portfolio life…" 

Fresh Approaches to Paying for Long-Term Care, Morningstar.  

Can I Retire Yet? — The Book, Darrow Kirkpatrick. 

Book Review - Can I Retire Yet by Darrow Kirkpatrick, by Me.  "…no matter how many numbers you throw at the decision, you and an advisor will ultimately be making a gut determination based on numerical probabilities, personal values, and what you want out of life (p 169)."

The Continuing Retirement Savings Crisis, Rhee and Boivie, U Cal Berkley [2015]. "A new research report calculates that the U.S. retirement savings crisis continues to worsen, and that the typical working household still has virtually no retirement savings." 

Some Random Off-the-MapThoughts On Retirement Spending, Me.  ' "Safe Withdrawal Rates" have almost nothing to do with retiree spending as experienced in real life as I see it.' 

With Retirement Longer Than Ever, What Is The New 4% Rule? Wade Pfau at Forbes.com.  " If a retiree’s portfolio drops in value during the early retirement period, portfolio withdrawals will dig a further hole. Climbing out of this hole becomes increasingly difficult, even if a subsequent market recovery arrives. This is sequence of returns risk. Sequence risk amplifies the impact of traditional investment volatility, meaning that the rate assumption has to be further reduced to improve the odds that the plan will work."  

MARKETS AND INVESTING

By This Metric, Bonds Have Never Been More Valuable, Vanguard. "…the data indicate that no asset boasts more potent diversification power—and more potential to protect a portfolio in a stock market downturn—than U.S. Treasury bonds."

Time for an All-Terrain Investment Portfolio, Institutional Investor.  "Quality is the superstructure of the all-terrain…portfolio: [it] must be able to survive anything thrown at [it] by the global economy."

Are Correlations Between Asset Classes Rising? The Capital Spectator.  "It appears that correlations overall are trending up. But that may not be relevant for every portfolio… for the moment, it’s hard to argue via correlation data that the traditional benefit of a stock/bond portfolio has evaporated."

Diversification Beats Portfolio Optimization: Study, CIO. "Practical optimization techniques are inferior to naive diversification when forming portfolios of individual stocks.”  

Good Overview And Dissection Of Mckinsey Report On Future Returns, Laurence Siegel at Advisor Perspectives. McKinsey Assesses FutureStock and Bond Returns: Are the good times really over for good? 

Diversification Will Always Disappoint, Newfound Research.  "This convergence means that our portfolio, which was optimal for the uncertain future, will almost certainly be sub-optimal when viewed retrospectively." 

Risk and the Stockmarket, The economist. "Malcolm Baker of the Harvard Business School—looks at an obvious flaw in the CAPM. The model suggests that stocks which are more volatile than the overall market (high beta in the jargon) should display higher returns while stocks that are more stable (low beta) should deliver lower returns. More risk means more reward. But that is not what has happened."   

Risk Parity Made Easy: Cliff’s Notes and Other Key Readings, CFA Institute.   

Emotional Intelligence and Investing, TheIrrelevantInvestor.  “How could economics not be behavioral? If it isn’t behavioral, what the hell is it?”- Charlie Munger.  

ALTERNATIVE RISK

Is Smart Beta Investing Really Smarter? Bloomberg.  "…smart beta funds now want to rein in that risk by diversifying…Does it work? … there appears to be merit to spreading your factor bets…There are two potential spoilers, however. [fees and over-enthusiasm is bidding up prices]" 

How Should Investors Time Their [Alt] Investment Strategies? Conversation with Rob Arnott, Morningstar.com. 

Ex-HP CIOs on the Ideal Asset Allocation Model, CIO.  "Move away from the policy portfolio and dive into factors, long-short positions, and alpha-beta separation, Ken Frier and Gretchen Tai argue" 

What You Should Know About Factor ETFs, ETF.com 

It May Be The End Of Hedge Funds As We Know It, Business Insider.  "Let's get the obvious out of the way: Hedge fund performance is abysmal." 

How To Go From Angel To Fund, Jeff Carter @ pointsandfigures.com.    "It’s probably harder than raising money for a seed stage company because at least with a company the investors get all the return-and they are investing in a product.  To tell you the truth though, it’s really really similar." [comment: as a former Angel, this article looks familiar.  This guy passed through a filter that I never made it through.  Hard earned comments and wisdom.] 

What Do Investing FOMO and Over-Eating Have In Common?  [comment: one of the many things I learned in doing a hedge fund startup is that there is always another trade, move on, don't regret missed trades that worked out but you didn't take. And whatever you do, don’t chase a trade…] 

What's in a name? Smart Beta Wins The War; Holdouts Persist, Edgar Senior at ETF.com.  "Nobel prize-winning academic Fischer Black has been quoted as saying, "When I hear 'smart beta,' it makes me sick." 

Is There a Bubble in Low Volatility Funds?  PragmaticCapitalism.com beating the market isn’t a financial goal for anyone. It’s almost always better to accept an appropriate portfolio rather than trying to time the market and pay higher fees in search of the optimal portfolio. 

Hedge Funds Could Lose 25% Of Assets This Year. ValueWalk.  

How Much Should Smart Beta Cost? CIO. "Investors should only pay for factor-based indexes if they prove they are superior to traditional cap-weighted benchmarks—so says EDHEC Risk Institute (ERI)." 

A Factor Investor’s Perspective of the Economic Cycle, FactorInvestor.  " The purpose of this piece is to identify investment themes that deliver persistent outperformance in multiple different economic environments." 

YTD 2016: Commodities On A Roll, Managed FuturesStumble.  Attain Capital. 

SOCIETY AND CAPITAL

Here’s One Really Obvious Way To Boost The US Economy,Quartz.  " US government investment in capital, research and development, and education and training is at its lowest point in 45 years." 

How a Startup’s ‘Burn Rate’ Influences Its Success, Wharton. "…if you spend too much or too little, the companies are more likely to fail. There is a balanced burn rate…"

Stuck In Your Parents’ Basement? Don’t Blame The Economy, FiveThirtyEight. "It turns out, though, that the recession wasn’t what led millennials to move back into their old bedrooms … Rather, long-run shifts in demographics and behavior have been pushing them in that direction for decades."

US Corporate Stock: The Transition in Who Owns It, ConversableEconomist.com.  "It used to be that most US corporate stock was held by taxable US investors. Now, most corporate stock is owned by a mixture of tax-deferred retirement accounts and foreign investors."

There’s Such A Thing As “Ethical Amnesia, Qz.com. " A study published (paywall) today (May 16) in the Proceedings of the National Academy of Sciences indicates that when we act unethically, we’re more likely to remember these actions less clearly." 

Trends in oil supply and demand, Econobrowser.  "I doubt that $50 is high enough to reverse the decline in U.S. shale production. Nor is the slashing that we’ve seen in longer-term oil-producing projects about to be undone. And while there is enough geopolitical stability at the moment in places like Iraq and Iran to sustain significantly higher levels of production than we saw in 2013, there is no shortage of news elsewhere in the world that could develop into important new disruptions." 

The Miracle of Debt, WSJ.  Finance has shaped the course of civilization—writing first appeared to record debts owed to Mesopotamian temples.

60 Minutes: The Future of Money, @rithotz.com.  

How the Profound Changes in Economics Make Left Versus RightDebates Irrelevant,  Evonomics.com.  "New economics seeks explanations of how the economy works that have empirical validity." 

Pension Funds Pile on Risk Just to Get a Reasonable Return, WSJ 

Fed: Almost Half of USHouseholds Have Under $400 Saved, Halbert Wealth Management.  "According to IRS data, Americans earning over $100,000 paid 79.5% of federal income taxes for 2014."   

Wage Growth Tracker, AtlantaFed.  " Jared Bernstein suggests that there isn't much of an inflation signal coming from the Wage Growth Tracker. His primary evidence is the insignificant response of core personal consumption expenditure (PCE) inflation to an increase in the Wage Growth Tracker in a model that relates inflation to lags of inflation, wage growth, and the exchange rate." 

Indonesia'sDangerous Trash Tax, Bloomberg.  "About a quarter of all deaths among Indonesian children under five are caused by diarrheal diseases, most of which result from unclean water. That would only get worse [with a trash tax]." 

Why States Should Feel Comfy Taxing the Heck Out ofMillionaires, Slate.  "In fact, it turns out that even though the rich do seem to keep taxes in mind when they move, they're not that mobile on the whole. The paper's authors find that while there are about 500,000 millionaire households annually, only about 12,000 move between states in a given year. That 2.4 percent moving rate is much lower than what you tend to see among middle-class earners who bring home less than $40,000.”